FORM 10 - K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Shares New York Stock Exchange
Toronto Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X or No
---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of the Form 10-K or any amendment to this
Form 10-K (X)
TOTAL NO. OF PAGES
EXHIBIT INDEX PAGE
As of February 20, 1997, Cineplex Odeon Corporation had
103,334,157 Common Shares without par value, outstanding, and the
aggregate market value of the Common Shares (based on the last
sale price of such stock as reported by the New York Stock
Exchange for February 20, 1997) held by nonaffiliates on such
date was approximately $83,230,000. All officers, directors and
more than 5% shareholders of the registrant have been deemed
"affiliates" for the purpose of calculating such aggregate market
value. The registrant does not represent that such persons, or
any of them, would be deemed "affiliates" of the registrant for
any other purpose of the United States Federal Securities Laws.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's definitive Proxy Statement for the
annual meeting to be held on June 5, 1997 (the "Proxy Statement")
are incorporated by reference into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
General
The Corporation is engaged primarily in the operation of motion
picture theatres in the United States and Canada. The
Corporation was originally incorporated in Ontario, Canada on
July 19, 1977, and commenced operations in April 1979. It
maintains its principal executive offices at 1303 Yonge Street,
Toronto, Ontario, Canada M4T 2Y9. The Corporation's telephone
number is (416) 323-6600. Unless otherwise specified, or the
context otherwise requires, the term "Corporation" as used herein
shall mean the Corporation and its consolidated subsidiaries.
Recent Developments
The Corporation's bank credit facilities contain restrictive
covenants which require maintenance of specific financial ratios.
At December 31, 1996, the Corporation failed to meet certain
financial covenants under its bank credit facilities and
subsequent to that date, the Corporation's bankers agreed to
amend specific financial covenants for the quarter ended December
31, 1996 and for all four quarters of 1997. Given the
uncertainty with respect to the admission and concession revenue
that the Corporation will generate, there is a possibility that
the Corporation may not meet certain financial covenants in the
future. The Corporation believes that the bank syndicate
participating in the bank credit facilities would waive the
particular financial covenants if the Corporation is not in
compliance at a measurement date during the next twelve month
period.
For a further discussion of 1996 events, see Part II - Item 7
"Management's Discussion and Analysis of Results of Operations
and Financial Condition."
Theatre Operations
At December 31, 1996, the Corporation operated 183 theatres in
the United States, 132 in Canada and one in Hungary with an
aggregate of 1,549 screens. Most of the Corporation's theatres
are multi-screen facilities.
The Corporation's head office is located in Toronto. Regional
offices are located in Los Angeles, New York, Chicago, Seattle,
Montreal, Minneapolis, Salt Lake City, and Washington, D.C. Head
office activities include corporate policy development, strategic
planning, site selection, theatre design, construction
coordination, labour negotiations, advertising, concession and
supply purchases, finance, accounting and data processing
activities.
Theatre Circuit Development
In 1996 the Corporation opened 2 new theatres and refurbished 5
theatres in the United States adding a total of 31 new screens.
In Canada in 1996 the Corporation opened 3 new theatres and
refurbished 8 theatres adding a total of 44 new screens. The
Corporation is also a partner in 4 new Canadian theatres which
opened in 1996 (adding 30 new screens). In addition, as part of
its longer term strategy, the Corporation opened its first
theatre outside of North America in Budapest, Hungary adding 6
new screens.
In July 1996, the Corporation sold 5 theatres, encompassing 27
screens located in Texas. In addition to this sale the
Corporation sold or closed an additional 17 theatre locations,
encompassing 57 screens during 1996.
Management's current strategy is to increase its revenue and
operating cash flow by developing and building additional
theatres and screens in target markets that complement the
Corporation's existing position in such markets or that provide
the Corporation with a strategic position in a new market.
During 1997 the Corporation expects, in North America, to open 14
new theatre locations (adding 151 new screens) and refurbish a
total of 7 theatres (adding 38 new screens).
Film Licensing
The Corporation obtains licenses to exhibit "first-run" films
by directly negotiating with or, in limited circumstances,
submitting bids to film distributors. Film exhibition licenses
typically specify rental fees based upon the higher of a gross
receipts formula or a theatre admissions revenue-sharing formula.
Under a gross receipts formula, the distributor receives a
specified percentage of box office receipts, with the percentage
generally declining over the term of the run. Under a theatre
admissions revenue-sharing formula, the distributor receives a
specified percentage of the excess of box office receipts over
certain house expenses.
A distributor will either require the exhibitors in a zone to bid
for a film or will allocate its films among the exhibitors in the
zone. When films are licensed under the allocation process, a
distributor will choose which exhibitor is offered a movie and
then that exhibitor will negotiate film rental terms directly
with the distributor for the film. Over the past several years,
distributors have generally used the allocation rather than the
bidding process to license their films.
The Corporation's theatre exhibition business is dependent upon
the availability of popular well-marketed motion pictures.
Accordingly, consistent poor performance of major release films
or disruption in the production of motion pictures by the major
studios and/or independent producers could, over time, have a
material adverse affect on the Corporation.
Film Distribution
The Corporation's distribution entity, Cineplex Odeon Films
Canada, is primarily in the business of distributing films in
Canada to the Corporation and other exhibitors for theatre
exhibition and for broadcast by network, syndicated and pay
television, as well as for home viewing through video-cassette
systems. In 1996, distribution activity in Canada included the
provision of theatrical distribution services for Columbia Tri-
Star Films Canada, Gramercy Pictures Inc. and PolyGram Filmed
Entertainment, in addition to the ongoing distribution of motion
pictures in all media for various other producers and/or
distributors.
Geographic Financial Information
For information concerning revenue, income(loss) from operations
and assets in the Corporation's different geographic areas for
the last three years, reference should be made to Note 14 of the
Notes to the Consolidated Financial Statements in Part II - Item
8 "Financial Statements and Supplementary Data."
Competition
The Corporation is the fifth largest film exhibitor in North
America in terms of number of screens and the third largest in
terms of box office revenue as of December 31, 1996. The major
market focus of the Corporation allows its theatre assets to
serve above average patron volumes compared to the industry.
Approximately 88% of the Corporation's U.S. screens are located
in 10 of the 15 largest U.S. Areas of Dominant Influence.
Approximately 78% of the Corporation's Canadian screens are
located in the 10 largest Canadian cities. The Corporation is the
largest film exhibitor in Canada and the ninth largest in the
United States based upon number of screens.
The Corporation competes with other theatre circuits and
independent theatres with respect to acquiring licenses to
successful films, attracting patrons and finding new theatre
sites. Throughout 1996 there has been an approximate 7.8% growth
in the total number of screens in North America. This growth has
been largely fuelled by exhibitors in the United States building
enormous complexes with 25 to 35 screens. While management
agrees that megaplexes are important there is no evidence that
more screens and more flexible show times have an appreciable
effect in expanding audiences. In certain markets such growth is
having an impact on the Corporation's theatres. The Corporation,
through its 1997 expansion program, will attempt to address the
increase in the industry screen count with its continuing
expansion program so as to increase market share.
Film distributors seek to place films in theatres from which they
can derive the greatest box office revenues. The Corporation
believes the principal competitive factors in obtaining films
from distributors include licensing terms, seating capacity,
location, prestige of the theatre circuit and of the particular
theatre, quality of projection and sound equipment and the
exhibitor's ability and willingness to promote the distributor's
films.
The Corporation believes that the principal competitive factors
in attracting film audiences are the availability of marketable
films, the location of theatres, theatre comfort and environment,
projection and sound quality, level of service and ticket price.
The theatre exhibition industry also faces competition from other
motion picture exhibition delivery systems, such as network,
syndicated and pay television and home video systems. The
Corporation believes that theatre exhibition competes effectively
with these and other alternative exhibition delivery systems for
a variety of reasons including the larger screen size and
superior audio quality. Further, the strength of these
alternative media are largely dependent on the successful
theatrical release in North America of first-run film product. In
addition, there has been significant growth in theatrical
exhibition markets outside of North America. Although this growth
and successful first run exhibitions of motion pictures help
companies in these other business areas derive greater returns,
the Corporation believes that such returns also benefit the
Corporation by providing additional capital to producers and
distributors to finance and distribute new motion pictures which
may be exhibited in the Corporation's theatres.
Regulatory Environment
The Corporation, as an exhibitor of motion pictures, is affected
by certain United States judicial decrees (the "Decrees")
regulating the trade practices of major motion picture
distributors and a small number of motion picture exhibitors
formerly owned by such distributors. The Corporation is not a
party to the Decrees. The Decrees provide, among other things,
that parties subject to the Decrees must distribute motion
pictures to exhibitors on a picture-by-picture and theatre-by-
theatre basis.
The Federal Americans With Disabilities Act ("the Disabilities
Act") prohibits discrimination on the basis of disability in
public accommodations and employment. The Disabilities Act became
effective as to public accommodations in January 1992 and as to
employment in July 1992. The Corporation is unable to predict
precisely the extent to which the Disabilities Act will impact
the Corporation. However, the Corporation currently constructs
new theatres to be accessible to the disabled and believes that
it is otherwise in substantial compliance with all current
applicable regulations relating to accommodations for the
disabled. The Corporation intends to comply with future
regulations relating to accommodating the needs of the disabled,
and the Corporation does not currently anticipate that such
compliance will have a material adverse effect on the Company.
Employees
As of December 31, 1996, the Corporation had 1,480 full-time
employees in the United States, 847 full-time employees in
Canada, 3,248 part-time employees in the United States and 2,087
part-time employees in Canada. The number of employees fluctuates
due to the seasonal nature of the Corporation's business.
Approximately 39.8% of the part-time employees are paid the
minimum wage. Approximately 7.5% of the employees of the
Corporation are film projectionists, who are represented by the
International Alliance of Theatrical Stagehand Employees and
Moving Picture Machine Operators ("I.A.T.S.E."). Approximately
5.0% of the employees of the Corporation are ushers, ticket
takers, cashiers, cleaners, stagehands or concession workers who
are represented by the Service Employees International Union, the
B.C. Government Employees Union, the I.A.T.S.E. Stagehands Union,
the I.A.T.S.E. Front of House Union, the United Food and
Commercial Workers Union or the Transportation Technical
Warehouse Industrial and Service Employees Union.
The Corporation experienced a work stoppage between October 26,
1996 and March 17, 1997 when it locked out projectionists of
Local 173 in the following markets in Ontario: Toronto, Ottawa,
Niagara Peninsula, Thunder Bay, and Sudbury. On March 9, 1997 the
union members of Local 173 accepted the Corporation's new
contract offer and members of the union will return to work as of
March 18, 1997. On February 24, 1997 the Corporation locked out
projectionists of Local 303 in Hamilton and Burlington, Ontario
as members of that union local rejected the new contract offer
from the Corporation. All of the Corporation's theatres
continued to operate throughout the lockouts and there has been
no adverse effect on theatre revenues as a result of the
lockouts. The Corporation is currently in negotiations with
I.A.T.S.E. in Alberta and Quebec City and there is the chance of
a work stoppage in 1997 in these markets. However, all theatres
will continue to operate as they did throughout the lockout in
Ontario. Contracts will be expiring in 1997 in the following
Canadian markets: Saskatchewan, Manitoba, and the Greater
Montreal area. There is the possibility of labour disputes in
all those markets but the theatres will continue to operate
should a labour dispute occur.
In the province of Quebec, the front of house bargaining
agreement is currently in arbitration.
In the United States, negotiations with projectionists continue
in Tacoma, Washington and San Francisco, California. The
Corporation will be entering into negotiations in Seattle,
Washington and Los Angeles, California. The possibility of
labour disputes exist in all those markets. However, the
theatres will continue to operate in the event of a strike or
lockout.
Seasonality
Admission and concession revenues are subject to seasonal
fluctuations which affect all motion picture exhibitors. These
fluctuations are the result of the distribution practices of the
major motion picture studios which have historically concentrated
the release of films during the summer and holiday seasons. The
major motion picture studios have, to some degree, addressed the
seasonality of motion picture exhibition with a strong first
quarter release schedule in both 1996 and 1997.
ITEM 2. PROPERTIES.
As of December 31, 1996, the Corporation leased an aggregate of
271 theatre locations, approximating 86% of all its theatre
locations, having terms (including options) generally ranging
from 15 to 40 years. For further information regarding leased
locations see Note 11 of the Notes to the Consolidated Financial
Statements in Part II - Item 8 "Financial Statements and
Supplementary Data." In addition to leasing premises the
Corporation owned 44 theatres at December 31, 1996, of which 22
are in the United States and 22 are in Canada, and one office
building in Toronto which is the site of the Corporation's head
office.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation has been, and continues to be, involved in
numerous legal proceedings. However, although such matters
cannot be predicted with certainty, the Corporation does not
believe that such lawsuits are likely to result in a judgment
which would have a material adverse effect on the Corporation's
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Executive Officers
As of February 1, 1997, the Corporation's executive officers were
as follows:
Name Age Office
Ernest Leo Kolber 68 Chairman of the Board and
Director
Allen Karp 56 President, Chief Executive Officer and Director
Irwin A. Cohen 56 Executive Vice-President,
Operations for North America
Michael Herman 42 Executive Vice-President,
Corporate Affairs and Secretary
Ellis Jacob 43 Executive Vice-President, Chief
Financial Officer and Director
Howard I. Lichtman 42 Executive Vice-President,
Marketing and Communications
Robert Tokio 53 Executive Vice-President
Stephen Brown 38 Senior Vice-President,
Treasury and Tax
Michael McCartney 42 Senior Vice-President,
Head Film Buyer, North America
James Vassos 42 Senior Vice-President,
Business Affairs and Planning
Senator Kolber was appointed Chairman of the Board of the
Corporation in December 1989. He has been a Member of the Senate
of Canada since December 1983. From October 1987 to September
1993, Senator Kolber was Chairman of Claridge Inc. Senator Kolber
is a director of The Seagram Company Ltd. and The Toronto-
Dominion Bank. Senator Kolber has been a director of the
Corporation since December 1989.
Mr. Karp has been President and Chief Executive Officer of the
Corporation since June 1990. He served as President and Chief
Operating Officer from December 1989 to June 1990. Mr. Karp was
Senior Executive Vice-President of the Corporation from July 1986
to December 1989, and President, North American Theatres Division
of the Corporation from August 1988 to December 1989. Mr. Karp is
a director of Alliance Communications Corporation and Speedy
Muffler King Inc. Mr Karp has been a director of the Corporation
since May 1987.
Mr. Cohen has been Executive Vice-President, Operations for North
America since January 1993. From October 1988 to January 1993 he
served as Senior Vice-President, Theatre Operations, U.S. and
from November 1985 to October 1988 he served as Vice-President,
Northern Division.
Mr. Herman has been Executive Vice-President, Corporate Affairs
and Secretary of the Corporation since January, 1995. He served
as Senior Vice President, Corporate Affairs and Secretary of the
Corporation from May 1992 to December 1994. Mr. Herman was a
partner in the law firm of Goodman and Carr, Toronto from
February 1987 to May 1992.
Mr. Jacob has been Executive Vice-President and Chief Financial
Officer of the Corporation since December 1989. From February
1989 to December 1989, he served as Senior Vice-President and
Chief Financial Officer; from October 1987 to February 1989 he
served as Vice-President Finance and Corporate Controller. Mr.
Jacob is a director of Alliance Communications Corporation. Mr.
Jacob has been a director of the Corporation since June 1990.
Mr. Lichtman has been Executive Vice-President, Marketing and
Communications since December 1989. From August 1988 to December
1989, he served as Senior Vice-President, Marketing; as Vice-
President, Marketing & Promotions from August 1987 to August
1988; as Vice-President, Theatre Publicity and Promotions from
October 1986 to August 1987; and as Director of Publicity and
Promotions for Canadian Theatre Operations from July 1985 to
October 1986.
Mr. Tokio has been Executive Vice-President since November 1990.
He served as Executive Vice-President, Real Estate, from December
1989 to November 1990. From November 1988 to December 1989, he
served as Senior Vice-President, Real Estate Administration.
Mr. Brown has been Senior Vice-President, Treasury and Tax of the
Corporation since January 1995. He served as Vice President,
Taxation and Treasurer from August 1990 to December, 1994. Mr.
Brown joined the Corporation in March 1990 as Director of
Internal Audit.
Mr. McCartney has been Senior Vice-President, Head Film Buyer,
North America, since November 1995. From December 1991 to
November 1995 he served as Senior Vice-President, Film, U.S. and
from September 1988 to December 1991 he served as Vice-President,
Film, U.S. Mr. McCartney joined the Corporation in September 1986
as Regional Film Buyer handling the southern division.
Mr. Vassos has been Senior Vice President, Business Affairs and
Planning since January 1995. He served as Vice President,
Business Affairs and Corporate Controller from May 1991 to
December 1994. Mr. Vassos had been Vice President and Corporate
Controller from January 1990 to April 1991. From February 1989 to
January 1990, Mr. Vassos held the position of Senior Controller -
Planning and Consolidation. Mr Vassos joined the Corporation in
November 1987 as Controller - Planning.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Market Information
The Corporation's Common Shares trade on the New York Stock Exchange and
the Toronto Stock Exchange under the ticker symbol CPX. The following table
indicates the quarterly price range of the Common Shares for the past two
years.
Toronto Stock Exchange New York Stock Exchange
(CDN. DOLLARS) (U.S. DOLLARS)
---------------------------------------------------------------
Fiscal 1995: High Low High Low
- --------------------------------------------------------
First Quarter 3.95 2.63 2.88 1.75
Second Quarter 3.40 2.62 2.50 1.88
Third Quarter 3.15 2.55 2.38 1.88
Fourth Quarter 2.73 1.92 2.00 1.38
Fiscal 1996: High Low High Low
- --------------------------------------------------------
First Quarter 2.73 1.70 2.50 1.25
Second Quarter 3.35 1.65 2.50 1.25
Third Quarter 2.80 2.05 2.13 1.50
Fourth Quarter 2.25 1.87 1.63 1.38
The Corporation's Common Shares began trading on the Toronto Stock Exchange
on October 29, 1982 and on the New York Stock Exchange on May 14, 1987.
Holders
The Corporation had 1,842 registered common shareholders of record as at
February 25, 1997. This amount excludes shareholders whose shares are held
in the name of investment dealers and other nominees.
Dividends
The Corporation has not paid any cash dividends. Under lending agreement
restrictions currently in effect, the Corporation cannot pay any dividends
unless it is in compliance with specified financial ratios. The Corporation
is not currently in compliance with such financial ratios. Any such payment
of dividends is further subject to annual limitations.
Dividends paid to United States shareholders on the Corporation's Common
Shares, if any, will be subject to Canadian non-resident withholding tax at
the treaty reduced rate of 15% of the dividend which is generally
applicable to dividends paid to a resident of the United States or 10% of
the dividend where the beneficial owner is a company which owns 10% of the
voting stock of the Corporation. A United States holder of Common Shares
will generally not be subject to Canadian income tax in respect of capital
gains realized on the disposition of Common Shares.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands of U.S. dollars except per share data)
- -----------------------------------------------------------------------------
-------------Year ended December 31,-------------------
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues * $509,692 $513,150 $541,112 $546,230 $518,723
Earnings before
interest, taxes
depreciation and
amortization * 49,438 51,966 62,725 72,244 38,230
Operating cash flow
excluding net change
in non-cash working
capital * 10,468 10,972 27,767 38,158 2,618
Operating cash
flow * 12,416 3,522 31,435 38,674 (1,698)
Income(loss) * (31,082) (32,907) (14,173) 969 (39,713)
Total assets 644,171 649,643 688,693 697,105 741,652
- -------------------------------------------------------------------------------------------------
Long-term
obligations 335,447 393,556 390,752 344,967 422,580
- -------------------------------------------------------------------------------------------------
Shareholders' equity 218,580 165,992 196,175 200,387 198,966
- -------------------------------------------------------------------------------------------------
Earning(loss) per share *
Basic (0.19) (0.29) (0.13) 0.01 (0.46)
Fully diluted (0.19) (0.29) (0.13) 0.01 (0.46)
- ------------------------------------------------------------------------------------------------
* From Continuing Operations
</TABLE>
See the Notes to the Consolidated Financial Statements and Part II - Item 7
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" with respect to various factors affecting the
comparability of information with respect to the three fiscal years ended
December 31, 1996. See Part II - Item 7 "Management's Discussion and
Analysis of Results of Operations and Financial Condition" with respect to
various factors which may have an effect on the Corporation's future
financial condition and results of operations.
<PAGE>
ITEM. 7 Management's Discussion and Analysis of
Results of Operations and Financial Condition
(All figures are in U.S. dollars except where otherwise noted)
INTRODUCTION
Management's discussion and analysis of results of operations and financial
condition focuses on liquidity, capital resources and the results of the
Corporation's operations. This section should be read in conjunction with
the consolidated financial statements, the notes thereto and other
information presented elsewhere herein.
The Corporation recorded a net loss for the year ended December 31, 1996 of
$31,082,000 compared to a net loss for the year ended December 31, 1995 of
$32,907,000 and a net loss for the year ended December 31, 1994 of
$14,173,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Continuing Operations
Cash flow from operations in 1996 amounted to a net inflow of $12,416,000
compared to a net inflow of $3,522,000 in 1995. Excluding the impact of the
net change in non-cash working capital, the Corporation's cash flow from
operations for the year ended December 31, 1996 amounted to a net inflow of
$10,468,000 compared to a net inflow of $10,972,000 for the year ended
December 31, 1995.
Long-Term Debt
In March of 1996 the Corporation issued 25,000,000 Common Shares to the
public at a price of $1.375 per share for an aggregate consideration of
$34,375,000. In addition, in accordance with the provisions of the Amended
and restated Subscription Agreement Universal Studios, Inc. and the Charles
Rosner Bronfman Trust subscribed for 24,242,181 Subordinate Restricted
Voting (SRV) Shares and 12,121,454 Common Shares respectively at the same
price as the offering to the public for an aggregate consideration of
$50,000,000. In April 1996, as part of the over-allotment option provided
to the underwriters pursuant to the public offering, the Corporation issued
a further 355,958 Common Shares at a price of $1.375 to the public. The
aggregate consideration from this issuance was $489,000. The proceeds from
the issuance of both the SRV and Common Shares were used to reduce the
Corporation's revolving credit facilities.
Long-term debt decreased from $381,857,000 at December 31, 1995 to
$326,058,000 at December 31, 1996. This decrease is the result of the
equity proceeds raised by the Corporation in the first quarter of 1996
which have been used to initially reduce the Corporation's revolving long-
term credit facilities.
Included in long-term debt at December 31, 1996 is an amount of $79,940,000
relating to the Corporation's bank credit facilities. These bank credit
facilities contain restrictive covenants which require the Corporation to
maintain certain financial ratios. At December 31, 1996, the Corporation
failed to meet certain financial covenants under these bank credit
facilities. Subsequent to that date, the Corporation's bankers agreed to
amend certain financial covenants for the quarter ended December 31, 1996
and for all four quarters of 1997. Given the uncertainty with respect to
the admission and concession revenue that the Corporation will generate,
there is a possibility that the Corporation may not meet certain financial
covenants in the future. The Corporation believes that the bank syndicate
participating in the bank credit facilities would waive the particular
financial covenants if the Corporation is not in compliance at a
measurement date during the next twelve month period.
At December 31, 1996 the Corporation had approximately $68,000,000
available under its bank credit facilities. The amount available under such
facilities from time to time is dependent on the operating results of the
Corporation. Scheduled repayments under the bank credit facilities in 1997
are $20,000,000.
