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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made as of
September 30, 1997 by and between LTM Holdings, Inc., a Delaware corporation
("LTM"), and Universal Studios, Inc., a Delaware corporation ("Universal").
WHEREAS, Universal is a significant shareholder of Cineplex
Odeon Corporation, an Ontario corporation ("Cineplex Odeon").
WHEREAS, the Boards of Directors of LTM and Cineplex Odeon
have determined that it is in the best interests of their respective
shareholders and companies that they engage in a strategic business combination
pursuant to which Cineplex Odeon would become a wholly-owned subsidiary of LTM
and the shareholders of Cineplex Odeon would receive newly issued shares of LTM
capital stock (the "Combination Transaction") as contemplated by that certain
Master Agreement of even date herewith (the "Master Agreement") by and among
LTM, Sony Pictures Entertainment Inc., a Delaware corporation and the indirect
parent of LTM ("SPE"), and Cineplex Odeon and certain other agreements referred
to and/or incorporated therein (capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Master Agreement); and
WHEREAS, in connection with the Combination Transaction, LTM,
Cineplex Odeon and Universal desire that Universal subscribe for 44,266,062
shares (subject to adjustment for the Reverse Stock Split and in accordance with
Section 4.6 hereof) of LTM's common stock, par value US$.01 per share (the
"Stock"), in exchange for a cash payment to LTM of US$84,500,000 (the "Purchase
Price").
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein, LTM and
Universal agree as follows:
ARTICLE I
SUBSCRIPTION
Section 1.1. Subscription. At the Closing, Universal shall purchase the
Stock from LTM, and LTM hereby agrees to issue and sell the Stock to Universal,
in exchange for the delivery by Universal to LTM of the Purchase Price, subject
to the terms and conditions set forth in this Agreement (the "Purchase").
Section 1.2. Closing; Payment of Purchase Price and Delivery of the
Stock. (a) Subject to the terms and conditions set forth in this Agreement, the
Purchase
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shall occur simultaneously with the Closing and at the offices of Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx.
(b) At the Closing, Universal shall pay to LTM US$84,500,000
by bank wire transfer in immediately available funds, to a bank account that LTM
shall designate in writing to Universal no less than three business days prior
to the Closing, and deliver (i) a receipt for the Stock and (ii) the certificate
to be delivered pursuant to Section 5.3(b).
(c) At the Closing, LTM shall deliver to Universal a
certificate or certificates representing the Stock issued in the name of
Universal or its nominee, free and clear of any Encumbrances, except
Encumbrances arising as a result of any action taken by Universal, and in form
reasonably satisfactory to Universal and with any required stock transfer tax
stamps affixed, (i) a receipt for the Purchase Price and (ii) the certificate to
be delivered pursuant to Section 5.2(a).
Section 1.3. Payment of Taxes and Fees. At the Closing, LTM shall pay
all state and local sales taxes, stamp taxes, transfer taxes and any similar
taxes that become payable in connection with the transactions contemplated
hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF UNIVERSAL
Universal represents and warrants to LTM as follows:
Section 2.1. Existence; Good Standing; Corporate Authority. Universal
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Universal has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now conducted. Neither Universal nor any of its Subsidiaries
is in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, governmental rule or regulation to
which Universal or any of its Subsidiaries or any of their respective properties
or assets is subject that would prevent Universal from performing its
obligations under the Documents.
Section 2.2. Authorization, Validity and Effect of Agreements.
Universal has the requisite corporate power and authority to execute and deliver
this Agreement and the Stockholders Agreement, and all agreements and documents
contemplated hereby or thereby to which it is a party, and the consummation by
Universal of the transactions contemplated hereby and thereby has been duly
authorized by all requisite corporate action. This Agreement and the
Stockholders Agreement, and all agreements and documents contemplated hereby or
thereby, to
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which Universal is a party, do or (when executed and delivered pursuant hereto
for value received) will constitute the valid and legally binding obligations of
Universal, enforceable against Universal in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
Section 2.3. No Violation. Neither the execution and delivery by
Universal of the Documents to which it is a party nor the consummation by
Universal of the transactions contemplated hereby in accordance with the terms
hereof, will: (i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of Universal; (ii) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any material
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation or court decree to which Universal or any of its
Subsidiaries is a party, except to the extent any of the effects described in
this clause (ii) would not (x) impair the ability of Universal to perform its
obligations under this Agreement or the Stockholders Agreement in any material
respect or (y) delay in any material respect or prevent the consummation of the
Purchase or any of the Transactions; or (iii) other than the Regulatory Filings
(to the extent applicable to Universal), require any material consent, approval
or authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, the failure to obtain or make which would
(x) impair the ability of Universal to perform its obligations under this
Agreement or the Stockholders Agreement in any material respect or (y) delay in
any material respect or prevent the consummation of the Purchase or any of the
Transactions.
Section 2.4. No Brokers. Universal has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of LTM or Cineplex Odeon to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the Transactions.
Section 2.5. Ownership of Cineplex Odeon Capital Stock. Universal holds
beneficially and of record 73,446,426 SRV Shares, free and clear of all
Encumbrances or other restrictions on transfer except those imposed under
securities laws of general application and those under the Standstill Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LTM
LTM represents and warrants to Universal as follows:
Section 3.1. Incorporation by Reference. LTM hereby makes to Universal
the representations and warranties of LTM set forth in Article III of the Master
Agreement, all of which representations and warranties are hereby incorporated
herein by reference in their entirety.
