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