-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SzFLlAmjfMe473q3Qdh8jluBaAnFBVv1PZfiObTGLbLUBMAuASG4TzURHhIC2Wrc rf7KmPLMqyXd0s0wsTAf/Q== 0000950123-97-008525.txt : 19971015 0000950123-97-008525.hdr.sgml : 19971015 ACCESSION NUMBER: 0000950123-97-008525 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19971014 SROS: NONE GROUP MEMBERS: SEAGRAM CO LTD GROUP MEMBERS: UNIVERSAL STUDIOS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CINEPLEX ODEON CORP /CAN/ CENTRAL INDEX KEY: 0000811925 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51211 FILM NUMBER: 97694897 BUSINESS ADDRESS: STREET 1: 1303 YONGE ST CITY: TORONTO ONTARIO CANA STATE: A6 BUSINESS PHONE: 4163236600 MAIL ADDRESS: STREET 1: 1303 YONGE STREET CITY: TORONTO ONTARIO CANA STATE: A6 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SEAGRAM CO LTD CENTRAL INDEX KEY: 0000088188 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 000000000 STATE OF INCORPORATION: CA FISCAL YEAR END: 0701 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1430 PEEL ST STREET 2: H3A 1S9 CITY: MONTREAL QUEBEC CANA STATE: A8 BUSINESS PHONE: 5148495271 MAIL ADDRESS: STREET 1: C/O JOSEPH E SEAGRAM & SONS INC STREET 2: 375 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10152 SC 13D/A 1 AMENDMENT #6 TO SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. 24 to the (Amendment No. 6 to the Schedule 13D filed by Universal Schedule 13D filed by Studios, Inc. (formerly MCA INC.)) The Seagram Company Ltd.) CINEPLEX ODEON CORPORATION - -------------------------------------------------------------------------------- (NAME OF ISSUER) COMMON SHARES - -------------------------------------------------------------------------------- (TITLE OF CLASS OF SECURITIES) 172455 10 7 - -------------------------------------------------------------------------------- (CUSIP NUMBER) HOWARD L. WEITZMAN UNIVERSAL STUDIOS, INC. 100 UNIVERSAL CITY PLAZA UNIVERSAL CITY, CALIFORNIA 91608 (818) 777-1000 - -------------------------------------------------------------------------------- (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) SEPTEMBER 30, 1997 - -------------------------------------------------------------------------------- (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) IF THE FILING PERSON HAS PREVIOUSLY FILED A STATEMENT ON SCHEDULE 13G TO REPORT THE ACQUISITION WHICH IS THE SUBJECT OF THIS SCHEDULE 13D, AND IS FILING THIS SCHEDULE BECAUSE OF RULE 13d-1(b)(3) OR (4), CHECK THE FOLLOWING BOX[ ]. NOTE: SIX COPIES OF THIS STATEMENT, INCLUDING ALL EXHIBITS, SHOULD BE FILED WITH THE COMMISSION. SEE RULE 13d-1(a) FOR OTHER PARTIES TO WHOM COPIES ARE TO BE SENT. *THE REMAINDER OF THIS COVER PAGE SHALL BE FILLED OUT FOR A REPORTING PERSON'S INITIAL FILING ON THIS FORM WITH RESPECT TO THE SUBJECT CLASS OF SECURITIES, AND FOR ANY SUBSEQUENT AMENDMENT CONTAINING INFORMATION WHICH WOULD ALTER DISCLOSURES PROVIDED IN A PRIOR COVER PAGE. THE INFORMATION REQUIRED ON THE REMAINDER OF THIS COVER PAGE SHALL NOT BE DEEMED TO BE "FILED" FOR THE PURPOSE OF SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 ("ACT") OR OTHERWISE SUBJECT TO THE LIABILITIES OF THAT SECTION OF THE ACT BUT SHALL BE SUBJECT TO ALL OTHER PROVISIONS OF THE ACT (HOWEVER, SEE THE NOTES). 2 SCHEDULE 13D CUSIP NO. 172455 10 7 PAGE 2 OF 29 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON UNIVERSAL STUDIOS, INC. IRS IDENTIFICATION NO. 95-2011468 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH SEE PAGE 3 REPORTING -------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER WITH -0- -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 73,446,426 common shares of Cineplex Odeon Corporation issuable upon transfer by Universal Studios, Inc. of the Subordinate Restricted Voting Shares owned by Universal Studios, Inc. - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 73,446,426 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 41.5% of the common shares of Cineplex Odeon Corporation assuming conversion of the Subordinate Restricted Voting Shares owned by Universal Studios, Inc. - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION 3 Page 3 of 29 Pages With respect to all matters other than the election of directors, Universal Studios, Inc. ("Universal"), as holder of all the issued and outstanding subordinate restricted voting shares ("SRVS") of Cineplex Odeon Corporation ("Cineplex"), may vote the lesser of: (i) one vote less than one vote for each SRV then issued and outstanding and (ii) one vote less than one-half of the sum of (a) the total number of votes attached to all Cineplex voting securities (other than the SRVS) then issued and outstanding minus (b) three times the number of votes attached to all Cineplex voting securities (other than the SRVS) owned by Universal, its subsidiaries, associates, affiliates, their respective directors and officers, and the associates and affiliates of such directors and officers. Universal has the right to vote all SRVS owned by it on the basis of one vote per share for the election of its nominees to the Cineplex Board of Directors. Except under certain limited circumstances, Universal may not vote for any other nominees to the Cineplex Board of Directors. 4 SCHEDULE 13D CUSIP NO. 172455 10 7 PAGE 4 OF 29 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON THE SEAGRAM COMPANY LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CANADA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH SEE PAGE 3 REPORTING -------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER WITH -0- -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 73,446,426 common shares of Cineplex Odeon Corporation issuable upon transfer by Universal Studios, Inc. of the Subordinate Restricted Voting Shares owned by Universal Studios, Inc. - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 73,446,426 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 41.5% of the common shares of Cineplex Odeon Corporation assuming conversion of the Subordinate Restricted Voting Shares owned by Universal Studios, Inc. - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION 5 Page 5 of 29 Pages The Statement on Schedule 13D, as amended (the "Schedule 13D"), filed pursuant to Rule 13d-1 of the Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), by Universal Studios, Inc., a Delaware corporation formerly known as MCA INC. ("Universal"), and by The Seagram Company Ltd., a Canadian corporation ("Seagram"), with respect to the common shares ("Common Shares") of Cineplex Odeon Corporation, a Canadian corporation ("Cineplex"), is hereby amended by amending and restating Items 2 and 5 in their entirety and by supplementing Items 3, 4 and 6 as set forth below. Item 2. Identity and Background. The principal executive offices of Seagram are located at 1430 Peel Street, Montreal, Quebec, Canada H3A 1S9 and the principal executive offices of Universal are located at 100 Universal City Plaza, Universal City, California 91608. Seagram operates in two global business segments: beverages and entertainment. The beverage businesses are engaged principally in the production and marketing of distilled spirits, wines, fruit juices, coolers, beers and mixers throughout more than 150 countries and territories. The entertainment company, Universal, produces and distributes motion picture, television and home video products, and recorded music, and operates theme parks and retail stores. 6 Page 6 of 29 Pages Descendants of the late Samuel Bronfman and trusts established for their benefit (collectively, the "Bronfman Family") beneficially own directly or indirectly approximately 35.5% of the outstanding common shares without nominal or par value of Seagram (the "Seagram Common Shares"). Of that partnership of which Edgar M. Bronfman, his children and a trust for the benefit of Edgar M. Bronfman and his descendants are the sole partners and of which Edgar M. Bronfman is the managing partner, along with a second trust for the benefit of Edgar M. Bronfman and his descendants, own directly approximately 17.5% of the Seagram Common Shares, trusts for the benefit of Charles R. Bronfman and his descendants own directly approximately 14.5% of the Seagram Common Shares, trusts for the benefit of the family of the late Minda de Gunzburg and members of her immediate family own directly or indirectly approximately 1.8% of the Seagram Common Shares, Phyllis Lambert owns directly or indirectly approximately 0.28% of the Seagram Common Shares, a charitable foundation of which Charles R. Bronfman is among the directors owns approximately 0.92% of the Seagram Common Shares, another charitable foundation of which Charles R. Bronfman is among the directors owns approximately 0.17% of the Seagram Common Shares, a charitable foundation of which Edgar M. Bronfman and Charles R. Bronfman are among the trustees owns approximately 0.07% of the Seagram Common Shares, and Edgar M. Bronfman, Charles R. Bronfman and their 7 Page 7 of 29 Pages respective spouses and children own directly approximately 0.30% of the Seagram Common Shares. In addition, such persons hold currently exercisable options to purchase an additional 0.92% of the Seagram Common Shares, calculated pursuant to Rule 13d-3 of the Rules and Regulations under the Act. Percentages set forth in this Item 2 are based on the number of Seagram Common Shares outstanding as of August 31, 1997. Edgar M. Bronfman is Chairman of the Board of Seagram and a director of Seagram. Charles R. Bronfman is Co-Chairman of the Board and Chairman of the Executive Committee of Seagram and a director of Seagram. Edgar M. Bronfman, Charles R. Bronfman, Phyllis Lambert and the late Minda de Gunzburg are siblings. Pursuant to a voting trust agreement, Charles R. Bronfman serves as voting trustee for Seagram Common Shares beneficially owned directly or indirectly by Bronfman Associates, the aforesaid trusts for the benefit of Edgar M. Bronfman and his descendants, the aforesaid trusts for the benefit of Charles R. Bronfman and his descendants, the first two of the three aforesaid charitable foundations and Charles R. Bronfman. Pursuant to another voting trust agreement, Edgar M. Bronfman and Charles R. Bronfman are among the voting trustees for Seagram Common Shares beneficially owned directly or indirectly by trusts for the benefit of the family of the late Minda de Gunzburg and members of her immediate family. Neither voting trust agreement 8 Page 8 of 29 Pages contains restrictions on the right of the voting trustees to vote the deposited Seagram Common Shares. The Bronfman Family may be deemed to be in control of Seagram. Information concerning the foregoing persons and entities, together with information concerning the directors and executive officers of Universal and Seagram, is contained in Schedule A attached hereto. During the last five years, neither Seagram nor Universal, nor to the best knowledge of Seagram or Universal, any of their respective directors or executive officers (or any other person or entity set forth in Schedule A), has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding has been or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source of Funds. As described in Item 4 below, Universal has agreed to purchase common stock of LTM Holdings, Inc., a Delaware corporation ("LTM"), for $84.5 million in cash pursuant to a Subscription Agreement dated as of September 30, 1997 between Universal and LTM (the 9 Page 9 of 29 Pages "Subscription Agreement"). Universal intends to obtain funds for such purchase from its general corporate funds. Item 4. Purpose of Transaction. On September 30, 1997, Cineplex, Sony Pictures Entertainment Inc., a Delaware corporation ("SPE"), and LTM, a wholly-owned subsidiary of SPE, entered into a Master Agreement (the "Master Agreement") providing for, among other things, a business combination involving LTM and Cineplex which will result in Cineplex becoming a wholly-owned subsidiary of LTM. The business combination will be effected pursuant to a plan of arrangement (the "Arrangement") of Cineplex under the Business Corporations Act (Ontario). Pursuant to the Arrangement, (i) Cineplex will exchange all of the capital stock of its wholly-owned subsidiary, Plitt Theatres, Inc., a Delaware corporation, to LTM for 82,423,849 shares of common stock, par value $0.01 per share, of LTM ("LTM Common Stock"), (ii) Cineplex will distribute such shares to its shareholders (including Universal) in consideration of the purchase from them, and cancellation, of approximately 46.62% of their shares of Cineplex capital stock at the rate of one share for each share of Cineplex capital stock, and (iii) LTM will immediately thereafter acquire from Cineplex's shareholders (including Universal) the remaining outstanding shares of Cineplex capital stock in exchange for, in the aggregate, 94,375,484 shares of 10 Page 10 of 29 Pages LTM Common Stock at the rate of one share for each share of Cineplex capital stock. In addition to receiving LTM Common Stock pursuant to the Arrangement as a Cineplex shareholder, as an integral part of the business combination between Cineplex and LTM, Universal has agreed to purchase 44,266,062 shares of LTM Common Stock for $84.5 million in cash (the "Purchase") pursuant to the Subscription Agreement which Universal and LTM entered into concurrently with the execution and delivery of the Master Agreement. The number of shares of LTM Common Stock to be issued pursuant to the Subscription Agreement is subject to adjustment in connection with certain issuances of securities by LTM. Pursuant to the Subscription Agreement, Universal has also agreed (i) to vote all the shares of Cineplex capital stock owned by it and to take all other necessary or desirable actions within its control to approve the transactions contemplated by the Master Agreement and (ii) to vote against any transaction that could reasonably be expected to interfere with or adversely affect such transactions. Universal has irrevocably appointed LTM, its officers, agents and nominees as proxy for Universal to act and vote Universal's shares of Cineplex capital stock in connection with the foregoing, provided that such proxy shall terminate if the Subscription Agreement is terminated. So long as the Master Agreement shall be in effect, Universal has agreed not to, directly or indirectly, acquire any Cineplex capital stock or, except pursuant to the Arrangement, sell, 11 Page 11 of 29 Pages offer to sell, solicit an offer to buy, contract to sell, grant an option to purchase or otherwise transfer or dispose of any Common Shares or SRVs held, directly or indirectly, beneficially or of record by it. Prior to the closing of the transactions contemplated by the Master Agreement (the "Closing"), Universal has also agreed not to initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of specified alternative proposals ("Alternative Proposals") or to engage in any negotiations concerning, or to provide any confidential information or data to, or have any discussions with, any person relating to any Alternative Proposal. The Closing is conditioned on, among other things, the closing of the Purchase, and the closing of the Purchase is conditioned on, among other things, the concurrent closing of the transactions (other than the Purchase) contemplated by the Master Agreement. The Master Agreement and the Subscription Agreement may each be terminated by the respective parties thereto in certain circumstances. If the Master Agreement is terminated in certain circumstances and within 12 months of such termination Cineplex consummates or accepts a written offer to consummate an Alternative Proposal, upon the consummation of an Alternative Proposal, Universal has agreed to pay LTM an amount equal to, at Universal's sole discretion, $5 million or 25% of the consideration above $1.75 per share it receives in connection with such Alternative Proposal. 12 Page 12 of 29 Pages The Subscription Agreement provides Universal with the option to cause LTM to lease the Universal City Cinema motion picture theater facility located at the Universal City, California retail and entertainment complex (the "Option") in exchange for cash consideration for entering into the lease and the conveyance of the related personal property equal to ten times the cash flow of the theater for the 12-month period ended on the last day of the month preceding Universal's exercise of the Option, subject to reduction in certain circumstances. The Option is exercisable by Universal for the three-year period commencing on the later of (i) the second anniversary of the Closing 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 12-month period then ended. Upon the Closing (and after giving effect to the consummation of the Arrangement and the Purchase), it is anticipated that (i) SPE will beneficially own 51.1% of the issued and outstanding LTM Common Shares (as defined below), 49.9% of the issued and outstanding LTM Common Stock and 100% of the issued and outstanding non-voting common stock, par value $0.01 per share, of LTM (the "LTM Non-Voting Common Stock" and, collectively with the LTM Common Stock, the "LTM Common Shares"), (ii) Universal will beneficially own 26.0% of the issued and outstanding LTM Common Shares and 26.7% of the issued and outstanding LTM Common Stock and (iii) the Claridge Group (as 13 Page 13 of 29 Pages defined below) will beneficially own 9.6% of the issued and outstanding LTM Common Shares and 9.9% of the issued and outstanding LTM Common Stock. Shares of LTM Non-Voting Common Stock will automatically convert into LTM Common Stock on a one-for-one basis on the third anniversary of the Closing or earlier upon transfer from SPE to an unaffiliated third party, or to the extent LTM would not own more than 49.9% of the LTM Common Stock following such conversion. Concurrently with the execution and delivery of the Master Agreement and the Subscription Agreement, Universal, LTM, SPE, the Charles Rosner Bronfman Family Trust, a trust created under the laws of the province of Quebec (the "Trust"), Charles R. Bronfman, E. Leo Kolber, Arnold M. Ludwick and certain related persons (the Trust and such individuals and related persons, collectively the "Claridge Group"), entered into a Stockholders Agreement dated as of September 30, 1997 (the "Stockholders Agreement") relating to certain post-Closing arrangements involving LTM, including, among other things (i) representation on the LTM Board of Directors, (ii) consent rights for SPE and Universal in connection with certain actions by LTM, (iii) purchase rights for SPE and Universal in connection with certain issuances of securities by LTM, (iv) restrictions on the acquisition and disposition of LTM securities by SPE, Universal and the Claridge Group and (v) registration rights covering LTM securities beneficially owned by SPE, Universal and the Claridge Group. As of the Closing, Universal shall be entitled to designate three directors to LTM's 16-person Board of Directors. 14 Page 14 of 29 Pages Concurrently with the execution and delivery of the agreements described above, Cineplex, Universal and the Trust entered into an agreement dated as of September 30, 1997 (the "Three Party Agreement") pursuant to which Cineplex agreed not to, among other things (i) amend or modify the Master Agreement or certain related agreements, (ii) waive any of the provisions or conditions provided for in the Master Agreement or certain related agreements or (iii) grant any consent under the Master Agreement or certain related agreements, in each case without the prior approval of Universal and the Trust. Concurrently with the execution and delivery of the agreements described above, Universal and Cineplex entered into an agreement dated as of September 30, 1997 (the "Termination Agreement") pursuant to which they agreed to terminate the Restated Subscription Agreement and the Standstill Agreement (each such agreement as defined and described in the prior Amendment to the Schedule 13D) effective as of the Closing and to waive certain provisions of such agreements in connection with the Arrangement and related transactions. The preceding summary of certain provisions of the Master Agreement, the Subscription Agreement, the Stockholders Agreement, the Three Party Agreement and the Termination Agreement is not intended to be complete and is qualified in its entirety by reference to the full text of such agreements. Copies of the Subscription Agreement, the Stockholders Agreement, the Three Party Agreement and the Termination 15 Page 15 of 29 Pages Agreement are filed as exhibits hereto. In addition, a copy of a press release dated as of September 30, 1997 issued by Sony Corporation of America and Cineplex relating to the transactions described above is also filed as an exhibit hereto. Other than as described above, Universal has no plans or proposals that relate to or would result in any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. Universal beneficially owns all of the issued and outstanding 73,446,426 Subordinate Restricted Voting Shares ("SRVs") of Cineplex and might be deemed to beneficially own 73,446,426 Common Shares, representing approximately 41.5% of the Common Shares that would be outstanding upon the conversion of the SRVs into Common Shares. As a result of its ownership of an indirect 80% interest in Universal, Seagram may also be deemed to beneficially own such Common Shares. Except as set forth in the cover pages of the Schedule 13D and as described below, neither Universal or Seagram nor, to the best knowledge of Universal and Seagram, any of their respective directors or executive officers (or any other person or entity set forth in Schedule A to the Schedule 13D) has the power to vote or direct the vote or to dispose or to direct the disposition of any Common Shares. Each of Universal and Seagram disclaims the beneficial ownership of the 16 Page 16 of 29 Pages Common Shares issuable upon conversion of the SRVs beneficially owned by Universal. Under the terms of the SRVs and subject to the terms of the agreements previously described in Item 6 to the Schedule 13D, with respect to all matters other than the election of directors, Universal, as holder of all the issued and outstanding SRVs, may vote the lesser of: (i) one vote less than one vote for each SRV then issued and outstanding and (ii) one vote less than one-half of the sum of (a) the total number of votes attached to all Cineplex voting securities (other than the SRVs) then issued and outstanding minus (b) three times the number of votes attached to all Cineplex voting securities (other than the SRVs) owned by Universal, its subsidiaries, associates, affiliates, their respective directors and officers, and the associates and affiliates of such directors and officers. Under the terms of the SRVs, as holder of all the issued and outstanding SRVs, Universal has the right to nominate a number of directors (rounded up or down to the nearest whole number) as is proportionate to its ownership of voting securities; provided, however, that such number will not exceed four when the authorized number of directors is 15, and will not exceed one-third of the members of the Cineplex Board of Directors (rounded down to the nearest whole number) when the authorized number of directors is other than 15. Universal has the right to vote all SRVs owned by it on the basis of one vote 17 Page 17 of 29 Pages per share for the election of its nominees to the Cineplex Board of Directors. Except under certain limited circumstances, Universal may not vote for any other nominees to the Cineplex Board. Subject to the terms of the agreements previously described in Item 6 to the Schedule 13D, Universal has the power to dispose or to direct the disposition of the SRVs. If SRVs are sold by Universal to a third party, such SRVs will be automatically converted into Common Shares on a share-for-share basis upon transfer. As disclosed in a Statement on Schedule 13D, as amended, as filed by the Trust, Stephen R. Bronfman, Arnold M. Ludwick, E. Leo Kolber, Charles R. Bronfman and the Phyllis Lambert Foundation, the Trust beneficially owns 35,918,429 Common Shares, representing 34.8% of the outstanding Common Shares and 20.3% of the Common Shares that would be outstanding upon the conversion of the SRVs into Common Shares. Charles R. Bronfman, Co-Chairman of the Board of Directors and Chairman of the Executive Committee of Seagram, beneficially owns 3,409,924 Common Shares, representing 3.3% of the outstanding Common Shares and 1.9% of the Common Shares that would be outstanding upon the conversion of the SRVs into Common Shares. E. Leo Kolber, a director of Seagram, beneficially owns, directly and indirectly through a wholly-owned corporation, 3,578,092 Common Shares, representing 3.5% of the outstanding Common Shares and 2.0% of the Common Shares that would be outstanding upon the conversion of the SRVs into Common Shares. Arnold 18 Page 18 of 29 Pages M. Ludwick, Vice President of Seagram and a trustee of the Trust, beneficially owns 233,772 Common Shares (excluding the Common Shares held by the Trust), representing 0.23% of the Common Shares outstanding and 0.13% of the Common Shares that would be outstanding upon the conversion of SRVs into Common Shares. The Phyllis Lambert Foundation, a charitable foundation the members and directors of which include Charles R. Bronfman and Phyllis Lambert, beneficially owns 314,107 Common Shares, representing 0.30% of the outstanding Common Shares and 0.18% of the Common Shares that would be outstanding upon the conversion of the SRVs into Common Shares. Each of the persons described in this paragraph has the sole power to vote and to dispose of the Common Shares reported to be owned by such person, except that Charles R. Bronfman has shared power to vote and to dispose of 99,266 Common Shares described as beneficially owned by him and E. Leo Kolber has shared power to vote and to dispose of 75,000 Common Shares as beneficially owned by him. Percentages set forth in this Item 5 are based on the number of Common Shares outstanding as of August 2, 1997 as reported in the Cineplex Report on Form 10-Q for the quarterly period ended June 30, 1997. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Except as described in Item 4 hereof or as previously described in Item 6 to the Schedule 13D, neither Seagram nor Universal, 19 Page 19 of 29 Pages nor to the best knowledge of Seagram or Universal, any of their respective directors or executive officers (or any other person or entity set forth in Schedule A), has any contract, arrangement, understanding or relationship (legal or otherwise) with any person with respect to any securities of Cineplex, including, but not limited to, transfer or voting of any securities of Cineplex, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. -------------------------------- 1. Subscription Agreement 2. Stockholders Agreement 3. Three Party Agreement 4. Termination Agreement 5. Press Release 20 Page 20 of 29 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. DATED: October 14, 1997 UNIVERSAL STUDIOS, INC. By: /s/ Howard L. Weitzman ----------------------------------------------- Name: Howard L. Weitzman Title: Executive Vice President, Corporate Operations THE SEAGRAM COMPANY LTD. By: /s/ Daniel R. Paladino ----------------------------------------------- Name: Daniel R. Paladino Title: Executive Vice President, Legal and Environmental Affairs 21 Page 21 of 29 Pages SCHEDULE A 1. Set forth below is the name, business address, principal occupation or employment and citizenship of each director and executive officer of Universal. The name of each person who is a director of Universal is marked with an asterisk. Unless otherwise indicated, the business address of each person listed below is 100 Universal City Plaza, Universal City, California 91608. Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- EDGAR BRONFMAN, JR.* Chief Executive Officer United States 375 Park Avenue and President of Seagram New York, New York 10152 and Chairman of the Executive Committee of Universal SAMUEL BRONFMAN II* President of Seagram United States 2600 Campus Drive Chateau & Estate Wines Suite 160 Company (a division of a San Mateo, CA 94403 subsidiary of Seagram) ARNOLD M. LUDWICK* Vice President of Seagram Canada 1170 Peel Street and President and Chief 8th Floor Executive Officer of Claridge Montreal, Quebec Inc. Canada H3B 4P2 ROBERT W. MATSCHULLAT* Vice Chairman and Chief United States 375 Park Avenue Financial Officer of Seagram New York, New York 10152 YASUO NAKAMURA* General Manager, Japan Matsushita Entertainment & Media Liaison Office at Universal 22 Page 22 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- FRANK J. BIONDI, JR.* Chairman and Chief United States Executive Officer of Universal RON MEYER* President and Chief United States Operating Officer of Universal HOWARD L. WEITZMAN Executive Vice President, United States Corporate Operations of Universal BRUCE L. HACK* Executive Vice President United States and Chief Financial Officer of Universal KAREN RANDALL Senior Vice President and United States General Counsel of Universal KENNETH L. KAHRS Senior Vice President, Human United States Resources of Universal DEBORAH S. ROSEN Senior Vice President, United States Corporate Communications and Public Affairs of Universal BRIAN C. MULLIGAN Senior Vice President of United States Universal HELLENE S. RUNTAGH Senior Vice President of United States Universal JAY E. SHECTER Vice President, Strategic Canada Sourcing of Universal 23 Page 23 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- PAUL BUSCEMI Vice President, Tax of Joseph United States 800 Third Avenue E. Seagram & Sons, Inc. and New York, New York 10022 Vice President of Universal MAREN CHRISTENSEN Vice President of Universal United States H. STEPHEN GORDON Vice President of Universal United States MARC PALOTAY Vice President of Universal United States WILLIAM A. SUTMAN Vice President and Controller United States of Universal SHARON S. GARCIA Secretary of Universal United States PAMELA F. CHERNEY Treasurer of Universal United States LEW R. WASSERMAN* Chairman Emeritus of Universal United States 2. Set forth below are the name, business address, principal occupation or employment and citizenship of each director and executive officer of Seagram. The name of each person who is a director of Seagram is marked with an asterisk. Unless otherwise indicated, the business address of each person listed below is 375 Park Avenue, New York, New York 10152. 24 Page 24 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- EDGAR M. BRONFMAN* Chairman of the Board of United States Seagram THE HON. CHARLES R. Co-Chairman of the Board Canada BRONFMAN, P.C., C.C.* and Chairman of the Executive 1170 Peel Street Committee of Seagram 8th Floor Montreal, Quebec Canada H3B 4P2 EDGAR BRONFMAN, JR.