Section 3.2. The Stock. At the Closing, the Stock (including any
Additional Shares (as defined in Section 4.6 below) issuable pursuant to Section
4.6) will have been duly and validly authorized, and, when issued and delivered
pursuant to this Agreement, shall be duly and validly issued and fully paid and
non-assessable, and not subject to preemptive or similar rights. The transfer
and delivery of the Stock (including any Additional Shares issued pursuant to
Section 4.6) by LTM to Universal as contemplated by this Agreement will transfer
good title to the Stock (including any Additional Shares issued pursuant to
Section 4.6) to Universal, free and clear of any Encumbrances, except
Encumbrances arising as a result of any action taken by Universal and
Encumbrances under the Stockholders Agreement.
Section 3.3. Section 203 of the Delaware General Corporation Law. The
Board of Directors of LTM has approved the Transactions, including, without
limitation, the transactions contemplated by this Agreement (including
Universal's acquisition of beneficial ownership of the Stock for purposes of
Section 203(a)(1) of the Delaware General Corporation Law).
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.1. Registration Statement/Proxy Statement/Prospectus.
Universal (i) shall cooperate with LTM and Cineplex Odeon in providing such
information concerning Universal, and, to the extent such information is
requested by the staff of the SEC in connection with its review of the Form S-4
or the Form S-1, information concerning the Universal City Cinema (as defined in
Section 4.7 below), as may be required under the Securities Act, the Exchange
Act and the rules and regulations of the SEC thereunder in the preparation of
the Registration Statements, the Proxy Statement and the Prospectus. Universal
agrees that the information provided by it for inclusion in the Registration
Statements, the Proxy Statement or the Prospectus and each amendment or
supplement thereto, (i) in the case of the Proxy Statement, at the time of
mailing thereof and at the time of the
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Cineplex Odeon Meeting, or, (ii) in the case of each Registration Statement and
the Prospectus or any amendment or supplement thereto, at the time it is filed
or becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 4.2. HSR Act; Competition Act; Investment Canada Act;
Submission of Plan of Arrangement for Approval. (a) Each of the parties hereto
shall use their best efforts to file as soon as practicable notifications under
the HSR Act in connection with the Transactions, and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission, the
Antitrust Division of the Department of Justice and/or the DIR for additional
information or documentation and to respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
governmental authority in connection with antitrust matters.
(b) Universal shall cooperate with LTM and Cineplex Odeon in
connection with the preparation and filing within five business days after the
date hereof (i) with the ICA Minister, an application by LTM for review under
the IC Act in connection with the Arrangement and (ii) with the DIR, an
application for an advance ruling certificate under the Competition Act in
connection with the Arrangement.
(c) Notwithstanding the provisions of Sections 4.2(a) and (b),
nothing in this Agreement shall obligate LTM to agree to any condition or
commitment sought to be imposed on LTM or its Affiliates in connection with the
approval or authorization of, consent or waiver with respect to, or
determination by any Governmental Entity not to challenge any of the
Transactions (including, without limitation, the transactions contemplated by
this Agreement) under the IC Act or any Antitrust Law that in the good faith
judgment of the board of directors of Sony Corporation of America would, in and
of itself, and without regard to any other circumstance or factor, be a material
and substantial basis for rendering the Transactions (including, without
limitation, the transactions contemplated by this Agreement) no longer in the
best interests of LTM.
Section 4.3. Bank Financing. Universal shall provide such financial and
other information concerning the Universal City Cinema to the proposed lenders
of the Bank Financing as may be reasonably requested in connection with the Bank
Financing by such proposed lenders; provided that such lenders have agreed to be
bound by the provisions of any confidentiality agreements then in effect between
LTM and Universal.
Section 4.4. No Shop. Prior to the Closing Date, Universal agrees
that:
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(a) neither it, nor any Universal Subsidiary, and none of the
officers, directors, employees, agents and representatives thereof (including,
without limitation, any investment banker, attorney or accountant retained
thereby), shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any Alternative Proposal or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to an Alternative
Proposal, or release any third party from any obligations under any existing
standstill agreement or arrangement relating to any Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal, provided, however, that, in the case of any individual serving as a
director of Cineplex Odeon and acting in such capacity (i) the provisions of
this Section 4.4 shall be subject to such individual's fiduciary duties as a
director and (ii) such provisions shall not prohibit actions taken in accordance
with Section 6.10 of the Master Agreement.
(b) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 4.4;
(c) it will notify LTM as promptly as practicable and without
delay if any such inquiries or proposals are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; and
(d) it will not, unless and until the Master Agreement is
terminated in accordance with Article VIII thereof, directly or indirectly,
purchase or otherwise acquire any Cineplex Odeon capital stock or, except
pursuant to the Plan of Arrangement, sell, offer to sell, solicit an offer to
buy, contract to sell, grant an option to purchase or otherwise transfer or
dispose of any Cineplex Odeon Common Shares or SRV Shares held, directly or
indirectly, beneficially or of record by it.