At December 31, 1996 the Corporation has three interest rate swap
agreements outstanding. The aggregate notional principal associated with
the three swap agreements is $55,000,000 and all such agreements require
the Corporation to pay a fixed interest rate and receive a floating rate.
The fixed interest rates associated with the swap agreements range from a
low of 5.72% per annum to a high of 5.78% per annum and all such swaps
expire in 1998. Of the Corporation's long-term debt at December 31, 1996
approximately 92% is subject to fixed rates of interest. During the second
half of 1996, Canadian dollar denominated interest rates decreased
significantly relative to such rates denominated in United States dollars.
The Corporation has the ability under its bank credit facilities to borrow
a portion of its funds in Canadian dollars and at December 31, 1996 has
availed itself of this option, with approximately 45% of the outstanding
bank credit facilities at that date being denominated in Canadian dollars.
Future Commitments
In 1996 the Corporation opened 2 new theatres and refurbished 5 theatres in
the United States adding a total of 31 new screens. In Canada in 1996 the
Corporation opened 3 new theatres and refurbished 8 theatres adding a total
of 44 new screens. The Corporation is also a partner in 4 new Canadian
theatres which opened in 1996 (adding 30 new screens). In addition, as part
of its longer term strategy, the Corporation opened its first theatre
outside of North America in Budapest, Hungary. The total cost associated
with the construction of these theatres was approximately $17,000,000.
In 1997 the Corporation expects to open 14 new theatre locations (adding
151 new screens) and refurbish a total of 7 theatres (adding 38 new
screens) in North America. It is estimated that the total cost for this
expansion will be approximately $30,000,000. The Corporation through 1997
will continue to look at opportunities outside of North America although at
this stage there are no definite plans for additional theatres. The
Corporation intends to fund the above noted expansion through a combination
of internally generated cash flow and funds available under its bank credit
facilities.
The Corporation's current strategy is to develop and build additional
theatres and screens in target markets that complement the Corporation's
existing position in such markets or that provide the Corporation with a
strategic position in a new market. Prior to commitment, management
conducts an exhaustive study of each potential site. Such study includes a
review of competition currently in the market and any proposed competition
and market demographics.
RESULTS OF OPERATIONS - 1996 AND 1995
Industry admission revenue and attendance increased in 1996 by 7.7% and
6.4% respectively compared to 1995 figures.
The Corporation reports its results in United States dollars. In order to
eliminate the impact of exchange rate fluctuations on the yearly comparison
of both admission and concession revenue, the results for the Canadian
operations discussed below are stated in Canadian dollars. The
Corporation's United States results have been impacted by the sale of 28
theatres, located in Florida and Georgia, to Carmike Cinemas, Inc. in the
second quarter of 1995. In 1996 the Corporation sold 5 theatres located in
Texas. The impact of this sale is not considered significant to the
Corporation's United States results.
The Corporation's United States theatre circuit box office revenue
decreased for both the year and the quarter ended December 31, 1996 by 4.0%
and 8.6% respectively when compared to the corresponding period in the
prior year. Adjusting for the impact of the sale of the Florida and Georgia
theatres, the Corporation's United States theatre circuit box office
revenue decreased by 1.9% for the year ended December 31, 1996 compared to
the year ended December 31, 1995. This decrease in box office revenue for
the year ended December 31, 1996 was the result of a decrease in attendance
of 4.3% offset by an increase in box office revenue per patron of 2.4%. The
decrease in attendance in 1996 compared to 1995 is a direct result of
increasing competition from other film exhibitors who have been
aggressively building new theatres. This fact is evidenced by an increase
in the total theatrical screen count in the United States of 6% when
compared to 1995. The decrease in box office revenue in the fourth quarter
of 1996 was the result of an attendance decrease of 10.3% offset by an
increase in box office revenue per patron of 1.7%. The decrease in
attendance in the fourth quarter reflects the fact that the film product in
the fourth quarter of 1996 was not as strong as the prior year and the
aforementioned increasing competition. The Corporation anticipates that its
expansion program will address, at least in part, this issue of increasing
competition.
The Corporation's Canadian theatres reported an increase in box office
revenue of 2.8% in 1996 compared to 1995 (when measured in Canadian
dollars). This increase was the result of an increase in attendance of 3.5%
offset by a decrease in box office revenue per patron of 0.7%. In the
fourth quarter of 1996 the Corporation's Canadian theatres reported an
increase in box office revenue of 5.0% compared to the fourth quarter of
1995 (when measured in Canadian Dollars). This increase was the result of
an increase in attendance of 4.1% and an increase in box office revenue per
patron of 0.9%. The increase in attendance experienced by the Corporation's
Canadian theatre circuit in 1996 compared to 1995 was a result of the
Corporation's relationships with certain film distributors who enjoyed
comparatively more successful film product in 1996 compared to 1995.
The Corporation's United States concession revenue decreased by 3.0% in
1996 compared to 1995. In the fourth quarter of 1996, the Corporation's
United States concession revenue decreased by 5.1% when compared to the
fourth quarter of 1995. Adjusting for the impact of the sale of the Florida
and Georgia theatres, the Corporation's United States concession revenue
for the year ended December 31, 1996 was equivalent to that of the year
ended December 31, 1995. This was achieved due to an increase in concession
revenue per patron of 4.3% which offset the decrease in attendance. For the
fourth quarter the decrease was the result of a decrease in attendance of
10.3% offset by a 5.2% increase in concession revenue per patron.
The Corporation's Canadian concession revenue increased in 1996 by 6.0%
(when measured in Canadian dollars) compared to 1995, reflecting an
increase in concession revenue per patron of 2.5% and an increase in
attendance of 3.5%. For the fourth quarter of 1996, the Corporation's
Canadian concession revenue increased by 3.7% comprising an increase in
attendance of 4.1% and a decrease in concession revenue per patron of 0.4%.
The increase in concession revenue per patron for the year reflects the
impact of the Corporation's focus in this area and the augmented design of
concession stands in the Corporation's newer theatres.
Gross Margin and Other Costs
The gross margin from theatre operations (being revenue from theatre
operations less film cost, cost of concessions, advertising, theatre
payroll, occupancy and supplies and services), when expressed as a
percentage of theatre operating revenue, decreased in 1996 to 15.4%
compared to 15.7% in 1995. The slight decline in gross margin for the year
was primarily the result of a general increase in certain direct costs
associated with theatre operations.
The gross margin from theatre operations, when expressed as a percentage of
theatre operating revenue, decreased in the fourth quarter of 1996 compared
to the fourth quarter of 1995 to 14.0% from 16.4%. The decline in gross
margin for the fourth quarter of 1996 was due to (1) a general increase in
certain direct costs associated with theatre operations; and (2) the fixed
component of theatre operating costs (primarily occupancy costs).
Interest on long-term debt decreased by 13.4% in 1996 compared to the prior
year. The decrease in interest on long-term debt was primarily attributable
to the initial application of equity proceeds from the public offering in
the first quarter of 1996 against the Corporation's long-term debt.
During 1996 the value of the Canadian dollar strengthened relative to the
United States dollar. While currency movements affect the reporting of
revenues and expenses of the Corporation's Canadian operations, the
financial impact is limited as the costs of operating the Canadian theatres
are supported by the revenues of such theatres.
RESULTS OF OPERATIONS - 1995 AND 1994
Industry admission revenue increased in 1995 by 2.0% while industry
attendance decreased by 2.3%, compared to 1994 figures.
The Corporation's United States results have been impacted by the sale of
28 theatres, located in Florida and Georgia, to Carmike Cinemas, Inc. in
the second quarter of 1995.
The Corporation's United States theatre circuit box office revenue
decreased for both the year and the quarter ended December 31, 1995 by 4.9%
and 0.9% respectively when compared to the corresponding period in the
prior year. Adjusting for theatres sold, the Corporation's United States
theatre circuit box office revenue increased by 0.1% for the year ended
December 31, 1995 compared to the year ended December 31, 1994 and
increased by 6.0% in the fourth quarter of 1995 when compared to the same
period in the prior year. This increase in box office revenue for the year
ended December 31, 1995 was the result of an increase in box office revenue
per patron of 0.2% offset by an attendance decrease of 0.1%. The increase
in box office revenue in the fourth quarter of 1995 was the result of an
attendance increase of 5.9% and an increase in box office revenue per
patron of 0.1%. The increase in attendance in the fourth quarter reflects
the strong film release schedule which included such movies as Ace Ventura
II, Goldeneye, Toy Story and Jumanji.
The Corporation's Canadian theatres reported a decrease in box office
revenue of 5.8% in 1995 compared to 1994 (when measured in Canadian
dollars). This decrease was the result of a decrease in attendance of 4.0%
and a decrease in box office revenue per patron of 1.8%. In the fourth
quarter of 1995 the Corporation's Canadian theatres reported a decrease in
box office revenue of 8.7% compared to the fourth quarter of 1994 (when
measured in Canadian Dollars). This decrease was the result of a decrease
in attendance of 5.7% and a decrease in box office revenue per patron of
3.0%. The decrease in attendance experienced by the Corporation's Canadian
theatre circuit in 1995 compared to 1994 was a result of the Corporation's
relationships with certain film distributors who enjoyed comparatively more
successful film product in 1994 compared to 1995. The decrease in box
office revenue per patron in Canada was primarily due to selective price
changes.
The overall results for 1995 reflect the relatively low box office
performance in the first quarter of 1995, which was the lowest quarter for
the movie exhibition industry in terms of both attendance and box office
revenue since 1988.
The Corporation's United States concession revenue decreased by 7.0% in
1995 compared to 1994. In the fourth quarter of 1995, the Corporation's
United States concession revenue decreased by 3.7% when compared to the
fourth quarter of 1994. Adjusting for theatres sold, the Corporation's
United States concession revenue decreased by 0.5% in the year ended
December 31, 1995 compared to 1994. In the fourth quarter of 1995, after
adjusting for theatres sold, the Corporation's United States concession
revenue increased by 5.4% primarily reflecting an increase in attendance
for the fourth quarter of 1995 compared to 1994.
The Corporation's Canadian concession revenue decreased in 1995 by 2.8%
(when measured in Canadian dollars) compared to 1994, reflecting an
increase in concession revenue per patron of 1.2% offset by the decrease in
attendance of 4.0%. For the fourth quarter of 1995, the Corporation's
Canadian concession revenue decreased by 5.2% comprising a decrease in
attendance of 5.7% and an increase in concession revenue per patron of
0.5%.
Gross Margin and Other Costs
The gross margin from theatre operations (being revenue from theatre
operations less film cost, cost of concessions, advertising, theatre
payroll, occupancy and supplies and services), when expressed as a
percentage of theatre operating revenue, decreased in 1995 to 15.7%
compared to 16.9% in 1994. The decline in the gross margin for the year was
primarily the result of two factors: (1) the gross margin from concession
sales decreased because of rising costs associated with some product lines
and the implementation of new products, and (2) the fixed component of
theatre operating costs (primarily occupancy costs).
The gross margin from theatre operations, when expressed as a percentage of
theatre operating revenue, increased in the fourth quarter of 1995 compared
to the fourth quarter of 1994 to 16.4% from 15.0%. The improvement in gross
margin in the fourth quarter of 1995 was due to lower operating costs and
the sale of certain theatres in Florida and Georgia which had generated
lower gross margin compared to the balance of the Corporation's United
States theatre circuit.
As a result of the sale of the theatres to Carmike Cinemas, Inc. the
Corporation recorded a charge against goodwill in the amount of $2,468,000
and a loss on disposal of tangible assets in the amount of $822,000. These
amounts have been reflected in Other Income (Expenses) in the Corporation's
consolidated income statement. Proceeds from the sale of these theatres
were approximately $22,000,000 and of this amount $13,900,000 was applied
against debt.
Interest on long-term debt increased by 21.8% in 1995 compared to the prior
year. The increase in interest on long-term debt was primarily attributable
to the impact of a full year of the 10.875% Senior Subordinated Notes
issued as part of the Corporation's debt restructuring in June of 1994.
Interest on long-term debt was also impacted by the general rise in
effective interest rates.
While the significant weakening of the United States dollar relative to the
Canadian dollar throughout 1995 affects the reporting of revenues and
expenses of the Corporation's Canadian operations, the financial impact is
limited as the costs of operating the Canadian theatres are supported by
the revenues of such theatres.
CANADIAN ISSUER
The Corporation is an Ontario corporation and expects to conduct
approximately one-third of its operations in Canada in 1997. The
Corporation is subject to certain Canadian economic, fiscal, monetary and
political policies and factors.
Reference is made to Note 17 of the Notes to the Consolidated Financial
Statements of the Corporation for a reconciliation of the Corporation's
financial statements to United States Generally Accepted Accounting
Principles.
INFLATION
For the three years ended December 31, 1996, inflation has not had a
pronounced effect on the Corporation's results of operations.
FORWARD LOOKING STATEMENTS
The Corporation and its representatives have made, or may make, forward
looking statements including those contained in this Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Use of the words "believes", "expects", "estimated", "intends", or
similar expressions identify such forward looking statements.
The results contemplated by the Corporation's forward looking statements
are subject to certain risks and uncertainties that could result in actual
performance being materially different from anticipated results, including
without limitation, lack of high quality commercial film product,
construction risks and delays, failure to obtain future waivers or
amendments under the Corporation's bank credit facilities and other factors
described herein.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Cineplex Odeon
Corporation
We have audited the consolidated balance sheets of Cineplex
Odeon Corporation as at December 31, 1996 and 1995 and the
consolidated statements of income and changes in
shareholders' equity and cash resources for each of the
years in the three year period ended December 31, 1996.
These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements
present fairly, in all material respects, the financial
position of the Corporation as at December 31, 1996 and 1995
and the results of its operations and the changes in its
shareholders' equity and cash resources for each of the
years in the three year period ended December 31, 1996 in
accordance with accounting principles generally accepted in
Canada.
United States generally accepted accounting principles
differ from Canadian accounting principles in the
Corporation's circumstances as described in note 17 to the
consolidated financial statements.
KPMG
Chartered Accountants
Toronto, Canada
February 18, 1997
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------------- -----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,718 $ 1,604
Accounts receivable (note 3) 9,552 10,362
Other 8,852 7,614
----------- -----------
21,122 19,580
PROPERTY, EQUIPMENT AND LEASEHOLDS (note 4) 579,841 583,442
OTHER ASSETS
Long-term investments and receivables 2,535 3,945
Goodwill
(less accumulated amortization of $11,281; 1995 - $10,167) 32,816 33,927
Deferred charges
(less accumulated amortization of $3,671; 1995 - $2,395) 7,857 8,749
------------ -----------
43,208 46,621
------------ -----------
TOTAL ASSETS $ 644,171 $ 649,643
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals (note 5) $ 59,474 $ 59,591
Deferred income (note 6) 17,150 14,930
Current portion of long-term debt and other obligations 6,926 7,146
----------- ----------
83,550 81,667
======== =======
LONG-TERM DEBT (note 7) 326,058 381,857
CAPITALIZED LEASE OBLIGATIONS (note 11) 8,317 10,451
DEFERRED INCOME (note 6) 6,594 8,428
PENSION OBLIGATION (note 9) 1,072 1,248
SHAREHOLDERS' EQUITY
Capital stock (note 10) 555,374 472,479
Translation adjustment 4,016 3,241
Retained earnings (deficit) (340,810) (309,728)
----------- -- ----------
218,580 165,992
COMMITMENTS AND CONTINGENCIES (note 11)
------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 644,171 $ 649,643
======== =======
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands of U.S. dollars except per share figures)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
---------------------
<S> <C> <C> <C>
REVENUE
Admissions $ 358,973 $ 365,220 $ 384,558
Concessions 126,636 126,319 133,850
Other 24,083 21,611 22,704
---------- ---------- ----------
509,692 513,150 541,112
EXPENSES
Theatre operations and other expenses 418,328 418,731 437,534
Cost of concessions 22,357 22,016 21,724
General and administrative 18,192 17,575 16,229
Depreciation and amortization 43,648 42,621 40,859
---------- ----------
502,525 500,943 516,346
---------- ---------- -------
Income before the undernoted (note 17) 7,167 12,207 24,766
Other expenses (note 12) (1,377) (2,862) (2,900)
---------- ---------- ----------
Income before interest on long-term
debt and income taxes (note 17) 5,790 9,345 21,866
Interest on long-term debt 35,482 40,983 33,641
---------- --------- ---------
Loss before income taxes (29,692) (31,638) (11,775)
Income taxes (note 13 ) 1,390 1,269 2,398
--------- --------- ---------
NET LOSS $ (31,082) $ (32,907) $ (14,173)
========= ======== ========
BASIC
Weighted average shares outstanding 163,473,000 114,764,000 110,175,000
Net loss per share ($0.19) ($0.29) ($0.13)
FULLY DILUTED
Weighted average shares outstanding 176,107,000 122,616,000 118,245,000
Net loss per share ($0.19) ($0.29) ($0.13)
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(in thousands of U.S. dollars except per share figures)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH PROVIDED BY(USED FOR)
OPERATING ACTIVITIES
Net loss $ (31,082) $ (32,907) $ (14,173)
Depreciation and amortization 43,648 42,621 40,859
Other non-cash items (2,098) 1,258 1,081
----------- ----------- ----------
10,468 10, 972 27,767
Net change in non-cash working capital 1,948 (7,450) 3,668
----------- ----------- ----------
12,416 3,522 31,435
----------- ----------- ----------
FINANCING ACTIVITIES
Decrease in long-term debt and other obligations (58,411) (9,289) (351,735)
Increase in long-term debt and other obligations 0 14,085 364,274
Net change in operating credit facilities 0 0 (8,168)
Issue of share capital, net of issue costs 82,895 64 14,646
Fees associated with refinancing 0 0 (9,093)
Other 175 (615) (27)
----------- ---------- ---------
24,659 4,245 9,897
----------- ---------- ---------
INVESTMENT ACTIVITIES
Additions to property, equipment and leaseholds (36,989) (30,749) (40,728)
Long-term investments 0 (109) (590)
Proceeds on sale of certain theatre properties 1,974 23,674 107
Proceeds on sale of non-theatre related assets 0 0 424
Other (946) (530) (262)
----------- ---------- ---------
(35,961) (7,714) (41,049)
----------- ---------- ---------
NET INCREASE(DECREASE) DURING YEAR 1,114 53 283
CASH AT BEGINNING OF YEAR 1,604 1,551 1,268
----------- ----------
CASH AT END OF YEAR $ 2,718 $ 1,604 $ 1,551
======= ======= =======
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic $ 0.08 $ 0.03 $ 0.29
Fully Diluted $ 0.07 $ 0.03 $ 0.27
CHANGE IN NON-CASH WORKING CAPITAL
Current assets
Accounts receivable $ 1,117 $ 629 $ 4,657
Other (1,024) 1,383 2,793
Current liabilities
Accounts payable and accruals (998) (9,509) (4,264)
Deferred income 2,157 508 790
Income taxes payable 696 (461) (308)
---------- --------- ---------
$ 1,948 $(7,450) $ 3,668
======= ======= ======
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of U.S. dollars, except for number of shares)
<TABLE>
<CAPTION>
Common Shares Subordinate Restricted Retained Total
Voting Shares Earnings Translation Shareholders'
Shares Amount Shares Amount (Deficit) Adjustment Equity
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993 62,528,852 $206,093 46,729,131 $251,676 ($262,648) $5,266 $200,387
Exercise of options 537,711 948 948
Net loss (14,173) (14,173)
Translation adjustment (4,685) (4,685)
Issue of shares 2,475,114 6,849 2,475,114 6,849 13,698
- ----------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 65,541,677 213,890 49,204,245 258,525 (276,821) 581 196,175
Exercise of options 38,950 64 64
Net loss (32,907) (32,907)
Translation adjustment 2,660 2,660
- -----------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1995 65,580,627 213,954 49,204,245 258,525 (309,728) 3,241 165,992
Exercise of options 276,118 375 375
Net loss (31,082) (31,082)
Translation adjustment 775 775
Issue of shares 37,477,412 49,187 24,242,181 33,333 82,520
- ----------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1996 103,334,157 $263,516 73,446,426 $291,858 ($340,810) $4,016 $218,580
===============================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars unless otherwise stated)
1. GENERAL
The Corporation is incorporated under the Ontario Business Corporations
Act.
The financial results of the Corporation's operations are presented in
United States dollars, as approximately two-thirds of the Corporation's
activities emanate from the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada, which, except as
described in note 17, conform in all material respects with accounting
principles generally accepted in the United States. A summary of
significant accounting policies is set out below.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Corporation and its subsidiaries. Intercompany accounts
and transactions have been eliminated. The Corporation accounts for its
interests in joint ventures through the proportionate consolidation method.
Inventories: Inventories are stated at the lower of cost (first-in, first-
out basis) and net realizable value.
Property, Equipment and Leaseholds: Property, equipment and leaseholds are
stated at cost less accumulated depreciation and amortization. Depreciation
and amortization are calculated using the following methods and annual
rates:
Buildings Straight-line over 40 years
Projection equipment Straight-line over 20 years
Other equipment Straight-line over 15 years
Leaseholds Straight-line over periods from 15 to 40 years
Construction in progress is depreciated from the date the asset is ready
for productive use.
Goodwill: Goodwill represents the excess of the purchase price of certain
businesses over the fair value of the net identifiable assets acquired and
is being amortized, on a straight-line basis, over 40 years. The
Corporation regularly reviews the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life
can be recovered through projected future undiscounted income from
operations before interest on long-term debt and effects of goodwill
amortization.
Deferred Income: Advance payments received under a strategic marketing
relationship with a major supplier, advance sales of admissions, the sale
of gift certificates and income from certain promotional programs are
included as deferred income, and are recognized as income when services are
rendered.
Deferred Charges: Deferred charges, consisting primarily of costs
associated with debt refinancing, are amortized over the term of the
related debt.
Foreign Currency Translation: Assets and liabilities denominated in a
currency other than U.S. dollars are translated to U.S. dollars at exchange
rates in effect at the balance sheet date. The resulting gains or losses
are accumulated in a separate component of shareholders' equity under the
caption "Translation adjustment". Revenue and expense items are translated
at average exchange rates prevailing during the year.
Admissions Revenue: Admissions revenue from the exhibition of motion
pictures is recognized on the dates of exhibition.
Earnings Per Share: Basic earnings per share are calculated using the
weighted daily average number of Common Shares and Subordinate Restricted
Voting Shares outstanding. Fully diluted earnings per share are calculated
assuming the exercise of stock options at the beginning of the year, or for
those stock options issued during the year, at the date of the grant to the
extent the impact is dilutive.
Interest Rate Hedging Activities: The Corporation uses interest rate swaps
to manage interest rate risk. These financial instruments are not held for
trading purposes and any payments or receipts under such contracts are
recognized as adjustments to interest expense.
Measurement Uncertainty: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period. Actual results could
differ from those estimates.
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Trade $ 8,446,000 $ 8,547,000
Current portion of
long-term receivables 150,000 840,000
Other 1,098,000 1,192,000
Employee loans 323,000 307,000
Allowance for doubtful accounts (465,000) (524,000)
- -----------------------------------------------------------------------------------------------
$ 9,552,000 $ 10,362,000
========================================================
</TABLE>
4. PROPERTY, EQUIPMENT AND LEASEHOLDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $63,116,000 $ 62,374,000
Buildings Cost 126,217,000 124,836,000
Accumulated depreciation (19,919,000) (17,163,000)
----------------- -----------------
106,298,000 107,673,000
Equipment Cost 136,521,000 133,100,000
Accumulated depreciation (70,851,000) (65,761,000)
---------------- ----------------
65,670,000 67,339,000
Leaseholds Cost 537,153,000 522,098,000
(including Accumulated depreciation (197,688,000) (180,426,000)
capital leases) ---------------- -----------------
339,465,000 341,672,000
Construction in progress 5,292,000 4,384,000
- --------------------------------------------------------------------------------------------------------
$579,841,000 $583,442,000
============================================================
</TABLE>
The net book value of assets held under capital leases at December 31, 1996
was $20,508,000 ($21,857,000 at December 31, 1995), net of accumulated
amortization of $7,700,000 ($6,655,000 at December 31, 1995).