* Chief Executive Officer United States and President of Seagram and Chairman of the Executive Committee of Universal SAMUEL BRONFMAN II* President of Seagram United States 2600 Campus Drive Chateau & Estate Wines Suite 160 Company (a division of a San Mateo, CA 94403 subsidiary of Seagram) MATTHEW W. BARRETT, O.C.* Chairman and Chief Executive Canada First Bank Tower Officer of Bank of Montreal 68th Floor (a financial institution) First Canadian Place 100 King Street West Toronto, Ontario M5X 1A1 FRANK J. BIONDI, JR.* Chairman and Chief Executive United States 100 Universal City Plaza Officer of Universal Studios, Universal City, CA 91608 Inc. THE HON. WILLIAM G. Counsel to Tory Canada DAVIS, P.C., C.C., Tory DesLauriers & Binnington Q.C.* (attorneys) Suite 3000, Aetna Tower 79 Wellington Street West Toronto, Ontario Canada M5K 1N2 25 Page 25 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- THE HON. PAUL DESMARAIS, Chairman of the Executive Canada P.C., C.C.* Committee of Power Corporation 751 Victoria Square of Canada (a holding and Montreal, Quebec management company) Canada H2Y 2J3 MICHELE J. HOOPER* Corporate Vice President, United States Caremark Caremark International Inc. International Inc. (a health care services 2211 Sanders Road provider) Northbrook, IL 60062 DAVID L. JOHNSTON, Professor of Law at McGill Canada O.C.* University (an educational 3690 Peel Street institution) Room 200 Montreal, Quebec Canada H3A 1W9 THE HON. E. LEO KOLBER, Member of The Senate of Canada Canada SENATOR* 1170 Peel Street 8th Floor Montreal, Quebec Canada H3B 4P2 MARIE-JOSIE KRAVIS, O.C.* Senior Fellow of The Hudson Canada and 625 Park Avenue Institute Inc. (a non-profit Switzerland New York, NY 10021 economics research institute) ROBERT W. MATSCHULLAT* Vice Chairman and United States Chief Financial Officer of Seagram C. EDWARD MEDLAND* President of Beauwood Canada 121 King Street West Investments Inc. (a private Suite 2525 investment company) Toronto, Ontario Canada M5H 3T9 LEW R. WASSERMAN* Chairman Emeritus of Universal United States 100 Universal City Plaza Studios, Inc. Universal City, CA 91608 26 Page 26 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- JOHN S. WEINBERG* General Partner of Goldman, United States 85 Broad Street Sachs & Co. (investment New York, NY 10004 bankers) JOHN D. BORGIA Executive Vice President, Human United States Resources of Seagram STEVEN J. KALAGHER Executive Vice President of United States Seagram and President and Chief Executive Officer, The Seagram Spirits And Wine Group (a division of a subsidiary of Seagram) ELLEN R. MARRAM Executive Vice President of United States Seagram and President and Chief Executive Officer, Tropicana Beverage Group (a division of a subsidiary of Seagram) DANIEL R. PALADINO Executive Vice President, Legal United States and Environmental Affairs of Seagram GABOR JELLINEK Vice President, Production of Canada 1430 Peel Street Seagram and Executive Vice Montreal, Quebec President, Manufacturing, The Canada H3A 1S9 Seagram Spirits And Wine Group (a division of a subsidiary of Seagram) ARNOLD M. LUDWICK Vice President of Seagram Canada 1170 Peel St. 8th Floor Montreal, Quebec Canada H3B 4P2 JOHN R. PRESTON Vice President, Finance of United States Seagram 27 Page 27 of 29 Pages MICHAEL C.L. HALLOWS Secretary of Seagram Canada 3. The trustees of the trusts for the benefit of Edgar M. Bronfman and his descendants are Edgar M. Bronfman, Edgar Bronfman, Jr., Matthew Bronfman, Harold R. Handler, Mayo O. Shattuck III and John L. Weinberg. The trustees of the trusts for the benefit of Charles R. Bronfman and his descendants are Stephen R. Bronfman, Ellen J. Bronfman Hauptman, Trevor Carmichael, Neville LeRoy Smith, Bruce I. Judelson, Gary J. Gartner, Steven H. Levin, Arnold M. Ludwick, Jeffrey D. Scheine and Robert S. Vineberg. The trustees of the trusts for the benefit of the family of the late Minda de Gunzburg are Stanley N. Bergman, Dr. Guido Goldman and Leonard M. Nelson. The directors of the first two charitable foundations referenced in Item 2 include Charles R. Bronfman, Stephen R. Bronfman and Arnold M. Ludwick, and the trustees of the third charitable foundation include Edgar M. Bronfman, Charles R. Bronfman, Samuel Bronfman II, Edgar Bronfman, Jr., Robert W. Matschullat and Daniel R. Paladino. Set forth below or under Part 2 above are the address, principal occupation or employment and citizenship of each person named in this Part 3. Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- PHYLLIS LAMBERT Architect Canada 1920 Baile Street Montreal, Quebec Canada H3H 2S6 28 Page 28 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- MATTHEW BRONFMAN Chief Executive Officer of United States 30 West 26th Street Perfumes Isabell, L.L.C. 2nd Floor (a perfume company) New York, NY 10010 STEPHEN R. BRONFMAN Private Investor Canada 1170 Peel Street 8th Floor Montreal, Quebec Canada H3B 4P2 ELLEN J. BRONFMAN Private Investor Canada HAUPTMAN c/o Withers Solicitors 12 Gough Square London, England EC4A 3DE HAROLD R. HANDLER Attorney whose professional United States 425 Lexington Avenue corporation is a partner of New York, NY 10017 Simpson Thacher & Bartlett (attorneys) MAYO O. SHATTUCK III President and Chief Operating United States Alex Brown & Sons Officer of Alex. Brown & Sons Incorporated Incorporated (investment 135 East Baltimore Street bankers) Baltimore, MD 21202 JOHN L. WEINBERG Senior Chairman of Goldman, United States 85 Broad Street Sachs & Co. (investment New York, NY 10004 bankers) ROBERT S. VINEBERG Partner of Goodman Phillips Canada 1501 McGill College & Vineberg (barristers and Avenue solicitors) 26th Floor Montreal, Quebec Canada H3A 3N9 GARY J. GARTNER Resident Counsel of Goodman Canada 430 Park Avenue Phillips & Vineberg (attorneys) 10th Floor New York, NY 10022 29 Page 29 of 29 Pages Name and Principal Occupation Business Address or Employment Citizenship - ---------------- --------------------- ----------- STEVEN H. LEVIN Resident Counsel of Goodman United States 430 Park Avenue Phillips & Vineberg (attorneys) 10th Floor New York, NY 10022 JEFFREY D. SCHEINE Resident Counsel of Goodman United States 430 Park Avenue Phillips & Vineberg (attorneys) 10th Floor New York, NY 10022 TREVOR CARMICHAEL, Q.C. Barrister, Chancery Chambers Barbados Chancery Chambers, Chancery (attorneys) House High Street Bridgetown, Barbados NEVILLE LEROY SMITH Managing Director of Royal Bank Barbados Sunset Drive of Canada Financial Corporation Pine Gardens (a financial institution) St. Michael, Barbados BRUCE I. JUDELSON Partner of Bergman, Horowitz & United States 157 Church Street Reynolds, P.C. (attorneys) New Haven, CT 06510 STANLEY N. BERGMAN Partner of Bergman, Horowitz & United States 157 Church Street Reynolds, P.C. (attorneys) New Haven, CT 06510 DR. GUIDO GOLDMAN Director of German Studies at United States First Spring Corporation the Center for European Studies 499 Park Avenue at Harvard University and New York, NY 10022 Chairman of First Spring Corporation (an investment company) LEONARD M. NELSON Shareholder of Bernstein, Shur, United States 100 Middle Street Sawyer & Nelson, P.C. Portland, ME 04104 (attorneys) 30 Exhibit Index ------------- 1. Subscription Agreement 2. Stockholders Agreement 3. Three Party Agreement 4. Termination Agreement 5. Press Release EX-99.1 2 SUBSCRIPTION AGREEMENT 1 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 2 shall occur simultaneously with the Closing and at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York. (b) At the Closing, Universal shall pay to LTM US$84,500,000 by bank wire transfer in immediately available funds, to a bank account that LTM shall designate in writing to Universal no less than three business days prior to the Closing, and deliver (i) a receipt for the Stock and (ii) the certificate to be delivered pursuant to Section 5.3(b). (c) At the Closing, LTM shall deliver to Universal a certificate or certificates representing the Stock issued in the name of Universal or its nominee, free and clear of any Encumbrances, except Encumbrances arising as a result of any action taken by Universal, and in form reasonably satisfactory to Universal and with any required stock transfer tax stamps affixed, (i) a receipt for the Purchase Price and (ii) the certificate to be delivered pursuant to Section 5.2(a). Section 1.3. Payment of Taxes and Fees. At the Closing, LTM shall pay all state and local sales taxes, stamp taxes, transfer taxes and any similar taxes that become payable in connection with the transactions contemplated hereby. ARTICLE II REPRESENTATIONS AND WARRANTIES OF UNIVERSAL Universal represents and warrants to LTM as follows: Section 2.1. Existence; Good Standing; Corporate Authority. Universal is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation. Universal has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted. Neither Universal nor any of its Subsidiaries is in violation of any order of any court, governmental authority or arbitration board or tribunal, or any law, ordinance, governmental rule or regulation to which Universal or any of its Subsidiaries or any of their respective properties or assets is subject that would prevent Universal from performing its obligations under the Documents. Section 2.2. Authorization, Validity and Effect of Agreements. Universal has the requisite corporate power and authority to execute and deliver this Agreement and the Stockholders Agreement, and all agreements and documents contemplated hereby or thereby to which it is a party, and the consummation by Universal of the transactions contemplated hereby and thereby has been duly authorized by all requisite corporate action. This Agreement and the Stockholders Agreement, and all agreements and documents contemplated hereby or thereby, to -2- 3 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. -3- 4 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 -4- 5 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: -5- 6 (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. -6- 7 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 -7- 8 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. -8- 9 (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 -9- 10 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 -10- 11 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 -11- 12 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 -12- 13 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 -13- 14 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. -14- 15 (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 -15- 16 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 -16- 17 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 -17- 18 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. -18- 19 711 Fifth Avenue, 11th Floor New York, NY 10022 Attention: Larry Ruisi With a copy to: LTM Holdings, Inc. 711 Fifth Avenue, 11th Floor New York, NY 10022 Attention: Seymour Smith and Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attention: David Golay If to Universal: Universal Studios, Inc. 100 Universal City Plaza Universal City, CA 91608 Attention: Brian C. Mulligan With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3909 Attention: John G. Finley or to such other address as any party may have furnished to the other parties in writing in accordance with this Section. Section 7.3. Fees and Expenses . Whether or not the Transactions are consummated, all costs and expenses incurred in connection with the Documents and the Transactions shall be paid by the party incurring such expenses, except as expressly provided herein. If the Purchase shall be consummated, LTM shall reimburse Universal for all reasonable out-of-pocket expenses and fees paid or payable by or on behalf of Universal or any of its Affiliates, whether incurred prior to, on or after the date of this Agreement, in connection with the Purchase and the other Transactions; provided that such amount, together with the amount -19- 20 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. -20- 21 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 -21- 22 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. -22- 23 IN WITNESS WHEREOF, the undersigned have executed this Subscription Agreement as of the date first written above. LTM HOLDINGS, INC. /s/ Stanley Steinberg ------------------------------------- By: Stanley Steinberg Its: Executive Vice President UNIVERSAL STUDIOS, INC. /s/ Brian C. Mulligan ------------------------------------- By: Brian C. Mulligan Its: Senior Vice President -23- EX-99.2 3 STOCKHOLDERS AGREEMENT 1 STOCKHOLDERS AGREEMENT AMONG LTM HOLDINGS, INC., SONY PICTURES ENTERTAINMENT INC., UNIVERSAL STUDIOS, INC., CHARLES ROSNER BRONFMAN FAMILY TRUST AND THE OTHER PARTIES HERETO DATED AS OF SEPTEMBER 30, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.1 Certain Defined Terms ....................................... 1 SECTION 1.2 Other Defined Terms ......................................... 11 SECTION 1.3 Other Definitional Provisions ............................... 12 SECTION 1.4 Methodology for Calculations ................................ 12 ARTICLE II CORPORATE GOVERNANCE SECTION 2.1 Composition of the Board .................................... 13 SECTION 2.2 Board Procedures ............................................ 18 SECTION 2.3 Committees .................................................. 19 SECTION 2.4 Voting on Certain Matters ................................... 20 SECTION 2.5 Irrevocable Proxy ........................................... 20 SECTION 2.6 Certain Restrictions ........................................ 21 SECTION 2.7 Cooperation ................................................. 22 ARTICLE III CONSENT RIGHTS SECTION 3.1 Consent for Certain Actions ................................. 22 SECTION 3.2 Certain Certificate Provisions .............................. 28 SECTION 3.3 Arbitration ................................................. 28 SECTION 3.4 Approval of Disinterested Directors ......................... 29 SECTION 3.5 Additional Shares ........................................... 30 ARTICLE IV TRANSFER OF COMMON SHARES SECTION 4.1 Restrictions on Transfer during Six-Months Following Closing 30 SECTION 4.2 Tag-Along for All Stockholders .............................. 30 SECTION 4.3 Tag-Along for USI and Claridge Group ........................ 31 SECTION 4.4 Right of First Refusal ...................................... 32 SECTION 4.5 Transferees ................................................. 35 SECTION 4.6 Notice of Transfer .......................................... 37 SECTION 4.7 Compliance with Transfer Provisions ......................... 37 ARTICLE V REGISTRATION RIGHTS SECTION 5.1 Demand Registrations ........................................ 38
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Page ---- SECTION 5.2 Piggyback Registrations ..................................... 40 SECTION 5.3 Registration Procedures ..................................... 41 SECTION 5.4 Registration Expenses ....................................... 46 SECTION 5.5 Limitations on Sale or Distribution of Other Securities...... 47 SECTION 5.6 Company Right to Postpone Registration ...................... 47 SECTION 5.7 No Required Sale ............................................ 48 SECTION 5.8 Indemnification ............................................. 48 SECTION 5.9 Contribution ................................................ 50 SECTION 5.10 Underwritten Offerings ..................................... 52 SECTION 5.11 Rule 144 ................................................... 52 SECTION 5.12 Article V Termination ...................................... 52 ARTICLE VI STANDSTILL SECTION 6.1 Standstill with the Company ................................. 53 SECTION 6.2 Standstill among the Stockholders ........................... 55 ARTICLE VII EQUITY PURCHASE RIGHTS SECTION 7.1 Equity Purchase Rights ...................................... 57 ARTICLE VIII MISCELLANEOUS SECTION 8.1 Conflicting Agreements ...................................... 59 SECTION 8.2 Duration of Agreement ....................................... 59 SECTION 8.3 Best Efforts ................................................ 59 SECTION 8.4 Ownership Information ....................................... 60 SECTION 8.5 Further Assurances .......................................... 60 SECTION 8.6 Amendment and Waiver ........................................ 60 SECTION 8.7 Severability ................................................ 60 SECTION 8.8 Entire Agreement ............................................ 61 SECTION 8.9 Successors and Assigns ...................................... 61 SECTION 8.10 Counterparts ............................................... 61 SECTION 8.11 Remedies ................................................... 61 SECTION 8.12 Notices .................................................... 62 SECTION 8.13 Governing Law; Consent to Jurisdiction ..................... 64 SECTION 8.14 Legends .................................................... 64 SECTION 8.15 Interpretation ............................................. 65 SECTION 8.16 Agents for Stockholders .................................... 65 SECTION 8.17 Additional Agreement ....................................... 66 SECTION 8.18 Effectiveness .............................................. 66
-ii- 4 EXHIBITS Exhibit A Members of the Claridge Group Exhibit B Form of Arbitration Agreement Exhibit C Sound Systems -iii- 5 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT dated as of September 30, 1997 among LTM Holdings, Inc., a Delaware corporation (the "Company"), Sony Pictures Entertainment Inc., a Delaware corporation ("SPE"), Universal Studios, Inc., a Delaware corporation ("USI"), the Charles Rosner Bronfman Family Trust, a trust created under the laws of the province of Quebec (the "Trust"), and the other persons listed on Exhibit A (such persons, together with the Trust, collectively, the "Claridge Group"). WHEREAS, concurrently with the execution and delivery of this Agreement, the Company, SPE and Cineplex Odeon Corporation, a corporation formed under the laws of the province of Ontario ("CO"), are entering into a Master Agreement dated as of the date hereof (the "Master Agreement") pursuant to which and subject to the terms and conditions thereof, among other things, (i) CO and the Company will engage in a business combination (the "Transaction") and (ii) the shareholders of CO will exchange shares of CO for shares of Common Stock (as defined below); WHEREAS, upon the closing of the Transaction (the "Closing"), and before giving effect to any Equity Offering (as defined below), (i) SPE will beneficially own 51.14% of the issued and outstanding Common Shares (as defined below), 49.90% of the issued and outstanding Common Stock and 100% of the issued and outstanding Non-Voting Common Stock (as defined below), (ii) USI will beneficially own 26.02% of the issued and outstanding Common Shares and 26.68% of the issued and outstanding Common Stock, and (iii) the Claridge Group will beneficially own 9.60% of the issued and outstanding Common Shares and 9.85% of the issued and outstanding Common Stock; and WHEREAS, the parties hereto desire to enter into certain post-Closing arrangements relating to the Company. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Certain Defined Terms. As used herein, the following terms shall have the following meanings: "Adjusted Applicable Percentage" means, with respect to any Stockholder, at any time, such Stockholder's Applicable Percentage, recalculated after subtracting from (x) the Voting Shares beneficially owned by such Stockholder and its Permitted Transferees and, in the case of the Claridge Group, all other members of the Claridge Group and their respective Permitted Transferees (y) all Voting Shares acquired in open market purchases, in privately-negotiated transactions (other than from a Stockholder or a Permitted Transferee of 6 2 any Stockholder) or from the Company (other than pursuant to Section 7.1 or a transaction described in clause (ii) of Section 7.1(g)). "Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person. For purposes of this definition, (i) no member of the Claridge Group shall be considered an Affiliate of USI or any Subsidiary of USI, (ii) Matsushita Electric Industrial Co., Ltd. ("MEI") shall not be considered an Affiliate of USI or any Subsidiary of USI, provided, that clause (ii) shall not be applicable at any time that USI shall disclose in a Schedule 13D filed pursuant to the Exchange Act that USI and MEI have formed a Group with respect to Voting Shares, and (iii) each member of the Claridge Group shall be considered an Affiliate of each other member of the Claridge Group. "Agreement" means this Stockholders Agreement as it may be amended, supplemented, restated or modified from time to time. "Applicable Percentage" means, with respect to any Stockholder, at any time, the ratio, expressed as a percentage, of (i) the then outstanding Voting Shares beneficially owned by such Stockholder and (a) in the case of SPE or USI, such Stockholder's Permitted Transferees, and (b) in the case of any member of the Claridge Group, all other members of the Claridge Group and all Permitted Transferees of the Claridge Group, to (ii) the sum of (x) the total then outstanding Voting Shares and (y) with respect to such Stockholder, any Voting Shares included in clause (i) that are issuable upon conversion, exchange or exercise of Voting Share Equivalents, provided, that if the Company shall issue or sell Voting Shares in a transaction (other than the Equity Offering) in respect of which either SPE or USI does not have the right to consent pursuant to clause (vii) of Section 3.1(a) at a time when such Stockholder has an Article III Consent Right, the aggregate amount of Voting Shares issued or sold pursuant to all such transactions shall be subtracted from the amount of outstanding Voting Shares in calculating such Stockholder's Applicable Percentage for purposes of Articles II and III and for any calculation of such Stockholder's Applicable Percentage under the Certificate, subject to the applicable rules of any stock exchange on which the Common Stock shall then be listed. "Article III Consent Right" means, with respect to SPE or USI, the right of such Stockholder pursuant to Section 3.1(a) to approve the actions specified in clauses (i)-(xiv) of such Section. "beneficial owner" or "beneficially own" has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person's beneficial ownership of Voting Shares shall be calculated in accordance with the provisions of such Rule, provided, however, that (i) in determining beneficial ownership for purposes of Article II, Section 4.3 and clauses (ii) and (iii) of Section 4.5(b) and for any calculation of such Stockholder's Applicable Percentage under the Certificate (including in the calculation of a Stockholder's Applicable Percentage and Adjusted Applicable Percentage in such provisions), a Person shall not be deemed to be the beneficial owner of any Voting Shares which may be acquired by such Person upon the conversion, exchange or exercise of any Voting Share Equivalents, except for purposes of 7 3 Section 4.3, a Person shall be deemed to beneficially own such Voting Shares if such Person has irrevocably agreed to convert, exchange or exercise the related Voting Share Equivalent upon consummation of the applicable Third Party Sale, (ii) in determining beneficial ownership for purposes of the other provisions of this Agreement, a Person shall be deemed to be the beneficial owner of any Voting Shares which may be acquired by such Person, whether within 60 days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities issued by the Company or any Subsidiary thereof and (iii) in determining beneficial ownership for purposes of Sections 2.1(a), (b) and (c), clauses (i) and (ii) of Section 2.1(g), Sections 4.2, 4.3 and 5.12, Article VII and Section 8.2 and for any calculation of such Stockholder's Applicable Percentage under the Certificate (including in the calculation of a Stockholder's Applicable Percentage and Adjusted Applicable Percentage in such provisions), a Person shall not be deemed to be the beneficial owner of any Voting Shares unless such Person has a pecuniary interest in such Voting Shares. "Board" means the Board of Directors of the Company. "Business Day" shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York. "Bylaws" means the Amended and Restated Bylaws of the Company in the form attached as Exhibit F to the Master Agreement, as the same may be amended, supplemented or modified from time to time. "Capital Lease Obligations" of a Person means the obligation to pay rent or other payment amounts under a lease of (or other arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on a balance sheet of such Person in accordance with GAAP. The principal amount of such obligation shall be the capitalized amount thereof that appears on a balance sheet of such Person in accordance with GAAP. "Capital Stock" means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited) or equivalent ownership interests in or issued by such Person. "Cash Flow" means, for purposes of determining the cash flow of an asset under clauses (i) or (ii) of Section 3.1(a), (i) with respect of any motion picture theater, "Cash Flow" as defined in the Master Agreement, and (ii) with respect to any other type of asset, cash flow shall be defined as the Company and each Stockholder who at the time of determination has an Article III Consent Right shall jointly determine in good faith and, in making any such determination, such parties shall consider any definition of cash flow that is customarily utilized by nationally recognized investment banking firms to measure the cash flow of such assets. 8 4 "Certificate" means the Amended and Restated Certificate of Incorporation of the Company in the form attached as Exhibit A to the Master Agreement, as the same may be amended, supplemented or modified from time to time. "Certificate Amendment" means any amendment or restatement of the Certificate after the Closing. "Claridge Director" means any Director designated pursuant to Section 2.1 by the Claridge Group. "Commission" means the Securities and Exchange Commission, and any successor commission or agency having similar powers. "Common Shares" means, collectively, the Common Stock and the Non-Voting Common Stock. "Common Stock" means common stock, par value $0.01 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization. "Company Expenses" means (i)(a) fees and disbursements of counsel for the Company and (b) fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) and fees and expenses of other Persons, including special experts retained by the Company, incident to the Company's performance of or compliance with its obligations under Article V, and (ii) if the Company participates in a registration pursuant to Article V, the Company's pro rata share of other Expenses related to such registration on the basis of the number of securities included in such registration by the Company relative to the total number of securities included in such registration. "Consolidated Income Tax Expense" of any Person means for any period the consolidated provision for income taxes of such Person and its consolidated Subsidiaries for such period as reported on such Person's financial statements for such period and determined in accordance with GAAP. "Consolidated Interest Expense" of any Person means for any period the consolidated interest expense included in a consolidated income statement (net of interest income) of such Person and its consolidated Subsidiaries for such period as reported on such Person's financial statements for such period and determined in accordance with GAAP. "Consolidated Net Income" of any Person means for any period the consolidated net income (or loss) of such Person and its consolidated Subsidiaries for such period as reported on such Person's financial statements for such period and determined in accordance with GAAP; provided that there shall be excluded therefrom (i) gains or losses on asset dispositions by such Person or its consolidated Subsidiaries, (ii) all extraordinary gains and extraordinary losses, (iii) any net income (loss) of a consolidated Subsidiary that is 9 5 attributable to a minority interest in such consolidated Subsidiary, (iv) all non-cash non-recurring charges and credits during such period not in the ordinary course of business and (v) the tax effect of any of the items described in clauses (i) through (iv) above. "control" (including the terms "controlled by" and "under common control with"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise. "Current Market Value" means, with respect to any security, the average of the daily closing prices on the New York Stock Exchange (or such principal exchange or market on which such security may be listed or may trade) for such security for the 20 consecutive trading days commencing on the 22nd trading day prior to the date with respect to which the Current Market Value is being determined. The closing price for each day shall be the closing price, if reported, or, if the closing price is not reported, the average of the closing bid and asked prices as reported by the New York Stock Exchange (or such principal exchange or market) or a similar source selected from time to time by the Company for such purpose. In the event such closing prices are unavailable, the Current Market Value shall be the Fair Market Value of such security established by a Determination of the Independent Directors. If a determination is required under this Agreement of the Current Market Value of any NonVoting Common Stock, such value shall be deemed to be equal to the Current Market Value of an equivalent number of shares of Common Stock. "Debt" means (without duplication), with respect to any Person, whether or not recourse is to all or a portion of the assets of such Person or any of its Subsidiaries, (i) every obligation of such Person or any of its Subsidiaries for money borrowed, (ii) every obligation of such Person or any of its Subsidiaries evidenced by bonds, debentures, notes or other similar instruments, (iii) every reimbursement obligation of such Person or any of its Subsidiaries with respect to letters of credit (including standby letters of credit to the extent drawn upon), bankers' acceptances or similar facilities issued for the account of such Person or any of its Subsidiaries, (iv) every obligation of such Person or any of its Subsidiaries issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person or any of its Subsidiaries other than Capital Lease Obligations of such Person or any of its Subsidiaries for real property, and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person or any of its Subsidiaries has guaranteed or for which such Person is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise; provided that, in the case of joint venture Debt, there shall only be included that portion of such Debt equal to the ratable share in such joint venture of such Person or any of its Subsidiaries. "DGCL" means the Delaware General Corporation Law. 10 6 "Determination of the Independent Directors" means, with respect to any matter, a determination made in good faith, on the basis of such relevant factors as the Independent Directors consider, in their judgment, appropriate, by the vote of a majority of the Independent Directors present at a meeting of the Independent Directors called for such purpose, a quorum being present (or at a meeting of the Board if a quorum of the Independent Directors is present at such meeting), or without a meeting if a majority of all Independent Directors consent thereto in writing. For these purposes, a majority of all Independent Directors, acting at a meeting duly assembled, shall constitute a quorum for the making of any such determination at such meeting. "Director" means any member of the Board. "Directors Chart" means the chart attached as Schedule I. "Disinterested Directors" means, with respect to any matter that is subject to approval under Section 3.4, all Directors other than any Director who is a designee of SPE (in the case of Section 3.4(a)) or USI (in the case of Section 3.4(b)). "Dissolution" means a voluntary liquidation, dissolution or winding up of the Company. "EBITDA" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expense deducted in determining the Consolidated Net Income of such Person for such period (excluding amortization of Capitalized Lease Obligations other than those incurred to finance equipment); provided, however, that the Consolidated Interest Expense, Consolidated Income Tax Expense and consolidated depreciation and amortization expense of a consolidated Subsidiary of such Person shall be added to the Consolidated Net Income of such Person pursuant to the foregoing only to the extent and in the same proportion that the Consolidated Net Income of such consolidated Subsidiary was included in calculating the Consolidated Net Income of such Person. "Equity Offering" means the sale for cash by the Company in one or more underwritten public offerings of Common Stock for an aggregate offering price of $200 million (before deducting underwriting discounts or commissions). "Exchange Act" means the Securities and Exchange Act of 1934, as amended. "Excluded Securities" means options issued by the Company to employees or directors of the Company or its Subsidiaries pursuant to any stock option or similar plan (and any Common Stock issuable thereunder) approved by the Board and any Common Stock issuable upon conversion of Non-Voting Common Stock. 