Section 4.5. Advice of Changes; SEC Filings. The parties shall confer
with each other on a regular basis on operational matters affecting or which may
reasonably be expected to affect the Combined Enterprise. LTM and Universal
shall advise each other promptly orally and in writing of any change or event
that has had, or could reasonably be expected to have, a LTM Material Adverse
Effect. Universal and LTM shall provide each other (or their respective counsel)
promptly copies of all filings made by such party with the SEC, any Canadian
Securities Authority or any other Governmental Entity in connection with the
Transactions.
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Section 4.6. Issuance of Additional Shares. (a) The number of shares of
Stock to be issued pursuant to this Agreement shall be subject to adjustment in
accordance with this Section 4.6. LTM agrees that at any time LTM shall issue or
sell any Common Stock (as defined in the Stockholders Agreement) (other than
Excluded Securities (as defined in the Stockholders Agreement)) to any Person
other than Universal or any of its Affiliates (a "Sale"), including issuances of
Common Stock upon conversion, exchange or exercise of Voting Share Equivalents
(as defined in the Stockholders Agreement), whether at the Closing (other than
pursuant to the Amalgamation or this Agreement) or thereafter, and whether in
one or a series of transactions, in exchange for consideration consisting solely
of cash and/or a deferred payment obligation of the purchaser of such Shares
valued (in accordance with Section 4.6(h) and prior to underwriting discounts or
commissions) at an amount per Share (the "Subsequent Sale Price") less than
US$1.90891, subject to adjustment for the Reverse Stock Split and further as
provided herein (the "Measurement Price"), concurrently with any such Sale and
as a condition thereto, LTM shall issue additional Shares ("Additional Shares")
to Universal or its designees for no additional consideration to the extent
required by the provisions of this Section 4.6. The provisions of this Section
4.6 shall not apply to any Sale occurring after a Capped Sale (as defined in
Section 4.6(b) below).
(b) In connection with any Sale described in Section 4.6(a),
LTM shall issue a number of Additional Shares calculated as set forth below:
(i) Upon the closing of the first Sale on or after
the Closing, the number of Additional Shares shall equal (x) the
quotient of US$84.5 million divided by the Subsequent Sale Price in
connection with such Sale minus (y) the number of shares issued to
Universal at the Closing pursuant to Section 1.2 of this Agreement
(such issued shares, the "Universal Cash Shares"). If the foregoing is
not a positive number, no Additional Shares will be issued in
connection with such Sale.
(ii) Upon the closing of any Sales other than the
Sale referred to in clause (i) above, the number of Additional Shares
shall equal (w) the quotient of US$84.5 million divided by the Weighted
Average Subsequent Sale Price (as defined in Section 4.6(c) below)
minus (x) the Universal Cash Shares minus (y) any Additional Shares
previously issued by LTM pursuant to this Section 4.6 ("Previously
Issued Additional Shares") plus (z) any shares delivered to LTM
pursuant to Section 4.6(d) ("Section 4.6 Shares"). If the foregoing is
not a positive number, no Additional Shares will be issued by LTM in
connection with such Sale.
(c) The "Weighted Average Subsequent Sale Price" shall equal
the quotient of (x) the Aggregate Consideration, divided by (y) the Aggregate
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Share Number. The "Aggregate Consideration" means the aggregate consideration
(prior to underwriting discounts or commissions and valued in accordance with
Section 4.6(h)) received by LTM in connection with all Sales; provided that (i)
Aggregate Consideration shall not exceed US$100,000,000 (the "Aggregate
Consideration Cap") and (ii) if the proceeds of any Sale, but for the Aggregate
Consideration Cap, would increase the Aggregate Consideration from the level
thereof immediately prior to such Sale (the "Pre-Cap Aggregate Consideration")
(such Sale being a "Capped Sale") to a level in excess of the Aggregate
Consideration Cap, the Aggregate Consideration shall only be increased by an
amount equal to the difference between the Aggregate Consideration Cap and the
Pre-Cap Aggregate Consideration (the "Aggregate Consideration Margin"). The
"Aggregate Share Number" means aggregate number of shares issued by LTM in all
Sales (including the Sale for which a calculation of Additional Shares pursuant
to clause (b)(ii) above is being made), excluding any Additional Shares that may
have been issued to Universal in connection with such Sales; provided that, with
respect to a Capped Sale, in addition to shares issued prior to such Capped
Sale, the Aggregate Share Number shall include only that number of shares
issuable in exchange for payment of an amount equal to the Aggregate
Consideration Margin based upon the average per share consideration paid or
payable pursuant to such Capped Sale.
(d) Universal agrees that at any time LTM shall issue or sell
any Shares pursuant to a Sale described in clause (ii) of Section 4.6(b) for a
Subsequent Sale Price greater than the Weighted Average Subsequent Sale Price,
promptly following such Sale, Universal shall deliver or cause to be delivered a
number of Shares to LTM equal to (x) the Universal Cash Shares plus (y) any
Additional Shares previously issued by LTM pursuant to this Section 4.6 minus
(z) the quotient of US$84.5 million divided by the Weighted Average Subsequent
Sale Price. If the foregoing is not a positive number, no Shares shall be
deliverable in connection with such Sale; provided, however, that under no
circumstances shall Universal be required to deliver any Shares in excess of the
number of Additional Shares that LTM shall have previously issued less the
number of Shares that Universal has previously delivered or caused to be
delivered to LTM pursuant to this Section 4.6(d).