5. ACCOUNTS PAYABLE AND ACCRUALS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Trade $ 40,332,000 $38,067,000
Accrued liabilities 9,809,000 12,096,000
Sales and other taxes 8,517,000 8,584,000
Other 816,000 844,000
- ---------------------------------------------------------------------------------------
$ 59,474,000 $ 59,591,000
==================================================
</TABLE>
6. DEFERRED INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Strategic marketing relationship $ 8,296,000 $ 10,128,000
Advance admission sales 9,157,000 7,573,000
Gift certificates 5,001,000 4,432,000
Promotional programs 1,012,000 1,135,000
Other 278,000 90,000
- --------------------------------------------------------------------------------
23,744,000 23,358,000
Less: Current portion 17,150,000 14,930,000
- -------------------------------------------------------------------------------------------
$ 6,594,000 $ 8,428,000
=====================================================
</TABLE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Senior subordinated notes maturing
June 15, 2004, bearing interest
at 10.875% $ 200,000,000 $ 200,000,000
Bank credit facilities of
$147,930,000 maturing
December 31, 1999 79,940,000 131,568,000
Various notes and mortgages
(interest rates from 8.00% to 11.50%) 49,877,000 54,209,000
- -----------------------------------------------------------------------------------------------
329,817,000 385,777,000
Less: Current portion 3,759,000 3,920,000
- -----------------------------------------------------------------------------------------------
$ 326,058,000 $ 381,857,000
========================================================
</TABLE>
The bank credit facilities bear interest at variable rates based upon an
applicable margin over LIBOR or the bank's reference rate. The applicable
margin for LIBOR borrowings will vary from a maximum of 2.25% to a minimum
of 1.25% based upon the Corporation meeting certain financial ratios.
Commitment reductions under the bank credit facilities amount to
$20,000,000 in 1997, $25,000,000 in 1998 and the remaining balance in 1999.
The bank credit facilities are secured by certain assets of the Corporation
and its subsidiaries.
The bank credit facilities contain restrictive covenants which require the
Corporation to maintain certain financial ratios. At December 31, 1996, the
Corporation failed to meet certain financial covenants under its bank
credit facilities. Subsequent to that date, the Corporation's bankers
agreed to amend certain financial covenants for the quarter ended December
31, 1996 and for all four quarters of 1997. Given the uncertainty with
respect to the admission and concession revenue that the Corporation will
generate, there is a possibility that the Corporation may not meet certain
financial covenants in the future. The Corporation believes that the bank
syndicate participating in the bank credit facilities would waive the
particular financial covenants if the Corporation is not in compliance at a
measurement date during the next twelve month period.
Principal repayments on long-term debt during each of the next five years
approximate the following:
- ----------------------------------------------------------
1997 $ 3,759,000
1998 27,215,000
1999 84,139,000
2000 1,939,000
2001 1,335,000
Thereafter 211,430,000
- ----------------------------------------------------------
$329,817,000
==================================
8. FINANCIAL INSTRUMENTS
(i) Swap Agreements - The Corporation has entered into interest rate swap
agreements to manage its interest rate exposure. At December 31, 1996 the
Corporation had outstanding three interest rate swap agreements with a
commercial bank. The details of the swaps are as follows:
(a) Notional principal - $20,000,000 - The Corporation pays 5.78% per
annum, payable on a quarterly basis and receives three month LIBOR
rate. This swap expires July 31, 1998.
(b) Notional principal - $15,000,000 - The Corporation pays 5.74% per
annum, payable on a quarterly basis and receives three month LIBOR
rate. This swap expires November 30, 1998.
(c) Notional principal - $20,000,000 - The Corporation pays 5.72% per
annum, payable on a quarterly basis and receives three month LIBOR
rate. This swap expires November 30, 1998.
The Corporation is exposed to credit loss in the event of non-performance
by the other party to the interest rate swap agreements. However, the
Corporation does not anticipate non-performance by the counterparty.
(ii) Fair Value of Financial Instruments - The carrying value of cash,
accounts receivable, accounts payable and accruals and the current portion
of long-term debt and other obligations approximates fair value due to the
short term maturities of these instruments. Financial instruments with a
carrying value different from their fair value include:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
Long-term investments and receivables
- Practicable to estimate fair value $ 935,000 $7,873,000 $3,210,000 $10,550,000
- Not practicable $1,600,000 -- $ 735,000 --
Financial liabilities
Long-term debt $326,058,000 $326,558,000 $381,857,000 $364,357,000
Swap agreements net receivable (payable) -- $123, 000 -- ($608,000)
</TABLE>
The fair value of long-term investments and receivables is based on quoted
market prices (where applicable) or by discounting future cash flows,
including interest payments, using rates currently available for similar
investments and receivables. The fair value of long-term debt is based on
quoted market prices (where applicable) or by discounting future cash
flows, including interest payments, using rates currently available for
debt of similar terms and maturity. The fair value of interest rate swap
agreements are the estimated amounts that the Corporation would receive (or
pay) upon termination of the agreements.
9. PENSION OBLIGATION
The Corporation has a defined benefit pension plan covering full-time
employees in the United States. The benefits under this plan are based upon
years of service and the employees' compensation for certain periods during
the last years of employment. This plan is non-contributory and the
Corporation's funding policy is to make the minimum annual contribution
required by the applicable regulations. At December 31, 1996, approximately
85% of the assets of this plan were held in bonds and approximately 15% in
equities. The most recent actuarial estimate for the plan covering these
employees as at December 31, 1996 indicates pension fund assets of
$6,557,262 ($6,071,000 at December 31, 1995) and accrued pension benefits
of $12,185,000 ($12,286,000 at December 31, 1995).
The Corporation has a pension plan covering full time employees in Canada.
Prior to January 1, 1993 this plan was a defined benefit plan and effective
on that date it was converted to a defined contribution plan. At the date
of the conversion benefits under the defined benefit plan were frozen. The
most recent actuarial estimate for the plan covering Canadian employees
indicates a surplus of pension fund assets over accrued benefits of
approximately $2,686,000.
At December 31, 1996, the Corporation's pension obligation is $2,145,000,
of which $1,072,000 is the long-term portion ($2,348,000 at December 31,
1995 of which $1,248,000 was the long-term portion).
10. CAPITAL STOCK
- -----------------------------------------------------------------
December 31, 1996 December 31, 1995
- -----------------------------------------------------------------
Authorized:
Unlimited number of Common Shares
Unlimited number of First Preference Shares issuable in series
Unlimited number of Subordinate Restricted Voting Shares
Issued:
103,334,157 Common Shares
(December 31, 1995 - 65,580,627) $263,516,000 $213,954,000
73,446,426 Subordinate Restricted
Voting Shares
(December 31, 1995 - 49,204,245) 291,858,000 258,525,000
- --------------------------------------------------------------------------
$555,374,000 $472,479,000
=====================================================
i) On March 20, 1996 the Corporation filed a supplemented short form
prospectus in Canada and the United States pursuant to the multi-
jurisdictional disclosure system with respect to an offering of 25,000,000
Common Shares to the public at a price of $1.375 per share, for an
aggregate consideration of $34,375,000. In addition, in accordance with the
provisions of the Amended and Restated Subscription Agreement, Universal
Studios, Inc. (Universal) (formerly MCA INC.) and the Charles Rosner
Bronfman Trust (the Trust) agreed to subscribe for 24,242,181 Subordinate
Restricted Voting (SRV) Shares and 12,121,454 Common Shares respectively,
at the same price as the offering to the public, for aggregate
consideration of $50,000,000. The public offering and the subscriptions by
Universal and the Trust were completed on March 28, 1996. On April 16,
1996, the Corporation issued 355,958 Common Shares at a price of $1.375 per
share as part of the over-allotment option provided to the underwriters
pursuant to the public offering. The net proceeds from the issuance of the
Common and SRV Shares were used to reduce indebtedness owing under the
Corporation's revolving bank credit facilities.
ii) The SRV Shares are held by Universal. Under the terms of the shares,
Universal is entitled to exercise no more than one-third less one vote of
the voting rights applicable to all issued voting shares.
iii) In 1996 the Amended and Restated Stock Option Plan (the Option Plan)
was approved. The Option Plan provides for the granting of rights to
purchase Common Shares under both incentive and non-incentive stock option
agreements. The options granted under the Option Plan are for 10 year terms
and vest over various periods to a maximum of 5 years. The maximum number
of options which can be granted under the Option Plan is 17,646,716.
During 1996 the Corporation amended the exercise price of 6,859,989 of the
outstanding stock options issued under the Option Plan to Canadian $1.87.
In addition, the Corporation extended the expiry dates of 2,754,244
outstanding stock options to the date which is 10 years from the date of
the original grant of such option.
The following options to purchase Common Shares expire between October 15,
2001 and April 16, 2006:
- ---------------------------------------------------------------
Option price per share December 31, 1996
- ---------------------------------------------------------------
$ 1.70 Canadian 8,450
1.87 Canadian 14,494,789
- ---------------------------------------------------------------
Options outstanding end of year 14,503,239
=====================================
Stock option transactions for the respective years were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1995
Number Weighted Av. Number Weighted Av.
of Exercise of Exercise
Options Price ($Cdn) Options Price ($Cdn)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding beginning of year 7,835,289 3.06 7,878,064 3.06
Additional options granted 8,019,020 1.87 42,000 2.62
Less options exercised 276,118 1.87 38,950 2.24
Less options terminated, canceled
or expired 1,074,952 2.74 45,825 3.02
- -------------------------------------------------------------------------------------------------------------------------------
Options outstanding end of year 14,503,239 1.87 7,835,289 3.06
==========================================================================
</TABLE>
At December 31, 1996 there were 7,683,136 options exercisable and 2,579,316
options available for grant.
iv) Under the Corporation's current financing arrangements, the Corporation
is prohibited from paying any Common Share or Subordinate Restricted Voting
Share dividends unless it is in compliance with specified financial ratios.
The Corporation is not currently in compliance with such financial ratios.
Any such payment of dividends is further subject to annual limitations.
11. COMMITMENTS AND CONTINGENCIES
i) Certain theatre properties and theatre equipment are subject to lease
agreements. Certain of the property leases require the Corporation to pay
additional rent and to pay all business and realty taxes and a proportion
of the landlord's operating costs in respect of the leased premises. Future
minimum payments, by year and in the aggregate, under theatre operating
leases and theatre and equipment capital leases, as at December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Capital leases Operating leases
- ----------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 2,913,000 $ 74,540,000
1998 2,637,000 74,470,000
1999 2,461,000 72,660,000
2000 2,334,000 70,908,000
2001 1,089,000 68,391,000
Thereafter 2,043,000 632,764,000
- ------------------------------------------------------------------------------------
Total minimum lease payments 13,477,000 $ 993,733,000
========================
Less: Imputed interest at
rates between 7.5% and
8.5% 3,066,000
Current portion 2,094,000
- ---------------------------------------------------------
$ 8,317,000
=================================
</TABLE>
ii) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities
have proposed to reassess taxes in respect of certain transactions and
income and expense items. Management believes that the Corporation and its
subsidiaries have meritorious defenses and is vigorously contesting the
adjustments proposed by the taxation authorities. Although such matters
cannot be predicted with certainty, management does not consider the
Corporation's exposure to such proposed reassessments to be material to
these financial statements.
iii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its business.
The outcome of this litigation is not currently determinable. Although such
matters cannot be predicted with certainty, management does not consider
the Corporation's exposure to such litigation to be material to these
financial statements.
12. OTHER INCOME(EXPENSES)
Other income(expenses) is comprised of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 31, 1996 December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss on sale or write down of
theatre related assets $ (14,000) $ (3,014,000) $ (32,000)
Net gain on sale or realization of
non-theatre related assets --- 1,175,000 517,000
Write-off of deferred
financing charges --- --- (3,198,000)
Severance and other
corporate charges (1,363,000) (1,023,000) (187,000)
- ---------------------------------------------------------------------------------------------------------------------------
$ (1,377,000) $ (2,862,000) $ (2,900,000)
========================================================================
</TABLE>
13. INCOME TAXES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 31, 1996 December 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 1,390,000 $ 1,269,000 $ 2,398,000
======================================================
</TABLE>
The Corporation's income tax provision based upon income(loss) from
continuing operations before income taxes is made up as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 31, 1996 December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 44.0% 44.0% 44.0%
Provision based on statutory
income tax rate $(13,064,000) $(13,921,000) $ (5,183,000)
Increase (decrease) in incom
tax provision resulting from:
Tax exempt portion of capital gains (6,000) (48,000) (158,000)
Permanent differences other than
capital gains 62,000 766,000 1,490,000
Non-recognition of tax benefit of
current year's losses for tax purposes:
Canada --- 1,290,000 2,990,000
United States 14,050,000 11,913,000 1,731,000
Recognition of tax benefit of
prior years' losses for tax purposes:
Canada (1,042,000) --- ---
United States --- --- ---
- ----------------------------------------------------------------------------
--- --- 870,000
Large Corporations Tax and
state taxes 1,390,000 1,269,000 1,528,000
- -------------------------------------------------------------------------------------------------------------------------
Income tax provision $ 1,390,000 $ 1,269,000 $ 2,398,000
=======================================================================
</TABLE>
For taxation purposes there are net operating loss carryforwards of
approximately $270,000,000 available to offset future taxable income. These
losses expire between the years 1997 and 2011. A portion of the United
States net operating loss carryforwards, in the amount of $53,000,000, are
subject to annual limitations.
14. SEGMENTED INFORMATION
Substantially all of the Corporation's operations are in the exhibition
business, including the exhibition and distribution of motion picture
films.
The geographic distribution of revenue, income(loss) from continuing
operations and assets are shown below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 31, 1996 December 31,1995 December 31,1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Canada $ 159,068,000 $ 150,026,000 $ 157,690,000
United States 350,624,000 363,124,000 383,422,000
- ----------------------------------------------------------------------------------------------
$ 509,692,000 $ 513,150,000 $ 541,112,000
=======================================================
Income(loss) from continuing operations
Canada $ 2,159,000 $ (2,914,000) $ (7,576,000)
United States (33,241,000) (29,993,000) (6,597,000)
- ----------------------------------------------------------------------------------------------
$ (31,082,000) $ (32,907,000) $ (14,173,000)
=======================================================
</TABLE>
- -------------------------------------------------------------
December 31, 1996 December 31, 1995
- ---------------------------------------------------------
Assets
Canada $ 142,448,000 $ 134,198,000
United States 501,723,000 515,445,000
- ------------------------------------------------------------------------
$ 644,171,000 $ 649,643,000
============================================================
Film exhibition operations outside of Canada and the United States are
currently limited to one theatre (six screens) in Budapest, Hungary. This
location is not material to the Corporation's financial position or results
of operations and is included with Canada for segmented disclosure
purposes.
15. SUMMARY FINANCIAL INFORMATION OF PLITT THEATRES, INC. (PLITT)
The following is summarized consolidated financial information of Plitt:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31,1994
==========================================================================
<S> <C> <C> <C>
Revenue $ 350,624,000 $ 363,124,000 $ 383,422,000
==========================================================================
Income from continuing operations
before general and administrative
expenses, depreciation and
amortization, interest on
long-term debt and income
taxes $ 45,847,000 $ 46,148,000 $ 57,057,000
==========================================================================
Net loss $ (33,241,000) $ (29,993,000) $ (6,597,000)
==========================================================================
</TABLE>
The results for the year ended December 31, 1996 include $1,799,000 of
costs charged to Plitt by the Corporation (1995-$ Nil; 1994-$590,000)
- ---------------------------------------------------------
December 31, 1996 December 31, 1995
- ---------------------------------------------------------
Current assets $ 17,105,000 $ 21,259,000
Noncurrent assets $ 484,618,000 $ 502,989,000
Current liabilities $ 55,078,000 $ 54,790,000
Noncurrent liabilities $ 265,386,000 $ 282,577,000
===================================================
Current liabilities at December 31, 1996 include a net payable to the
Corporation and other corporations within the consolidated group in the
amount of $9,551,000 (December 31, 1995 - net receivable of $3,834,000).
Noncurrent liabilities at December 31, 1996 and December 31, 1995 include
$10,000,000 that is owed to the Corporation.
16. RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere in these financial
statements include film distribution and exhibition agreements which the
Corporation enters into with Universal. These agreements are conducted in
accordance with normal business terms and conditions. Pursuant to these
agreements, the Corporation, in the year ended December 31, 1996, paid
approximately $20,631,000 in film licensing fees to Universal (1995 -
$31,198,000, 1994 - $34,734,000) and received from Universal approximately
$666,000 (1995 - $576,000, 1994 - $879,000) relating to distribution
services.
17. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
i) The Corporation has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109), for
its financial statements presented under United States accounting
principles. Under FAS 109 the Corporation's method of accounting for income
taxes changes from the deferred method, as recorded under Canadian
accounting principles, to an asset and liability approach. Under the asset
and liability method of FAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.
The income tax provision for the year ended December 31, 1996 calculated in
accordance with United States accounting principles was the same as that
reported under Canadian accounting principles after reflecting a net
increase in the valuation allowance of $19,400,000 (1995 - net increase of
$22,700,000, 1994 - net increase of $6,100,000).
The application of the above noted United States accounting principles on
the balance sheet of the Corporation as at December 31, 1996 resulted in no
net difference in deferred taxes from that reported under Canadian
accounting principles. At December 31, 1996, the gross deferred tax asset
was $139,000,000 less a valuation allowance of $103,000,000 (December 31,
1995 - $127,700,000 less a valuation allowance of $83,500,000) and the
deferred tax liability was $36,000,000 (December 31, 1995 - $44,200,000).
ii) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, all operating
income and expenses, such as those listed in note 12 to the consolidated
financial statements, are required to be included in any subtotal
purporting to represent income(loss) from operations. Therefore, under
U.S. GAAP, income(loss) from operations as cross-referenced from the income
statement to this note would be as follows:
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
- ------------------------------------------------------------------
$ 5,790,00 $ 9,345,000 $ 21,866,000
==============================================
iii) As required by Statement of Financial Accounting Standards No. 95, the
following disclosures are provided.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on long-term
debt paid $ 35,482,000 $ 40,983,000 $ 33,641,000
Income taxes paid $ 1,390,000 $ 1,269,000 $ 2,398,000
===============================================================
</TABLE>
iv) The Corporation applies APB Opinion No. 25 in accounting for its stock
options under United States GAAP. Beginning in 1996, United States GAAP
encourages, but does not require, the recording of compensation cost for
stock options at fair value. The new United States accounting
pronouncement, SFAS No. 123, does however, require the disclosure of pro
forma net income and earnings per share information as if the Corporation
had accounted for its stock options issued in 1996 and 1995 under the fair
value method. Accordingly, the fair value of these options has been
estimated at the date of grant or re-issue using the Black-Scholes option
pricing model with the following assumptions for 1996: weighted average
risk free interest rate of 5.96%; dividend yield of 0%; volatility factor
of the expected market price of the Corporation's Common Shares of 0.60;
and a weighted average expected life of the options of 2.9 years. The
weighted-average grant-date fair value of the options issued in 1996 was
Canadian $0.80. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting
period which ranges from upon issuance or re-issue to four years.
Retroactive application of the fair value method to prior years is not
permitted, therefore the full effect of the fair value method will not be
reflected in the pro forma disclosures until it has been applied to all
nonvested options. Assuming the Corporation has accounted for its stock
options issued under the fair value method, United States GAAP pro forma
net loss and net loss per share for the year ended December 31, 1996 would
have been $35,059,000 and $0.21 respectively. Compensation cost for the
year ended December 31, 1995 has not been estimated as the number of
options issued in the year was insignificant.
18. JOINT VENTURES
The Corporation's prorata share of the joint venture operations through
which it carries out part of its activities is summarized below. The
Balance Sheet amounts below reflect the elimination of accounts between
these joint ventures and the Corporation.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
========================================================
<S> <C> <C> <C>
Revenue $ 4,727,000 $ 3,624,000 $ 2,449,000
Expenses 3,519,000 2,588,000 $ 1,738,000
- ------------------------------------------------------------------------------------------------
Net income $ 1,208,000 $ 1,036,000 $ 711,000
=========================================================
Cash flow from
operations $ 1,589,000 $ 1,251,000 $ 850,000
=========================================================
</TABLE>
- -----------------------------------------------------------------------
December 31, 1996 December 31, 1995
- -----------------------------------------------------------------------
Current assets $ 966,000 $ 680,000
Noncurrent assets $ 10,953,000 $ 8,570,000
Current liabilities $ 1,629,000 $ 190,000
Noncurrent liabilities $ 2,167,000 $ 2,619,000
==========================================================
19. RECLASSIFICATIONS
Certain prior years' balances have been reclassified to conform with
financial statement presentation adopted in the current year.
<PAGE>
Selected Quarterly Financial Data
(In thousands of U.S. dollars except per share data)
<TABLE>
<CAPTION>
Unaudited
- -------------------------------------------------------------------------------------------------
Three Months Ended
March 31 June 30 September 30 December 31
1995 1995 1995 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 109,964 $ 122,514 $ 155,667 $ 125,005
Operating income(loss) (5,660) (366) 14,780 3,453
Income(loss) (15,109) (15,147) 4,333 (6,984)
Earnings(loss) per share
Basic (0.13) (0.13) 0.04 (0.06)
Fully Diluted (0.13) (0.13) 0.04 (0.06)
- -------------------------------------------------------------------------------------------------
Three Months Ended
March 31 June 30 September 30 December 31
1996 1996 1996 1996
- -------------------------------------------------------------------------------------------------
Revenues $ 128,351 $ 117,783 $ 141,976 $ 121,582
Operating income(loss) 3,951 (1,793) 6,523 (1,514)
Loss (7,157) (11,070) (2,970) (9,885)
Loss per share
Basic (0.06) (0.06) (0.02) (0.06)
Fully Diluted (0.06) (0.06) (0.02) (0.06)
- --------------------------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL SCHEDULES:
Schedules of the Corporation for each of the three years in the
period ended December 31, 1996 are filed under Item 14 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 is set forth in the
Corporation's Proxy Statement under the caption "Election of
Directors" and "Security Ownership of Certain Beneficial Owners
and Management" and is incorporated herein by reference (except
that certain information regarding the Corporation's executive
officers is included in Part I under the heading "Executive
Officers").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is set forth in the
Corporation's Proxy Statement under the caption "Executive
Compensation" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 is set forth in the
Corporation's Proxy Statement under the caption "Security
Ownership of Certain Beneficial Owners and Management" and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is set forth in the
Corporation's Proxy Statement under the captions "Indebtedness of
Directors and Senior Officers", "Interests of Insiders in
Material Transactions" and "Executive Compensation" and is
incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
The following financial statements of the Corporation have been filed
under Item 8 hereto.
Auditors' Report
Consolidated Balance Sheets at December 31, 1996 and 1995
For each of the years ended December 31, 1996, 1995 and 1994:
Consolidated Income Statement
Consolidated Statement of Changes in Cash Resources
Consolidated Statement of Changes in Shareholders' Equity
Notes to the Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE
Auditors' Report on Schedule
Schedule II - Valuation and qualifying accounts
All other schedules have been omitted because the information
required is included in the consolidated financial statements or
the notes thereto.
