AMENDED AND RESTATED JOINT VENTURE AGREEMENT
by and among
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
LOEWS CINEPLEX INTERNATIONAL HOLDINGS, INC.
MEGABOX CINEPLEX, INC.
TABLE OF CONTENTS
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT, dated as of July 25, 2002 (this “ Agreement ”), by and among Megabox Cineplex, Inc., a corporation established under the laws of the Republic of Korea and having its offices at 7F, Cinehouse B/D, 91-6 Nonhyun-dong, Kangnam-ku, Seoul, Republic of Korea (hereinafter the “ Company ”), Mediaplex, Inc., a corporation established under the laws of the Republic of Korea and having its offices at 7F, Cinehouse B/D, 91-6 Nonhyun-dong, Kangnam-ku, Seoul, Republic of Korea (hereinafter “ Mediaplex ”), Loews Cineplex Entertainment Corporation, a corporation established under the laws of the State of Delaware, United States of America, and having its offices at 711 Fifth Avenue, New York, NY 10022, U.S.A (hereinafter “ LCE ”) and Loews Cineplex International Holdings, Inc., a corporation established under the laws of the State of Delaware, United States of America and having its offices at 711 Fifth Avenue, New York, NY 10022, U.S.A. (hereinafter “ LCI ”)
W I T N E S S E T H :
WHEREAS, Mediaplex and LCE have entered into a Heads of Agreement dated October 21, 1999, as amended by the First Amendment to Heads of Agreement dated November 14, 1999, the Second Amendment to Heads of Agreement dated May 9, 2000, the Third Amendment to Heads of Agreement dated August 8, 2000 and the Fourth Amendment to Heads of Agreement dated August 24, 2000 (the “ Heads of Agreement ”) establishing the basic framework of a joint venture to develop, construct, own and operate new state-of-the-art multiplex theaters of high quality in key locations in the Republic of Korea;
WHEREAS, in order to facilitate the transfer of the rights and obligations under a Lease Agreement dated July 28, 1998 between Daewoo Corporation (“ Daewoo ”) and the Korea International Trade Association (“ KITA ”) regarding the UEC Multiplex located at KITA’s ASEM MALL (the “ UEC Multiplex ”), Daewoo and LCE executed an Agreement for the Formation of a Joint Venture Agreement (the “ JVA ”) on October 21, 1999, pursuant to which each of Daewoo and LCE subscribed to 1,200,000 shares of the Company at the time of the Company’s incorporation on November 16, 1999;
WHEREAS, as contemplated by the Heads of Agreement, Mediaplex acquired all of the 1,200,000 shares of the Company owned by Daewoo pursuant to a Share Transfer Agreement dated November 25, 1999;
WHEREAS, Mediaplex, LCI and the Company have entered into a Joint Venture Agreement dated May 9, 2000 (the “ Joint Venture Agreement ”), in which the parties agreed to consummate Mediaplex’s subscription to 2,479,840 Common Shares of the Company (as defined therein), LCE’s transfer of all of its Common Shares of the Company to LCI and LCI’s subscription to 2,479,840 Convertible Preferred Shares of the Company (as defined therein) by August 8, 2000;
WHEREAS, due to unforeseen circumstances, the closing of the Joint Venture Agreement was rescheduled to August 25, 2000 by the First Amendment to Joint Venture Agreement dated August 8, 2000 by and among Mediaplex, LCI and the Company (the “ First Amendment ”), and subsequently to October 15, 2000 by the Supplemental Agreement and Second Amendment to Joint Venture Agreement dated August 24, 2000 by and among Mediaplex, LCI and the Company (the “ Second Amendment ”);
WHEREAS, as the closing did not occur on or prior to October 15, 2000 due to a cause solely attributable to LCI/LCE, pursuant to Article 4 of the Second Amendment, Mediaplex subscribed to 2,479,840 Common Shares of the Company on November 11, 2000, resulting in the shareholding ratio of Mediaplex and LCE being 75.4% and 24.6%, respectively, and certain provisions of the Joint Venture Agreement were amended to reflect the dilution of LCE’s shareholding ratio;
WHEREAS, under Article 4(o) of the Second Amendment, LCI has the right to subscribe to or purchase from Mediaplex on or prior to October 15, 2003 such number of shares of the Company that will result in both Mediaplex and LCI having equal equity interests in the Company;
WHEREAS, concurrently with the execution of this Agreement, Mediaplex, LCE and the Company have entered into a Stock Purchase and Subscription Agreement (the “ Stock Purchase and Subscription Agreement ”), in which LCE agreed to purchase from Mediaplex 1,015,518 shares of the Company’s common stock owned by Mediaplex, and to subscribe to 448,804 new shares of the Company’s common stock on the terms and conditions set forth therein, such that each of Mediaplex and LCE shall have 50% equity interest in the Company; and
WHEREAS, in connection with LCE’s purchase and subscription of the shares of the Company contemplated in the Stock Purchase and Subscription Agreement, the parries hereto wish to amend the Joint Venture Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants contained herein, the parties hereto agree as follows:
Section 1.1. Definitions
Capitalized terms used herein are defined in Appendix A .
ORGANIZATION OF THE COMPANY
Section 2.1. Organizational Documents; Shareholder Resolutions . The parties hereto agree that, on or prior to the Closing, the Company will take such action as is necessary to amend the Company’s Articles of Incorporation (the “ Articles of Incorporation ”) so that they shall be as set forth in Exhibit 2.1 attached to this Agreement, effective upon the Closing. From the Closing, in the event that the relevant Korean registration authorities considers that any portion of the Articles of Incorporation should be changed from the form contained in Exhibit 2.1 , the parties will amend the Articles of Incorporation so as to reflect as closely as possible the agreements set forth herein. Notwithstanding anything herein or in the Articles of Incorporation to the contrary, to the extent that any provision of the Articles of Incorporation conflicts with, or otherwise is inconsistent with, any provision of this Agreement with respect to any matter, or this Agreement covers any matter that is not covered in the Articles of Incorporation, the provisions of this Agreement with respect to such matter shall control and shall be binding upon each of the parties hereto.
Section 2.2. Purpose . The purpose of the Company will be to develop and operate, either itself or through its Subsidiaries, the UEC Multiplex and to conduct such other business as prescribed in Article 2 of the Articles of Incorporation, as amended from time to time.
EFFECTIVENESS OF PRIOR AGREEMENTS
Section 3.1. Replacement of Prior Agreements .
Subject to Section 3.2 hereof, the parties hereto agree that this Agreement shall replace and supersede the Heads of Agreement, the JVA, the Joint Venture Agreement, the First Amendment and the Second Amendment, regardless of whether the Closing occurs. Any and all rights and obligations of the parties under such prior agreements shall forthwith become null and void upon the execution of this Agreement; provided , however , that each party shall continue to be liable for its breach of such prior agreements, if any, prior to the date of this Agreement; provided further , that Mediaplex’s right to retain the payment by LCI of $2,000,000 in accordance with Article 4 of the Second Agreement shall not be affected by this Agreement.
Section 3.2. Conditional Effectiveness .
Notwithstanding anything to the contrary herein, none of the provisions in Articles VI and IX of this Agreement shall be effective until the Closing. Until the Closing, Articles VI, and IX of the Joint Venture Agreement, as amended by Article 4 of the Second Amendment, shall remain in full force and effect, except that all references to LCI in the Joint Venture Agreement, the First Amendment and the Second Amendment shall be interpreted as references to LCE.
Section 4.1. Subsequent Capital Contributions .
(a) All capital contributions called for by the Board of Directors subsequent to the payment for the New Shares (as defined in the Stock Purchase and Subscription Agreement) will be made on a pro rata basis based on the percentage of outstanding Shares held by each Shareholder.
(b) If at any time any Shareholder shall fail to subscribe for all or part of the Shares which such Shareholder is required to make under this Agreement on the date so required pursuant to written notice (a “Funding Notice ”) provided by the Board of Directors (which date shall not be sooner than 45 days following the date of such notice), the Shareholder failing to subscribe for such shares shall be deemed to be a “ Non-Contributing Shareholder ” and the other Shareholder shall be deemed to be “Contributing Shareholder .” In such event, the Contributing Shareholder may subscribe for such Shares for which the Non-Contributing Shareholder has failed to subscribe with written notice to the Board of Directors.
(c) All capital contributions made pursuant to this Agreement shall be in Won. The capital contributions required to be made to the Company pursuant to Section 4.1 shall be made in the form of subscriptions for additional Shares at such subscription price per Share as shall be determined by the Board of Directors and set forth in the relevant Funding Notice.
(d) No Shareholder shall be required to make contributions pursuant to Section 4.1 unless the other Shareholder shall have made or concurrently be making its contribution pursuant to such Section.
REPRESENTATIONS AND WARRANTIES
The representations and warranties of the parties to this Agreement are set forth in Appendix B .
CORPORATE GOVERNANCE; CERTAIN CORPORATE ACTIONS
Section 6.1. Voting of Shares . Each Shareholder shall vote all Shares owned or controlled by it, and shall take all other necessary or desirable actions within its control (including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), to effectuate the provisions of this Agreement.
