MASTER AGREEMENT
among
SONY PICTURES ENTERTAINMENT INC.,
LTM HOLDINGS, INC.
and
CINEPLEX ODEON CORPORATION
Dated as of September 30, 1997
TABLE OF CONTENTS
Page
ARTICLE I SONY ASSET TRANSFER, LTM DEBT REPAYMENT, CLOSING
ADJUSTMENT, ARRANGEMENT, UNIVERSAL SUBSCRIPTION AND
SPE TRANSFER TRANSACTIONS 5
Section 1.1. Sony Asset Transfer 5
Section 1.2. LTM Debt Repayment 5
Section 1.3. Closing Adjustment 5
Section 1.4. The Arrangement 5
Section 1.5. The Universal Subscription 6
Section 1.6. The SPE Transfer 6
Section 1.7. The Closing 6
Section 1.8. Deliveries at the Closing 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CINEPLEX ODEON 8
Section 2.1. Existence; Good Standing; Corporate
Authority; Compliance with Law 8
Section 2.2. Authorization, Validity and Effect of
Agreements 9
Section 2.3. Capitalization 9
Section 2.4. Subsidiaries 10
Section 2.5. Other Interests 11
Section 2.6. No Violation 11
Section 2.7. Reports 12
Section 2.8. Litigation 18
Section 2.9. Absence of Certain Changes 18
Section 2.10. Taxes 19
Section 2.11. Employee Benefit Plans 20
Section 2.12. No Brokers 28
Section 2.13. Opinions of Financial Advisor, Etc 29
Section 2.14. Environmental Matters 29
Section 2.15. Real Property; Leases. 32
Section 2.16. Operating Assets 36
Section 2.17. Contracts 37
Section 2.18. Insurance 38
Section 2.19. Interested Party Transactions 38
Section 2.20. Expenses 39
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LTM 39
Section 3.1. Existence; Good Standing; Corporate
Authority; Compliance with Law 39
Section 3.2. Authorization, Validity and Effect of
Agreements 40
Section 3.3. Capitalization 40
Section 3.4. Subsidiaries 41
Section 3.5. Other Interests 42
Section 3.6. No Violation 42
Section 3.7. Financial Statements 42
Section 3.8. Litigation 44
Section 3.9. Absence of Certain Changes 44
Section 3.10. Taxes 45
Section 3.11. Employee Benefit Plans 45
Section 3.12. No Brokers 50
Section 3.13. Cineplex Odeon Stock Ownership 50
Section 3.14. Environmental Matters 51
Section 3.15. Real Property; Leases 52
Section 3.16. Operating Assets 55
Section 3.17. Contracts 56
Section 3.18. Insurance 57
Section 3.19. Related Party Transactions 58
Section 3.20. Expenses 58
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SPE 58
Section 4.1. Existence; Good Standing; Corporate Authority 58
Section 4.2. Authorization, Validity and Effect of
Agreements 59
Section 4.3. No Violation 59
Section 4.4. Transferred SPE Subsidiaries 60
Section 4.5. Effects of Transactions 60
ARTICLE V CONDUCT OF BUSINESS PRIOR TO CLOSING 61
Section 5.1. Conduct of Business Prior to Closing 61
ARTICLE VI ADDITIONAL AGREEMENTS 64
Section 6.1. Access and Information 64
Section 6.2. Meetings of Shareholders 65
Section 6.3. Registration Statement/Proxy
Statement/Prospectus 65
Section 6.4. Change of Control Offer and Change of
Guarantor 67
Section 6.5. Compliance with the Securities Act 67
Section 6.6. Stock Exchange Listing 67
Section 6.7. HSR Act; Competition Act; Investment Canada
Act; Submission of Arrangement for Approval 68
Section 6.8. Bank Financing; Equity Offering 68
Section 6.9. Audit Requirements; Closing Adjustment 69
Section 6.10. No Shop 75
Section 6.11. Advice of Changes; SEC Filings 77
Section 6.12. Benefit Plans 77
Section 6.13. Inventory 78
Section 6.14. Registrar and Transfer Agent 78
Section 6.15. Additional Agreements 78
Section 6.16. Transition Services 79
Section 6.17. Adoption of LTM Charter and Bylaws 80
Section 6.18. Designation of Directors 80
Section 6.19. Amendments and Modifications of Documents 80
Section 6.20. No Capital Contributions 80
Section 6.21. Tax Sharing and Indemnity Agreement 81
Section 6.22. Sony Trademark Agreement; Existing Theaters 81
Section 6.23. Fractional Shares 81
Section 6.24. Reverse Stock Split 81
ARTICLE VII CONDITIONS PRECEDENT 82
Section 7.1. Conditions to Each Party's Respective
Obligations to Effect the Transactions 82
Section 7.2. Conditions to Obligation of Cineplex Odeon to
Effect the Transactions 84
Section 7.3. Conditions to Obligations of SPE and LTM to
Effect the Transactions 86
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 87
Section 8.1. Termination 87
Section 8.2. Fees 89
ARTICLE IX MISCELLANEOUS 90
Section 9.1. Non-Survival of Representations and
Warranties; Survival of Agreements 90
Section 9.2. Notices 90
Section 9.3. Fees and Expenses 92
Section 9.4. Publicity 93
Section 9.5. Specific Performance 93
Section 9.6. Assignment; Binding Effect 93
Section 9.7. Entire Agreement 93
Section 9.8. Amendment 94
Section 9.9. Governing Law 94
Section 9.10. Counterparts 94
Section 9.11. Headings and Table of Contents 94
Section 9.12. Interpretation 95
Section 9.13. Waivers 95
Section 9.14. Severability 95
Section 9.15. Certain Definitions 95
Section 9.16. Knowledge 96
Section 9.17. Release. 96
Exhibits
Exhibit A Form of Amended and Restated Certificate
of Incorporation of LTM Holdings, Inc.
Exhibit B Form of Plan of Arrangement
Exhibit C Letter Agreement
Exhibit D Form of Tax Sharing and Indemnity
Agreement
Exhibit E Form of Sony Trademark Agreement
Exhibit F Form of Amended and Restated By-laws of
LTM Holdings, Inc.
Exhibit G List of Transition Services
Exhibit H Stockholders Agreement
Exhibit I Universal Subscription Agreement
Index of Defined Terms
Term
Section
ADA
2.15(c)
Adjusted EBITDA
2.7(b)
Adjustment Factor
6.9(d)
Affiliate
6.5
Agreement
Preamble
Alternative Proposal
6.10(a)
Antitrust Law
6.15(a)
Applicable Law
2.11(h)
Arrangement
Recitals
Arrangement Filings
6.7(c)
Arrangement Shares
1.8(d)
Audited Financial Statements
6.9(a)
Bank Financing
Recitals
Benefit Plan
2.11(a)
Canadian GAAP
2.7(a)
Canadian Securities Authorities
2.7(a)
Canadian Securities Laws
2.6
Capital Lease Obligations
2.7(b)
Cash Flow
2.7(b)
Cash Flow Statement
2.7(b)
Cineplex Odeon
Preamble
Cineplex Odeon Benchmark
6.9(d)
Cineplex Odeon Benefit Plan
2.11(a)
Cineplex Odeon Canadian Benefit Plan
2.11(h)
Cineplex Odeon Canadian Pension Plans
2.11(h)
Cineplex Odeon Common Shares
2.3
Cineplex Odeon Contracts
2.17
Cineplex Odeon Disclosure Statement
Article II
Cineplex Odeon Employee
2.11(a)
Cineplex Odeon Employee Agreement
2.11(a)
Cineplex Odeon ERISA Affiliate
2.11(a)
Cineplex Odeon Leased Real Properties
2.15(a)
Cineplex Odeon Meeting
6.2
Cineplex Odeon Multi-Employer Plan
2.11(a)
Cineplex Odeon Negative Theaters
2.7(b)
Cineplex Odeon Original Consolidated EBITDA
6.9(d)
Cineplex Odeon Owned Real Properties
2.15(a)
Cineplex Odeon Pension Plan
2.11(a)
Cineplex Odeon Permits
2.15(c)
Cineplex Odeon Permitted Encumbrances
2.15(a)
Cineplex Odeon Real Properties
2.15(a)
Cineplex Odeon Reports
2.7(a)
Cineplex Odeon Revised Consolidated EBITDA
6.9(d)
Cineplex Odeon Shareholder Approval
7.1(a)
Cineplex Odeon Theaters
2.7(b)
Cineplex Odeon Welfare Plan
2.11(a)
Cinescapes
2.7(b)
Claridge Group
Stockholders Agreement
Closing
1.7
Closing Adjustment
Recitals
Closing Date
1.7
Code
2.11(a)
Combination Shares
Recitals
Combined Enterprise
Recitals
Competition Act
2.6
Confidentiality Agreement
6.1(a)
Consolidated EBITDA
2.7(b)
Consolidated Income Tax Expense
2.7(b)
Consolidated Interest Expense
2.7(b)
Consolidated Net Income
2.7(b)
Construction Work in Progress Statement
2.15(c)
Court
6.7(c)
Court Approval
7.1(a)
Debt
2.7(b)
Department
2.11(a)
DIR
6.7(a)
Documents
Recitals
EBITDA Statements
2.7(b)
Encumbrances
2.4
Environmental Costs
2.14(c)
Environmental Laws
2.14(c)
Environmental Matter
2.14(c)
Environmental Permits
2.14(a)
ERISA
2.11(a)
Exchange
Recitals
Exchange Act
2.6
Exchange Shares
Recitals
Final Closing Statement
6.9(e)
Final Order
6.7(c)
First Preference Shares
2.3
Form S-1
6.3
Form S-4
6.3
401(k) Plan
6.12(d)
GAAP
2.7(a)
Governmental Entity
2.11(h)
Hazardous Substances
2.14(c)
HMO
2.11(m)
HSR Act
2.6
IC Act
2.6
ICA Application
6.7(b)
ICA Minister
6.7(b)
IMAX Ground Leases
Recitals
IMAX Leases
Recitals
IMAX Purchase Price
Recitals
Independent Directors
Stockholders Agreement
Indianapolis Theaters
3.7(b)
Initial Closing Statements
6.9(e)
Intercompany Debt
Recitals
Interim Order
6.7(c)
IRS
2.11(a)
Knowledge
9.16
Letter Agreement
Recitals
LIBOR
8.2(b)
LTM
Preamble
LTM Benchmark
6.9(d)
LTM Benefit Plan
3.11(a)
LTM Bylaws
1.8(e)
LTM Cap
Recitals
LTM Charter
Recitals
LTM Common Stock
Recitals
LTM Contracts
3.17
LTM Debt Repayment
Recitals
LTM Disclosure Statement
Article III
LTM Dividend
Recitals
LTM Employee
3.11(a)
LTM Employee Agreement
3.11(a)
LTM Excluded Employee
3.11(a)
LTM Financial Statements
3.7(a)
LTM Leased Real Properties
3.15(a)
LTM Multi-Employer Plan
3.11(a)
LTM Negative Theaters
3.7(b)
LTM Non-Voting Common Stock
Recitals
LTM Original Consolidated EBITDA
6.9(d)
LTM Owned Real Properties
3.15(a)
LTM Permits
3.15(c)
LTM Preferred Stock
Recitals
LTM Permitted Encumbrances
3.15(a)
LTM Real Properties
3.15(a)
LTM Revised Consolidated EBITDA
6.9(d)
LTM Theaters
3.7(b)
LTM Welfare Plan
3.11(a)
Material Adverse Effect
9.15
Xxxxxx Xxxxxxx
2.12
NASDAQ
6.6
Net Working Capital
2.7(b)
NYSE
6.6
OBCA
Recitals
Objecting Party
6.9(e)
PBGC
2.11(a)
PCBs
2.14(c)
Plan of Arrangement
Recitals
Xxxxx
Recitals
Xxxxx Debt
Recitals
Xxxxx Indenture
Recitals
Xxxxx Stock
Recitals
Preliminary Closing Qualified Tangible Net Worth
6.9(b)
Preliminary Closing Statements
6.9(b)
Preliminary Statements Date
6.9(b)
Prospectus
6.3
Proxy Statement
6.3
Qualified Tangible Net Worth
2.7(b)
Registration Statements
6.3
Regulatory Filings
2.6
Restated Subscription Agreement
2.3
Retained Negative Theaters
6.9(b)
Reverse Stock Split
6.24
San Francisco IMAX Equipment Lease
Recitals
SEC
2.7(a)
Securities Act
2.6
Significant Subsidiaries
9.15
Sony Asset Transfer
Recitals
Sony Capital
Recitals
Sony Land
Recitals
Sony Trademark Agreement
Recitals
SPE
Preamble
SPE Material Adverse Effect
4.3
SPE Permitted Encumbrances
4.4(b)
SPE Transfer
Recitals
SPE Transferred Shares
4.4
Special Committee
2.2
SRV Shares
2.3
Standstill Agreement
2.3
Stockholder Payments
Recitals
Stockholders Agreement
7.1(h)
Subsidiary
9.15
Tax Sharing and Indemnity Agreement
Recitals
Taxes
2.10(a)
Termination Date
8.1(b)
Termination Fee
8.2(a)
Theater Costs
2.15(c)
Three Party Agreement
Universal
Subscription
Agreement
Transaction Expenses
2.7(b)
Transactions
Recitals
Transfer Plans
6.12(d)
Transferred SPE Subsidiary
Recitals
Transferred SPE Subsidiaries
Recitals
Transferred SPE Subsidiary Purchase Price
Recitals
Transition Services Agreement
6.16
Trust
Recitals
TSE
6.6
Universal
Recitals
Universal Subscription
Recitals
Universal Subscription Agreement
7.1(i)
Working Capital Debt
Recitals
MASTER AGREEMENT
THIS MASTER AGREEMENT (this "Agreement"), dated as of September 30,
1997 by and among Sony Pictures Entertainment Inc., a Delaware corporation
("SPE"), LTM Holdings, Inc., a Delaware corporation ("LTM"), and Cineplex
Odeon Corporation, a corporation formed under the laws of the province of
Ontario ("Cineplex Odeon").
WHEREAS, LTM, an indirect subsidiary of SPE, is engaged directly
and through subsidiaries in the business of developing and operating motion
picture theaters primarily in the United States, and Cineplex Odeon is engaged
directly and through subsidiaries in the business of developing and operating
motion picture theaters primarily in the United States and Canada;
WHEREAS, the Boards of Directors of LTM and Cineplex Odeon have
each determined that a business combination between LTM and Cineplex Odeon is
in the best interests of their respective companies and shareholders and
presents an opportunity for their respective companies to achieve long-term
strategic and financial benefits, and accordingly, have agreed to the
following series of transactions (the "Transactions") pursuant to which a
business combination of LTM and Cineplex Odeon shall be accomplished:
1. Prior to the Closing, pursuant to an amendment and
restatement of LTM's certificate of incorporation, in the form attached hereto
as Exhibit A (the "LTM Charter"), the authorized capital stock of LTM shall be
increased to 3,000,000,000 shares of Common Stock, par value US$.01 per share
( "LTM Common Stock"), 100,000,000 shares of Non-Voting Common Stock, par
value US$.01 per share ("LTM Non-Voting Common Stock") and 100,000,000 shares
of preferred stock, par value US$.01 per share, without designation shares
("LTM Preferred Stock");
2. Prior to the Closing, LTM shall make a distribution to its
shareholder of record as of the day on which the LTM Charter becomes
effective, with respect to the 972 shares of LTM Common Stock held thereby, of
(i) that number of additional shares of LTM Common Stock that, when added to
the number of shares issuable in connection with the SPE Transfer described in
paragraph 9 below, equals an aggregate of 220,181,927 shares (for a total of
220,182,899 shares including the shares of LTM Common Stock owned by SPE as of
the date hereof) of LTM Common Stock and (ii) 11,188,212 shares of LTM Non-
Voting Common Stock;
3. SPE shall sell, assign and transfer, or shall cause to be
sold, assigned and transferred, to a Subsidiary of LTM (the "Sony Asset
Transfer") all of the right, title and interest of SPE and its Affiliates in
(i) the Lease Agreement between Lincoln Metrocenter Partners, L.P. and SPE
dated May 21, 1992, and all ancillary agreements thereto (the "IMAX Ground
Lease"), (ii) the Letter Agreement between IMAX Corporation and Sony Retail
Entertainment dated March 3, 1995 (the "San Francisco IMAX Equipment Lease")
and (iii) the Agreement between IMAX Corporation and SPE dated May 28, 1992,
as amended January 19, 1996 (together with the San Francisco IMAX Equipment
Lease and the IMAX Ground Lease, the "IMAX Leases") in exchange for a cash
payment of an amount equal to the fair market value thereof (the "IMAX
Purchase Price");
4. LTM shall enter into a new bank credit facility (the "Bank
Financing") providing for term loan commitments and revolving commitments
sufficient, in combination with the payment by Universal referred to in
paragraph 7 below, to refinance the existing Cineplex Odeon bank facility,
fund the Stockholder Payments referred to in paragraph 12 below, fund the LTM
Debt Repayment referred to in paragraph 5 below, finance the Change of Control
Offer required by Section 6.4 and finance the working capital requirements of
the Combined Enterprise (including, without limitation, providing alternative
financing until an Equity Offering (as defined in the Stockholders Agreement)
is consummated);
5. LTM shall (i) lend to various Subsidiaries of LTM and cause
such Subsidiaries to pay to Sony/Columbia Land Corporation, a California
corporation ("Sony Land"), in full satisfaction of the intercompany
indebtedness, including accrued interest thereon through the date of
repayment, identified as "Intercompany Debt" in the Preliminary Closing
Statement prepared by LTM in accordance with the provisions of Section 6.9 as
being subject to repayment at the Closing (the "Intercompany Debt") owed by
Subsidiaries of LTM to Sony Land at their face amount as of the Closing Date,
plus accrued interest thereon through the Closing Date and (ii) repay to Sony
Capital Corporation, a Delaware corporation ("Sony Capital"), in full
satisfaction of the intercompany indebtedness (including all liabilities to
Sony Corporation of America and its Affiliates in respect of taxes through the
Closing Date except taxes for periods prior to Closing resulting from audit as
provided in the Tax Sharing and Indemnity Agreement), including accrued
interest thereon through the date of repayment, identified as "Working Capital
Debt" in the Preliminary Closing Statement prepared by LTM in accordance with
the provisions of Section 6.9 as being subject to repayment at the Closing
(the "Working Capital Debt") owed by LTM and its direct or indirect
subsidiaries to Sony Capital at its face amount as of the Closing Date, plus
accrued interest thereon through the Closing Date (the repayment of the
Intercompany Debt and the Working Capital Debt, together, the "LTM Debt
Repayment");
6. Prior to the Closing, LTM shall declare as a dividend (the
"LTM Dividend") payable to its shareholder of record as of the day prior to
the Closing Date and shall pay to such shareholder on the Closing Date, an
amount equal to the difference between (a) US$409,347,000 (subject to
adjustment in accordance with Section 6.9 (such amount, as adjusted, being
referred to herein as the "LTM Cap")) and (b) the sum of the LTM Debt
Repayment, the IMAX Purchase Price and, if applicable, the Transferred SPE
Subsidiary Purchase Price (such difference, the "Closing Adjustment"), to the
extent such amount is positive;
7. Subject to the terms and conditions of the Universal
Subscription Agreement, Universal Studios, Inc., a Delaware corporation
("Universal"), (a) shall vote, and shall cause its subsidiaries to vote, all
of the shares of Cineplex Odeon capital stock owned by them to approve the
Transactions, and (b) shall subscribe for 44,266,062 shares of LTM Common
Stock in consideration of the payment and other deliveries provided for in the
Universal Subscription Agreement (the "Universal Subscription");
8. Pursuant to a plan of arrangement of Cineplex Odeon under
Section 182 of the Business Corporations Act (Ontario) (the "OBCA")
substantially in the form attached hereto as Exhibit B (the "Plan of
Arrangement") (a) Cineplex Odeon shall exchange (the "Exchange") all of the
capital stock (the "Xxxxx Stock") of its wholly-owned subsidiary, Xxxxx
Theatres, Inc., a Delaware corporation ("Xxxxx"), to LTM for 82,423,849 shares
of newly issued LTM Common Stock (the "Exchange Shares"), (b) Cineplex Odeon
shall distribute the Exchange Shares to its shareholders in consideration of
the purchase from them, and cancellation, of approximately 46.62% of their
shares of Cineplex Odeon capital stock at the rate of one Exchange Share for
each share of Cineplex Odeon capital stock, and (c) LTM shall immediately
thereafter acquire from Cineplex Odeon's shareholders the remaining
outstanding shares of Cineplex Odeon capital stock in exchange for, in the
aggregate, 94,375,484 shares of LTM Common Stock (the "Combination Shares") at
the rate of one Combination Share for each share of Cineplex Odeon capital
stock (the transactions described in subclauses (a), (b) and (c) hereof being
referred to herein, collectively, as the "Arrangement");
9. SPE shall either, with respect to each of Star Theatres of
Michigan, Inc., a Delaware corporation, and S&J Theatres Inc., a California
corporation (each, a wholly owned Subsidiary of SPE and a "Transferred SPE
Subsidiary," and, together, the "Transferred SPE Subsidiaries") (i)(A)
transfer or cause to be transferred to a Subsidiary of LTM all of the shares
of stock owned directly or indirectly by SPE of such Transferred SPE
Subsidiary, or (B) cause such Transferred SPE Subsidiary to merge with and
into a Subsidiary of LTM, with such Subsidiary of LTM surviving the merger, in
either case, in exchange for shares of LTM Common Stock, or (ii) cause such
Transferred SPE Subsidiary to transfer all of its assets and related
liabilities to a Subsidiary of LTM in exchange for a cash payment of an amount
equal to the fair market value thereof (such cash amount being the
"Transferred SPE Subsidiary Purchase Price")((i) and (ii) collectively, the
"SPE Transfer").
10. Subject to the terms and conditions of the letter agreement
of even date herewith between Xxxxxxx Xxxxxx Xxxxxxxx Family Trust, a trust
created under the laws of Quebec (the "Trust") and LTM, a conformed copy of
which is attached hereto as Exhibit C (the "Letter Agreement"), the Trust
shall cause all of the shares of Cineplex Odeon capital stock beneficially
owned by it to be voted to approve the Transactions;
11. Subject to the terms and conditions of a tax sharing and
indemnity agreement between Sony Corporation of America and LTM in the form
attached hereto as Exhibit D (the "Tax Sharing and Indemnity Agreement"), Sony
Corporation of America and LTM shall indemnify and hold one another harmless
for certain tax and employee benefits liabilities;
12. Subject to the terms and conditions of the Universal
Subscription Agreement and the Letter Agreement, LTM shall reimburse Universal
and the Trust (or at their option pay directly on their behalf) on the Closing
Date up to US$1,000,000, in the aggregate, for their reasonable out-of-pocket
expenses and fees (including fees and expenses of counsel, financial advisors,
accountants and other experts and consultants) incurred by such parties prior
to the Closing Date in connection with the Documents and the Transactions upon
receipt of reasonable documentation therefor at least five business days prior
to the Closing Date (collectively, the "Stockholder Payments"); and
13. Subject to the terms and conditions of a trademark agreement
in the form attached hereto as Exhibit E (the "Sony Trademark Agreement"),
Sony Corporation will grant LTM the right to use the trademark "Sony."
WHEREAS, upon consummation of the Transactions (and before giving
effect to any Equity Offering), it is contemplated that SPE will indirectly
own 220,182,899 shares of LTM Common Stock and 11,188,212 shares of LTM Non-
Voting Common Stock, representing approximately 51.14% of the outstanding LTM
Common Stock (including, for such purposes, the outstanding LTM Non-Voting
Common Stock), Universal will own 117,712,488 shares of LTM Common Stock,
representing approximately 26.02% of the outstanding LTM Common Stock
(including, for such purposes, the outstanding LTM Non-Voting Common Stock),
the Claridge Group (as defined in the Stockholders Agreement) will own
43,454,324 shares of LTM Common Stock, representing approximately 9.60% of the
outstanding LTM Common Stock (including, for such purposes, the outstanding
LTM Non-Voting Common Stock), and the shareholders of Cineplex Odeon, other
than Universal and the Claridge Group will own 59,898,583 shares of LTM Common
Stock, representing approximately 13.24% of the outstanding LTM Common Stock
(including, for such purposes, the outstanding LTM Non-Voting Common Stock);
WHEREAS, (i) Cineplex Odeon is a guarantor of Xxxxx'x 10 7/8%
Senior Subordinated Securities due 2004 having an aggregate outstanding
principal amount of US$200,000,000 (the "Xxxxx Debt") and (ii) subject to the
terms of Section 5.01 of the Indenture (the "Xxxxx Indenture") dated June 23,
1994 governing the Xxxxx Debt, Cineplex Odeon may be released from its
obligations as the guarantor of the Xxxxx Debt; provided that, immediately
after consummation of the Exchange, LTM satisfies certain covenants contained
in the Xxxxx Indenture;
WHEREAS, the combined company formed as a result of the
Transactions is sometimes hereafter referred to as the "Combined Enterprise,"
and as used herein, the "Documents" refers, collectively, to this Agreement,
the Plan of Arrangement, the Stockholders Agreement, the LTM Charter, the
Universal Subscription Agreement, the Tax Sharing and Indemnity Agreement, the
Sony Trademark Agreement, the Transition Services Agreement (if entered into
pursuant to Section 6.16) the documents giving effect to each of the Universal
Subscription, the Sony Asset Transfer and the SPE Transfer, and the Letter
Agreement, and includes all exhibits and schedules attached hereto and
thereto.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
SONY ASSET TRANSFER, LTM DEBT REPAYMENT,
CLOSING ADJUSTMENT, ARRANGEMENT, UNIVERSAL SUBSCRIPTION AND SPE TRANSFER
TRANSACTIONS
Section 1.1. Sony Asset Transfer
. At or prior to the Closing, SPE and LTM shall effect the Sony
Asset Transfer.
Section 1.2. LTM Debt Repayment
. At the Closing, LTM shall effect the LTM Debt Repayment.
Section 1.3. Closing Adjustment
. At the Closing, LTM shall pay the LTM Dividend in cash to the
extent the amount of the Closing Adjustment is positive.
Section 1.4. The Arrangement
. Concurrently with the Closing, Cineplex Odeon and LTM shall
cause the Arrangement to become effective.
Section 1.5. The Universal Subscription
. Concurrently with the Closing, Universal and LTM shall
consummate the transactions contemplated by the Universal Subscription
Agreement.
Section 1.6. The SPE Transfer
. Concurrently with the Closing and immediately following
consummation of the transactions contemplated by Sections 1.2 through 1.5, SPE
and LTM shall cause the SPE Transfer to be consummated.
Section 1.7. The Closing
. The closing of the Transactions (the "Closing") in the order
specified in the recitals shall take place as soon as reasonably practicable
following the satisfaction or waiver of each of the conditions set forth in
Article VII hereof at the offices of Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx,
Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, XX 00000 and Xxxxxx, Xxxx & Xxxx, 44th Floor,
Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0. The date of the
Closing shall be referred to herein as the "Closing Date."
Section 1.8. Deliveries at the Closing
. At the Closing, the following shall occur:
(a) LTM or its Subsidiary shall deliver or cause to be delivered
to SPE for its own account and the accounts of Sony Land and Sony Capital by
bank wire transfer in immediately available funds the sum of (i) the IMAX
Purchase Price, to the extent not previously paid to SPE, (ii) the LTM Debt
Repayment and (iii) the amount of the LTM Dividend, if any.
(b) SPE shall deliver, and shall cause its Subsidiaries to
deliver, to LTM (i) any note or notes evidencing the Intercompany Debt,
together with bond powers executed in blank by SPE or a Subsidiary thereof, as
applicable, (ii) the stock transfer and minute books of the Transferred SPE
Subsidiaries, (iii) to the extent that the SPE Transfer is effected by (A) a
transfer by SPE to one or more LTM Subsidiaries of all the shares of stock
owned directly or indirectly by SPE of one or both of the Transferred SPE
Subsidiaries, certificates representing the shares of capital stock of the
Transferred SPE Subsidiaries, registered in the name of one or more
Subsidiaries of LTM, as designated by LTM prior to Closing, and evidence of
the cancellation of the stock certificates representing the shares of the
capital stock of the Transferred SPE Subsidiaries which were, immediately
prior to Closing, in the name of SPE or any Subsidiary thereof, all in form
reasonably satisfactory to Cineplex Odeon, (B) merging one or both of the
Transferred SPE Subsidiaries with and into one or more LTM Subsidiaries in
exchange for shares of LTM Common Stock, all documents necessary to effect
such mergers, all in form reasonably satisfactory to Cineplex Odeon and/or
(C) causing one or more of the Transferred SPE Subsidiaries to transfer all of
its assets to one or more Subsidiaries of LTM in exchange for a cash payment
in an amount equal to the fair market value of such assets, such bills of sale
and other documents necessary to effect such transfer, all in form reasonably
satisfactory to Cineplex Odeon, and (iv) all documents necessary to effect the
assignment of the IMAX Leases to LTM, all in form reasonably satisfactory to
Cineplex Odeon.