(e) At least fifteen business days prior to consummating a
Sale, LTM shall deliver a written notice to Universal, which such notice shall
specify the consideration to be paid in connection with such Sale, LTM's belief
as to the value of any deferred payment obligation in connection therewith,
LTM's belief as to the Subsequent Sale Price, LTM's belief as to the number of
Additional Shares to be issued pursuant to Section 4.6(a), if any, or the number
of shares to be delivered pursuant to Section 4.6(d), if any, along with a
calculation in accordance with Section 4.6(b) or 4.6(d), as applicable,
supporting such determination.
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(f) The obligations under this Section 4.6 shall terminate if
LTM shall have issued or sold Shares in one or more Sales for an aggregate
consideration (prior to underwriting discounts or commissions) equal to or
greater than the Aggregate Consideration Cap, provided, however, that the
provisions of this Section 4.6 shall be applicable to any Sale that is part of a
series of related Sales, if such Sale relates to the Sale that resulted in the
Aggregate Consideration Cap having been exceeded or that was consummated at a
time when the Aggregate Consideration Cap had not yet been exceeded.
(g) If, in connection with a Sale, LTM is prohibited by the
rules of any applicable stock exchange from issuing all of the Additional Shares
required to be issued pursuant to Section 4.6(a) and (b) or any restrictions or
conditions on LTM's ability to issue Additional Shares in accordance with such
Sections are imposed by any applicable stock exchange which are not satisfactory
to Universal, LTM shall be prohibited from making any such Sale without
Universal's consent, which consent shall be given in Universal's sole
discretion.
(h) For purposes of this Section 4.6, the value of the
Subsequent Share Price shall be equal to the per share cash consideration, if
any, plus the per share fair market value of the deferred payment obligation of
the purchaser of the applicable shares and, in the case of Common Stock issuable
upon the conversion, exercise or exchange of any Voting Share Equivalent, the
amount in cash payable to LTM upon conversion, exercise or exchange thereof. The
fair market value of any such payment obligation shall be determined in good
faith by Universal and LTM, provided that if such parties cannot agree on such
valuation prior to closing of the applicable Sale, each party shall set forth
its proposed valuation and a nationally recognized investment banking firm
jointly selected by such parties shall determine which of the two such values
shall be used to value such obligation. The party whose value is not selected
shall bear the fees and expenses of such firm. If the parties cannot jointly
agree on an investment banking firm, the parties shall request that the
Arbitrator (as defined in the Stockholders Agreement) select a firm (which firm
shall not have provided any investment banking services to either party during
the prior three years). The parties shall share equally the fees and expenses of
the Arbitrator in connection with the foregoing. LTM shall not consummate any
proposed Sale until the Subsequent Sale Price has been determined in accordance
with this Section 4.6(h).
(i) The number of Universal Cash Shares, the number of
Previously Issued Additional Shares, the number of Section 4.6 Shares, the
Aggregate Share Number, the Measurement Price, the Weighted Average Subsequent
Sale Price and the Subsequent Sale Price in respect of any Sale that is
consummated prior to the effective date of an event described in this Section
4.6(i) (a "Consummated Subsequent Sale Price") shall be subject to adjustment
from
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time to time as set forth in this Section 4.6(i). LTM shall give Universal
notice of any event described below which requires an adjustment pursuant to
this Section 4.6(i) at the time of such event. At any time LTM delivers a
written notice to Universal pursuant to Section 4.6(e), LTM shall, without any
action on the part of Universal, cause the appropriate adjustment to be made
pursuant to this Section 4.6(i). If at any time after the Closing LTM shall: (A)
pay a dividend payable in, or make any other distribution of, Common Stock; (B)
subdivide its outstanding shares of Common Stock into a larger number of shares
of Common Stock; (C) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock; (D) issue any shares of its capital
stock or other securities by reclassification of the Common Stock; or (E) be
involved in any other similar event with respect to which an adjustment would be
equitable; (x) the Measurement Price, the Weighted Average Subsequent Sale Price
and any Consummated Subsequent Sale Price shall be proportionately decreased in
the case of such a dividend or distribution of Common Stock or such a
subdivision, or proportionately increased in the case of such a combination, (y)
the number of Universal Cash Shares, Previously Issued Additional Shares,
Section 4.6 Shares and the Aggregate Share Number shall be proportionately
increased in the case of such a dividend or distribution of Common Stock or such
a subdivision, or proportionately decreased in the case of such a combination or
(z) the kind of capital stock or other securities of LTM that may be acquired by
Universal upon any Sale shall be adjusted in the case of such a reclassification
of the Common Stock, each on the effective date of such dividend, distribution,
subdivision, combination, reclassification or similar event, as the case may be.