11 7 "Expenses" means any and all fees and expenses incident to the Company's performance of or compliance with its obligations under Article V (other than internal expenses incurred by the Company including the services of the Company's executives and legal department), including: (i) listing and filing fees of the Commission or any stock exchange registration, (ii) fees and expenses of compliance with state and provincial securities or "blue sky" laws and in connection with the preparation of a "blue sky" survey, including reasonable fees and expenses of "blue sky" counsel, (iii) fees and expenses of compliance with any Canadian securities laws, (iv) printing and copying expenses, (v) messenger and delivery expenses, (vi) expenses incurred in connection with any road show, (vii) fees and disbursements of counsel for the Company, (viii) with respect to each registration, the reasonable fees and disbursements of one counsel for the selling Holder(s) (selected by the Initiating Holder, in the case of a Demand Registration, or by the Requisite Percentage of Participating Holders, in the case of a Piggyback Registration), (ix) fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) and fees and expenses of other Persons, including special experts, retained by the Company, and (x) any other fees and disbursements of underwriters, if any, customarily paid by issuers or sellers of securities. "Fair Market Value" means, as to any securities or other property, the cash price at which a willing seller would sell and a willing buyer would buy such securities or property in an arm's-length negotiated transaction without time constraints. "Five-Year Plan" means (i) the Initial Five-Year Plan, or any replacement of such plan adopted in accordance with Section 3.1(b), and (ii) after the expiration of the Initial Five-Year Plan, or any replacement thereof, subsequent five-year strategic business plans of the Company adopted by the Board in accordance with Section 3.1(d) or any replacement thereof adopted in accordance with Section 3.1(b). "GAAP" means United States generally accepted accounting principles, as in effect from time to time. "Group" shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act. "Holder" means SPE, USI, each member of the Claridge Group and any of their respective Permitted Transferees, and any Third Party Transferee (i) to the extent the rights and obligations of a Holder are specifically assigned to such Third Party Transferee by a Stockholder in accordance with Section 4.5(b)(iv) and (ii) who agrees, pursuant to Sections 4.5(b) and 4.5(c), to be bound by the provisions of this Agreement as a "Holder" hereunder. "Independent Director" means any Director who satisfies the criteria set forth in the second paragraph of Section 2.1(i). "Initial Five-Year Plan" means the Company's five-year strategic business plan in effect as of the Closing, as adopted by the Board. 12 8 "Initial Interest" means, with respect to any Stockholder, all of the Common Shares beneficially owned by such Stockholder and its Permitted Transferees immediately following the Closing. "Management Director" means any Director who is also an executive officer of the Company. "Market Capitalization" means, as of any Determination Date, the product of (i) the number of Common Shares outstanding and (ii) the Current Market Value. "Market Sale" means a "brokers' transaction" within the meaning of Section 4(4) of the Securities Act. "Maximum Debt Ratio" means 6.0 to 1.0, provided that such ratio shall be decreased by 0.25 to 1.0 if the Company shall have issued Common Stock in a public offering after the Closing for an aggregate net offering price of $40 million and by an additional 0.25 to 1.0 for each additional $40 million that the Company shall issue in a public offering after the Closing, provided, further, that in no event shall such ratio be less than 4.75 to 1.0. "Merger" means any merger or consolidation in which the Company is a constituent corporation or any sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole, provided that a merger which satisfies all of the following criteria shall not be deemed a Merger for purposes of this definition: (i) the Company is the surviving corporation, (ii) all shares of Common Stock outstanding immediately prior to the consummation thereof remain outstanding immediately after the consummation thereof and the only change in the Capital Stock of the Company resulting from such merger is the issuance of shares of Capital Stock pursuant thereto, and (iii) no consent of the Stockholders would be required in connection therewith either under the DGCL or under Article III. "Minimum Percentage" means, with respect to SPE or USI, an Applicable Percentage of 17.86%, provided that if such Stockholder and its Permitted Transferees beneficially own at least 80% of such Stockholder's Initial Interest, such percentage shall equal 15%. "Non-Voting Common Stock" means non-voting common stock, par value $0.01 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization. "pecuniary interest" has the meaning given such term in Rule 16a-1(a)(2) under the Exchange Act. "Permitted Transferee" means (i) with respect to SPE, any direct or indirect wholly-owned Subsidiary of Sony Corporation which is incorporated in the United States, (ii) 13 9 with respect to USI, any direct or indirect wholly-owned Subsidiary of The Seagram Company Ltd. or USI which is incorporated in the United States, and (iii) with respect to each member of the Claridge Group, (a) any member of the Claridge Group, (b) any one or more of the lineal descendants of Charles R. Bronfman, Senator E. Leo Kolber or Arnold M. Ludwick, (c) the spouses of any one or more of the foregoing Persons referred to in this clause (iii), (d) any trust of which any one or more of the foregoing Persons referred to in this clause (iii) is the principal beneficiary, (e) Phyllis Lambert, (f) the legal representatives of any one or more of the Persons referred to in clauses (a), (b) or (c) of this clause (iii), (g) any corporation, partnership or other entity directly or indirectly of which more than 90% of the total voting power of the Capital Stock entitled to vote in the election of directors, managers or administrators thereof is beneficially owned by Persons referred to in this clause (iii), and (h) any private charitable foundation of which one or more of the foregoing Persons referred to in this clause (iii) constitutes a majority of the members. In addition, each of SPE, USI and each member of the Claridge Group shall each be a Permitted Transferee of its respective Permitted Transferees. "Person" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing. "Public Stockholder" means any stockholder of the Company other than (i) the Stockholders and their respective Permitted Transferees and (ii) stockholders of the Company who are required to file a Schedule 13D pursuant to the Exchange Act with respect to their ownership of Voting Shares, excluding any such stockholders that (a) are investment advisers registered under Section 203 of the Investment Advisers Act of 1940, as amended, (b) are not participating and have not publicly disclosed (in a Schedule 13D filing or otherwise) an intention to participate in an election contest affecting the Company and (c) have not publicly disclosed (in a Schedule 13D filing or otherwise) any intention or purpose of influencing control of the Company in any material respect (including seeking representation on the Board). "Registrable Securities" means any Common Stock beneficially owned by any Holder (including any Common Stock issuable upon conversion of Non-Voting Common Stock), whether beneficially owned as of the Closing or thereafter acquired. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been sold (other than in a privately-negotiated sale) pursuant to Rule 144 (or any successor provision) under the Securities Act or (iii) such securities shall have ceased to be outstanding. "Requisite Percentage of Participating Holders" means, with respect to any registration pursuant to Article V, Holders of a majority of the total Registrable Securities which the Company has been requested to register by all Holders. 14 10 "Securities Act" means the Securities Act of 1933, as amended. "SPE Director" means any Director designated pursuant to Section 2.1 by SPE. "Stockholder" means each of SPE, USI and each member of the Claridge Group. "Subsidiary" means, with respect to any Person, any corporation, partnership, joint venture, limited liability company or other entity controlled by such Person directly or indirectly through one or more intermediaries. "Targeted EBITDA" means (i) for the 12-month period commencing on the Closing Date, if the Closing Date shall be on the first day of a month, or otherwise for the 12-month period commencing on the first day of the month following the month during which the Closing shall occur, and (ii) for each 12-month period thereafter (each full 12-month period, including the initial period described in clause (i), a "Measurement Period"), Targeted EBITDA of the Company as set forth in the Five-Year Plan, subject to the following adjustments: (x) Targeted EBITDA shall be reduced (but not increased) as at the end of any Measurement Period if subsidiaries or assets specifically identified in the Five-Year Plan to be disposed of or closed during such period shall not have been disposed of or closed, such reduction to be in an amount equal to the extent to which the aggregate actual EBITDA of such assets or subsidiaries during such Measurement Period is negative (net of any positive actual EBITDA of any such assets or subsidiaries), and if such assets or subsidiaries are not disposed of or closed within 12 months following the date projected in the Five-Year Plan for such disposition or closure, Targeted EBITDA in respect of such 12-month period shall be reduced (but not increased) in an amount equal to the extent to which the aggregate actual EBITDA of such assets or subsidiaries during such 12-month period is negative (net of any positive actual EBITDA of any such assets or subsidiaries), (y) Targeted EBITDA shall be reduced (but not increased) as at the end of any Measurement Period if expansions and acquisitions specifically identified in the Five-Year Plan to be made during such period shall not have occurred during such period, such reduction to be in an amount equal to the amount of EBITDA specifically identified in the Five-Year Plan as being associated with such expansions and acquisitions (net of any positive actual EBITDA during such Measurement Period from expansions and acquisitions that were not specifically identified in the Five-Year Plan), and (z) Targeted EBITDA shall be reduced by an amount equal to 25% of the projected expense savings that are specifically identified in the Five-Year Plan. "Third Party Transferee" means any Person to whom a Stockholder (including a Third Party Transferee subject to this Agreement pursuant to Sections 4.5(b) and 4.5(c)) or a Permitted Transferee Transfers Voting Shares, other than a Permitted Transferee of such Stockholder. "Transfer" means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Voting 15 11 Shares or any interest in any Voting Shares, provided, however, that, subject to the second to last sentence of Section 4.5(a), a merger or consolidation in which a Stockholder is a constituent corporation shall not be deemed to be the Transfer of any Voting Shares beneficially owned by such Stockholder (provided, that the primary purpose of any such transaction is not to avoid the provisions of this Agreement). "USI Director" means any Director designated pursuant to Section 2.1 by USI. "USI Subscription Agreement" means the Agreement between USI and the Company attached as Exhibit I to the Master Agreement, as the same may be amended, supplemented or modified from time to time. "Voting Share Equivalents" means any warrants, options, rights or securities convertible into, or exchangeable or exercisable for, Voting Shares. "Voting Shares" means any securities of the Company the holders of which are generally entitled to vote for members of the Board and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization. SECTION 1.2 Other Defined Terms. The following terms shall have the meanings defined for such terms in the Sections set forth below:
Term Section ---- ------- Aggrieved Stockholder 8.11(c) Arbitration Agreement 3.3(c) Arbitrator 3.3(c) Bylaw Amendment 2.4(a) CO Recitals Claims 5.8(a) Claridge Group Preamble Closing Recitals Company Preamble Demand Exercise Notice 5.1(a) Demand Registration Requests 5.1(a) Demand Registrations 5.1(a) Determination Date 3.1(a) Initiating Holder 5.1(a) Issuance Notice 7.1(b) Issuance Shares 7.1(a) Litigation 8.13 Master Agreement Recitals New Five-Year Plan 3.1(b) Nominating Committee 2.1(i)
16 12 Offer Notice 4.4(b) Offer Price 4.4(c) Offered Shares 7.1(a) Offeree 7.1(a) Other Holders 5.1(b) Other Stockholder 4.4(b) Permitted Debt 3.1(a) Piggyback Registration 5.2(a) Reorganization Proposal 3.1(f) Significant Sale 4.2(a) Significant Sale Initiator 4.2(a) Significant Sale Notice 4.2(a) Significant Sale Shares 4.2(a) SPE Preamble Tag-Along Notice 4.3(a) Tag-Along Offeree 4.3(a) Tag-Along Sale 4.3(a) Tag-Along Shares 4.3(a) Target 3.1(a) Transaction Recitals Transferring Party 4.4(a) Trust Preamble USI Preamble
SECTION 1.3 Other Definitional Provisions. (a) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 1.4 Methodology for Calculations. For purposes of this Agreement, the Transfer or issuance of a Voting Share Equivalent shall be treated as the Transfer or issuance of the Voting Shares into which such Voting Share Equivalent can be converted, exchanged or exercised. For purposes of calculating the amount of outstanding Voting Shares as of any date and the amount of Voting Shares beneficially owned by any Person as of any date, (i) the amount of any Voting Shares shall be equal to the number of votes such Voting Shares shall then entitle the holder thereof to cast in an election for members of the Board, (ii) any Voting Shares held in the Company's treasury or owned by any Subsidiaries of the Company shall be disregarded, (iii) the Stockholders shall not be deemed to share beneficial ownership of any Voting Shares as a result of any of the provisions of this Agreement and (iv) if any Voting Shares shall otherwise be deemed to be beneficially owned by more than one Stockholder, such shares shall be deemed to be beneficially owned only by the Stockholder with the greatest pecuniary interest in such shares (provided that if such 17 13 Stockholders shall have an equal pecuniary interest in any such shares, each Stockholder shall be deemed to beneficially own an equal portion of such shares (which portions shall not exceed 100% in the aggregate)). ARTICLE II CORPORATE GOVERNANCE SECTION 2.1 Composition of the Board. (a) Effective as of the Closing, the Board shall be comprised of 16 members, consisting of six designees of SPE, three designees of USI, one designee of the Claridge Group, two Management Directors and four Independent Directors. The designees of SPE, USI and the Claridge Group shall have been designated by SPE, USI and the Claridge Group prior to the Closing in accordance with the provisions of Section 6.18 of the Master Agreement, the Independent Directors shall have been designated by SPE, USI and a majority of the members of the Special Committee (as defined in the Master Agreement) prior to the Closing in accordance with the provisions of Section 6.18 of the Master Agreement and the Management Directors shall be the individuals satisfying the criteria set forth in Section 2.1(j). (b) After the Closing, SPE, USI and the Claridge Group shall be entitled to designate for nomination for election to the Board the number of Directors set forth in the Directors Chart which corresponds to such Stockholder's Applicable Percentage; provided, however, that: (i) (x) until the five-year anniversary of the Closing, the Claridge Group shall be entitled to designate one Director if its Applicable Percentage exceeds 3.5%, and, thereafter, if its Applicable Percentage exceeds 5%, and (y) the Claridge Group's entitlement to designate two or more Directors shall be determined in accordance with this Section 2.1 on the same basis as the entitlement of the other Stockholders; (ii) if the Directors Chart provides that the Stockholders would in the aggregate be entitled to designate more than 14 Directors, each reference to a percentage in such chart under the "Applicable Percentage" column, shall be increased by the least number of percentage points that would result in the Stockholders in the aggregate being entitled to designate 14 Directors (after giving effect to the provisions of clause (i)(x) above); and (iii) prior to the four-year anniversary of the Closing, no Stockholder shall be entitled to designate more than eight Directors, provided, however, that if any Stockholder would be entitled to designate more than eight Directors pursuant to the Directors Chart based on such Stockholder's Adjusted Applicable Percentage (rather than such Stockholder's Applicable Percentage), (x) such Stockholder shall be entitled to designate the number of Directors set forth in the Directors Chart based on such 18 14 Stockholder's Applicable Percentage and (y) the limitation contained in this clause (iii) regarding a Stockholder's entitlement to designate Directors shall thereupon terminate. (c) Notwithstanding anything to the contrary contained in Section 2.1(b), each of SPE and USI covenants and agrees with the other and each member of the Claridge Group covenants and agrees with each of SPE and USI that: (i) no Stockholder shall be entitled to designate more than six Directors, provided, however, that if any Stockholder would be entitled to designate more than eight Directors pursuant to the Directors Chart based on such Stockholder's Adjusted Applicable Percentage (rather than such Stockholder's Applicable Percentage), such Stockholder shall be entitled to designate such greater number of Directors and the limitation contained in this clause (i) regarding a Stockholder's entitlement to designate Directors shall thereupon terminate, provided, further, that, if at any time commencing on the three-year anniversary of the Closing, any Stockholder's Applicable Percentage exceeds 45%, the limitation contained in this clause (i) regarding a Stockholder's entitlement to designate Directors shall be increased from six Directors to seven Directors; (ii) at any time that SPE's Applicable Percentage equals or exceeds 40.625% but the number of SPE Directors is limited to six by clause (i) of this Section 2.1(c), USI agrees with SPE that one of the individuals designated by USI to serve as a Director shall be an Independent Director so long as USI's Applicable Percentage equals or exceeds 21.875% (provided that in determining whether such individual is an Independent Director, the opinion of such Stockholder shall be substituted for the opinion of the Nominating Committee for purposes of clauses (i) and (iii) of Section 2.1(i)); and (iii) at any time that USI's Applicable Percentage equals or exceeds 40.625% but the number of USI Directors is limited to six by clause (i) of this Section 2.1(c), SPE agrees with USI that one of the individuals designated by SPE to serve as a Director shall be an Independent Director so long as SPE's Applicable Percentage exceeds 21.875% (provided that in determining whether such individual is an Independent Director, the opinion of such Stockholder shall be substituted for the opinion of the Nominating Committee for purposes of clauses (i) and (iii) of Section 2.1(i)). (d) After the Closing, except for the designees of the Stockholders and for the Management Directors (who shall be selected in accordance with Section 2.1(i) and (j)), the individuals to be nominated for election as Directors shall all be Independent Directors and shall be selected in accordance with Section 2.1(i), unless the Independent Directors (based on a Determination of the Independent Directors) shall otherwise agree, provided that there shall be at least two Independent Directors and at least two Management Directors nominated in each such election. 19 15 (e) Each Stockholder agrees to vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, any Voting Shares beneficially owned by it to cause the designees of SPE, USI and the Claridge Group and each of the Independent Directors and Management Directors designated by the Nominating Committee to be elected to the Board, and the Company agrees to use its best efforts to cause the election of each such designee to the Board, including nominating such individuals to be elected as members of the Board as provided herein. At least 45 days prior to its distribution of its proxy statement or information statement with respect to each meeting of stockholders at which Directors are to be elected, the Company shall notify each Stockholder that is then entitled to designate Directors pursuant to Section 2.1(b) of (i) the aggregate number of Directors to be elected at the meeting, (ii) such Stockholder's Applicable Percentage as of the record date for such meeting and (iii) the number of Directors such Stockholder is entitled to designate (calculated based on such Stockholder's Applicable Percentage as of the record date). Each Stockholder shall notify the Company of the Directors designated by it pursuant to this Section on or prior to the close of business on the later of (x) the 15th day following its receipt of the Company's notice and (y) the 20th day prior to the Company's distribution of such proxy statement or information statement. (f) In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of any SPE Director, USI Director or Claridge Director, SPE, USI or the Claridge Group, as the case may be, shall have the right to designate a replacement Director to fill such vacancy and the Company agrees to use its best efforts to cause such vacancy to be filled with the replacement Director so designated. Upon the written request of SPE, USI or the Claridge Group, each Stockholder shall vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, all Voting Shares beneficially owned by it and otherwise take or cause to be taken all actions necessary to remove any Director designated by such requesting party and to elect any replacement Director designated as provided in the first sentence of this Section 2.1(f). Unless all the Stockholders otherwise agree, no Stockholder or any of its Affiliates shall take any action to cause the removal of any SPE Director, USI Director, Claridge Director, Management Director or Independent Director without cause, except (i) in the case of an SPE Director, USI Director or Claridge Director, upon the written request of the Stockholder which designated such Director, (ii) in the case of a Management Director, if such individual shall cease to serve as one of the two most senior executive officers of the Company, and (iii) as provided in Section 2.1(g). For purposes of the preceding sentence, "cause" shall mean the wilful and continuous failure of a Director to substantially perform such Director's duties to the Company or the wilful engaging by a Director in gross misconduct materially and demonstrably injurious to the Company. (g) If, at any time, any of the Stockholders or any of their respective Permitted Transferees shall Transfer Voting Shares and, upon consummation of such Transfer, the Applicable Percentage of such Stockholder is reduced such that the number of Directors such Stockholder is entitled to designate pursuant to Section 2.1(b) and 2.1(c) is reduced by one or more Directors, then: 20 16 (i) the number of SPE Directors, USI Directors and Claridge Directors shall be recalculated by the Company in accordance with Section 2.1(b) and 2.1(c) as of the consummation of such Transfer (and after giving effect thereto); (ii) to the extent that, after giving effect to the recalculation described in clause (i), any of SPE, USI or the Claridge Group is entitled to designate fewer Directors than the number of Directors then serving as designees of such Stockholder(s), any such Stockholder shall use its best efforts to cause Director(s) designated by such Stockholder to resign from the Board as promptly as practicable so that the number of Directors designated by such Stockholder does not exceed the number of designees such Stockholder shall then be entitled to designate based on such recalculation; (iii) if a sufficient number of SPE Directors, USI Directors or Claridge Directors, as the case may be, shall not have resigned within 30 days of the event requiring such recalculation, each Stockholder shall vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, all Voting Shares beneficially owned by it and otherwise take or cause to be taken all actions necessary to remove such excess number of Directors designated by the Stockholder(s) whose designees have not resigned in accordance with clause (ii); (iv) upon the effectiveness of the resignation(s) or removal(s) described in clauses (ii) and (iii), the Company shall cause the Board (and each Stockholder shall use its best efforts to cause its respective designees to the Board) to fill all vacancies created by such resignation(s) or removal(s) (x) by appointing to the Board designees of any Stockholder (including any Third Party Transferee described in clause (ii) of Section 4.5(b)) who is entitled, as a result of the recalculation described in clause (i), to designate more Directors than the number of Directors then serving as designees of such Stockholder and (y) to the extent vacancies remain after giving effect to clause (x), by filling such remaining vacancies with Independent Directors designated by the Nominating Committee pursuant to Section 2.1(i); and (v) if the vacancies to the Board have not be filled in accordance with clause (iv), each Stockholder shall vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, all Voting Shares beneficially owned by it and otherwise take or cause to be taken all actions necessary to fill all vacancies as provided in clause (iv). (h) The Company agrees not to take any action that would cause the number of Directors constituting the entire Board to be other than 16 and each Stockholder agrees to use its best efforts to cause the number of Directors constituting the entire Board to be 16. (i) In connection with each election of Directors, the Company will use its best efforts to cause there to be nominated for election as Directors, in accordance with the Company's procedures for the nomination of Directors and to the extent permissible in accordance with applicable legal requirements, (1) the two Management Directors who satisfy 21 17 the criteria set forth in Section 2.1(j), and (2) the number of Independent Directors required to be nominated in accordance with Section 2.1(d). With respect to each election held after the Closing, the Management Directors referred to in clause (1) above and the Independent Directors referred to in clause (2) above shall be designated by a nominating committee of the Board (the "Nominating Committee") established to determine whether prospective nominees meet the criteria set forth in Section 2.1(j) with respect to such Management Directors and the criteria set forth in the following paragraph with respect to such Independent Directors. The Company agrees to cause the Nominating Committee to be comprised of four Directors, consisting of (x) two Independent Directors designated by a majority of the Independent Directors and (y) one SPE Director and one USI Director, provided if at any time there shall cease to be at least one USI Director or one SPE Director, then the Nominating Committee shall include two SPE Directors or two USI Directors, as the case may be, to the extent SPE or USI, as applicable, then has two designees serving as Directors. An Independent Director is a Director who, and each future qualified nominee for election as an Independent Director shall be an individual who: (i) is free from any relationship that, in the opinion of the Nominating Committee, would interfere with the exercise of independent judgment as a member of the Board; (ii) is not an Affiliate of the Company, SPE, USI or the Claridge Group or a current or former officer of the Company or any of its Subsidiaries or a current