(c) Cineplex Odeon shall deliver to LTM a certificate or
certificates representing the shares of Xxxxx Stock to be exchanged for the
Exchange Shares, registered in the name of LTM or its nominee. Delivery of
such certificates to LTM shall be made against receipt by or on behalf of
Cineplex Odeon from LTM of a certificate or certificates representing the
Exchange Shares, registered in the name of Cineplex Odeon or its nominee or,
if Cineplex Odeon shall so direct LTM, against delivery by LTM of the Exchange
Shares directly to the shareholders of Cineplex Odeon or their respective
nominees. Cineplex Odeon shall deliver to LTM (i) a copy of Cineplex Odeon's
Articles, certified by the Ministry of Consumer and Commercial Relations
(Ontario) as of a recent date, and (ii) a true, correct and complete copy of
the Bylaws of Cineplex Odeon, certified by the secretary of Cineplex Odeon.
Cineplex Odeon shall also deliver to LTM a certificate, in form and substance
reasonably satisfactory to LTM, that either (i) no withholding is due pursuant
to U.S. Treasury regulation 1.1445-3, as determined by the Internal Revenue
Service or (ii) the stock of Xxxxx is not a U.S. real property interest
pursuant to U.S. Treasury regulation 1.1445-2(c)(3).
(d) LTM and Cineplex Odeon (i) shall deliver to the Exchange
Agent appointed pursuant to the Plan of Arrangement the certificates
representing the Exchange Shares and Combination Shares (collectively, the
"Arrangement Shares") required to be delivered by them, respectively, in
accordance with the Plan of Arrangement and (ii) shall cause their respective
stock registers to reflect holders of the Arrangement Shares in accordance
with the Plan of Arrangement.
(e) LTM shall deliver to Cineplex Odeon (i) a copy of the LTM
Charter (which shall, among other things, change the name of LTM to Loews
Cineplex Entertainment Corporation) certified by the Delaware Secretary of
State as of a recent date, and (ii) a true, correct and complete copy of the
bylaws of LTM in the form attached hereto as Exhibit F (the "LTM Bylaws"),
certified by the secretary or assistant secretary of LTM.
(f) If required by Section 6.16, SPE and LTM shall execute and
deliver the Transition Services Agreement, meeting the requirements of such
section, a true and correct copy of which shall also be delivered to Cineplex
Odeon.
(g) LTM shall pay to the order of Universal and the Trust their
respective Stockholder Payments by bank wire transfer in immediately available
funds.
(h) Each of the parties shall execute and deliver such other
certificates and agreements as are required thereof to be executed and
delivered at or prior to the Closing in accordance with the provisions of this
Agreement and any other Document.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CINEPLEX ODEON
Except as set forth in the disclosure statement delivered at or
prior to the execution hereof to LTM (the "Cineplex Odeon Disclosure
Statement"), Cineplex Odeon represents and warrants to LTM as follows:
Section 2.1. Existence; Good Standing; Corporate Authority;
Compliance with Law
. Cineplex Odeon is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Cineplex Odeon is duly licensed or qualified to do business as
a foreign corporation and is in good standing under the laws of any state of
the United States or other province of Canada in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a Cineplex Odeon Material Adverse Effect. Cineplex
Odeon has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted. Each of
Cineplex Odeon's Significant Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not have a Cineplex Odeon Material Adverse Effect. Neither
Cineplex Odeon nor any of its Subsidiaries is in violation of any order of any
court, Governmental Entity or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Cineplex Odeon or any
Cineplex Odeon Subsidiary or any of their respective properties or assets is
subject, where such violation would have a Cineplex Odeon Material Adverse
Effect. Cineplex Odeon and the Cineplex Odeon Subsidiaries have obtained all
licenses, permits and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their
business as now conducted, except where the failure to obtain any such item or
to take any such action would not have a Cineplex Odeon Material Adverse
Effect. The copies of Cineplex Odeon's Articles and Bylaws attached as
exhibits to the Cineplex Odeon Disclosure Statement are complete, true and
correct.
Section 2.2. Authorization, Validity and Effect of Agreements
. Cineplex Odeon has the requisite corporate power and authority
to execute and deliver each of the Documents to which it is a party and all
agreements and documents contemplated thereby to which it is a party. Subject
only to Cineplex Odeon Shareholder Approval and Court Approval for the
Arrangement, the consummation of the Arrangement and the consummation by
Cineplex Odeon of the other Transactions to which it is a party has been duly
authorized by all requisite corporate action on the part of Cineplex Odeon,
including, without limitation, all requisite approvals of the Board of
Directors of Cineplex Odeon, and has been recommended to the Board of
Directors of Cineplex Odeon by the special committee of independent directors
(the "Special Committee"). Cineplex Odeon has previously delivered to LTM
copies of resolutions adopted by unanimous vote of the Special Committee
recommending, and of all members of the Board of Directors of Cineplex (other
than any member of the Board of Directors of Cineplex Odeon who reasonably and
in good faith, after considering applicable provisions of law on the basis of
advice of counsel, pursuant to section 132 of the OBCA discloses his or her
interest and does not vote on the resolution authorizing the execution and
delivery of the Documents and the consummation of the Transactions)
authorizing, Cineplex Odeon to execute and deliver the Documents to which it
is a party and to consummate the Transactions to which it is a party, and,
since the adoption thereof, such resolutions have not been amended, modified
or withdrawn in any manner through the date of this Agreement. The Documents
to which it is a party constitute, and all agreements and documents
contemplated thereby to which it is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Cineplex Odeon, enforceable against Cineplex Odeon in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
Section 2.3. Capitalization
. The authorized capital of Cineplex Odeon consists of an
unlimited number of Common Shares ("Cineplex Odeon Common Shares"), an
unlimited number of First Preference Shares ("First Preference Shares") and an
unlimited number of Subordinate Restricted Voting Shares ("SRV Shares"). As
of March 31, 1997, 103,334,157 Cineplex Odeon Common Shares, 73,446,426 SRV
Shares and no First Preference Shares were validly issued and outstanding.
Since such date, no additional shares of Cineplex Odeon capital stock have
been issued, except pursuant to the Cineplex Odeon Stock Option Plan or as
otherwise permitted by Section 5.1. There are no bonds, debentures, notes or
other indebtedness issued and outstanding having the right to vote (or that
are convertible into or exercisable for securities having the right to vote)
on any matters on which Cineplex Odeon's shareholders may vote. All such
issued and outstanding Cineplex Odeon Common Shares and SRV Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights other than the rights of Universal set forth in the Restated
Subscription Agreement between Cineplex Odeon and Universal dated January 15,
1986, as amended through the date of this Agreement (collectively, the
"Restated Subscription Agreement"), and the rights of Cineplex Odeon and
Universal set forth in the Standstill Agreement between Cineplex Odeon and
Universal, dated May 12, 1986, as amended through the date of this Agreement
(collectively, the "Standstill Agreement"). Except for the termination
agreement dated as of the date hereof by and between Universal and Cineplex
Odeon, neither the Restated Subscription Agreement nor the Standstill
Agreement will be amended or modified in any way prior to the Closing Date.
Except as set forth in the Standstill Agreement or as may be granted
subsequent to the date hereof in accordance with Section 5.1 under the
Cineplex Odeon Stock Option Plan, there are no options, warrants, calls or
other rights, agreements or commitments currently outstanding obligating
Cineplex Odeon to issue, deliver or sell any shares or debt securities, or
obligating Cineplex Odeon to grant, extend or enter into any option, warrant,
call or other such right, agreement or commitment. Except as contemplated by
the Documents, upon consummation of the Transactions, LTM will have no
obligation to issue, transfer or sell any shares of Cineplex Odeon or LTM
pursuant to any Cineplex Odeon Benefit Plan.
Section 2.4. Subsidiaries
. Cineplex Odeon owns directly or indirectly all of the
outstanding shares of capital stock of each of Cineplex Odeon's Subsidiaries.
Each of the outstanding shares of capital stock of each of Cineplex Odeon's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by Cineplex Odeon free and clear of all
liens, pledges, security interests, rights of first refusal, options, claims,
hypothecs or other encumbrances (collectively, "Encumbrances") other than
Encumbrances imposed by local law the enforcement of which would not have a
Cineplex Odeon Material Adverse Effect. The following information for each
Cineplex Odeon Subsidiary is set forth on Section 2.4 of the Cineplex Odeon
Disclosure Statement, if applicable: (i) its name and jurisdiction of
incorporation, formation or organization; (ii) its authorized capital stock or
share capital; and (iii) the number of issued and outstanding shares (and
options, warrants or other rights for purchase of shares) of capital stock or
share capital (and, with respect to partnerships, joint ventures, limited
liability companies and similar alternative business entities, analogous
information). Cineplex Odeon has previously provided to LTM true and complete
copies of the charter documents and bylaws for each of Cineplex Odeon's
Significant Subsidiaries. Other than as contemplated by the Documents, there
are no options, warrants, calls or other rights, agreements or commitments
currently outstanding obligating any Subsidiary of Cineplex Odeon to issue,
deliver or sell any shares or debt securities, or obligating any Subsidiary of
Cineplex Odeon to grant, extend or enter into any option, warrant, call or
other such right, agreement or commitment to issue, deliver or sell any equity
or debt securities. There are no bonds, debentures, notes or other
indebtedness issued and outstanding having the right to vote (or that are
convertible into or exercisable for securities having the right to vote) on
any matters on which the shareholders of any Subsidiary of Cineplex Odeon may
vote.
Section 2.5. Other Interests
. Except for interests in the Cineplex Odeon Subsidiaries,
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary owns, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity.
Section 2.6. No Violation
. Neither the execution and delivery by Cineplex Odeon of the
Documents to which it is a party, nor the consummation by Cineplex Odeon of
the Transactions to which it is a party contemplated thereby in accordance
with the terms thereof, will: (i) conflict with or result in a breach of any
provisions of the Articles and Bylaws of Cineplex Odeon; (ii) either
(a) result in a breach or violation of, a default under, or the triggering of
any payment or other material obligations pursuant to, or (b) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the material properties
of Cineplex Odeon or the Cineplex Odeon Subsidiaries under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which Cineplex Odeon or any of
the Cineplex Odeon Subsidiaries is a party, or by which Cineplex Odeon or any
of the Cineplex Odeon Subsidiaries or any of their properties is bound or
affected (except to the extent any of the effects described in this clause
(ii) would not (x) have a Cineplex Odeon Material Adverse Effect, (y) impair
the ability of Cineplex Odeon to perform its obligations under the Documents
in any material respect or (z) delay in any material respect or prevent the
consummation of the Transactions); or (iii) except for the United States and
Canadian federal, provincial, state and local regulatory filings, waivers or
orders required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000
(xxx "XXX Xxx"), the Competition Act (Canada) (the "Competition Act"), the
Investment Canada Act, R.S.C. 1985, c.28 (1st Supp.) as amended ("IC Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), the OBCA, the
securities legislation of each Canadian province and territory, as amended
from time to time, and the rules, regulations, blanket orders and orders
having application to Cineplex Odeon and forms made or promulgated under that
legislation, and the policies, bulletins and notices of regulatory authorities
administering such legislation (collectively, the "Canadian Securities Laws"),
applicable state "Blue Sky" laws, and filings in connection with the
maintenance of qualification to do business in jurisdictions where such
filings are required (collectively, "Regulatory Filings") listed in the
Cineplex Odeon Disclosure Statement, require, to the extent applicable to
Cineplex Odeon, any material consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, the failure to obtain or make that would (x) have a
Cineplex Odeon Material Adverse Effect , (y) impair the ability of Cineplex
Odeon to perform its obligations under the Documents in any material respect
or (z) delay in any material respect or prevent the consummation of the
Transactions.
Section 2.7. Reports
. (a) Cineplex Odeon has previously furnished LTM with each
registration statement, prospectus, report filed with the Securities and
Exchange Commission ("SEC") or proxy statement prepared by it since December
31, 1994, including, without limitation, (i) its Annual Report on Form 10-K
for the years ended December 31, 1995 and Xxxxxxxx 00, 0000, (xx) its
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and
(iii) its management information circular and proxy included in its Proxy
Statement for the Annual Meeting of Shareholders held on June 26, 1997, each
in the form (including exhibits and any amendments thereto) filed with the SEC
or with the securities commission or other securities regulatory authority in
one or more of the provinces of Canada (collectively, the "Canadian Securities
Authorities") (collectively, the "Cineplex Odeon Reports"). As of their
respective dates, the Cineplex Odeon Reports (i) were prepared in all material
respects in accordance with the applicable requirements of the Securities Act
and the Exchange Act, and the rules and regulations thereunder, or the
Canadian Securities Laws, as the case may be, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
of the consolidated balance sheets of Cineplex Odeon included in or
incorporated by reference into the Cineplex Odeon Reports (including the
related notes and schedules) fairly presents in all material respects the
consolidated financial position of Cineplex Odeon and the Cineplex Odeon
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of Cineplex Odeon included in or incorporated
by reference into the Cineplex Odeon Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations,
retained earnings or cash flows, as the case may be, of Cineplex Odeon and the
Cineplex Odeon Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments that would
not be material in amount or effect), in each case in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP") consistently
applied during the periods involved, except as may be noted therein, in each
case with note disclosure to provide reconciliation to United States generally
accepted accounting principles ("GAAP") to the extent required to comply with
SEC regulations. Except as and to the extent set forth on the consolidated
balance sheet of Cineplex Odeon and the Cineplex Odeon Subsidiaries at March
31, 1997, including all notes thereto, or as set forth in the Cineplex Odeon
Reports, neither Cineplex Odeon nor any of the Cineplex Odeon Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as contemplated by or resulting from this
Agreement or the Transactions or (iii) that would not have a Cineplex Odeon
Material Adverse Effect.
(b) Attached as Section 2.7(b) of the Cineplex Odeon Disclosure
Statement are true and accurate copies of (1) a statement of Cash Flow for
each motion picture theater owned or operated by Cineplex Odeon or any
Cineplex Odeon Subsidiary (the "Cineplex Odeon Theaters"), in the aggregate
and on a theater-by-theater basis for the twelve months ended March 31, 1997
(a "Cash Flow Statement"), (2) statements of Consolidated EBITDA and Adjusted
EBITDA ("EBITDA Statements") of Cineplex Odeon, in each case for the twelve
months ended March 31, 1997, and (3) a statement showing Cineplex Odeon's
Qualified Tangible Net Worth as of March 31, 1997. Cineplex Odeon represents
and warrants that the Consolidated EBITDA and Adjusted EBITDA of Cineplex
Odeon for such twelve-month period and that its Qualified Tangible Net Worth
as of March 31, 1997 were as set forth on Section 2.7(b) of the Cineplex Odeon
Disclosure Statement. Cineplex Odeon has delivered to LTM true and accurate
copies of the following statements used in the determination of Adjusted
EBITDA and Qualified Tangible Net Worth:
(i) a statement listing each theater that has been disposed of
during the twelve-month period ended March 31, 1997, such theater's date of
disposition and the related Cash Flow of such theater from April 1, 1996
through the earlier of (A) one month after its date of disposition and
(B) March 31, 1997;
(ii) a statement listing each theater that has been or is
projected, as of the date of this Agreement, to be closed or disposed of
subsequent to March 31, 1997 but prior to the Closing Date (the "Cineplex
Odeon Negative Theaters"), the actual or, to the extent known, projected
closing or disposition date, as the case may be, and, to the extent known, any
material terms applicable to such disposition, and setting forth the related
Cash Flow of such theater for the twelve months ended March 31, 1997;
(iii) a statement listing each theater opened after April 1, 1996
and before March 31, 1997 and the Cash Flow generated by such theater during
the period from its opening through March 31, 1997 and the projected Cash Flow
for such theater for its first full year of operation. Such statement shall
exclude the cash flow of Cinescapes located at Eau Claire Marketplace,
Calgary, Alberta and at Sharpstown, Houston, Texas (the "Cinescapes");
(iv) a statement listing each capital lease or other agreement
pursuant to which Cineplex Odeon or any Cineplex Odeon Subsidiary had
outstanding a Capital Lease Obligation at March 31, 1997 and, with respect to
such lease or agreement, (A) the amount of payments thereunder during the
twelve months ended Xxxxx 00, 0000, (X) the amount of payments thereunder
during the twelve months ended March 31, 1997 that relates to real property,
(C) the amount of the obligation in respect thereof as reflected on the
balance sheet of Cineplex Odeon at March 31, 1997 and (D) whether such lease
or other agreement relates to real property or equipment;
(v) a statement listing each component of Debt, including
maturity date, interest rate, payment terms, assets pledged as security (if
any), leasehold mortgages secured by leases (if any) and outstanding balance
as of March 31, 1997;
(vi) a statement listing and fairly presenting in all material
respects each component of Net Working Capital as of March 31, 1997; and
(vii) a Construction Work in Progress Statement.
Each of the foregoing statements as described herein is complete and fairly
presents such data for the periods or dates indicated and contains all
customary year-end adjustments. The foregoing statements may, at Cineplex
Odeon's option, be prepared in accordance with Canadian GAAP, provided such
statements include a reconciliation to GAAP if the amounts shown would be
materially different under GAAP. As used in this Agreement, the following
terms have the meanings set forth below (for the purposes of the definitions
set forth in this Section 2.7(b), the consolidated Subsidiaries of LTM shall
include the Transferred SPE Subsidiaries and the assets subject to the Sony
Asset Transfer):
"Cash Flow" in respect of any motion picture theater shall mean
(a) operating revenue net of applicable sales or admissions taxes (but only to
the extent allocable to the period in question and exclusive of amounts that,
are advance or prepaid items to be amortized in future periods) derived at
such theater during the period in question (i) from the sale of admission
tickets and concession items, (ii) from the rental or sale of home video
materials, (iii) from the rental of such theater, (iv) from the operation of
vending and gaming machines, (v) from pay telephones (net of commissions),
(vi) from advertising (vii) from advance ticket service charges, (viii) from
theater screenings, (ix) from pass service charges, (x) from the sale of movie
related merchandise, (xi) from the operation of Cinescapes, and theater cafes
and (xii) from partnerships minus (b) the sum of the following: (i) cost of
sales including film expenses, advertising expenses and confection and other
concession item purchases, (ii) all direct operating expenses of such theater
(including signs and marquees) including labor; employee benefits; employee
taxes; security; utilities; supplies and services; repairs and maintenance;
insurance; bank collection and deposit charges; marketing costs at the theater
level of group sales; cost of obtaining and marketing operating licenses and
fees; manager and staff awards at the theater level; direct theater special
event expenses (excepting, however, new theater pre-opening expenses); fees
for business licenses and permits; sewer rent and water charges; cleaning
costs; real and personal property taxes, and (iii) all amounts payable under
leases including basic rent, percentage rent, common area charges, insurance
and merchant associations fees; all to be determined on an accrual basis in
accordance with GAAP consistently applied.
"Consolidated EBITDA" of any party means for any period the
Consolidated Net Income for such period increased (a) by the sum of
(i) Consolidated Interest Expense of such party for such period, plus
(ii) Consolidated Income Tax Expense of such party for such period, plus
(iii) the consolidated depreciation and amortization expense deducted in
determining the Consolidated Net Income of such party for such period, less
(b) the pro rata share of any minority interest included in the items
identified in clause (a).
"Adjusted EBITDA" of any party means Consolidated EBITDA for the
twelve months ended March 31, 1997 adjusted as follows:
(i) There shall be added (in the case of negative Cash Flow) and
subtracted (in the case of positive Cash Flow) to Consolidated EBITDA for such
period an amount equal to (A) the absolute value of the positive or negative
Cash Flow generated for the twelve months ended March 31, 1997 for those
theaters that are closed or disposed of or projected to be closed or disposed
of as described in Sections 2.7(b)(i) and (ii) of the Cineplex Odeon
Disclosure Statement in the case of Cineplex Odeon and its Subsidiaries and
Sections 3.7(b)(i) and (ii) of the LTM Disclosure Statement in the case of LTM
and its Subsidiaries, and (B) the projected incremental impact of including
the first full year of operations of those new theaters described in Section
2.7(b)(iii) of the Cineplex Odeon Disclosure Statement in the case of Cineplex
Odeon and its Subsidiaries and Section 3.7(b)(iii) of the LTM Disclosure
Statement in the case of LTM and its Subsidiaries.
(ii) There shall be subtracted from Consolidated EBITDA all lease
payments (without duplication) during the twelve months until March 31, 1997
under Capital Lease Obligations in respect of real property described in
Section 2.7(b)(iv) (B) of the Cineplex Odeon Disclosure Statement or Section
3.7(b)(iv) (B) of the LTM Disclosure Statement, as the case may be.
(iii) In the case of Cineplex Odeon, there shall be added to
Consolidated EBITDA the amount of Canadian capital taxes expensed as a
component of general and administrative expenses for the twelve months ended
March 31, 1997.
"Capital Lease Obligations" of a party means the obligation to pay
rent or other payment amounts under a lease of (or other arrangements
conveying the right to use) real or personal property of such party that is
required to be classified and accounted for as a capital lease or a liability
on a balance sheet of such party in accordance with GAAP. The principal
amount of such obligation shall be the capitalized amount thereof that appear
on a balance sheet of such party in accordance with GAAP.
"Consolidated Income Tax Expense" of any party means for any
period the consolidated provision for income taxes of such party and its
consolidated Subsidiaries for such period determined in accordance with GAAP
applied, in the case of Cineplex Odeon, consistently with the financial
statements included in the Cineplex Odeon Reports and, in the case of LTM,
consistently with the LTM Financial Statements.
"Consolidated Interest Expense" of any party means for any period
the consolidated interest expense included in a consolidated income statement
(net of interest income) of such party and its consolidated Subsidiaries for
such period as reported on such party's financial statements for such period
and determined in accordance with GAAP applied, in the case of Cineplex Odeon,
consistently with the financial statements included in Cineplex Odeon Reports
and, in the case of LTM, consistently with the LTM Financial Statements.
"Consolidated Net Income" of any party means for any period the
consolidated net income (or loss) of such party and its consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
there shall be excluded therefrom (i) gains or losses on asset dispositions by
such party or its consolidated Subsidiaries, (ii) any net income (loss) of a
consolidated Subsidiary that is attributable to a minority interest in such
consolidated Subsidiary, (iii) all extraordinary gains and extraordinary
losses, (iv) all non-cash non-recurring charges and credits during such period
not in the ordinary course of business, (v) with respect to Cineplex Odeon,
other expenses of the type included under the caption "other expense" in its
Annual Report on Form 10-K for the year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and
(vi) the tax effect of any of the items described in clauses (i) through
(v) above.
"Debt" means (without duplication), with respect to any party at
any date, whether or not recourse is to all or a portion of the assets of such
party or any of its Subsidiaries, (i) every obligation of such party or any of
its Subsidiaries for money borrowed, (ii) every obligation of such party or
any of its Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such party or any of its
Subsidiaries with respect to letters of credit (including standby letters of
credit only to the extent drawn upon) bankers' acceptances or similar
facilities issued for the account of such party or any of its Subsidiaries,
(iv) every obligation of such party or any of its Subsidiaries issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course
of business), (v) every Capital Lease Obligation of such party or any of its
Subsidiaries other than Capital Lease Obligations of such party or any of its
Subsidiaries for real property as listed on Section 2.7(b)(iv)(B) of the
Cineplex Odeon Disclosure Statement or Section 3.7(b)(iv)(B) of the LTM
Disclosure Statement, and (vi) every obligation of the type referred to in
clauses (i) through (v) of another person and all dividends of another person
the payment of which, in either case, such party or any of its Subsidiaries
has guaranteed or for which such party is responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or otherwise but
without duplicating Debt to the extent included in such party's Net Working
Capital; provided, that, in the case of joint venture Debt, there shall be
included only that portion of such Debt equal to the party's ratable share in
such joint venture and; provided, further, in the case of LTM, Debt shall not
include the Intercompany Debt or Working Capital Debt or amount of any
dividend declared in respect of the Closing Adjustment.
"Net Working Capital" means with respect to any party at any date
and without duplication (i) the sum of such party's (A) current assets plus
(B) long-term receivables and marketable equity securities at cost plus
(C) long-term prepaid expenses (including Transaction Expenses previously paid
by LTM and Cineplex Odeon) and security deposits or unremitted cash from prior
earnings of any unconsolidated Subsidiaries plus (D) spare parts inventory
minus (ii) the sum of such party's (x) current liabilities (excluding (1) the
current portion of long-term Debt included in Debt and (2) the Intercompany
Debt and Working Capital Debt) plus (y) other liabilities (including pension
and other employee benefit liabilities, including, without limitation, post-
retirement obligations, and excluding Debt and Capitalized Lease Obligations
and, in the case of LTM, excluding any liability in respect of any dividend
declared in respect of the Closing Adjustment) required to appear on the face
of such party's balance sheet plus (z) deferred income and current tax
liabilities, all as determined in accordance with GAAP consistently applied.
For purposes of this definition, "Net Working Capital" in the case of LTM,
shall not include refundable construction advances made to the landlord under
the IMAX Ground Lease. In addition, working capital shall be adjusted further
to exclude the pro rata share of any minority interest in such working
capital. Net Working Capital shall not include any liability for (1) minority
interests or deferred taxes or (2) in respect of LTM's and Cineplex Odeon's
accrued and unpaid Transaction Expenses.
"Qualified Tangible Net Worth" means at any date for any party the
sum of (i) such party's pro rata share of the investment in Construction Work
in Progress as set forth in the Construction Work in Progress Statement of
such party, plus (ii) in the case of Cineplex Odeon, its investment at cost in
the Cinescapes (referred to in Section 2.7(b) (iii)) plus (iii) such party's
Net Working Capital if it is positive, minus (iv) the absolute value of such
party's Net Working Capital if it is negative, minus (v) such party's Debt
minus (vi) in the case of LTM, two times the Cash Flow for the twelve months
ended March 31, 1997 of the Indianapolis Theaters (as defined in Section
3.7(b)(viii), plus (vii) in the case of Cineplex Odeon, US$15 million, in each
case on a consolidated basis determined in accordance with GAAP.
"Transaction Expenses" means, with respect to LTM and Cineplex
Odeon, the out-of-pocket expenses and fees incurred by such party in
connection with the Documents and the Transactions, including (1) up to
US$1,000,000 of compensation expense in respect of bonuses payable to the
individuals listed on Section 2.7(b) of the Cineplex Odeon Disclosure
Statement, (2) severance costs and "stay" bonuses incurred by LTM and Cineplex
Odeon as a result of the Transactions in accordance with a plan jointly
approved by Cineplex Odeon and LTM, (3) fees and expenses of counsel,
financial advisors, accountants and other experts and consultants, (4)
printing and mailing costs, (5) proxy solicitation fees and expenses, and (6)
governmental, court, regulatory and stock exchange filing fees. Transaction
Expenses shall not include (x) any out-of-pocket expenses and fees incurred by
or on behalf of a stockholder of LTM or Cineplex Odeon or (y) liabilities
incurred or amounts paid to third parties in connection with obtaining
consents or waivers from such third parties to the Transactions.
Section 2.8. Litigation
. There are no actions, suits, proceedings or investigations
pending against Cineplex Odeon or the Cineplex Odeon Subsidiaries or, to the
Knowledge of Cineplex Odeon, threatened against Cineplex Odeon or the Cineplex
Odeon Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that would have a
Cineplex Odeon Material Adverse Effect.
Section 2.9. Absence of Certain Changes
. Except as disclosed in the Cineplex Odeon Reports filed with
the SEC prior to the date hereof, or as otherwise contemplated by this
Agreement or resulting from the Transactions, since March 31, 1997,
(a) Cineplex Odeon and the Cineplex Odeon Subsidiaries have conducted their
respective businesses only in the ordinary course of such business (b) except
for (i) facts and circumstances affecting the economy as a whole, (ii) facts
and circumstances affecting the motion picture industry generally, or
(iii) adverse changes in Cash Flow per screen from sales of tickets and
concession items, there has not been a Cineplex Odeon Material Adverse Effect,
and (c) there has not been (x) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or
(y) any material change in its accounting principles, practices or methods.
Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has deferred any
material expenses or accelerated any material income, other than in the
ordinary course of business in accordance with Canadian GAAP consistently
applied, in contemplation of the Transactions.
Section 2.10. Taxes
. (a) Except where the failure to do so would not have a
Cineplex Odeon Material Adverse Effect, Cineplex Odeon and each of the
Cineplex Odeon Subsidiaries (i) has timely filed all United States federal and
state tax returns required to be filed by any of them, all Canadian federal
and provincial tax returns required to be filed by any of them and all
material tax returns required to be filed by any of them under the laws of any
other country, in each case for tax years ended prior to the date of this
Agreement or requests for extensions have been timely filed and any such
request shall have been granted and not expired and all such returns are
correct and complete in all respects, (ii) has paid or accrued in the Cineplex
Odeon Reports all taxes, levies, assessments, charges, withholdings,
reassessments, penalties, interest, fines and any other governmental charges
of any kind (collectively, "Taxes") payable for all periods covered by such
returns, (iii) has properly accrued in the Cineplex Odeon Reports all Taxes
for periods subsequent to the periods covered by such returns and (iv) has
"open" years for United States and Canadian federal income tax returns only as
set forth in the Cineplex Odeon Disclosure Statement. Correct and complete
copies of all tax returns, including schedules thereto, filed by Cineplex
Odeon and the Cineplex Odeon Subsidiaries in respect of the last three
completed fiscal years with all regulatory authorities, including Canadian
federal goods and services tax returns and state, provincial or local sales or
use tax returns filed by Cineplex Odeon or the Cineplex Odeon Subsidiaries,
all assessments or reassessments in respect of such years, all waivers in
respect of such years or any other periods and all written communications and
other documents relating thereto have been made available to LTM prior to the
date of this Agreement.
(b) As of December 31, 1996, for Canadian federal income tax
purposes, Cineplex Odeon's (i) non-capital losses by year incurred and
(ii) undepreciated capital cost in its depreciable property (for each class of
assets set forth thereon), were as set forth in Section 2.10(b) of the
Cineplex Odeon Disclosure Statement. As of December 31, 1996, for Canadian
federal income tax purposes, Cineplex Odeon Quebec's (i) non-capital losses by
year incurred and (ii) undepreciated capital cost in its depreciable property
(for each class of assets set forth thereon), were as set forth in Section
2.10(b) of the Cineplex Odeon Disclosure Statement. As of December 31, 1996,
for US federal income tax purposes, Xxxxx'x restricted and unrestricted net
operating losses were as set forth in Section 2.10 of the Cineplex Odeon
Disclosure Statement by year incurred.
(c) Except where the failure to do so would not have a Cineplex
Odeon Material Adverse Effect, Cineplex Odeon and the Cineplex Odeon
Subsidiaries have withheld, collected and remitted all amounts required to be
withheld, collected or remitted by them in respect of any Taxes, including any
such Taxes in respect of payments made to any past or present employees,
officers or directors, and to any persons not resident in Canada or the United
States (as applicable in the case of Cineplex Odeon and its Canadian
Subsidiaries and Xxxxx and its U.S. Subsidiaries, respectively), to the proper
tax or other receiving officers within the time prescribed under any
applicable legislation.
Section 2.11. Employee Benefit Plans
. (a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Benefit Plan" means each plan, program, policy, payroll practice,
contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether written or
oral, funded or unfunded, including, without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA and each "multi-
employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
"Cineplex Odeon Benefit Plan" means each Benefit Plan (other than
a Cineplex Odeon Employee Agreement and other than a Cineplex Odeon Canadian
Benefit Plan) which is currently in effect and which is or previously has been
sponsored, maintained, contributed to, or required to be contributed to, or
with respect to which any withdrawal liability (within the meaning of Section
4201 of ERISA) has been incurred, by Cineplex Odeon or any Cineplex Odeon
Subsidiary or any Cineplex Odeon ERISA Affiliate for the benefit of any
Cineplex Odeon Employee, and pursuant to which Cineplex Odeon or any Cineplex
Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate has or may have any
liability, contingent or otherwise.
"Cineplex Odeon Employee" means each current, former, or retired
employee, officer, consultant, independent contractor, agent or director of
Cineplex Odeon or any Cineplex Odeon Subsidiary.
"Cineplex Odeon Employee Agreement" means each management,
employment, severance, consulting, non-compete, confidentiality, or similar
agreement or contract, whether written or oral, between Cineplex Odeon or any
Cineplex Odeon Subsidiary and any Cineplex Odeon Employee pursuant to which
Cineplex Odeon or any Cineplex Odeon Subsidiary has or may have any liability
contingent or otherwise, in excess of US$100,000 in each instance.
"Cineplex Odeon ERISA Affiliate" means each business or entity
which is a member of a "controlled group of corporations," under "common
control" or an "affiliated service group" with Cineplex Odeon within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with Cineplex Odeon under Section 414(o) of the Code, or is under
"common control" with Cineplex Odeon within the meaning of Section 4001(a)(14)
of ERISA.
"Cineplex Odeon Multi-Employer Plan" means each Cineplex Odeon
Benefit Plan which is "multi-employer plan" within the meaning of Sections
3(37) or 4001(a)(3) of ERISA.
"Cineplex Odeon Pension Plan" means each Cineplex Odeon Benefit
Plan (other than a Cineplex Odeon Multi-Employer Plan) which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA.
"Cineplex Odeon Welfare Plan" means each Cineplex Odeon Benefit
Plan which is an "employee welfare benefit plan" within the meaning of Section
3(1) of ERISA and each Cineplex Odeon Canadian Benefit Plan that provides
similar benefits.
"Code" means the Internal Revenue Code of 1986, as amended.
"Department" means the U.S. Department of Labor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended and any regulations promulgated or proposed thereunder.
"IRS" means the Internal Revenue Service.
"PBGC" means the Pension Benefit Guaranty Corporation.
(b) Schedule. Section 2.11(b) of the Cineplex Odeon Disclosure
Statement contains a true and complete list of each Cineplex Odeon Benefit
Plan and each Cineplex Odeon Employee Agreement. Neither Cineplex Odeon nor
any Cineplex Odeon Subsidiary, nor any Cineplex Odeon ERISA Affiliate, has any
plan or commitment, whether legally binding or not, to establish any new
Cineplex Odeon Benefit Plan or Cineplex Odeon Canadian Benefit Plan, to enter
into any Cineplex Odeon Employee Agreement or to modify or to terminate any
Cineplex Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan or Cineplex
Odeon Employee Agreement (except to the extent required by law or to conform
any such Cineplex Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan or
Cineplex Odeon Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to LTM, or as required by this
Agreement), nor has any intention to do any of the foregoing been communicated
to Cineplex Odeon Employees. Section 2.11(b) of the Cineplex Odeon Disclosure
Statement identifies each employee of Cineplex Odeon or any Cineplex Odeon
Subsidiary who received total compensation in excess of US$100,000 in
connection with such employment in 1996 or is expected to receive at least
such amount in 1997 as employment compensation.
(c) Documents. Cineplex Odeon has made available to LTM
(i) current, accurate and complete copies of all material documents embodying
or relating to each Cineplex Odeon Benefit Plan and each Cineplex Odeon
Employee Agreement, including all amendments thereto, and trust or funding
agreements with respect thereto; (ii) the two (2) most recent annual actuarial
valuations, if any, prepared for each Cineplex Odeon Benefit Plan; (iii) the
two (2) most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA in connection with each Cineplex Odeon Benefit Plan
or related trust; (iv) a statement of alternative form of compliance pursuant
to Department Regulation 2520.104-23, if any, filed for each Cineplex Odeon
Benefit Plan that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA for a select group of management or highly compensated
employees; (v) the most recent determination letter received from the IRS, if
any, for each Cineplex Odeon Benefit Plan and related trust which is intended
to satisfy the requirements of Section 401(a) of the Code; (vi) if the
Cineplex Odeon Benefit Plan is funded, the most recent annual and periodic
accounting of Cineplex Odeon Benefit Plan assets; and (vii) the most recent
summary plan description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Cineplex
Odeon Benefit Plan.
(d) Compliance. With respect to each Cineplex Odeon Benefit
Plan except as would not have a Cineplex Odeon Material Adverse Effect
(i) Cineplex Odeon, each Cineplex Odeon Subsidiary and each Cineplex Odeon
ERISA Affiliate have performed all obligations required to be performed by
them under each Cineplex Odeon Benefit Plan and Cineplex Odeon Employee
Agreement and neither Cineplex Odeon nor any Cineplex Odeon Subsidiary, nor
any Cineplex Odeon ERISA Affiliate is in default under or in violation of, any
Cineplex Odeon Benefit Plan, (ii) each Cineplex Odeon Benefit Plan has been
established and maintained in accordance with its terms and in compliance with
all applicable laws, orders, rules and regulations, including but not limited
to ERISA and the Code, including without limiting the foregoing, the timely
filing of all required reports, documents and notices, where applicable, with
the IRS and the Department; (iii) each Cineplex Odeon Benefit Plan intended to
qualify under Section 401 of the Code is, and since its inception has been, so
qualified and a determination letter has been issued by the IRS to the effect
that each such Cineplex Odeon Benefit Plan is so qualified and that each trust
forming a part of any such Cineplex Odeon Benefit Plan is exempt from tax
pursuant to Section 501(a) of the Code and no circumstances exist which would
adversely affect this qualification or exemption; (iv) no non-exempt
"prohibited transaction," within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any Cineplex Odeon Benefit
Plan; (v) no action or failure to act and no transaction or holding of any
asset by, or with respect to, any Cineplex Odeon Benefit Plan has or may
subject Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon
ERISA Affiliate or any fiduciary to any tax, penalty or other liability,
whether by way of indemnity or otherwise; (vi) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the Knowledge of
Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA
Affiliate, threatened or anticipated (other than routine claims for benefits)
against Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon
ERISA Affiliate or any administrator, trustee or other fiduciary of any
Cineplex Odeon Benefit Plan with respect to any Cineplex Odeon Benefit Plan or
Cineplex Odeon Employee Agreement, or against any Cineplex Odeon Benefit Plan
or against the assets of any Cineplex Odeon Benefit Plan; (vii) no event or
transaction has occurred with respect to any Cineplex Odeon Benefit Plan that
would result in the imposition of any tax under Chapter 43 of Subtitle D of
the Code; (viii) each Cineplex Odeon Benefit Plan can be amended, terminated
or otherwise discontinued without liability to Cineplex Odeon, any Cineplex
Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate; (ix) Cineplex Odeon,
each Cineplex Odeon Subsidiary and each Cineplex Odeon ERISA Affiliate have
made all payments due and owing with respect to all periods through the date
hereof; and (x) no Cineplex Odeon Benefit Plan is under audit or investigation
by the IRS, the Department or the PBGC, no such audit or investigation is
pending and to the Knowledge of Cineplex Odeon, each Cineplex Odeon Subsidiary
and any Cineplex Odeon ERISA Affiliate no such audit or investigation is
threatened.
(e) Pension Plans. With respect to each Cineplex Odeon Pension
Plan, except as would not have a Cineplex Odeon Material Adverse Effect,
(i) no steps have been taken to terminate any Cineplex Odeon Pension Plan now
maintained or contributed to, no termination of any Cineplex Odeon Pension
Plan has occurred pursuant to which all liabilities have not been satisfied in
full, no liability under Title IV of ERISA has been incurred by Cineplex
Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate
that has not been satisfied in full, and no event has occurred and no
condition exists that could reasonably be expected to result in Cineplex
Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate
incurring a liability under Title IV of ERISA or could constitute grounds for
terminating any Cineplex Odeon Pension Plan; (ii) no proceeding has been
initiated by the PBGC to terminate any Cineplex Odeon Pension Plan or to
appoint a trustee to administer any Cineplex Odeon Pension Plan; (iii) each
Cineplex Odeon Pension Plan which is subject to Part 3 of Subtitle B of Title
I of ERISA or Section 412 of the Code, has been maintained in compliance with
the minimum funding standards of ERISA and the Code and no such Cineplex Odeon
Pension Plan has incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code and Section 302 of ERISA, whether or not waived;
(iv) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary, nor any
Cineplex Odeon ERISA Affiliate, has sought nor received a waiver of its
funding requirements with respect to any Cineplex Odeon Pension Plan and all
contributions payable with respect to each Cineplex Odeon Pension Plan have
been timely made; (v) within the immediately preceding three years, no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 of ERISA, has occurred with respect to any
Cineplex Odeon Pension Plan; and (vi) the funded status of each Cineplex Odeon
Pension Plan as reflected in the actuarial reports of Xxxxxx Xxxxx and
Company, with respect to the United States employees, prepared as of January,
1996 are accurate and such reports fairly present the funded status of such
Cineplex Odeon Pension Plan as of the respective date on the basis set forth
therein.
(f) Cineplex Odeon Multi-Employer Plans. Except as would not
have a Cineplex Odeon Material Adverse Effect, as of the Closing Date,
Cineplex Odeon, each Cineplex Odeon Subsidiary and each Cineplex Odeon ERISA
Affiliate will not have completely or partially withdrawn from any Cineplex
Odeon Multi-Employer Plan and will not be subject to any withdrawal liability
as described in Section 4201 of ERISA for withdrawals that have occurred on or
prior to the Closing Date (including, without limitation, any withdrawal
deemed to have occurred as a result of the Transactions). To the Knowledge of
Cineplex Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA
Affiliate and with such exceptions as would not have a Cineplex Odeon Material
Adverse Effect, (i) no Cineplex Odeon Multi-Employer Plan fails to qualify
under Section 401(a) of the Code, is insolvent or is in reorganization within
the meaning of Part 3 of Subtitle E of Title IV of ERISA; and (ii) no
condition exists which presents a risk of any Cineplex Odeon Multi-Employer
Plan becoming insolvent or going into reorganization. Except as would not
have a Cineplex Odeon Material Adverse Effect, no event has occurred which
could result in a "partial withdrawal" under Section 4205 of ERISA with
respect to any Cineplex Odeon Multi-Employer Plan and neither Cineplex Odeon,
any Cineplex Odeon Subsidiary nor any Cineplex Odeon ERISA Affiliate has any
contingent liability under Section 4204 of ERISA.
(g) No Post-Employment Obligations. Except as would not have a
Cineplex Odeon Material Adverse Effect, neither Cineplex Odeon, any Cineplex
Odeon Subsidiary nor any Cineplex Odeon ERISA Affiliate (i) maintains or
contributes to any Cineplex Odeon Benefit Plan or Cineplex Odeon Canadian
Benefit Plan which provides, or has any liability to provide, life insurance,
medical, severance or other Cineplex Odeon Employee welfare benefits to any
Cineplex Odeon Employee upon his retirement or termination of employment,
except as may be required by Section 4980B of the Code or Applicable Law; or
(ii) has ever represented, promised or contracted (whether in oral or written
form) to any Cineplex Odeon Employee in the United States (either individually
or to Cineplex Odeon Employees as a group) that such Cineplex Odeon
Employee(s) would be provided with life insurance, medical, severance or other
Cineplex Odeon Employee welfare benefits upon their retirement or termination
of employment, except to the extent required by Section 4980B of the Code or
Applicable Law.
(h) Canadian Plans. Section 2.11(h) of the Cineplex Odeon
Disclosure Statement contains a true and complete list of each retirement,
pension, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation,
benefits relating to legal services, unemployment benefits, vacation,
incentive or other compensation plan or arrangement, or other employee
benefit, other than Cineplex Odeon Benefit Plans (each, a "Cineplex Odeon
Canadian Benefit Plan") that is currently in effect and is now or previously
has been sponsored, maintained, contributed to or required to be contributed
to, by Cineplex Odeon or by any Cineplex Odeon Subsidiary in Canada or any
province thereof, for the benefit of Cineplex Odeon Employees or former
Cineplex Odeon Employees and their spouses, dependents or beneficiaries.
Cineplex Odeon has made available to LTM (i) current, accurate and complete
copies of all documents embodying or relating to each Cineplex Odeon Canadian
Benefit Plan including all amendments thereto, and written interpretations
thereof and trust or funding agreements with respect thereto, (ii) the two
most recent annual reports, if any, for each Cineplex Odeon Canadian Benefit
Plan, (iii) the two most recent actuarial valuations, if any, prepared for
each Cineplex Odeon Canadian Benefit Plan; (iv) the most recent summary plan
descriptions and determination letters for each Cineplex Odeon Canadian
Benefit Plan; (v) if the Cineplex Odeon Canadian Benefit Plan is funded, the
most recent accounting of the Cineplex Odeon Canadian Benefit Plan assets;
(vi) all material communications to any Cineplex Odeon Employee or Employees
relating to each Cineplex Odeon Canadian Benefit Plan; and (vii) all opinions
Cineplex Odeon has received from legal counsel, accountants and actuaries
relating to contribution holidays or surplus withdrawal from any of the
Cineplex Odeon Canadian Pension Plans. Except as would not have a Cineplex
Odeon Material Adverse Effect (1) Cineplex Odeon and each Cineplex Odeon
Subsidiary, as applicable, is in compliance with each law, statute, ordinance,
rule, code or regulation enacted or promulgated, or order, directive,
instruction or other guideline or policy having the force of law and
applicable to the Cineplex Odeon Canadian Benefit Plans ("Applicable Law")
imposed or administered by any Canadian federal, provincial or local executive
office, legislature, governmental agency or ministry, commission, or
administrative or regulatory authority or instrumentality (a "Governmental
Entity"); (2) with respect to each Cineplex Odeon Canadian Benefit Plan that
provides pension or retirement benefits or obligations to current or former
Cineplex Odeon Employees or their spouses, dependents and beneficiaries
(collectively, the "Cineplex Odeon Canadian Pension Plans") identified in
Section 2.11(h) of the Cineplex Odeon Disclosure Statement, no provision
concerning any Cineplex Odeon Canadian Pension Plan is contained in any
collective bargaining agreement affecting any current or former employees of
Cineplex Odeon or any Cineplex Odeon Subsidiary; (3) each Cineplex Odeon
Canadian Pension Plan is registered under, and is in compliance in all
material respects with, Applicable Law; (4) all contributions to, and payments
from, each Cineplex Odeon Canadian Benefit Plan that may have been required to
be made in accordance with the terms of such Cineplex Odeon Canadian Benefit
Plan and, where applicable, Applicable Laws that govern such Cineplex Odeon
Canadian Benefit Plan, have been made in a timely manner and each Cineplex
Odeon Canadian Benefit Plan has otherwise at all times been administered in
accordance with its terms and Applicable Law; (5) except as disclosed in the
Cineplex Odeon Reports, no contribution holidays have been taken with respect
to any of the Cineplex Odeon Canadian Pension Plans and no surplus has been
withdrawn from any of the Cineplex Odeon Canadian Pension Plans; (6) all
contribution holidays taken and withdrawals of surplus made from each Cineplex
Odeon Canadian Pension Plan have been in accordance with the terms of such
plan and Applicable Law; (7) all material reports, taxation returns and
similar documents with respect to any Cineplex Odeon Canadian Benefit Plan
required to be filed with any Governmental Entity or distributed to any
Cineplex Odeon Canadian Benefit Plan participant have been duly filed on a
timely basis or distributed; (8) there are no pending investigations by any
Governmental Entity involving or related to any Cineplex Odeon Canadian
Benefit Plan, no claims (except for claims for benefits payable in the normal
operation of the Cineplex Odeon Canadian Benefit Plan), suits or proceedings
pending or threatened, against any Cineplex Odeon Canadian Benefit Plan or
asserting any rights or claims for benefits under any Cineplex Odeon Canadian
Benefit Plan that could give rise to an unfunded liability nor are there any
facts that could give rise to an unfunded liability in the event of any such
investigation, claim, suit or proceeding; (9) no notice has been received by
Cineplex Odeon or any Cineplex Odeon Subsidiary of any complaint or other
proceeding of any kind involving Cineplex Odeon or any Cineplex Odeon
Subsidiary or any of their employees or other potential claimants before any
Governmental Entity relating to any Cineplex Odeon Canadian Benefit Plan or to
Cineplex Odeon; (10) the funded status of each Cineplex Odeon Canadian Pension
Plan as reflected in the actuarial report of Xxxxxxx X. Xxxxxx prepared as of
December 31, 1996 is accurate and such report fairly presents the status of
such Cineplex Odeon Canadian Pension Plan on the basis set forth therein, and
no event has occurred since the date of that report that would materially
adversely affect the funded status of any Cineplex Odeon Canadian Pension
Plan; and (11) there exists no condition or set of circumstances in connection
with which LTM or Cineplex Odeon would be subject to any unfunded liability
under the terms of any Cineplex Odeon Canadian Pension Plan or under any
Applicable Law with respect thereto.
(i) Effect of Transactions. Section 2.11(i) of the Cineplex
Odeon Disclosure Statement contains a true and complete list of every Cineplex
Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan and every Cineplex
Odeon Employee Agreement with respect to which payments or benefits under such
plan or agreement would increase or accelerate by reason of the Transactions.
Except as would not have a Cineplex Odeon Material Adverse Effect, (i) the
execution of this Agreement and the performance by Cineplex Odeon of its
obligations hereunder will not (either alone or upon the occurrence of any
additional or subsequent events) (x) constitute an event under any Cineplex
Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan, Cineplex Odeon
Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Cineplex Odeon Employee, or (y) result in
the triggering or imposition of any restrictions or limitations on the right
of Cineplex Odeon to amend or terminate any Cineplex Odeon Benefit Plan or
Cineplex Odeon Canadian Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
Applicable Law and applicable taxes; and (ii) no payment or benefit which will
or may be made by Cineplex Odeon, any Cineplex Odeon Subsidiary, or any of
their respective affiliates, with respect to any Cineplex Odeon U.S. Employee
will be characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code.
(j) Employment Matters. Except as would not have a Cineplex
Odeon Material Adverse Effect, Cineplex Odeon and each Cineplex Odeon
Subsidiary (i) is in compliance with all applicable Canadian federal,
provincial and local laws, rules and regulations, United States federal, state
and local laws, rules and regulations and foreign national, state and local
laws, rules and regulations respecting employment, employment practices,
labor, terms and conditions of employment and wages and hours, in each case,
with respect to Cineplex Odeon Employees; (ii) has withheld and remitted, as
required, all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Cineplex Odeon Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable (other than for
amounts accrued but not yet payable) for any payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or social insurance,
employment insurance, Canada pension plan payment or other benefits for
Cineplex Odeon Employees.
(k) Labor. Except as would not have a Cineplex Odeon Material
Adverse Effect or as otherwise disclosed in the Cineplex Odeon Reports or the
Cineplex Odeon Disclosure Statement, no work stoppage or labor strike against
Cineplex Odeon or any Cineplex Odeon Subsidiary by Cineplex Odeon Employees is
pending or, to the Knowledge of Cineplex Odeon, threatened. Except as
disclosed in the Cineplex Odeon Reports or Cineplex Odeon Disclosure Statement
or as would not otherwise have a Cineplex Odeon Material Adverse Effect,
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary (i) is involved in
or, to the Knowledge of Cineplex Odeon, threatened with any labor dispute,
grievance, or litigation relating to labor matters involving any Cineplex
Odeon Employees, including, without limitation, violation of any federal,
state, provincial or local labor, safety or employment laws (domestic or
foreign), charges of unfair labor practices or discrimination complaints;
(ii) has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act, the Railway Labor Act, the Labor Relations Act
(Ontario) or any other similar applicable legislation; or (iii) is presently,
nor has been in the past a party to, or bound by, any collective bargaining
agreement or union contract with respect to Cineplex Odeon Employees, and no
such agreement or contract is currently being negotiated by Cineplex Odeon or
any Cineplex Odeon Subsidiary. Except as disclosed on the Cineplex Odeon
Reports or Cineplex Odeon Disclosure Statement, no Cineplex Odeon Employees
are currently represented by any labor union for purposes of collective
bargaining and no activities the purpose of which is to achieve such
representation of all or some of such Cineplex Odeon Employees are ongoing or,
to the Knowledge of Cineplex Odeon, threatened.
(l) 501(c)(9) Trust. Except as would not have a Cineplex Odeon
Material Adverse Effect, no Cineplex Odeon Benefit Plan or Cineplex Odeon
Employee Agreement is funded by a trust described in Section 501(c)(9) of the
Code.
(m) Welfare Plan Funding. Except as would not have a Cineplex
Odeon Material Adverse Effect with respect to each Cineplex Odeon Welfare
Plan, all material claims incurred (including claims incurred but not
reported) by Cineplex Odeon Employees thereunder for which Cineplex Odeon is,
or will become, liable are (i) insured pursuant to a contract of insurance
whereby the insurance company bears any risk of loss with respect to such
claims; (ii) covered under a contract with a health maintenance organization
(an "HMO") pursuant to which the HMO bears the liability for such claims; or
(iii) reflected as a liability or accrued for on the Cineplex Odeon Financial
Statements to the extent required by Canadian GAAP.
(n) Controlled Group Liability. Except as would not have a
Cineplex Odeon Material Adverse Effect, Cineplex Odeon is not (i) a member of
a "controlled group of corporations," under "common control" or an "affiliated
service group" within the meanings of Sections 414(b), (c) or (m) of the Code
with any entity other than Cineplex Odeon Subsidiaries, (ii) required to be
aggregated under Section 414(o) of the Code; or (iii) under "common control,"
within the meaning of Section 4001(a)(14) of ERISA, and no Benefit Plan (other
than Cineplex Odeon Benefit Plans, Cineplex Odeon Canadian Benefit Plans and
Cineplex Odeon Employee Agreements) is now or previously has been sponsored,
maintained, contributed to or required to be contributed to, by Cineplex Odeon
or any Cineplex Odeon Subsidiary.
Section 2.12. No Brokers
. Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
entered into any contract, arrangement or understanding with any person or
firm that may result in the obligation of Cineplex Odeon, any Cineplex Odeon
Subsidiary or LTM to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement, any of the other Documents or the consummation of the transactions
contemplated hereby or thereby, except that the Special Committee has retained
Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx") as its financial advisor,
the arrangements with which have been disclosed in writing to LTM prior to the
date hereof. Other than the foregoing arrangements, Cineplex Odeon is not
aware of any claim against Cineplex Odeon for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement, any of the other Documents or the
consummation of the Transactions.
Section 2.13. Opinions of Financial Advisor, Etc
. The Special Committee has received the opinion of Xxxxxx
Xxxxxxx, to the effect that, as of the date hereof, the consideration to be
received by the shareholders of Cineplex Odeon, other than Universal and the
Claridge Group, upon consummation of the Transactions is fair from a financial
point of view.
Section 2.14. Environmental Matters
. (a) Except as set forth in the Cineplex Odeon Reports or the
Cineplex Odeon Disclosure Statement or as would not have a Cineplex Odeon
Material Adverse Effect:
(i) each of Cineplex Odeon and the Cineplex Odeon Subsidiaries
has been and is in compliance in all respects with all applicable
Environmental Laws;
(ii) each of Cineplex Odeon and the Cineplex Odeon Subsidiaries
has obtained, and is in compliance with, all permits, licenses,
authorizations, approvals, registrations and other governmental consents
required for their operations as currently conducted by applicable
Environmental Laws ("Environmental Permits"), including, without limitation,
those regulating emissions, discharges, or releases of Hazardous Substances;
(iii) to the Knowledge of Cineplex Odeon, the Cineplex Odeon Real
Properties are free of any Hazardous Substances (except those present,
maintained, used, stored, discharged or released in compliance in all respects
with Environmental Laws) and free of all contamination, including, but not
limited to groundwater contamination, arising from, relating to, or resulting
from any Hazardous Substances, that exceeds any applicable clean-up levels or
any level at which any report or other action by Cineplex Odeon or any
Cineplex Odeon Subsidiary is required under any applicable Environmental Law;
(iv) there are no claims, notices, civil, criminal or
administrative actions, suits, orders or proceedings pending or, to the
Knowledge of Cineplex Odeon, threatened against Cineplex Odeon or any Cineplex
Odeon Subsidiary that are based on or related to any Environmental Matters or
the failure to have any required Environmental Permits, and, to the Knowledge
of Cineplex Odeon, there are no investigations pending or threatened against
Cineplex Odeon or any Cineplex Odeon Subsidiary that are based on or related
to any Environmental Matters or the failure to have any Environmental Permits;
(v) to the Knowledge of Cineplex Odeon, there are no past or
present conditions, events or circumstances, (a) that may reasonably be
expected to interfere with or prevent continued material compliance by any of
Cineplex Odeon or the Cineplex Odeon Subsidiaries with Environmental Laws and
the requirements of Environmental Permits, (b) that may reasonably be expected
to give rise to any liability or other obligation under any Environmental Laws
that may require any of Cineplex Odeon or the Cineplex Odeon Subsidiaries to
incur any Environmental Costs, or (c) that may reasonably be expected to form
the basis of any claim, action, suit, order, proceeding, hearing,
investigation or inquiry against or involving any of Cineplex Odeon or the
Cineplex Odeon Subsidiaries based on or related to any Environmental Matter or
which could reasonably be expected to require any of Cineplex Odeon and the
Cineplex Odeon Subsidiaries to incur any Environmental Costs; and
(vi) except to the extent such request or requirement has been
fully complied with, since January 1, 1990, neither Cineplex Odeon nor any
Cineplex Odeon Subsidiary has been requested or required by any Governmental
Entity to perform any investigatory or remedial activity or other action in
connection with any Environmental Matter.