3. EXHIBITS:
(i) The following Exhibits,
numbered as they were numbered for filing as Exhibits
to the Corporation's Form S-1 Registration Statement,
No. 33-12919, as amended, effective May 14, 1987, are
incorporated herein by reference:
10.9 Restated Subscription Agreement between Cineplex
Odeon Corporation and MCA INC. dated
January 15, 1986, as amended May 6, 1986
10.11 Cineplex Standstill Agreement between Cineplex
Odeon Corporation and MCA INC. dated
May 12, 1986, as amended January, 1987
10.14 MCA Registration Agreement between Cineplex
Odeon Corporation and MCA INC. dated
May 12, 1986
10.26 Amendment to Restated Subscription Agreement
dated May 4, 1987
10.27 Amendment to Standstill Agreement dated
May 4, 1987
(ii) The following Exhibit,
numbered as it was for filing as an Exhibit to the
Corporation's Annual Report on Form 10-K for 1987, is
incorporated herein by reference:
10.2 Amendment to Cineplex Standstill
Agreement dated as of March 3, 1988
(iii) The following Exhibits,
numbered as they were for filing as Exhibits to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 are incorporated herein by
reference:
10.6 Agreement made May 15, 1989 between Cineplex
Odeon Corporation and MCA INC., further
amending the Standstill Agreement between
them dated May 12, 1986
10.7 Form of Indemnity as executed by Cineplex Odeon
Corporation in favour of each of the Corporation's
directors
(iv) The following Exhibits,
numbered as they were for filing as Exhibits to the
Corporation's report on Form 8-K which was filed
October 24, 1989 are incorporated herein by reference:
3 Agreement made October 24, 1989 between Cineplex
Odeon Corporation and MCA INC., further amending
the Standstill Agreement between them dated
May 12, 1986
(v) The following Exhibits,
numbered as they were for filing as Exhibits to the
Corporation's Annual Report on Form 10-K for 1989, are
incorporated herein by reference:
3.2 Bylaws
(vi) The following Exhibits,
numbered as they were for filing as Exhibits to the
Corporation's Annual Report on Form 10-K for 1990, are
incorporated herein by reference:
3.1 Articles of Amalgamation
10.2 Sample Cineplex Odeon Corporation Option
Agreement for United States resident
(vii) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 are incorporated herein by
reference:
4.1 Indenture dated as of June 23, 1994, by and
among Plitt Theatres, Inc. and Cineplex
Odeon Corporation and The Bank
of New York as Trustee.
10.1 Credit Agreement dated as of June 23, 1994, by
and among Cineplex Odeon Corporation and
Plitt Theatres, Inc. and The Bank of Nova Scotia
as agent, and the banks party thereto.
10.2 Letter Agreement dated as of June 23, 1994,
regarding the establishment of an operating
credit facility, between Cineplex Odeon Corporation,
as borrower, and The Bank of Nova Scotia.
(viii) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 are incorporated herein by
reference:
10.1 Second Amendment Agreement dated as of
March 31, 1995 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
(ix) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 are incorporated
herein by reference:
10.1 Third Amendment Agreement dated as of
September 30, 1995 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
(x) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Annual Report on Form 10-K for 1995 are
incorporated herein by reference:
10.1 Fifth Amendment Agreement dated as of
March 26, 1996 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors
The Bank of Nova Scotia as agent, and the Banks
party thereto.
10.2 Amended and Restated Subscription Agreement
dated as of March 19, 1996 by and among Cineplex
Odeon Corporation, MCA INC. amd the
Charles Rosner Bronfman Trust.
(xi) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 are incorporated herein by
reference:
3.1 Articles of the Corporation as amended
effective June 6, 1996.
10.1 Stock Option Plan as amended effective
June 6, 1996.
(xii) The following Exhibits,
numbered as they were for filing as an Exhibit to the
Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 are incorporated
herein by reference:
10.1 Sixth Amendment Agreement dated as of
August 16, 1996 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
10.2 Seventh Amendment Agreement dated as of
October 31, 1996 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
(xiii) The following Exhibits are
filed herewith:
10.1 Eighth Amendment Agreement dated as of
February 17, 1997 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
10.2 Employment Agreement between Cineplex Odeon
Corporation and Mr. Allen Karp dated as of
July 4, 1996 as amended by letter agreement dated
as of December 6, 1996.
10.3 Employment Agreement between Cineplex Odeon
Corporation and Mr. Ellis Jacob dated as of
December 6, 1996.
10.4 Employment Agreement between Cineplex Odeon
Corporation and Mr. Robert Tokio dated as of
December 6, 1996.
10.5 Employment Agreement between Cineplex Odeon
Corporation and Mr. Michael Herman dated as of
December 6, 1996.
10.6 Employment Agreement between Cineplex Odeon
Corporation and Mr. Howard Lichtman dated as
of December 6, 1996.
10.7 Employment Agreement between Cineplex Odeon
Corporation and Mr. Irwin Cohen dated as of
December 6, 1996.
10.8 Employment Agreement between Cineplex Odeon
Corporation and Mr. Michael McCartney dated as
of September 15, 1995 as amended by letter agreement
dated as of January 22, 1997.
11.1 Statement re computation of earnings per share
21.1 Subsidiaries of the Corporation
23.1 Consent of KPMG
27 Financial Data Schedule
(b) The Corporation did not file any reports on
Form 8-K during the three months ended December 31,
1996.
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Corporation has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CINEPLEX ODEON CORPORATION
By: Allen Karp
__________________
Allen Karp
President and Chief
Executive Officer
Date: March 11, 1997
By: Ellis Jacob
____________________
Ellis Jacob
Executive Vice-President
and Chief Financial Officer
Date: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
Allen Karp President, Chief Executive March 11, 1997
__________ Officer and Director
Allen Karp (Principal Executive
Officer)
Ellis Jacob Executive Vice-President March 11, 1997
__________ and Chief Financial Officer
Ellis Jacob and Director (Principal
Financial and Accounting Officer)
E. Leo Kolber Chairman of the Board March 11, 1997
_______________
E. Leo Kolber
Rudolph P. Bratty Director March 11, 1997
_______________
Rudolph P. Bratty
______________
John H. Daniels Director
______________
Bruce L. Hack Director
________________
Andrew J. Parsons Director March 11, 1997
_______________
Andrew J. Parsons
Eric W. Pertsch Director March 11, 1997
_______________
Eric W. Pertsch
Robert Rabinovitch Director March 11, 1997
________________
Robert Rabinovitch
James D. Raymond Director March 11, 1997
________________
James D. Raymond
__________________ Director
Christopher J. McGurk
__________________ Director
Howard L. Weitzman
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Shareholders of Cineplex Odeon
Corporation
Under date of February 18, 1997, we reported on the
consolidated balance sheets of Cineplex Odeon Corporation as
at December 31, 1996 and 1995 and the related consolidated
statements of income and changes in shareholders' equity and
cash resources for each of the years in the three year
period ended December 31, 1996, as contained in the annual
report on Form 10-K for the year 1996. In connection with
our audits of the aforementioned consolidated financial
statements, we also have audited the related financial
statement schedule in the Form 10-K. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits.
In our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG
Chartered Accountants
Toronto, Canada
February 18, 1997
<PAGE>
CINEPLEX ODEON CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For fiscal periods 1996, 1995 and 1994
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Charged to Charged to Deductions/
Beginning of Costs and Other Other Balance at
Description Period Expenses Accounts Changes End of Period
- -------------- --------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Allowance for doubtful accounts $524 N/A N/A ($59) $465
Goodwill 10,167 1,114 0 0 11,281
Deferred charges 2,395 1,275 0 1 3,671
--------------- -------------- --------------- ------------- -----------------
$13,086 $2,389 $0 ($58) $15,417
--------------- -------------- --------------- ------------- -----------------
Year Ended December 31, 1995
Allowance for doubtful accounts $519 N/A N/A $5 $524
Goodwill 9,702 1,147 0 (682)(ii) 10,167
Deferred charges 1,170 1,452 0 (227)(iii) 2,395
--------------- -------------- ---------------- -------------- ----------------
$11,391 $2,599 $0 ($904) $13,086
-------------- ------------- ---------------- -------------- ---------------
Year Ended December 31, 1994
Allowance for doubtful accounts $430 N/A N/A $89 $519
Goodwill 8,518 1,192 0 (8) 9,702
Deferred charges 5,946 2,198 0 (6,974)(iv) 1,170
-------------- ------------- ------------- ------------ --------------
$14,894 $3,390 $0 ($6,893) $11,391
------------ ---------- ------------- --------------- --------------
Notes
(i) Unless otherwise stated, Deductions/Other Changes represent the
translation adjustment on the conversion of Canadian dollar amounts
to U.S. dollars.
(ii) $687 relates to the write-off of the accumulated amortization of
goodwill associated with the sale of certain theatres.
(iii) $236 relates to the write-off of a deferred charge item that had
become fully amortized during the period.
(iv) $6,736 relates to the write-off of debt financing charges
</TABLE>
EXHIBIT INDEX
Exhibit Description Page Number
10.1 Eighth Amendment Agreement dated as
of February 17, 1997 by and among
Cineplex Odeon Corporation, Plitt Theatres,
Inc.,the Guarantors, The Bank of Nova
Scotia as agent, and the Banks
party thereto.
10.2 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Allen Karp dated as of July 4, 1996
as amended by letter agreement dated as
of December 6, 1996.
10.3 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Ellis Jacob dated as of December 6, 1996.
10.4 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Robert Tokio dated as of December 6, 1996.
10.5 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Michael Herman dated as of December 6, 1996.
10.6 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Howard Lichtman dated as of December 6, 1996.
10.7 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Irwin Cohen dated as of December 6, 1996.
10.8 Employment Agreement between
Cineplex Odeon Corporation and
Mr. Michael McCartney dated as of September 15,
1995 as amended by letter agreement dated as of
January 22, 1997.
11.1 Statement re computation of earnings per share.
21.1 Subsidiaries of the Corporation.
23.1 Consent of KPMG.
27 Financial Data Schedule.
MODIFICATION NO. 10
THIS EIGHTH AMENDMENT AGREEMENT is made as of the 17th day of
February, 1997.
B E T W E E N:
CINEPLEX ODEON CORPORATION
a corporation incorporated under the
laws of the Province of Ontario
("Cineplex")
- and -
PLITT THEATRES, INC.
a corporation incorporated under the
laws of the State of Delaware
("Plitt")
- and -
CINEPLEX ODEON (QUEBEC) INC.
RKO CENTURY WARNER THEATRES, INC.
THE WALTER READE ORGANIZATION, INC.
PLITT SOUTHERN THEATRES, INC.
MANBECK THEATRE CORPORATION
(collectively, the "Guarantors")
- and -
THE BANK OF NOVA SCOTIA
NATIONAL BANK OF CANADA
THE BANK OF NEW YORK
ROYAL BANK OF CANADA
(collectively, the "Banks")
- and -
THE BANK OF NOVA SCOTIA
in its capacity as agent for the Banks
(the "Agent")
- and -
THE BANK OF NOVA SCOTIA
as operating lender
(the "Operating Lender")
WHEREAS:
A. Cineplex, Plitt, the Banks and the Agent entered into a credit
agreement dated as of 23 June 1994 pursuant to which the Banks
established a reducing/revolving term credit facility in favour of
Cineplex and Plitt, which agreement has been amended by a Waiver
Agreement made as of 25 October 1994, a Second Amendment Agreement
made as of 31 March 1995, a Second Waiver Agreement made as of 19
September 1995, a Third Amendment Agreement made as of 30 September
1995, a Consent made as of 15 December 1995, a Fourth Amendment
Agreement made as of 9 February 1996, a Fifth Amendment Agreement
made as of 26 March 1996, a Sixth Amendment Agreement made as of 16
August 1996 and a Seventh Amendment Agreement made as of 31 October
1996 (such credit agreement as so amended and as further
supplemented, amended, restated or replaced from time to time, the
"Credit Agreement").
B. Cineplex and the Operating Lender entered into a letter loan
agreement dated 23 June 1994 (as the same may be amended,
supplemented, restated or replaced from time to time, the
"Operating Credit Agreement") pursuant to which the Operating
Lender established in favour of Cineplex a revolving operating
credit facility.
C. Pursuant to the Credit Agreement and the Operating Credit
Agreement, each of the Guarantors has provided a Guarantee.
D. Cineplex has requested that certain provisions of the Credit
Agreement be amended to provide greater operational flexibility and
the Banks and the Operating Lender have agreed to such requests.
E. The Banks and the Operating Lender have agreed to such
requests on the terms set forth herein and the parties hereto are
entering into to this Agreement to evidence their agreement with
respect to such requests, to set forth the terms and conditions
upon which such agreements by the Banks and the Operating Lender
are made and to deal with the other matters set forth herein.
NOW THEREFORE in consideration of these premises and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto
agree as follows:
Section 1 - Interpretation
Capitalized terms used herein, unless otherwise defined or
indicated herein, have the respective meanings ascribed thereto in
the Credit Agreement. This Agreement amends the Credit Agreement
effective from and after the date hereof. This Agreement and the
Credit Agreement shall be read together and have effect so far as
practicable as though the provisions thereof and the relevant
provisions hereof are contained in one agreement.
Section 2 - Amendment to Financial Covenants
Section 7.08 of the Credit Agreement is amended so that it
reads as follows:
"Funded Indebtedness Coverage: Cineplex shall maintain,
on a consolidated basis, a ratio of (a) Funded
Indebtedness to (b) Cash Flow for the last four full
fiscal quarters, calculated as at the dates shown below
of not greater than:
6.75:1 up to and including September 30, 1994
6.25:1 at December 31, 1994
8.20:1 at March 31, 1995
8.00:1 at June 30, 1995, September 30, 1995 and
December 31, 1995
6.55:1 at March 31, 1996 and June 30, 1996
6.45:1 at September 30, 1996
7.12:1 at December 31, 1996
8.00:1 at March 31, 1997 and June 30, 1997
7.10:1 at September 30, 1997
7.00:1 at December 31, 1997
4.00:1 at the end of each fiscal quarter
thereafter."
Section 7.09 of the Credit Agreement is amended so that it
reads as follows:
"Cash Flow to Interest Expense: Cineplex shall
maintain, on a consolidated basis, a ratio of (a) Cash
Flow for the last four full fiscal quarters to (b)
Interest Expense for the last four full fiscal quarters,
calculated as at the dates shown below of at least:
1.60:1 up to and including December 31, 1994
1.30:1 at March 31, 1995 and June 30, 1995
1.20:1 at September 30, 1995 and December 31,
1995
1.30:1 at March 31, 1996 and June 30, 1996
1.40:1 at September 30, 1996
1.37:1 at December 31, 1996
1.20:1 at March 31, 1997 and June 30, 1997
1.40:1 at September 30, 1997 and December 31, 1997
2.00:1 at the end of each fiscal quarter thereafter;
provided that, in the calculation of Cash Flow for the
purposes of this covenant only, the amounts referred to
in subparagraph 1.01(y)(iii)(F) will be added back to
the extent deducted and the amounts referred to in
subparagraph 1.01(y)(iv) which arose prior to the date
of acquisition will be deducted to the extent added."
Section 7.10 of the Credit Agreement is amended so that it
reads as follows:
"Senior Debt to Cash Flow: Cineplex shall maintain, on
a consolidated basis, a ratio of (a) Senior Debt to (b)
Cash Flow for the last four full fiscal quarters,
calculated as at the dates shown below of not greater
than the following:
4.00:1 up to and including September 30, 1994
3.75:1 at December 31, 1994
4.30:1 at March 31, 1995 and June 30, 1995
4.00:1 at September 30, 1995 and December 31,
1995
3.00:1 at March 31, 1996, June 30, 1996,
September 30, 1996 and December 31, 1996
3.55:1 at March 31, 1997 and June 30, 1997
3.15:1 at September 30, 1997
3.00:1 at December 31, 1997 and at the end of each
fiscal quarter thereafter."
Section 7.11 of the Credit Agreement is amended so that
it reads as follows:
"Cash Flow to Proforma Debt Service: Cineplex shall
maintain, on a consolidated basis, a ratio of (a) Cash
Flow for the last four fiscal quarters to (b) Proforma
Debt Service greater than:
1:10:1 up to and including December 31, 1996
1.00:1 at March 31, 1997, June 30, 1997, September
30, 1997 and December 31, 1997
1.35:1 at March 31, 1998, June 30, 1998 and
September 30, 1998
1:55:1 at the end of each fiscal
quarter thereafter."
Section 3 - Conditions Precedent to Effectiveness of this Amendment
Agreement
This Eighth Amendment Agreement shall only become binding on
the Banks upon satisfaction of the following conditions precedent:
(a) execution of this Eighth Amendment Agreement by the
Super Majority Banks in accordance with Section
12.01(ii) of the Credit Agreement; and
(b) payment of the amendment fee as contemplated by
Section 4 below.
Section 4 - Amendment Fee
Each of Cineplex, Plitt and the Guarantors agrees that an
amendment fee in the amount of U.S. $147,930 shall be payable by
Cineplex to the Agent (for and on behalf of the Banks and the
Operating Lender) upon execution by Cineplex of this Agreement,
such amendment fee to be divided among those Banks and the
Operating Lender that have executed and delivered this Ninth
Amendment Agreement on a pro rata basis based on their respective
commitment levels under the Credit Agreement and the Operating
Credit Agreement.
Section 5 - Confirmation by Guarantors
Each Guarantor confirms that the Guarantee and Collateral made
or granted by it pursuant to the Credit Agreement and the Operating
Credit Agreement remain in full force and effect notwithstanding
the amendments and supplements to Credit Agreement herein
contained.
Section 6 - Continuing Effect of Agreements
Except as amended by this Agreement, the Credit Agreement and
the Operating Credit Agreement shall remain in full force and
effect, without amendment, and each is hereby ratified and
confirmed.
Section 7 - Counterparts
This Agreement may be executed in any number of counterparts
and all such counterparts taken together shall be deemed to
constitute one and the same instrument and shall be effective on
the date when each of the parties hereto has signed a copy hereof
and shall have delivered the same to the Agent.
EXECUTED AND EFFECTIVE as of the date first written above.
THE BANKS
THE BANK OF NOVA SCOTIA
By: Robert King
Name: R.A. King
Title: Account Officer
NATIONAL BANK OF CANADA
By: Anne Brown
Name: Anne L. Brown
Title: Manager
THE BANK OF NEW YORK
By:
Name:
Title:
ROYAL BANK OF CANADA
By: R. Ahmad
Name: R. (Rizwan) Ahmad
Title: Senior Account Manager
THE BANK OF NOVA SCOTIA, as
Agent
By: R. Boomhour
Name: R. J. Boomhour
Title: Asst. Gen. Mgr.
THE BANK OF NOVA SCOTIA, as
Operating Lender
By: Robert King
Name: R.A. King
Title: Account Officer
THE BORROWERS
CINEPLEX ODEON CORPORATION
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
PLITT THEATRES, INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
EACH OF THE UNDERSIGNED hereby acknowledges and agrees to
and accepts the terms and conditions set forth in this Agreement as
of the date first written above.
THE GUARANTORS
CINEPLEX ODEON CORPORATION
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
PLITT THEATRES, INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer c/s
RKO CENTURY WARNER THEATRES,
INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
THE WALTER READE
ORGANIZATION, INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
PLITT SOUTHERN THEATRES,
INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
MANBECK THEATRE CORPORATION
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
CINEPLEX ODEON (QUEBEC) INC.
By: Ellis Jacob c/s
Name: Ellis Jacob
Title: Executive Vice President and Chief Financial Officer
December 6, 1996
Mr. Allen Karp
President and Chief Executive Officer
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Karp:
Reference is made to the employment agreement between you and
Cineplex Odeon Corporation dated July 4, 1996. This letter amends
(with effect from and after July 4, 1996) the said letter agreement
as follows:
1. The semicolon at the end of Subsection 7(b) is hereby deleted
and replaced by a period and the following is added thereafter:
"Notwithstanding the foregoing, Cineplex shall not be entitled to
terminate your employment hereunder pursuant to Subparagraph
7(b)(ii) above if the conduct complained of is the same as, or is
substantially similar to, conduct engaged in by other executives of
Cineplex which has not given rise to complaint by Cineplex;".
2. The words ("except those contemplated in your Performance-
Based Option Agreement)" appearing in the 9th and 10th lines of
Paragraph 10(B)(ii) are hereby deleted.
In all other respects, the terms and provisions of the said letter
agreement are hereby ratified and confirmed and shall remain
unamended.
Yours very truly,
CINEPLEX ODEON CORPORATION
Robert Rabinovitch
By:______________________________
AGREED this 6th day of December, 1996.
Allen Karp
_______________________________________
Allen Karp
July 4, 1996
Mr. Allen Karp
President and Chief Executive Officer
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Karp:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company"). At the same
time, you wish to have the term of your current employment
agreement with Cineplex extended with a view to both you and
Cineplex confirming the long term nature of our relationship.
This Agreement amends (with effect from and after July 4, 1996) and
restates the agreement dated December 1, 1994 which was accepted by
you on December 19, 1994, governing your employment with Cineplex.
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as President and Chief Executive
Officer of Cineplex and President and Chief Executive Officer and
director of its material subsidiaries upon the terms and conditions
hereinafter set forth. Cineplex's obligation to cause your
appointment or election as President and Chief Executive Officer
and director of any material subsidiary shall be subject to the
provision that such election or appointment be in accordance with
applicable laws. Notwithstanding the foregoing if in relation to
any material subsidiary the Board of Directors so resolves and you
agree, Cineplex shall not be obligated to cause your appointment as
President and Chief Executive Officer of such material subsidiary
provided that the individual appointed to that office reports (for
all management purposes) solely and directly to you.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chairman
of the Compensation Committee of the Board (such approval not to be
unreasonably withheld); (b) deliver lectures, fulfil speaking
engagements or teach at educational institutions; and (c) manage
personal investments; so long as such activities do not materially
and adversely affect the performance by you of your
responsibilities as an executive of the Company in accordance with
this Agreement and do not reflect adversely on the Company to a
material extent. It is further understood and agreed that to the
extent that any such activities have been conducted by you prior to
the Effective Date (as hereinafter defined) and have been notified
to the current Chairman of the Compensation Committee of the Board
in writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by the
Board; provided, however that without your prior consent you shall
not be required to perform services other than those comparable in
scope and dignity to those you were performing as at July 4, 1996.