or former officer or director of SPE or USI or any of their respective Subsidiaries; (iii) does not, in addition to such individual's role as a Director, also act on a regular basis as an individual or representative of an organization serving as a professional advisor, legal counsel or consultant to management of the Company or SPE, USI or the Claridge Group or any of their respective Subsidiaries; and (iv) does not represent, and is not a member of the immediate family of, a Person who does not satisfy the requirements of clauses (i), (ii) or (iii) above. In the event that the Stockholders collectively have the right to designate at least 13 of the members of the Board pursuant to Section 2.1, SPE and USI agree that at least one of the individuals designated by each such Stockholder to serve as a Director shall be an Independent Director, provided that if one of such Stockholders shall be entitled to designate only one Director, such Stockholder shall not be required to designate an Independent Director and the other such Stockholder shall be required to designate two Independent Directors (provided, further, that such designees shall qualify to serve on the Audit Committee of the Board in accordance with the policies of the New York Stock Exchange governing membership on audit committees). (j) The two Management Directors referenced in clause (1) of Section 2.1(i) shall be the two most senior executive officers of the Company, provided that so long as 22 18 Allen Karp shall be an executive officer of the Company or any Affiliate thereof he shall be a Management Director even if he is not one of the two most senior executive officers and, in such circumstances, the Management Directors shall be the most senior executive officer of the Company and Mr. Karp. If any Management Director shall cease to satisfy the foregoing criteria, the Company shall cause such individual to immediately resign as a Management Director, and upon such resignation, the Company shall cause the Board (and each Stockholder shall use its best efforts to cause its respective designees to the Board) to fill the vacancy created thereby in accordance with Section 2.1. (k) If, on the three-year anniversary of the Closing, any Stockholder shall then be entitled to designate seven Directors rather than six Directors in accordance with the second proviso contained in clause (i) of Section 2.1(c), at the request of such Stockholder, the Company shall take such action as may be necessary to cause one of the Independent Directors to resign from the Board so as to enable such Stockholder to designate a seventh Director, and if an Independent Director has not so resigned within 30 days of such Stockholder's request to the Company, at the request of such Stockholder, each other Stockholder shall vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, all Voting Shares beneficially owned by it and otherwise take or cause to be taken all actions necessary to remove the Independent Director designated by the requesting Stockholder. (l) If the number of SPE Directors or USI Directors shall have been limited to six by clause (i) of Section 2.1(c) and as a result thereof one of the USI Directors or the SPE Directors shall be an Independent Director in accordance with clauses (ii) or (iii), as the case may be, of Section 2.1(c), and if the number of SPE Directors or USI Directors shall cease to be limited to six on the three-year anniversary of Closing in accordance with the second proviso contained in clause (i) of Section 2.1(c), at the request of USI or SPE, as the case may be, the Company shall take such action as may be necessary to cause the Independent Director designated by USI or SPE, as the case may be, to resign and, if such Independent Director has not resigned within 30 days of such Stockholder's request to the Company, at the request of such Stockholder, each other Stockholder shall vote (and cause each of its Affiliates to vote, if applicable), or act by written consent with respect to, all Voting Shares beneficially owned by it and otherwise take or cause to be taken all actions necessary to remove the Independent Director designated by USI or SPE, as the case may be. SECTION 2.2 Board Procedures. The Company shall cause the following procedures to be followed: (a) Meetings. The Board shall hold at least six regularly scheduled meetings per year at such times as may from time to time be fixed by resolution of the Board and no notice (other than the resolution) need be given as to a regularly scheduled meeting. Special meetings of the Board may be held at any time upon the call of the Chairman of the Board or at least two Directors, following notice to each Director which shall be given orally or by personal delivery, facsimile or reliable overnight courier at least three Business Days before the meeting. Reasonable efforts shall be made to ensure that each Director actually receives 23 19 timely notice of any such special meeting. An annual meeting of the Board shall be held without notice immediately following the annual meeting of the stockholders of the Company. (b) Agenda. A reasonably detailed agenda shall be supplied to each Director reasonably in advance of each meeting of the Board, together with other appropriate documentation with respect to agenda items calling for Board action, to inform adequately the Directors regarding matters to come before the Board. Any Director wishing to place a matter on the agenda for any meeting of the Board may do so by communicating with the Chairman of the Board sufficiently in advance of the meeting of the Board so as to permit timely dissemination to all Directors of information with respect to the agenda items. (c) Powers of the Board. The Board shall reserve to itself the power to approve transactions that are of a type customarily subject to board approval as a matter of good corporate practice for public companies in the United States. The Board shall not delegate to any committee of the Board or to any officers of the Company the authority to conduct business in any manner that would circumvent, or deprive SPE, USI or the Claridge Group or any of their respective Permitted Transferees of, any of their respective rights set forth in this Agreement. In no event will the Board establish an executive committee, or any committee performing functions comparable to those customarily performed by executive committees of boards of directors of public companies in the United States, without the prior written consent of SPE and USI. All committees of the Board will report to and be accountable to the Board. The Board shall establish, in cooperation with the Chief Executive Officer of the Company, a schedule for Board review or action, as appropriate, with respect to matters which shall typically come before the Board, including, but not limited to (i) annual and multi-year business plans (including capital expenditures and operating budgets), (ii) major collaborative arrangements with third parties not in the ordinary and normal course of business as theretofore conducted and (iii) appointments of officers. SECTION 2.3 Committees. Except for the Nominating Committee and except for an audit committee and compensation committee performing functions comparable to those customarily performed by audit committees and compensation committees of boards of directors of public companies in the United States, the Company shall cause the Board not to establish any committees without the prior written consent of SPE and USI. Except for the Nominating Committee, the members of which shall be determined in accordance with Section 2.1(i) above, the Company shall cause each committee of the Board to, subject to any requirements under the Exchange Act or applicable to securities, or the issuance of securities, traded on the principal United States exchange or market on which the Common Stock shall be listed or trade, include (x) at the request of SPE, a number of SPE Directors (rounded to the nearest whole number, but in no event less than one such SPE Director) equivalent to the proportion of SPE Directors then serving on the whole Board multiplied by the total number of members comprising such committee and (y) at the request of USI, a number of USI Directors (rounded to the nearest whole number, but in no event less than one such USI Director) equivalent to the proportion of USI Directors then serving on the whole Board multiplied by the total number of members comprising such committee. Subject to the rights of SPE and USI pursuant to clause (xi) of Section 3.1, the Company shall cause matters relating to the hiring, termination or compensation of executive officers of the Company 24 20 (including any entering into, amendment, termination or renewal (including option renewals) of any agreement with an executive officer of the Company) to be approved by the compensation committee of the Board. The Company shall not permit any Management Director to serve on the audit or compensation committee of the Board. Subject to the foregoing, the Board shall have the power at any time to fill vacancies in, to change the membership of or to discharge any committee. SECTION 2.4 Voting on Certain Matters. (a) In connection with any vote or action by written consent of the Board relating to a Merger, Dissolution or Certificate Amendment or the amendment or repeal of any provision of, or the addition of any provision to, the Bylaws (a "Bylaw Amendment"), each Stockholder agrees to use its best efforts to cause the Director(s) designated by such Stockholder, to vote against (and not consent to) such Merger, Dissolution, Certificate Amendment or Bylaw Amendment at the request of SPE or USI, provided, that at the time SPE or USI delivers such request its Applicable Percentage exceeds the Minimum Percentage. (b) In connection with any vote or action by written consent of the stockholders of the Company relating to a Merger, Dissolution, Certificate Amendment or Bylaw Amendment, each Stockholder agrees (and agrees to cause each of its Affiliates, if applicable), with respect to any Voting Shares beneficially owned by it, to vote against (and not consent to) such Merger, Dissolution, Certificate Amendment or Bylaw Amendment at the request of SPE or USI (which, in the case of a vote at a meeting of stockholders, shall be delivered to such Stockholder no later than fifteen Business Days prior to the applicable meeting), provided, that at the time SPE or USI delivers such request its Applicable Percentage exceeds the Minimum Percentage. SECTION 2.5 Irrevocable Proxy. (a) At least ten Business Days prior to any meeting of stockholders (or three Business Days following receipt of proxy solicitation materials from the Company, if later), each Stockholder agrees to deliver a duly executed irrevocable proxy to the Company (and a copy of such proxy to each other Stockholder by such day) specifying how such Stockholder intends to vote as to each matter scheduled to be brought before the meeting. Such proxy shall appoint the Chief Executive Officer of the Company and Secretary of the Company as such Stockholder's true and lawful proxies and attorneys-in-fact as to the matters to be voted at the meeting, shall state that it is irrevocable and shall be voted in accordance with the provisions of this Agreement. Such proxy shall also state that it is not effective until the date of the applicable meeting of stockholders and that its effectiveness is contingent upon the Company not having received, prior to the third Business Day before the meeting, a notification from any other Stockholder asserting such other Stockholder's good faith belief that such proxy does not comply with the provisions of this Agreement. (b) In connection with any proposed action by written consent of the stockholders, each Stockholder agrees that it shall execute and deliver its written consent to the Company (with simultaneous delivery of a copy thereof to each other Stockholder). Such consent shall state that it is not effective until a specified date (which date shall be at least ten Business Days following delivery to the Company), and that its effectiveness is contingent 25 21 upon the Company not having received prior to the third Business Day before such specified date a notification from any other Stockholder asserting such other Stockholder's good faith belief that such consent does not comply with the provisions of this Agreement. Any written consent delivered by any Stockholder shall be made in accordance with the terms of this Agreement. (c) If any Stockholder shall fail to deliver a proxy to the Company and the other Stockholders by the date described in Section 2.5(a) or a consent to the Company and the other Stockholders by the date described in Section 2.5(b) or if such proxy (or consent) shall not comply with the provisions of this Agreement, or shall be voted in a manner that is contrary to this Agreement, the irrevocable proxies set forth in Section 2.5(d) below shall thereupon be irrevocably activated with respect to the matters to be brought before the meeting or which are subject to the consent, as the case may be. (d) In order to secure each Stockholder's obligation to vote (or to act or not act by written consent with respect to) all Voting Shares beneficially owned by it in accordance with the provisions of this Article II and Sections 3.2 and 8.11, each Stockholder hereby appoints each other Stockholder as its true and lawful proxy and attorney-in-fact, with full power of substitution, to vote (or to act or not act by written consent with respect to) all of the Voting Shares beneficially owned by it in accordance with the terms of this Agreement and to take all such other actions as are necessary to enforce the rights of such other Stockholders under this Article II and Sections 3.2 and 8.11 in the event the Stockholder fails to comply with any provision of this Agreement granting such other Stockholder rights under this Article II and Sections 3.2 and 8.11. The proxies and powers granted by each Stockholder pursuant to this Section 2.5 are irrevocable and are coupled with an interest and are given to secure the performance of the Stockholders' obligations under this Article II and Sections 3.2 and 8.11. Such proxies and powers shall survive the bankruptcy, insolvency, dissolution or liquidation of a Stockholder. Notwithstanding the foregoing, upon termination of the rights and obligations of a Stockholder pursuant to Section 8.2 any proxy granted by such Stockholder or granted to such Stockholder pursuant to this Section 2.5 shall terminate. SECTION 2.6 Certain Restrictions. Without the prior written consent of SPE and USI, each Stockholder agrees not to, and to cause each of its Affiliates not to, directly or indirectly, alone or in concert with others: (a) seek election to, seek to place a representative on, or seek the removal (other than for cause) of any member of, the Board, except pursuant to Section 2.1; (b) deposit any Common Shares in a voting trust or subject any Common Shares to any arrangement or agreement with respect to the voting of such Common Shares (other than this Agreement or a voting trust, arrangement or agreement solely among members of the Claridge Group); (c) engage in any "solicitation" (within the meaning of Rule 14a-1 under the Exchange Act) of proxies or consents (whether or not relating to the election or removal of directors) with respect to the Company, or become a "participant" in any "election contest" 26 22 (within the meaning of Rule 14a-11 under the Exchange Act) or, except as contemplated by this Agreement, execute any written consent in lieu of a meeting of the holders of any class of Common Shares, provided that the foregoing shall not prohibit any such action (i) in response to a solicitation conducted by any Person that is neither a Stockholder nor an Affiliate thereof or (ii) to facilitate a tender offer or exchange offer by such Stockholder in response to a bona fide tender or exchange offer to acquire more than 20% of the Voting Shares made by any Person other than such Stockholder or any Affiliate thereof, in each case so long as such Stockholder otherwise remains in compliance with its obligations under this Agreement in all material respects; or (d) form, join or in any way participate in or assist in the formation of a Group with respect to any Common Shares, other than any such Group consisting exclusively of Stockholders, any of their Affiliates or Permitted Transferees. SECTION 2.7 Cooperation. Each Stockholder shall vote (or act or not act by written consent with respect to) all of its Voting Shares and shall take all other necessary or desirable actions within its control (including attending all meetings in person or by proxy for purposes of obtaining a quorum, executing all written consents in lieu of meetings and voting to remove members of the Board, as applicable), and the Company shall take all necessary and desirable actions within its control (including calling special Board and stockholder meetings, as applicable), to effectuate the provisions of this Article II. ARTICLE III CONSENT RIGHTS SECTION 3.1 Consent for Certain Actions. (a) The Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, take any of the following actions without the prior written consent of (i) SPE, if its Applicable Percentage equals or exceeds the Minimum Percentage, and (ii) USI, if its Applicable Percentage equals or exceeds the Minimum Percentage: (i) in the case of the Company or any Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 405 under the Securities Act, voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency or similar law; (ii) merge or consolidate with, purchase or otherwise acquire any other Person (the "Target") or all or substantially all of the business or any assets of another Person in one or a series of related transactions if (x) the book value of the assets of the Target (in the case of an acquisition of a Target) or of the business and/or assets to be acquired as reflected on the books of the seller of such business or assets, as the case may be, as of the end of such Person's most recently ended fiscal quarter preceding the earlier of the date the 27 23 Company or a Subsidiary thereof enters into definitive agreements in respect of such transaction or publicly announces such transaction (the "Determination Date") (based on a Determination of the Independent Directors) would exceed 20% of the book value of the Company's total assets as of the end of the Company's most recently ended fiscal quarter preceding the Determination Date or (y) the Fair Market Value (based on a Determination of the Independent Directors) of the consideration paid or payable for the Target, the business and/or assets to be acquired as of the Determination Date (including, with respect to any asset acquisition, the value of any Debt assumed or to be assumed in such transaction) would exceed 20% of the Company's Market Capitalization as of the Determination Date or (z) EBITDA of the Target and/or of the business and/or the Cash Flow of the assets to be acquired as reflected on the books of the Target and/or such seller, as the case may be, for its last four fiscal quarters preceding the Determination Date exceeds 20% of the Company's EBITDA for the Company's last four fiscal quarters preceding the Determination Date; (iii) sell, lease, transfer or otherwise dispose of (including by merger, dividend or other distribution or other transaction involving one or more stockholders of the Company, formation of a joint venture or otherwise) any other Person, business or assets in one or a series of related transactions if (x) the book value of such Person, business and/or assets exceeds 15% of the book value of the Company's total assets as of the end of the Company's most recent fiscal quarter preceding the Determination Date or (y) the Fair Market Value (based on a Determination of the Independent Directors) of the consideration received or receivable for such Person, the business and/or assets (including, with respect to any asset acquisition, the value of any Debt assumed or to be assumed in such transaction) exceeds 15% of the Company's Market Capitalization as of the Determination Date or (z) the EBITDA of such Person and/or business and/or the Cash Flow of such assets for the Company's last four fiscal quarters preceding the Determination Date exceeds 15% of the Company's EBITDA for such four fiscal quarters; (iv) enter into, commence or engage in any business other than the exhibition of films (including as a result of an acquisition or pursuant to a joint venture) except as otherwise provided for in the Five-Year Plan and except for matters customarily related to the exhibition of films in respect of which the Company and its Subsidiaries do not expend more than an aggregate of $5 million of cash during any calendar year; (v) enter into any contract with or otherwise engage in or become obligated to engage in any transaction or series of related transactions with SPE or USI or any of their respective Affiliates involving more than $1 million per calendar year; provided, however, that (A) all such contracts and transactions (whether or not exceeding the $1 million limitation) shall be on an arms' length basis and (B) the $1 million limitation shall not apply to transactions 28 24 that occur in the ordinary course of the Company's business, including film booking arrangements; (vi) increase or decrease the number of Directors that comprise the entire Board or that constitute a quorum for purposes of convening a meeting of the Board; (vii) issue or sell (including by merger or otherwise) any Voting Shares or Voting Share Equivalents (other than pursuant to the Equity Offering or upon conversion of the Non-Voting Common Stock) that would, upon closing of such issuance or sale (A) together with the aggregate amount of all such issuances or sales during the 12-month period preceding the proposed date of issuance or sale, increase the number of Voting Shares by more than 10% of the average number of Voting Shares outstanding as of the last day of each of the 12 full calendar months preceding the proposed date of issuance or sale or (B) together with the aggregate amount of all such issuances or sales during the 24-month period preceding the proposed date of issuance or sale, increase the number of Voting Shares by more than 15% of the average number of Voting Shares outstanding as of the last day of each of the 24 full calendar months preceding the proposed date of issuance or sale; provided, (1) in determining whether SPE or USI shall have an Article III Consent Right in respect of issuances or sales described in clauses (A) or (B), issuances or sales pursuant to the Equity Offering shall be disregarded in calculating the aggregate amount of issuances or sales during the applicable period (but shall not be disregarded in calculating the outstanding Voting Shares as of any date) and (2) the issuance or sale of Voting Shares upon the exercise, conversion or exchange of Voting Share Equivalents shall not be an issuance or sale that is subject to this clause (vii) but the issuance or sale of Voting Share Equivalents shall be subject to this clause (vii) in accordance with Section 1.4; (viii) pay, declare or set aside any sums for the payment of any cash dividends on, or make any other cash distributions on (including by merger or otherwise), any shares of Capital Stock, or any warrants, options, rights or securities convertible into, exchangeable or exercisable for, Capital Stock (excluding any such payment or distribution made to the Company or any of its Subsidiaries), if the amount thereof, together with the aggregate amount of any other items referred in this clause (viii) and clause (ix) below, during the prior 12 months, exceeds 5% of the Company's Market Capitalization at the time of such action; provided that the payment of any such dividend or distribution shall be permitted to be made within 60 days of its declaration if such declaration was not subject to an Article III Consent Right; (ix) redeem, purchase or otherwise acquire for cash (including by merger or otherwise), any shares of Capital Stock or any warrants, options and rights or securities convertible into, exchangeable or exercisable for, Capital Stock, or redeem or purchase for cash or make any cash payments with respect 29 25 to any stock appreciation rights or phantom stock plans (excluding any such redemption, purchase or payment from the Company or any of its Subsidiaries), if the amount thereof, together with the aggregate amount of any other items referred to in clause (viii) above and this clause (ix), during the prior 12 months, exceed 5% of the greater of (x) the Company's Market Capitalization at the time of such payment and (y) the Company's Market Capitalization at the time it commits to make such redemption, purchase or payment; (x) incur, assume or otherwise become obligated with respect to, any Debt (x) if immediately after giving effect to the incurrence of such Debt and the receipt and application of the proceeds thereof, the ratio of the Company's consolidated Debt to EBITDA for the four full fiscal quarters next preceding the incurrence of such Debt, calculated on a pro forma basis as if such Debt had been incurred and the proceeds thereof had been received and so applied at the beginning of the four full fiscal quarters, would be greater than the Maximum Debt Ratio or (y) in excess of $100,000,000 in aggregate principal amount in one or a series of related transactions, provided that this clause (y) shall not apply to (1) Debt owed by the Company to any of its Subsidiaries or Debt owed by a Subsidiary of the Company to the Company or to another Subsidiary of the Company, (2) Debt outstanding immediately following the Closing and (3) Debt incurred to renew, extend, refinance or refund any outstanding Debt permitted in clauses (1) or (2) and any Debt incurred in connection with subsequent refinancings of such Debt (collectively, "Permitted Debt"), provided, further, that any Debt described in clause (3) shall not be Permitted Debt if the amount of such Debt shall exceed the amount of the outstanding Debt that is being renewed, extended, refinanced or refunded. (xi) hire, or renew the employment contract (including option renewals) of, either the Chief Executive Officer of the Company or the second most senior executive officer of the Company; (xii) enter into any arrangement (other than this Agreement or pursuant to this Agreement) with any holder of Voting Shares in such holder's capacity as a holder of Voting Shares which subjects actions taken by the Company or any Subsidiary to the prior approval of any Person, or issue or sell any series or class of Capital Stock of the Company having either (x) more than one vote per share or (y) a class vote on any matter, except to the extent such class vote is required by the DGCL or to the extent that the holders of any series of preferred stock may have the right, voting separately as a class, to elect a number of Directors upon the occurrence of a default in payment of dividend or redemption price; (xiii) adopt any stockholder rights plan, or any other plan or arrangement that could reasonably be expected to disadvantage any stockholder on the basis of the size of its shareholding, such that any holder of Common Shares or any of its Affiliates would be adversely affected; or 30 26 (xiv) adopt a Bylaw Amendment by action of the Board. Notwithstanding anything to the contrary contained in this Section 3.1(a), neither SPE nor USI shall have an Article III Consent Right to the extent such action requires the approval of holders of Common Stock under the DGCL or the Certificate. (b) If any of the following shall occur and be continuing: (i) the Company's actual EBITDA in each of the two most recently ended fiscal years is less than 80% of Targeted EBITDA for such year; (ii) at the end of the most recent fiscal quarter, the Company's ratio of consolidated Debt as reported in its financial statements to EBITDA for the last four fiscal quarters exceeds the Maximum Debt Ratio, or (iii) at the end of the most recent fiscal quarter, the Company's EBITDA for the last four fiscal quarters is less than 8.5% of the Company's consolidated total assets as reported in its financial statements (excluding intangible assets and construction work-in-process); the Company (x) shall submit to SPE, if its Applicable Percentage equals or exceeds the Minimum Percentage, and USI, if its Applicable Percentage equals or exceeds the Minimum Percentage, for approval a new plan for the Company covering a new five-year term commencing with the first day of the next fiscal year of the Company (the "New Five-Year Plan") which shall replace the Five-Year Plan and which shall be consistent in form and contain a corresponding level of detail with the Initial Five-Year Plan and (y) pending the effectiveness of the New Five-Year Plan, shall submit to SPE, if its Applicable Percentage equals or exceeds the Minimum Percentage, and USI, if its Applicable Percentage equals or exceeds the Minimum Percentage, for approval no later than the last Business Day of the month immediately preceding the end of the Company's fiscal year, annual operating and capital budgets for the next fiscal year. The Company and any such Stockholder agree to cooperate in good faith to adopt the New Five-Year Plan and such budgets as promptly as practicable. (c) If any of the conditions specified in paragraph (b)(i) through (iii) above shall have occurred, then until the Company's actual EBITDA for each of two consecutive fiscal years shall equal or exceed Targeted EBITDA for each of such years as reflected in the New Five-Year Plan, the Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, take any of the following actions without the prior written consent of SPE (so long as its Applicable Percentage equals or exceeds the Minimum Percentage) and USI (so long as its Applicable Percentage equals or exceeds the Minimum Percentage): (w) make, or agree to make, any capital expenditures not specifically identified in the New Five-Year Plan in excess of $5,000,000 per expenditure or series of related expenditures or $10,000,000 in the aggregate during any 12-month period, (x) incur an aggregate amount of Debt in excess of $25,000,000, excluding Debt specifically identified in the New Five-Year Plan and Permitted Debt, (y) create or incur any lien on the assets of the Company or any of its Subsidiaries to 31 27 secure unsecured Debt of the Company or any of its Subsidiaries and (z) except for issuances or sales of Excluded Securities, authorize the issuance of, or issue or sell, any additional shares of, or any new series or class of, Capital Stock of the Company. (d) So long as any Stockholder shall have an Article III Consent Right, at least six months prior to the expiration of the period covered by any Five-Year Plan, the Company shall in good faith prepare a Five-Year Plan for the