(b) Cineplex Odeon has made available to LTM each environmental
audit, assessment, study, report or other information relating in any material
respect to Cineplex Odeon or any Cineplex Odeon Subsidiary in the possession
or under the control of Cineplex Odeon or any Cineplex Odeon Subsidiary.
(c) For the purposes of this Agreement, the following terms
shall have the meanings indicated:
"Environmental Costs" means, to the extent applicable, without
limitation, any actual or potential cleanup costs, remediation, removal,
containment, control or other response costs (which, without limitation, shall
include costs to cause a party to come into compliance with Environmental
Laws), investigation costs (including, without limitation, fees of
consultants, counsel, and other experts in connection with any environmental
investigation, testing, audits or studies), losses, liabilities or obligations
(including, without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including, without limitation, any actual,
punitive or consequential damages under any statutory laws, common law cause
of action or contractual obligations or otherwise, including, without
limitation, damages (a) of third parties for personal injury or property
damage, or (b) to natural resources), civil or criminal fines or penalties,
judgments, and amounts paid in settlement arising out of or relating to or
resulting from any Environmental Matter.
"Environmental Laws" means, to the extent applicable, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. 11001, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq.; the Toxic
Substances Control Act, 15 U.S.C. 2601, et seq.; the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. 136, et seq.; the Clean Air Act,
42 U.S.C. 7401, et seq.; the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. 1251, et seq.; the Safe Drinking Xxxxx Xxx, 00
X.X.X. 000x, et seq.; the Occupational Safety and Health Act, 29 U.S.C.
651, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
1801, et seq.; the Canadian Environmental Protection Act; the
Transportation of Dangerous Goods Act, 1992 (Canada); the Fisheries Act
(Canada); the Environmental Protection Act (Ontario); the Ontario Water
Resources Act; the Occupational Health and Safety Act (Ontario); as any of the
above statutes have been amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other
international, foreign, federal, state, provincial or local treaty, law,
statute, ordinance, by-law, rule or regulation governing Environmental
Matters, as the same have been amended from time to time, including any common
or civil law cause of action providing any right or remedy relating to
Environmental Matters, all indemnity agreements and other contractual
obligations (including leases, asset purchase and merger agreements) relating
to Environmental Matters, the requirements of all applicable Environmental
Permits, and all applicable and legally binding judicial and administrative
decisions, directives, judgments, orders, and decrees relating to
Environmental Matters.
"Environmental Matter" means any matter arising out of, relating
to, or resulting from pollution, contamination, protection of the environment,
human health or safety, health or safety of employees, sanitation, and any
matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Substances into the air (indoor and
outdoor), surface water, groundwater, soil, land surface or subsurface,
buildings, facilities, real or personal property or fixtures or otherwise
arising out of, relating to, or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, release
or threatened release of Hazardous Substances.
"Hazardous Substances" means any pollutants, contaminants, toxic,
deleterious or hazardous substances, materials, wastes, constituents,
compounds, chemicals (including, without limitation, petroleum or any by-
products or fractions thereof, any form of natural gas, lead, asbestos and
asbestos-containing materials, building construction materials and debris,
polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon and
other radioactive elements, infectious, carcinogenic, mutagenic, or etiologic
agents, pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by any Environmental Laws.
Section 2.15. Real Property; Leases.
(a) Section 2.15(a) of the Cineplex Odeon Disclosure Statement
lists all real property leased by Cineplex Odeon and all Cineplex Odeon
Subsidiaries (the "Cineplex Odeon Leased Real Properties") and all real
property owned by Cineplex Odeon and all Cineplex Odeon Subsidiaries (the
"Cineplex Odeon Owned Real Properties," and together with the Cineplex Odeon
Leased Real Properties, the "Cineplex Odeon Real Properties"). For each
Cineplex Odeon Leased Real Property, Section 2.15(a) of the Cineplex Odeon
Disclosure Statement sets forth the following information as at the date of
this Agreement: (i) the address of the property; (ii) the name of the
landlord, manager or payee, as appropriate; (iii) the name of the tenant;
(iv) the date of the lease and all amendments thereto; (v) the current
expiration date of such lease; (vi) any options to extend the term of such
lease; (vii) if a theater site, the number of screens at such theater;
(viii) whether the theaters on such site are operating or non-operating;
(ix) whether the landlord's consent is required as a result of the
Transactions; (x) any landlord right to terminate the lease (other than
arising from a default, casualty, or condemnation); (xi) with respect only to
those theaters located in markets where LTM has theaters, any tenant radius
restrictions set forth in such lease; (xii) whether the landlord has sent to
the tenant under such lease a notice of default or a notice of termination of
such lease which remains uncured; (xiii) whether the tenant under such lease
is obligated to purchase such property; (xiv) whether such lease is required
to be accounted for under GAAP as a capitalized lease; (xv) whether there are
any leasehold mortgages secured by such lease and whether the consent of the
mortgagee is required in connection with the Transactions; and (xvi) whether
the rent, common area charges, taxes or other payments due under such lease
are in arrears in excess of 60 days. For each Cineplex Odeon Owned Real
Property, Section 2.15(a) of the Cineplex Odeon Disclosure Statement lists as
at the date of this Agreement: (i) the address for each such property and
(ii) whether the consent of any mortgage or lien holder of such property is
required as a result of the Transactions. Except for such exceptions as would
not have a Cineplex Odeon Material Adverse Effect and except for (A) the items
set forth in Section 2.15(a) of the Cineplex Odeon Disclosure Statement;
(B) zoning and planning restrictions, easements, permits and other
restrictions or limitations of public record affecting the use of such
properties; provided, that individually and in the aggregate, such
restrictions, easements and permits do not materially impair the use of such
properties as motion picture theaters or for such other purposes as such
properties are currently being used; (C) mechanic's liens or other similar
Encumbrances arising in the ordinary course of business and securing
obligations not yet due and payable; and (D) other Encumbrances that
individually and in the aggregate do not materially impair the ability of the
owner to obtain financing by using such assets as collateral, (I) Cineplex
Odeon and the Cineplex Odeon Subsidiaries have good and marketable title and,
with respect to real property located in the United States, insurable title to
the Cineplex Odeon Owned Real Properties, (II) properties are free and clear
of all mortgages, liens, leases, tenancies, security interests, options to
purchase or lease or rights of first refusal and (III) except for any matter
of public record affecting the use of such properties, such properties are
free and clear of all covenants, conditions, Encumbrances, restrictions,
rights-of-way, easements, servitudes, judgments or other imperfections of
title. The items listed in subsections (A) through (D) above are hereinafter
collectively referred to as the "Cineplex Odeon Permitted Encumbrances." With
respect to the Cineplex Odeon Leased Real Properties, to the Knowledge of
Cineplex Odeon as at the date of this Agreement, all such leases are in full
force and effect. Except for such exceptions as would not have a Cineplex
Odeon Material Adverse Effect, (i) all such leases are the result of bona-fide
arm's-length negotiations between the parties and (ii) Cineplex Odeon and the
Cineplex Odeon Subsidiaries are not in arrears in the payment of rents, common
area charges, real estate taxes or other amounts due under any such leases in
excess of 60 days. As at the date of this Agreement, except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, with
respect to each Cineplex Odeon Leased Real Property, so long as the tenant
performs all of its obligations under such lease within applicable notice and
grace periods, (i) the rights of Cineplex Odeon or any Cineplex Odeon
Subsidiary under such lease cannot be legally terminated by the landlord
thereof and (ii) Cineplex Odeon's or such Subsidiary's possession of such
Cineplex Odeon Leased Real Property and the use and enjoyment thereof cannot
be legally disturbed by any landlord. Except for such exceptions as would not
have a Cineplex Odeon Material Adverse Effect, Cineplex Odeon is not obligated
to purchase any Cineplex Odeon Leased Real Property, and no Cineplex Odeon
Leased Real Property is required to be accounted for under GAAP as a
capitalized lease. To the Knowledge of Cineplex Odeon, except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, there
are no intended public improvements that will result in any material charge
being levied against, or in the creation of any Encumbrances upon the Cineplex
Odeon Owned Real Properties or any portion thereof, and there are no options,
rights of first refusal, rights of first offer or other similar rights with
respect to the Cineplex Odeon Owned Real Properties.
(b) The leases pursuant to which Cineplex Odeon or any Cineplex
Odeon Subsidiary leases or has the right to possess the Cineplex Odeon Leased
Real Properties have not been amended or modified since March 31, 1996 except
as set forth in Section 2.15(a) of the Cineplex Odeon Disclosure Statement,
except where such amendment or modification would not have a Cineplex Odeon
Material Adverse Effect.
(c) Except for such exceptions as would not have a Cineplex
Odeon Material Adverse Effect:
(i) Cineplex Odeon or a Cineplex Odeon Subsidiary is the owner
of, and no other person, firm or corporation has any interest as owner in or
to, or any right to occupancy in, any Cineplex Odeon Owned Real Property;
(ii) Cineplex Odeon or a Cineplex Odeon Subsidiary is the tenant
or lessee with respect to, and no other person, firm or corporation has any
interest as tenant or lessee in or to, or any right to occupancy in, any
Cineplex Odeon Leased Real Property;
(iii) there are no persons, firms or corporations currently in
possession of the Cineplex Odeon Real Properties other than Cineplex Odeon and
the Cineplex Odeon Subsidiaries, nor are there any leases, subleases,
licenses, concessions or other agreements permitting anyone other than
Cineplex Odeon and the Cineplex Odeon Subsidiaries, to use, manage, occupy or
possess any Cineplex Odeon Real Property or any part thereof;
(iv) (A) neither Cineplex Odeon nor any Cineplex Xxxx Subsidiary
has received any written notes or notices of violation of law or local or
municipal ordinances or orders, or regulations, presently noted in or issued
by federal, state, local or municipal departments having jurisdiction against
or affecting any of the Cineplex Odeon Real Properties that remain uncured and
(B) to the Knowledge of Cineplex Odeon the current maintenance, operation, use
and occupancy of the Cineplex Odeon Real Properties does not violate any
building, zoning, health, environmental, fire or similar law, ordinance, order
or regulation (other than the Americans with Disabilities Act of 1990, 42
U.S.C. 12183, as amended (the "ADA")) and comparable state and municipal
legislation), or the terms and conditions of any of the applicable leases;
(v) to the Knowledge of Cineplex Odeon, the Cineplex Odeon Real
Properties do not violate the provisions of the ADA and comparable state and
municipal legislation based upon the reasonable interpretation and
understanding of Cineplex Odeon of the provisions of the ADA and such other
legislation and any reference to compliance with laws, or any other reference
to like effect, contained in this Agreement with respect to the Cineplex Odeon
Real Properties shall, solely as it relates to compliance with the ADA, be
deemed to be qualified to the Knowledge of Cineplex Odeon in addition to any
other qualifications set forth in this Agreement as may be applicable, and
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has received any
written notice of violation of the ADA and/or comparable state and municipal
legislation against or affecting the Cineplex Odeon Real Properties that
remain uncured;
(vi) (A) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary
has received written notice of its failure to obtain any necessary certificate
of occupancy (or similar permit) for use of each of the theaters located on
the Cineplex Odeon Real Properties as a motion picture theater, (B) to
Cineplex Odeon's Knowledge, either Cineplex Odeon or a Cineplex Odeon
Subsidiary possesses the certificate of occupancy and all other certificates,
approvals, permits and licenses from any Governmental Entity having
jurisdiction over such theaters that are necessary to permit the lawful use
and operation of such theaters as motion picture theaters (the "Cineplex Odeon
Permits"), and all of the same are valid and in full force and effect, and
(C) to the Knowledge of Cineplex Odeon, there exists no threatened revocation
of any certificate of occupancy or any of the Cineplex Odeon Permits;
(vii) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
received any written notice that it has failed to obtain any necessary sign
permits, illuminated sign permits, and marquee permits from the appropriate
Governmental Entity having jurisdiction over existing signs and marquees at
the Cineplex Odeon Real Properties, and, to the Knowledge of Cineplex Odeon,
such permits are valid and in full force and effect and there exists no
threatened revocation of any such permits;
(viii) Cineplex Odeon has no Knowledge of any action pending
or threatened to adversely change the zoning or building ordinances affecting
any of the Cineplex Odeon Real Properties, or of any pending or threatened
condemnation of any of the Cineplex Odeon Real Properties;
(ix) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
received any written notice from any insurance carrier of any work required to
be performed at any theater located on the Cineplex Odeon Real Properties or
the real property on which such theater is located that has not been performed
as of the date hereof or of any defects or inadequacies in a Cineplex Odeon
Theater that have not been corrected as of the date hereof and which if not
corrected could result in termination of insurance coverage or a material
increase in the cost thereof;
(x) with respect to all operating Cineplex Odeon Theaters, all
water, sewer, gas, electricity, telephone and other utilities required for the
operation of each such theater located on a Cineplex Odeon Real Property are
installed and operating and all installations and connection charges charged
to Cineplex Odeon or any Cineplex Odeon Subsidiary pursuant to applicable
invoices that are not the subject of a good faith dispute have been paid in
full and any installation and connection charges that are properly charges to
Cineplex Odeon or such Cineplex Odeon Subsidiary after the date hereof and
prior to the Closing Date shall be paid in full, except, in each case, for
payments that are current and will be paid in the ordinary course of business;
and
(xi) Cineplex Odeon has delivered to LTM a statement of theaters
currently under construction, or with respect to which construction is
pending, planned, contemplated or under study setting forth (A) a brief
description of each theater, including location, budget and related financial
projections, lease terms, if any, capacity, planned equipment and assumptions
regarding attendance, (B) a statement of costs relating to planning,
developing, constructing, equipping and supplying each such theater ("Theater
Costs"), (C) the total amount invested in such project as of Xxxxx 00, 0000,
(X) an estimate of the amount that will be invested in such project as of
February 28, 1998 and (E) an estimate of the total amount that will be
invested in such project upon its completion (a "Construction Work in Progress
Statement").
Section 2.16. Operating Assets
. Except for such exceptions as would not have a Cineplex Odeon
Material Adverse Effect, (a) Cineplex Odeon has good and marketable title or
leasehold title or a valid license to all of the personal property used, or
held for use, in connection with the theaters operated on the Cineplex Odeon
Real Properties (other than gaming and vending machines used in the ordinary
course of business), subject to no Encumbrance other than the Cineplex Odeon
Permitted Encumbrances; (b) no financing statement under the Uniform
Commercial Code or under the personal property securities laws and regulations
of any province or territory of Canada or any similar applicable statute has
been filed in any jurisdiction except as contemplated in the Cineplex Odeon
Disclosure Statement, and neither Cineplex Odeon nor any Cineplex Odeon
Subsidiary has signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing statement;
(c) each theater located on a Cineplex Odeon Real Property and each of the
items of personal property used or held for use in, or in connection with,
each such theater, including without limitation, seating, projection equipment
and screens, are in good operating condition, subject to normal wear and tear,
and are fit for the use for which they are intended and to which they are
presently devoted; (d) except for closed theaters, each theater located on a
Cineplex Odeon Real Property, together with the related items of personal
property located therein, constitutes a fully operable motion picture theater
and is sufficient to permit Cineplex Odeon to operate the business as
currently being conducted therein; and (e) except as contemplated by this
Agreement, since March 31, 1997, neither Cineplex Odeon nor any Cineplex Odeon
Subsidiary has sold, removed or transferred any equipment or property from any
theater located on a Cineplex Odeon Real Property, except in the ordinary
course of business and so long as such equipment or property has been replaced
prior to the date hereof.
Section 2.17. Contracts
. Cineplex Odeon has delivered to LTM a statement of all
contracts, agreements, leases (other than leases with respect to the Cineplex
Odeon Leased Real Property and film rental contracts in the ordinary course of
business), mortgages, notes, bonds, indentures, licenses, intellectual
property rights and other obligations, oral or written express or implied,
involving the payment (or the provision of goods and/or services having value)
in each case of more than US$500,000 per annum to which Cineplex Odeon or any
Cineplex Odeon Subsidiary is bound as of the date of this Agreement,
including, without limitation, contracts relating to employment, collective
bargaining, consultants, independent contractors, agents, advertising,
concessions, as well as contracts relating to any partnerships and joint
ventures and contracts restricting the ability to operate theaters in any
geographical area (collectively, the "Cineplex Odeon Contracts"), excluding
(a) those that are terminable without penalty by Cineplex Odeon within 30 days
upon the giving of notice and (b) those directly relating to the construction
of theaters currently under construction, or with respect to which
construction is pending, planned, contemplated or under study as set forth on
Cineplex Odeon's Construction Work in Progress Statement; such statement sets
forth with respect to each Cineplex Odeon Contract the names of the parties
thereto. True and complete copies of all of the Cineplex Odeon Contracts, or,
in the case of oral Cineplex Odeon Contracts, true and complete descriptions
thereof, have been made available to LTM. Section 2.17 of the Cineplex Odeon
Disclosure Statement summarizes the material terms of each Cineplex Odeon
Contract that provides for (a) the payment of refunds or similar arrangements
if specified conditions are not satisfied or the volume of specified services
provided during a reference period is not continued at minimum levels and/or
(b) supplemental payments if specified conditions are satisfied or the volume
of specified services provided during a reference period exceeds a specified
threshold. In addition to the foregoing, (x) prior to the date hereof,
Cineplex Odeon has provided to LTM a summary of the material terms of the
Cineplex Odeon Contracts and arrangements with Universal and Universal's
Affiliates, and the Trust and the Trust's Affiliates, and the impact of such
Cineplex Odeon Contracts and arrangements on Cineplex Odeon's Consolidated
EBITDA during the twelve-month period ended March 31, 1997, and (y) since
March 31, 1997, there has been no material change in the material terms of
such Cineplex Odeon Contracts and arrangements, including, without limitation,
with respect to the exhibition of motion pictures. For purposes of clause (y)
of the preceding sentence only, film rental contracts shall be deemed to be
included within the definition of Cineplex Odeon Contracts. Except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, (a) the
Cineplex Odeon Contracts are valid, existing and in full force and effect and
(subject to (i) the application of any applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar law, now or
hereafter in effect, affecting creditors rights generally and (ii) the
application of general principles of equity) binding against Cineplex Odeon
and, to the Knowledge of Cineplex Odeon, the other parties to such Cineplex
Odeon Contracts in accordance with their respective terms, and (b) there has
not occurred any material default or breach or event which, with the giving of
notice or lapse of time, or both, would constitute a material default or
breach under any of them. No officer or director of Cineplex Odeon, and no
shareholder of Cineplex Odeon that owns directly or indirectly 10% or more of
the outstanding equity of Cineplex Odeon, nor any Affiliate of any such
officer, director or shareholder, is a party to any such Cineplex Odeon
Contract as lessor, landlord, supplier or in any other capacity except as
noted on the Cineplex Odeon Reports.
Section 2.18. Insurance
. All of the material assets of each of Cineplex Odeon and the
Cineplex Odeon Subsidiaries that are of insurable character are covered by
insurance with reputable insurers against risks of liability, casualty and
fire and other losses and liabilities customarily obtained to cover comparable
businesses and tangible assets in amounts, scope and coverage that are
consistent with prudent industry practice. Neither Cineplex Odeon nor any
Cineplex Odeon Subsidiary is in default in any material respect with respect
to its obligations under any material insurance policy maintained by it.
Section 2.18 of the Cineplex Odeon Disclosure Statement sets forth a list of
all insurance coverage carried by Cineplex Odeon and the Cineplex Odeon
Subsidiaries, including the carrier, the terms and the amount of coverage.
All such policies and other instruments are in full force and effect and all
premiums due and payable with respect thereto have been paid. Except to the
extent that the failure to do so would not have a Cineplex Odeon Material
Adverse Effect, neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
failed to give any notice or present any claim under any such insurance policy
in due and timely fashion or as required by any of such insurance policies or
has not otherwise, through any act, omission or non-disclosure, jeopardized or
impaired full recovery of any claim under such policies, and, except as
aforesaid, there are no material claims by Cineplex Odeon or any Cineplex
Odeon Subsidiary under any of such policies to which any insurance company is
denying liability or defending under a reservation of rights or similar
clause. Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has received
notice of any pending or threatened termination of any of such policies or any
material premium increases for the current policy period with respect to any
of such policies.
Section 2.19. Interested Party Transactions
. Except as set forth in the Cineplex Odeon Reports and as
contemplated by the Transactions, since the date of Cineplex Odeon's Proxy
Statement dated May 26, 1997 no event has occurred that would be required to
be reported pursuant to Item 404 of Regulation S-K promulgated by the SEC or
that would constitute related party transactions subject to the requirements
of Sections 18 and 20 of Ontario Securities Commission Policy 9.1 promulgated
as a rule pursuant to the Securities Act (Ontario).
Section 2.20. Expenses
. Cineplex Odeon has provided to LTM a good faith estimate and
description of the expenses that Cineplex Odeon expects to incur, or has
incurred, in connection with the Transactions, and Cineplex Odeon will
promptly notify LTM if it believes that Cineplex Odeon will incur expenses
materially in excess of such amount in connection with the Transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LTM
Except as set forth in the disclosure statement delivered at or
prior to the execution hereof to Cineplex Odeon (the "LTM Disclosure
Statement"), LTM represents and warrants to Cineplex Odeon as follows:
Section 3.1. Existence; Good Standing; Corporate Authority;
Compliance with Law
. LTM is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation. LTM is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a LTM Material Adverse Effect.
LTM has all requisite corporate power and authority to own, operate and lease
its properties and carry on its business as now conducted. Each of LTM's
Significant Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or partnership power and
authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its property or the conduct of
its business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing would not have a LTM
Material Adverse Effect. Neither LTM nor any of the LTM Subsidiaries is in
violation of any order of any court, Governmental Entity or arbitration board
or tribunal, or any law, ordinance, governmental rule or regulation to which
LTM or any LTM Subsidiary or any of their respective properties or assets is
subject, where such violation would have a LTM Material Adverse Effect. LTM
and the LTM Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
would not have a LTM Material Adverse Effect. The copies of LTM's Certificate
and Bylaws attached as exhibits to the LTM Disclosure Statement are complete,
true and correct.
Section 3.2. Authorization, Validity and Effect of Agreements
. LTM has the requisite corporate power and authority to execute
and deliver each of the Documents to which it is a party and all agreements
and documents contemplated thereby to which it is a party, and the
consummation by LTM of the Transactions to which it is a party has been duly
authorized by all requisite corporate action on the part of LTM, including,
without limitation, all requisite approvals of the Board of Directors of LTM
and any special or other committee thereof. LTM has previously delivered to
Cineplex Odeon copies of resolutions adopted by unanimous vote of the Board of
Directors of LTM authorizing LTM to execute and deliver the Documents to which
it is a party and to consummate the Transactions, and, since the adoption
thereof, such resolutions have not been amended, modified or withdrawn in any
manner through the date of this Agreement. The Documents to which it is a
party constitute (or in the case of the LTM Charter will at the Closing
constitute), and all agreements and documents contemplated thereby to which it
is a party (when executed and delivered pursuant hereto for value received)
will constitute, the valid and legally binding obligations of LTM, enforceable
against LTM in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
Section 3.3. Capitalization
. (a) As of the date hereof, the authorized capital stock of LTM
consists of 1,000 shares of Common Stock, US$.01 par value per share, of which
972 shares are issued and outstanding. All of such issued and outstanding
shares of LTM Common Stock are duly authorized, validly issued, fully paid,
nonassessible and free of preemptive rights.
(b) As of the Closing, the authorized capital stock of LTM will
consist of 3,000,000,000 shares of LTM Common Stock, 100,000,000 shares of LTM
Non-Voting Common Stock and 100,000,000 shares of LTM Preferred Stock. As of
the Closing (including issuances made in connection with the Arrangement and
the transactions contemplated by this Agreement (but before giving effect to
any Equity Offering and assuming no Cineplex Odeon shareholders exercise
dissenters rights)), there will be 441,248,294 shares of LTM Common Stock
issued and outstanding, 11,188,212 shares of LTM Non-Voting Common Stock
issued and outstanding and no shares of LTM Preferred Stock issued and
outstanding, subject to the redemption of Cineplex Odeon capital stock as a
consequence of the exercise of dissenting shareholders' rights. As of the
Closing, all issued and outstanding shares of LTM Common Stock (including the
shares of LTM Common Stock to be issued pursuant to the Arrangement and the
other Transactions) will be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights or any Encumbrances created by SPE
or LTM or any of their respective Affiliates.
(c) LTM does not have and, as of the Closing, LTM will not have
any outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or that are convertible into or exercisable for
securities having the right to vote) with the stockholders of LTM on any
matter. There are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments that obligate LTM or any LTM Subsidiary to issue,
transfer or sell any shares of capital stock of LTM or any LTM Subsidiary.
Section 3.4. Subsidiaries
. LTM owns directly or indirectly all of the outstanding shares
of capital stock of each of LTM's Subsidiaries (other than the Transferred SPE
Subsidiaries). Each of the outstanding shares of capital stock of each of the
LTM Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and (except for the capital stock of the Transferred SPE
Subsidiaries) is owned, directly or indirectly, by LTM free and clear of all
Encumbrances other than Encumbrances imposed by local law the enforcement of
which would not have a LTM Material Adverse Effect. The following information
for each LTM Subsidiary is set forth on Section 3.4 of the LTM Disclosure
Statement, if applicable: (a) its name and jurisdiction of incorporation,
formation or organization; (b) its authorized capital stock or share capital;
and (c) the number of issued and outstanding shares (and options, warrants or
other rights for purchase of shares) of capital stock or share capital (and,
with respect to partnerships, joint ventures, limited liability companies and
similar alternative business entities, analogous information). LTM has
previously provided to Cineplex Odeon true and complete copies of the charter
documents and bylaws for each of LTM's Significant Subsidiaries. Other than
as contemplated by the Documents, there are no options, warrants, calls or
other rights, agreements or commitments currently outstanding obligating any
Subsidiary of LTM to issue, deliver or sell any shares or debt securities, or
obligating any Subsidiary of LTM to grant, extend or enter into any option,
warrant, call or other such right, agreement or commitment to issue, deliver
or sell any equity or debt securities. There are no bonds, debentures, notes
or other indebtedness issued and outstanding having the right to vote (or that
are convertible into or exercisable for securities having the right to vote)
on any matters on which the shareholders of any Subsidiary of LTM may vote.
Section 3.5. Other Interests
. Except for interests in the LTM Subsidiaries, neither LTM nor
any LTM Subsidiary owns, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity.
Section 3.6. No Violation
. Neither the execution and delivery by LTM of the Documents to
which it is a party, nor the consummation by LTM of the Transactions
contemplated thereby to which it is a party in accordance with the terms
thereof, will: (i) conflict with or result in a breach of any provisions of
the Certificate of Incorporation or Bylaws of LTM; (ii) either (a) result in a
breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or (b) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any Encumbrance upon any of the material properties of LTM or the
LTM Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation to which LTM or any of the LTM Subsidiaries is a party, or by
which LTM or any of the LTM Subsidiaries or any of their properties is bound
or affected (except to the extent any of the effects described in this clause
(ii) would not (x) have a LTM Material Adverse Effect, (y) impair the ability
of LTM to perform its obligations under the Documents in any material respect
or (z) delay in any material respect or prevent the consummation of the
Transactions); or (iii) other than the Regulatory Filings listed in the LTM
Disclosure Statement, require, to the extent applicable to LTM, any material
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make that would (x) have a LTM Material Adverse Effect, (y) impair the
ability of LTM to perform its obligations under the Documents in any material
respect or (z) delay in any material respect or prevent the consummation of
the Transactions.