Without limiting the generality of the foregoing, services to be
performed by you shall be deemed to be not comparable in scope and
dignity to those you were performing as at July 4, 1996, if there
shall occur a material adverse change in your status, position or
salary group or scope of responsibility as an executive in effect
immediately prior to the Effective Date including, without
limitation, (i) a material diminution of the scope of your duties
or responsibilities; (ii) the addition to Cineplex or any
subsidiary of new executive positions with equal or greater title,
status or responsibility; (iii) any material change in your
reporting responsibility; (iv) the assignment to you of any duties
or areas of responsibilities which are materially inconsistent with
such status or position(s) or responsibilities undertaken
immediately prior to the Effective Date; or (v) any removal of you
from or any failure to reappoint or re-elect you to the offices
referred to in the first paragraph of this Section 1 (except in
connection with the termination of your employment pursuant to
Section 7); provided, however, that in the event of any such
occurrence, Cineplex shall have ten Business Days following receipt
of notice (given in accordance with Section 12) from you to cure
such occurrence. For greater certainty, it shall be a material
adverse change in your status and position if you shall cease to be
a member of the Board, unless such change results from your
voluntary resignation or refusal to stand for re-election or unless
your appointment to the Board is contrary to applicable laws. In
this Agreement, "Business Day" means a day other than a Saturday or
Sunday on which banks are open for business for normal business
hours in the City of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1995 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 2001 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is one year prior to the Expiry Date (or one year
prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "One Year Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the One Year Notice Date or thereafter on any Business Day
during the first six (6) months of the last year of the term
hereof (or during the first six (6) months of any extension
thereof provided for herein) (such six (6) month period being
herein called the "Six-Month Notice Period") provided that
Cineplex may, instead of providing notice of non-renewal on or
before the One Year Notice Date, be entitled to deliver
written notice to you on or before the One Year Notice Date
electing not to renew this Agreement upon its expiry and
terminating your employment hereunder effective on the One
Year Notice Date. For greater certainty, if Cineplex
determines not to renew this Agreement upon its expiry after
the One Year Notice Date but during the Six-Month Notice
Period, it may not, except as permitted pursuant to Subsection
7(a), deliver to you notice of immediate termination during
that period, but only notice of non-renewal as aforesaid.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of U.S. Five Hundred and Fifty
Thousand Dollars (U.S. $550,000) commencing January 1, 1995,
or at such higher salary as may be determined by the Board at
a review to be held annually or more frequently if the Board
so determines (the "Base Salary"). The Base Salary shall be
converted into Canadian dollars as hereinafter provided and
shall be paid in equal instalments on Cineplex's regular
paydays during the term, subject to usual and required payroll
deductions and withholdings.
For the period January 1 to June 30 of each year, the Base
Salary shall be converted into Canadian dollars at the Bank of
Canada noon rate on November 15 of the prior year or, if such
date is not a Business Day, on the immediately preceding
Business Day. For the period July 1 to December 31 of each
year, the Base Salary shall be converted into Canadian dollars
at the Bank of Canada noon rate on May 15 of such year
provided that if such date is not a Business Day, on the
immediately preceding Business Day. You and Cineplex agree to
review the manner in which the Base Salary is converted into
Canadian dollars in the event of significant changes in the
exchange rate.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you. Bonus payments shall be converted into Canadian
dollars at the Bank of Canada noon rate on either November 15
or May 15 (or if such date is not a Business Day, the
immediately preceding Business Day) depending on the period in
which they are paid as provided in Subsection 4(a).
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Place and Condition of Employment
You shall not be required, without your consent, to perform your
primary duties under this Agreement in a location other than in the
Municipality of Metropolitan Toronto, nor shall you be required to
travel to a materially greater extent than you were at the
Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of the Chairman
of the Compensation Committee of the Board;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by the Chairman of the Compensation Committee of
the Board which describes such activity or conduct with
reasonable particularity and states the basis on which the
Board has determined that such activities or conduct is
inconsistent with this Agreement or the Cineplex Code of
Conduct and Confidentiality; provided that in the case of any
such event referred to in paragraph (ii) which has (to an
extent or in a manner which cannot be remedied) materially and
adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by the Chairman of the Compensation
Committee of the Board and ten Business Days cure period shall
be required;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
(d) on not less than six months' notice to you (or immediate
notice together with payment by Cineplex to you of six months'
Base Salary) given at any time during the term of this
Agreement; or
(e) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3 (as opposed to notice of
non-renewal and termination of your employment pursuant to
Section 3); or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I, special benefit
listed in Schedule II, or other similar employee benefit
plan introduced by the Board after the Effective Date
(which subsequently introduced plan has not been
discontinued by resolution of the Board pursuant to a
power to do so provided for in the terms of the plan
when first introduced) (collectively, "Benefit Plans")
in which you are participating from time to time (unless
you are otherwise provided with at least substantially
similar benefits as evidenced by the written opinion of
a nationally recognized employee benefits consulting
firm, a copy of which is provided to you) or the taking
of any action, or the failure to act, by Cineplex which
would adversely affect your continued participating in
any of such Benefit Plans (or other substantially
similar benefit arrangements) on at least as favourable
a basis to you as is the case at the Effective Date or
which would materially reduce your benefit in the future
under any of such Benefit Plans (or other substantially
similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10 and Schedule II, except as
specifically provided under the Benefit Plans (or other
substantially similar benefit arrangements referred to in paragraph
8(b)(iii)) and subject in all cases to the terms and conditions of
each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at July 4, 1996
including, without limitation, in any particular respect
referred to in the third paragraph of Section 1. In
this Agreement, "Principal Business Unit" means each of
Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at July 4, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the One Year
Notice Date (as opposed to notice of non-renewal and
termination of your employment pursuant to Section 3) and you
do not terminate your employment pursuant to Subsection 8(a),
Cineplex shall pay to you in a lump sum in cash on the Expiry
Date, the aggregate of the following amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If Cineplex shall give notice of non-renewal and
termination of your employment pursuant to Section 3 on or
before the One Year Notice Date (as opposed to notice of non-
renewal of this Agreement pursuant to Section 3), Cineplex
shall pay to you in a lump sum in cash on the Employment
Termination Date, the aggregate of the following amounts:
(i) an amount equal to two times your Average
Compensation (as defined in Subsection 10(A)(e)); and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(d) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 within the Six-Month Notice
Period and you do not terminate your employment pursuant to
Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to two times your Average
Compensation less the amount of Base Salary paid to you
from the date of your receipt of such notice of non-
renewal to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(e) For the purposes of paragraphs 10(A)(c)(i) and
10(A)(d)(i), "Average Compensation" means the sum of the Base
Salary and any bonus, in both cases, paid or payable to you
for, or in respect of, the three (3) calendar years
immediately preceding the year in question, all divided by 3.
For these purposes, the year in question means:
(1) for the purposes of paragraph 10(A)(c)(i), the year
in which the One Year Notice Date occurs; or
(2) for the purposes of paragraph 10(A)(d)(i), the year
in which the Expiry Date occurs.
In any such case, the amounts in question shall be as reported
on Revenue Canada Taxation Form T-4 and, if applicable, T-4A
issued by Cineplex. For the purposes of determining Average
Compensation, any bonus which was awarded otherwise than in
cash shall be valued at the fair market value thereof which,
in the case of common shares of Cineplex, shall be deemed to
be the closing price on The Toronto Stock Exchange on the
trading day immediately preceding the date on which the bonus
was paid or became payable.
(f) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the greater of:
(x) the aggregate of the following amounts:
(i) an amount equal to the greater of (a) an
amount equal to the most recent bonus awarded to
you, plus the Base Salary (prior to any reduction
thereof as provided in Subsection 8(b)(i)) then
being paid to you which would have otherwise been
paid to you from the Employment Termination Date to
the Expiry Date, and (b) two times the sum of the
most recent bonus awarded to you and the annual
Base Salary (prior to any reduction thereof as
provided in Subsection 8(b)(i)) then being paid to
you; and
(ii) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex; and
(y) the aggregate of the following amounts:
(i) an amount equal to the Aggregate Compensation
which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date;
and
(ii) an amount equal to one times your Aggregate
Compensation; and
(iii) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(f), "Aggregate
Compensation" means the sum of the Base Salary and any bonus,
in both cases, paid or payable to you for, or in respect of,
the three (3) calendar years immediately preceding the year in
which the notice in question is given by you, all divided by
three. In any such case, the amounts in question shall be as
reported on Revenue Canada Taxation Form T-4 and, if
applicable, T-4A issued by Cineplex.
For the purposes of this paragraph 10(A)(f), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(g) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to two times the Aggregate
Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(g)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(h) If your employment shall be terminated by Cineplex
pursuant to Subsection 7(d), Cineplex shall pay to you in a
lump sum in cash on the Employment Termination Date, the
aggregate of the following amounts:
(i) an amount equal to the Aggregate Compensation which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date; and
(ii) an amount equal to one times your Aggregate
Compensation; and
(iii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this Paragraph 10(A)(h), "Aggregate
Compensation" means the sum of the Base Salary and any bonus,
in both cases, paid or payable to you for, or in respect of,
the three (3) calendar years immediately preceding the year in
which the notice in question is given to you, all divided by
three. In any such case, the amounts in question shall be as
reported on Revenue Canada Taxation Form T-4 and, if
applicable, T-4A issued by Cineplex. For the purposes of
determining aggregate compensation, any bonus which was
awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on the
Toronto Stock Exchange on the trading date immediately
preceding the date on which the bonus was paid or became
payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Subsection 7(d) or Section 3:
(a) Subject as hereinafter provided, for a period of
two and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such two and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions relating to the
acceleration of the vesting of options in any Cineplex stock
option plan or agreement, subject to regulatory approval, in
the event you terminate your employment pursuant to Subsection
9A(c) or Cineplex terminates your employment for any reason,
then all stock options previously granted to you (except those
contemplated in your Performance-Based Option Agreement) shall
immediately vest upon the Employment Termination Date. In
addition, subject to regulatory approval and subject to
Section 6.06 of the Cineplex Stock Option Plan, as amended
from time to time, you (or your personal representative) shall
remain entitled to exercise any stock options previously
granted to you (except those contemplated in your Performance-
Based Option Agreement) and then exercisable at any time until
the expiration of the full term of the exercise period
relating to each of such vested stock options. In connection
with the termination of your employment, Cineplex shall use
its best efforts to make such arrangements with you (at no
material cost to Cineplex) or to obtain necessary regulatory
clearances (at no material inconvenience to Cineplex) as may
be necessary to permit the accelerated vesting and
continuation of such vested stock options as aforesaid.
Your rights under this paragraph (ii) are in addition to your
rights under any stock option plans and agreements.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except as provided in Schedule II and except for claims for
monies actually due and payable to Cineplex by you, Cineplex's
obligation to make the payment provided for in this Section 10
and otherwise to perform its obligations hereunder shall not
be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or
other claim (based on termination by Cineplex or otherwise),
right or action which Cineplex may have against you or others.
All payments made to you pursuant to this Section 10 shall be
subject to any withholding of (or in respect of) tax required
by law provided that such withholding shall be at the lowest
amount permitted by law. All cash payments pursuant to
Section 10(A) shall be converted to Canadian dollars at the
Bank of Canada noon rate on either November 15 or May 15 (or
if such date is not a Business Day, the immediately preceding
Business Day) depending on the period in which they are paid
as provided in Subsection 4(a). Further, provided that there
is no additional cost to Cineplex, Cineplex will co-operate
with you to structure payments provided in this Section 10 in
a manner which will be most tax effective for you.
10A. Non-Competition
If a Material Change occurs and you terminate your employment
pursuant to Section 9A, then, unless you refuse the payment
otherwise payable to you pursuant to Subsection 10(A)(g) and
release Cineplex from any liability or obligation in respect
thereof, you covenant and agree that you will not, for a period of
one (1) year from the Employment Termination Date, directly or
indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in
conjunction with any other person or persons, firm, association,
syndicate, company or corporation, as principal, agent,
shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
You acknowledge and agree that all restrictions contained in this
Section and in Section 10B are reasonable and valid and all
defences to the strict enforcement thereof by Cineplex are hereby
waived by you. If any covenant contained in this Section or in
Section 10B or any portion of either or both of such Sections shall
be held to be unreasonable for any reason, then such covenant shall
be given effect to in such reduced form as may be decided by any
court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section or Section 10B and such enforceable or invalid
covenant or portion thereof shall be severable from the remainder
of this Section or Section 10B.
Notwithstanding the restrictions contained in this Section, nothing
herein shall restrict you from, directly or indirectly, acquiring
or holding share investments in a public company whose shares are
listed on a recognized stock exchange or on an over-the-counter
market, where such share investment does not in the aggregate
exceed 5% of any class of shares of such company and where you are
only a passive investor in such company.
For purposes of clarity, it is hereby acknowledged that:
(a) if a Material Change occurs and you terminate your
employment pursuant to Section 9A and if you refuse the
payment otherwise payable to you pursuant to Subsection
10(A)(g) and release Cineplex from any liability or obligation
in respect thereof, or
(b) if Cineplex terminates your employment pursuant to
Section 7 or you terminate your employment pursuant to Section
8,
you shall, subject to the provisions of Section 10B, be entitled
to, directly or indirectly, in any manner whatsoever, including,
without limitation, either individually or in partnership or
jointly, or in conjunction with any other person or persons, firm,
association, syndicate, company or corporation, as principal,
agent, shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
10B. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
11. Legal Costs
Cineplex agrees to pay (as incurred by you), to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest (regardless of the
outcome thereof) by Cineplex or others of the occurrence of a
Material Change (other than one described in paragraphs 9A(b)(iii)
or (vi)) or any liability of Cineplex flowing from the occurrence
of such a Material Change plus, in each case, interest compounded
quarterly, on the total unpaid amount determined to be payable
under this Section 11, such interest to be calculated at a rate
equal to 1% in excess of the Canadian Prime Rate in effect from
time to time during the period of such non-payment. Cineplex
agrees to pay (as incurred by you) to the full extent permitted by
law, all legal fees and expenses which you may reasonably incur as
a result of any contest by Cineplex or others relating to this
Agreement and not covered by the immediately preceding sentence in
which you are substantially successful on the merits. For the
purposes of this Section 11, "Canadian Prime Rate" means the
commercial lending rate of interest, expressed as an annual rate,
which Cineplex's bankers quote in Toronto as the reference rate of
interest (commonly known as "prime") for the purpose of determining
the rate of interest that it charges to its commercial customers
for loans in Canadian funds.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Allen Karp
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Allen Karp
88B Crescent Road
Toronto, Ontario
M4W 1T5
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chairman of the Board or
Chairman of the Executive
Committee
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Robert Rabinovitch
By:_______________________________
AGREED this 4th day of July, 1996.
Allen Karp
______________________________
ALLEN KARP
SCHEDULE II
ADDITIONAL BENEFIT
1. Cineplex shall provide at no cost to you, term life insurance
in an amount equal to twice the amount of your annual base
salary, providing, and to the extent that, such insurance is
obtainable at an annual cost to Cineplex of not more than
$10,000 in Canadian funds.
December 6, 1996
Mr. Ellis Jacob
Executive Vice-President and
Chief Financial Officer
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Jacob:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company").
This Agreement amends (with effect from and after December 6, 1996)
and restates the agreement dated December 1, 1994 which was
accepted by you on December 19, 1994, governing your employment
with Cineplex.
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as Executive Vice-President and
Chief Financial Officer of Cineplex upon the terms and conditions
hereinafter set forth.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chairman
of the Compensation Committee of the Board (such approval not to be
unreasonably withheld); (b) deliver lectures, fulfil speaking
engagements or teach at educational institutions; and (c) manage
personal investments; so long as such activities do not materially
and adversely affect the performance by you of your
responsibilities as an executive of the Company in accordance with
this Agreement and do not reflect adversely on the Company to a
material extent. It is further understood and agreed that to the
extent that any such activities have been conducted by you prior to
the Effective Date (as hereinafter defined) and have been notified
to the current Chairman of the Compensation Committee of the Board
in writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by the
Board; provided, however that without your prior consent you shall
not be required to perform services other than those comparable in
scope and dignity to those you were performing as at December 6,
1996. Without limiting the generality of the foregoing, services
to be performed by you shall be deemed to be not comparable in
scope and dignity to those you were performing as at December 6,
1996, if there shall occur a material adverse change in your
status, position or salary group or scope of responsibility as an
executive in effect immediately prior to the Effective Date
including, without limitation, (i) a material diminution of the
scope of your duties or responsibilities; (ii) the addition to
Cineplex or any subsidiary of new executive positions with equal or
greater title, status or responsibility as a result of which you no
longer report directly and solely to the Chief Executive Officer of
Cineplex; (iii) any material change in your reporting
responsibility as a result of which you no longer report directly
and solely to the Chief Executive Officer of Cineplex; (iv) the
assignment to you of any duties or areas of responsibilities which
are materially inconsistent with such status or position(s) or
responsibilities undertaken immediately prior to the Effective
Date; or (v) any removal of you from or any failure to reappoint or
re-elect you to the offices referred to in the first paragraph of
this Section 1 (except in connection with the termination of your
employment pursuant to Section 7); provided, however, that in the
event of any such occurrence, Cineplex shall have ten Business Days
following receipt of notice (given in accordance with Section 12)
from you to cure such occurrence. In this Agreement, "Business
Day" means a day other than a Saturday or Sunday on which banks are
open for business for normal business hours in the City of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1995 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 2001 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is one year prior to the Expiry Date (or one year
prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "One Year Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the One Year Notice Date or thereafter on any Business Day
during the first six (6) months of the last year of the term
hereof (or during the first six (6) months of any extension
thereof provided for herein) (such six (6) month period being
herein called the "Six-Month Notice Period") provided that
Cineplex may, instead of providing notice of non-renewal on or
before the One Year Notice Date, be entitled to deliver
written notice to you on or before the One Year Notice Date
electing not to renew this Agreement upon its expiry and
terminating your employment hereunder effective on the One
Year Notice Date. For greater certainty, if Cineplex
determines not to renew this Agreement upon its expiry after
the One Year Notice Date but during the Six-Month Notice
Period, it may not, except as permitted pursuant to Subsection
7(a), deliver to you notice of immediate termination during
that period, but only notice of non-renewal as aforesaid.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of U.S. Two Hundred and Sixty
Thousand Dollars (U.S. $260,000) commencing January 1, 1995,
or at such higher salary as may be determined by the Board at
a review to be held annually or more frequently if the Board
so determines (the "Base Salary"). The Base Salary shall be
converted into Canadian dollars as hereinafter provided and
shall be paid in equal instalments on Cineplex's regular
paydays during the term, subject to usual and required payroll
deductions and withholdings.
For the period January 1 to June 30 of each year, the Base
Salary shall be converted into Canadian dollars at the Bank of
Canada noon rate on November 15 of the prior year or, if such
date is not a Business Day, on the immediately preceding
Business Day. For the period July 1 to December 31 of each
year, the Base Salary shall be converted into Canadian dollars
at the Bank of Canada noon rate on May 15 of such year
provided that if such date is not a Business Day, on the
immediately preceding Business Day. You and Cineplex agree to
review the manner in which the Base Salary is converted into
Canadian dollars in the event of significant changes in the
exchange rate.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you. Bonus payments shall be converted into Canadian
dollars at the Bank of Canada noon rate on either November 15
or May 15 (or if such date is not a Business Day, the
immediately preceding Business Day) depending on the period in
which they are paid as provided in Subsection 4(a).
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Place and Condition of Employment
You shall not be required, without your consent, to perform your
primary duties under this Agreement in a location other than in the
Municipality of Metropolitan Toronto, nor shall you be required to
travel to a materially greater extent than you were at the
Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of the Chairman
of the Compensation Committee of the Board;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by the Chairman of the Compensation Committee of
the Board which describes such activity or conduct with
reasonable particularity and states the basis on which the
Board has determined that such activities or conduct is
inconsistent with this Agreement or the Cineplex Code of
Conduct and Confidentiality; provided that in the case of any
such event referred to in paragraph (ii) which has (to an
extent or in a manner which cannot be remedied) materially and
adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by the Chairman of the Compensation
Committee of the Board and ten Business Days cure period shall
be required. Notwithstanding the foregoing, Cineplex shall
not be entitled to terminate your employment hereunder
pursuant to subparagraph 7(b)(ii) above if the conduct
complained of is the same as, or is substantially similar to,
conduct engaged in by other executives of Cineplex which has
not given rise to complaint by Cineplex;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
or
(d) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3 (as opposed to notice of
non-renewal and termination of your employment pursuant to
Section 3); or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I or other similar
employee benefit plan introduced by the Board after the
Effective Date (which subsequently introduced plan has
not been discontinued by resolution of the Board
pursuant to a power to do so provided for in the terms
of the plan when first introduced) (collectively,
"Benefit Plans") in which you are participating from
time to time (unless you are otherwise provided with at
least substantially similar benefits as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which is provided to
you) or the taking of any action, or the failure to act,
by Cineplex which would adversely affect your continued
participating in any of such Benefit Plans (or other
substantially similar benefit arrangements) on at least
as favourable a basis to you as is the case at the
Effective Date or which would materially reduce your
benefit in the future under any of such Benefit Plans
(or other substantially similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10, except as specifically provided
under the Benefit Plans (or other substantially similar benefit
arrangements referred to in paragraph 8(b)(iii)) and subject in all
cases to the terms and conditions of each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at December 6,
1996 including, without limitation, in any particular
respect referred to in the third paragraph of Section 1.
In this Agreement, "Principal Business Unit" means each
of Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at December 6, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the One Year
Notice Date (as opposed to notice of non-renewal and
termination of your employment pursuant to Section 3) and you
do not terminate your employment pursuant to Subsection 8(a),
Cineplex shall pay to you in a lump sum in cash on the Expiry
Date, the aggregate of the following amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If Cineplex shall give notice of non-renewal and
termination of your employment pursuant to Section 3 on or
before the One Year Notice Date (as opposed to notice of non-
renewal of this Agreement pursuant to Section 3), Cineplex
shall pay to you in a lump sum in cash on the Employment
Termination Date, the aggregate of the following amounts:
(i) an amount equal to two times your Average
Compensation (as defined in Subsection 10(A)(e)); and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(d) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 within the Six-Month Notice
Period and you do not terminate your employment pursuant to
Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to two times your Average
Compensation less the amount of Base Salary paid to you
from the date of your receipt of such notice of non-
renewal to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(e) For the purposes of paragraphs 10(A)(c)(i) and
10(A)(d)(i), "Average Compensation" means the sum of the Base
Salary and any bonus, in both cases, paid or payable to you
for, or in respect of, the three (3) calendar years
immediately preceding the year in question, all divided by 3.
For these purposes, the year in question means:
(1) for the purposes of paragraph 10(A)(c)(i), the year
in which the One Year Notice Date occurs; or
(2) for the purposes of paragraph 10(A)(d)(i), the year
in which the Expiry Date occurs.
In any such case, the amounts in question shall be as reported
on Revenue Canada Taxation Form T-4 and, if applicable, T-4A
issued by Cineplex. For the purposes of determining Average
Compensation, any bonus which was awarded otherwise than in
cash shall be valued at the fair market value thereof which,
in the case of common shares of Cineplex, shall be deemed to
be the closing price on The Toronto Stock Exchange on the
trading day immediately preceding the date on which the bonus
was paid or became payable.
(f) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the aggregate of the
following amounts:
(i) an amount equal to the greater of (a) an amount
equal to the most recent bonus awarded to you, plus the
Base Salary (prior to any reduction thereof as provided
in Subsection 8(b)(i)) then being paid to you which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date, and (b)
two times the sum of the most recent bonus awarded to
you and the annual Base Salary (prior to any reduction
thereof as provided in Subsection 8(b)(i)) then being
paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this paragraph 10(A)(f), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(g) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to two times the Aggregate
Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(g)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Section 3:
(a) Subject as hereinafter provided, for a period of
two and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such two and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions relating to the
acceleration of the vesting of options in any Cineplex stock
option plan or agreement, subject to regulatory approval, in
the event you terminate your employment pursuant to Subsection
9A(c) or Cineplex terminates your employment for any reason,
then all stock options previously granted to you (except those
contemplated in your Performance-Based Option Agreement) shall
immediately vest upon the Employment Termination Date. In
addition, subject to regulatory approval and subject to
Section 6.06 of the Cineplex Stock Option Plan, as amended
from time to time, you (or your personal representative) shall
remain entitled to exercise any stock options previously
granted to you and then exercisable at any time until the
expiration of the full term of the exercise period relating to
each of such vested stock options. In connection with the
termination of your employment, Cineplex shall use its best
efforts to make such arrangements with you (at no material
cost to Cineplex) or to obtain necessary regulatory clearances
(at no material inconvenience to Cineplex) as may be necessary
to permit the accelerated vesting and continuation of such
vested stock options as aforesaid. Your rights under this
paragraph (ii) are in addition to your rights under any stock
option plans and agreements.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except for claims for monies actually due and payable to Cineplex
by you, Cineplex's obligation to make the payment provided for in
this Section 10 and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
claim (based on termination by Cineplex or otherwise), right or
action which Cineplex may have against you or others. All payments
made to you pursuant to this Section 10 shall be subject to any
withholding of (or in respect of) tax required by law provided that
such withholding shall be at the lowest amount permitted by law.