Section 6.2. Composition of the Board of Directors . Each Shareholder shall vote all Shares owned or controlled by it and shall take all necessary action within its control, so that the composition of the Board of Directors and the manner of selecting members thereof shall be as follows:
(a) From and after the Closing Date, the Board of Directors shall be comprised of four persons, two of whom shall be designated by LCE and two of whom shall be designated by Mediaplex. All such designations shall be notified in writing to the Company, which shall notify all of the Shareholders.
(b) Each Shareholder shall have the right by notice in writing to the Company to require the Board of Directors to call a shareholder meeting (i) to remove, with or without cause, any Director designated by such shareholder pursuant to this Section 6.2 and (ii) to designate any replacement for a Director designated by such shareholder pursuant to this Section 6.2, upon the death, resignation, retirement, disqualification or removal from office of such Director; provided , however , that the Shareholder proposing to remove any Director it has designated shall be responsible for any claims, actions, losses, expenses or damage arising out of or in relation to such removal and shall indemnify and hold harmless the other Shareholder and the Company from any claim, actions, losses, expenses or damages arising out of or in relation to such removal.
(c) At all meetings of the Board of Directors, a quorum shall consist of not less than three Directors provided that such quorum consists of at least one Director designated by LCE and one Director designated by Mediaplex. Written notice shall be duly given to each Director at least fifteen (15) business days in advance of each meeting, provided no notice need be given to any Director who signs a written waiver of notice at or in advance of a meeting, or who attends the meeting without protesting any lack of notice. Unless a higher vote is specifically required by this Agreement, all actions of the Board of Directors shall be determined by the vote of a simple majority ( i.e. , greater than 50%) of the Directors attending the meeting; provided that such majority includes at least one Director designated by LCE and one Director designated by Mediaplex. Directors shall be entitled to participate at meetings of the Board of Directors telephonically in the event telephonic participation becomes permissible under the law of the Republic of Korea.
(d) Board of Directors meetings shall be held no less frequently than once per year. Minutes of the Board of Directors meetings shall be taken and a copy of the minutes shall be distributed to each Director in a timely fashion.
Section 6.3. Representative Director, Chief Operating Officer, Chief Financial Officer and Statutory Auditor . (a) The Company’s Representative Director shall be elected by the Board of Directors from among the members of the Board of Directors nominated by Mediaplex. The Company shall also have one Statutory Auditor who shall be nominated by Mediaplex and elected at the General Meeting of Shareholders, one Chief Operating Officer who shall be an individual nominated by Mediaplex and approved by LCE (and who shall be a resident of the Republic of Korea) and one Chief Financial Officer who shall be nominated by Mediaplex and approved by LCE (and who shall be a resident of the Republic of Korea). The day-to-day affairs of the Company shall be managed by the Chief Operating Officer.
(b) The Representative Director shall represent the Company and act on all matters of the Company. The Representative Director and the Chief Operating Officer will
report to the Board of Directors. The Chief Operating Officer, subject to the control of the Board of Directors, shall have general charge and control of all of the Company’s business and affairs and shall perform all duties incident to his office; provided that neither the Representative Director, the Chief Operating Officer nor any other executive of the Company (acting individually or jointly) shall take or shall be entitled to take, and each Shareholder shall use its best efforts to prevent the Company or any of its Subsidiaries from taking, any of the actions specified in Section 6.4 (a) without the prior approval of the Board of Directors in accordance with this Agreement. The Representative Director and the Chief Operating Officer shall have such other powers and perform such other duties as may from time to time be assigned to them by the Board of Directors.
(c) The Representative Director shall delegate all matters concerning the day-to-day operations of the Company to the Chief Operating Officer and shall authorize the Chief Operating Officer to take, without approval of the Representative Director, any and all actions concerning the Company not otherwise requiring the approval of the Board of Directors or Shareholders pursuant to Section 6.4.
Section 6.4. Approval of Certain Matters . (a) The Representative Director and the Chief Operating Officer, acting individually or jointly, shall not and shall not permit the Company or any Subsidiary of the Company to take or agree to take any of the following actions or engage in any of the following transactions without the prior approval of the Board of Directors in accordance with the provisions of this Agreement:
(i) expenditure of any Company sum or sums in excess of $400,000 in the aggregate in any fiscal year that is not included in an Approved Budget for the then current fiscal year, it being understood and agreed that all such expenditures shall be directly related to the construction, renovation, development or improvement of the Company’s theatres, it being further understood and agreed that expenditures on film rental, to the extent such expenditures are determined by reference to box-office sales, shall not be restricted by this clause (i); provided , however , that at the end of the three-year period referenced in Section 6.3(a) above, the parties hereto shall review the provisions of this Section 6.4(a)(i) and shall jointly determine whether it would be appropriate to modify the terms hereof;
(ii) sale, transfer or disposal of assets of the Company or any of its Subsidiaries, or purchase or other acquisition of assets or businesses, in each case in any single or series of related transactions, for a consideration in excess of $100,000;
(iii) engagement by the Company or any of its Subsidiaries in any business other than as prescribed in the Articles of Incorporation;
(iv) varying the Company’s accounting policies and practices in any material respect, other than to comply with Korean GAAP;
(v) entering into, amending or waiving the provision of any agreement or transaction with any Shareholder or any Affiliate of any Shareholder after the Closing Date, except as expressly provided for in this Agreement, and except relating to the exhibition and settlement of motion pictures;
(vi) establishing any place of business outside the Republic of Korea;
(vii) commencing or settling litigation where the amount involved exceeds $100,000 in the aggregate in any fiscal year or consenting to any injunction;
(viii) entering into any joint venture, partnership, agreement or similar arrangement requiring capital funding;
(ix) approving and adopting the annual budget or the Business Plan or any change thereto;
(x) incurring any debt for borrowed money in excess of $100,000 in the aggregate in any fiscal year; or
(xi) entering into any employment agreement or consulting agreement with any Person involving the payment of any amount in excess of $100,000 per year or authorizing any Person to enter into any such employment agreement or consulting agreement.
(b) Neither the Company nor any Subsidiary of the Company shall take any of the following actions without the approval of the Shareholders by a two-thirds (2/3) vote:
(i) varying any of the rights attaching to the Shares;
(ii) modifying the Articles of Incorporation;
(iii) taking any steps to effect the winding-up, liquidation, dissolution or voluntary bankruptcy of the Company or any of its subsidiaries;
(iv) the issuance of additional Shares by the Company (except for the issuance of new shares to third parties other than the shareholders of the Company); provided, however, that the Shareholders shall undertake discussions in good faith as and when requested by a Shareholder concerning capital raising activities, including the possible sale of private or public equity in the Company;
(v) entering into any merger, amalgamation, consolidation or other business combination to which the Company or any of its subsidiaries is a party;
(vi) declaring dividend, distribution of liquidation proceeds or purchase of treasury stock;
(vii) other actions requiring a special resolution of a General Meeting of Shareholders pursuant to the Korean Commercial Code;
(viii) changing the name of the Company;
(ix) the removal of a Director or the Statutory Auditor;
(x) the transfer of all or a significant part of the business of the Company;
(xi) the issuance of shares of the Company at a price less than par value; or
(xii) reduction of paid-in capital of the Company.
TRANSFER AND SALE
Section 7.1. Transfer Restrictions . Other than to a Permitted Transferee, no Shareholder shall sell, transfer, assign, pledge or otherwise dispose of (a “ Transfer ”) all or part of any Shares beneficially owned by it (i) except in compliance with the provisions of this Article VII and the Articles of Incorporation, and (ii) without obtaining a written agreement in form and substance reasonably satisfactory to the Company executed by the transferee to be bound by the terms of this Agreement, and any Transfer not in compliance with clauses (i) and (ii) and any other provisions of this Article VII shall have no effect and be null and void. Notwithstanding the foregoing restrictions, either Shareholder may pledge all or part of any Shares beneficially owned by it to a third party for financing purposes, the period of which pledge must expire no later than one (1) year from the Closing Date; provided, that transfer restrictions set forth in this Article 7 shall apply with the same force and effect to the sale, transfer or disposal of such pledged shares by such third party.
Section 7.2. Consent . Until May 9, 2005 (the “ Transfer Waiver Date ”), no Shareholder shall Transfer any Shares without the prior written consent of the other Shareholders other than to a Permitted Transferee.
Section 7.3. First Refusal . (a) If, following the Transfer Waiver Date, either LCE (on behalf of itself and its Permitted Transferees) or Mediaplex (on behalf of itself and its Permitted Transferees) (as appropriate, the “ Transferring Shareholder ”) desires to Transfer, directly or indirectly, all or any portion of the Shares owned by it (other than to a Permitted Transferee), the Transferring Shareholder shall provide the other Shareholder (the “ Non-Transferring Shareholder ”) with a written notice (the “ First Refusal Notice ”), with a copy to the Company, setting forth:
(i) the number of Shares to be offered;
(ii) the terms and conditions of the proposed Transfer, including the price (the “ Offering Price ”) at which the Transferring Shareholder proposes to Transfer such Shares; and
(iii) the name of the proposed transferee and a statement specifying whether that transferee is a Competitor or not.
Within 30 Business Days following the delivery of the First Refusal Notice, the Non-Transferring Shareholder shall, by notice in writing to the Transferring Shareholder (copied to the Company), have the opportunity and right to purchase 100% (but not less than 100%) of the Shares referred to in the First Refusal Notice (on the terms specified in the First Refusal Notice or on any other terms as are agreed by the parties). If the Non-Transferring Shareholder fails to exercise or waive its right to purchase 100% of the Shares referred to in the First Refusal Notice, then the Transferring Shareholder shall be free, for a three-month period commencing at the end of such 30-day period to enter into a definitive agreement to Transfer the offered Shares to any third party, on terms (including, without limitation, all terms affecting price) no more favorable to the proposed purchaser than the terms specified in the First Refusal Notice, it being understood, however, that if the Transferring Shareholder does not complete the Transfer of the Shares within one month following the end of such three month period, or if the definitive agreement is subsequently terminated, the Transferring Shareholder shall once again be subject to all the provisions of this Section 7.3.
(b) Each acceptance made hereunder shall constitute a separate, binding contract obligating the Transferring Shareholder to sell, and the Non-Transferring Shareholder to purchase, the Shares accepted on the terms specified in the relevant notice (or on any other terms as the parties shall have agreed). The parties agree to negotiate in good faith to consummate the transaction as soon as possible, but in no event later than the date 120 days after the date the First Refusal Notice was given. Notwithstanding any provision of this Agreement to the contrary, in the event of failure by the Non-Transferring Shareholder to close the transaction within such 120-day time periods referred to above, the Transferring Shareholder shall be entitled, in addition to all other available remedies, to treat that failure as a waiver under Section 7.3(a) by the Non-Transferring Shareholder of its purchase rights, entitling the Transferring Shareholder to take the action specified in Section 7.3(a) pursuant to that waiver.
(c) If the Offering Price specified in the First Refusal Notice includes any property other than cash, the fair market value of any non-cash property shall be determined in the following manner:
(i) The fair market value of securities which are publicly traded shall be deemed to be the average of the daily closing prices of those securities for the five consecutive trading days immediately prior to the date of the First Refusal Notice (or the date of the last written proposal made by the Transferring Shareholder); and
(ii) The fair market value of any other property shall be determined by the good faith agreement of the Transferring Shareholder and the accepting Non-Transferring Shareholder or, if such parties are unable to agree, by an appropriate expert
mutually selected by such parties. If the parties cannot mutually agree on an expert, each party shall select an expert, and those experts shall select an independent expert to resolve the dispute. The costs and expenses of the appraisal shall be borne by the Transferring Shareholder.
Notwithstanding anything to the contrary in this Section 7.3, each Non-Transferring Shareholder may pay the Offering Price in cash, with any non-cash property valued as provided above.
Section 7.4. Tag-Along Rights .
(a) If, following the Transfer Waiver Date, a Transferring Shareholder desires to Transfer, directly or indirectly, all or any portion of the Shares beneficially owned by it and its Affiliates, the Transferring Shareholder shall provide the Non-Transferring Shareholder with written notice (the “ Tag Along Notice ”) (which may, but need not be, incorporated into the First Refusal Notice required pursuant to Section 7.3) setting forth:
(i) the number of Shares proposed to be Transferred;
(ii) all terms and conditions of the proposed Transfer including the Offering Price at which the Transferring Shareholder proposes to Transfer such Shares;
(iii) the name of the proposed transferee and a statement specifying whether or not that transferee is a Competitor; and
(iv) that the Transferring Shareholder is offering the Non-Transferring Shareholder the right to participate in such Transfer on the same terms and conditions as are applicable to the Transferring Shareholder.
(b) If the proposed transferee is a Competitor of a Non-Transferring Shareholder then, within 10 Business Days following delivery of the Tag Along Notice, such Non-Transferring Shareholder may, by notice in writing to the Transferring Shareholder, require the Transferring Shareholder to request the proposed transferee to purchase all of the Shares held by the Non-Transferring Shareholder and its Affiliates on the terms specified in the Tag Along Notice. If the Transferring Shareholder declines to make such request or the proposed transferee rejects the request, the Transferring Shareholder shall not be entitled to sell the Shares which are the subject of the Tag Along Notice to that proposed transferee. .
(c) If the proposed transferee is not a Competitor of any Non-Transferring Shareholder, then, within 10 Business Days following the delivery of the Tag Al