Section 3.7. Financial Statements
. (a) LTM has previously furnished Cineplex Odeon with the
combined statements of income, shareholders' equity and cash flows of LTM and
its consolidated Subsidiaries and the Transferred SPE Subsidiaries for the
twelve months ended February 28, 1995, February 29, 1996, February 28, 1997
and March 31, 1997 and the combined balance sheet of LTM and its consolidated
Subsidiaries and the Transferred SPE Subsidiaries as of such dates (all such
financial statements being collectively referred to herein as the "LTM
Financial Statements"). The LTM Financial Statements (including the audited
financial statements required to be delivered pursuant to Section 6.9(a))
(i) are in accordance with the books and records of LTM, (ii) have been
prepared in accordance with GAAP consistently applied (except that such
unaudited financial statements do not contain all of the footnotes and do not
reflect provisions for income taxes on a stand-alone basis as required under
GAAP) and (iii) fairly present in all material respects the combined financial
position of LTM and its consolidated Subsidiaries and the Transferred SPE
Subsidiaries as of February 28, 1995, February 29, 1996, February 28, 1997 and
March 31, 1997 and the combined results of their operations and cash flows for
the twelve months ended February 28, 1995, February 28, 1996, February 28,
1997 and March 31, 1997 (subject, in the case of such unaudited financial
statements, to normal year-end audit adjustments). Except as and to the
extent set forth on the combined balance sheet of LTM and the LTM Subsidiaries
at March 31, 1997, including all notes thereto, or as set forth in the LTM
Disclosure Statement, neither LTM nor any of the LTM Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as contemplated by or resulting from this
Agreement or the Transactions, or (ii) that would not have a LTM Material
Adverse Effect.
(b) Attached as Section 3.7(b) of the LTM Disclosure Statement
are true and accurate copies of (1) a Cash Flow Statement for each motion
picture theater owned or operated by LTM or any LTM Subsidiary (the "LTM
Theaters"), in the aggregate and on a theater-by-theater basis for the twelve
months ended Xxxxx 00, 0000, (0) XXXXXX Xxxxxxxxxx of LTM, in each case for
the twelve months ended March 31, 1997, and (3) a statement showing LTM's
Qualified Tangible Net Worth as of March 31, 1997. LTM represents and
warrants that the Consolidated EBITDA and Adjusted EBITDA of LTM for such
twelve-month period and that its Qualified Tangible Net Worth as of March 31,
1997 were as set forth on Section 3.7(b) of the LTM Disclosure Statement. LTM
has delivered to Cineplex Odeon true and accurate copies of the following
statements used in the determination of Adjusted EBITDA and Qualified Tangible
Net Worth:
(i) a statement listing each theater that has been disposed of
during the twelve-month period ended March 31, 1997, such theater's date of
disposition and the related Cash Flow of such theater from April 1, 1996
through the earlier of (A) one month after its date of disposition and
(B) March 31, 1997;
(ii) a statement listing each theater that has been or is
projected, as of the date of this Agreement, to be closed or disposed of
subsequent to March 31, 1997 but prior to the Closing Date (the "LTM Negative
Theaters"), the actual or, to the extent known, projected closing or
disposition date, as the case may be, and, to the extent known, any material
terms applicable to such disposition, and setting forth the related Cash Flow
of such theater for the twelve months ended March 31, 1997;
(iii) a statement listing each theater opened after April 1, 1996
and before March 31, 1997 and the Cash Flow generated by such theater during
the period from its opening through March 31, 1997 and the projected Cash Flow
for such theater for its first full year of operation;
(iv) a statement listing each capital lease or other agreement
pursuant to which LTM or any LTM Subsidiary had outstanding a Capital Lease
Obligation at March 31, 1997 and, with respect to each such lease or
agreement, (A) the amount of payments thereunder during the twelve months
ended Xxxxx 00, 0000, (X) the amount of payments thereunder during the twelve
months ended March 31, 1997 that relates to real property, (C) the amount of
the obligation in respect thereof as reflected on the balance sheet of LTM at
March 31, 1997 and (D) whether such lease or other agreement relates to real
property or equipment;
(v) a statement listing each component of Debt, including
maturity date, interest rate, payment terms, assets pledged as security (if
any), leasehold mortgages secured by leases (if any) and outstanding balance
as of March 31, 1997;
(vi) a statement listing and fairly presenting in all material
respects each component of Net Working Capital as of March 31, 1997;
(vii) a Construction Work in Progress Statement; and
(viii) the Cash Flow for the twelve months ended March 31,
1997 of the theaters listed on Section 3.7(b)(viii) of the LTM Disclosure
Statement (the "Indianapolis Theaters").
Each of the foregoing statements as described herein is complete and fairly
presents such data for the periods or dates indicated and contains all
customary year-end adjustments.
Section 3.8. Litigation
. There are no actions, suits, proceedings or investigations
pending against LTM or the LTM Subsidiaries or, to the Knowledge of LTM,
threatened against LTM or the LTM Subsidiaries, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, that would have a LTM Material Adverse Effect.
Section 3.9. Absence of Certain Changes
. Except as otherwise contemplated by this Agreement or resulting
from the Transactions, since March 31, 1997, (a) LTM and the LTM Subsidiaries
have conducted their respective businesses, only in the ordinary course of
such business, (b) except for (i) facts and circumstances affecting the
economy as a whole, (ii) facts and circumstances affecting the motion picture
industry generally, or (iii) adverse changes in Cash Flow per screen from
sales of tickets and concession items, there has not been a LTM Material
Adverse Effect, and (c) there has not been (x) any declaration, setting aside
or payment of any dividend or other distribution with respect to its capital
stock or (y) any material change in its accounting principles, practices or
methods. Neither LTM nor any LTM Subsidiary has deferred any material
expenses or accelerated any material income, other than in the ordinary
course of business in accordance with GAAP consistently applied, in
contemplation of the Transactions.
Section 3.10. Taxes
. Except where the failure to do so would not have a LTM Material
Adverse Effect, LTM and each of the LTM Subsidiaries (i) has timely filed all
United States federal, state and material foreign tax returns required to be
filed by any of them for tax years ended prior to the date of this Agreement
or requests for extensions have been timely filed and any such request shall
have been granted and not expired and all such returns are correct and
complete in all respects, (ii) has paid or accrued in the LTM Financial
Statements all Taxes payable for all periods covered by such returns,
(iii) has properly accrued in the LTM Financial Statements all Taxes for
periods subsequent to the periods covered by such returns, and (iv) has "open"
years for United States federal income tax returns only as set forth in the
LTM Disclosure Statement. Correct and complete copies of all tax returns,
including schedules thereto, filed by LTM and the LTM Subsidiaries or the
portions of tax returns relating solely to LTM or any LTM Subsidiary in the
case of tax returns filed on behalf of LTM or any LTM Subsidiary by any
affiliated, combined or unitary group which included any corporation other
than LTM or any LTM Subsidiary, in respect of the last three completed fiscal
years with all regulatory authorities, all assessments or reassessments in
respect of such years, all waivers in respect of such years or any other
periods and all written communications and other documents relating thereto
have been made available to Cineplex Odeon prior to the date of this
Agreement. Except where the failure to do so would not have a LTM Material
Adverse Effect, LTM and the LTM Subsidiaries have withheld, collected and
remitted all amounts required to be withheld, collected or remitted by them in
respect of any Taxes, including any such Taxes in respect of payments made to
any past or present employees, officers or directors, and to any persons not
resident in the United States, to the proper tax or other receiving officers
within the time prescribed under any applicable legislation.
Section 3.11. Employee Benefit Plans
. (a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"LTM Benefit Plan" means each Benefit Plan (other than a LTM
Employee Agreement) which is currently in effect and which is or previously
has been sponsored, maintained, contributed to, or required to be contributed
to, or with respect to which any withdrawal liability (within the meaning of
Section 4201 of ERISA) has been incurred, by LTM or any LTM Subsidiary for the
benefit of any LTM Employee, and pursuant to which LTM or any LTM Subsidiary
has or may have any liability, contingent or otherwise.
"LTM Employee" means each current, former, or retired employee,
officer, consultant, independent contractor, agent or director of LTM or any
LTM Subsidiary (other than the LTM Excluded Employees).
"LTM Employee Agreement" means each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
contract, whether written or oral, between LTM or any LTM Subsidiary and any
LTM Employee pursuant to which LTM or any LTM Subsidiary has or may have any
liability contingent or otherwise, in excess of US$100,000 in each instance.
"LTM Excluded Employee" means each current, former or retired
employee, officer, consultant, independent contractor, agent or director of
Sony Corporation of America, Sony Plaza Inc. and LTMA, Inc. whose payroll is
or has been processed through LTM.
"LTM Multi-Employer Plan" means each LTM Benefit Plan which is
"multi-employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"LTM Welfare Plan" means each LTM Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
(b) Schedule. Section 3.11(b) of the LTM Disclosure Statement
contains a true and complete list of each LTM Benefit Plan and each LTM
Employee Agreement. Neither LTM nor any LTM Subsidiary has any plan or
commitment, whether legally binding or not, to establish any new LTM Benefit
Plan, to enter into any LTM Employee Agreement or to modify or to terminate
any LTM Benefit Plan or LTM Employee Agreement (except to the extent required
by law or to conform any such LTM Benefit Plan or LTM Employee Agreement to
the requirements of any applicable law, in each case as previously disclosed
to Cineplex Odeon, or as required by this Agreement), nor has any intention to
do any of the foregoing been communicated to LTM Employees. Section 3.11(b)
of the LTM Disclosure Statement identifies each LTM Employee who received
total compensation in excess of US$100,000 in connection with such employment
in 1996 or is expected to receive at least such amount in 1997 as employment
compensation.
(c) Documents. LTM has made available to Cineplex Odeon
(i) current, accurate and complete copies of all material documents embodying
or relating to each LTM Benefit Plan and each LTM Employee Agreement,
including all amendments thereto, and trust or funding agreements with respect
thereto; (ii) the two (2) most recent annual actuarial valuations, if any,
prepared for each LTM Benefit Plan; (iii) the two (2) most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA
in connection with each LTM Benefit Plan or related trust; (iv) a statement of
alternative form of compliance pursuant to Department Regulation 2520.104-23,
if any, filed for each LTM Benefit Plan that is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA for a select group of management or
highly compensated employees; (v) the most recent determination letter
received from the IRS, if any, for each LTM Benefit Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the Code;
(vi) if the LTM Benefit Plan is funded, the most recent annual and periodic
accounting of LTM Benefit Plan assets; and (vii) the most recent summary plan
description together with the most recent summary of material modifications,
if any, required by ERISA with respect to each LTM Benefit Plan.
(d) Compliance. With respect to each LTM Benefit Plan, except
as would not have a LTM Material Adverse Effect (i) LTM and each LTM
Subsidiary have performed all obligations required to be performed by them
under each LTM Benefit Plan and LTM Employee Agreement and neither LTM nor any
LTM Subsidiary is in default under or in violation of, any LTM Benefit Plan,
(ii) each LTM Benefit Plan has been established and maintained in accordance
with its terms and in compliance with all applicable laws, orders, rules and
regulations, including but not limited to ERISA and the Code including without
limiting the foregoing, the timely filing of all required reports, documents
and notices, where applicable, with the IRS and the Department; (iii) each LTM
Benefit Plan intended to qualify under Section 401 of the Code is, and since
its inception has been, so qualified and a determination letter has been
issued by the IRS to the effect that each such LTM Benefit Plan is so
qualified and that each trust forming a part of any such LTM Benefit Plan is
exempt from tax pursuant to Section 501(a) of the Code and no circumstances
exist which would adversely affect this qualification or exemption; (iv) no
non-exempt "prohibited transaction," within the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred with respect to any LTM Benefit
Plan; (v) no action or failure to act and no transaction or holding of any
asset by, or with respect to, any LTM Benefit Plan has or may subject LTM or
any LTM Subsidiary or any fiduciary to any tax, penalty or other liability,
whether by way of indemnity or otherwise; (vi) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the Knowledge of LTM
or any LTM Subsidiary, threatened or anticipated (other than routine claims
for benefits) against LTM or any LTM Subsidiary or any administrator, trustee
or other fiduciary of any LTM Benefit Plan with respect to any LTM Benefit
Plan or LTM Employee Agreement, or against any LTM Benefit Plan or against the
assets of any LTM Benefit Plan; (vii) no event or transaction has occurred
with respect to any LTM Benefit Plan that would result in the imposition of
any tax under Chapter 43 of Subtitle D of the Code; (viii) each LTM Benefit
Plan can be amended, terminated or otherwise discontinued without liability to
Cineplex Odeon or any LTM Subsidiary; (ix) LTM and each LTM Subsidiary have
made all payments due and owing with respect to all periods through the date
hereof; and (x) no LTM Benefit Plan is under audit or investigation by the
IRS, the Department or the PBGC, no such audit or investigation is pending and
to the Knowledge of LTM and each LTM Subsidiary, no such audit or
investigation is threatened.
(e) Pension Plans. Except as would not have a LTM Material
Adverse Effect neither LTM nor any LTM Subsidiary presently sponsors,
maintains, contributes to, nor is LTM, any LTM Subsidiary required to
contribute to, nor has LTM or any LTM Subsidiary ever sponsored, maintained,
contributed to, or been required to contribute to, an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA that is subject to
Title IV of ERISA.
(f) LTM Multi-Employer Plans. Except as would not have a LTM
Material Adverse Effect, as of the Closing Date, LTM and each LTM Subsidiary
will not have completely or partially withdrawn from any LTM Multi-Employer
Plan and will not be subject to any withdrawal liability as described in
Section 4201 of ERISA for withdrawals that have occurred on or prior to the
Closing Date (including, without limitation, any withdrawal deemed to have
occurred as a result of the Transactions). To the Knowledge of LTM or any LTM
Subsidiary and with such exceptions as would not have a LTM Material Adverse
Effect, (i) no LTM Multi-Employer Plan fails to qualify under Section 401(a)
of the Code, is insolvent or is in reorganization within the meaning of Part 3
of Subtitle E of Title IV of ERISA; and (ii) no condition exists which
presents a risk of any LTM Multi-Employer Plan becoming insolvent or going
into reorganization. Except as would not have a LTM Material Adverse Effect,
no event has occurred that could result in a "partial withdrawal" under
Section 4205 of ERISA with respect to any LTM Multi-Employer Plan and neither
LTM nor any LTM Subsidiary has any contingent liability under Section 4204 of
ERISA.
(g) No Post-Employment Obligations. Except as would not have a
LTM Material Adverse Effect, neither LTM nor any LTM Subsidiary (i) maintains
or contributes to any LTM Benefit Plan which provides, or has any liability to
provide, life insurance, medical, severance or other LTM Employee welfare
benefits to any LTM Employee upon his retirement or termination of employment,
except as may be required by Section 4980B of the Code or Applicable Law; or
(ii) has ever represented, promised or contracted (whether in oral or written
form) to any LTM Employee (either individually or to LTM Employees as a group)
that such LTM Employee(s) would be provided with life insurance, medical,
severance or other LTM Employee welfare benefits upon their retirement or
termination of employment, except to the extent required by Section 4980B of
the Code or Applicable Law.
(h) Effect of Transactions. Section 3.11(h) of the LTM
Disclosure Statement contains a true and complete list of every LTM Benefit
Plan and every LTM Employee Agreement with respect to which payments or
benefits under such plan or agreement would increase or accelerate by reason
of the Transactions. Except as would not have a LTM Material Adverse Effect,
(i) the execution of this Agreement and the performance by LTM of its
obligations hereunder will not (either alone or upon the occurrence of any
additional or subsequent events) (x) constitute an event under any LTM Benefit
Plan, LTM Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any LTM Employee, or (y) result in the
triggering or imposition of any restrictions or limitations on the right of
LTM or any LTM Subsidiary to amend or terminate any LTM Benefit Plan and
receive the full amount of any excess assets remaining or resulting from such
amendment or termination, subject to Applicable Law and applicable taxes; and
(ii) no payment or benefit which will or may be made by LTM, any LTM
Subsidiary, or any of their respective affiliates, with respect to any LTM
Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. Except as would not have a LTM Material
Adverse Effect, LTM and each LTM Subsidiary (i) is in compliance with all
applicable United States federal, state and local laws, rules and regulations
and foreign national, state and local laws, rules and regulations respecting
employment, employment practices, labor, terms and conditions of employment
and wages and hours, in each case, with respect to LTM Employees; (ii) has
withheld and remitted all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to LTM Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable (other
than for amounts accrued but not yet payable) for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits for LTM
Employees.
(j) Labor. Except as would not have a LTM Material Adverse
Effect or as otherwise disclosed in the LTM Disclosure Statement, no work
stoppage or labor strike against LTM or any LTM Subsidiary by LTM Employees is
pending, or to the Knowledge of LTM, threatened. Except as disclosed in the
LTM Disclosure Statement or as would not otherwise have a LTM Material Adverse
Effect, neither LTM nor any LTM Subsidiary (i) is involved in or, to the
Knowledge of LTM, threatened with any labor dispute, grievance, or litigation
relating to labor matters involving any LTM Employees, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints; (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act or any other similar applicable legislation; or (iii) is presently, or has
been in the past a party to, or bound by, any collective bargaining agreement
or union contract with respect to LTM Employees and no such agreement or
contract is currently being negotiated by LTM or any LTM Subsidiary. Except
as disclosed on the LTM Disclosure Statement, no LTM Employees are currently
represented by any labor union for purposes of collective bargaining and no
activities the purpose of which is to achieve such representation of all or
some of such LTM Employees are ongoing or, to the Knowledge of LTM,
threatened.
(k) 501(c)(9) Trust. Except as would not have a LTM Material
Adverse Effect, no LTM Benefit Plan or LTM Employee Agreement is funded by a
trust described in Section 501(c)(9) of the Code.
(l) Welfare Plan Funding. Except as would not have a LTM
Material Adverse Effect, with respect to each LTM Welfare Plan, all material
claims incurred (including claims incurred but not reported) by LTM Employees
thereunder for which LTM is, or will become, liable are (i) insured pursuant
to a contract of insurance whereby the insurance company bears any risk of
loss with respect to such claims; (ii) covered under a contract with an HMO
pursuant to which the HMO bears the liability for such claims; or
(iii) reflected as a liability or accrued for on the LTM Financial Statements
to the extent required by GAAP.
Section 3.12. No Brokers
. Neither LTM nor any LTM Subsidiary has entered into any
contract, arrangement or understanding with any person or firm that may result
in the obligation of LTM, any LTM Subsidiary or Cineplex Odeon to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, any of the other
Documents or the consummation of the transactions contemplated hereby or
thereby. LTM is not aware of any claim against LTM for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, any of the other
Documents or the consummation of the Transactions.
Section 3.13. Cineplex Odeon Stock Ownership
. Neither SPE or LTM, nor any of their respective Subsidiaries or
Affiliates, owns any Cineplex Odeon Common Shares or other securities
convertible into Cineplex Odeon Common Shares.
Section 3.14. Environmental Matters
. (a) Except as set forth in Section 3.14 of the LTM Disclosure
Statement or as would not have a LTM Material Adverse Effect:
(i) each of LTM and the LTM Subsidiaries has been and is in
compliance in all respects with all applicable Environmental Laws;
(ii) each of LTM and the LTM Subsidiaries has obtained, and is in
compliance with, all Environmental Permits, including, without limitation,
those regulating emissions, discharges, or releases of Hazardous Substances;
(iii) to the Knowledge of LTM, the LTM Real Properties are free of
any Hazardous Substances (except those present, maintained, used, stored,
discharged or released in compliance in all respects with Environmental Laws)
and free of all contamination, including, but not limited to groundwater
contamination, arising from, relating to, or resulting from any Hazardous
Substances, that exceeds any applicable clean-up levels or any level at which
any report or other action by LTM or any LTM Subsidiary is required under any
applicable Environmental Laws;
(iv) there are no claims, notices, civil, criminal or
administrative actions, suits, orders or proceedings pending or, to the
Knowledge of LTM, threatened against LTM or any LTM Subsidiary that are based
on or related to any Environmental Matters or the failure to have any required
Environmental Permits, and, to the Knowledge of LTM, there are no
investigations pending or threatened against LTM or any LTM Subsidiary that
are based on or related to any Environmental Matters or the failure to have
any Environmental Permits;
(v) to the Knowledge of LTM, there are no past or present
conditions, events or circumstances, (a) that may reasonably be expected to
interfere with or prevent continued material compliance by any of LTM or the
LTM Subsidiaries with Environmental Laws and the requirements of Environmental
Permits, (b) that may reasonably be expected to give rise to any liability or
other obligation under any Environmental Laws that may require any of LTM or
the LTM Subsidiaries to incur any Environmental Costs, or (c) that may
reasonably be expected to form the basis of any claim, action, suit, order,
proceeding, hearing, investigation or inquiry against or involving any of LTM
or the LTM Subsidiaries based on or related to any Environmental Matter or
which could reasonably be expected to require any of LTM and the LTM
Subsidiaries to incur any Environmental Costs; and
(vi) except to the extent such request or requirement has been
fully complied with, since January 1, 1990, neither LTM nor any LTM Subsidiary
has been requested or required by any Governmental Entity to perform any
investigatory or remedial activity or other action in connection with any
Environmental Matter.
(b) LTM has made available to Cineplex Odeon each environmental
audit, assessment, study, report or other information relating in any material
respect to LTM or any LTM Subsidiary in the possession or under the control of
LTM or any LTM Subsidiary.
Section 3.15. Real Property; Leases
. (a) Section 3.15(a) of the LTM Disclosure Statement lists all real property
leased by LTM and all LTM Subsidiaries (the "LTM Leased Real Properties") and
all real property owned by LTM and all LTM Subsidiaries (the "LTM Owned Real
Properties," and together with the LTM Leased Real Properties, the "LTM Real
Properties"). For each LTM Leased Real Property, Section 3.15(a) of the LTM
Disclosure Statement sets forth the following information as at the date of
this Agreement: (i) the address of the property; (ii) the name of the
landlord, manager or payee, as appropriate; (iii) the name of the tenant;
(iv) the date of the lease and all amendments thereto; (v) the current
expiration date of such lease; (vi) any options to extend the term of such
lease; (vii) if a theater site, the number of screens at such theater;
(viii) whether the theaters on such site are operating or non-operating;
(ix) whether the landlord's consent is required as a result of the
Transactions; (x) any landlord right to terminate the lease (other than
arising from a default, casualty, or condemnation); (xi) with respect solely
to those theaters located in markets where Cineplex Odeon has theaters, any
tenant radius restrictions set forth in such lease; (xii) whether the landlord
has sent to the tenant under such lease a notice of default or a notice of
termination of such lease which remains uncured; (xiii) whether the tenant
under such lease is obligated to purchase such property; (xiv) whether such
lease is required to be accounted for under GAAP as a capitalized lease;
(xv) whether there are any leasehold mortgages secured by such lease and
whether the consent of the mortgagee is required in connection with the
Transactions; and (xvi) whether the rent, common area charges, taxes or other
payments due under such lease are in arrears in excess of 60 days. For each
LTM Owned Real Property, Section 3.15(a) of the LTM Disclosure Statement lists
as at the date of this Agreement: (i) the address for each such property and
(ii) whether the consent of any mortgage or lien holder of such property is
required as a result of the Transactions. Except for such exceptions as would
not have a LTM Material Adverse Effect and except for (A) the items set forth
in Section 3.15(a) of the LTM Disclosure Statement; (B) zoning and planning
restrictions, easements, permits and other restrictions or limitations of
public record affecting the use of such properties; provided that,
individually and in the aggregate, such restrictions, easements and permits do
not materially impair the use of such properties as motion picture theaters or
for such other purposes as such properties are currently being used;
(C) mechanic's liens or other similar Encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable; and
(D) other Encumbrances that individually and in the aggregate do not
materially impair the ability of the owner to obtain financing by using such
assets as collateral, (I) LTM and the LTM Subsidiaries have good and
marketable and insurable title to the LTM Owned Real Properties, (II) such
properties are free and clear of all mortgages, liens, leases, tenancies,
security interests, options to purchase or lease and rights of first refusal
and (III) except for any matter of public record affecting the use of such
properties, such properties are free and clear of all covenants, conditions,
Encumbrances, restrictions, rights-of-way, easements, servitudes, judgments or
other imperfections of title. The items listed in subsections (A) through
(D) above are hereinafter collectively referred to as the "LTM Permitted
Encumbrances." With respect to the LTM Leased Real Properties, to the
Knowledge of LTM all such leases are in full force and effect. Except for
such exceptions as would not have a LTM Material Adverse Effect, (i) all such
leases are the result of bona-fide arm's-length negotiations between the
parties and (ii) LTM and the LTM Subsidiaries are not in arrears in the
payment of rents, common area charges, real estate taxes or other amounts due
under any such leases in excess of 60 days. As at the date of this Agreement,
except for such exceptions as would not have a LTM Material Adverse Effect,
with respect to each LTM Leased Real Property, so long as the tenant performs
all of its obligations under such lease within applicable notice and grace
periods, (i) the rights of LTM or any LTM Subsidiary under such lease cannot
be legally terminated by the landlord thereof and (ii) LTM's or such
Subsidiary's possession of such LTM Leased Real Property and the use and
enjoyment thereof cannot be legally disturbed by any landlord. Except for
such exceptions as would not have a LTM Material Adverse Effect, LTM is not
obligated to purchase any LTM Leased Real Property, and no LTM Leased Real
Property is required to be accounted for under GAAP as a capitalized lease.
To the Knowledge of LTM, except for such exceptions as would not have a LTM
Material Adverse Effect, there are no intended public improvements that will
result in any material charge being levied against, or in the creation of any
Encumbrances upon the LTM Owned Real Properties or any portion thereof, and
there are no options, rights of first refusal, rights of first offer or other
similar rights with respect to the LTM Owned Real Properties.
(b) The leases pursuant to which LTM or any LTM Subsidiary
leases or has the right to possess the LTM Leased Real Properties have not
been amended or modified since March 31, 1996, except as set forth in Section
3.15(a) of the LTM Disclosure Statement, except where such amendment or
modification would not have a LTM Material Adverse Effect.
(c) Except for such exceptions as would not have a LTM Material
Adverse Effect:
(i) LTM or a LTM Subsidiary is the owner of, and no other
person, firm or corporation has any interest as owner in or to, or any right
to occupancy in, any LTM Owned Real Property;
(ii) LTM or any LTM Subsidiary is the tenant or lessee with
respect to, and no other person, firm or corporation has any interest as
tenant or lessee in or to, or any right to occupancy in, any LTM Leased Real
Property;
(iii) there are no persons, firms or corporations currently in
possession of the LTM Real Properties other than LTM and the LTM Subsidiaries,
nor are there any leases, subleases, licenses, concessions or other agreements
permitting anyone other than LTM and the LTM Subsidiaries, to use, manage,
occupy or possess any LTM Real Property or any part thereof;
(iv) (A) neither LTM nor any LTM Subsidiary has received any
written notes or notices of violation of law or local or municipal ordinances
or orders, or regulations, presently noted in or issued by federal, state,
local or municipal departments having jurisdiction against or affecting any of
the LTM Real Properties that remain uncured and (B) to the Knowledge of LTM,
the current maintenance, operation, use and occupancy of the LTM Real
Properties does not violate any building, zoning, health, environmental, fire
or similar law, ordinance, order or regulation (other than the ADA and
comparable state and municipal legislation) or the terms and conditions of any
of the applicable leases;
(v) to the Knowledge of LTM, the LTM Real Properties do not
violate the provisions of the ADA and comparable state and municipal
legislation based upon the reasonable interpretation and understanding of LTM
of the provisions of the ADA and such other legislation and any reference to
compliance with laws, or any reference to like effect, contained in this
Agreement with respect to the LTM Real Properties shall, solely as it relates
to compliance with the ADA, be deemed to be qualified to the Knowledge of LTM
in addition to any other qualifications set forth in this Agreement as may be
applicable, and neither LTM nor any LTM Subsidiary has received any written
notice of violation of the ADA and/or any comparable state and municipal
legislation against or affecting the LTM Real Properties that remain uncured;
(vi) (A) neither LTM nor any LTM Subsidiary has received written
notice of its failure to obtain any necessary certificate of occupancy (or
similar permit) for use of each of the theaters located on the LTM Real
Properties as a motion picture theater, (B) to LTM's Knowledge, either LTM or
a LTM Subsidiary possesses the certificate of occupancy and all other
certificates, approvals, permits and licenses from any Governmental Entity
having jurisdiction over such theaters that are necessary to permit the lawful
use and operation of such theaters as motion picture theaters (the "LTM
Permits"), and all of the same are valid and in full force and effect and
(C) to the Knowledge of LTM, there exists no threatened revocation of any
certificate of occupancy or any of the LTM Permits;
(vii) neither LTM nor any LTM Subsidiary has received any written
notice that it has failed to obtain any necessary sign permits, illuminated
sign permits, and marquee permits from the appropriate Governmental Entity
having jurisdiction over existing signs and marquees at the LTM Real
Properties, and to the Knowledge of LTM, such permits are valid and in full
force and effect and there exists no threatened revocation of any such
permits.