All cash payments pursuant to Section 10(A) shall be converted to
Canadian dollars at the Bank of Canada noon rate on either November
15 or May 15 (or if such date is not a Business Day, the
immediately preceding Business Day) depending on the period in
which they are paid as provided in Subsection 4(a). Further,
provided that there is no additional cost to Cineplex, Cineplex
will co-operate with you to structure payments provided in this
Section 10 in a manner which will be most tax effective for you.
10A. Non-Competition
If a Material Change occurs and you terminate your employment
pursuant to Section 9A, then, unless you refuse the payment
otherwise payable to you pursuant to Subsection 10(A)(g) and
release Cineplex from any liability or obligation in respect
thereof, you covenant and agree that you will not, for a period of
one (1) year from the Employment Termination Date, directly or
indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in
conjunction with any other person or persons, firm, association,
syndicate, company or corporation, as principal, agent,
shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
You acknowledge and agree that all restrictions contained in this
Section and in Section 10B are reasonable and valid and all
defences to the strict enforcement thereof by Cineplex are hereby
waived by you. If any covenant contained in this Section or in
Section 10B or any portion of either or both of such Sections shall
be held to be unreasonable for any reason, then such covenant shall
be given effect to in such reduced form as may be decided by any
court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section or Section 10B and such enforceable or invalid
covenant or portion thereof shall be severable from the remainder
of this Section or Section 10B.
Notwithstanding the restrictions contained in this Section, nothing
herein shall restrict you from, directly or indirectly, acquiring
or holding share investments in a public company whose shares are
listed on a recognized stock exchange or on an over-the-counter
market, where such share investment does not in the aggregate
exceed 5% of any class of shares of such company and where you are
only a passive investor in such company.
For purposes of clarity, it is hereby acknowledged that:
(a) if a Material Change occurs and you terminate your
employment pursuant to Section 9A and if you refuse the
payment otherwise payable to you pursuant to Subsection
10(A)(g) and release Cineplex from any liability or obligation
in respect thereof, or
(b) if Cineplex terminates your employment pursuant to
Section 7 or you terminate your employment pursuant to Section
8,
you shall, subject to the provisions of Section 10B, be entitled
to, directly or indirectly, in any manner whatsoever, including,
without limitation, either individually or in partnership or
jointly, or in conjunction with any other person or persons, firm,
association, syndicate, company or corporation, as principal,
agent, shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
10B. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
11. Legal Costs
Cineplex agrees to pay (as incurred by you), to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest (regardless of the
outcome thereof) by Cineplex or others of the occurrence of a
Material Change (other than one described in paragraphs 9A(b)(iii)
or (vi)) or any liability of Cineplex flowing from the occurrence
of such a Material Change plus, in each case, interest compounded
quarterly, on the total unpaid amount determined to be payable
under this Section 11, such interest to be calculated at a rate
equal to 1% in excess of the Canadian Prime Rate in effect from
time to time during the period of such non-payment. Cineplex
agrees to pay (as incurred by you) to the full extent permitted by
law, all legal fees and expenses which you may reasonably incur as
a result of any contest by Cineplex or others relating to this
Agreement and not covered by the immediately preceding sentence in
which you are substantially successful on the merits. For the
purposes of this Section 11, "Canadian Prime Rate" means the
commercial lending rate of interest, expressed as an annual rate,
which Cineplex's bankers quote in Toronto as the reference rate of
interest (commonly known as "prime") for the purpose of determining
the rate of interest that it charges to its commercial customers
for loans in Canadian funds.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Ellis Jacob
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Ellis Jacob
53 Harrison Road
North York, Ontario
M2L 1V7
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chairman of the Board or
Chairman of the Executive
Committee
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Allen Karp
By:_______________________________
AGREED this 6th day of December, 1996.
Ellis Jacob
______________________________
ELLIS JACOB
December 6, 1996
Mr. Robert Tokio
Executive Vice-President
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Tokio:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company").
This Agreement amends (with effect from and after December 6, 1996)
and restates the agreement dated December 1, 1994 which was
accepted by you on December 19, 1994, governing your employment
with Cineplex.
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as Executive Vice-President of
Cineplex upon the terms and conditions hereinafter set forth.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chairman
of the Compensation Committee of the Board (such approval not to be
unreasonably withheld); (b) deliver lectures, fulfil speaking
engagements or teach at educational institutions; and (c) manage
personal investments; so long as such activities do not materially
and adversely affect the performance by you of your
responsibilities as an executive of the Company in accordance with
this Agreement and do not reflect adversely on the Company to a
material extent. It is further understood and agreed that to the
extent that any such activities have been conducted by you prior to
the Effective Date (as hereinafter defined) and have been notified
to the current Chairman of the Compensation Committee of the Board
in writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by the
Board; provided, however that without your prior consent you shall
not be required to perform services other than those comparable in
scope and dignity to those you were performing as at December 6,
1996. Without limiting the generality of the foregoing, services
to be performed by you shall be deemed to be not comparable in
scope and dignity to those you were performing as at December 6,
1996, if there shall occur a material adverse change in your
status, position or salary group or scope of responsibility as an
executive in effect immediately prior to the Effective Date
including, without limitation, (i) a material diminution of the
scope of your duties or responsibilities; (ii) the addition to
Cineplex or any subsidiary of new executive positions with equal or
greater title, status or responsibility as a result of which you no
longer report directly and solely to the Chief Executive Officer of
Cineplex; (iii) any material change in your reporting
responsibility as a result of which you no longer report directly
and solely to the Chief Executive Officer of Cineplex; (iv) the
assignment to you of any duties or areas of responsibilities which
are materially inconsistent with such status or position(s) or
responsibilities undertaken immediately prior to the Effective
Date; or (v) any removal of you from or any failure to reappoint or
re-elect you to the offices referred to in the first paragraph of
this Section 1 (except in connection with the termination of your
employment pursuant to Section 7); provided, however, that in the
event of any such occurrence, Cineplex shall have ten Business Days
following receipt of notice (given in accordance with Section 12)
from you to cure such occurrence. In this Agreement, "Business
Day" means a day other than a Saturday or Sunday on which banks are
open for business for normal business hours in the City of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1995 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 2001 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is one year prior to the Expiry Date (or one year
prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "One Year Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the One Year Notice Date or thereafter on any Business Day
during the first six (6) months of the last year of the term
hereof (or during the first six (6) months of any extension
thereof provided for herein) (such six (6) month period being
herein called the "Six-Month Notice Period") provided that
Cineplex may, instead of providing notice of non-renewal on or
before the One Year Notice Date, be entitled to deliver
written notice to you on or before the One Year Notice Date
electing not to renew this Agreement upon its expiry and
terminating your employment hereunder effective on the One
Year Notice Date. For greater certainty, if Cineplex
determines not to renew this Agreement upon its expiry after
the One Year Notice Date but during the Six-Month Notice
Period, it may not, except as permitted pursuant to Subsection
7(a), deliver to you notice of immediate termination during
that period, but only notice of non-renewal as aforesaid.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of U.S. Two Hundred and Sixty
Thousand Dollars (U.S. $260,000) commencing January 1, 1995,
or at such higher salary as may be determined by the Board at
a review to be held annually or more frequently if the Board
so determines (the "Base Salary"). The Base Salary shall be
converted into Canadian dollars as hereinafter provided and
shall be paid in equal instalments on Cineplex's regular
paydays during the term, subject to usual and required payroll
deductions and withholdings.
For the period January 1 to June 30 of each year, the Base
Salary shall be converted into Canadian dollars at the Bank of
Canada noon rate on November 15 of the prior year or, if such
date is not a Business Day, on the immediately preceding
Business Day. For the period July 1 to December 31 of each
year, the Base Salary shall be converted into Canadian dollars
at the Bank of Canada noon rate on May 15 of such year
provided that if such date is not a Business Day, on the
immediately preceding Business Day. You and Cineplex agree to
review the manner in which the Base Salary is converted into
Canadian dollars in the event of significant changes in the
exchange rate.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you. Bonus payments shall be converted into Canadian
dollars at the Bank of Canada noon rate on either November 15
or May 15 (or if such date is not a Business Day, the
immediately preceding Business Day) depending on the period in
which they are paid as provided in Subsection 4(a).
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Place and Condition of Employment
You shall not be required, without your consent, to perform your
primary duties under this Agreement in a location other than in the
Municipality of Metropolitan Toronto, nor shall you be required to
travel to a materially greater extent than you were at the
Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of the Chairman
of the Compensation Committee of the Board;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by the Chairman of the Compensation Committee of
the Board which describes such activity or conduct with
reasonable particularity and states the basis on which the
Board has determined that such activities or conduct is
inconsistent with this Agreement or the Cineplex Code of
Conduct and Confidentiality; provided that in the case of any
such event referred to in paragraph (ii) which has (to an
extent or in a manner which cannot be remedied) materially and
adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by the Chairman of the Compensation
Committee of the Board and ten Business Days cure period shall
be required. Notwithstanding the foregoing, Cineplex shall
not be entitled to terminate your employment hereunder
pursuant to subparagraph 7(b)(ii) above if the conduct
complained of is the same as, or is substantially similar to,
conduct engaged in by other executives of Cineplex which has
not given rise to complaint by Cineplex;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
or
(d) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3 (as opposed to notice of
non-renewal and termination of your employment pursuant to
Section 3); or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I or other similar
employee benefit plan introduced by the Board after the
Effective Date (which subsequently introduced plan has
not been discontinued by resolution of the Board
pursuant to a power to do so provided for in the terms
of the plan when first introduced) (collectively,
"Benefit Plans") in which you are participating from
time to time (unless you are otherwise provided with at
least substantially similar benefits as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which is provided to
you) or the taking of any action, or the failure to act,
by Cineplex which would adversely affect your continued
participating in any of such Benefit Plans (or other
substantially similar benefit arrangements) on at least
as favourable a basis to you as is the case at the
Effective Date or which would materially reduce your
benefit in the future under any of such Benefit Plans
(or other substantially similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10, except as specifically provided
under the Benefit Plans (or other substantially similar benefit
arrangements referred to in paragraph 8(b)(iii)) and subject in all
cases to the terms and conditions of each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at December 6,
1996 including, without limitation, in any particular
respect referred to in the third paragraph of Section 1.
In this Agreement, "Principal Business Unit" means each
of Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at December 6, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the One Year
Notice Date (as opposed to notice of non-renewal and
termination of your employment pursuant to Section 3) and you
do not terminate your employment pursuant to Subsection 8(a),
Cineplex shall pay to you in a lump sum in cash on the Expiry
Date, the aggregate of the following amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If Cineplex shall give notice of non-renewal and
termination of your employment pursuant to Section 3 on or
before the One Year Notice Date (as opposed to notice of non-
renewal of this Agreement pursuant to Section 3), Cineplex
shall pay to you in a lump sum in cash on the Employment
Termination Date, the aggregate of the following amounts:
(i) an amount equal to two times your Average
Compensation (as defined in Subsection 10(A)(e)); and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(d) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 within the Six-Month Notice
Period and you do not terminate your employment pursuant to
Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to two times your Average
Compensation less the amount of Base Salary paid to you
from the date of your receipt of such notice of non-
renewal to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(e) For the purposes of paragraphs 10(A)(c)(i) and
10(A)(d)(i), "Average Compensation" means the sum of the Base
Salary and any bonus, in both cases, paid or payable to you
for, or in respect of, the three (3) calendar years
immediately preceding the year in question, all divided by 3.
For these purposes, the year in question means:
(1) for the purposes of paragraph 10(A)(c)(i), the year
in which the One Year Notice Date occurs; or
(2) for the purposes of paragraph 10(A)(d)(i), the year
in which the Expiry Date occurs.
In any such case, the amounts in question shall be as reported
on Revenue Canada Taxation Form T-4 and, if applicable, T-4A
issued by Cineplex. For the purposes of determining Average
Compensation, any bonus which was awarded otherwise than in
cash shall be valued at the fair market value thereof which,
in the case of common shares of Cineplex, shall be deemed to
be the closing price on The Toronto Stock Exchange on the
trading day immediately preceding the date on which the bonus
was paid or became payable.
(f) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the aggregate of the
following amounts:
(i) an amount equal to the greater of (a) an amount
equal to the most recent bonus awarded to you, plus the
Base Salary (prior to any reduction thereof as provided
in Subsection 8(b)(i)) then being paid to you which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date, and (b)
two times the sum of the most recent bonus awarded to
you and the annual Base Salary (prior to any reduction
thereof as provided in Subsection 8(b)(i)) then being
paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this paragraph 10(A)(f), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(g) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to two times the Aggregate
Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(g)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Section 3:
(a) Subject as hereinafter provided, for a period of
two and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such two and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions relating to the
acceleration of the vesting of options in any Cineplex stock
option plan or agreement, subject to regulatory approval, in
the event you terminate your employment pursuant to Subsection
9A(c) or Cineplex terminates your employment for any reason,
then all stock options previously granted to you (except those
contemplated in your Performance-Based Option Agreement) shall
immediately vest upon the Employment Termination Date. In
addition, subject to regulatory approval and subject to
Section 6.06 of the Cineplex Stock Option Plan, as amended
from time to time, you (or your personal representative) shall
remain entitled to exercise any stock options previously
granted to you and then exercisable at any time until the
expiration of the full term of the exercise period relating to
each of such vested stock options. In connection with the
termination of your employment, Cineplex shall use its best
efforts to make such arrangements with you (at no material
cost to Cineplex) or to obtain necessary regulatory clearances
(at no material inconvenience to Cineplex) as may be necessary
to permit the accelerated vesting and continuation of such
vested stock options as aforesaid. Your rights under this
paragraph (ii) are in addition to your rights under any stock
option plans and agreements.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except for claims for monies actually due and payable to Cineplex
by you, Cineplex's obligation to make the payment provided for in
this Section 10 and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
claim (based on termination by Cineplex or otherwise), right or
action which Cineplex may have against you or others. All payments
made to you pursuant to this Section 10 shall be subject to any
withholding of (or in respect of) tax required by law provided that
such withholding shall be at the lowest amount permitted by law.
All cash payments pursuant to Section 10(A) shall be converted to
Canadian dollars at the Bank of Canada noon rate on either November
15 or May 15 (or if such date is not a Business Day, the
immediately preceding Business Day) depending on the period in
which they are paid as provided in Subsection 4(a). Further,
provided that there is no additional cost to Cineplex, Cineplex
will co-operate with you to structure payments provided in this
Section 10 in a manner which will be most tax effective for you.
10A. Non-Competition
If a Material Change occurs and you terminate your employment
pursuant to Section 9A, then, unless you refuse the payment
otherwise payable to you pursuant to Subsection 10(A)(g) and
release Cineplex from any liability or obligation in respect
thereof, you covenant and agree that you will not, for a period of
one (1) year from the Employment Termination Date, directly or
indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in
conjunction with any other person or persons, firm, association,
syndicate, company or corporation, as principal, agent,
shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
You acknowledge and agree that all restrictions contained in this
Section and in Section 10B are reasonable and valid and all
defences to the strict enforcement thereof by Cineplex are hereby
waived by you. If any covenant contained in this Section or in
Section 10B or any portion of either or both of such Sections shall
be held to be unreasonable for any reason, then such covenant shall
be given effect to in such reduced form as may be decided by any
court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section or Section 10B and such enforceable or invalid
covenant or portion thereof shall be severable from the remainder
of this Section or Section 10B.
Notwithstanding the restrictions contained in this Section, nothing
herein shall restrict you from, directly or indirectly, acquiring
or holding share investments in a public company whose shares are
listed on a recognized stock exchange or on an over-the-counter
market, where such share investment does not in the aggregate
exceed 5% of any class of shares of such company and where you are
only a passive investor in such company.
For purposes of clarity, it is hereby acknowledged that:
(a) if a Material Change occurs and you terminate your
employment pursuant to Section 9A and if you refuse the
payment otherwise payable to you pursuant to Subsection
10(A)(g) and release Cineplex from any liability or obligation
in respect thereof, or
(b) if Cineplex terminates your employment pursuant to
Section 7 or you terminate your employment pursuant to Section
8,
you shall, subject to the provisions of Section 10B, be entitled
to, directly or indirectly, in any manner whatsoever, including,
without limitation, either individually or in partnership or
jointly, or in conjunction with any other person or persons, firm,
association, syndicate, company or corporation, as principal,
agent, shareholder, consultant, employee or in any other manner
whatsoever, carry on or be engaged in the business of exhibiting
motion pictures within North America.
10B. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
11. Legal Costs
Cineplex agrees to pay (as incurred by you), to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest (regardless of the
outcome thereof) by Cineplex or others of the occurrence of a
Material Change (other than one described in paragraphs 9A(b)(iii)
or (vi)) or any liability of Cineplex flowing from the occurrence
of such a Material Change plus, in each case, interest compounded
quarterly, on the total unpaid amount determined to be payable
under this Section 11, such interest to be calculated at a rate
equal to 1% in excess of the Canadian Prime Rate in effect from
time to time during the period of such non-payment. Cineplex
agrees to pay (as incurred by you) to the full extent permitted by
law, all legal fees and expenses which you may reasonably incur as
a result of any contest by Cineplex or others relating to this
Agreement and not covered by the immediately preceding sentence in
which you are substantially successful on the merits. For the
purposes of this Section 11, "Canadian Prime Rate" means the
commercial lending rate of interest, expressed as an annual rate,
which Cineplex's bankers quote in Toronto as the reference rate of
interest (commonly known as "prime") for the purpose of determining
the rate of interest that it charges to its commercial customers
for loans in Canadian funds.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Robert Tokio
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Robert Tokio
2287 Lakeshore Blvd. West
Grand Harbour, Suite 1408
Toronto, Ontario
M8V 3Y1
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chairman of the Board or
Chairman of the Executive
Committee
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Allen Karp
By:_______________________________
AGREED this 6th day of December, 1996.
Robert Tokio
______________________________
ROBERT TOKIO
December 6, 1996
Mr. Michael Herman
Executive Vice-President, Corporate Affairs
and Secretary
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Herman:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company").
This Agreement amends (with effect from and after December 6, 1996)
and restates the agreement dated May 1, 1992 which was accepted by
you on May 15, 1992, governing your employment with Cineplex.
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as Executive Vice-President,
Corporate Affairs and Secretary of Cineplex upon the terms and
conditions hereinafter set forth.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chief
Executive Officer of Cineplex or engage in such other similar
activities from time to time as are approved by the Chief Executive
Officer of Cineplex (such approval not to be unreasonably
withheld); and (b) manage personal investments; so long as such
activities do not materially and adversely affect the performance
by you of your responsibilities as an executive of the Company in
accordance with this Agreement and do not reflect adversely on the
Company to a material extent. It is further understood and agreed
that to the extent that any such activities have been conducted by
you prior to the Effective Date (as hereinafter defined) and have
been notified to the current Chief Executive Officer of Cineplex in
writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by
Cineplex's Chief Executive Officer provided, however that without
your prior consent you shall not be required to perform services
other than those comparable in scope and dignity to those you were
performing as at December 6, 1996. Without limiting the generality
of the foregoing, services to be performed by you shall be deemed
to be not comparable in scope and dignity to those you were
performing as at December 6, 1996, if there shall occur a material
adverse change in your status, position or salary group or scope of
responsibility as an executive in effect immediately prior to the
Effective Date including, without limitation, (i) a material
diminution of the scope of your duties or responsibilities; (ii)
the assignment to you of any duties or areas of responsibilities
which are materially inconsistent with such status or position(s)
or responsibilities undertaken immediately prior to the Effective
Date; or (iii) any removal of you from or any failure to reappoint
or re-elect you to the offices referred to in the first paragraph
of this Section 1 (except in connection with the termination of
your employment pursuant to Section 7); provided, however, that in
the event of any such occurrence, Cineplex shall have ten Business
Days following receipt of notice (given in accordance with
Section 12) from you to cure such occurrence. In this Agreement,
"Business Day" means a day other than a Saturday or Sunday on which
banks are open for business for normal business hours in the City
of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1996 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 1999 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is six months prior to the Expiry Date (or six
months prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "Six Month Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the Six Month Notice Date.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of Two Hundred and Fifty Thousand
Canadian Dollars ($250,000 Cdn.) commencing January 1, 1996,
or at such higher salary as may be determined by the Board and
Cineplex's Chief Executive Officer at a review to be held
annually or more frequently if the Board and Cineplex's Chief
Executive Officer so determine (the "Base Salary"). The Base
Salary shall be paid in equal instalments on Cineplex's
regular paydays during the term, subject to usual and required
payroll deductions and withholdings.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you.
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Place and Condition of Employment
You shall not be required, without your consent, to perform your
primary duties under this Agreement in a location other than in the
Municipality of Metropolitan Toronto, nor shall you be required to
travel to a materially greater extent than you were at the
Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of Cineplex's
Chief Executive Officer;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by Cineplex's Chief Executive Officer which
describes such activity or conduct with reasonable
particularity and states the basis on which Cineplex's Chief
Executive Officer has determined that such activities or
conduct is inconsistent with this Agreement or the Cineplex
Code of Conduct and Confidentiality; provided that in the case
of any such event referred to in paragraph (ii) which has (to
an extent or in a manner which cannot be remedied) materially
and adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by Cineplex's Chief Executive Officer and
ten Business Days cure period shall be required.
Notwithstanding the foregoing, Cineplex shall not be entitled
to terminate your employment hereunder pursuant to
subparagraph 7(b)(ii) above if the conduct complained of is
the same as, or is substantially similar to, conduct engaged
in by other executives of Cineplex which has not given rise to
complaint by Cineplex;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
or
(d) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3; or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I, special benefit
listed in Schedule II, or other similar employee benefit
plan introduced by the Board after the Effective Date
(which subsequently introduced plan has not been
discontinued by resolution of the Board pursuant to a
power to do so provided for in the terms of the plan
when first introduced) (collectively, "Benefit Plans")
in which you are participating from time to time (unless
you are otherwise provided with at least substantially
similar benefits as evidenced by the written opinion of
a nationally recognized employee benefits consulting
firm, a copy of which is provided to you) or the taking
of any action, or the failure to act, by Cineplex which
would adversely affect your continued participating in
any of such Benefit Plans (or other substantially
similar benefit arrangements) on at least as favourable
a basis to you as is the case at the Effective Date or
which would materially reduce your benefit in the future
under any of such Benefit Plans (or other substantially
similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10 and Schedule II, except as
specifically provided under the Benefit Plans (or other
substantially similar benefit arrangements referred to in paragraph
8(b)(iii)) and subject in all cases to the terms and conditions of
each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at December 6,
1996 including, without limitation, in any particular
respect referred to in the third paragraph of Section 1.