Section 4.7. Universal City Cinema. (a) From and after the later of (i)
the second anniversary of the Closing Date and (ii) the fifteenth day of the
month following the first month end as of which the outstanding Debt of LTM is
less than 4.75 times the Consolidated EBITDA of LTM for the twelve month period
then ended (the "Start Date"), Universal shall have the right to cause LTM to
lease the Universal City Cinema motion picture theater facility located at the
Universal City, California retail and entertainment complex (the "Universal City
Cinema") by delivering to LTM a written notice of its exercise of such right
setting forth which of the options set forth in Section 4.7 (c) it is electing,
together with a draft of a lease agreement (together with any agreements and
documents ancillary thereto, the "Draft Lease") reflecting the terms set forth
on Schedule 4.7 hereto (such notice and Draft Lease, collectively, the "Put
Notice"), to LTM at any time on or before the termination of such right pursuant
to Section 4.7(d). Not later than 30 days following the date of the Put Notice
(the "Put Notice Date"), Universal shall deliver to LTM the true and accurate
statement of Cash Flow of the Universal City Cinema for the twelve months ended
on the last day of the month preceding the Put Notice Date, accompanied by the
unqualified report of Universal's independent auditors that such statement is
complete and fairly
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presents such data for the period indicated and has been prepared in accordance
with the terms of this Agreement (the "Audited Cash Flow Statement").
(b) As soon as reasonably practicable and in any event not
later than ten days following delivery of the Put Notice, LTM and Universal
shall commence negotiation of the definitive lease (the "Lease"). In addition to
the terms set forth on Schedule 4.7 hereto, the Lease shall provide that LTM
shall pay to Universal on the date the Lease is signed (the "Lease Signing
Date") cash consideration for entering into the Lease and the conveyance of the
related personal property equal to (i) ten times the Cash Flow of the Universal
City Cinema for the twelve-month period covered by the Audited Cash Flow
Statement (the "Base Price") less (ii) (if applicable) any Deficiency Amount (as
defined in Section 4.7(c) below). LTM and Universal shall use their respective
best efforts to complete negotiation and drafting of, and enter into, the Lease
within 90 days following the Put Notice Date. In connection with such Lease, LTM
agrees to accept representations and warranties with respect to the Universal
City Cinema that would be customarily made by a passive owner of a motion
picture theater entering into a lease with the manager of such theater.
(c) On the Lease Signing Date, Universal shall elect one of
the following three options (provided, however, that, in the case of an election
of the option in clause (ii) below, an engineering firm reasonably acceptable to
LTM shall have been retained at least 30 days prior thereto and LTM shall have
received not less than two business days advance notice of the Deficiency Amount
together with the written report of such engineering firm):
(i) to provide a surviving representation and
warranty to LTM that, as of the Lease Signing Date, the Universal City
Cinema satisfies all of the operating requirements and standards set
forth in the Lease;
(ii) to (A) certify that, as of the Lease Signing
Date, the Universal City Cinema satisfies all of the operating
requirements and standards set forth in the Lease with only such
deficiencies therefrom as are (x) specifically listed on a certificate
executed by an officer of Universal and (y) accompanied by an estimate
of the cost of eliminating such deficiencies in full (the "Deficiency
Amount") prepared by an engineering firm or other expert selected by
Universal and reasonably acceptable to LTM and (B) agree that such
Deficiency Amount shall be deducted from the Base Price; or
(iii) to (A) certify as provided in clause (ii)(A)
and (B) agree, at Universal's sole cost and expense, to cause such
deficiencies to be
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eliminated in full in accordance with the terms of the Lease in lieu of
deducting the Deficiency Amount from the Base Price.
(d) Subject to the provisions of the following sentence, the
rights granted to Universal pursuant to this Section 4.7 shall terminate as of
the close of business on the third anniversary of the Start Date if the Put
Notice has not been delivered prior to such date. LTM shall provide to Universal
not less than five days prior written notice of the Start Date (the "Start Date
Notice"), and, if LTM shall fail to provide such notice, the Start Date shall be
tolled until the fifth day following delivery of the Start Date Notice.
Section 4.8. Additional Agreements. (a) In case at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, or any other agreement contemplated hereby, the
proper officers and/or directors of LTM and Universal shall use their best
efforts to effect such action.
(b) Universal shall vote all of its Cineplex Odeon capital
stock and shall take all other necessary or desirable actions within its control
(including, without limitation, attending all meetings in person or by proxy for
purposes of obtaining a quorum, executing all written consents in lieu of
meetings and voting to remove members of the Cineplex Odeon Board of Directors,
as applicable) to approve the Documents and the Transactions and shall vote
against any transaction that could reasonably be expected to interfere with or
adversely affect the Transactions. Universal hereby irrevocably appoints LTM,
its officers, agents and nominees, with full power of substitution, as proxy for
Universal to act and vote Universal's shares of Cineplex Odeon capital stock for
and in the name, place and stead of Universal at any annual, special or other
meeting of the shareholders of Cineplex Odeon and at any adjournment thereof or
pursuant to any consent in lieu of a meeting, or otherwise, (i) in favor of the
Transactions, (ii) against (A) any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other obligation of Cineplex Odeon under the Master Agreement; and (B) any
action or agreement that would impede, interfere with or attempt to discourage
the Transactions, including, but not limited to, any extraordinary corporate
transaction (other than the Transactions), that would conflict with or result in
a breach of any of the representations and warranties or covenants of Cineplex
Odeon under the Documents to which it is a party such as (1) a merger,
consolidation, business combination, reorganization, recapitalization or
liquidation involving Cineplex Odeon or any of its Significant Subsidiaries; (2)
a sale or transfer of a material amount of assets of Cineplex Odeon or any of
its Significant Subsidiaries; (3) any material change in the present
capitalization or dividend policy of Cineplex Odeon; or (4) any other material
change in Cineplex Odeon's corporate structure or business unless in any such
case
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such transaction is permitted under Article V of the Master Agreement;
provided that the proxy granted pursuant to this Section 4.8(b) shall terminate
if this Agreement is terminated. The proxy and powers granted by Universal
pursuant to this Section 4.8(b) are coupled with an interest and are given to
secure the performance of Universal under this Agreement. Such proxy and powers,
to the extent permitted by law, shall survive the bankruptcy, insolvency,
dissolution or liquidation of Universal and shall be effective until this
Agreement is terminated in accordance with its terms.
(c) Universal shall use its reasonable best efforts, prior to
the effective date of the Form S-4 and mailing of the Proxy Statement, to
identify in writing to LTM, SPE, the Trust and Cineplex Odeon the persons to be
elected as the initial USI Directors (as defined in the Stockholders Agreement)
as of the Closing as contemplated by Section 6.18 of the Master Agreement.
(d) Universal shall not amend or modify any provision of the
letter agreement by and among Universal, Cineplex Odeon, the Trust of even date
herewith, a conformed copy of which is attached hereto as Exhibit A (the "Three
Party Agreement"). without the prior written consent of LTM, which shall not be
unreasonably withheld.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1. Conditions to Each Party's Respective Obligations
to Close. The respective obligations of LTM and Universal to effect the
Purchase shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) The concurrent closing of the Transactions (other than the
Purchase) in accordance with the terms of the Master Agreement and the other
Documents.
(b) The Stockholders Agreement shall be in full force and
effect.
(c) There shall not be any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Purchase that makes the
consummation of the Purchase illegal.
(d) No preliminary or permanent injunction or other order by
any federal, state or provincial court in the United States or Canada of
competent jurisdiction that prevents the consummation of the Transactions shall
have been issued and remain in effect, nor shall any proceeding by any
Governmental Entity
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seeking any of the foregoing be pending. LTM and Universal each hereby agree to
use its reasonable efforts to have any such injunction or order lifted.
Section 5.2. Conditions to Obligation of Universal to Close.
The obligations of Universal to effect the Purchase shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions, unless waived by Universal:
(a) Each of SPE and LTM shall have performed in all material
respects its agreements contained in the Documents required to be performed on
or prior to the Closing Date; their respective representations and warranties
contained in this Agreement and any of the other Documents shall be true and
correct in all material respects when made and on and as of the Closing Date as
if made on and as of such date (except to the extent they relate to a particular
date), except as expressly contemplated or permitted by this Agreement or such
other Document, as the case may be (provided, however, that for purposes of this
Section 5.2(a) only, such representations and warranties shall be deemed to be
true and correct in all material respects unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a LTM Material Adverse
Effect), and Universal shall have received a certificate of the President or
Chief Executive Officer or a Vice President of LTM to that effect.
(b) From the date of this Agreement through the Closing Date,
there shall not have occurred any change, individually or together with other
changes, that has had, or would reasonably be expected to have a LTM Material
Adverse Effect.
(c) The LTM Debt Repayment, the IMAX Purchase Price and, if
applicable, the Transferred SPE Subsidiary Purchase Price shall not exceed the
LTM Cap.
(d) Cineplex Odeon shall not have breached or violated any of
its obligations under the Three Party Agreement.
Section 5.3. Conditions to Obligations of LTM to Close. The
obligations of LTM to effect the Purchase shall be subject to the fulfillment at
or prior to the Closing Date of the following additional conditions:
(a) The conditions precedent to the obligations of LTM and SPE
to effect the Transactions contemplated by the Documents as set forth in Section
7.3 of the Master Agreement shall have been satisfied, unless waived by LTM.
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(b) Universal shall have performed in all material respects
its agreements contained in the Documents required to be performed on or prior
to the Closing Date; its representations and warranties contained in this
Agreement and any of the other Documents shall be true and correct in all
material respects when made and on and as of the Closing Date as if made on and
as of such date (except to the extent they relate to a particular date), except
as expressly contemplated or permitted by this Agreement or such other Document,
as the case may be, and LTM shall have received a certificate of the President
or Chief Executive Officer or a Vice President of Universal to that effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.1. Termination. (a) This Agreement may be terminated at any
time before the Closing Date:
(i) by mutual written consent of Universal and LTM;
(ii) by either Universal or LTM if the Closing shall not have
occurred on or before June 30, 1998 (the "Termination Date"); provided, however,
that the right to terminate this Agreement under this Section 6.1(a)(ii) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before the Termination Date; provided, however, further, that if on
the Termination Date the conditions to the Closing set forth in Section 7.1(b),
7.1(d), 7.1(f) or 7.1(j) of the Master Agreement shall not have been fulfilled,
but all other conditions to the Closing shall be fulfilled or shall be capable
of being fulfilled, then the Termination Date shall be extended to December 31,
1998. The parties agree that any amendment of this Agreement to extend the
Termination Date beyond June 30, 1998 shall be made without any amendment to or
renegotiation of any other material provisions of this Agreement;
(iii) by either Universal or LTM if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties shall use their commercially reasonable
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement or the Master
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(iv) by either Universal or LTM if the other shall have
breached, or failed to comply with, in any material respect, any of its
obligations under this
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Agreement or any representation or warranty made by such other party shall have
been incorrect in any material respect when made or shall have since ceased to
be true and correct in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice thereof and, in the
case of breaches, failures or misrepresentations by LTM, such breaches, failures
or misrepresentations, individually or in the aggregate and without regard to
materiality qualifiers contained therein, results or would reasonably be
expected to result in a LTM Material Adverse Effect, it being understood that
failure to obtain any landlord or other non-governmental third party consent to
the entering into or completion of the Transactions that has been disclosed on
the LTM Disclosure Statement shall not give rise to any rights under this
Article VI; or
(v) by Universal if Cineplex Odeon shall have breached or
violated its obligations under the Three Party Agreement; provided that such
breach shall not have been induced by Universal.
(b) In addition to and without limiting the foregoing, this
Agreement shall automatically terminate upon termination of the Master Agreement
in accordance with the provisions of Article VIII thereof.
(c) In the event of termination of this Agreement and the
abandonment of the transactions contemplated hereby pursuant to this Article VI,
all obligations of the parties hereto shall terminate, except for the
obligations of Universal set forth in Section 6.2 and except for the provisions
of Article VII (other than Section 7.4). Moreover, in the event of termination
of this Agreement pursuant to Section 6.1(a)(iv), nothing herein shall prejudice
the ability of the non-breaching party from seeking damages from the other for
the willful breach of a covenant or agreement contained herein. With respect to
any proceeding initiated hereunder, any party that shall have been found to have
willfully breached any of such party's obligations to perform its covenants
under this Agreement shall bear the costs and expenses of the other party in
connection with such proceeding, including, without limitation, attorneys' fees.
Section 6.2 Fees. (a) If the Master Agreement is terminated (i) by LTM
pursuant to Section 8.1(e) thereof or by Cineplex Odeon pursuant to Section
8.1(g) thereof, (ii) by LTM as a result of Cineplex Odeon's material breach of
Section 6.2 thereof that is not cured within 30 days after notice thereof to
Cineplex Odeon, or (iii)(A) by LTM or Cineplex Odeon pursuant to Section 8.1(f)
thereof because of the failure to obtain the Cineplex Odeon Shareholder Approval
at the Cineplex Odeon Meeting or by LTM pursuant to Section 8.1(h) thereof if a
final decision that is nonappealable has been issued by a court of competent
jurisdiction denying either the Interim Order or the Final Order, and (B) prior
to the Cineplex Odeon Meeting or the denial of the Interim Order or the Final
Order, as the case may be, there shall have been an Alternative Proposal,
whether or not such Alternative
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Proposal shall have been withdrawn prior to such meeting or the denial of either
the Interim Order or the Final Order, involving Cineplex Odeon or any of its
Significant Subsidiaries (other than an Alternative Proposal initiated prior to
the date of this Agreement that shall have been withdrawn, rejected or
terminated or shall otherwise no longer be under consideration as of the date of
this Agreement and that shall not have been renewed or re-initiated, in any
form, by the party or parties that previously initiated such Alternative
Proposal or any Affiliates, agents, representatives or advisors thereof) and (b)
within 12 months of such termination, Cineplex Odeon consummates or accepts a
written offer to consummate an Alternative Proposal, then in addition to any
fees payable as a consequence of such termination pursuant to Section 8.2 of the
Master Agreement, and without deduction or offset therefor, Universal shall,
upon the consummation of an Alternative Proposal, (subject to delay solely to
the extent necessary to determine the Alternative Proposal Profit pursuant to
Section 6.2(b)) pay to LTM a fee (the "Universal Termination Fee") in
immediately available funds in an amount equal, at Universal's sole discretion,
to either (A) US$5 million or (B) 25% of the aggregate Alternative Proposal
Profit received by Universal.
(b) For the purposes of this Letter Agreement, the term
"Alternative Proposal Profit" shall mean the excess of (i) the sum of (A) any
cash and (B) the Fair Market Value (calculated in US Dollars) of the
consideration received by Universal upon consummation of or in connection with
an Alternative Proposal over (ii) the product of (x) US$1.75 and (y) the
aggregate number of shares of capital stock of Cineplex Odeon disposed of by
Universal in connection with such Alternative Transactions. As used herein, (a)
"Fair Market Value" shall mean (i) as to any securities that are publicly
traded, the average of the Current Market Prices of such securities for each day
of the Valuation Period and (ii) as to any security that is not publicly traded
or of any other property shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the valuation of
such securities or property jointly selected by LTM and Universal; (b) "Current
Market Price" shall mean the average of the daily closing prices of such
securities for such Valuation Period; and (c) "Valuation Period" shall mean the
period of ten consecutive trading days immediately following the closing of the
Alternative Transaction with respect to which the Fair Market Value of the
consideration to be received by Universal is to be determined. The closing price
for each day shall be the last quoted bid price in the over-the-counter market,
as reported by the Nasdaq National Market or such other system then in use, or,
if on any such date such securities are not quoted by any such organization, the
closing bid price as furnished by a professional market maker making a market in
such securities jointly selected by LTM and Universal. If the securities are
listed or admitted to trading on a national securities exchange, the closing
price shall be the closing bid price, regular way, as reported in the principal
consolidated transaction reporting system with respect to securities listed
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or admitted to trading on NYSE or, if the securities are not listed or admitted
to trading on NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the securities are listed or admitted to trading.
(c) Universal hereby acknowledges that the provisions of this
Section 6.2 are an integral part of the Transactions and the Universal
Termination Fee constitutes liquidated damages and not a penalty, and that
without them, LTM and SPE would not enter into this Agreement, the Master
Agreement or any of the other Documents. Universal acknowledges and agrees that
the Universal Termination Fee is intended to reimburse LTM for the time and
costs attributable to negotiating this Agreement and the Master Agreement and
analyzing the Transactions, LTM's opportunity cost and foregone alternative
transactions and the impact on LTM's other business relationships. If Universal
fails to pay promptly the amount due pursuant to this Section 6.2, Universal
shall pay, in addition to, and not in lieu of, the Universal Termination Fee,
the costs and expenses (including legal fees and expenses) incurred by LTM
and/or SPE in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the one-year LIBOR rate plus 2.0% per annum accruing
from the date such fee was required to be paid.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Non-Survival of Representations, Warranties and Agreements
. Except for the representations set forth in Sections 3.2 and 3.3, no
representations and warranties set forth in this Agreement shall survive the
Closing Date. All covenants and agreements set forth in this Agreement shall
survive in accordance with their terms.
Section 7.2. Notices . Any notice, request, claim, demand or other
communication under this Agreement shall be in writing, shall be either
personally delivered or sent by reputable overnight courier service (charges
prepaid) to the address for such person set forth below and shall be deemed to
have been given hereunder when delivered personally or one day after deposit
with a reputable overnight courier service:
If to LTM:
LTM Holdings, Inc.
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000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
With a copy to:
LTM Holdings, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
and
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
If to Universal:
Universal Studios, Inc.
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 7.3. Fees and Expenses . Whether or not the Transactions are
consummated, all costs and expenses incurred in connection with the Documents
and the Transactions shall be paid by the party incurring such expenses, except
as expressly provided herein. If the Purchase shall be consummated, LTM shall
reimburse Universal for all reasonable out-of-pocket expenses and fees paid or
payable by or on behalf of Universal or any of its Affiliates, whether incurred
prior to, on or after the date of this Agreement, in connection with the
Purchase and the other Transactions; provided that such amount, together with
the amount
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payable to the Trust under paragraph 10 of the Letter Agreement, shall not
exceed US$1,000,000. Such reimbursement shall be made on the Closing Date in
immediately available funds to a bank account which Universal shall designate in
writing to LTM no less than three business days prior to the Closing Date.
Section 7.4. Publicity . So long as this Agreement is in effect, LTM
and Universal agree to consult with each other in issuing any press release or
otherwise making any public statement with respect to the Transactions, and none
of them shall issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchange. The commencement of
litigation relating to the Documents or the Transactions, or any proceedings in
connection therewith, shall not be deemed a violation of this Section 7.4.
Section 7.5. Specific Performance . The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. The parties accordingly agree that each shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction. The provisions of this Section 7.5 are
in addition to any other remedy to which a party is entitled at law or in
equity.
Section 7.6. Assignment; Binding Effect . Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (except by operation of law pursuant to a merger whose
purpose is not to avoid the provisions of this Agreement) without the prior
written consent of the other parties. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
Section 7.7. Entire Agreement . This Agreement, the Stockholders
Agreement, the Confidentiality Agreement and any documents delivered by the
parties in connection herewith and therewith or on the date hereof constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
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Section 7.8. Amendments; Modifications. This Agreement may not be
amended or modified in any manner except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 7.9. Governing Law . This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws.
Section 7.10. Counterparts . This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 7.11. Headings and Table of Contents . Headings of the Articles
and Sections of this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
Section 7.12. Interpretation . In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
Section 7.13. Waivers . At any time prior to the Closing Date, the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
Section 7.14. Severability . Any term or provision of this Agreement
that is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this
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Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 7.15. RELEASE. Subject to the consummation of the Purchase, and
excluding (a) amounts owned to Universal and its Affiliates for film booking and
home video arrangements or under the management agreement in respect of the
Universal City Cinema and (b) obligations and liabilities included in clauses
(ii)(x) and (y) of the definition of Net Working Capital and Debt reflected in
each case in Cineplex Odeon's Closing Statement or arising under the Documents,
Universal, on behalf of itself and its Affiliates, hereby acknowledges, releases
and discharges, and indemnifies and saves harmless, Cineplex Odeon and the
Cineplex Odeon Subsidiaries and their successors and assigns from all actions,
causes of action, suits, debts, dues, sums of money, accounts, claims and
demands owned by Cineplex Odeon and the Cineplex Odeon Subsidiaries to Universal
and its Affiliates by reason of any matter, cause, contract (whether written or
oral), course of dealing or thing whatsoever arising during, or in respect of,
the period on or before the Closing Date.
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IN WITNESS WHEREOF, the undersigned have executed this
Subscription Agreement as of the date first written above.
LTM HOLDINGS, INC.
/s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
By: Xxxxxxx Xxxxxxxxx
Its: Executive Vice President
UNIVERSAL STUDIOS, INC.
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------
By: Xxxxx X. Xxxxxxxx
Its: Senior Vice President
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