(viii) LTM has no Knowledge of any action pending or
threatened to adversely change the zoning or building ordinances affecting any
of the LTM Real Properties, or of any pending or threatened condemnation of
any of the LTM Real Properties;
(ix) neither LTM nor any LTM Subsidiary has received any written
notice from any insurance carrier of any work required to be performed at any
theater located on the LTM Real Properties or the real property on which such
theater is located that has not been performed as of the date hereof or of any
defects or inadequacies in a LTM Theatre that have not been corrected as of
the date hereof and which if not corrected could result in termination of
insurance coverage or a material increase in the cost thereof;
(x) with respect to all operating LTM Theatres, all water,
sewer, gas, electricity, telephone and other utilities required for the
operation of each such theater located on a LTM Real Property are installed
and operating and all installations and connection charges charged to LTM or
any LTM Subsidiary pursuant to applicable invoices that are not the subject of
a good faith dispute have been paid in full and any installation and
connection charges that are properly charges to LTM or such LTM Subsidiary
after the date hereof and prior to the Closing Date shall be paid in full
except, in each case, for payments that are current and will be paid in the
ordinary course of business; and
(xi) LTM has delivered to Cineplex Odeon a Construction Work in
Progress Statement.
Section 3.16. Operating Assets
. Except for such exceptions as would not have a LTM Material
Adverse Effect, (a) LTM has good and marketable title or leasehold title or a
valid license to all of the personal property used, or held for use, in
connection with the theaters operated on the LTM Real Properties (other than
gaming and vending machines used in the ordinary course of business), subject
to no Encumbrance other than LTM Permitted Encumbrances; (b) no financing
statement under the Uniform Commercial Code or any similar applicable statute
has been filed in any jurisdiction except as contemplated in the LTM
Disclosure Statement, and neither LTM nor any LTM Subsidiary has signed any
such financing statement or any security agreement authorizing any secured
party thereunder to file any such financing statement; (c) each theater
located on a LTM Real Property and each of the items of personal property used
or held for use in, or in connection with, each such theater, including
without limitation, seating, projection equipment and screens, are in good
operating condition, subject to normal wear and tear, and are fit for the use
for which they are intended and to which they are presently devoted; (d)
except for closed theaters, each theater located on a LTM Real Property,
together with the related items of personal property located therein,
constitutes a fully operable motion picture theater and is sufficient to
permit LTM to operate the business as currently being conducted therein; and
(e) except as contemplated by this Agreement, since March 31, 1997, neither
LTM nor any LTM Subsidiary has sold, removed or transferred any equipment or
property from any such theater located on a LTM Real Property, except in the
ordinary course of business and so long as such equipment or property has been
replaced prior to the date hereof.
Section 3.17. Contracts
. Section 3.17 of the LTM Disclosure Statement set forth a true
and complete statement of all contracts, agreements, leases (other than leases
with respect to the LTM Leased Real Property and film rental contracts in the
ordinary course of business), mortgages, notes, bonds, indentures, licenses,
intellectual property rights and other obligations, oral or written, express
or implied, involving the payment (or the provision of goods and/or services
having value) in each case of more than US$500,000 per annum to which LTM or
any LTM Subsidiary is bound as of the date of this Agreement, including,
without limitation, contracts relating to employment, collective bargaining,
consultants, independent contractors, agents, advertising, concessions, as
well as contracts relating to any partnerships and joint ventures and
contracts restricting the ability to operate theaters in any geographic area
(collectively, the "LTM Contracts"), excluding (a) those that are terminable
without penalty by LTM within 30 days upon the giving of notice and (b) those
directly relating to the construction of theaters currently under
construction, or with respect to which construction is pending, planned,
contemplated or under study as set forth on LTM's Construction Work in
Progress Statement; such statement sets forth with respect to each LTM
Contract the names of the parties thereto. True and complete copies of all of
the LTM Contracts, or, in the case of oral LTM Contracts, true and complete
descriptions thereof, have been made available to Cineplex Odeon.
Section 3.17 of the LTM Disclosure Statement summarizes the material terms of
each LTM Contract that provides for (a) the payment of refunds or similar
arrangements if specified conditions are not satisfied or the volume of
specified services provided during a reference period is not continued at
minimum levels and/or (b) supplemental payments if specified conditions are
satisfied or the volume of specified services provided during a reference
period exceeds a specified threshold. In addition to the foregoing, (x) prior
to the date hereof, LTM has provided to Cineplex Odeon a summary of the
material terms of the LTM Contracts and arrangements with SPE and SPE's
Affiliates and the impact of such LTM Contracts and arrangements on LTM's
Consolidated EBITDA during the twelve-month period ended March 31, 1997, and
(y) since March 31, 1997, there has been no material change in the material
terms of such LTM Contracts and arrangements, including, without limitation,
with respect to the exhibition of motion pictures. For purposes of clause (y)
of the preceding sentence only, film rental contracts shall be deemed to be
included within the definition of LTM Contracts. Except for such exceptions
as would not have a LTM Material Adverse Effect, (a) the LTM Contracts are
valid, existing and in full force and effect and (subject to (i) the
application of any applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar law, now or hereafter in effect,
affecting creditors rights generally and (ii) the application of general
principles of equity) binding against LTM and, to the Knowledge of LTM, the
other parties to such LTM Contracts in accordance with their respective terms,
and (b) there has not occurred any material default or breach or event which,
with the giving of notice or lapse of time, or both, would constitute a
material default or breach under any of them. No officer or director of LTM
nor any Affiliate of any such officer, director or shareholder, is a party to
any such LTM Contract as lessor, landlord, supplier or in any other capacity
except as noted on the LTM Disclosure Statement.
Section 3.18. Insurance
. All of the material assets of each of LTM and the LTM
Subsidiaries that are of insurable character are covered by insurance with
reputable insurers against risks of liability, casualty and fire and other
losses and liabilities customarily obtained to cover comparable businesses and
tangible assets in amounts, scope and coverage that are consistent with
prudent industry practice. Neither LTM nor any LTM Subsidiary is in default
in any material respect with respect to its obligations under any material
insurance policy maintained by it. Section 3.18 of the LTM Disclosure
Statement sets forth a list of all insurance coverage carried by LTM and the
LTM Subsidiaries, including the carrier, the terms and the amount of coverage.
All such policies and other instruments are in full force and effect and all
premiums due and payable with respect thereto have been paid. Except to the
extent that failure to do so would not have a LTM Material Adverse Effect,
neither LTM nor any LTM Subsidiary has failed to give any notice or present
any claim under any such insurance policy in due and timely fashion or as
required by any of such insurance policies or has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
claim under such policies, and, except as aforesaid, there are no material
claims by LTM or any LTM Subsidiary under any of such policies to which any
insurance company is denying liability or defending under a reservation of
rights or similar clause. Neither LTM nor any LTM Subsidiary has received
notice of any pending or threatened termination of any of such policies or any
material premium increases for the current policy period with respect to any
of such policies.
Section 3.19. Related Party Transactions
. Section 3.19 of the LTM Disclosure Statement contains a summary
of all contracts (whether oral or written), agreements, transactions or other
arrangements (including those relating to the provision of any services or the
sale of any goods) since March 1, 1994 and all proposed contracts, agreements,
transactions or other arrangements between LTM, any LTM Subsidiary or any
Transferred SPE Subsidiary, on the one hand, and SPE or any of its Affiliates
(other than LTM, any LTM Subsidiary and any Transferred SPE Subsidiary), on
the other hand, other than film booking agreements or arrangements, entered
into in the ordinary course of business. Section 3.19 of the LTM Disclosure
Statement also contains a summary of all contracts, agreements, transactions
or other arrangements since March 1, 1994 and all proposed contracts,
agreements, transactions or other arrangements between LTM, any LTM Subsidiary
or any Transferred SPE Subsidiary, on the one hand, and any current or former
director or officer of SPE or any of its Affiliates (other than LTM, any LTM
Subsidiary and any Transferred SPE Subsidiary) or any entity controlled by
such current or former director or officer, on the other hand, other than
employment agreements or arrangements or under employee benefit plans.
Section 3.20. Expenses
. LTM has provided to Cineplex Odeon a good faith estimate and
description of the expenses that LTM expects to incur, or has incurred, in
connection with the Transactions, and LTM will promptly notify Cineplex Odeon
if it believes that LTM will incur expenses materially in excess of such
amount in connection with the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPE
SPE represents and warrants to Cineplex Odeon as follows:
Section 4.1. Existence; Good Standing; Corporate Authority
. SPE is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation. SPE has
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Neither SPE nor any of
the Transferred SPE Subsidiaries is in violation of any order of any court,
Governmental Entity or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which SPE or any of the Transferred SPE
Subsidiaries or any of their respective properties or assets is subject that
would prevent SPE from performing its obligations under the Documents in any
material respect.
Section 4.2. Authorization, Validity and Effect of Agreements
. SPE has the requisite corporate power and authority to execute
and deliver each of the Documents to which it is a party and all agreements
and documents contemplated thereby to which it is a party. The consummation
by SPE of the Transactions to which it is a party has been duly authorized by
all requisite corporate action on the part of SPE, including, without
limitation, all requisite approvals of the Board of Directors of SPE. The
Documents to which it is a party constitute, and all agreements and documents
contemplated thereby to which it is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of SPE, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
Section 4.3. No Violation
. Neither the execution and delivery by SPE of the Documents to
which it is a party, nor the consummation by SPE of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict
with or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of SPE; (ii) either (a) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or (b) violate, or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any
Encumbrance upon the Imax Leases or the Transferred SPE Subsidiaries or any of
their assets under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation or court decree to which SPE or any of the Transferred SPE
Subsidiaries is a party, or by which SPE or any of the Transferred SPE
Subsidiaries or any of their properties is bound or affected, except for any
of the foregoing matters which would not (x) have a LTM Material Adverse
Effect, (y) impair the ability of SPE to perform its obligations under the
Documents in any material respect (an "SPE Material Adverse Effect") or
(z) delay in any material respect or prevent the consummation of the
Transactions; or (iii) other than the Regulatory Filings, require any material
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make which would have a LTM or SPE Material Adverse Effect or delay in any
material respect or prevent the consummation of the Transactions.
Section 4.4. Transferred SPE Subsidiaries
. (a) SPE owns directly or indirectly all of the outstanding
shares of capital stock or other equity interests of the Transferred SPE
Subsidiaries(the "SPE Transferred Shares"). Each of the SPE Transferred
Shares is owned, directly or indirectly, by Encumbrances. To the extent that
the SPE Transfer is effected by a transfer by SPE to one or more LTM
Subsidiaries of all the shares of stock owned directly or indirectly by SPE of
the Transferred SPE Subsidiaries, such LTM Subsidiary or LTM Subsidiaries will
have good and marketable title to the SPE Transferred Shares, free and clear
of all Encumbrances other than LTM Permitted Encumbrances. To the extent that
the SPE Transfer is effected by merging one or both of the Transferred SPE
Subsidiaries with and into one or more LTM Subsidiaries in exchange for shares
of LTM Common Stock, LTM or one or more of its Subsidiaries will have good and
marketable title to all of the issued and outstanding shares of capital stock
of the surviving corporation or corporations in such merger or mergers, free
and clear of all Encumbrances other than LTM Permitted Encumbrances.
(b) Each of the representations and warranties of LTM in
Sections 3.1, 3.7 through 3.11 and 3.14 through 3.19, insofar as they relate
to the IMAX Leases and the Transferred SPE Subsidiaries, are true and correct.
Section 4.5. Effects of Transactions
. Immediately following the Closing, (a) all of the motion
picture exhibition assets owned by SPE or its Affiliates and used in
connection with or relating to SPE's motion picture exhibition business in the
United States or Canada will be owned by LTM and/or LTM's Subsidiaries
(including, without limitation, the Transferred SPE Subsidiaries), (b) neither
SPE nor any affiliate thereof (other than LTM or any LTM Subsidiary) will own,
operate or manage any motion picture theaters in the United States or Canada,
and (c) except for liabilities for film booking arrangements and obligations
and liabilities included in clauses (ii)(x) or (y) of the definition of Net
Working Capital or Debt reflected in each case in LTM's Preliminary Closing
Statement or arising under the Documents or with respect to which LTM is
required to indemnify SPE or SPE's Affiliates in accordance with the Tax
Sharing and Indemnity Agreement, neither LTM nor any LTM Subsidiary
(including, without limitation, the Transferred SPE Subsidiaries) will have
any obligation or liability, contingent or otherwise, owed to SPE or any
Affiliate thereof (other than LTM and the LTM Subsidiaries).
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO CLOSING
Section 5.1. Conduct of Business Prior to Closing
. (a) Prior to the Closing Date except (i) as set forth in the
Cineplex Odeon Disclosure Statement or the LTM Disclosure Statement, as the
case may be, (ii) as required or contemplated by the Documents or (iii) as
otherwise permitted by Section 5.1(b), LTM shall, and shall cause each of the
LTM Subsidiaries, SPE shall in respect of the assets subject to the Imax
Leases and shall cause each of the Transferred SPE Subsidiaries and Cineplex
Odeon shall, and shall cause each of the Cineplex Odeon Subsidiaries:
(A) to carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted including, without limitation:
(i) using their reasonable best efforts to negotiate and
enter into and performing its obligations (contemplated or otherwise) under
agreements or leases to operate, develop or construct those theaters which are
planned, contemplated, under study or pursuant to which construction has
commenced or is pending, as described in the Construction Work in Progress
Statements delivered pursuant to this Agreement; and
(ii) using their reasonable best efforts to preserve intact
their present business organizations and preserve their relationships with
film studios, distributors, customers, suppliers and others having business
dealings with them;
(B) except as contemplated in Section 2.7(b)(ii) of the Cineplex
Odeon Disclosure Statement or Section 3.7(b)(ii) of the LTM Disclosure
Statement, as the case may be, or except as would not otherwise result in a
Cineplex Odeon Material Adverse Effect or a LTM Material Adverse Effect, as
the case may be, use their reasonable best efforts to:
(i) sell, close or otherwise dispose of the Cineplex Odeon
Negative Theatres or the LTM Negative Theatres;
(ii) maintain insurance coverages and its books, accounts
and records in the usual manner consistent with prior practices;
(iii) comply in all material respects with all laws,
ordinances and regulations of Governmental Entities applicable to it;
(iv) maintain and keep its properties and equipment in good
repair, working order and condition, ordinary wear and tear excepted; and
(v) perform in all material respects its obligations under
the leases with respect to the Cineplex Odeon Leased Real Properties and the
LTM Leased Real Properties, as the case may be;
(C) not to, or not to propose to, as the case may be:
(i) amend its charter documents;
(ii) split, combine or reclassify its outstanding capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or,
other than, in each case, in accordance with such party's current cash
management practices and in the ordinary course of business, declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property; or
(iii) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock;
(iv) issue, deliver or sell or agree to issue, deliver or
sell any additional shares of, or rights of any kind to acquire any shares of,
its capital stock of any class, any indebtedness having the right to vote on
which its shareholders may vote or any option, rights or warrants to acquire,
any securities convertible into, shares of capital stock other than, in the
case of Cineplex Odeon, (a) Cineplex Odeon Common Shares pursuant to
employment agreements or stock options as in effect on the date hereof and (b)
shares of Cineplex Odeon Common Shares issued upon the exercise of stock
options;
(v) acquire, develop, build or construct any new theaters,
or purchase, lease or otherwise acquire, directly or indirectly, an interest
in any theaters or make any investment in any business or any corporation,
partnership, association or other business organization or division thereof
(other than an entity that is a wholly owned Subsidiary of such party as at
the date hereof), other than, with respect to either Cineplex Odeon or LTM,
(a) those theaters described on their respective Construction Work in Progress
Statements (b) pursuant to pre-existing contractual arrangements or (c) where
the purchase price, financial commitment or investment (including, without
limitation, any build-out commitments under a lease) does not exceed (1)
US$25,000,000 on an individual basis or (2) US$75,000,000 in the aggregate in
respect of all such acquisitions, investments or financial commitments;
(vi) directly or indirectly sell, close or otherwise
dispose of any theaters other than (a) the Cineplex Odeon Negative Theaters
and the LTM Negative Theaters, as the case may be, (b) other theaters that by
the terms of their respective leases expire or are terminated by the landlord
in accordance with the term of any such leases, or (c) other theaters of which
the Cash Flow for the twelve months ended March 31, 1997 does not exceed
US$500,000 on an individual theater basis or US$2,000,000 in the aggregate for
all such theaters;
(vii) borrow monies to finance the construction, development
or acquisition of theaters described in the Cineplex Odeon's or LTM's
Construction Work in Progress Statement, as the case may be, or to finance the
disposition of the Cineplex Odeon Negative Theaters or the LTM Negative
Theaters, as the case may be, except (a) pursuant to bank commitments and
lines of credit existing on the date hereof; (b) in the case of Cineplex Odeon
and its Subsidiaries, pursuant to proposed bank commitments and lines of
credit substantially on the terms set forth in Section 5.1(C)(vii) of the
Cineplex Odeon Disclosure Statement; (c) in the case of LTM, pursuant proposed
bank commitments and lines of credit substantially on the terms set forth in
Section 5.1(C)(vii) of the LTM Disclosure Statement; or (d) solely
specifically to finance the acquisition, development or construction of such
theaters, provided that any security therefor is limited to the theaters being
financed;
(viii) other than in the ordinary course of business
consistent with past practice or as contemplated by the Cineplex Odeon
Disclosure Statement or the LTM Disclosure Statement or this Agreement, amend
or supplement any lease relating to the Cineplex Odeon Leased Real Properties
or the LTM Leased Real Properties, as the case may be, so as to increase
materially the obligations of the tenant, or decrease the obligations of the
landlord under such lease;
(ix) grant increases in compensation payable to directors,
officers or employees, except in any of the foregoing cases (A) as required by
Applicable Law or this Agreement; (B) in accordance with pre-existing
contractual arrangements; (C) cash bonuses to employees specifically for past
services rendered; or (D) in the ordinary course of business consistent with
past practice;
(x) (A) except as set forth in Section 5.1(a)(x) of the
LTM Disclosure Statement, employ the services of any individual who is not
currently a member of senior management in a senior management capacity; (B)
enter into a new written employment agreement with a member of senior
management; (C) renew or amend any existing written employment agreement with
a member of senior management, or (D) pay any bonus or other amount to any
member of senior management as an inducement to maintain the ongoing services
of such individual.
(b) Notwithstanding the provisions of Section 5.1(a), LTM
may and may permit the LTM Subsidiaries, and SPE may and may permit the
Transferred SPE Subsidiaries, to do anything otherwise prohibited thereby with
the prior written consent of Cineplex Odeon, not to be unreasonably withheld;
provided, however, that no such consent granted by Cineplex Odeon shall be
effective unless and until such consent is accompanied by delivery to LTM of
evidence satisfactory to LTM that such consent will not result in a breach or
violation of the Three Party Agreement (as defined in the Universal
Subscription Agreement), and Cineplex Odeon may and may permit the Cineplex
Odeon Subsidiaries to do anything otherwise prohibited by Section 5.1(a) with
the prior written consent of LTM, not to be unreasonably withheld.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. Access and Information
. (a) Each of Cineplex Odeon and LTM and their respective
Subsidiaries shall afford to the other and to the other's accountants, counsel
and other representatives reasonable access during normal business hours (and
at such other times as the parties may mutually agree) throughout the period
prior to the Closing Date to all of its properties, books, contracts,
commitments, records and personnel (including, without limitation, consultants
and agents) and ensure the cooperation of its personnel and, during such
period, each shall furnish promptly to the other (i) a copy of each report,
schedule and other document filed or received by it pursuant to the
requirements of United States or Canadian federal, provincial or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as the other may reasonably request. Each of the
parties hereto shall hold, and shall cause their respective employees and
agents to hold, in confidence all such information in accordance with the
terms of the Confidentiality Agreements dated September 24, 1996 (each a
"Confidentiality Agreement").
(b) SPE and the Transferred SPE Subsidiaries shall afford to
Cineplex Odeon and to its accountants, counsel and other representatives
reasonable access during normal business hours (and at such other times as the
parties may mutually agree) throughout the period prior to the Closing Date to
all of the properties, books, contracts, commitments, records and personnel
relating to the Transferred SPE Subsidiaries and the Imax Leases and, during
such period, shall furnish promptly to Cineplex Odeon all other information
concerning the IMAX Leases and the business, properties, and personnel of the
Transferred SPE Subsidiaries as Cineplex Odeon may reasonably request.
Section 6.2. Meetings of Shareholders
. Provided that the Board of Directors of Cineplex Odeon has not
withdrawn its approval or recommendation of this Agreement or the
Transactions, Cineplex Odeon will take all action necessary, including
permitting and instructing its registrar and transfer agent to act as
depository in connection with the Arrangement and timely mailing of the Proxy
Statement, in accordance with Applicable Law and its Articles and Bylaws to
convene a meeting of its shareholders (the "Cineplex Odeon Meeting") as
promptly as practicable following the later of (x) the date on which the
Interim Order is issued and (y) the date on which the Form S-4 is declared
effective, to consider and vote upon the approval of the Arrangement as
provided for in this Agreement and the transactions contemplated thereby.
Subject to the exercise of its fiduciary duties, the Board of Directors of
Cineplex Odeon shall recommend such approval and Cineplex Odeon shall take all
necessary and appropriate lawful actions to solicit such approval. Cineplex
Odeon and LTM shall, as the context may require, take all necessary action,
prior to mailing the Proxy Statement, to ensure that (i) LTM shall have
received a "comfort" letter from KPMG, independent auditors for Cineplex
Odeon, dated the date of the Proxy Statement with respect to the financial
statements of Cineplex Odeon included in the Proxy Statement, substantially in
the form described in Section 7.3(b), and (ii) Cineplex Odeon shall have
received a "comfort" letter from Price Waterhouse, L.L.P., independent public
accountants for LTM, dated the date of the Proxy Statement, with respect to
the financial statements of LTM and the LTM Subsidiaries included in the Proxy
Statement, substantially in the form described in Section 7.2(b).
Section 6.3. Registration Statement/Proxy Statement/Prospectus
. LTM and Cineplex Odeon (i) shall cooperate and promptly
prepare, and LTM shall file with the SEC as soon as practicable, a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the LTM Common Stock, portions of which Registration Statement
shall also serve as the proxy statement and management information circular
(the "Proxy Statement") with respect to the Cineplex Odeon Meeting. LTM and
Cineplex Odeon will cooperate in the preparation and filing with the SEC and
the Canadian Securities Authorities of a Registration Statement on Form S-1
(the "Form S-1" and, together with the Form S-4, the "Registration
Statements") and a prospectus prepared in accordance with Canadian Securities
Laws (the "Prospectus") in respect of any Equity Offering. LTM shall use all
reasonable efforts, and Cineplex Odeon shall cooperate with LTM, to have the
Form S-4 declared effective by the SEC and the Prospectus accepted for filing
and receipted by the Canadian Securities Authorities as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Transactions. LTM shall, as promptly as practicable, provide
copies of any written comments received from the SEC and Canadian Securities
Authorities with respect to the Registration Statements and the Prospectus to
Cineplex Odeon and advise Cineplex Odeon of any oral comments with respect to
the Registration Statements received from the SEC and with respect to the
Prospectus received from Canadian Securities Authorities. LTM shall use its
best efforts to obtain, prior to the effective date of the Registration
Statements, all necessary provincial or state securities law or "Blue Sky"
permits or approvals required to carry out the Transactions, and LTM shall pay
all expenses incident thereto. LTM agrees that none of the information
supplied or to be supplied by LTM for inclusion or incorporation by reference
in the Registration Statements, the Proxy Statement or the Prospectus (i) in
the case of the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the Cineplex Odeon Meeting, or
(ii) in the case of each Registration Statement or the Prospectus and each
amendment or supplement thereto, at the time it is filed or becomes effective,
as applicable, will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Cineplex Odeon agrees that none of the information supplied
or to be supplied by Cineplex Odeon for inclusion or incorporation by
reference in the Registration Statements, the Proxy Statement or the
Prospectus (i) in the case of the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Cineplex Odeon Meeting, or, (ii) in the case of each Registration Statement
and the Prospectus or any amendment or supplement thereto, at the time it is
filed or becomes effective, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. For purposes of the foregoing, it is
understood and agreed that (x) information concerning or related to LTM and
the LTM Subsidiaries will be deemed to have been supplied by LTM, and
(y) information concerning or related to Cineplex Odeon, the Cineplex Odeon
Subsidiaries, and the Cineplex Odeon Meeting shall be deemed to have been
supplied by Cineplex Odeon. No amendment or supplement to the Proxy
Statement, a Registration Statement or the Prospectus shall be made by LTM or
Cineplex Odeon without the approval of the other affected party. LTM will
advise Cineplex Odeon, promptly after it receives notice thereof, of the time
when the Registration Statements have become effective or any supplement or
amendment has been filed, and when a receipt has been issued for a Prospectus
by a Canadian Securities Authority, the issuance of any stop order or cease-
trade order, the suspension of the qualification of the shares of LTM Common
Stock for offering or sale in any jurisdiction, or any request by the SEC or a
Canadian Securities Authority for amendment of the Proxy Statement, a
Registration Statement or the Prospectus or comments thereon and responses
thereto or requests by the SEC or a Canadian Securities Authority for
additional information.
Section 6.4. Change of Control Offer and Change of Guarantor
. (a) Not later than 30 days following the Closing Date, LTM
shall make, or shall cause Xxxxx to make, a Change of Control Offer, as
defined in, and in accordance with, the terms of Section 4.19 of the Xxxxx
Indenture.
(b) LTM shall use its best efforts to cause Cineplex Odeon to be
released on and after the Closing Date from all of its obligations under its
Parent Guarantee (as such term is defined in the Xxxxx Indenture) and the
Xxxxx Indenture, if and to the extent that the requirements for such release
set forth in Section 5.01 of the Xxxxx Indenture are then satisfied.
Section 6.5. Compliance with the Securities Act
. At least 30 days prior to the Closing Date, Cineplex Odeon
shall deliver to LTM a list of names and addresses of those persons (other
than Universal and its affiliates and the members of the Claridge Group) who
were, in Cineplex Odeon's reasonable judgment, at the record date for the
Cineplex Odeon Meeting, "affiliates" of Cineplex Odeon within the meaning of
Rule 145 of the rules and regulations promulgated under the Securities Act
(each such person, an "Affiliate"). Cineplex Odeon shall use all reasonable
efforts to deliver or cause to be delivered to LTM, prior to the Closing Date,
from each of the Affiliates of Cineplex Odeon identified in the foregoing
list, an affiliate letter in customary form satisfactory to Cineplex Odeon and
LTM. LTM shall be entitled to place legends as specified in such affiliate
letters on the certificates evidencing any LTM Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for LTM Common
Stock, consistent with the terms of such affiliate letters.
Section 6.6. Stock Exchange Listing
. LTM and Cineplex Odeon shall use their best efforts to list and
post for trading LTM Common Stock on The New York Stock Exchange, Inc. (the
"NYSE") (or, if LTM Common Stock shall not be approved for listing on the
NYSE, the Nasdaq Stock Market (the "NASDAQ")) and The Toronto Stock Exchange
(the "TSE"), upon official notice of issuance.
Section 6.7. HSR Act; Competition Act; Investment Canada Act;
Submission of Arrangement for Approval
. (a) Each of the parties hereto shall use its best efforts to
file as soon as practicable notifications under the HSR Act and the
Competition Act in connection with the Transactions, and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission, the Antitrust Division of the Department of Justice and/or the
Director of Investigation and Research appointed under the Competition Act
(the "DIR") for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters.