In this Agreement, "Principal Business Unit" means each
of Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at December 6, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the Six Month
Notice Date and you do not terminate your employment pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the aggregate of the
following amounts:
(i) an amount equal to the greater of (a) an amount
equal to the most recent bonus awarded to you, plus the
Base Salary (prior to any reduction thereof as provided
in Subsection 8(b)(i)) then being paid to you which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date, and (b)
one and one-half times the sum of the most recent bonus
awarded to you and the annual Base Salary (prior to any
reduction thereof as provided in Subsection 8(b)(i))
then being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this paragraph 10(A)(c), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(d) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to one and one-half times the
Aggregate Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(d)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Section 3:
(a) Subject as hereinafter provided, for a period of
one and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such one and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions in any Cineplex stock
option plan or agreement, but subject to regulatory approval
and subject to Section 6.06 of the Cineplex Stock Option Plan,
as amended from time to time, in the event you terminate your
employment pursuant to Subsection 9A(c) or Cineplex terminates
your employment for any reason, then you (or your personal
representative) shall remain entitled to exercise any stock
options previously granted to you and then exercisable at any
time until the expiration of the full term of the exercise
period relating to each of such vested stock options. In
connection with the termination of your employment, Cineplex
shall use its best efforts to make such arrangements with you
(at no material cost to Cineplex) or to obtain necessary
regulatory clearances (at no material inconvenience to
Cineplex) as may be necessary to permit the continuation of
such vested stock options as aforesaid. Your rights under
this paragraph (ii) are in addition to your rights under any
stock option plans and agreements.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except for claims for monies actually due and payable to Cineplex
by you, Cineplex's obligation to make the payment provided for in
this Section 10 and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
claim (based on termination by Cineplex or otherwise), right or
action which Cineplex may have against you or others. All payments
made to you pursuant to this Section 10 shall be subject to any
withholding of (or in respect of) tax required by law provided that
such withholding shall be at the lowest amount permitted by law.
Further, provided that there is no additional cost to Cineplex,
Cineplex will co-operate with you to structure payments provided in
this Section 10 in a manner which will be most tax effective for
you.
10A. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
You acknowledge and agree that all restrictions contained in this
Section are reasonable and valid and all defences to the strict
enforcement thereof by Cineplex are hereby waived by you. If any
covenant contained in this Section or any portion of this Section
shall be held to be unreasonable for any reason, then such covenant
shall be given effect to in such reduced form as may be decided by
any court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section and such enforceable or invalid covenant or portion
thereof shall be severable from the remainder of this Section.
11. Legal Costs
Cineplex agrees to pay (as incurred by you) to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest by Cineplex or others
relating to this Agreement in which you are substantially
successful on the merits.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Michael Herman
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Michael Herman
84 Elwood Boulevard
Toronto, Ontario
M5N 1G8
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise, if you terminate your employment pursuant to Section 9A
hereof. In all other circumstances, you shall be under a duty to
attempt to mitigate amounts payable to you by seeking other
employment (other than as a lawyer) and amounts payable to you
hereunder shall be reduced by compensation earned by you (for
greater certainty, including compensation earned by you if you
return to the practice of law) as a result of employment by another
employer.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Allen Karp
By:_______________________________
AGREED this 6th day of December, 1996.
Michael Herman
______________________________
MICHAEL HERMAN
SCHEDULE II
Cineplex shall pay all necessary fees, dues and other amounts
required to maintain your status as a member in good standing of
The Law Society of Upper Canada and of The Canadian Bar Association
(Ontario).
December 6, 1996
Mr. Howard Lichtman
Executive Vice-President, Communications
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Lichtman:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company").
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as Executive Vice-President,
Communications of Cineplex upon the terms and conditions
hereinafter set forth.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chief
Executive Officer of Cineplex or engage in such other similar
activities from time to time as are approved by the Chief Executive
Officer of Cineplex (such approval not to be unreasonably
withheld); and (b) manage personal investments; so long as such
activities do not materially and adversely affect the performance
by you of your responsibilities as an executive of the Company in
accordance with this Agreement and do not reflect adversely on the
Company to a material extent. It is further understood and agreed
that to the extent that any such activities have been conducted by
you prior to the Effective Date (as hereinafter defined) and have
been notified to the current Chief Executive Officer of Cineplex in
writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by
Cineplex's Chief Executive Officer provided, however that without
your prior consent you shall not be required to perform services
other than those comparable in scope and dignity to those you were
performing as at December 6, 1996. Without limiting the generality
of the foregoing, services to be performed by you shall be deemed
to be not comparable in scope and dignity to those you were
performing as at December 6, 1996, if there shall occur a material
adverse change in your status, position or salary group or scope of
responsibility as an executive in effect immediately prior to the
Effective Date including, without limitation, (i) a material
diminution of the scope of your duties or responsibilities; (ii)
the assignment to you of any duties or areas of responsibilities
which are materially inconsistent with such status or position(s)
or responsibilities undertaken immediately prior to the Effective
Date; or (iii) any removal of you from or any failure to reappoint
or re-elect you to the offices referred to in the first paragraph
of this Section 1 (except in connection with the termination of
your employment pursuant to Section 7); provided, however, that in
the event of any such occurrence, Cineplex shall have ten Business
Days following receipt of notice (given in accordance with
Section 12) from you to cure such occurrence. In this Agreement,
"Business Day" means a day other than a Saturday or Sunday on which
banks are open for business for normal business hours in the City
of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1996 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 1999 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is six months prior to the Expiry Date (or six
months prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "Six Month Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the Six Month Notice Date.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of Two Hundred and Thirty-five
Thousand Canadian Dollars ($235,000 Cdn.) commencing January
1, 1996, or at such higher salary as may be determined by the
Board and Cineplex's Chief Executive Officer at a review to be
held annually or more frequently if the Board and Cineplex's
Chief Executive Officer so determine (the "Base Salary"). The
Base Salary shall be paid in equal instalments on Cineplex's
regular paydays during the term, subject to usual and required
payroll deductions and withholdings.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you.
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Place and Condition of Employment
You shall not be required, without your consent, to perform your
primary duties under this Agreement in a location other than in the
Municipality of Metropolitan Toronto, nor shall you be required to
travel to a materially greater extent than you were at the
Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of Cineplex's
Chief Executive Officer;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by Cineplex's Chief Executive Officer which
describes such activity or conduct with reasonable
particularity and states the basis on which Cineplex's Chief
Executive Officer has determined that such activities or
conduct is inconsistent with this Agreement or the Cineplex
Code of Conduct and Confidentiality; provided that in the case
of any such event referred to in paragraph (ii) which has (to
an extent or in a manner which cannot be remedied) materially
and adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by Cineplex's Chief Executive Officer and
ten Business Days cure period shall be required.
Notwithstanding the foregoing, Cineplex shall not be entitled
to terminate your employment hereunder pursuant to
subparagraph 7(b)(ii) above if the conduct complained of is
the same as, or is substantially similar to, conduct engaged
in by other executives of Cineplex which has not given rise to
complaint by Cineplex;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
or
(d) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3; or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I or other similar
employee benefit plan introduced by the Board after the
Effective Date (which subsequently introduced plan has
not been discontinued by resolution of the Board
pursuant to a power to do so provided for in the terms
of the plan when first introduced) (collectively,
"Benefit Plans") in which you are participating from
time to time (unless you are otherwise provided with at
least substantially similar benefits as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which is provided to
you) or the taking of any action, or the failure to act,
by Cineplex which would adversely affect your continued
participating in any of such Benefit Plans (or other
substantially similar benefit arrangements) on at least
as favourable a basis to you as is the case at the
Effective Date or which would materially reduce your
benefit in the future under any of such Benefit Plans
(or other substantially similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10, except as specifically provided
under the Benefit Plans (or other substantially similar benefit
arrangements referred to in paragraph 8(b)(iii)) and subject in all
cases to the terms and conditions of each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at December 6,
1996 including, without limitation, in any particular
respect referred to in the third paragraph of Section 1.
In this Agreement, "Principal Business Unit" means each
of Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at December 6, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the Six Month
Notice Date and you do not terminate your employment pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the aggregate of the
following amounts:
(i) an amount equal to the greater of (a) an amount
equal to the most recent bonus awarded to you, plus the
Base Salary (prior to any reduction thereof as provided
in Subsection 8(b)(i)) then being paid to you which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date, and (b)
one and one-half times the sum of the most recent bonus
awarded to you and the annual Base Salary (prior to any
reduction thereof as provided iin Subsection 8(b)(i))
then being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this paragraph 10(A)(c), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(d) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to one and one-half times the
Aggregate Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(d)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Section 3:
(a) Subject as hereinafter provided, for a period of
one and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such one and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions in any Cineplex stock
option plan or agreement, but subject to regulatory approval
and subject to Section 6.06 of the Cineplex Stock Option Plan,
as amended from time to time, in the event you terminate your
employment pursuant to Subsection 9A(c) or Cineplex terminates
your employment for any reason, then you (or your personal
representative) shall remain entitled to exercise any stock
options previously granted to you and then exercisable at any
time until the expiration of the full term of the exercise
period relating to each of such vested stock options. In
connection with the termination of your employment, Cineplex
shall use its best efforts to make such arrangements with you
(at no material cost to Cineplex) or to obtain necessary
regulatory clearances (at no material inconvenience to
Cineplex) as may be necessary to permit the continuation of
such vested stock options as aforesaid. Your rights under
this paragraph (ii) are in addition to your rights under any
stock option plans and agreements.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except for claims for monies actually due and payable to Cineplex
by you, Cineplex's obligation to make the payment provided for in
this Section 10 and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
claim (based on termination by Cineplex or otherwise), right or
action which Cineplex may have against you or others. All payments
made to you pursuant to this Section 10 shall be subject to any
withholding of (or in respect of) tax required by law provided that
such withholding shall be at the lowest amount permitted by law.
Further, provided that there is no additional cost to Cineplex,
Cineplex will co-operate with you to structure payments provided in
this Section 10 in a manner which will be most tax effective for
you.
10A. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
You acknowledge and agree that all restrictions contained in this
Section are reasonable and valid and all defences to the strict
enforcement thereof by Cineplex are hereby waived by you. If any
covenant contained in this Section or any portion of this Section
shall be held to be unreasonable for any reason, then such covenant
shall be given effect to in such reduced form as may be decided by
any court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section and such enforceable or invalid covenant or portion
thereof shall be severable from the remainder of this Section.
11. Legal Costs
Cineplex agrees to pay (as incurred by you) to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest by Cineplex or others
relating to this Agreement in which you are substantially
successful on the merits.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Howard Lichtman
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Howard Lichtman
161 Old Yonge Street
Willowdale, Ontario
M2P 1R1
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise, if you terminate your employment pursuant to Section 9A
hereof. In all other circumstances, you shall be under a duty to
attempt to mitigate amounts payable to you by seeking other
employment and amounts payable to you hereunder shall be reduced by
compensation earned by you as a result of employment by another
employer.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Allen Karp
By:_______________________________
AGREED this 6th day of December, 1996.
Howard Lichtman
______________________________
HOWARD LICHTMAN
December 6, 1996
Mr. Irwin Cohen
Executive Vice-President, Operations for North America
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Dear Mr. Cohen:
Cineplex Odeon Corporation ("Cineplex") considers the establishment
and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of Cineplex and its
shareholders. Accordingly, the Board of Directors of Cineplex (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage you to continue employment with Cineplex
and its subsidiaries (collectively, the "Company").
With the foregoing background, you and Cineplex agree as follows:
1. Employment and Services
Cineplex will continue to employ you and you will continue to
perform your full-time services as Executive Vice-President,
Operations for North America of Cineplex upon the terms and
conditions hereinafter set forth.
It is expressly understood and agreed that it shall not be a
violation of this Agreement for you to (a) serve on corporate,
civic or charitable boards or committees approved by the Chief
Executive Officer of Cineplex or engage in such other similar
activities from time to time as are approved by the Chief Executive
Officer of Cineplex (such approval not to be unreasonably
withheld); and (b) manage personal investments; so long as such
activities do not materially and adversely affect the performance
by you of your responsibilities as an executive of the Company in
accordance with this Agreement and do not reflect adversely on the
Company to a material extent. It is further understood and agreed
that to the extent that any such activities have been conducted by
you prior to the Effective Date (as hereinafter defined) and have
been notified to the current Chief Executive Officer of Cineplex in
writing prior to the date hereof, the continued conduct of such
activities subsequent to the Effective Date shall thereafter be
deemed not to materially and adversely affect your ability to
perform your responsibilities hereunder or to reflect adversely on
the Company.
You will perform such services as required from time to time by
Cineplex's Chief Executive Officer provided, however that without
your prior consent you shall not be required to perform services
other than those comparable in scope and dignity to those you were
performing as at December 6, 1996. Without limiting the generality
of the foregoing, services to be performed by you shall be deemed
to be not comparable in scope and dignity to those you were
performing as at December 6, 1996, if there shall occur a material
adverse change in your status, position or salary group or scope of
responsibility as an executive in effect immediately prior to the
Effective Date including, without limitation, (i) a material
diminution of the scope of your duties or responsibilities; (ii)
the assignment to you of any duties or areas of responsibilities
which are materially inconsistent with such status or position(s)
or responsibilities undertaken immediately prior to the Effective
Date; or (iii) any removal of you from or any failure to reappoint
or re-elect you to the offices referred to in the first paragraph
of this Section 1 (except in connection with the termination of
your employment pursuant to Section 7); provided, however, that in
the event of any such occurrence, Cineplex shall have ten Business
Days following receipt of notice (given in accordance with
Section 12) from you to cure such occurrence. In this Agreement,
"Business Day" means a day other than a Saturday or Sunday on which
banks are open for business for normal business hours in the City
of Toronto.
2. Results and Proceeds
As your employer, Cineplex shall own all rights in and to the
results and proceeds connected with or arising out of, directly or
indirectly, your services hereunder.
3. Term
The term of this Agreement shall commence on January 1, 1996 (the
"Effective Date") and, subject to Sections 7, 8 and 9A, continue
until January 1, 1999 (the "Expiry Date"), unless extended pursuant
to the provisions of this Section 3.
Cineplex and you agree and acknowledge that neither Cineplex nor
you has any obligation to renew this Agreement or to continue your
employment after expiration of the term hereunder, and Cineplex and
you expressly acknowledge that no promises or understandings to the
contrary have been made or reached. Subject to Subsection 8(a) and
Sections 9A and 10 hereof:
(a) if you determine not to renew this Agreement upon its
expiry, you shall notify Cineplex in writing on or before the
date which is six months prior to the Expiry Date (or six
months prior to the expiry of any extension of this Agreement
provided for herein) (provided that if such date is not a
Business Day, on or before the immediately preceding Business
Day) (such date being herein called the "Six Month Notice
Date"); or
(b) if Cineplex determines not to renew this Agreement upon
its expiry, Cineplex shall notify you in writing on or before
the Six Month Notice Date.
Failing such notice by either party, the term of this Agreement
shall be deemed to have been extended by a period of one year from
the date upon which it would otherwise have expired and the "Expiry
Date" shall mean the last day of such year. Failure to give such
notices from time to time shall again operate to extend the term
for further periods of one year each; provided that any extension
which would otherwise extend the term beyond your normal retirement
age (applicable to employees generally under company policy) shall
only extend the term to your normal retirement age. The parties
acknowledge that the normal retirement age is presently 65.
You and Cineplex hereby agree that the provisions of Section 2 of
the Employers and Employees Act (Ontario) shall not apply to this
Agreement.
4. Compensation
(a) Base Salary
For your services rendered under this Agreement, Cineplex
shall pay you a base salary of Two Hundred and Fifteen
Thousand Canadian Dollars ($215,000 Cdn.) commencing January
1, 1996, or at such higher salary as may be determined by the
Board and Cineplex's Chief Executive Officer at a review to be
held annually or more frequently if the Board and Cineplex's
Chief Executive Officer so determine (the "Base Salary"). The
Base Salary shall be paid in equal instalments on Cineplex's
regular paydays during the term, subject to usual and required
payroll deductions and withholdings.
(b) Bonus
You acknowledge that the payment of bonuses in any year is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of bonus payments
will be considered by the Board at least annually; that
bonuses, if any, may be in amounts equal to up to 100% of Base
Salary and may be paid in cash, Cineplex common shares or a
combination of the two; and that the decision as to payment
and amount will take into account primarily individual
performance and corporate performance and may take into
account such other secondary factors as the Board deems
appropriate. Any decision of the Board with respect to the
amount or form of a bonus, if any, shall be final and binding
upon you.
(c) Stock Options
You acknowledge that the issuance of stock options is a matter
in the sole discretion of the Board. Cineplex confirms to you
its existing policy that the question of issuance of stock
options will be considered by the Board at least annually.
Subject to the terms of Cineplex's stock option plan, as from
time to time in effect, any decision of the Board with respect
to the quantity or terms of a stock option grant, if any, will
be final and binding on you.
5. Travel
You shall not be required, without your consent, to travel to a
materially greater extent than you were at the Effective Date.
6. Vacation
You shall be entitled to vacation with pay during the term of this
Agreement in accordance with Cineplex vacation policy which was
current at the Effective Date, which shall in no event be less than
four weeks per annum.
7. Termination by Cineplex
Cineplex may terminate your employment hereunder:
(a) subject as hereinafter provided, without notice for such
cause as would entitle Cineplex at law to terminate your
employment without notice; provided such termination occurs
within one month of the circumstances providing a basis for
such termination first coming to the attention of Cineplex's
Chief Executive Officer;
(b) on not less than 90 days' notice to you in either of the
following events:
(i) you engage in activities outside the scope of your
employment which do not meet the requirements for such
activities set forth in the second paragraph of
Section 1; or
(ii) you engage in conduct which constitutes a material
breach of the Cineplex Code of Conduct and
Confidentiality (a copy of which is attached hereto) as
amended from time to time; and
you fail to desist from such activities or conduct within ten
Business Days of being requested to do so in writing by a
notice signed by Cineplex's Chief Executive Officer which
describes such activity or conduct with reasonable
particularity and states the basis on which Cineplex's Chief
Executive Officer has determined that such activities or
conduct is inconsistent with this Agreement or the Cineplex
Code of Conduct and Confidentiality; provided that in the case
of any such event referred to in paragraph (ii) which has (to
an extent or in a manner which cannot be remedied) materially
and adversely affected your ability to perform your
responsibilities as an executive of the Company and does
reflect adversely on the Company to a material extent, no such
request to desist by Cineplex's Chief Executive Officer and
ten Business Days cure period shall be required.
Notwithstanding the foregoing, Cineplex shall not be entitled
to terminate your employment hereunder pursuant to
subparagraph 7(b)(ii) above if the conduct complained of is
the same as, or is substantially similar to, conduct engaged
in by other executives of Cineplex which has not given rise to
complaint by Cineplex;
(c) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long term disability insurance plan, but in no case
shall such right be exercised until six months from the date
of the commencement of such disability, or until the date the
first payment is received under the plan, whichever is later;
or
(d) as provided in Section 3.
The rights of Cineplex under this Section 7 shall not be affected
by the occurrence of a Material Change.
8. Termination by You
In addition to your rights under Section 9A, you may terminate your
employment hereunder:
(a) at any time on not less than 90 days' written notice in
the event that Cineplex gives you notice of non-renewal of
this Agreement pursuant to Section 3; or
(b) at any time on not less than 60 days' written notice in
the event that Cineplex fails in any material respect to
perform its obligations hereunder; provided that Cineplex
shall be deemed to have failed to perform its obligations
hereunder in a material respect in the event of:
(i) a reduction by Cineplex in your Base Salary as in
effect from time to time;
(ii) failure by Cineplex to pay or cause to be paid to
you any amounts awarded and due to you by way of bonus
in accordance with Subsection 4(b); or
(iii) the failure by Cineplex to continue in effect any
benefit plan listed in Schedule I or other similar
employee benefit plan introduced by the Board after the
Effective Date (which subsequently introduced plan has
not been discontinued by resolution of the Board
pursuant to a power to do so provided for in the terms
of the plan when first introduced) (collectively,
"Benefit Plans") in which you are participating from
time to time (unless you are otherwise provided with at
least substantially similar benefits as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which is provided to
you) or the taking of any action, or the failure to act,
by Cineplex which would adversely affect your continued
participating in any of such Benefit Plans (or other
substantially similar benefit arrangements) on at least
as favourable a basis to you as is the case at the
Effective Date or which would materially reduce your
benefit in the future under any of such Benefit Plans
(or other substantially similar benefit arrangements);
provided that Cineplex shall have ten Business Days following
receipt of written notice from you to cure any such
occurrence. Provided further that if a Material Change (as
defined in Section 9A hereof) shall occur and, thereafter but
prior to the termination of your employment consequent upon
such Material Change, Cineplex shall fail in any material
respect to perform its obligations under the third paragraph
of Section 1, you shall not, during the period of 180 days
following the date on which you become aware that the Material
Change has occurred, rely on your right to terminate your
employment under this Section 8 to effect a termination at an
earlier date than would have been permitted under Section 9A.
Except as provided in the immediately preceding sentence,
your rights under this Section 8 shall not be affected by the
occurrence of a Material Change.
9. Benefits
During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the Benefit
Plans referred to in paragraph 8(b)(iii) (or other
substantially similar benefit arrangements refereed to in
paragraph 8(b)(iii)); and
(c) You shall be entitled to secretarial, transportation and
other facilities commensurate with that which you receive at
present.
You further expressly agree and acknowledge that after termination
of your employment you are entitled to no additional benefits not
expressly set forth in Section 10, except as specifically provided
under the Benefit Plans (or other substantially similar benefit
arrangements referred to in paragraph 8(b)(iii)) and subject in all
cases to the terms and conditions of each such plan.
9A. Material Change
(a) No Modification of Other Rights
Cineplex, on behalf of itself and its shareholders, wishes to
assure itself of continuity of management in the event of any
Material Change (as defined in Subsection (b) of this
Section 9A). The rights provided under this Section 9A will
only take effect in the event of a Material Change and
Cineplex is not obligated to continue your employment after
the expiration of the term under Section 3 of this Agreement,
and this Section 9A does not otherwise modify any of
Cineplex's rights or obligations under the other provisions of
this Agreement.
(b) Definition of Material Change
For the purposes of this Agreement, a "Material Change" shall
mean any one of the following events:
(i) either MCA INC. or the Claridge Group (as
hereinafter defined) shall dispose of all or
substantially all of its direct or indirect shareholding
in Cineplex;
(ii) either MCA INC. or the Claridge Group nominates, in
fact, a majority of the directors to be elected at any
meeting of shareholders at which directors are to be
elected and such nominees are elected;
(iii) Cineplex ceases in fact to be the manager, directly
or indirectly, of all or substantially all of the assets
employed from time to time in carrying on the business
of any Principal Business Unit (as hereinafter defined)
or Cineplex, directly or indirectly, discontinues or
disposes of all or substantially all the business of any
Principal Business Unit without retaining management of
such business as aforesaid and, in either case, as a
consequence, the scope and dignity of your services
cease to be comparable to the scope and dignity of the
services which you were performing as at December 6,
1996 including, without limitation, in any particular
respect referred to in the third paragraph of Section 1.
In this Agreement, "Principal Business Unit" means each
of Cineplex's Canadian Theatre Division and U.S. Theatre
Division;
(iv) any person or group of persons acting jointly or in
concert (including any persons deemed to be an "offeror"
or "beneficial owner" of securities of Cineplex for the
purposes of the Securities Act (Ontario) or the
Securities Exchange Act, 1934) (hereinafter, a "Person
or Group") acquire or are deemed (by or under applicable
legislation) to acquire a number of common shares of
Cineplex greater than the number of common shares held
by the Claridge Group and, at any meeting of
shareholders at which directors are elected held within
three years of such event, any of the nominees for
election to the Board named by the Board in the
management proxy circular are not elected to the Board;
(v) Cineplex's head office activities shall be
relocated to a place other than the Municipality of
Metropolitan Toronto; and/or
(vi) a Person or Group acquires or are deemed (by or
under applicable legislation) to acquire shares of
Cineplex entitled to 20% or more of the then outstanding
votes and, as a consequence thereof, the scope and
dignity of your services cease to be comparable to the
scope and dignity of the services which you were
performing as at December 6, 1996, including, without
limitation, in any particular respect referred to in the
third paragraph of Section 1.
In this Section 9A, "Claridge Group" means, collectively,
Charles R. Bronfman, E. Leo Kolber and The Charles R. Bronfman
Trust and their respective associates (as defined in the
Securities Act (Ontario)).
(c) Optional Early Termination by Executive Following
Material Change
In consideration of the mutual covenants and obligations of
the parties under this Agreement, Cineplex agrees that
following the occurrence of a Material Change, you may
voluntarily and at your sole option terminate your employment
hereunder without giving any reason, provided that your
employment has not been otherwise terminated by Cineplex
pursuant to Section 7 or by you pursuant to Section 8. You
may exercise the foregoing option to terminate this Agreement
by a "Notice of Termination" (as defined in Section 12) to
Cineplex received not later than the 270th day following the
date on which you become aware that such Material Change has
occurred. Such Notice of Termination shall specify an
effective date of termination which is not earlier than either
90 days after the Notice of Termination is given or 180 days
after the date on which you become aware that the Material
Change has occurred.
10. (A) Compensation Due Executive Upon Termination
(a) If your employment shall be terminated by you pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date (as defined in Section
12), the aggregate of the following amounts:
(i) an amount equal to the Base Salary then being paid
to you which would have otherwise been paid to you from
the Employment Termination Date to the Expiry Date; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(b) If Cineplex shall give notice of non-renewal of this
Agreement pursuant to Section 3 on or before the Six Month
Notice Date and you do not terminate your employment pursuant
to Subsection 8(a), Cineplex shall pay to you in a lump sum in
cash on the Expiry Date, the aggregate of the following
amounts:
(i) an amount equal to the annual Base Salary then
being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
(c) If your employment shall be terminated by you pursuant
to Subsection 8(b), Cineplex shall pay to you in a lump sum in
cash on the Employment Termination Date, the aggregate of the
following amounts:
(i) an amount equal to the greater of (a) an amount
equal to the most recent bonus awarded to you, plus the
Base Salary (prior to any reduction thereof as provided
in Subsection 8(b)(i)) then being paid to you which
would have otherwise been paid to you from the
Employment Termination Date to the Expiry Date, and (b)
one and one-half times the sum of the most recent bonus
awarded to you and the annual Base Salary (prior to any
reduction thereof as provided in Subsection 8(b)(i))
then being paid to you; and
(ii) in the case of compensation, if any, previously
deferred, all amounts of such compensation previously
deferred and not yet paid by Cineplex.
For the purposes of this paragraph 10(A)(c), any bonus which
was awarded otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares of
Cineplex, shall be deemed to be the closing price on The
Toronto Stock Exchange on the trading day immediately
preceding the date on which the bonus was paid or became
payable.
(d) If your employment shall be terminated by you pursuant
to Section 9A, Cineplex shall pay to you in a lump sum in cash
on the Employment Termination Date, an amount equal to the
greater of:
(i) the Base Salary then being paid to you which would
have otherwise been paid to you from the Employment
Termination Date to the Expiry Date; and
(ii) the aggregate of:
(1) if not theretofore paid, the Aggregate
Compensation (as hereinafter defined) for a period
equal to the greater of: (x) the period from the
date of the Material Change to the Employment
Termination Date; and (y) six months;
(2) an amount equal to one and one-half times the
Aggregate Compensation; and
(3) in the case of compensation, if any,
previously deferred, all amounts of such
compensation previously deferred and not yet paid
by Cineplex.
For the purposes of this paragraph 10(A)(d)(ii),
"Aggregate Compensation" means the Base Salary and the
most recent bonus due or paid to you in or in respect of
the period of one year immediately preceding the date of
the Material Change, provided that if no bonus was paid
or due to you in or in respect of such period, there
shall be added to the said Base Salary the amount of the
then most recent bonus paid or due to you in respect of
the period of one year. For the purposes of determining
Aggregate Compensation, any bonus which was awarded
otherwise than in cash shall be valued at the fair
market value thereof which, in the case of common shares
of Cineplex, shall be deemed to be the closing price on
The Toronto Stock Exchange on the trading day
immediately preceding the date on which the bonus was
paid or became payable.
(B) Benefits Due Executive Upon Termination
(i) Benefits
If your employment shall be terminated by you pursuant to
Sections 8 or 9A or if Cineplex shall give a notice pursuant
to Section 3:
(a) Subject as hereinafter provided, for a period of
one and one-half years following the Employment
Termination Date Cineplex shall continue benefits
to you and/or your family under the Benefit Plans
(or other substantially similar arrangements
referred to in paragraph 8(b)(iii)) at least equal
to those which would have been provided to them if
your employment had not terminated, if and as in
effect at any time during the 90 day period
immediately preceding the Employment Termination
Date or, if more favourable to you, as in effect at
any time thereafter during such one and one-half
year period with respect to other key executives
and their families.
(b) Cineplex shall use its best efforts to make such
arrangements with you (at no material additional
net cost to itself) as may be necessary to permit
continuation of benefits as contemplated by
paragraph 10(B)(i)(a). If under the terms of any
Benefit Plan (or other substantially similar
benefit arrangements referred to in paragraph
8(b)(iii)) it is not possible to continue as
aforesaid the benefit of such Benefit Plan (or
other such arrangements) following termination of
your employment, Cineplex shall provide at least
substantially similar benefits (as evidenced by the
written opinion of a nationally recognized employee
benefits consulting firm, a copy of which will be
provided to you) unless such replacement benefit
exceeds in its cost that of the original benefit,
in which event Cineplex shall be obliged only to
provide a replacement benefit to the extent of its
cost of the original Benefit Plan (or other such
similar arrangements).
(ii) Stock Option Arrangements
Notwithstanding any other provisions in any Cineplex stock
option plan or agreement, but subject to regulatory approval
and subject to Section 6.06 of the Cineplex Stock Option Plan,
as amended from time to time, in the event you terminate your
employment pursuant to Subsection 9A(c) or Cineplex terminates
your employment for any reason, then you (or your personal
representative) shall remain entitled to exercise any stock
options previously granted to you and then exercisable at any
time until the expiration of the full term of the exercise
period relating to each of such vested stock options. In
connection with the termination of your employment, Cineplex
shall use its best efforts to make such arrangements with you
(at no material cost to Cineplex) or to obtain necessary
regulatory clearances (at no material inconvenience to
Cineplex) as may be necessary to permit the continuation of
such vested stock options as aforesaid. Your rights under
this paragraph (ii) are in addition to your rights under any
stock option plans and agreements.
(iii) Assistance for your Spouse
If your employment is terminated as a result of your death or
your having suffered a disability which makes you eligible to
receive the maximum benefit payable under Cineplex's long-term
disability insurance plan (and your having received the first
payment under the plan or six months from the date of
commencement of such disability having elapsed, whichever is
later), Cineplex will use its reasonable best efforts to
assist your wife in relocating to the United States of
America.
(C) General Provisions Re: Amounts Due Executive Upon
Termination
Except for claims for monies actually due and payable to Cineplex
by you, Cineplex's obligation to make the payment provided for in
this Section 10 and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
claim (based on termination by Cineplex or otherwise), right or
action which Cineplex may have against you or others. All payments
made to you pursuant to this Section 10 shall be subject to any
withholding of (or in respect of) tax required by law provided that
such withholding shall be at the lowest amount permitted by law.
Further, provided that there is no additional cost to Cineplex,
Cineplex will co-operate with you to structure payments provided in
this Section 10 in a manner which will be most tax effective for
you.
10A. Confidentiality
All confidential records, material and information and copies
thereof, and all trade secrets concerning the business or affairs
of Cineplex obtained by you in the course of your employment shall
remain the exclusive property of Cineplex. During your employment,
you shall not reveal, divulge or make known the contents of such
confidential records or any of such confidential information or
trade secrets to any person or entity other than to Cineplex,
Cineplex's qualified employees, Cineplex's professional advisors
and other persons on a "need to know" basis in connection with
matters directly relating to Cineplex, and you shall not, following
the termination of your employment hereunder for any reason,
reveal, divulge or make known the contents of such confidential
records or any of such confidential information or trade secrets to
any person or entity for any purpose whatsoever or make use thereof
for your own or any other person's or entity's benefit. For the
purposes hereof, confidential records, material and information
include information known or used by Cineplex in connection with
its business including, but not limited to, any design, prototype,
compilation of information, data, program, code, method, technique
or process, information relating to any product, device, equipment
or machine, information about or relating to Cineplex's customers
and suppliers and Cineplex's markets and marketing plans, present
and future, information about or relating to Cineplex's potential
business ventures and locations, financial information of all kinds
relating to Cineplex and its activities, all inventions, ideas, and
related material but does not include any of the foregoing which is
or becomes a matter of public knowledge.
You acknowledge and agree that all restrictions contained in this
Section are reasonable and valid and all defences to the strict
enforcement thereof by Cineplex are hereby waived by you. If any
covenant contained in this Section or any portion of this Section
shall be held to be unreasonable for any reason, then such covenant
shall be given effect to in such reduced form as may be decided by
any court of competent jurisdiction, the intent being that such
covenant shall have effect to the maximum extent permitted by law.
If, notwithstanding the foregoing, any covenant or any portion of
any such covenant should be held to be unenforceable or be declared
invalid for any reason, such unenforceability or invalidity shall
not affect the enforceability or validity of the remaining portions
of this Section and such enforceable or invalid covenant or portion
thereof shall be severable from the remainder of this Section.
11. Legal Costs
Cineplex agrees to pay (as incurred by you) to the full extent
permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest by Cineplex or others
relating to this Agreement in which you are substantially
successful on the merits.
12. Notices
All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to you: Mr. Irwin Cohen
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
with a copy to: Mr. Irwin Cohen
130 Carlton Street
Apartment 506
Toronto, Ontario
M5A 4K3
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
Any termination by either party pursuant to this Agreement shall be
communicated by Notice of Termination to the other given in
accordance with this Section 12. For purposes of this Agreement, a
"Notice of Termination" means a written notice which:
(a) states the specific provision of this Agreement relied
upon;
(b) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
your employment under the provision so stated; and
(c) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
date shall be not more than 15 days after the giving of such
notice, except as otherwise may be provided in this Agreement)
(the "Employment Termination Date").
13. No Mitigation
You shall not be obligated to seek other employment or otherwise
mitigate the amounts payable to you under any of the provisions of
this Agreement, nor shall any amounts payable to you hereunder be
reduced by any compensation earned by you as a result of employment
by another employer after the Employment Termination Date, or
otherwise, if you terminate your employment pursuant to Section 9A
hereof. In all other circumstances, you shall be under a duty to
attempt to mitigate amounts payable to you by seeking other
employment and amounts payable to you hereunder shall be reduced by
compensation earned by you as a result of employment by another
employer.
14. Successors
This Agreement shall inure to the benefit of and be binding upon
Cineplex and its successor by way of merger, amalgamation,
reorganization or otherwise. Cineplex shall not take any action or
enter into any contract as a result of which Cineplex would not be
able to make the payments herein provided for in the event of your
termination of employment consequent upon a Material Change.
15. Severability; Entire Agreement; Amendments
This Agreement has been fully authorized by all necessary corporate
action on the part of Cineplex; constitutes a valid and legally
binding obligation of Cineplex; and sets forth the entire
understanding between us. There are no terms, conditions,
representations, warranties or covenants other than those contained
herein. No terms or provision of this Agreement may be amended,
waived, released, discharged or modified in any respect except in
writing, signed by the appropriate party(s). No waiver of any
breach or default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. A
delay or failure to assert rights or a breach of this Agreement
shall not be deemed to be a waiver of such rights either with
respect to that breach or any subsequent breach. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Cineplex Code of Conduct and Confidentiality
Attached hereto and made a part of this Agreement is a copy of the
Cineplex Code of Conduct and Confidentiality. You confirm that you
have read, understand and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenor of the current Code of
Conduct and Confidentiality and not in violation of public policy.
17. Governing Law
This agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario.
Yours very truly,
CINEPLEX ODEON CORPORATION
Allen Karp
By:_______________________________
AGREED this 6th day of December, 1996.
Irwin Cohen
______________________________
IRWIN COHEN
January 22, 1997
Mr. Michael D. McCartney
23 Del Rey Circle
Thousand Oaks, CA 91360
U.S.A.
Dear Mr. McCartney:
Reference is made to the letter agreement (the "Employment
Agreement") dated September 15, 1995 between Cineplex Odeon
Corporation ("Cineplex") and you.
This letter will confirm that the Employment Agreement has been
extended from January 1, 1997 to December 31, 1998 and that the
base salary referred to in paragraph 3(a) has been increased to
$225,000 U.S. per annum effective January 1, 1997.
In all other respects, Cineplex and you agree that the terms and
conditions of the Employment Agreement are hereby confirmed and
ratified without amendment and remain in full force and effect.
Yours very truly,
CINEPLEX ODEON CORPORATION
Michael Herman
By:______________________________
Michael Herman
Executive Vice President,
Corporate Affairs
AGREED TO AND ACCEPTED this day of January, 1997.
Michael McCartney
_________________
Michael McCartney
September 15, 1995
Mr. Michael D. McCartney
23 Del Rey Circle
Thousand Oaks, CA 91360
U.S.A.
Dear Mr. McCartney:
This letter will serve to confirm our recent discussions regarding
your continuing employment arrangements with Cineplex Odeon
Corporation ("Cineplex") as follows:
1. Employment and Services: Cineplex has agreed to cause Plitt
Theatres, Inc. to continue your employment and you have agreed to
perform your full-time services as Senior Vice President, U.S. Film
upon the terms and conditions hereinafter set forth. You will
perform such services as required from time to time by, and you
shall be required to report directly to, the Chief Executive
Officer of Cineplex or to such other senior executive of Cineplex
as the Chief Executive Officer may designate.
2. Term: The term of this agreement shall commence on September
11, 1995 (the "Effective Date") and continue until December 31,
1996 (the "Expiry Date").
3. Compensation:
(a) Base Salary: For your services rendered, Cineplex shall
pay you a base salary of $200,000.00 U.S. per annum or such
higher salary as may be determined by the Board of Directors
of Cineplex (the "Board") at a review to be held annually
(effective January 1st) or more frequently if the Board so
determines. Such salary shall be payable in equal instalments
on Cineplex's regular pay days, subject to the usual and
required employee payroll deductions and withholdings.
(b) Bonus: You acknowledge that the payment of bonuses in
any year is a matter in the sole discretion of the Board.
Cineplex confirms to you its existing policy that the question
of bonus payments will be considered by the Board at least
annually; bonuses may be paid in cash, Cineplex common shares
or a combination of the two; and that the decision as to
payment and amount will take into account primarily individual
performance, departmental performance and corporate
performance and may take into account such other secondary
factors as the Board deems appropriate. Any decision of the
Board with respect to the amount or form of a bonus, if any,
shall be final and binding upon you.
(c) Stock Options: In consideration of you agreeing to
continuing to be employed by Cineplex, you shall be granted on
the Effective Date options to acquire an additional 25,000
common shares of Cineplex subject to and in accordance with
the terms of Cineplex's existing stock option plan. You
acknowledge that the issuance of additional options is a
matter in the sole discretion of the Board. Cineplex confirms
to you its existing policy that the question of issuance of
stock options will be considered by the Board at least
annually. Subject to the terms of Cineplex's stock option
plan, as from time to time in effect, any decision of the
Board with respect to the quantity or terms of a stock option
grant, if any, will be final and binding on you.
4. Vacation: You shall be entitled to vacation with pay during
the term of this agreement in accordance with current Cineplex
vacation policy at the Effective Date, which shall in no event be
less than four weeks per annum.
5. Benefits: During the term of your employment hereunder:
(a) Cineplex shall reimburse you for your reasonable and
necessary business expenses in accordance with its then
prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred);
(b) You shall be entitled to participate in the benefit
plans referred to in Schedule "I" (or other substantially
similar benefit arrangements offered to senior executives of
the Corporation); and
(c) You shall be entitled to a car allowance of 4.5% of your
Base Salary.
6. Termination by Cineplex: Cineplex may terminate your
employment hereunder:
(a) without notice for such cause as would entitle Cineplex
at law to terminate your employment without notice; or
(b) if you have suffered a disability which makes you
eligible to receive the maximum benefit payable under
Cineplex's long-term disability insurance plan.
7. Termination by You: Without waiving or prejudicing any other
rights or remedies which you might otherwise have against Cineplex,
you may terminate your employment hereunder at any time on not less
than 90 days' notice in the event that Cineplex reduces your Base
Salary or otherwise fails in any material respect to perform its
obligations hereunder, provided such notice is given within ninety
days of such reduction in Base Salary or failure to perform and
provided that your employment has not been otherwise terminated
pursuant to Paragraph 6.
8. Notices: All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by register of certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to you: Mr. Michael D. McCartney
Cineplex Odeon Corporation
1925 Century Park East
Suite 300
Los Angeles, California 90067
U.S.A.
If to Cineplex: Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: President and Chief
Executive Officer
or to such other addresses either party shall have furnished to the
other in writing in accordance herewith. Notices and
communications shall be effective when actually received by the
addressee.
9. Successors: This agreement shall enure to the benefit of and
be binding upon Cineplex and its successors and assigns.
10. Severability, Entire Agreement and Amendments: This agreement
sets forth the entire understanding between us. There are no
terms, conditions, representations, warranties or covenants other
than those contained herein. The invalidity or unenforceability of
any provision of this agreement shall not effect the validity or
enforceability of any other provision of this agreement.
11. Cineplex Code of Conduct and Confidentiality: Attached hereto
and made a part of this agreement is a draft of the Cineplex Code
of Conduct and Confidentiality. You confirm that you have read,
understood, and will comply with such Code of Conduct and
Confidentiality, and any amendments thereto which you receive, such
amendments to be consistent with the tenure of the current Code of
Conduct and Confidentiality and not in violation of public policy.
12. Governing Law: This agreement shall be governed by and
construed in accordance with the laws of the State of California.
Yours very truly,
CINEPLEX ODEON CORPORATION
By: Michael Herman
AGREED TO AND ACCEPTED this 21st day of September, 1995.
Michael McCartney
_________________
Michael McCartney
CINEPLEX ODEON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Calculated in accordance with United States generally accepted
accounting principles)
(In U.S. dollars, except number of shares)
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Primary
- -------
Loss from continuing operations (G) ($31,082,000) ($32,907,000) ($14,173,000)
Net loss (H) ($31,082,000) ($32,907,000) ($14,173,000)
Weighted average outstanding common and
subordinate restricted voting shares 163,473,000 114,764,000 110,175,000
Add: incremental shares based on
treasury stock method, calculated using
average stock price for the year 0 (2) 0 (2) 0 (2)
Adjusted weighted average outstanding
shares (I) 163,473,000 114,764,000 110,175,000
Loss per share from continuing
operations (G/I) ($0.19) ($0.29) ($0.13)
Loss per share (H/I) ($0.19) ($0.29) ($0.13)
Fully Diluted
- -------------
Loss from continuing operations ($31,082,000) ($32,907,000) ($14,173,000)
Imputed interest savings on
convertible debt N/A (1) N/A (1) 0 (1)
Adjusted net loss from continuing
operations (J) ($31,082,000) ($32,907,000) ($14,173,000)
Net loss ($31,082,000) ($32,907,000) ($14,173,000)
Imputed interest savings on
convertible debt N/A (1) N/A (1) 0 (1)
Adjusted net loss (K) ($31,082,000) ($32,907,000) ($14,173,000)
Weighted average outstanding common and
subordinate restricted voting shares 163,473,000 114,764,000 110,175,000
Add: incremental shares based on
treasury stock method, calculated
using ending stock price for the year 0 (2) 0 (2) 0 (2)
Add: Incremental shares on
convertible debt N/A (2) N/A (2) 0 (2)
Adjusted weighted average outstanding
shares (L) 163,473,000 114,764,000 110,175,000
Loss per share from continuing
operations (J/L) ($0.19) ($0.29) ($0.13)
Loss per share (K/L) ($0.19) ($0.29) ($0.13)
(1) Imputed interest calculation would be anti-dilutive and therefore has
been excluded in calculations.
(2) Inclusion of conversions would be anti-dilutive and therefore are
excluded in calculations.
</TABLE>
EXHIBIT 21.1
CINEPLEX ODEON CORPORATION SUBSIDIARIES
1. Cine Parc Mercier Inc. (Quebec, Canada)
2. Cineplex Odeon (Quebec) Inc. (Canada)
3. Cineplex Odeon Films, Inc. (Delaware)
4. Cineplex Odeon Films International, Inc. (Delaware)
5. C.O.H. Entertainment, Inc. (Delaware)
6. Manbeck Theatre Corp. (New York)
7. Plitt Southern Theatres, Inc. (Delaware)
8. Plitt Theatres, Inc. (Delaware)
9. RKO Century Warner Theatres, Inc. (Delaware)
10. Sedgwick Music Company (California)
11. Theatre Enterprises, Inc. (New York)
12. The Walter Reade Organisation, Inc. (Delaware)
13. Westlake Investments, Ltd. (Manitoba, Canada)
14. 140075 Canada Limited (Canada)
15. 158983 Canada Inc. (Canada)
16. 619918 Ontario Inc. (Ontario, Canada)
17. 796278 Ontario Limited (Ontario, Canada)
18. 796279 Ontario Limited (Ontario, Canada)
19. The Film House Group Inc. (Ontario, Canada)
20. 1002818 Ontario Limited (Ontario, Canada)
21. Les Films Cineplex Odeon Quebec Inc. (Quebec, Canada)
22. 1002817 Ontario Limited (Ontario, Canada)
23. Cineplex Odeon (Barbados) Inc. (Barbados)
24. Cineplex Odeon Hungary Kft. (Hungary)
25. Gatineau General Partnership (Quebec, Canada)
26. Rio Centre Associates Limited Partnership (District of
Columbia)
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors of Cineplex Odeon Corporation
We consent to the incorporation by reference in Registration
Statements (Numbers 33-19713 and 33-86878) on Forms S-8 of
Cineplex Odeon Corporation (the "Corporation") of our
reports dated February 18, 1997, relating to the
consolidated balance sheets of the Corporation as at
December 31, 1996 and 1995, and the related consolidated
statements of income and changes in shareholders' equity and
cash resources for each of the years in the three year
period ended December 31, 1996, and the related schedule,
which reports appear in the Annual Report on Form 10-K of
the Corporation for the year ended December 31, 1996.
KPMG
Chartered Accountants
Toronto, Canada
March 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,718
<SECURITIES> 406
<RECEIVABLES> 4,079
<ALLOWANCES> 715
<INVENTORY> 6,036
<CURRENT-ASSETS> 21,122
<PP&E> 868,299
<DEPRECIATION> 288,458
<TOTAL-ASSETS> 644,171
<CURRENT-LIABILITIES> 83,550
<BONDS> 246,118
0
0
<COMMON> 555,374
<OTHER-SE> (336,794)
<TOTAL-LIABILITY-AND-EQUITY> 644,171
<SALES> 126,636
<TOTAL-REVENUES> 509,692
<CGS> 22,357
<TOTAL-COSTS> 440,685
<OTHER-EXPENSES> 63,217
<LOSS-PROVISION> 320
<INTEREST-EXPENSE> 35,482
<INCOME-PRETAX> (29,692)
<INCOME-TAX> 1,390
<INCOME-CONTINUING> (31,082)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,082)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