subsequent five year period, which shall be subject to prior approval by the Board and which shall be consistent in form and contain a corresponding level of detail with the Initial Five-Year Plan. The provisions of Sections 3.1(a), (b) and (c) shall be applicable to all Five-Year Plans or New Five-Year Plans, whether adopted prior to, on or after the five-year anniversary of the Closing. (e) Any action or attempted action of the Company or any Subsidiary of the Company in violation of any provision of Section 3.1 shall be void. (f) The Company agrees to notify the Trust when practicable of any proposed (A) corporate reorganization, (B) share capital reorganization, (C) transaction involving the exchange of Capital Stock of the Company for other equity of the Company or any other corporation or (D) merger with another corporation (any one of such proposals, a "Reorganization Proposal") which would, in the opinion of counsel for the Company, constitute a disposition of Common Stock pursuant to the Income Tax Act (Canada) or any successor legislation, for Canadian resident holders thereof in respect of which any resulting gain would be taxable pursuant to such Act. In the event of any such Reorganization Proposal, the Company shall assist the Claridge Group, at the request of the Claridge Group and at its expense, with an application for a remission order pursuant to the Financial Administration Act (Canada), provided that counsel to the Company considers that the Department of Finance (Canada) is likely to issue a remission order providing fiscal relief to Canadian resident stockholders of the Company. (g) In connection with the grant of any consent relating to a matter described in clauses (ii) or (iii) of Section 3.1(a), the Company and each Stockholder who then has an Article III Consent Right agree to negotiate in good faith appropriate adjustments to Targeted EBITDA. If after 21 days following the grant of such consent, the Company and the Stockholders have not agreed upon appropriate adjustments, then each of SPE and USI shall have the opportunity to submit its reasonable estimate of the appropriate adjustments to Targeted EBITDA to any "Big Six" accounting firm mutually selected by SPE and USI that is not the principal outside accounting firm for SPE, CO or USI within the 10 days (the "Submission Period") following the end of such 21-day period. If the parties cannot agree upon such an accounting firm, the principal outside accounting firms of SPE and USI shall mutually select another "Big Six" accounting firm to act hereunder. Along with their proposed adjustments to Targeted EBITDA, the Company and each Stockholder who then has an Article III Consent Right may submit to the accounting firm such written memoranda, arguments, briefs and other evidence in support of their respective adjustments as they see fit, copies of which shall also be provided to the other parties hereto. Within 10 days following the expiration of the Submission Period, the 32 28 accounting firm shall make a determination as to which of the adjustments submitted by the parties is the most reasonable estimate of the impact on the Company's EBITDA of the matter which was subject to consent (the adjustment so chosen, the "Final Adjustment"). The accounting firm shall be limited to selecting one of the adjustments submitted by the parties as the Final Adjustment and shall have no authority to alter in any way any adjustment so submitted. The Final Adjustment shall be deemed to be approved by all parties to this Agreement for all purposes of this Agreement. If the accounting firm shall select the adjustment submitted by USI, SPE shall bear all fees and expenses of the accounting firm, including the fees and expenses of any experts hired by the accounting firm to assist it in rendering a decision hereunder. If the accounting firm shall select the adjustment submitted by SPE, USI shall bear all such fees and expenses. Following the determination of the Final Adjustment, the Company shall cause the Final Adjustment to be submitted to the Board for its approval. The Company shall use its best efforts to cause the Final Adjustment to be adopted by the Board, and SPE and USI covenant and agree with each other to use their respective best efforts to cause the Company to fulfill the Company's obligations under this Section 3.1(g). SECTION 3.2 Certain Certificate Provisions. So long as the Applicable Percentage of SPE or USI equals or exceeds the Minimum Percentage, (i) the Company agrees that the Certificate will provide that effecting a Merger or Dissolution or adopting a Certificate Amendment or adopting a Bylaw Amendment by action of the stockholders of the Company shall require the affirmative vote or written consent of the holders of at least 80% of the outstanding Common Stock, provided that in the case of any of the foregoing matters (other than adopting a Bylaw Amendment by action of the stockholders) such 80% stockholder approval requirement shall not be applicable if 14 members of the Board shall have approved such matter, provided, further, that in the case of any Merger that is approved by 14 members of the Board, such Merger shall require the affirmative vote or written consent of the holders of at least 66 2/3% of the outstanding Common Stock and (ii) no Stockholder shall vote in favor of, consent in writing to, or take any other action to effect an amendment or repeal of such provisions of the Certificate. SECTION 3.3 Arbitration. (a) At least seven Business Days prior to the Company or any Subsidiary thereof (i) merging or consolidating with, or purchasing or otherwise acquiring, any other entity or assets, except in the ordinary course of business consistent with past practice, (ii) selling, leasing, transferring or otherwise disposing of any assets, except in the ordinary course of business consistent with past practice, (iii) issuing or selling any Voting Shares or new series or class of Capital Stock (other than Excluded Securities), (iv) incurring or assuming any Debt, other than incurrences of Debt in the ordinary course of business consistent with past practice that could not reasonably be expected to trigger an Article III Consent Right, or (v) taking any action described in clauses (i), (iv), (v), (vi), (viii), (ix), (xi), (xii), (xiii) or (xiv) of Section 3.1(a), the Company shall provide SPE and USI with a notice that describes the material terms of such proposed action and indicates whether the Company reasonably believes in good faith that any Article III 33 29 Consent Right will be triggered by such action. The Company shall also provide such Stockholders with all information reasonably relevant and necessary to determine whether an Article III Consent Right will be triggered by such action. The foregoing notification requirement will be satisfied if the Company provides the requisite information to any SPE Director, in the case of SPE, and any USI Director, in the case of USI. If either SPE or USI disagrees with the Company's conclusion and reasonably believes in good faith that such Stockholder has an Article III Consent Right in connection with such action, such Stockholder shall provide the Company with written notice of its disagreement by the close of business on the sixth Business Day following receipt of the Company's notice. (b) In addition, if either SPE or USI reasonably believes in good faith that the Company intends to take any action in respect of which the Company has not delivered a notice described in Section 3.3(a) and that such Stockholder has an Article III Consent Right in connection with such action, such Stockholder may provide the Company with written notice of such belief. By the close of business on the sixth Business Day following receipt of such Stockholder's notice and prior to taking any such action, the Company shall provide such Stockholder with a notice that indicates whether the Company reasonably believes in good faith that such action would trigger an Article III Consent Right and with all information reasonably relevant and necessary to determine whether an Article III Consent Right will be triggered by such action. (c) If within five Business Days following the Company's receipt of a notice described in the last sentence of Section 3.3(a) or a Stockholder's receipt of a notice described in the second sentence of Section 3.3(b), as the case may be, the Company and such Stockholder cannot reach an agreement as to whether an Article III Consent Right is triggered in connection with the proposed action, the issue shall be submitted for arbitration by the Company and the objecting Stockholder(s) in accordance with the Arbitration Agreement, a form of which is attached Exhibit B (the "Arbitration Agreement"). The scope of the dispute to be resolved by the arbitrator thereunder (the "Arbitrator") in connection with any such dispute is limited to whether, under the terms of this Agreement, an Article III Consent Right is triggered in connection with the proposed action. (d) Prior to the Closing Date, SPE, USI, the members of the Claridge Group and the Company agree to cooperate in good faith in selecting the Arbitrator, who shall be reasonably acceptable to each such party, and agree to execute and deliver the Arbitration Agreement at the Closing. If the parties cannot so select the Arbitrator by such date, SPE, USI and the Independent Directors shall each designate an individual who qualifies to serve as the Arbitrator under the Arbitrator Agreement and the three such individuals shall jointly select to Arbitrator. SECTION 3.4 Approval of Disinterested Directors. (a) If the Applicable Percentage of SPE equals or exceeds the Minimum Percentage, neither SPE nor any of its Affiliates shall enter into any contract with the Company or any Subsidiary thereof, nor shall the Company otherwise engage in or become obligated to engage in any transaction or series of related transactions with SPE and/or its Affiliates, in either case involving more than $1 million per calendar year, unless such contract or transaction shall have been approved by a 34 30 majority of the Disinterested Directors following disclosure of the material facts of the contract or transaction to the Disinterested Directors, provided, however, that the foregoing shall not apply to contracts or transactions that occur in the ordinary course of the Company's business, including film booking arrangements, or to any Transactions contemplated by the Documents. (b) If the Applicable Percentage of USI equals or exceeds the Minimum Percentage, neither USI nor any of its Affiliates shall enter into any contract with the Company or any Subsidiary thereof, nor shall the Company otherwise engage in or become obligated to engage in any transaction or series of related transactions with USI and/or its Affiliates, in either case involving more than $1 million per calendar year, unless such contract or transaction shall have been approved by a majority of the Disinterested Directors following disclosure of the material facts of the contract or transaction to the Disinterested Directors, provided, however, that the foregoing shall not apply to contracts or transactions that occur in the ordinary course of the Company's business, including film booking arrangements, or to any Transactions contemplated by the Documents. SECTION 3.5 Additional Shares. Notwithstanding anything to the contrary in Section 3.1, without the prior written consent of USI, the Company agrees that it shall not issue or sell any Common Shares or any Voting Share Equivalents (other than Excluded Securities) at or after the Closing (other than pursuant to the Amalgamation or the USI Subscription Agreement) unless USI or its designee shall be issued Additional Shares (as defined in the USI Subscription Agreement) to the extent required by, and in accordance with, the terms of Section 4.6 of such agreement. ARTICLE IV TRANSFER OF COMMON SHARES SECTION 4.1 Restrictions on Transfer during Six-Months Following Closing. Without the consent of a majority of the Independent Directors, during the period commencing on the Closing and ending on the six-month anniversary thereof, each of SPE and USI agrees not to, and to cause its respective Permitted Transferees not to, Transfer in privately-negotiated transactions more than 20% of such Stockholder's Initial Interest, provided, that the foregoing shall not be applicable to Transfers (i) between such Stockholder and its Permitted Transferees, (ii) to another Stockholder or its Permitted Transferees, (iii) pursuant to a merger or consolidation in which the Company is a constituent corporation or (iv) pursuant to a bona fide third party tender offer or exchange offer which was not induced directly or indirectly by such Stockholder or any of its Affiliates. SECTION 4.2 Tag-Along for All Stockholders. (a) Subject to prior compliance with Section 4.4, neither SPE nor USI nor any of their respective Affiliates shall be permitted to Transfer, individually or collectively, an aggregate of more than 50% of the then outstanding Common Shares in one or a series of related transactions to a Third Party Transferee (or to one or more Third Party Transferees constituting a Group) (a "Significant 35 31 Sale") unless each stockholder of the Company has the right to participate in the Significant Sale on the same basis as the proposed transferor(s) (all such proposed transferors, collectively the "Significant Sale Initiator"). If the Significant Sale Initiator desires to effect a Significant Sale, it shall give not less than 20 days prior written notice of such intended Transfer to each Stockholder and the Company. Such notice (the "Significant Sale Notice") shall set forth the terms and conditions of such proposed Significant Sale, including the name of the proposed transferee, the number of shares of Common Stock (the "Significant Sale Shares") proposed to be Transferred by the Significant Sale Initiator (specifying the number of shares of Common Stock for each proposed transferor, if more than one), the purchase price per Share proposed to be paid therefor and the payment terms and other material terms of the proposed Transfer. (b) Within 10 days after delivery of the Significant Sale Notice to the Company, the Independent Directors shall review the terms of the proposed Significant Sale and, subject to compliance with applicable law and stock exchange requirements, establish procedures to ensure that each stockholder of the Company (including each Stockholder which is not a Significant Sale Initiator) shall have the opportunity and right to sell to the proposed transferee (upon the same terms and conditions as the Significant Sale Initiator) up to that number of Common Shares owned of record by such stockholder as shall equal the product of (x) a fraction, the numerator of which is the number of Significant Sale Shares and the denominator of which is the aggregate number of Common Shares beneficially owned as of the date of the Significant Sale Notice by the Significant Sale Initiator and its Permitted Transferees (provided that if there shall be more than one proposed transferor, the denominator shall be the aggregate number of Common Shares beneficially owned as of such date by all the proposed transferors), multiplied by (y) the number of Common Shares owned of record by such stockholder as of the date of the Significant Sale Notice. The number of Common Shares that a stockholder, including the Significant Sale Initiator, may sell pursuant to this Section 4.2 shall be determined by multiplying the maximum number of Common Shares that the proposed transferee of the Significant Sale Shares is willing to purchase on the terms set forth in the Significant Sale Notice by a fraction, the numerator of which is the number of Common Shares that such stockholder proposes to sell hereunder and the denominator of which is the aggregate number of Common Shares that all stockholders exercising rights under this Section 4.2, including the Significant Sale Initiator, propose to sell hereunder. (c) No Transfer or Transfers constituting a Significant Sale shall be effected absent compliance with this Section 4.2. SECTION 4.3 Tag-Along for USI and Claridge Group. (a) Subject to prior compliance with Section 4.4, if SPE or any of its Affiliates shall desire to Transfer an aggregate of more than 50% of SPE's Initial Interest to any Person (including any Group), other than an SPE Permitted Transferee, in one or a series of related transactions (a "Tag-Along Sale"), SPE shall give not less than 20 days prior written notice of such intended Transfer to USI and the Claridge Group (each, a "Tag-Along Offeree"). Such notice (the "Tag-Along Notice") shall set forth the terms and conditions of such proposed Transfer, including the name of the proposed transferee, the number of Common Shares proposed to be 36 32 Transferred (the "Tag-Along Shares"), the purchase price per Share proposed to be paid therefor and the payment terms and type of Transfer to be effectuated. (b) Within 10 days after delivery of the Tag-Along Notice by SPE to the Tag-Along Offerees, each Tag-Along Offeree shall, by written notice to SPE, have the opportunity and right to sell to the transferee in such proposed Transfer (upon the same terms and conditions as SPE) up to that number of Common Shares beneficially owned by such Tag-Along Offeree as shall equal the product of (x) a fraction, the numerator of which is the number of Tag-Along Shares and the denominator of which is the aggregate number of Common Shares beneficially owned as of the date of the Tag-Along Notice by SPE and its Affiliates, multiplied by (y) the number of Common Shares beneficially owned by such Tag-Along Offeree as of the date of the Tag-Along Notice, provided, that in respect of any proposed Transfer to USI or a USI Permitted Transferee, for purposes of this clause (y), the number of Common Shares beneficially owned by the Claridge Group shall be reduced by the number of Common Shares acquired (net of Transfers) by the Claridge Group after the Closing (other than from the Company or other members of the Claridge Group). The number of Common Shares that a Stockholder, including SPE, may sell pursuant to this Section 4.3 shall be determined by multiplying the maximum number of Common Shares that the proposed transferee of the Tag-Along Shares is willing to purchase on the terms set forth in the Tag-Along Notice by a fraction, the numerator of which is the number of Common Shares that such Stockholder proposes to sell hereunder (subject to the maximum amount for each Stockholder calculated pursuant to the preceding sentence) and the denominator of which is the aggregate number of Common Shares that all Stockholders exercising rights under this Section 4.3, including SPE, propose to sell hereunder. (c) At the closing of any proposed Transfer in respect of which a Tag-Along Notice has been delivered, each Stockholder electing to sell Common Shares shall deliver, free and clear of all liens, to the proposed transferee certificates evidencing the Common Shares to be sold thereto duly endorsed with Transfer powers and shall receive in exchange therefore the consideration to be paid by the proposed transferee in respect of such Common Shares as described in the Tag-Along Notice. (d) No Transfer or Transfers constituting a Tag-Along Sale shall be effected absent compliance with this Section 4.3. (e) This Section 4.3 shall not be applicable to any Transfer which constitutes a Significant Sale with respect to which each stockholder of the Company has the right to participate pursuant to Section 4.2. SECTION 4.4 Right of First Refusal. (a) The following Transfers of Voting Shares by SPE or USI or their respective Affiliates (the proposed transferor, the "Transferring Party") will be subject to the right of first refusal provisions of this Section 4.4: (i) any Transfer in one or a series of related privately-negotiated transactions or a public offering if (A) 5% or more of the then outstanding Voting Shares are subject to the Transfer, (B) any transferee, or any Group of 37 33 which a transferee is a member, would, following such Transfer, beneficially own 5% or more of the outstanding Voting Shares (except, in the case of any public offering, the limitation set forth in this clause (B) shall not be applicable if the Transferring Party has taken all reasonable steps to assure that such limitation shall have been satisfied) or (C) in the case of any Transfer by SPE or any of its Affiliates, SPE's Applicable Percentage exceeds 25%; (ii) any Transfer pursuant to a bona fide third party tender offer or exchange offer; (iii) any Transfer to the Company or to a Subsidiary of the Company pursuant to a self-tender offer or otherwise; and (iv) any Transfer in a Market Sale. Notwithstanding the foregoing and subject to compliance with Section 4.5(a), the provisions of this Section 4.4 shall not apply to any Transfer between SPE or USI and any of their respective Permitted Transferees. (b) Prior to effecting any Transfer described in Section 4.4(a), the Transferring Party shall deliver a written notice (the "Offer Notice") to USI, if the Transferring Party is SPE or an Affiliate thereof, or to SPE, if the Transferring Party is USI or an Affiliate thereof (the recipient of such notice, the "Other Stockholder"), which Offer Notice shall specify (i) the Person to whom the Transferring Party proposes to make such Transfer or the proposed manner of Transfer in the case of a public offering or a Market Sale, (ii) the number or amount and description of the Voting Shares to be Transferred, (iii) except in the case of a public offering or a Market Sale, the Offer Price (as defined below), and (iv) all other material terms and conditions of the proposed Transfer, including a description of any non-cash consideration sufficiently detailed to permit valuation thereof, and which Offer Notice shall be accompanied by any written offer from the prospective transferee to purchase such Voting Shares, if available and permitted pursuant to the terms thereof. The Offer Notice shall constitute an irrevocable offer to the Other Stockholder or its designee, for the period of time described below, to purchase all (but not less than all) of such Voting Shares upon the same terms specified in the Offer Notice, subject to Section 4.4(g) and as otherwise set forth in this Section 4.4. The Other Stockholder may elect to purchase all (but not less than all) of the Voting Shares at the Offer Price (or, if the Offer Price includes property other than cash, the equivalent in cash of such property as determined in accordance with Section 4.4(g)) and upon the other terms and conditions specified in the Offer Notice. (c) For purposes of this Section 4.4, "Offer Price" shall be defined to mean on a per share or other amount of Voting Shares basis (i) in the case of a third party tender offer or exchange offer, the tender offer or exchange offer price per Voting Share taking into account any provisions thereof with respect to proration and any proposed second step or "back-end" transaction, (ii) in the case of a public offering or a Market Sale, the Current Market Value per Voting Share as of the date the election notice of the Other Stockholder 38 34 hereinafter described is delivered and (iii) in the case of a privately-negotiated transaction, the proposed sale price per Voting Share. (d) If the Other Stockholder elects to purchase the offered Voting Shares, it shall give notice to the Transferring Party within 20 days of its receipt of the Offer Notice of its election (or in the case of a third party tender offer or exchange offer, not later than five Business Days prior to the expiration date of such offer, provided that all conditions to such offer (other than with respect to the number of Voting Shares tendered) shall have been satisfied or waived and the Offer Notice shall have been provided at least ten Business Days prior to the expiration date of such offer), which shall constitute a binding obligation, subject to standard terms and conditions for a stock purchase contract between two significant stockholders of an issuer (provided that the Transferring Party shall not be required to make any representations or warranties regarding the business of the Company), to purchase the offered Voting Shares, which notice shall include the date set for the closing of such purchase, which date shall be no later than 60 days following the delivery of such election notice. Notwithstanding the foregoing, such time periods shall not be deemed to commence with respect to any purported notice that does not comply in all material respects with the requirements of this Section 4.4(d). The Other Stockholder may assign its rights to purchase under this Section 4.4 to any Person (including the Company). (e) Subject to Section 4.4(f) in the case of a Market Sale, if the Other Stockholder does not respond to the Offer Notice within the required response time period or elects not to purchase the offered Voting Shares, the Transferring Party shall be free to complete the proposed Transfer (to the same proposed transferee, in the case of privately-negotiated transaction) on terms no less favorable to the Transferring Party or its Affiliate, as the case may be, than those set forth in the Offer Notice, provided that (x) such Transfer is closed within 90 days after the latest of (A) the expiration of the foregoing required response time periods, or (B) the receipt by the Transferring Party of the foregoing election notice or, in the case of a public offering, within 20 days of the declaration by the Commission of the effectiveness of a registration statement filed with the Commission pursuant to this Agreement, and (y) the price at which the Voting Shares are transferred must be equal to or higher than the Offer Price (except in the case of a public offering, in which case the price at which the Voting Shares are sold (before deducting underwriting discounts and commissions) shall be equal to at least 90% of the Offer Price). Such periods within which such Transfer must be closed shall be extended to the extent necessary to obtain required governmental approvals and other required approvals and the Transferring Party and the Other Stockholder shall use their respective best efforts to obtain such approvals. (f) If the Other Stockholder does not respond to the Offer Notice with respect to a Market Sale within the required response time period or elects not to purchase the offered Voting Shares, the Transferring Party shall be free to complete the proposed Market Sale in one or more transactions during the 90-day period commencing on the latest of (i) the expiration of the required response time period described in Section 4.4(d) or (ii) receipt by the Transferring Party of the election notice described in Section 4.4(d), provided that the price at which each Voting Share is transferred (excluding brokerage commissions) shall be at least equal to 90% of the Offer Price. 39 35 (g) If (i) the consideration specified in the Offer Notice consists of, or includes, consideration other than cash or a publicly traded security for which a closing market price is published for each Business Day, or (ii) any property other than Voting Shares is proposed to be transferred in connection with the transaction to which the Offer Notice relates, then the price payable by the Other Stockholder under this Section 4.4 for the Voting Shares being transferred shall be the Determination of the Independent Directors of the Fair Market Value of the consideration per share or amount in the case of clause (i) and the Determination of the Independent Directors of the Fair Market Value of the consideration per share or amount determined to be properly allocable to the Voting Shares in the case of clause (ii). Notwithstanding anything to the contrary contained in this Section 4.4, the time periods applicable to an election by the Other Stockholder to purchase the offered securities set forth in Section 4.4(a) shall not be deemed to commence until the Determination of the Independent Directors under this Section 4.4(g) has been made, provided that, in the case of a third party tender offer or exchange offer, in no event shall any such election be permitted later than 24 hours prior to the latest time by which Voting Shares shall be tendered in order to be accepted pursuant to such offer or to qualify for any proration applicable to such offer if all conditions to such offer (other than the number of shares tendered) have been satisfied or waived. The Company agrees to use its best efforts to cause the Determination of the Independent Directors under this Section 4.4(g) to be made as promptly as practicable but in no event later than ten Business Days after the receipt by the Company of the Offer Notice. (h) The provisions of this Section 4.4 shall be applicable to any proposed Transfer of Non-Voting Common Stock to any Person other than an SPE Permitted Transferee as if the Common Stock that is issuable upon Transfer in accordance with clause (i) of Section 4(b) of Article IV of the Certificate were being Transferred. SECTION 4.5 Transferees. (a) Any Permitted Transferee of a Stockholder shall be subject to the terms and conditions of this Agreement as if such Permitted Transferee were SPE (in the case SPE or a Permitted Transferee of SPE is the transferor), USI (in the case USI or a Permitted Transferee of USI is the transferor) or a member of the Claridge Group (in the case a member of the Claridge Group or a Permitted Transferee thereof is the transferor). Prior to the initial acquisition of beneficial ownership of any Voting Shares or Non-Voting Common Stock by any Permitted Transferee, and as a condition thereto, each Stockholder agrees (i) to cause its respective Permitted Transferees to agree in writing with the other parties hereto to be bound by the terms and conditions of this Agreement to the extent described in the preceding sentence and (ii) that such Stockholder shall remain directly liable for the performance by its respective Permitted Transferees of all obligations of such Permitted Transferees under this Agreement; provided, however, that, unless the Trust elects otherwise, the foregoing shall not be applicable to any Permitted Transferee described in clause (iii)(b) of the definition thereof or any spouse of any such Permitted Transferee so long as such Person has not purchased Voting Shares for aggregate consideration (excluding brokerage commissions) exceeding $20,000 (measured at the time of the applicable acquisition) and that such Voting Shares have been acquired solely in open market purchases; provided, further, that the Trust shall not permit all Persons described in the preceding proviso who the Trust has not elected to be subject to clause (i) and (ii) above to so acquire Voting Shares for aggregate consideration (excluding brokerage commissions) exceeding 40 36 $100,000 (measured at the time of the applicable acquisition). Each of SPE and USI agrees not to cause or permit any of its respective Permitted Transferees to cease to be directly or indirectly wholly-owned by such Stockholder so long as such Permitted Transferee beneficially owns any Voting Shares or Non-Voting Common Stock, and if any such Permitted Transferee shall cease to be so wholly-owned, such Permitted Transferee shall automatically upon the occurrence of such event cease to be a "Permitted Transferee" for any purpose under this Agreement. Each Stockholder agrees not to Transfer any Voting Shares or Non-Voting Common Stock to any Affiliate other than a Permitted Transferee of such Stockholder. (b) No Third Party Transferee shall have any rights or obligations under this Agreement, except: (i) if such Third Party Transferee (together with its Affiliates) would beneficially own more than 10% of the outstanding Voting Shares upon consummation of any Transfer or if such Third Party Transferee (together with its Affiliates) shall acquire beneficial ownership of more than 3.5% of the outstanding Voting Shares in any Transfer or series of related Transfers from members of the Claridge Group and Permitted Transferees thereof, such Third Party Transferee shall be subject to the terms and conditions of Article I, Article II (but shall not have the right to designate any Directors pursuant thereto, except in the circumstances described in clauses (ii) or (iii) below), Section 4.4 (but only with respect to the rights and obligations of a "Transferring Party" thereunder, and such Third Party Transferee shall not have the right to purchase Voting Shares pursuant thereto or any other rights of an "Other Stockholder" thereunder), this Section 4.5, Section 4.6 and Articles VI and VIII as if such Third Party Transferee were SPE (in the case SPE or a Permitted Transferee of SPE is the transferor), USI (in the case USI or a Permitted Transferee of USI is the transferor) or a member of the Claridge Group (in the case a member of the Claridge Group or a Permitted Transferee thereof is the transferor); (ii) if such Third Party Transferee (together with its Affiliates) would beneficially own more than 10% of the outstanding Voting Shares upon consummation of any Transfer from SPE or USI or any of their respective Permitted Transferees, and if such Third Party Transferee shall have acquired from SPE or USI (or such Permitted Transferees) all Voting Shares then beneficially owned by such Stockholder and its Permitted Transferees, such Third Party Transferee shall have the right to designate Directors pursuant to Article II if the applicable transferor elects to assign such right to such Third Party Transferee; (iii) if in a Transfer or series of related Transfers from any member of the Claridge Group and Permitted Transferees thereof to any Third Party Transferee, such Third Party Transferee (together with its Affiliates) shall acquire beneficial ownership of more than 3.5% of the outstanding Voting 41 37 Shares constituting more than 50% of the Initial Interest of the Claridge Group, such Third Party Transferee shall have the right to designate Directors pursuant to Section 2.1(b)(i) if (x) the applicable transferor elects to assign such right to such Third Party Transferee (which in the event of the grant of an option upon Voting Shares, may be assigned either upon the grant or the exercise thereof) and (y) SPE and USI shall have given their prior written consent to the assignment of such right to the Third Party Transferee (which consent shall not be unreasonably withheld), provided that (i) upon any such Transfer or series of related Transfers the Claridge Group shall cease to have a right to elect Directors pursuant to Section 2.1 in the event that such right is transferred in accordance with the provisions of this subsection 4.5(b)(iii) and (ii) such Third Party Transferee shall not have the right to assign such right to any Person (other than a Permitted Transferee thereof); and (iv) if such Third Party Transferee (together with its Affiliates) shall acquire beneficial ownership of more than 3.5% of the outstanding Voting Shares in any Transfer or series of related Transfers from a Stockholder and/or its Permitted Transferees, such Third Party Transferee shall have the right to initiate Demand Registrations pursuant to Section 5.1 and the other rights and obligations of a Holder pursuant to Article V to the extent the transferor to such Third Party Transferee assigns, in whole or in part, any such rights and obligations to such Third Party Transferee (provided that no rights of a Holder under Article V shall be assigned unless the obligations of a Holder thereunder are also assigned). (c) Prior to the consummation of a Transfer described in Section 4.5(b) to the extent rights and obligations are to be assigned, and as a condition thereto, the applicable Third Party Transferee shall agree in writing with the other parties hereto to be bound by the terms and conditions of this Agreement to the extent described in Section 4.5(b). To the extent the Third Party Transferee is not an "ultimate parent entity" (as defined in the HSR Act), the ultimate parent entity of such Third Party Transferee shall agree in writing to be directly liable for the performance of the Third Party Transferee to the same extent USI or SPE would be liable for their respective Permitted Transferees. SECTION 4.6 Notice of Transfer. To the extent any Stockholder and its Permitted Transferees shall Transfer any Voting Shares, such Stockholder shall, within three Business Days following consummation of such Transfer, deliver notice thereof to the Company and the other Stockholders, provided, however, that no such notice shall be required to be delivered unless the aggregate Voting Shares transferred by such Stockholder and its Permitted Transferees since the date of the last notice delivered by such Stockholder pursuant to this Section 4.6 or Section 8.4(b) exceeds 1% of the outstanding Voting Shares. SECTION 4.7 Compliance with Transfer Provisions. Any Transfer or attempted Transfer of Voting Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Voting Shares as the owner of such Voting Shares for any purpose. 42 38 ARTICLE V REGISTRATION RIGHTS SECTION 5.1 Demand Registrations. (a) Subject to Section 5.1(d), at any time and from time to time after the one-year anniversary of the Closing, any Holder shall have the right to require the Company to file a registration statement under the Securities Act and/or a prospectus under applicable Canadian securities laws covering all or any part of their respective Registrable Securities, by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration by such Holder(s) and the intended method of distribution thereof. All such requests pursuant to this Section 5.1(a) are referred to herein as "Demand Registration Requests" and the registrations so requested are referred to herein as "Demand Registrations" (with respect to any Demand Registration, the Holder making such demand for registration being referred to as the "Initiating Holder"). As promptly as practicable, but no later than 15 days after receipt of a Demand Registration Request, the Company shall give written notice (the "Demand Exercise Notice") of such Demand Registration Request to all Holders of record of Registrable Securities. (b) The Company shall include in a Demand Registration (i) the Registrable Securities of the Initiating Holder and (ii) the Registrable Securities of any other Holder (collectively, the "Other Holders") that shall have made a written request to the Company for inclusion thereof in such registration (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder(s)) within 30 days after the receipt of the Demand Exercise Notice. (c) The Company shall, as expeditiously as possible following a Demand Registration Request, use its best efforts to (i) effect the registration under the Securities Act (including by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested and if the Company is then eligible to use such a registration) of the Registrable Securities which the Company has been so requested to register by such Holder, for distribution, in accordance with such intended method of distribution, and (ii) if requested by the Initiating Holder, obtain acceleration of the effective date of the registration statement relating to such registration. (d) The rights of Holders of Registrable Securities to request Demand Registrations pursuant to Section 5.1(a) are subject to the following limitations: (i) the Company shall not be obligated to effect a Demand Registration within six months after the effective date of any other registration of equity securities by the Company (other than pursuant to a registration on Form S-4 or Form S-8 or any successor or similar form that is then in effect) which was not effected on Form S-3 (or any successor or similar short-form registration statement), provided, however, that this clause (i) shall not be applicable with respect to any Registrable Securities beneficially owned by any Holder if in connection with a Piggyback Registration such Holder requested during such six month period to have such Registrable Securities included in such Piggyback Registration and Registrable Securities with 43 39 a Current Market Value exceeding $25,000,000 (valued at the time of such request) were not included pursuant to Section 5.2(d), (ii) in no event shall the Company be required to effect, in the case of SPE, more than four Demand Registrations, in the case of USI, more than four Demand Registrations, and, in the case of the Claridge Group, more than one Demand Registration, (iii) the Company shall not be obligated to effect a Demand Registration by either SPE or USI if a Demand Registration initiated by either SPE or USI shall have been effected in the preceding 12 months, and (iv) the Company shall not be obligated to effect a Demand Registration the reasonably anticipated aggregate price to the public of which would not exceed $25,000,000. Upon assignment by a Stockholder of the right to initiate a Demand Registration to a Third Party Transferee in accordance with Section 4.5(b)(iv), such Stockholder shall cease to have the right to initiate such Demand Registration and the number of Demand Registrations to which such Stockholder shall be entitled as set forth in the preceding sentence shall be reduced accordingly. In no event shall the Company be required to effect more than nine Demand Registrations pursuant to this Agreement. (e) The Company shall select the registration statement form for any registration pursuant to this Section, provided, that if any registration requested pursuant to this Section which is proposed by the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form. (f) A registration requested pursuant to this Section 5.1 will not be deemed to have been effected unless it has become effective, provided that if, within 180 days after it has become effective, the offering of Registrable Securities pursuant to such registration is subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court, such registration will be deemed not to have been effected. (g) If a requested registration pursuant to this Section involves an underwritten offering, the Company shall have the right to select in good faith the investment banker or bankers and managers to administer the offering; provided, however, that such investment banker or bankers and managers shall be reasonably satisfactory to the Initiating Holder. The Initiating Holder shall notify the Company if such Holder objects to any investment banker or manager selected by the Company pursuant to this Section 5.1(g) within 10 Business Days after the Company has notified such Holder of such selection. (h) If the managing underwriter of any underwritten offering shall advise the Holders participating in a Demand Registration that the Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the Initiating Holder, then the Initiating Holder shall have the right to notify the Company that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such registration statement. If a requested registration pursuant to this Section 5.1 involves an underwritten offering and the managing underwriter advises the Company that, in its opinion, the number of securities requested to be included in 44 40 such registration (including securities of the Company which are not Registrable Securities) exceeds the number which can be sold in such offering within a price range acceptable to the Initiating Holder, the Company will include in such registration only the Registrable Securities requested to be included in such registration pursuant to this Section 5.1. In the event that the number of Registrable Securities requested to be included in such registration exceeds the number which, in the opinion of such managing underwriter, can be sold in such offering within a price range acceptable to the Initiating Holder, the Company shall include in such registration the number of Registrable Securities proposed to be sold by the Initiating Holder and, to the extent the managing underwriter believes that additional Registrable Securities can be sold in such offering within such price range, the number of Registrable Securities proposed to be sold by the Other Holders, allocated pro rata among the Other Holders on the basis of the relative number of shares of Registrable Securities requested to be registered pursuant to clause (ii) of Section 5.1(b) by each such Holder. In the event that the number of Registrable Securities requested by all Holders to be included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, the Company may include in such registration a number of securities that the Company proposes to sell up to the number of securities that, in the opinion of the underwriter, can be sold in such offering within a price range acceptable to the Initiating Holder. (i) If the Company at any time grants to any other holders of Voting Shares (or securities that are convertible, exchangeable or exercisable into Voting Shares) any rights to request the Company to effect the registration under the Securities Act of any such Voting Shares (or any such securities) on terms more favorable to such holders than the terms set forth in this Section 5.1, then the Holders shall be entitled to such more favorable rights and benefits. SECTION 5.2 Piggyback Registrations. (a) If, at any time following the Equity Offering, the Company proposes or is required to register any of its equity securities under the Securities Act (other than pursuant to (i) registrations on such form or similar form(s) solely for registration of securities in connection with an employee benefit plan or dividend reinvestment plan or a merger, consolidation or acquisition or (ii) a Demand Registration pursuant to Section 5.1) on a registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent general registration form then in effect), whether or not for its own account, the Company shall give prompt written notice of its intention to do so to each of the Holders of record of Registrable Securities. Upon the written request of any Holder, made within 15 days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company shall use its best efforts to cause all such Registrable Securities, the Holders of which have so requested the registration thereof, to be registered under the Securities Act (with the securities that the Company at the time proposes to register) to permit the sale or other disposition by such Holders (in accordance with the intended method of distribution thereof) of the Registrable Securities to be so registered (such registration, a "Piggyback Registration"). There is no limitation on the number of Piggyback Registrations pursuant to the preceding sentence that the Company is obligated to effect. No registration effected under this Section 5.2(a) shall relieve the Company of its obligations to effect Demand Registrations. 45 41 (b) If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company may, at its election, give written notice of such determination to all Holders of record of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 5.1, and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities. (c) Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 5.2 by giving written notice to the Company of its request to withdraw; provided, however, that (i) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made. (d) If the managing underwriter of any underwritten offering shall inform the Company by letter of its belief that the number of Registrable Securities requested to be included in a registration under this Section 5.2 would materially adversely affect such offering, then the Company will include in such registration, first, the securities proposed by the Company to be sold for its own account, second, the Registrable Securities and all other securities of the Company to be included in such registration to the extent of the number and type, if any, that the Company is so advised can be sold in (or during the time of) such offering, pro rata among the Holders on the basis of the relative number of shares of Registrable Securities requested to be registered pursuant to Section 5.2(a) by each such Holder and, third, pro rata among the holders of any other securities of the Company with respect to which the holders thereof are entitled to and desire "piggy-back" or similar registration rights. SECTION 5.3 Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company shall, as expeditiously as possible: (a) prepare and file with the Commission a registration statement on an appropriate registration form of the Commission for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof, which form (i) shall be selected by the Company and (ii) shall, in the case of a shelf registration, be available for the sale of the Registrable Securities by the selling Holders thereof and such registration statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed 46 42 therewith, and the Company shall use its best efforts to cause such registration statement to become effective (provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or "blue sky" laws of any jurisdiction, the Company will furnish to counsel for the Holders participating in the planned offering (selected by the Initiating Holder, in the case of a Demand Registration, or the Requisite Percentage of Participating Holders, in the case of a Piggyback Registration) and the underwriters, if any, copies of all such documents proposed to be filed (including all exhibits thereto), which documents will be subject to the reasonable review and, in the case of a registration pursuant to Section 5.1, reasonable comment of such counsel, and the Company shall not file any registration statement or amendment thereto or any prospectus or supplement thereto pursuant to Section 5.1 to which the Holders of a majority of the Registrable Securities covered by such registration statement or the underwriters, if any, shall reasonably object in writing); (b) prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for such period as any seller of Registrable Securities pursuant to such registration statement shall request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement until the earlier of (i) such time as all such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the Holder or Holders thereof set forth in such registration statement and (ii) the expiration of 180 days from the date such registration statement first becomes effective; (c) furnish, without charge, to each seller of such Registrable Securities and each underwriter, if any, of the securities covered by such registration statement such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits), and the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement, and such other documents, as such seller and underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller; (d) use its best efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or "blue sky" laws of such jurisdictions as any sellers of Registrable Securities or any managing underwriter, if any, shall reasonably request, and do any and all other acts and things that may be necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions, except that in no event shall the Company be required to qualify generally to do business as a foreign corporation in any jurisdiction where it would not, but for the requirements of this paragraph (d), be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; 47 43 (e) enter into such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other persons in addition to, or in substitution for, the provisions of Section 5.8 hereof, and take such other actions as the Initiating Holder, in the case of a Demand Registration, or the Requisite Percentage of Participating Holders, in the case of a Piggyback Registration, or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (f) furnish to each seller of Registrable Securities (i) a signed counterpart, addressed to such seller, of any opinion of counsel for the Company, dated the date of the closing under the underwriting agreement with respect to such offering, in customary form and in form and scope reasonably satisfactory to the underwriter and its counsel, and (ii) a signed counterpart, if requested by such Seller, addressed to it, of any "cold comfort" letter signed by the independent public accountants in customary form and covering matters of the type customarily covered by "cold comfort" letters (provided that Registrable Securities constitute at least 25% of the securities covered by such registration statement, unless such a "cold comfort" letter or letters are provided to the Company or other selling holders in connection with such registration); (g) immediately notify each Holder selling Registrable Securities covered by such registration statement and each managing underwriter, if any: (i) when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed and, with respect to the registration statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction or the initiation of any proceeding for such purpose; (v) of the existence of any fact of which the Company becomes aware that results in the registration statement, the prospectus related thereto or any document incorporated therein by reference containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and (vi) if at any time the representations and warranties contemplated by Section 5.8 below cease to be true and correct in all material respects; and, if the notification relates to an event described in clause (v), the Company shall promptly prepare and furnish to each such seller and each underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; (h) use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable 48 44 after the effective date of the registration statement (and in any event within 16 months thereafter), an earnings statement (which need not be audited) covering the period of at least 12 consecutive months beginning with the first day of the Company's first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations thereunder; (i) use its best efforts to cause all such Registrable Securities covered by such registration statement to be listed on each securities exchange or quotation system on which similar securities issued by the Company are then listed or quoted (if any), and provide a transfer agent and registrar for such Registrable Securities not later than the effective date of such registration statement; (j) enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Initiating Holder, in the case of a Demand Registration, or the Requisite Percentage of Participating Holders, in the case of a Piggyback Registration, shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (k) deliver promptly to the each Holder and counsel for the selling Holders participating in the offering and each underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and any memoranda relating to discussions with the Commission or its staff with respect to the registration statement, other than those portions of any such memoranda that contain information subject to attorney-client privilege with respect to the Company, and, upon receipt of such confidentiality agreements as the Company may reasonably request, make reasonably available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter, if any, participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (l) use reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (m) provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement; (n) make reasonably available its employees and personnel and otherwise provide reasonable assistance to the underwriters (taking into account the needs of the Company's businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any underwritten offering; 49 45 (o) promptly prior to the filing of any document that is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of such registration statement), provide copies of such document to counsel for the selling Holders and to each managing underwriter, if any, and make the Company's representatives reasonably available for discussion of such document and make such changes in such document concerning the selling holders prior to the filing thereof as counsel for such selling holders or underwriters may reasonably request; (p) furnish to each Holder participating in the offering and the managing underwriter, without charge, at least one signed copy of the registration statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (q) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (r) use reasonable efforts to make available the executive officers of the Company to participate with the Holders of Registrable Securities and any underwriters in any "road shows" or other selling efforts that may be reasonably requested by the selling Holders in connection with the methods of distribution for the Registrable Securities; (s) cooperate with the selling Holders of Registrable Securities and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the selling Holders of Registrable Securities at least three business days prior to any sale of Registrable Securities; (t) in the case of a registration under Canadian securities laws, take such reasonable actions as may be necessary to facilitate the sale of Registrable Securities on a public basis in Canada, including making any necessary filings with Canadian securities authorities or any Canadian stock exchange on which the Registrable Securities are listed; and (u) take all such other reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities. The Company may require as a condition precedent to the Company's obligations under this Section 5.3 that each seller of Registrable Securities as to which any registration is being effected furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing and as shall be required by law or by the Commission in connection therewith, provided that such 50 46 information shall be used only in connection with such registration. Each Holder of Registrable Securities agrees that upon receipt of any notice from the Company of the happening of any event of the kind described in clause (v) of paragraph (g) of this Section 5.3, such Holder will discontinue such Holder's disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (g) of this Section 5.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Registrable Securities that was in effect at the time of receipt of such notice. In the event the Company shall give any such notice, the applicable period mentioned in paragraph (b) of this Section 5.3 shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by paragraph (g) of this Section 5.3. If any such registration statement or comparable statement under "blue sky" laws refers to any Holder by name or otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state "blue sky" or securities law then in force, the deletion of the reference to such Holder. SECTION 5.4 Registration Expenses. (a) Each Holder of Registrable Securities (together with the Company, if the Company participates in a registration) participating in any registration pursuant to Section 5.1 shall pay its pro rata share of Expenses related to such registration on the basis of the number of Registrable Securities included in such registration by such Holder (including the Company, if applicable) relative to the number of securities included in such registration by all holders (including the Company, if applicable, and any other holders including securities in the registration pursuant to an agreement with the Company other than this Agreement), other than Expenses directly attributable to a particular Holder, which shall be borne by such Holder, provided that the Company shall bear all expenses of the initial registration effected pursuant to Section 5.1 upon the request of each of SPE, USI and the Claridge Group. (b) Each Holder of Registrable Securities participating in any registration initiated by the Company pursuant to Section 5.2 shall pay its pro rata share of Expenses (other than Company Expenses which shall be borne by the Company) related to such registration on the basis of the number of Registrable Securities included in such registration by such Holder relative to the number of securities included in such registration by all holders (excluding the Company and including any holders including securities in the registration 51 47 pursuant to an agreement with the Company other than this Agreement), other than Expenses directly attributable to a particular Holder which shall be borne by such Holder. (c) Notwithstanding the foregoing, (i) the provisions of this Section 5.4 shall be deemed amended to the extent necessary to cause these expense provisions to comply with the "blue sky" laws of each state in which the offering is made, (ii) in connection with any registration hereunder, each Holder of Registrable Securities being registered shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares sold in the offering by such Holder, and (iii) the Company shall, in the case of all registrations under this Article V, be responsible for all its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties). SECTION 5.5 Limitations on Sale or Distribution of Other Securities. (a) To the extent requested in writing by a managing underwriter, if any, of any registration effected pursuant to Section 5.1, each Holder of Registrable Securities agrees not to Transfer, including any sale pursuant to Rule 144 under the Securities Act, any Common Stock (other than as part of such underwritten public offering) during the time period reasonably requested by the managing underwriter, not to exceed 90 days (and the Company hereby also so agrees (except that the Company may effect any sale or distribution of any such securities pursuant to a registration on Form S-4 (if reasonably acceptable to such managing underwriter) or Form S-8, or any successor or similar form that is then in effect or upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent) to use its reasonable best efforts to cause each holder of any equity security or any security convertible into or exchangeable or exercisable for any equity security of the Company purchased from the Company at any time other than in a public offering so to agree). Each managing underwriter shall be entitled to rely on the agreements of each Holder of Registrable Securities set forth in this Section 5.5(a) and shall be a third party beneficiary of the provisions of this Section 5.5(a). (b) The Company hereby agrees that, if it shall previously have received a request for registration pursuant to Section 5.1, and if such previous registration shall not have been withdrawn or abandoned, the Company shall not Transfer any Common Stock (other than as part of such underwritten public offering, a registration on Form S-4 or Form S-8 or any successor or similar form that is then in effect or upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent), until a period of 90 days shall have elapsed from the effective date of such previous registration; and the Company shall so provide in any registration rights agreements hereafter entered into with respect to any of its securities. SECTION 5.6 Company Right to Postpone Registration. The Company shall be entitled to postpone for a reasonable period of time (but not exceeding 120 days) the filing of any registration statement otherwise required to be prepared and filed by it pursuant to this Agreement if the Company concludes that such registration and offering would materially adversely affect any financing, acquisition, corporate reorganization or other material 52 48 transaction involving the Company or any of its Affiliates or would require premature disclosure thereof and the Company promptly gives the Holders of Registrable Securities requesting registration thereof pursuant to Section 5.1 written notice of such delay. If the Company shall so postpone the filing of a registration statement, such Holders of Registrable Securities requesting registration thereof pursuant to Section 5.1 shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which Holders of Registrable Securities are entitled pursuant to Section 5.1 hereof. SECTION 5.7 No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement. SECTION 5.8 Indemnification. (a) In the event of any registration of any securities of the Company under the Securities Act pursuant to this Article V, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each seller of any Registrable Securities covered by such registration statement, its directors, officers, affiliates, employees, stockholders, members and general and limited partners (and the directors, officers, affiliates, employees, stockholders, members and general and limited partners thereof), each other Person who participates as an underwriter in the offering or sale of such securities, each officer, director, employee, stockholder, member or general and limited partner of such underwriter, and each other Person, if any, who controls such seller or any such underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof ("Claims") and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise, insofar as such Claims or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act, together with the documents incorporated by reference therein or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim or expense arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein. Such 53 49 indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the Transfer of such securities by such seller. (b) Each Holder of Registrable Securities that are included in the securities as to which any registration under Section 5.1 or 5.2 is being effected (and, if the Company requires as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 5.1 or 5.2, any underwriter) shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 5.8) to the extent permitted by law the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their directors, officers, general and limited partners and respective controlling Persons with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such Holder or underwriter specifically for use therein and reimburse such indemnified party for any legal or other expenses reasonably incurred in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the aggregate amount that any such Holder shall be required to pay pursuant to this Section 5.8(b) and Sections 5.8(c) and 5.9 shall in no case be greater than the amount of the net proceeds received by such person upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such Claim. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the Transfer of such securities by such Holder. (c) Indemnification similar to that specified in the preceding paragraphs (a) and (b) of this Section 5.8 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any state securities and "blue sky" laws. (d) Any person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 5.8, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 5.8, except to the extent the indemnifying party is materially prejudiced thereby, and shall not relieve the indemnifying party from any liability that it may have to any indemnified party otherwise than under this Article V. In case any action or proceeding is brought against an indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that 54 50 it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that if (i) the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; (ii) such indemnified party who is a defendant in any action or proceeding that is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party that are not available to the indemnifying party; or (iii) representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction who shall be approved by the Requisite Percentage of Participating Holders in the registration in respect of which such indemnification is sought), and the indemnifying party shall be liable for any expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (x) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (y) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (e) The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution that any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the Transfer of the Registrable Securities by any such party. (f) The indemnification and contribution required by this Section 5.8 and Section 5.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. SECTION 5.9 Contribution. (a) If for any reason the indemnity provided for in Section 5.8 is unavailable or is insufficient to hold harmless an indemnified party under Sections 5.8(a), (b) or (c), then each indemnifying party and the Company (i) as between the Company and the holders of Registrable Securities covered by a registration statement, on the one hand, and the underwriters, on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such holders, on the one hand, and the underwriters, on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such holders, on 55 51 the one hand, and of the underwriters, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations, and (ii) as between the Company, on the one hand, and each holder of Registrable Securities covered by a registration statement, on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each such holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and such holders, on the one hand, and the underwriters, on the other, shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such holders bear to the total underwriting discounts and commissions received by the underwriters. The relative fault of the Company and such holders, on the one hand, and of the underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such holders or by the underwriters. The relative fault of the Company, on the one hand, and of each such holder, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (b) The Company and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 5.9 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the next preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the next preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.9, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public exceeds the amount of any damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no holder of Registrable Securities shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such holder were offered to the public exceeds the amount of any damages that such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Stockholder's obligation to contribute pursuant to this Section 5.9 is several in the proportion that the proceeds of the offering received by such Stockholder bears to the total proceeds of the offering received by all the Stockholders and not joint. 56 52 SECTION 5.10 Underwritten Offerings. (a) If requested by the underwriters for any underwritten offering by the Holders pursuant to a registration requested under Section 5.1, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Initiating Holder and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally included in the standard underwriting agreement of such underwriters, including indemnities and contribution agreements. Any Holder participating in the offering shall be a party to such underwriting agreement and may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder. Such underwriting agreement shall also contain such representations and warranties by the participating Holders as are customary in agreements of that type. (b) In the case of a registration pursuant to Section 5.2 hereof, if the Company shall have determined to enter into an underwriting agreement in connection therewith, all of the Holders' Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Holder participating in such registration may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder. Such underwriting agreement shall also contain such representations and warranties by the participating Holders as are customary in agreements of that type. SECTION 5.11 Rule 144. The Company covenants and agrees that (i) so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities Act), and (ii) it will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (x) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (y) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 5.12 Article V Termination. The rights and obligations of a Stockholder and its Permitted Transferees under this Article V shall terminate upon such Stockholder's Applicable Percentage equalling less than 3.5%, provided that in the event that a Stockholder's Applicable Percentage shall be less than 3.5% as a result of the issuance of additional Voting Shares by the Company, such Stockholder shall be so advised by the 57 53 Company by written notice and the provisions of this Article V shall continue to bind and enure to the benefit of such Stockholder for a period of 180 days following such Stockholder's receipt of such notice and will continue to bind and enure to the benefit of such Stockholder thereafter in the event that such Stockholder (and/or its Permitted Transferees) acquires, during such 180-day period, a sufficient number of Voting Shares such that its Applicable Percentage equals or exceeds 3.5%. ARTICLE VI STANDSTILL SECTION 6.1 Standstill with the Company. (a) Each of SPE and USI and each member of the Claridge Group covenants and agrees with the Company and with each of SPE and USI that such Stockholder shall not, and shall cause its Affiliates not to, acquire, directly or indirectly, the beneficial ownership of any additional Voting Shares (except by way of stock dividends, stock reclassifications or other distributions or offerings made available to holders of Voting Shares generally), except for: (i) subject to the provisions at the end of clause (ii) below, acquisitions of a number of Voting Shares representing up to an aggregate of 5% of the Company's outstanding Voting Shares in open market purchases or in privately-negotiated transactions during any rolling 12-month period (measuring the outstanding Voting Shares as of the first day of such period), provided that any such acquisition in a privately-negotiated transaction shall not be at a price in excess of 3% of the closing price of such Voting Shares on the principal exchange or market on which such security may be listed or trade on the trading day immediately preceding the date on which a binding agreement is entered into regarding such acquisition and, in the event a closing price is unavailable, such price shall not be in excess of Fair Market Value ; (ii) acquisitions in privately-negotiated transactions from five or fewer persons pursuant to offers not made generally to holders of Voting Shares and pursuant to which the value of any consideration paid for any Voting Shares, including brokerage fees or commissions, does not exceed 115% of the "Market Price" (as determined in accordance with the regulations under the Securities Act (Ontario)), provided, however, that no acquisition shall be permitted pursuant to clause (i) or (ii) if, as a result of such acquisition, the Public Stockholders would beneficially own less than 20% of the outstanding Voting Shares, provided, further, that the foregoing proviso shall not be applicable to USI or any of its Affiliates, SPE or any of its Affiliates or the members of the Claridge Group if, upon consummation of such acquisition, such Stockholder's Applicable Percentage would be less than 25%. (iii) acquisitions from SPE, USI, members of the Claridge Group and their respective Permitted Transferees; 58 54 (iv) acquisitions from the Company pursuant to Section 7.1 or on terms and conditions approved by a Determination of the Independent Directors; (v) acquisitions pursuant to a tender offer or exchange offer made in accordance with applicable law; (vi) if the Company shall have issued or sold Voting Shares (other than pursuant to the Equity Offering) to any Person other than such Stockholder or a Permitted Transferee thereof without effecting a pro rata issuance of Voting Shares to such Stockholder or a Permitted Transferee thereof (calculated based on such Stockholder's Applicable Percentage at the time of such issuance or sale), acquisitions (whether pursuant to Section 7.1 or otherwise) of an aggregate number of Voting Shares equal to the number of Voting Shares that would result in such Stockholder having the same Applicable Percentage as such Stockholder would have had if the Company had not issued or sold such Voting Shares; or (vii) acquisitions of Common Stock upon the conversion of Non-Voting Common Stock. (b) Notwithstanding anything to the contrary contained in Section 6.1(a), in the case of any acquisition permitted pursuant to Section 6.1(a) that would constitute a "Rule 13e-3 transaction" (as defined in Rule 13e-3 under the Exchange Act), prior to the consummation of any such transaction (x) a nationally recognized investment bank shall have delivered an opinion to the Board that such transaction is fair from a financial point of view to the stockholders of the Company, other than the applicable Stockholder, (y) a majority of the Independent Directors shall have approved the transaction and (z) if the Public Stockholders beneficially own more than 20% of the Voting Shares and if approval of stockholders of the Company is required by the DGCL or the Certificate, a majority of the shares of Common Stock held by such holders shall have been voted in favor of the transaction. (c) The restrictions of Section 6.1(a) and 6.1(b) shall terminate on the earlier of (x) the six-year anniversary of the Closing and (y) any time after the four-year anniversary of the Closing upon the Claridge Group ceasing to have the right to designate a Director pursuant to Section 2.1, or upon the occurrence of: (i) a bona fide tender or exchange offer to acquire more than 20% of the Voting Shares having been made by any Person (except that such restrictions shall not terminate as to any Stockholder if such tender or exchange offer is made by such Stockholder or any of its Affiliates or by any Person acting in concert with such Stockholder or any of its Affiliates or is induced by such Stockholder or any of its Affiliates), provided that if such offer is withdrawn or expires without being consummated, Section 6.1(a) and 6.1(b) shall be reinstated (but no such reinstatement shall prohibit any Stockholder from thereafter purchasing Voting Shares pursuant to a contract entered into prior to the withdrawal or expiration of such tender offer or 59 55 exchange offer or pursuant to a tender offer or exchange offer commenced by a Stockholder prior to such time); (ii) the Applicable Percentage of SPE, USI or the Claridge Group equaling or exceeding 80%, provided that, in the case of USI, such percentage shall be 33 1/3% at any time USI and its Affiliates beneficially own more Voting Shares than any other holder of Common Stock; (iii) with respect to any Stockholder, such Stockholder's Applicable Percentage being less than 15% (provided that such restrictions shall be reinstated if such Stockholder's Applicable Percentage equals or exceeds 15% within one year thereafter); (iv) any Person (other than a Stockholder or a Permitted Transferee) beneficially owning more than 20% of the Voting Shares, excluding from the Voting Shares beneficially owned by such Person Voting Shares acquired from a Stockholder, a Permitted Transferee or the Company; or (v) the Public Stockholders beneficially owning more than 66 2/3% of the Voting Shares. (d) Notwithstanding anything to the contrary herein, if a Stockholder who would otherwise be in violation of Section 6.1(a) has violated such Section inadvertently, and after becoming aware of such violation such Stockholder divests as promptly as practicable a sufficient number of Voting Shares so that such Stockholder would no longer be in violation of such Section, then such Stockholder shall not be deemed to have been in violation of Section 6.1(a) for any purposes of this Agreement. (e) Notwithstanding anything to the contrary herein, the provisions of Section 6.1(a) shall not be applicable to any member of the Claridge Group so long as the Applicable Percentage of the Claridge Group is less than 15% (provided that an acquisition by any member of the Claridge Group shall be subject to the restriction of Section 6.1(a) if such acquisition would result in the Applicable Percentage of the Claridge Group equalling or exceeding 15%). SECTION 6.2 Standstill among the Stockholders. (a) Each of SPE and USI covenants and agrees with the other and each member of the Claridge Group covenants and agrees with each of SPE and USI that neither such Stockholder nor any of its Affiliates will acquire, directly or indirectly, the beneficial ownership of any Voting Shares if immediately prior to such acquisition such Stockholder's Applicable Percentage exceeds 50%, excluding Voting Shares acquired from another Stockholder or its Permitted Transferees, or if, as a result of such acquisition, (i) such Stockholder and its Affiliates would beneficially own an aggregate of more than 50% of the Voting Shares, excluding Voting Shares acquired from another Stockholder or its Permitted Transferees, or (ii) the Public Stockholders would beneficially own less than 20% of the outstanding Voting Shares; provided, however, that this clause (ii) shall not be applicable to USI or any of its Affiliates, or SPE or any of its 60 56 Affiliates or the members of the Claridge Group and their respective Affiliates, if, upon consummation of such acquisition, such Stockholder's Applicable Percentage would be less than 25%. Notwithstanding the foregoing, the provisions of this Section 6.2(a) shall not prohibit the acquisition of Common Stock upon the conversion of Non-Voting Common Stock. (b) The restrictions of Section 6.2(a) shall terminate if: (i) the Applicable Percentage of either SPE or USI is less than 10% (provided that such restrictions shall be reinstated if such Stockholder's Applicable Percentage equals or exceeds 10% within one year thereafter); (ii) a bona fide tender or exchange offer to acquire more than 15% of the outstanding Voting Shares is made by any Person (except that such restrictions shall not terminate as to any Stockholder if such tender or exchange offer is made by such Stockholder or any of its Affiliates or by any Person acting in concert with such Stockholder or any of its Affiliates or is induced by such Stockholder or any of its Affiliates), provided that if such offer is withdrawn or expires without being consummated, Section 6.2(a) shall be reinstated (but no such reinstatement shall prohibit any Stockholder from thereafter purchasing Voting Shares pursuant to a contract entered into prior to the withdrawal or expiration of such tender offer or exchange offer or pursuant to a tender offer or exchange offer commenced by a Stockholder prior to such time); or (iii) any Person (other than a Stockholder or a Permitted Transferee) beneficially owns more than 15% of the Voting Shares, excluding Voting Shares acquired from a Stockholder or a Permitted Transferee, but only if the sum of the Applicable Percentages of SPE and USI is less than 45%. (c) Notwithstanding anything to the contrary herein, if a Stockholder who would otherwise be in violation of Section 6.2(a) has violated such Section inadvertently, and after becoming aware of such violation such Stockholder divests as promptly as practicable a sufficient number of Voting Shares so that such Stockholder would no longer be in violation of such Section, then such Stockholder shall not be deemed to have been in violation of Section 6.2(a) for any purposes of this Agreement. (d) Notwithstanding anything to the contrary herein, the provisions of Section 6.2(a) shall not be applicable to any member of the Claridge Group so long as the Applicable Percentage of the Claridge Group is less than 10% (provided that an acquisition by any member of the Claridge Group shall be subject to the restrictions of Section 6.2(a) if such acquisition would result in the Applicable Percentage of the Claridge Group equalling or exceeding 10%). 61 57 ARTICLE VII EQUITY PURCHASE RIGHTS SECTION 7.1 Equity Purchase Rights. (a) If the Company proposes to issue or sell any Voting Shares pursuant to a transaction in respect of which SPE or USI shall have the right to consent pursuant to clause (vii) of Section 3.1(a) (any such Stockholder, an "Offeree"), each Offeree shall have the right, exercisable in whole or in part and subject to the applicable rules of any stock exchange on which the Common Stock shall then be listed, to acquire from the Company up to a number of shares or other amount of Voting Shares equal to the number or amount of Voting Shares proposed to be issued or sold to Persons other than such Offeree or any of its Affiliates (the "Issuance Shares") multiplied by such Offeree's then Applicable Percentage, prior to giving effect to the consummation of the proposed issuance or sale and any acquisition by an Offeree pursuant to this Section 7.1(a) (with respect to each Offeree, the number or amount of Voting Shares which such Offeree may purchase pursuant to this Section 7.1(a) shall be referred to as such Offeree's "Offered Shares"). Notwithstanding anything to the contrary contained in this Section 7.1(a), in the event that SPE and its Permitted Transferees beneficially own Non-Voting Common Stock and Common Stock, SPE's Offered Shares will be allocated between Non-Voting Common Stock and Common Stock in the same proportion. (b) The Company shall give written notice of a proposed issuance or sale described in Section 7.1(a) to each Offeree within two Business Days following any meeting of the Board of Directors at which any such issuance or sale is approved. Such notice (the "Issuance Notice") shall set forth the material terms and conditions of such proposed transaction, including the name of any proposed purchaser(s) or the proposed manner of disposition, in the case of a public offering, the number or amount and description of the Issuance Shares and, except in the case of a public offering, the proposed purchase price per share, including a description of any non-cash consideration sufficiently detailed to permit valuation thereof. Such notice shall also set forth the number of Offered Shares for all Stockholders and shall be accompanied by any written offer from the prospective purchaser to purchase such Voting Shares, if available and permitted pursuant to the terms thereof. The Issuance Notice shall be received by each Offeree at least 20 days prior to the proposed issuance or sale. (c) At any time during the 20-day period following an Offeree's receipt of an Issuance Notice, each Offeree shall have the right to irrevocably elect to purchase up to the number of such Offeree's Offered Shares at the purchase price set forth in the Issuance Notice (or if such price includes property other than cash, the equivalent in cash of such price) and upon the other terms and conditions specified in the Issuance Notice by delivering a written notice to the Company. Except as provided in the following sentence, such purchase(s) shall be consummated concurrently with the consummation of the issuance or sale described in the Issuance Notice. The closing of any purchase by an Offeree may be extended beyond the closing of the transaction described in the Issuance Notice to the extent necessary to obtain required governmental approvals and other required approvals and the Company and the Offeree shall use their respective best efforts to obtain such approvals. 62 58 (d) If the Offeree(s) do not elect pursuant to Section 7.1(c) to purchase Offered Shares, the Company shall be free to complete the proposed issuance or sale described in the Issuance Notice on terms no less favorable to the Company than those set forth in the Issuance Notice, provided that (x) such issuance or sale is closed within 90 days after the latest of the expiration of the 20-day period described in Section 7.1(c) or, in the case of a public offering, within 20 days of the declaration by the Commission of the effectiveness of the applicable registration statement filed by the Company, (y) the price at which the Voting Shares are transferred must be equal to or higher than the purchase price described in the Issuance Notice (except in the case of a public offering, in which case the price at which the Voting Shares are sold (before deducting underwriting discounts and commissions) shall be equal to at least 90% of such price) and (z) subject to Section 7.1(f), the amount of securities to be issued or sold by the Company may be reduced. Such periods within which such issuance or sale must be closed shall be extended to the extent necessary to obtain required governmental approvals and other required approvals and the Company shall use its best efforts to obtain such approvals. (e) If (i) the consideration specified in the Issuance Notice consists of, or includes, consideration other than cash or a publicly traded security for which a closing market price is published for each Business Day, or (ii) any property other than Voting Shares is proposed to be transferred by the Company in connection with the transaction to which the Issuance Notice relates, then the price payable by the Offerees under this Section 7.1 shall be the Determination of the Independent Directors of the Fair Market Value of the consideration per share or other amount in the case of clause (i) and the Determination of the Independent Directors of the Fair Market Value of the consideration per share or other amount determined to be properly allocable to the Voting Shares in the case of clause (ii). Notwithstanding anything to the contrary contained in this Section 7.1, the time periods applicable to an election by the Offerees to purchase the Offered Shares set forth in Section 7.1(c) shall not be deemed to commence until the Determination of the Independent Directors under this Section 7.1(e) has been made. The Company agrees to use its best efforts to cause the Determination of the Independent Directors under this Section 7.1(e) to be made as promptly as practicable but in no event later than ten Business Days after delivery by the Company of the Issuance Notice. (f) To the extent that, after an Offeree's election to acquire Voting Shares pursuant to its purchase right under this Section 7.1, the number of Issuance Shares shall be reduced (whether at the discretion of the Company or otherwise), then the number of shares or other amount of Voting Shares that such Offeree has the right to acquire under this Section 7.1 shall be reduced pro rata and such Offeree's election shall be deemed to have been its irrevocable commitment to purchase such reduced number of shares or other amount of such Voting Shares. (g) Notwithstanding anything to the contrary contained in this Section 7.1, an Offeree shall not be entitled to purchase any securities pursuant to this Section 7.1 (i) unless and until the Company actually issues or sells the securities that gave rise to the Offeree's purchase right under this Section 7.1 (and the Company may in its sole discretion elect at any 63 59 time to abandon any such issuance or sale) or (ii) in connection with any pro rata stock split, stock dividend or other combination or reclassification of any Capital Stock of the Company. (h) Notwithstanding anything to the contrary contained in this Section 7.1, upon any purchase of Voting Shares by an Offeree pursuant to this Section 7.1 on a later date than the issuance or sale of securities described in the Issuance Notice (x) the purchase price shall be adjusted by subtracting therefrom the Fair Market Value (as established by a Determination of the Independent Directors) of any dividend or distribution received in respect of such Voting Shares after the date of such issuance and prior to the purchase by such Offeree hereunder, (y) the purchase price and number of shares or amount to be purchased shall be adjusted to reflect any stock split, stock dividend, or other combination or reclassification of the Company's Capital Stock during such time and (z) such Offeree shall be entitled to exercise any rights to purchase additional Voting Shares available to all holders of Voting Shares proportionately that it would have been entitled to exercise if it had been the owner of the Voting Shares purchased by such Offeree hereunder on the record date for the distribution of such rights. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Conflicting Agreements. Each Stockholder and the Company represents and warrants that such party has not granted and is not a party to any proxy, voting trust or other agreement that is inconsistent with or conflicts with any provision of this Agreement. SECTION 8.2 Duration of Agreement. Except as otherwise provided in this Agreement, the rights and obligations of a Stockholder and its Permitted Transferees under this Agreement shall terminate upon such Stockholder's Applicable Percentage equalling less than 6.25% (or, in the case of the members of the Claridge Group, 3.5% until the five-year anniversary of the Closing and 5% thereafter), provided that in the event that a Stockholder's Applicable Percentage shall be less than 6.25% (or, in the case of the members of the Claridge Group, 3.5% until the five-year anniversary of the Closing and 5% thereafter) as a result of the issuance of additional Voting Shares by the Company, such Stockholder shall be so advised by the Company by written notice following any required recalculation of the number of such Stockholder's designees pursuant to Section 2.1(e) or Section 2.1(g), and the Agreement shall continue to bind and enure to the benefit of such Stockholder for a period of 180 days following such Stockholder's receipt of such notice and will continue to bind and enure to the benefit of such Stockholder thereafter in the event that such Stockholder (and/or its Permitted Transferees) acquires, during such 180-day period, a sufficient number of Voting Shares such that its Applicable Percentage equals or exceeds the applicable percentage set forth above. SECTION 8.3 Best Efforts. Each of SPE and USI covenant and agree with the other to use its best efforts to cause the Company to fulfill the Company's obligations 64 60 under Article II and Article III of this Agreement. If either SPE or USI fails to use its best efforts to cause the Company to fulfill in any material respect any of the Company's obligations under Article II or Article III, such Stockholder shall immediately cease to have any rights under the provisions of such Articles, provided, however, that if such failure is reasonably capable of being cured, such Stockholder shall retain its rights under such provisions if such failure is cured within 30 days after such Stockholder has received written notice of such failure. SECTION 8.4 Ownership Information. (a) For purposes of this Agreement, a Stockholder, in determining the amount of outstanding Voting Shares, may rely upon information set forth in the most recent quarterly or annual report, and any current report subsequent thereto, filed by the Company with the Commission, unless the Company shall have updated such information by delivery of notice to all Stockholders. (b) Upon the reasonable request of the Company or any Stockholder, each Stockholder shall deliver to the Company and each other Stockholder a notice specifying the amount of each class of Voting Shares then beneficially owned by such Stockholder, its Permitted Transferees and its Affiliates. The Company and the other Stockholders shall be entitled to rely on the most recently delivered such notice for all purposes of this Agreement, unless such Stockholder shall have updated such information by delivery of a subsequent notice (including a notice delivered pursuant to Section 4.6). SECTION 8.5 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. SECTION 8.6 Amendment and Waiver. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or any Stockholder unless such modification, amendment or waiver is approved in writing by the Company and each Stockholder whose rights or obligations hereunder are affected by such modification, amendment or waiver, provided that (i) the Company shall not agree to any of the foregoing without the prior written consent of SPE and USI and (ii) unless approved by a Determination of the Independent Directors, the Company shall not agree to any amendment, modification or waiver of any provision contained in Section 2.1 (other than Section 2.1(c) and 2.1(k)), Sections 2.6 and 2.7, clauses (v) and (vi) of Section 3.1(a), Sections 3.3, 3.4, 4.1, 4.2, 4.5(b), 6.1 and 8.2 or this Section 8.6. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. SECTION 8.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in 65 61 any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. SECTION 8.8 Entire Agreement. Except as otherwise expressly set forth herein, this document and the other documents dated the date hereof embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way. Without limiting the generality of the foregoing, to the extent that any of the terms hereof are inconsistent with the rights or obligations of any Stockholder under any other agreement with the Company, the terms of this Agreement shall govern. SECTION 8.9 Successors and Assigns. Except as provided in Section 4.5, neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part (except by operation of law pursuant to a merger whose purpose is not to avoid the provisions of this Agreement), by any party without the prior written consent of the other parties hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. SECTION 8.10 Counterparts. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. SECTION 8.11 Remedies. (a) Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that, subject to the provisions of Section 3.3, in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. (b) All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. (c) In the event that either SPE or USI (the "Aggrieved Stockholder") has a good faith belief that any other Stockholder or the Company is likely to breach in any material respect or has breached in any material respect any of its obligations under Sections 2.1, 2.4, 2.5, 2.6, 2.7, 3.1, 3.2 or 3.5 or Article VI of this Agreement, upon notice of such belief from the Aggrieved Stockholder, such Stockholder and/or the Company, as the case 66 62 may be, agrees to immediately cease taking any action to the extent such Aggrieved Stockholder believes in good faith that such action breaches or would breach any of the foregoing provisions of this Agreement in any material respect. Upon receipt of notice of the Aggrieved Stockholder's belief and until the dispute is resolved, the Company and each of the Stockholders agree not to take any action that would facilitate any such breach and to take reasonable actions to prevent such breach, if it has not yet occurred, or to minimize any adverse consequences to the Aggrieved Stockholder of any such breach. The parties agree that the Aggrieved Stockholder shall have the right to a temporary restraining order from any court of competent jurisdiction enjoining any such breach or potential breach (or otherwise preserving the status quo) pending decision as to whether the Aggrieved Stockholder's belief is correct by, at the Aggrieved Stockholder's election, the court or the Arbitrator. If the Aggrieved Stockholder seeks a judicial determination of such dispute, the parties agree that the court should schedule a hearing to resolve the dispute on one day's notice. If the court or the Arbitrator, as applicable, shall determine that there is a breach or potential breach, the parties agree that the court or the Arbitrator, as applicable, should impose a remedy that would put the Aggrieved Stockholder in the same position it would have been in had there been no such dispute. If any dispute under this Section has been previously determined by a court or the Arbitrator adversely against any party, in connection with any subsequent dispute that is determined by a court or an Arbitrator adversely against such party, such party shall bear all costs and expenses of the Arbitrator or the court, as the case may be, in connection with such subsequent dispute. (d) In the event that SPE or the Company shall breach in any material respect any of their respective obligations to USI under this Agreement, at the request of USI, SPE and the Company shall use their respective best efforts to amend the Certificate as soon as practicable, including calling a special meeting of stockholders or soliciting written consents from stockholders, so as to authorize a class of common stock of the Company which would be issued by the Company to USI and its Permitted Transferees on a one-for-one basis in exchange for all the Shares then beneficially owned by them. Such class of common stock would be identical in all respects to the existing Common Stock, except that (i) the consent rights contained in Article III would be incorporated in such class and SPE and USI would cease to have any consent rights under this Agreement, (ii) such class would entitle the holders thereof to proportionate Board representation on the same basis that USI is entitled to Board representation pursuant to Article II and (iii) shares of such class could be converted from time to time at the holder's election into Common Stock on a share-for-share basis. In addition, USI and its Affiliates will have the right to convert any Common Stock from time to time into shares of such class on a share-for-share basis. SECTION 8.12 Notices. Any notice, request, claim, demand or other communication under this Agreement shall be in writing, shall be either personally delivered or sent by reputable overnight courier service (charges prepaid) to the address for such Person set forth below or such other address as the recipient party has specified by prior written notice to the other parties hereto and shall be deemed to have been given hereunder when delivered personally or one day after deposit with a reputable overnight courier service. 67 63 If to the Company: LTM Holdings, Inc. 711 Fifth Avenue, 11th Floor New York, NY 10022 Attention: Larry Ruisi with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attention: David Golay If to SPE: Sony Pictures Entertainment 10202 West Washington Boulevard Culver City, CA 90232 Attention: Ronald N. Jacobi with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attention: Morton A. Pierce If to USI: Universal Studios, Inc. 100 Universal City Plaza Universal City, CA 91608 Attention: Brian C. Mulligan with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3909 Attention: John G. Finley 68 64 If to the Trust: Charles Rosner Bronfman Family Trust c/o Claridge Inc. 1170 Peel Street, 8th Floor Montreal, Quebec, Canada H3B 4P2 Attention: Robert Rabinovitch with a copy to: Goodman Phillips & Vineberg 1501 McGill College Avenue, 26th Floor Montreal, Quebec, Canada H3A 3N9 Attention: Michael D. Vineberg SECTION 8.13 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law. Except as provided in Section 3.3, each of the parties hereto hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any action, proceeding or investigation in any court or before any governmental authority ("Litigation") arising out of or relating to this Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. or Canadian registered mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby. SECTION 8.14 Legends. (a) Upon original issuance thereof, and until such time as the same is no longer required hereunder or under the applicable requirements of the Securities Act or applicable state securities or "blue sky" laws, any certificate issued representing any Shares held by a Stockholder or any Permitted Transferee (including all certificates issued upon Transfer (including to any Third Party Transferee who has entered into an agreement contemplated by Section 4.5(c)) or in exchange thereof or in substitution therefor) shall bear the following legend: 69 65 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING AGREEMENTS AND RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 30, 1997 AMONG SONY PICTURES ENTERTAINMENT, INC., UNIVERSAL STUDIOS, INC., CHARLES ROSNER BRONFMAN FAMILY TRUST, THE OTHER STOCKHOLDERS PARTY THERETO AND LTM HOLDINGS, INC. (THE "COMPANY"), COPIES OF WHICH AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY." (b) The certificates representing the Shares (including any certificate issued upon Transfer (including to any Third Party Transferee who has entered into an agreement contemplated by Section 4.5(c)) or in exchange thereof or in substitution therefor) shall also bear any legend required under any applicable state securities or "blue sky" laws. (c) The Company may make a notation on its records or give instructions to any transfer agents or registrars for the Voting Shares in order to implement the restrictions on Transfer set forth in Article IV. (d) In connection with any Transfer of Voting Shares, the transferor shall provide the Company with such customary certificates, opinions and other documents as the Company may reasonably request to assure that such Transfer complies fully with applicable securities and other laws. (e) The Company shall not incur any liability for any delay in recognizing any Transfer of Voting Shares if the Company in good faith reasonably believes that such Transfer may have been or would be in violation in any material respect of the provisions of the Securities Act, applicable state securities or "blue sky" laws, or this Agreement. (f) After such time as any of the legends described by this Section 8.14 are no longer required on any certificate or certificates representing the Voting Shares, upon the request of any Stockholder, the Company will cause such Stockholder's certificate or certificates to be exchanged for a certificate or certificates that do not bear such legend. SECTION 8.15 Interpretation. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". SECTION 8.16 Agents for Stockholders. (a) The Trust shall act as the sole agent for each member of the Claridge Group and its Permitted Transferees (if any) and shall be authorized to exercise all rights of the members of the Claridge Group and such Permitted Transferees hereunder except that the designation of Claridge Directors shall be effected by such party as may be designed in writing at any time or from time to time by the members of the Claridge Group. The Trust shall have sole power and authority to take any action on 70 66 behalf of the members of the Claridge Group and such Permitted Transferees pursuant to this Agreement, including delivering any notice or granting any waiver or consent hereunder, and the other parties hereto shall be entitled to rely on any action taken by the Trust as being taken on behalf of all members of the Claridge Group and such Permitted Transferees. The rights of the members of the Claridge Group and such Permitted Transferees under this Agreement shall be exercised only by the Trust on behalf of such members and such Permitted Transferees and no such members or Permitted Transferees shall be separately entitled to exercise any such rights. Any notice required to be delivered hereunder to any such member or Permitted Transferee shall be delivered to the Trust. (b) SPE shall act as the sole agent for each of its Permitted Transferees (if any) and shall be authorized to exercise all rights of such Permitted Transferees hereunder. SPE shall have sole power and authority to take any action on behalf of its Permitted Transferees pursuant to this Agreement, including delivering any notice or granting any waiver or consent hereunder, and the other parties hereto shall be entitled to rely on any action taken by SPE as being taken on behalf of such Permitted Transferees. The rights of such Permitted Transferees under this Agreement shall be exercised only by SPE on behalf of such Permitted Transferees and no such Permitted Transferees shall be separately entitled to exercise any such rights. Any notice required to be delivered hereunder to any such Permitted Transferee shall be delivered to SPE. (c) USI shall act as the sole agent for each of its Permitted Transferees (if any) and shall be authorized to exercise all rights of such Permitted Transferees hereunder. USI shall have sole power and authority to take any action on behalf of its Permitted Transferees pursuant to this Agreement, including delivering any notice or granting any waiver or consent hereunder, and the other parties hereto shall be entitled to rely on any action taken by USI as being taken on behalf of such Permitted Transferees. The rights of such Permitted Transferees under this Agreement shall be exercised only by USI on behalf of such Permitted Transferees and no such Permitted Transferees shall be separately entitled to exercise any such rights. Any notice required to be delivered hereunder to any such Permitted Transferee shall be delivered to USI. SECTION 8.17 Additional Agreement. The Company agrees to comply with the provisions set forth in Exhibit C relating to the use of sound systems in theaters. SECTION 8.18 Effectiveness. This Agreement shall become effective upon consummation of the Transaction and prior thereto shall be of no force or effect, provided that the provisions of Section 3.3(d) shall be effective as of the date of their Agreement. If the Master Agreement shall be terminated in accordance with its terms, this Agreement shall automatically be deemed to have been terminated and shall thereafter be of no force or effect. 71 67 IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the date first written above. LTM HOLDINGS, INC. By:/s/ Stanley Steinberg ------------------------------------------- Name: Stanley Steinberg Title: Executive Vice President SONY PICTURES ENTERTAINMENT INC. BY:/s/ Ronald N. Jacobi ------------------------------------------- Name: Ronald N. Jacobi Title: Executive Vice President & General Counsel UNIVERSAL STUDIOS, INC. By:/s/ Brian C. Mulligan ------------------------------------------- Name: Brian C. Mulligan Title: Senior Vice President CHARLES ROSNER BRONFMAN FAMILY TRUST By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative 72 68 CHARLES R. BRONFMAN By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative E. LEO KOLBER By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative ARNOLD M. LUDWICK By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative 73 69 PHYLLIS LAMBERT FOUNDATION By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative 3096475 CANADA INC. By:/s/ Robert Rabinovitch ------------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative By:/s/ Michael Vineberg ------------------------------------------- Name: Michael Vineberg Title: Authorized Representative 74 SCHEDULE I
Applicable Percentage Number of Directors --------------------- ------------------- >= 6.25% and < 9.375% 1 >= 9.375% and <15.625% 2 >=15.625% and <21.875% 3 >=21.875% and <28.125% 4 >=28.125% and <34.375% 5 >=34.375% and <40.625% 6 >=40.625% and <46.875% 7 >=46.875% and <53.125% 8 >=53.125% and <59.375% 9 >=59.375% and <65.625% 10 >=65.625% and <71.875% 11 >=71.875% and <78.125% 12 >=78.125% and <84.375% 13 84.375% and greater 14
EX-99.3 4 THREE PARTY AGREEMENT 1 Cineplex Odeon Corporation 1303 Yonge Street Toronto, Ontario, Canada M4T 2Y9 September 30, 1997 Universal Studios, Inc. 100 Universal City Plaza Universal City, CA 91608 Attention: Brian C. Mulligan Charles Rosner Bronfman Family Trust c/o Claridge Inc. 1170 Peel Street, 8th Floor Montreal, Quebec, Canada H3B 4P2 Attention: Robert Rabinovitch Dear Sirs: Reference is made to (i) the Master Agreement dated as of the date hereof among Sony Pictures Entertainment, Inc. ("SPE"), LTM Holdings, Inc. ("LTM") and Cineplex Odeon Corporation ("Cineplex Odeon") (the "Master Agreement"), (ii) the Subscription Agreement dated as of the date hereof between LTM and Universal Studios, Inc. ("Universal") (the "Subscription Agreement"), and (iii) that certain Letter Agreement dated as of the date hereof between the Charles Rosner Bronfman Family Trust (the "Trust") and LTM (the "Trust Agreement"). Capitalized terms used but not defined herein shall have the meanings set forth in the Master Agreement. In consideration of Universal's agreement to enter into the Subscription Agreement and the Trust's agreement to enter into the Trust Agreement, Cineplex Odeon has agreed not to (i) amend or modify the Master Agreement or any of the other Documents, including the schedules or exhibits thereto, (ii) amend, modify or supplement the Cineplex Odeon Disclosure Statement or permit LTM to amend, modify or supplement the LTM Disclosure Statement, (iii) waive any of the provisions or conditions provided for in the Master Agreement or any of the other Documents, or (iv) grant any consent under the Master Agreement (including Section 5.1(b) thereof) or any of the other Documents, in each case without the prior written approval of Universal and the Trust, which consent shall not be unreasonably withheld, provided, however, that such consent may be withheld in the sole discretion of Universal or the Trust, as the case may be, as to any matter (x) that would affect the number of shares of LTM capital stock to be issued pursuant to the Transactions, or (y) that relates to Articles 1 or 2 of the Plan of Arrangement or Sections 1.8(g), 2.7, 3.7, 4.5, 6.7, 6.8, 6.9, 6.15(c), 6.17, 6.18, 6.20, 6.21, 7.1(h), 7.1(l), 7.1(o), 7.2(e), 7.2(f), 8.1, 8.2, 9.1, 9.6 or 9.17 of the Master Agreement or, in the case of 2 Universal only, Section 7.1(i) of the Master Agreement (including, in each case, any item of the Cineplex Odeon Disclosure Statement or the LTM Disclosure Statement that relates to any of the foregoing provisions). This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of law. 3 If you are in agreement with the foregoing, please sign the enclosed copy of this Letter Agreement and return it to the undersigned. Very truly yours, CINEPLEX ODEON CORPORATION /s/ Allen Karp ---------------------------------------- Name: Allen Karp Title: President and Chief Executive Officer AGREED: UNIVERSAL STUDIOS, INC. /s/ Brian C. Mulligan - --------------------------------------- Name: Brian C. Mulligan Title: Senior Vice President CHARLES ROSNER BRONFMAN FAMILY TRUST /s/ Robert Rabinovitch - --------------------------------------- Name: Robert Rabinovitch Title: Authorized Representative /s/ Michael Vineberg - --------------------------------------- Name: Michael Vineberg Title: Authorized Representative EX-99.4 5 TERMINATION AGREEMENT 1 TERMINATION AGREEMENT THIS AGREEMENT dated as of the 30th day of September, 1997 BETWEEN: UNIVERSAL STUDIOS, INC. (formerly MCA INC.), a corporation incorporated under the laws of the State of Delaware, ("Universal") AND: CINEPLEX ODEON CORPORATION, a corporation amalgamated under the laws of the Province of Ontario, ("Cineplex") WHEREAS Universal and Cineplex entered into a restated subscription agreement dated January 15, 1986, which agreement has been amended from time to time (such agreement as amended is hereinafter referred to as the "Restated Subscription Agreement'); AND WHEREAS Universal and Cineplex entered into a standstill agreement dated May 12, 1986, which agreement has been amended from time to time (such agreement as amended is hereinafter referred to as the "Cineplex Standstill Agreement"); AND WHEREAS Universal and Cineplex entered into a registration agreement dated May 12, 1986, which agreement has been amended from time to time (such agreement as amended is hereinafter referred to as the "Cineplex Registration Agreement" and, together with the Restated Subscription Agreement and the cineplex Standstill Agreement, collectively the "Cineplex Agreements"); AND WHEREAS concurrently with the execution and delivery of this Agreement, Cineplex, Sony Pictures Entertainment, Inc. ("SPE") and LTM Holdings, Inc. ("LTM") are entering into a master agreement dated the date hereof (the "Master Agreement") pursuant to which and subject to the term sand conditions thereof among other things (i) Cineplex and LTM will enter into a business combination (the "Transaction") and (ii) the shareholders of Cineplex will exchange shares of Cineplex for shares of LTM; NOW THIS AGREEMENT WITNESS THAT, in consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Universal and Cineplex hereby agree as follows: 1. The Cineplex Agreements shall terminate and be of no further force and effect effective immediately upon the closing of the Transaction. 2 2 2. Universal hereby waives and releases Cineplex of any obligation in respect of any and all rights of Universal to acquire Subordinate Restricted Voting Shares in the capital of Cineplex pursuant to the provisions of article 8.00 of the Restated Subscription Agreement in respect of any issuances by Cineplex prior to the date hereof of Equity Securities (as such term is defined in the Restated Subscription Agreement). 3. Universal hereby waives and releases Cineplex of any obligation in respect of any and all rights of Universal which may otherwise arise or accrue to Universal pursuant to Paragraph 6 of the Cineplex Standstill Agreement by reason of the sale by Cineplex to LTM of the shares of Plitt Theatres, Inc. and/or the sale or disposition of theatres by Cineplex or its affiliates as contemplated by the Master Agreement and/or the Documents (as such term is defined in the Master Agreement). 4. Cineplex hereby waives and releases Universal of any obligation in respect of any and all rights of Cineplex contemplated by Paragraph 5 of the Cineplex Standstill Agreement which may otherwise arise or accrue to Cineplex by reason of the transfer by Universal to LTM of shares owned by Universal in the capital of Cineplex as contemplated by the Master Agreement and/or the Documents. 5. The parties hereto shall sign such further and other documents and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this agreement and every part thereof. 6. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 7. This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. IN WITNESS WHEREOF the parties have duly executed this Termination Agreement as of the date first above written. UNIVERSAL STUDIOS, INC. Per: /s/ Brian C. Mulligan ---------------------------------- Title: Senior Vice President CINEPLEX ODEON CORPORATION Per: /s/ Michael Herman ---------------------------------- Title: Executive Vice President, Corporate Affairs and Secretary EX-99.5 6 PRESS RELEASE 1 PRESS RELEASE NEW YORK, TORONTO, Sept. 30 -- Sony Corporation of America (SCA) and Cineplex Odeon today announced an agreement to merge Sony Retail Entertainment's (SRE's) Loews Theatres Exhibition Group and Cineplex Odeon to create the world's largest theatrical exhibition company, with annual revenues of approximately $1 billion. The combined company will be named Loews Cineplex Entertainment (LCE) and will have over 2,600 screens in approximately 460 locations in North America. The transaction will involve the merger of Cineplex Odeon with the Loews Theatres Exhibition Group, which consists of Sony/Loews Theatres and its joint ventures with Star Theatres and Magic Johnson Theatres. SRE will own 51.1% of LCE's shares (representing 49.9% of the voting shares) and Universal Studios will own 26% subsequent to a cash contribution of $84.5 million; the Charles Rosner Bronfman Family Trust will own 9.6% and the public Cineplex Odeon shareholders will own 13.3% of the new company. Cineplex Odeon shares will be exchanged for shares in LCE at closing. It is estimated that the total number of shares in the combined company will be 452 million. It is anticipated that the transaction will close in approximately six months. "The merger of these two premiere theatre chains will create the global leader in theatrical exhibition and advance Sony's involvement in this rapidly expanding industry," remarked Howard Stringer, President and Chief Operating Officer, Sony Corporation of America. Lawrence J. Ruisi, currently President of Sony Retail Entertainment, has been named President and Chief Executive Officer of LCE. Mr. Ruisi, who spearheaded the merger, has worked extensively in theatrical exhibition as well as filmed entertainment. He has overseen SRE's Theatrical Exhibition Group since 1991, and, in that time, has been instrumental in both the physical and financial growth of the theatres. Previously, Mr. Ruisi served as Chief Financial Officer of Columbia Pictures Entertainment, where he was involved in the acquisition of Loews Theatres. As one of the original executives of TriStar Pictures in 1983, Mr. Ruisi has a proven track record in building successful entertainment companies. According to Mr. Ruisi, the merger of the two circuits will enable the combined company to compete more effectively on a global basis. "We are very excited about what we have set in motion with this combination, creating a company with significant growth capacity and the opportunity to enjoy substantial cost savings and operating efficiencies," he said. "Using our expertise in designing, building and operating successful theatres, coupled with our significant cash flow and full access to the capital markets, LCE will be able to aggressively participate in the dramatic changes taking place in the U.S. and 2 2 Canadian marketplace, as well as pursue the many lucrative opportunities which exist in the international markets." Allen Karp, who has led Cineplex Odeon as President and Chief Executive Officer since 1990 and who initiated the merger for Cineplex, will serve as Chairman and Chief Executive Officer of Cineplex Odeon Canada, the Canadian operating subsidiary of LCE. During his tenure at Cineplex, Mr. Karp has repositioned the theatre circuit as a leading exhibitor in the U.S. and Canada. He has kept Cineplex Odeon a major force in the theatrical exhibition business. Commenting on the merger, Mr. Karp stated, "I am proud to have seen this merger through to fruition for the benefit of our company and its shareholders. Additionally, this combination will benefit the Canadian film industry in that Cineplex Odeon has a long and proud history of supporting the industry, and I am delighted that LCE is committed to continue that tradition." On a combined pro forma basis for the 12 months ending August 31, 1997, LCE would have generated approximately $700 million in box office revenues and approximately $140 million in EBITDA. It is anticipated that as of the closing, combined total debt would be approximately $700 million. The pro forma earnings capacity of the combined entity coupled with its strengthened capital structure will serve to relieve many of the capital constraints and balance sheet issues Cineplex Odeon has faced to date. The merger of the two theatre circuits will give LCE a key presence in 22 states, including major cities such as New York, Los Angeles, Chicago, Boston, Seattle, Washington D.C. and Houston, as well as a leading position in Canada, including major cities such as Toronto, Montreal and Vancouver, as one of the two major exhibitors in that country. Morgan Stanley & Co. is advising the Independent Committee of Cineplex Odeon with respect to this transaction and has provided the Committee with a fairness opinion in that regard. Credit Suisse First Boston is advising Sony Corporation of America. LCE's corporate headquarters will be in New York, with U.S. operational headquarters in New York and Canadian operational headquarters in Toronto. The merger is subject to shareholder and regulatory approval in both Canada and the United States. Upon obtaining these approvals, it is intended that LCE will be listed on the New York Stock Exchange and the Toronto Stock Exchange. Cineplex Odeon currently trades on the New York and Toronto Stock Exchanges under the symbol CPX. -----END PRIVACY-ENHANCED MESSAGE-----