(b) Cineplex Odeon shall cooperate with LTM in connection with
the preparation and filing within five business days after the date hereof,
(i) with the Minister responsible for administering the IC Act (the "ICA
Minister"), an application by LTM for review under the IC Act in connection
with the Arrangement (the "ICA Application") and (ii) with the DIR an
application for an advance ruling certificate under the Competition Act in
connection with the Arrangement. Cineplex Odeon and LTM each hereby agrees to
be bound by the undertakings set forth in the ICA Application as initially
filed with the ICA Minister.
(c) As promptly as practicable after the Form S-4 is declared
effective as contemplated in Section 5.3, Cineplex Odeon shall apply to the
Ontario Court (General Division) (the "Court") pursuant to Subsection 182(5)
of the OBCA for an interim order of the Court in form and substance reasonably
satisfactory to LTM and Cineplex Odeon (the "Interim Order") providing for,
among other things, the holding the Cineplex Odeon Meeting. As promptly as
practicable following approval by Cineplex Odeon's shareholders at the
Cineplex Odeon Meeting of the Arrangement as provided in the Interim Order,
Cineplex Odeon shall take all steps necessary to submit the Arrangement to the
Court and to apply for and use all reasonable efforts to obtain a final order
of the Court in form and substance reasonably satisfactory to LTM and Cineplex
Odeon approving the Arrangement (the "Final Order"). As soon as reasonably
practicable after issuance of the Final Order, subject to the satisfaction
and/or waiver of the conditions set forth in Article VII hereof, and
concurrently with the Closing, Cineplex Odeon shall file articles of
arrangement and such other documents required to be filed in connection
therewith in accordance with the provisions of the OBCA to give effect to the
Arrangement (collectively, the "Arrangement Filings").
Section 6.8. Bank Financing; Equity Offering
. (a) LTM and Cineplex Odeon shall cooperate with each other
and shall use their respective best efforts to arrange the Bank Financing on
terms that the respective boards of directors of LTM and Cineplex Odeon have
determined in good faith are not commercially unreasonable and as contemplated
in the recitals, including providing such financial and other information
concerning their respective businesses, and such opinions of counsel and
certifications as the lenders may reasonably request and the members of LTM's
and Cineplex Odeon's senior management shall, to the extent reasonably
requested by the lenders, assist such lenders in syndicating the Bank
Financing. SPE shall provide such financial and other information concerning
the Transferred SPE Subsidiaries and the IMAX Leases as the lenders may
reasonably request in connection with the Bank Financing.
(b) Subject to prevailing market conditions, LTM and Cineplex
Odeon shall cooperate in effecting an Equity Offering simultaneously with the
Closing or as soon thereafter as the Board of Directors of LTM deems
advisable. Consummation of an Equity Offering shall not be a condition to the
Closing hereunder.
Section 6.9. Audit Requirements; Closing Adjustment
. (a) Each of LTM and Cineplex Odeon shall promptly and in any
event no later than 60 days following the date of this Agreement, prepare and
deliver to the other (i) audited financial statements and an unaudited
statement of Consolidated EBITDA for the twelve months ended March 31, 1997,
in the case of Cineplex Odeon, for Cineplex Odeon and its consolidated
Subsidiaries, and, in the case of LTM, for LTM and the LTM Subsidiaries
(including the Transferred SPE Subsidiaries and the assets subject to the Sony
Asset Transfer) on a combined basis. Such financial statements shall include,
in each case, an audited balance sheet at March 31, 1997, and audited
statements of income, cash flow and changes in shareholders' equity for the
twelve months then ended and an unaudited statement of Consolidated EBITDA
(the "Audited Financial Statements"). The Audited Financial Statements of
each of LTM and Cineplex Odeon delivered hereunder shall contain all customary
year-end adjustments, shall be accompanied by the unqualified report of their
respective independent auditors and shall include all footnote disclosures as
required under GAAP in the case of LTM and Canadian GAAP in the case of
Cineplex Odeon. In the case of Cineplex Odeon, such footnotes shall include a
reconciliation to United States GAAP. The respective statements of
Consolidated EBITDA shall be accompanied by a report issued in the case of LTM
by Price Waterhouse LLP and in the case of Cineplex Odeon by KPMG indicating
that the statement has been examined in accordance with standards prescribed
by the AICPA in the case of Price Waterhouse LLP and the CICA Handbook in the
case of KPMG and that such statements have been prepared in accordance with
the terms of Sections 2.7, 3.7 and 6.9 of this Agreement.
(b) Not earlier than five days nor later than one day prior to
the Closing Date, each of LTM and Cineplex Odeon shall deliver to the other as
of the last day of the month ended immediately preceding the Closing Date (the
"Preliminary Statement Date" provided that if the Closing Date shall be prior
to the fifteenth day of a month, the Preliminary Statement Date shall be the
last day of the second preceding month) a statement (the "Preliminary Closing
Statements") consisting of the following:
(i) a statement (A) listing each theater (a "Retained Negative
Theater") identified in Schedule 2.7(b)(ii) in the case of Cineplex Odeon and
Schedule 3.7(b)(ii) in the case of LTM that has not been and as of the
Preliminary Statement Date is not expected to be sold, closed or disposed of
prior to the Closing Date and (B) setting out an amount equal to the actual
positive or negative Cash Flow for the twelve months ended March 31, 1997 for
each of such party's Retained Negative Theaters.
(ii) a statement setting out the annualized incremental impact of
the new theaters required to be identified under Section 2.7(b)(iii) in the
case of Cineplex Odeon and Section 3.7(b)(iii) in the case of LTM (for
purposes of this calculation, the annualized incremental impact shall be: (1)
(A) actual positive or negative Cash Flow, as the case may be, generated by
such theater for the first twelve months of operations commencing on the date
of opening if such theater has been operating for twelve months or more and
(B) if such theater has not been operating for at least twelve months, actual
Cash Flow for the period from opening through the Preliminary Statement Date,
divided by the number of days in operation and multiplied by 365 (and in the
case of Cineplex Odeon shall exclude Cash Flow of the Cinescapes); less (2) in
each case, the actual negative or positive Cash Flow of such theater for the
twelve months ended March 31, 1997;
(iii) a statement (A) listing each theater that is not identified
in Schedule 2.7(b)(i) or 2.7(b)(ii) in the case of Cineplex Odeon and Schedule
3.7(b)(i) or 3.7(b)(ii) in the case of LTM but that has been sold, closed or
disposed of subsequent to the date of this Agreement or is at the Preliminary
Statement Date expected to be sold, closed or disposed of prior to the Closing
Date and (B) setting out an amount equal to the actual positive or negative
Cash Flow for the twelve months ended March 31, 1997 for each such theater;
(iv) in the case of LTM, a statement of the estimated amount of
the IMAX Purchase Price, the Intercompany Debt and Working Capital Debt as of
the Closing Date; and
(v) a Construction Work in Progress Statement setting forth the
amount invested as of the Preliminary Statement Date with respect to each
theater identified on Section 2.15(c)(xi) of the Cineplex Odeon Disclosure
Statement, in the case of Cineplex Odeon, and Section 3.15(c)(xi) of the LTM
Disclosure Statement, in the case of LTM.
(vi) a statement of Qualified Tangible Net Worth calculating the
Qualified Tangible Net Worth of such party as of the Preliminary Statement
Date (the "Preliminary Closing Qualified Tangible Net Worth"), provided that
each of the following shall be included in calculating Preliminary Closing
Qualified Tangible Net Worth (and such statement shall set forth each of the
following, without duplication: (A) a liability representing the estimated
disposal costs (including any costs associated with the buy-out of any Leases)
of the party's Retained Negative Theaters which shall include the present
value of projected negative Cash Flow of such theaters through their estimated
dates of disposition and (B) the amount invested as of the Preliminary
Statement Date in each theater not identified in Schedule 2.15(c)(xi) of the
Cineplex Odeon Disclosure Statement in the case of Cineplex Odeon and Section
3.15(c)(xi) of the LTM Disclosure Statement in the case of LTM that has been
or is at the Preliminary Statement Date expected to be acquired subsequent to
the date of this Agreement and prior to the Closing Date or in respect of
which such party has invested an amount in theater construction or at the
Preliminary Statement Date expects to have invested an amount in theater
construction prior to the Closing Date). The Preliminary Closing Statement
shall include a list of each such theater, the amount invested as of the
Preliminary Statement Date and an estimate of the amount that will be invested
in each such newly acquired theater or theater under construction at the
Closing Date.
(c) The Preliminary Closing Statements required by Section
6.9(b) shall be accompanied by a report issued in the case of LTM by Price
Waterhouse LLP which includes their findings based upon performing procedures
in accordance with AICPA standards and in the case of Cineplex Odeon by KPMG
which includes their findings based upon performing such procedures with
respect to the Preliminary Closing Statements required by Section 6.9(b) in
accordance with the CICA Handbook. Such reports shall confirm that the
Preliminary Closing Statements have been prepared in accordance with the terms
of Sections 2.7, 3.7 and 6.9 of this Agreement.
(d) The LTM Cap shall be adjusted on the Closing Date in
accordance with the relevant information set out in the Preliminary Closing
Statements, without duplication, as follows:
(i) (A) if the Consolidated EBITDA of Cineplex Odeon set out in
the Audited Financial Statements delivered by it in accordance with Section
6.9(a) (the "Cineplex Odeon Revised Consolidated EBITDA") differs from
Cineplex Odeon's Consolidated EBITDA set out in Schedule 2.7(b) of the
Cineplex Odeon Disclosure Statement (the "Cineplex Odeon Original Consolidated
EBITDA"), then the LTM Cap shall be increased by the product of the Adjustment
Factor and ten times the absolute value of any negative change in the Cineplex
Odeon Revised Consolidated EBITDA from the Cineplex Odeon Original
Consolidated EBITDA, and the LTM Cap shall be decreased by the product of the
Adjustment Factor and ten times any positive change in the Cineplex Odeon
Revised Consolidated EBITDA from the Cineplex Odeon Original Consolidated
EBITDA; and
(B) if the Consolidated EBITDA of LTM set out in the
Audited Financial Statements delivered by it in accordance with Section 6.9(a)
(the "LTM Revised Consolidated EBITDA") differs from LTM's Consolidated EBITDA
set out in Schedule 3.7(b) of the LTM Disclosure Statement (the "LTM Original
Consolidated EBITDA"), then the LTM Cap shall be increased by ten times any
positive change in the LTM Revised Consolidated EBITDA from the LTM Original
Consolidated EBITDA, and the LTM Cap shall be decreased by ten times the
absolute value of any negative change in the LTM Revised Consolidated EBITDA
from the LTM Original Consolidated EBITDA;
(ii) the LTM Cap shall be increased by:
(A) the product of the Adjustment Factor and two times the
absolute value of the Cash Flow for the twelve months ended March
31, 1997 of each of Cineplex Odeon's Retained Negative Theaters
whose Cash Flow for such period is a negative amount, and
(B) two times the positive Cash Flow for the twelve months
ended March 31, 1997 of each of LTM's Retained Negative Theaters
whose Cash Flow for such period is a positive amount,
and the LTM Cap shall be decreased by:
(C) the product of the Adjustment Factor and two times the
positive Cash Flow for the twelve months ended March 31, 1997 of
each of Cineplex Odeon's Retained Negative Theaters whose Cash
Flow for such period is a positive amount, and
(D) two times the absolute value of the Cash Flow for the
twelve months ended March 31, 1997 of each of LTM's Retained
Negative Theaters whose Cash Flow for such period is a negative
amount.
(iii) with respect to the annualized incremental impact of new
theaters of Cineplex Odeon or LTM described under Section 6.9(b)(ii), the LTM
Cap shall be increased by:
(A) ten times any positive change in the annualized
incremental impact of LTM's new theaters from the amount set out
in Section 3.7(b) of the LTM Disclosure Statement,
(B) the product of the Adjustment Factor and ten times the
absolute value of any negative change in the annualized
incremental impact of Cineplex Odeon's new theaters from the
amount set out in Section 2.7(b) of the Cineplex Odeon Disclosure
Statement,
and the LTM Cap shall be decreased by:
(C) ten times the absolute value of any negative change in
the annualized incremental impact of LTM's new theaters from the
amount set out in Section 3.7(b) of the LTM Disclosure Statement
and
(D) the product of the Adjustment Factor and ten times any
positive change in the annualized incremental impact of Cineplex
Odeon's new theaters from the amount set out in Section 2.7(b) of
the Cineplex Odeon Disclosure Statement;
(iv) if on or prior to the Closing Date Cineplex Odeon or LTM
sells, closes or disposes of any theater other than those identified under
Section 2.7(b)(i) or 2.7(b)(ii) in the case of Cineplex Odeon and Section
3.7(b)(i) or 3.7(b)(ii) in the case of LTM, the LTM Cap shall be increased by
(A) the product of the Adjustment Factor and ten times the
positive Cash Flow for the twelve months ended March 31, 1997
from each of such theaters sold, closed or disposed of by
Cineplex Odeon whose Cash Flow for such period is a positive
amount,
(B) ten times the absolute value of the Cash Flow for the
twelve months ended March from each of such theaters sold, closed
or disposed of by LTM whose Cash Flow for such period is a
negative amount,
and the LTM Cap shall be decreased by
(C) the product of the Adjustment Factor and ten times the
absolute value of the Cash Flow for the twelve months ended March
31, 1997 from each of such theaters sold, closed or disposed of
by Cineplex Odeon whose Cash Flow for such period is a negative
amount, and
(D) ten times the positive Cash Flow for the twelve months
ended March 31, 1997 from each of such theaters sold, closed or
disposed of by LTM whose Cash Flow for such period is a positive
amount.
(v) the LTM Cap shall be increased by the product of the
Adjustment Factor and the amount required to be reimbursed to Universal and
the Trust pursuant to the terms of the Universal Subscription Agreement and
the Letter Agreement;
(vi) if the Preliminary Closing Qualified Tangible Net Worth of
Cineplex Odeon or of LTM differs from (a) in the case of Cineplex Odeon the
sum of (1) the Qualified Tangible Net Worth of Cineplex Odeon as set out in
Section 2.7(b) of the Cineplex Odeon Disclosure Statement plus
(2) US$7,172,000 (such sum, the "Cineplex Odeon Benchmark") and (b) in the
case of LTM the sum of (1) the Qualified Tangible Net Worth of LTM as set out
in Section 3.7(b) of the LTM Disclosure Statement plus (2) US$69,078,000 (such
sum, the "LTM Benchmark"), then the LTM Cap shall be increased by any positive
difference between LTM's Preliminary Closing Qualified Tangible Net Worth less
the LTM Benchmark and by the product of the Adjustment Factor and the absolute
value of any negative difference between Cineplex Odeon's Preliminary Closing
Qualified Tangible Net Worth less the Cineplex Odeon Benchmark, and the LTM
Cap shall be decreased by the absolute value of any negative difference
between LTM's Preliminary Closing Qualified Tangible Net Worth less the LTM
Benchmark and by the product of the Adjustment Factor and any positive
difference between Cineplex Odeon's Preliminary Closing Qualified Tangible Net
Worth less the Cineplex Odeon Benchmark.
As used in this Agreement, "Adjustment Factor" means 1.046618.
As used in this Section 6.9 and Sections 2.7(b) and 3.7(b), a
theater will be deemed to be closed or disposed of if a binding agreement has
been entered into that has, in substance, terms as favorable as if such
theater were closed or disposed of without significant additional cost, and a
theater will be deemed not to be closed or disposed of it is temporarily
closed by reason of damage or destruction and Cineplex Odeon or LTM, as the
case may be, intends to reopen the theater and is proceeding diligently to
achieve such reopening.
(e) Within 60 days following the Closing Date, LTM shall prepare
(or cause to be prepared) and shall deliver to SPE, Universal, Claridge Inc.
(as agent for the Claridge Group) and the Independent Directors (as defined in
the Stockholders Agreement), (i) audited balance sheets for LTM and Cinexplex
Odeon as of the Closing Date, prepared by their respective accounting firms,
(ii) initial closing statements giving effect to the adjustments required
under Sections 6.9 (ii), (iii), (iv), (v) and (vi) as of the Closing Date
rather than the Preliminary Statement Date (the "Initial Closing Statements")
and (iii) a final Closing Statement, recalculating the LTM Cap as of the
Closing Date reflecting the results of the Initial Closing Statements as of
the Closing Date rather than as of the Preliminary Statement Date (the "Final
Closing Statement"), and shall make available to SPE, Universal, Claridge Inc.
(as agent for the Claridge Group) and such Independent Directors for their
review the work papers and supporting documents generated in connection
therewith. The audited balance sheets delivered hereunder shall contain all
customary year-end adjustments, shall include all appropriate footnote
disclosures as required under GAAP in the case of LTM and Canadian GAAP in the
case of Cineplex Odeon. In the case of Cineplex Odeon such footnotes shall
include a reconciliation to US GAAP. The Final Closing Statement shall be
accompanied by a report issued by LTM's independent accountants addressed to
SPE, Universal, Claridge Inc. (as agent for the Claridge Group) and the
Independent Directors that shall include the results of reports in the Initial
Closing Statements prepared by Price Waterhouse in the case of LTM and KPMG in
the case of Cineplex Odeon indicating their findings based upon performing
procedures in accordance with AICPA standards in the case of LTM and the CICA
Handbook in the case of Cineplex Odeon. Such report shall indicate that the
Final Closing Statements have been prepared in accordance with the terms of
Sections 2.7, 3.7 and 6.9 of this Agreement. Unless (i) a majority of the
Independent Directors, (ii) SPE, (iii) Universal or (iv) Claridge Inc. (as
agent for the Claridge Group) (each an "Objecting Party") within 30 days after
delivery of the Final Closing Statement, notifies LTM in writing that it
objects to any information contained in the Final Closing Statement and
specifying in reasonable detail the basis for such objection, the Final
Closing Statement shall be conclusively binding upon the parties without
further rights of appeal. If LTM and the Objecting Parties are unable to
agree upon the information contained in the Final Closing Statement within 10
days after notice of objection has been given, a nationally recognized
independent accounting firm to be mutually agreed upon by LTM and the
Objecting Parties shall finally resolve the disputed items and make the
appropriate adjustments to the Final Closing Statement based on its resolution
of the disputed items within 30 days after its acceptance of appointment. Any
such determination shall be conclusively binding upon the parties without
further rights of appeal. The LTM Cap shall be adjusted in accordance with
the provisions of this Section 6.9 based on the Final Closing Statement, and,
within ten business days following determination of the Final Closing
Statement, LTM shall pay to SPE or SPE shall refund to LTM, as applicable, an
amount equal to such adjustment. LTM shall bear the fees, costs and expenses
of the accounting firm selected in the event of a dispute.
Section 6.10. No Shop
. Prior to the Closing Date, Cineplex Odeon agrees that:
(a) neither it, nor any of its Subsidiaries, and none of the
officers, directors, employees, agents and representatives thereof (including,
without limitation, any investment banker, attorney or accountant retained
thereby), shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with respect to
a merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or (except with
respect to the exercise of stock options issued pursuant to the terms of the
Cineplex Odeon Stock Option Plan) any equity securities of Cineplex Odeon or
any of Cineplex Odeon's Significant Subsidiaries (any such proposal or offer
being hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal,
or release any third party from any obligations under any existing standstill
agreement or arrangement relating to any Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 6.10; and
(c) it will notify the other parties without unnecessary delay
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with it;
provided, however, that nothing contained in this Section 6.10 shall prohibit
the Board of Directors of Cineplex Odeon from, prior to the time at which the
shareholders of Cineplex Odeon approve the Arrangement and the transactions
contemplated thereby at the Cineplex Odeon Meeting, (i) furnishing information
to or entering into discussions or negotiations with, any person or entity
that makes an unsolicited bona fide proposal to acquire such party pursuant to
a merger, consolidation, share exchange, purchase of a substantial portion of
the assets, business combination or other similar transaction, if, and only to
the extent that, (A) such Alternative Proposal is, in the opinion of the
financial advisor to Cineplex Odeon, financially superior to the Transactions,
(B) the third party making such Alternative Proposal has demonstrated that the
consideration necessary for the Acquisition Proposal is likely to be available
(as reasonably determined in good faith by the Special Committee after
consultation with its financial advisors), (C) the Board of Directors of
Cineplex Odeon shall reasonably conclude in good faith, after considering
applicable provision of law, on the basis of oral or written advice of outside
counsel, that such action may be required for the Board of Directors to comply
with its fiduciary duties to stockholders imposed by law, (D) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Cineplex Odeon provides written notice to LTM to
the effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or entity, and (E) Cineplex Odeon or its
representative receives from such person or entity an executed confidentiality
agreement in reasonably customary form on terms not in the aggregate
materially more favorable to such person or entity than the terms of the
Confidentiality Agreements; and (ii) to the extent applicable, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative
Proposal. Cineplex Odeon shall notify LTM orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it), by
the close of business on the business day following the receipt thereof by
Cineplex Odeon, and shall keep LTM informed of the status and details of any
such inquiry, offer or proposal, and shall give LTM one business day's advance
notice of any agreement to be entered into with, or any information to be
supplied to, any person making such inquiry, offer or proposal.
Section 6.11. Advice of Changes; SEC Filings
. The parties shall confer with each other on a regular basis on
operational matters affecting or which may reasonably be expected to affect
the Combined Enterprise. LTM and Cineplex Odeon shall advise each other
promptly orally and in writing of any change or event that has had, or could
reasonably be expected to have, a Cineplex Odeon Material Adverse Effect or a
LTM Material Adverse Effect, as the case may be. Cineplex Odeon and LTM shall
provide to the other (or their respective counsel) promptly copies of all
filings made by such party with the SEC, any Canadian Securities Authority or
any other Governmental Entity in connection with the Transactions.
Section 6.12. Benefit Plans
. (a) LTM and Cineplex Odeon agree that each of their respective
employee incentive or benefit plans, programs and arrangements shall be
amended, to the extent necessary or appropriate, to reflect the Transactions.
The actions to be taken by LTM and Cineplex Odeon pursuant to this Section
6.12 shall include the submission by LTM and Cineplex Odeon of the amendments
to the benefit plans, programs or arrangements referred to herein to such
Governmental Entity and to their respective stockholders, if any such
submission is determined to be necessary or advisable by counsel to LTM and
Cineplex Odeon after consultation with one another; provided, however, that
such approval shall not be a condition to the consummation of the Transaction.
(b) Effective as of the Closing Date, each option to purchase
Cineplex Odeon Common Shares that is outstanding on the Closing Date, whether
or not exercisable, and whether or not vested, shall be treated as provided
for in the Plan of Arrangement.
(c) LTM shall reserve for issuance the number of shares of LTM
Common Stock as required under the Plan of Arrangement.
(d) As of the Closing Date or as soon as practicable thereafter,
(i) each LTM Excluded Employee who currently participates in the Sony Theatres
Salaried Employees' Profit Sharing and 401(k) Plan, (the "401(k) Plan") shall
cease to actively participate in the 401(k) Plan and (ii) each LTM Excluded
Employee shall participate in the SPE Savings and Profit-Sharing Plan or such
other defined contribution plan as SPE shall designate (collectively, the
"Transfer Plans"). LTM and SPE shall take, or cause to be taken, all action
as may be necessary to effect such cessation of participation and to cause the
transfer of the LTM Excluded Employees from the 401(k) Plan to a Transfer
Plan; provided that prior to any such transfer, SPE shall demonstrate to the
reasonable satisfaction of LTM that such Transfer Plan meets the qualification
requirements under Section 401(a) of the Code.
(e) Prior to the Closing Date, LTM shall deliver to Cineplex
Odeon a list of the LTM Excluded Employees.
Section 6.13. Inventory
. Each of LTM and Cineplex Odeon shall maintain inventories of
spare parts and items sold in its respective theaters at levels and variety
consistent with past practice in the ordinary course of business and industry
custom. All such items of inventory shall be of good quality and, with respect
to items held for sale, salable in the ordinary course of business.
Section 6.14. Registrar and Transfer Agent
. Cineplex Odeon shall permit its registrar and transfer agent to
act as depository in connection with the Arrangement and the Transactions.
Section 6.15. Additional Agreements
. (a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the Transactions, including using all reasonable efforts to
obtain all necessary waivers, consents (including all third party consents
that may be required in connection with the Sony Asset Transfer, the LTM Debt
Repayment and the LTM Dividend) and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the
HSR Act, the Competition Act and the IC Act and with all applicable
Governmental Entities); provided, however, that nothing in this Agreement
shall obligate any party hereto to agree to any condition or commitment sought
to be imposed on such party or its Affiliates in connection with the approval
or authorization of, consent or waiver with respect to, or determination by
any Governmental Entity not to challenge any of the Transactions under the IC
Act or any Antitrust Law that in the good faith judgment of its board of
directors (and, in the case of LTM, the board of directors of Sony Corporation
of America) would, in and of itself, and without regard to any other
circumstance or factor, be a material and substantial basis for rendering the
Transactions no longer in the best interests of LTM or Cineplex Odeon, as the
case may be. As used in this Agreement, the term "Antitrust Law" shall mean
any of the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the HSR Act,
the Federal Trade Commission Act, as amended, the Competition Act, and all
other applicable United States federal and state and Canadian federal and
state, if any, statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through
merger or acquisition.
(b) In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement
or any other Documents, the proper officers and/or directors of SPE, LTM and
Cineplex Odeon shall take all such necessary action.
(c) (i) For a period of six years after the Closing, LTM shall
cause Cineplex Odeon to maintain in effect the current provisions regarding
indemnification of officers and directors contained in the charter and bylaws
of Cineplex Odeon and its Subsidiaries and any directors, officers or
employees indemnification agreements of Cineplex Odeon and its Subsidiaries,
(ii) LTM shall cause Cineplex Odeon to purchase policies of directors' and
officers' liability insurance and fiduciary liability insurance of at least
the same coverage and amount containing terms and conditions that are no less
advantageous to the insured in any material respect than policies currently
maintained by Cineplex Odeon with respect to claims arising from facts or
events that occurred on or before the Closing Date, subject to a six year
"discovery period," effective as of the Closing (provided, however, that, in
connection with the foregoing, LTM shall only be obligated to cause Cineplex
Odeon to purchase insurance at an aggregate cost equal to 250% of the annual
cost of such insurance coverage as currently provided by Cineplex Odeon),
except that if the insurance coverage contemplated in the principal provision
of this clause (ii) is not available as of the Closing, LTM shall cause
Cineplex Odeon to maintain in effect the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Cineplex Odeon with respect to claims arising from facts or events that
occurred on or before the Closing Date, subject to a six year "discovery
period" (provided that LTM may substitute therefor policies of at least the
same coverage and amount containing terms and conditions that are no less
advantageous to the insured in any material respect; provided, further, that,
in connection with this exception, LTM shall only be obligated to cause
Cineplex Odeon to purchase insurance at an annual cost of up to 150% of the
cost of such insurance as currently provided by Cineplex Odeon) and (iii) for
a period of six years after the Closing LTM shall cause Cineplex Odeon to, and
LTM shall, indemnify the directors and officers of Cineplex Odeon and LTM,
respectively, to the fullest extent to which Cineplex Odeon and LTM are
permitted to indemnify such officers and directors under their respective
charters and bylaws and applicable law.
Section 6.16. Transition Services
. Following the date hereof, SPE, LTM and Cineplex Odeon shall
negotiate in good faith the terms of a transition services agreement between
LTM and SPE (the "Transition Services Agreement") to be executed and delivered
on the Closing Date pursuant to which SPE will agree to provide LTM with
certain services currently performed by SPE or its Affiliates on behalf of LTM
listed on Exhibit G hereto following the Closing Date to the extent LTM will
require such services to conduct its operations in the ordinary course
following the Closing Date at such prices and rates, and subject to such
termination provisions, as may be agreed upon by SPE, Cineplex Odeon and LTM,
and which shall be no less favorable to LTM as would be obtainable from
unaffiliated third parties.
Section 6.17. Adoption of LTM Charter and Bylaws
. Prior to the Closing, LTM and SPE shall take all steps
necessary and proper to cause the LTM Charter and the LTM Bylaws to be adopted
in accordance with the provisions of the Delaware General Corporation Law and
SPE shall cause the LTM Charter to be filed with the Delaware Secretary of
State.
Section 6.18. Designation of Directors
. SPE shall use its reasonable best efforts, prior to the
effective date of the Form S-4 and mailing of the Proxy Statement, to identify
in writing to LTM, Universal and Cineplex Odeon the persons who will serve as
SPE Directors (as defined in the Stockholders Agreement) upon election thereof
effective as of the Closing pursuant to the Stockholders Agreement. Effective
as of the Closing, SPE shall cause the then-current members of the Board of
Directors of LTM to resign, and shall cause (i) the persons designated by SPE
pursuant to this Section 6.18 to serve as SPE Directors, (ii) the Management
Directors (as defined in the Stockholders Agreement), (iii) the persons
designated by mutual agreement of LTM, Universal, SPE and a majority of the
members of the Special Committee to serve as Independent Directors, (iv) the
persons designated by Universal pursuant to the Universal Subscription
Agreement to serve as USI Directors (as defined in the Stockholders Agreement)
and (v) the person designated by the Claridge Group pursuant to the Letter
Agreement to serve as the Claridge Director (as defined in the Stockholders
Agreement) to be elected as members of the Board of Directors of LTM.
Section 6.19. Amendments and Modifications of Documents
. Cineplex Odeon and LTM each agree not to amend or modify any of
the Documents, including any schedules or exhibits thereto, or terminate any
of the Documents (other than this Agreement in accordance with its terms) to
which they are party, respectively, or to waive any provisions or conditions
thereof, or grant any consents thereunder, without the consent of the other,
which shall not be unreasonably withheld.
Section 6.20. No Capital Contributions
. SPE and LTM shall take such steps as are necessary (other than
through capital contributions) to ensure that the LTM Cap will not be less
than the sum of the LTM Debt Repayment, the IMAX Purchase Price and, if
applicable, the Transferred SPE Subsidiary Purchase Price.
Section 6.21. Tax Sharing and Indemnity Agreement
. At or prior to the Closing, LTM shall, and SPE shall cause Sony
Corporation of America to, enter into and deliver the Tax Sharing and
Indemnity Agreement.
Section 6.22. Sony Trademark Agreement; Existing Theaters
. At or prior to the Closing, LTM shall, and SPE shall cause Sony
Corporation, a Japanese Corporation to, enter into and deliver the Sony
Trademark Agreement. LTM hereby agrees that it will, within 60 days after the
date hereof, prepare, subject to confirmation by Sony Corporation prior to the
Closing, a complete and correct list of the movie theater facilities owned,
operated or managed by LTM or the Subsidiaries which used, on September 30,
1997, the Trademark (as defined in the Sony Trademark Agreement) in the name
of the movie theater (other than Lincoln Square (as defined in the Sony
Trademark Agreement)). The parties agree that, upon such confirmation, such
list will be attached as Schedule A to the Trademark Agreement.
Section 6.23. Fractional Shares
. LTM shall cause the depositary under the Plan of Arrangement to
sell shares of LTM Common Stock as contemplated by Section 4.03 of the Plan of
Arrangement.
Section 6.24. Reverse Stock Split
. The parties agree that prior to filing the Form S-4 with the
SEC and listing applications with the TSE and the NYSE, the LTM share amounts
set forth herein (other than the 972 shares of LTM Common Stock held by SPE on
the date hereof) shall be reverse split by such divisor as the parties, based
on the recommendation of their respective financial advisors, deem appropriate
(provided that the share amount immediately preceding the parenthetical in
paragraph 2 of the recitals shall (prior to dividing by the applicable
divisor) be reduced by a number equal to the product of (a) such divisor less
1.0 multiplied by (b) 972) (the "Reverse Stock Split").
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions to Each Party's Respective Obligations
to Effect the Transactions
. The respective obligations of each party to effect the
Transactions to which it is a party shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) The Arrangement and the Transactions shall have been
approved and adopted at the Cineplex Odeon Meeting by (i) all requisite votes
of the shareholders of Cineplex Odeon required pursuant to the OBCA, Canadian
Securities Laws and the Interim Order and (ii) the affirmative vote of the
holders of at least a majority (50.1%) of the votes cast by the holders of the
outstanding Cineplex Odeon Common Shares other than Universal and its
Affiliates and the Claridge Group (together "Cineplex Odeon Shareholder
Approval"), the Court shall have issued the Final Order approving the
Arrangement in form and substance reasonably satisfactory to each party (the
"Court Approval"), the Plan of Arrangement shall have been filed and become
effective in accordance with the Final Order, and all other conditions
precedent to the consummation of the Arrangement shall have been satisfied in
full or waived in accordance with the Plan of Arrangement or this Agreement.
(b) The waiting period applicable to the consummation of the
Transactions under the HSR Act shall have expired or been terminated. In
addition, either (i) the DIR shall have issued an advance ruling certificate
under Section 102 of the Competition Act in respect of the Arrangement and the
Transactions, or (ii) the applicable time period under Section 123 of the
Competition Act shall have expired, and, in either case, the DIR or
representative thereof shall have advised Cineplex Odeon and LTM that the DIR
does not currently intend to make an application under either Section 92 or
Section 100 of the Competition Act in respect of the Arrangement and the
Transactions and neither the DIR nor any representative thereof shall have
rescinded such advice.
(c) The Form S-4 shall have become effective in accordance with
the provisions of the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no cease
trade order shall have been issued by a Canadian Securities Authority and, in
either case, remain in effect and all necessary orders, rulings and approvals
shall have been obtained under Canadian Securities Laws relating to the
issuance or trading of LTM Common Stock.
(d) No preliminary or permanent injunction or other order by any
federal, state or provincial court in the United States or Canada of competent
jurisdiction that prevents the consummation of the Transactions shall have
been issued and remain in effect, nor shall any proceeding by any Governmental
Entity seeking any of the foregoing be pending. Each party hereby agrees to
use its reasonable efforts to have any such injunction or order lifted.
(e) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Transactions that makes the consummation of the Transactions illegal.
(f) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body (i) required so that upon the Arrangement becoming effective
there shall be no restriction under Canadian Securities Laws on the resale and
trading in the Arrangement Shares by persons (other than those specified in
clause (c) of the definition of "distribution" in subsection 1.1 of the
Securities Act (Ontario or the analogous definitions contained in the
securities laws of the other Canadian provinces)), and (ii) otherwise required
in connection with the execution, delivery and performance of the Documents,
shall have been obtained or made, including, without limitation, the Final
Order and the Arrangement Filings as well as such orders and/or waivers as may
be required under Canadian Securities Laws with respect to the distribution of
the Arrangement Shares, including the distribution of the Exchange Shares, in
consideration for the purchase by Cineplex Odeon of a portion of its shares as
provided in the Plan of Arrangement, except, in the case of clause (ii) above,
for any documents required to be filed after the Closing Date and except where
the failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a LTM Material Adverse Effect
or a Cineplex Odeon Material Adverse Effect following the Closing Date.
(g) LTM Common Stock shall have been approved for listing on TSE
and either NYSE or NASDAQ, subject only to official notice of issuance.
(h) The Stockholders Agreement, dated the date hereof, among
SPE, LTM, Universal and the Claridge Group, a conformed copy of which is
attached hereto as Exhibit H (the "Stockholders Agreement"), shall not have
been amended and shall be in full force and effect.
(i) The transactions contemplated by the Universal Subscription
Agreement, dated the date hereof, among LTM and Universal, a conformed copy of
which is attached hereto as Exhibit I (the "Universal Subscription
Agreement"), shall have closed or shall close concurrently with the Closing
and the Universal Subscription Agreement shall be in full force and effect.
(j) LTM shall have received from the ICA Minister a notice,
satisfactory in form and substance to LTM and Cineplex Odeon, stating either
that (A) under Subsections 21(1) or 22(2) or paragraph 23(3)(a) of the IC Act,
the ICA Minister is satisfied that the Transactions are likely to be of net
benefit to Canada or (B) under Subsections 21(2) or 22(3) of the IC Act, the
ICA Minister shall have been deemed to be satisfied that the Transactions are
likely to be of net benefit to Canada.
(k) Holders of not more than 3.5% of the issued and outstanding
shares of Cineplex Odeon capital stock shall have exercised (and not withdrawn
as at the Closing) dissent rights under the Arrangement.
(l) LTM shall have entered into definitive agreements in respect
of the Bank Financing in accordance with Section 6.8, and such agreements
shall be in full force and effect.
(m) Cineplex Odeon and LTM shall have received the written
opinion of Xxxxxxx and Xxxx that the Arrangement has become effective in
accordance with applicable law.
(n) The Letter Agreement shall not have been amended and shall
be in full force and effect.
(o) The persons designated to be elected as members of the Board
of Directors of LTM (i) by SPE as SPE Directors pursuant to Section 6.18 of
this Agreement, (ii) by Claridge (as agent for the Claridge Group) as the
Claridge Director, pursuant to the Letter Agreement, (iii) by Universal as the
USI Directors pursuant to the Universal Subscription Agreement and (iv) by
mutual agreement of LTM, SPE, Universal and a majority of the Special
Committee as the Independent Directors shall have been elected as members of
the Board of Directors of LTM and shall be the only persons serving in such
capacity effective as of the Closing.
Section 7.2. Conditions to Obligation of Cineplex Odeon to
Effect the Transactions
. The obligations of Cineplex Odeon to effect the Transactions to
which it is a party shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions, unless waived by Cineplex
Odeon:
(a) Each of SPE and LTM shall have performed in all material
respects its agreements contained in the Documents required to be performed on
or prior to the Closing Date; its representations and warranties contained in
this Agreement and any of the other Documents shall be true and correct in all
material respects when made and on and as of the Closing Date as if made on
and as of such date (except to the extent they relate to a particular date),
except as expressly contemplated or permitted by this Agreement or such other
Documents, as the case may be (provided, however, that only for purposes of
this Section 7.2(a) and Article VIII, such representations and warranties
shall be deemed to be true and correct in all material respects unless the
failure or failures of such representations and warranties to be so true and
correct (without regard to materiality qualifiers contained therein),
individually or in the aggregate, results or would reasonably be expected to
result in a LTM Material Adverse Effect), and Cineplex Odeon shall have
received a certificate of the President or Chief Executive Officer or a Vice
President of LTM to that effect. In addition, Cineplex Odeon shall have
received a certificate of the Chief Financial Officer of LTM certifying that,
as of the Closing Date, except for (a) liabilities for film booking
arrangements and (b) obligations and liabilities included in clauses (ii)(x)
or (y) of the definition of Net Working Capital or Debt reflected in each case
in LTM's Preliminary Closing Statement or arising under the Documents or as
disclosed in Section 3.19 of the LTM Disclosure Schedule or with respect to
which LTM is required to indemnify SPE or SPE's Affiliates in accordance with
the Tax Sharing and Indemnity Agreement, neither LTM nor any LTM Subsidiary
(including, without limitation, the Transferred SPE Subsidiaries) will have
any obligation or liability, contingent or otherwise, owed to SPE or any
Affiliate thereof (other than LTM and the LTM Subsidiaries).
(b) Cineplex Odeon shall have received a "comfort" letter from
Price Waterhouse, L.L.P. of the kind contemplated by the AICPA Statement,
dated the Closing Date, in form and substance reasonably satisfactory to
Cineplex Odeon, in connection with the procedures undertaken by them with
respect to the combined financial statements of LTM and the LTM Subsidiaries
contained in the Form S-4 and the other matters contemplated by the AICPA
Statement and customarily included in comfort letters relating to transactions
similar to the Transactions.
(c) Sony Corporation of America and LTM shall have entered into
the Tax Sharing and Indemnity Agreement, and such agreement shall be in full
force and effect.
(d) To the extent LTM is required to, or requires to, use the
trademark "Sony," Sony Corporation and LTM shall have entered into the Sony
Trademark Agreement and such agreement shall be in full force and effect.
(e) If required by Section 6.16, SPE, SPE and LTM shall have
entered into the Transition Services Agreement on terms satisfactory to the
parties hereto and Universal, and such agreement shall be in full force and
effect.
(f) The LTM Charter and the LTM Bylaws shall have been adopted
and shall be in full force and effect.
(g) SPE and LTM shall have satisfied their obligations under
Section 6.20.
(h) Cineplex Odeon shall have received such legal opinions from
counsel to LTM and SPE reasonably requested by it and customary in
transactions similar to the Transactions.
Section 7.3. Conditions to Obligations of SPE and LTM to Effect
the Transactions
. The obligations of SPE and LTM to effect the Transactions shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, unless waived by LTM:
(a) Cineplex Odeon shall have performed in all material respects
its agreements contained in the Documents required to be performed on or prior
to the Closing Date; Cineplex Odeon's representations and warranties contained
in this Agreement and any of the other Documents shall be true in all material
respects when made and on and as of the Closing Date as if made on and as of
such date (except to the extent they relate to a particular date), except as
expressly contemplated or permitted by this Agreement or such other Document,
as the case may be (provided, however, that only for purposes of this Section
7.3(a) and Article VIII, such representations and warranties shall be deemed
to be true and correct in all material respects unless the failure or failures
of such representations and warranties to be so true and correct (without
regard to materiality qualifiers contained therein), individually or in the
aggregate, results or would reasonably be expected to result in a Cineplex
Odeon Material Adverse Effect), and LTM shall have received a certificate of
the President or Chief Executive Officer or a Vice President of Cineplex Odeon
to that effect. In addition, LTM shall have received a certificate of the
Chief Financial Officer of Cineplex Odeon certifying that, as of the Closing
Date, except for (a) amounts owed to Universal and its Affiliates for film
booking and home video arrangements or under the management agreement in
respect of the Universal City Cinema, (b) obligations and liabilities included
in clauses (ii)(x) and (y) of the definition of Net Working Capital and Debt
reflected in each case in Cineplex Odeon's Closing Statement or arising under
the Documents or as disclosed in the Cineplex Odeon Reports or in Section 2.19
of the Cineplex Disclosure Schedule and (c) the exclusions set forth in the
final sentence of paragraph 9 of the Letter Agreement, Cineplex Odeon has no
outstanding obligations or liabilities, contingent or otherwise, owed to
Universal or the Claridge Group, or their respective Affiliates.
(b) LTM shall have received a "comfort" letter from KPMG of the
kind contemplated by the CICA Handbook, dated the Closing Date, in form and
substance reasonably satisfactory to LTM, in connection with the procedures
undertaken by them with respect to the financial statements of Cineplex Odeon
contained in the Form S-4 and the other matters contemplated by the CICA
Handbook and customarily included in comfort letters relating to transactions
similar to the Transactions.
(c) LTM shall have received such legal opinions from counsel to
Cineplex Odeon reasonably requested by it and customary in transactions
similar to the Transactions.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination
. This Agreement may be terminated at any time before the Closing
Date, in each case as authorized by the respective Board of Directors of
Cineplex Odeon or LTM:
(a) by mutual written consent of each of Cineplex Odeon and LTM;
(b) by either Cineplex Odeon or LTM if the Closing shall not
have occurred on or before June 30, 1998 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date; provided, further, that if
on the Termination Date the conditions to the Closing set forth in
Section 7.1(b), 7.1(d), 7.1(f), or 7.1(j) shall not have been fulfilled, but
all other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be extended to December 31,
1998. The parties agree that any amendment of this Agreement to extend the
Termination Date beyond June 30, 1998 shall be made without any amendment to
or renegotiating of any other material provisions of this Agreement;
(c) by either Cineplex Odeon or LTM if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties shall use their commercially
reasonable efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Cineplex Odeon or LTM if the other shall have
breached, or failed to comply with, or by Cineplex Odeon if SPE shall have
breached, or failed to comply with, in any material respect any of its
obligations under this Agreement or any representation or warranty made by
such other party shall have been incorrect in any material respect when made
or shall have since ceased to be true and correct in any material respect, and
such breach, failure or misrepresentation is not cured within 30 days after
notice thereof and such breaches, failures or misrepresentations, individually
or in the aggregate and without regard to materiality qualifiers contained
therein, results or would reasonably be expected to result in a Cineplex
Odeon Material Adverse Effect or a LTM Material Adverse Effect as the case may
be (it being understood that failure to obtain any consent from landlords to
the entering into or completion of any of the Transactions shall not give rise
to any rights under this Section 8.1(d));
(e) by LTM if the Board of Directors of Cineplex Odeon or any
committee of the Board of Directors of Cineplex Odeon (i) shall withdraw or
modify in any manner adverse to LTM its approval or recommendation of this
Agreement or the Transactions, (ii) shall fail to reaffirm such approval or
recommendation within 15 business days following receipt of a written request
for such reaffirmation from LTM acting reasonably, (iii) shall approve or
recommend any acquisition of Cineplex Odeon or a material portion of its
assets or any tender offer for shares of its capital stock, in each case,
other than by a party or an affiliate thereof, or (iv) shall resolve to take
any of the actions specified in clauses (i) and (iii) above;
(f) by LTM or Cineplex Odeon if the Cineplex Odeon Shareholder
Approvals are not obtained at the Cineplex Odeon Meeting, including any
adjournments thereof;
(g) by Cineplex Odeon, prior to the Cineplex Odeon Meeting, upon
five days' prior notice to LTM, if, as a result of an Alternative Proposal,
the Board of Directors of Cineplex Odeon determines in good faith that their
fiduciary obligations under applicable law require that such Alternative
Proposal be accepted; provided, however, that (i) the conditions set forth in
the last sentence of Section 6.10(c) shall have been satisfied; (ii) the Board
of Directors of Cineplex Odeon shall have reasonably concluded in good faith,
after considering provisions of applicable law and after giving effect to all
concessions which may be offered by LTM pursuant to clause (iii) below, on the
basis of oral or written advice of outside counsel, that such action may be
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under the applicable law and (iii) prior to any such
termination, Cineplex Odeon shall, and shall cause its financial and legal
advisors to, negotiate with LTM to make such adjustments in the terms and
conditions of this Agreement as would enable Cineplex Odeon to proceed with
the transactions contemplated hereby; provided, however, that no termination
by Cineplex Odeon shall be effective pursuant to this Section 8.1(g) under
circumstances in which a Cineplex Odeon Termination Fee is payable by Cineplex
Odeon under Section 8.2(a), unless concurrently with such termination, such
Cineplex Odeon Termination Fee is paid in full by Cineplex Odeon in accordance
with the provisions of Section 8.2(a); and
(h) by LTM or Cineplex Odeon if a final decision that is
nonappealable has been issued by a court of competent jurisdiction denying
either the Interim Order or the Final Order.
Section 8.2. Fees
. (a) If this Agreement (i) is terminated by LTM pursuant to
Section 8.1(e) hereof or by Cineplex Odeon pursuant to Section 8.1(g) hereof
or (ii) is terminated by LTM as a result of Cineplex Odeon's material breach
of Section 6.2 hereof that is not cured within 30 days after notice thereof to
Cineplex Odeon, Cineplex Odeon shall pay to LTM a one-time termination fee
(the "Termination Fee") of US$11 million. In addition, Cineplex Odeon shall
pay to LTM the Termination Fee (if it has not already been paid pursuant to
the prior sentence) if (x) this Agreement is terminated by LTM or Cineplex
Odeon pursuant to Section 8.1(f) hereof because of the failure to obtain
Cineplex Odeon Shareholder Approval at the Cineplex Odeon Meeting or by LTM or
Cineplex Odeon pursuant to Section 8.1(h) hereof if a final decision that is
nonappealable has been issued by a court of competent jurisdiction denying
either the Interim Order or the Final Order, (y) prior to the Cineplex Odeon
Meeting or denial of the Interim Order or the Final Order, as the case may be,
there shall have been an Alternative Proposal (other than an Alternative
Proposal initiated prior to the date of this Agreement that shall have been
withdrawn, rejected, terminated or otherwise no longer under consideration as
of the date of this Agreement and that shall not have been renewed or re-
initiated, in any form, by the party or parties that previously initiated such
Alternative Proposal or any Affiliates, agents, representatives or advisors
thereof) involving Cineplex Odeon or any of its Significant Subsidiaries
(whether or not such Alternative Proposal shall have been rejected or
withdrawn prior to such meeting or the denial of either the Interim Order or
the Final Order) and (z) within twelve months of such termination, Cineplex
Odeon consummates or accepts a written offer to consummate an Alternative
Proposal. In no case shall more than one Termination Fee be payable pursuant
to this Section 8.2.
(b) The parties agree that the agreements contained in
Section 8.2(a) above are an integral part of the Transactions and constitute
liquidated damages and not a penalty. The parties agree that the Termination
Fee is intended to reimburse LTM for the time and costs attributable to
negotiating this Agreement and analyzing the Transactions, LTM's opportunity
cost and foregone alternative transactions and the impact on LTM's other
business relationships that otherwise cannot be reasonably quantified. If
Cineplex Odeon fails to promptly pay to LTM any fee due under Section 8.2(a),
in addition to such fees, if LTM shall initiate any action, including the
filing of any lawsuit or other legal action taken to collect payment, the
party with respect to whom such action is determined adversely shall reimburse
the other for its costs and expenses (including legal fees and expenses) in
connection with such action and, if such action is determined adversely to
Cineplex Odeon, Cineplex Odeon shall also pay interest on the amount of any
unpaid fee at the one-year London Interbank Offered Rate that appears on the
Reuters Telerate Page 3750 as of 11 a.m. London time on the day such
Termination Fee is required to be paid in an amount of U.S. dollars most
nearly similar to the amount of the Termination Fee ("LIBOR") rate plus 2% per
annum accruing from the date such fee was required to be paid.
(c) In the event of termination of this Agreement and the
abandonment of the Transactions pursuant to this Article VIII, all obligations
of the parties hereto shall terminate, and no party shall have any further
liability to the others except (i) as set forth in the next sentence, and
(ii) the obligations of the parties pursuant to this Section 8.2 and Section
9.3 and (iii) as provided in Sections 9.1, 9.2, 9.5, 9.6, 9.7, 9.9, 9.11,
9.12, 9.14, 9.15, 9.16 and 9.17. Moreover, in the event of termination of
this Agreement pursuant to Section 8.1(d), nothing herein shall prejudice the
ability of the non-breaching party from seeking damages from any other party
for any willful breach of such other party's obligations to perform its
covenants under this Agreement and the right to pursue any remedy at law or in
equity. With respect to any proceeding initiated hereunder, any party that
shall be found to have willfully breached any of such party's obligations to
perform its covenants under this Agreement shall bear the costs and expenses
of the other party in connection with such proceeding, including, without
limitation, attorneys' fees.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Non-Survival of Representations and Warranties;
Survival of Agreements
. Except for Section 4.5(c), no representations and warranties
set forth in this Agreement shall survive the Closing Date. Subject to
Section 8.2(c), all covenants and agreements set forth in this Agreement shall
survive in accordance with their terms.
Section 9.2. Notices
. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telegram, telex or other
standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to Cineplex Odeon:
Cineplex Odeon Corporation
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx and Xxxx
000 Xxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
and
Weil, Gotshal & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
If to LTM:
LTM Holdings, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
With a copy to:
LTM Holdings, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
and
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
and
Xxxxxx, Xxxx & Xxxx
0 Xxxxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to SPE:
Sony Pictures Entertainment
00000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 9.3. Fees and Expenses
. Whether or not the Transactions are consummated, except as
otherwise provided in the Documents, all costs and expenses incurred in
connection with the Documents and the Transactions shall be paid by the party
incurring such expenses. With respect to any sales, transfer, stamp or
similar taxes or other governmental fees payable in connection with any
transfer forming part of the Transactions, such taxes or governmental fees
shall be borne by the transferor.
Section 9.4. Publicity
. So long as this Agreement is in effect, LTM and Cineplex Odeon
agree to consult with each other in issuing any press release or otherwise
making any public statement with respect to the Transactions, and none of them
shall issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange. The commencement
of litigation relating to the Documents or the Transactions, or any
proceedings in connection therewith, shall not be deemed a violation of this
Section 9.4. Nothing in this Section 9.4 shall require LTM or Cineplex Odeon
to consult the other with respect to press releases other than those directly
related to the Transactions, including without limitation press releases
relating to theater openings, theaters to be built or developed, or the
acquisition and/or disposition of theaters.
Section 9.5. Specific Performance
. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. The parties
accordingly agree that each shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States, Canada or any
province or state having jurisdiction. The provisions of this Section 9.5 are
in addition to any other remedy to which a party is entitled at law or in
equity.
Section 9.6. Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except for the rights in favor of the Persons identified in
Sections 1.8(g), 6.9(e), 6.15(c), 6.18, 6.20, 6.21, 7.1(o), 7.2(c), 7.2(d) and
7.2(e).
Section 9.7. Entire Agreement
. This Agreement, the exhibits attached hereto, the
Confidentiality Agreement and any documents delivered by the parties in
connection herewith and therewith or on the date hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 9.8. Amendment
. This Agreement, including the exhibits and schedules hereto,
may be amended by the parties hereto, by action taken by their respective
Boards of Directors, at any time before or after approval of matters presented
in connection with the Arrangement Transaction by the shareholders of Cineplex
Odeon, but after any such shareholder approval, no amendment shall be made
that by law requires the further shareholder approval without obtaining such
further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; and no purported
amendment, modification or supplement of this Agreement (including any
amendment, modification or supplement of the exhibits or schedules hereto) by
Cineplex Odeon shall be effective unless and until such amendment,
modification or supplement is accompanied by the delivery to LTM of evidence
satisfactory to LTM that such amendment, modification or supplement will not
result in a breach or violation of the Three Party Agreement.
Section 9.9. Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflict of laws.
Section 9.10. Counterparts
. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
Section 9.11. Headings and Table of Contents
. Headings of the Articles and Sections of this Agreement are for
the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
Section 9.12. Interpretation
. In this Agreement, unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words denoting natural
persons shall include corporations and partnerships and vice versa.
Section 9.13. Waivers
. At any time prior to the Closing Date, the parties hereto, by
or pursuant to action taken by their respective Boards of Directors, may
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party; and no purported waiver or consent
granted under this Agreement (including any of the exhibits or schedules
hereto) by Cineplex Odeon shall be effective unless and until such waiver or
consent is accompanied by the delivery to LTM of evidence satisfactory to LTM
that such waiver or consent will not result in a breach or violation of the
Three Party Agreement. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
Section 9.14. Severability
. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 9.15. Certain Definitions
. As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly
owns or controls at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board
of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is
a general partner. For purposes of Article III and Article IV, the
Subsidiaries of LTM shall include the Transferred SPE Subsidiaries and the LTM
Contracts shall include the Imax Leases, and the Transferred SPE Subsidiaries
shall also be deemed to be consolidated subsidiaries of LTM. As used in this
Agreement, the words "Significant Subsidiaries" of a party shall refer to the
Subsidiaries that constitute "significant subsidiaries" of such party under
Rule 405 promulgated by the SEC under the Securities Act. As used in this
Agreement, "Material Adverse Effect" means such state of facts, event, change
or effect that has had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations or financial condition
of the referenced party and its Subsidiaries (including, in the case of LTM,
the Transferred SPE Subsidiaries and the assets subject to the Sony Asset
Transfer) taken as a whole.
Section 9.16. Knowledge
. As used in this Agreement, the word "Knowledge" when used with
respect to any party means the actual knowledge of any senior executive
officer of such party.
Section 9.17. Release.
Subject to the consummation of the Transactions, and excluding
(a) amounts owed to SPE and its Affiliates for film booking arrangements (b)
obligations and liabilities included in clauses (ii)(x)and (y) of the
definition of Net Working Capital and Debt reflected in each case in LTM's
Closing Statement and (c) amounts owed to SPE and its Affiliates (i) arising
under the Documents or (ii) with respect to which LTM is required to indemnify
SPE or its Affiliates in accordance with the Tax Sharing and Indemnity
Agreement, SPE, on behalf of itself and its Affiliates, (including, without
limitation, Sony Land and Sony Capital), hereby acknowledges, releases and
discharges and indemnifies and saves harmless LTM and the LTM Subsidiaries
(including the Transferred SPE Subsidiaries) and their successors and assigns
from all actions, causes of action, suits, debts, dues, sums of money,
accounts, claims and demands owed by LTM and the LTM Subsidiaries (including,
without limitation, the Transferred SPE Subsidiaries) to SPE and its
Affiliates by reason of any matter, cause, contract (whether written or oral),
course of dealing or thing whatsoever arising during, or in respect of, the
period on or before the Closing Date.
IN WITNESS WHEREOF, SPE, LTM and Cineplex Odeon have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
SONY PICTURES ENTERTAINMENT INC.
Xxxxxx X. Xxxxxx
By: ________________________________________
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and General Counsel
LTM HOLDINGS, INC.
By: Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxx
Title: Exec. V.P.
CINEPLEX ODEON CORPORATION
By: Xxxxxxx Xxxxxx
Name:
Title:
