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EXHIBIT 99
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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) Chapter 11
In re: ) Case Nos. 00-3897
) through 00-3927 (EIK)
GC COMPANIES, INC., et al., )
) (Jointly Administered)
Debtors. )
__________________________________________) HEARING DATE: 7__/01 OBJECTION
DEADLINE: 7/___/01 AT 4:00 P.M.
MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR AN
ORDER (A) ESTABLISHING BIDDING PROCEDURES IN CONNECTION
WITH THE SOLICITATION OF HIGHER OR BETTER OFFERS FOR
THE ACQUISITION OF 100% OF THE COMMON STOCK OF
REORGANIZED GC COMPANIES, INC. BY CHAPTER 11 PLAN, AND
(B) APPROVING THE FORM AND MANNER OF NOTICE THEREOF
GC Companies, Inc. ("GCX") and its affiliated debtors-in-possession
(collectively, the "Debtors") hereby move the Court for the entry of an order
(a) establishing bidding procedures in connection with the solicitation of
offers for the acquisition of 100% of the common stock of the reorganized GCX
(the "New Common Stock") by chapter 11 plan, and (b) approving the form and
manner of notice thereof. In support of this Motion, the Debtors
respectfully represent as follows:
JURISDICTION
1. This Court has jurisdiction to consider this matter pursuant to 28
U.S.C. sections 157 and 1334. This is a core proceeding pursuant to 28 U.S.C.
section 157(b). Venue is proper before this Court pursuant to 28 U.S.C. sections
1408 and 1409.
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GENERAL BACKGROUND
2. On October 11, 2000 (the "Petition Date"), the Debtors commenced their
cases under chapter 11 of the Bankruptcy Code in this Court. Pursuant to
sections 1107 and 1108 of the Bankruptcy Code, the Debtors are operating their
business as debtors-in-possession. GCX is the parent company of General Cinema
Theatres, Inc. ("GCT") and GCC Investments, Inc. ("GCCI"), both Debtors herein
and of General Cinema International, Inc., which is not a Debtor. GCT in turn is
the parent company of 34 active theatre subsidiaries (the "Theatre
Subsidiaries"), each of which owns and operates theatres throughout the United
States, and 28 of which are Debtors herein. An additional six Theatre
Subsidiaries filed petitions under chapter 7 of the Bankruptcy Code on the
Petition Date. Almost all of the Debtors' theatres have been occupied and
operated by the Debtors under the terms of commercial real property leases with
landlords, rather than through outright ownership.
3. The commencement of the Debtors' cases was necessitated by their need
to alleviate continuing cash flow losses at a number of theatre locations,
unexpected cash flow shortages, and the need to restructure the Debtors'
financial obligations. From November 1, 1999 through July 31, 2000, the Debtors,
on a consolidated basis, reported revenues of $317.3 million, primarily from
admissions and concession sales. As of August 31, 2000, the Debtors' books and
records reflected assets totaling approximately $328.9 million and liabilities
totaling approximately $195.1 million. As of the Petition Date, the Debtors had
approximately 5,000 employees.
THE ONEX/OAKTREE REORGANIZATION PROPOSAL
4. On June 11, 2001, the Debtors entered into a letter of intent (the
"Onex/Oaktree Agreement" which term shall also include the Plan (as defined
below) when filed and the definitive
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agreement with Onex/Oaktree when completed (the "Definitive Agreement")) with
Onex Corporation and Oaktree Capital Management, LLC ("Onex/Oaktree") providing
for the acquisition by Onex/Oaktree of the New Common Stock pursuant to a
chapter 11 plan of reorganization ("Plan") for $36.6 million plus additional
consideration for the benefit of the Class 5 Creditor Harcourt General, Inc.
("Harcourt") in the form of a favorable theatre management contract (the
"Management Contract") to manage theatres to be transferred to an entity to be
owned by it (the "Onex/Oaktree Investment"), subject to Court approval and the
opportunity for third parties to submit higher or better offers. A true and
correct copy of the Onex/Oaktree Agreement is attached hereto as Exhibit A.(1)
5. The Onex/Oaktree Agreement is subject to a number of customary
conditions, including completion of definitive documentation, arrangement of a
revolver/working capital facility of at least $21.8 million (the "New
Financing"), filing of the Plan by July 11, 2001 and confirmation of the Plan by
October 31, 2001. The Debtors believe that each of these conditions will be
satisfied. The Debtors further believe that the Onex/Oaktree Agreement, or a
higher or better agreement should one occur, presents the Debtors with the best
opportunity to emerge successfully from chapter 11 and maximize returns for the
parties in interest. The Onex/Oaktree Agreement requires that, on or before June
22, 2001, the Debtors move for an order of this Court approving certain bidding
procedures and protections (the "Overbid Order") and that the Overbid Order
enter by July 11, 2001. Onex/Oaktree is not prepared to proceed absent the grant
of such relief.
RELIEF REQUESTED
6. The Debtors hereby request the entry of the Overbid Order, as set forth
below, for the solicitation of offers higher or better than the Onex/Oaktree
Investment for the acquisition,
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(1) Defined terms used herein but not otherwise defined are as defined in the
Onex/Oaktree Agreement. The Debtors and Onex/Oaktree continue to discuss
the terms of the Onex/Oaktree Agreement and the Plan with parties in
interest, and it is possible that certain terms of the Agreement may be
modified before the hearing date.
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pursuant to the Plan, of the New Common Stock. The Debtors also seek approval of
the form and manner of notice of the procedures provided for in this Motion.
A. NEED FOR IMPLEMENTATION OF BIDDING PROCEDURES
7. The Debtors seek authority to implement certain procedures (the
"Bidding Procedures") to permit the Debtors to determine whether the
Onex/Oaktree Investment represents the highest and best value for the New Common
Stock. The Debtors believe that the Bidding Procedures are reasonably calculated
to accomplish that objective.
8. The Debtors believe that an expeditious but orderly solicitation of
offers pursuant to the Bidding Procedures ("Overbids") is necessary to ensure
the adequacy of the consideration to be provided by Onex/Oaktree under the Plan.
The Debtors believe that most, if not all, potential acquirors have seen media
reports or otherwise will become aware of the proposed Onex/Oaktree Investment
before or upon the filing of this Motion or will be contacted by the Debtors
upon entry of the Overbid Order. The Onex/Oaktree Investment permits the Debtors
to accept inquiries and respond to diligence requests from interested parties
upon filing of this Motion and to notify and negotiate with such parties upon
entry of the Overbid Order. A focused procedure is necessary to bring this sale
process to completion quickly and productively.
B. THE BIDDING PROCEDURES
9. As set forth below, the Debtors propose a three-stage process for
soliciting and receiving Overbids. First, the Debtors will receive or solicit
bids from interested parties pursuant to the Bidding Procedures set forth
herein. Second, if any Qualified Bids (as defined below) are received, the
Debtors may conduct an auction among the Qualified Bidders (as defined below).
Third, the Debtors will either file a new Plan and disclosure statement
("Disclosure Statement")
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or amend the Plan and Disclosure Statement to reflect the terms of the bid
determined by it to constitute the highest or best bid (the "Final Approved
Bid").
THE SOLICITATION OF QUALIFYING BIDS
10. Upon approval of this Motion, the Debtors shall provide notice of the
Overbid Procedures, substantially in the form of Exhibit C hereto, together with
a copy of the Onex/Oaktree Agreement, to those persons who have contacted or
have been contacted by the Debtors with respect to a potential purchase of the
New Common Stock, as well as all other entities that the Debtors believe, in
their business judgment, may have an interest in acquiring the New Common Stock.
a. Upon request by a prospective offeror to the Debtors, the
Debtors shall, upon determination that such person or entity
is a Qualified Bidder (as defined below), and subject to
appropriate confidentiality provisions, provide such person
with a copy of the Plan and Disclosure Statement and with
access to relevant business and financial information
reasonably necessary to enable such person to evaluate the
Debtors' assets and liabilities for the purpose of submitting
an Overbid.
b. Unless otherwise ordered by the Bankruptcy Court for cause
shown, to participate in any bidding process, each potential
bidder must deliver (unless previously delivered) to the
Debtors: (i) an executed confidentiality agreement in form and
substance satisfactory to GCX; and (ii) such financial
disclosure and other information acceptable to GCX and its
financial advisor that demonstrates such party's financial and
other ability to consummate an Overbid. A potential bidder
shall be considered
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to be a qualified bidder ("Qualified Bidder") if it delivers
the documents described in subparagraphs (i) and (ii) above
and GCX determines it is reasonably likely (based on
availability of financing, experience and other
considerations) to be able to consummate a purchase of the New
Common Stock, if selected as the successful bidder.
Onex/Oaktree is a Qualified Bidder and the Onex/Oaktree
Agreement is a Qualified Bid, as described below.
c. To be considered a "Qualified Bid," each competing offer for
an Overbid must:
(i) be made by a party satisfying the conditions described
in the preceding paragraph (b) (i.e., be a "Qualified
Bidder");
(ii) be in the form of a letter from such Qualified Bidder
stating that (A) the Bidder offers to acquire the new
Common Stock upon the terms and conditions set forth in
the Definitive Agreement or the Plan, marked to show
those amendments and modifications to the Onex/Oaktree
Agreement or the Plan, including price and terms, that
the Qualified Bidder proposes (the "Marked Applicable
Agreement") and (B) such Qualified Bidder's offer is
irrevocable until the conclusion of any scheduled
Auction and, if accepted as the Final Accepted Offer at
such Auction, until the effective date of the Plan. Each
Qualified Bidder shall accompany its bid with written
evidence satisfactory to the Debtors of available funds
to complete the transaction. Upon the entry of the
Overbid Order, the
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Onex/Oaktree Agreement (and the Plan, when filed and the
Definitive Agreement with Onex/Oaktree when completed),
shall be deemed to be a Qualified Bid.
(iii) (A) provide for the Debtors' review of the Qualified
Bidder's draft submissions relating to approval of the
Qualified Bidder's acquisition of the New Common Stock
by the Federal Trade Commission ("FTC") in accordance
with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, if required to consummate the Overbid
transaction; (B) represent that the Qualified Bidder is
prepared to immediately initiate all actions necessary
to obtain FTC approval for the competing bid; and (C)
provide its best estimate of the time within which such
FTC approval will be obtained;
(iv) provide for aggregate consideration to the Debtors'
estates of at least $5 million in excess of the
Onex/Oaktree Investment;
(v) not be conditioned on the outcome of due diligence; and
(vi) be submitted by delivering fifteen complete written
copies of its Qualified Bid to Daniel M. Glosband, P.C.,
Goodwin Procter LLP, Exchange Place, Boston,
Massachusetts 02109, not later than 4:00 p.m. Eastern
Time on the date (which the Debtors assume, subject to
the Court's calendar, will be August 24, 2001) that is
10 business days before the first Disclosure Statement
Hearing on the adequacy of the Disclosure Statement for
the Plan (the "Bid
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Deadline"), who shall then distribute a copy of the bid
to: (i) Debtors and their financial Advisor; (ii)
counsel for the Creditors' Committee; (iii) counsel for
the Debtors' pre-petition lenders, General Electric
Capital Corporation, Reliastar, Bank Leumi, Harcourt
General, Inc., and Heller EMX, Inc. (collectively, the
"Parties in Interest"); (iv) counsel for Onex/Oaktree;
and (v) all other Qualified Bidders;
d. Upon receipt of a Qualified Bid (other than the Onex/Oaktree
Agreement) that satisfies all of the required terms and
conditions set forth in the preceding paragraphs (b) and (c)
(a "Conforming Qualified Bid"), the Debtors, in their
discretion, may communicate with such Qualified Bidder prior
to the Auction, and such Qualified Bidder shall provide to the
Debtors within one business day after the Debtors' request
therefor any information reasonably required by the Debtors in
connection with the Debtors' evaluation of such Conforming
Qualified Bid;
e. Prior to the Auction, the Debtors shall evaluate the
Onex/Oaktree Investment, as embodied in the Onex/Oaktree
Agreement, the Plan and the Definitive Agreement and any
Conforming Qualified Bids they have received and shall select
the offer that they determine in their business judgment is
the highest and best offer for the Assets (the "Initial
Accepted Offer").
f. If there is at least one Qualified Bid (other than from
Onex/Oaktree), the Debtors may conduct an open auction (the
"Auction") to determine
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whether the Initial Accepted Offer or a higher and better
offer will be presented to the Court pursuant to a Plan. The
Auction shall take place three (3) business days prior to the
Disclosure Statement Hearing, at the offices of Goodwin
Procter LLP. Unless the Bankruptcy Court determines otherwise,
only Onex/Oaktree and any Qualified Bidder who has timely
submitted a Qualified Bid will be eligible to participate in
the Auction. The bidding shall start at the purchase price
stated in the Initial Accepted Offer and be based upon the
related Marked Applicable Agreement (subject to non-material
modifications) for the respective assets and continue in
increments of at least $500,000.
g. Upon conclusion of the Auction or, if the Debtors determine
not to hold an Auction, then promptly following the Bid
Deadline, the Debtors shall review each Qualified Bid on the
basis of financial and contractual terms and the factors
relevant to the sale of the New Common Stock and the chapter
11 process, including those factors affecting the speed and
certainty of consummating the transaction and the reasonable
value of any non-cash consideration. GCX shall present to the
Bankruptcy Court a modified Plan which incorporates the Final
Approved Bid which GCX determines in the aggregate constitutes
the highest or otherwise best offer and seek approval of that
Final Approved Bid at the Disclosure Statement hearing,
conditioned upon and subject to the subsequent confirmation of
the Plan.
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h. If no Qualified Bids are received, the Debtors shall proceed
with the Plan embodying the Onex/Oaktree Investment as set
forth below.
11. In the event the Debtors do not receive a higher and better Conforming
Qualified Bid from a Qualified Bidder other than Onex/Oaktree, they intend to
consummate the Onex/Oaktree Agreement pursuant to the Plan. While the Debtors
submit that the Onex/Oaktree Investment is a fair and reasonable purchase price
for the New Common Stock, the Debtors believe that the foregoing procedures may
generate further bidding, and therefore, enable the Debtors to realize even
greater value for their estates.
THE PROPOSED TERMINATION RIGHTS AND PAYMENTS
12. Pursuant to section XI of the Onex/Oaktree Agreement, certain events
give rise to termination rights of Onex/Oaktree that, if exercised, trigger
specified payment obligations of the Debtors. The following summary of such
provisions is qualified entirely by reference to the Onex/Oaktree Agreement
itself:
EXPENSE REIMBURSEMENT. Debtors shall be required to reimburse
Onex/Oaktree's reasonable and documented out-of-pocket expenses incurred
in connection with the Onex/Oaktree Investment, the New Financing, the
Plan and the transactions contemplated thereby (including Onex/Oaktree's
continued due diligence in connection therewith), including the reasonable
fees and expenses of Onex/Oaktree's professionals, not to exceed $1
million (the "Expense Reimbursement"), which obligation shall constitute
an allowed claim against the Debtors under sections 503 and 507(a) of the
Bankruptcy Code, if and when:
(a) The Overbid Order has been entered; and either:
(b) (i) The Debtors seek approval of, or the Bankruptcy Court
approves, any agreement with a third party for the sale of all or
any substantial portion of the business or assets of the Debtors or
an investment in or underwriting of post-confirmation securities of
GCX or any of the Debtors or their successors, whether pursuant to a
chapter 11 plan for the Debtors or pursuant to section 363(b) of the
Bankruptcy Code, or (ii) the Debtors seek confirmation of, or the
Bankruptcy Court confirms, a chapter 11 plan that does not contain
the Onex/Oaktree Investment and implement the
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Onex/Oaktree Agreement (each of (i) and (ii), an "Alternative
Transaction"); or
(c) The Plan is not confirmed on or before October 31, 2001,
provided that Onex/Oaktree shall not have breached its obligations
under the Onex/Oaktree Agreement or the Plan.
TERMINATION FEE. Debtors shall be required to pay Onex/Oaktree a
termination fee of $3 million (the "Termination Fee") upon the
consummation of an Alternative Transaction, which obligation shall
constitute an allowed claim against the Debtors under sections 503 and
507(a) of the Bankruptcy Code; provided, that Onex/Oaktree shall not be
entitled to the Termination Fee if (1) Onex/Oaktree shall have breached
its obligations under the Onex/Oaktree Agreement or the Plan in any
material respect, (2) Onex/Oaktree shall have terminated the Proposed
Onex/Oaktree Transaction as a result of its due diligence, or (3) the
Overbid Order has not been entered.
13. Sellers, as the Debtors have here, often employ break-up fees and
other bidding protections in order to encourage the making of an original offer
subject to higher and/or better offers and ultimately to increase value for the
debtor's estate. In this case, the Debtors believe that the approval of an
expense reimbursement and termination fee contingent upon the foregoing conduct
is in the best interests of their estates, because it places a relatively low
cap upon the purchaser's conceivably compensable due diligence costs and
opportunity costs and, more importantly, induces an otherwise unwilling buyer to
commit to purchase the Debtors' New Common Stock.
14. In Calpine Corp. v. O'Brien Env. Energy, Inc. (In re O'Brien Env.
Energy, Inc.), the Third Circuit held that the allowance of a break-up fee and
expense reimbursement depends on whether such fee meets the requirements for the
allowance of an administrative expense under section 503 of the Bankruptcy Code.
181 F.3d 527 (3rd Cir. 1999). Therefore, "the allowability of a break-up fee
depends upon the requesting party's ability to show that the fees were actually
necessary to preserve the value of the estate." Id. Under the Third Circuit's
approach, a break-up fee will be held to have benefited a debtor's estate if,
for example, "assurance of a
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break-up fee promoted more competitive bidding, such as by inducing a bid that
otherwise would not have been made and without which bidding would have been
limited," id. at 537, if the initial offer (encompassing the break-up fee)
"served as a catalyst to higher bids," id., or "if the availability of break-up
fees and expenses were to induce a bidder to research the value of the debtor
and convert that value to a dollar figure on which other bidders can rely." Id.
15. The termination fee here is reasonable in relation to the aggregate of
the Onex/Oaktree Investment of $36.6 million plus additional consideration to
creditors in the estimated amount of $185 million. This request for a
termination fee is approximately 1.35% of the Onex/Oaktree Investment plus
additional consideration to creditors. The percentage of this fee is well within
the range of break-up fees typically approved by courts in this jurisdiction.
See, e.g., Exhibit B hereto.
16. The Debtors submit that the termination payment provisions of the
Onex/Oaktree Agreement as set forth above are fair and reasonable and are
necessary and of benefit to the Debtors' estates. The Debtors have undertaken
significant efforts to effectuate a recapitalization, and notwithstanding the
distinct possibility that an Alternative Transaction could occur and that the
Debtors could propose a recapitalization at any time, Onex/Oaktree has expended
substantial time, money, and effort in entering into the Onex/Oaktree Agreement
to acquire the New Common Stock and enable the Debtors to proceed with
confidence that the Plan, subject to higher and better offers, will be
confirmed.
17. As of the present date, no entity other than Onex/Oaktree has made a
formal proposal to acquire the New Common Stock or to sponsor or support an
acceptable, confirmable Plan. Approval of the termination payment provisions
required by Onex/Oaktree provides an invaluable benefit to these estates by
establishing a competitive bidding framework for any other
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offer that may emerge. Equally important, such provisions contemplate that
confirmation of a chapter 11 plan will occur promptly, providing maximum value
to these estates by minimizing the delay in emergence from chapter 11 and
distribution of the consideration to creditors. Accordingly, the Debtors submit
that the criteria identified in O'Brien Environmental Energy are satisfied.
CERTAIN BIDDING PROCEDURES
18. As part of the proposed procedures, the Debtors also request that the
Court require an initial Overbid by Qualified Bidders of $5 million. This
Overbid exceeds the termination payment and maximum expense reimbursement
potentially payable by the Debtors by $1 million, and therefore, ensures that
the competitive bidding process compensates the Debtors for the cost of any
termination payment payable and permits the Debtors' estates to derive an added
economic benefit from conducting the Auction and entertaining such competing
bids. Moreover, depending upon the level of progress made by potential bidders
in obtaining all requisite consents and approvals, an even higher bid may be
necessary to justify spending extra time and incurring the resulting uncertainty
to pursue a transaction with an entity other than Onex/Oaktree. Indeed, if a
bidder has not obtained required regulatory consents or approvals and is not
prepared to close its proposed transaction at or within a relatively short time
after the time of the Auction, a "higher" offer may well not be a "better" one.
19. For the same reasons expressed above, the Debtors believe that it is
reasonable to evaluate any subsequent Overbid by Onex/Oaktree by comparing it to
the net amount to be received by the Debtors from any other Qualified Bidder
after deduction of the Expense Reimbursement and Termination Fee.
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NOTICE OF THE COMPETITIVE OFFER PROCEDURES AND THE PROPOSED SALE
20. In accordance with Federal Rule of Bankruptcy Procedure 2002, the
Debtors propose to give notice of the Auction, substantially in the form of
Exhibit C hereto (a) by first class mail deposited as soon as practicable after
the date of this Order to (i) the Office of the United States Trustee, (ii) the
Debtors' 20 largest unsecured creditors, (iii) all parties requesting notices
under Bankruptcy Rule 2002, (iv) counsel for the Creditors' Committee, (vi)
counsel to Onex/Oaktree, (vii) the Securities and Exchange Commission, (viii)
the Internal Revenue Service, (ix) counsel for Fleet Bank N.A., The Bank of Nova
Scotia, General Electric Capital Corporation, Reliastar, Bank Leumi, Harcourt
General, Inc., and Heller EMX, Inc. and (x) those parties identified by the
Debtors (and their representatives) as potential acquirors of the Assets; and
(b) as soon as practicable after the date of this Overbid Order by publication
in The Wall Street Journal (National Edition). The Debtors submit that such
notice constitutes good and sufficient notice of the competitive offer
procedures and all proceedings to be held thereon and that no other or further
notice need be given.
21. Based upon the foregoing, the Debtors submit that the relief requested
herein is necessary and appropriate, is in the best interests of the Debtors and
their estates, and should be granted in all respects.
22. No previous requests for the relief sought in this Motion has been
made to this or any other Court.
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WHEREFORE, the Debtors respectfully request that the Court enter
an order, substantially in the form attached hereto as Exhibit D, (a)
approving the Bidding Procedures, (b) approving the form and manner of notice
of the foregoing and (c) granting such other and further relief as the Court
deems just and proper.
Respectfully submitted,
GC COMPANIES, INC., et al.
By their attorneys,
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David M. Fournier (DE No. 2812)
PEPPER HAMILTON LLP
1201 Market Street, Suite 1600
P.O. Box 1709
Wilmington, Delaware 19899
(302) 777-6500
- and -
Daniel M. Glosband, P.C.
Colleen A. Murphy, Esq.
Philip F. Coppinger, Esq.
GOODWIN PROCTER LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000
Dated: June 22, 2001
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EXHIBIT A
ONEX/OAKTREE AGREEMENT
June 11, 2001
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, Massachusetts 02467
Attn: G. Gail Edwards
President and COO
Dear Ms. Edwards:
Onex Corporation ("Onex") and Oaktree Capital Management, LLC, on behalf
of certain funds and accounts managed by it ("Oaktree", and together with Onex,
"Sponsors" or "we") commit to acquire, through a newly formed acquisition
company or companies, pursuant to a chapter 11 plan of reorganization (the
"Plan") to be proposed by GC Companies, Inc. and its affiliated debtors and
debtors in possession (collectively, "GC"), 100% of the common stock ("New
Common Stock") of GC, as reorganized pursuant to the Plan ("Reorganized GC") for
$36.6 million and such additional consideration as set forth herein, on the
terms and conditions described below (the "Sponsors Investment").(1) The Plan is
premised upon, among other things, (i) the Sponsors Investment, (ii) Reorganized
GC's issuance of New Notes (as defined below) in the amount described below,
(iii) the raising of New Financing (as defined below) for Reorganized GC; and
(iv) the provision of overbid/investor protection as described herein.
In determining the price and structure of this transaction (the "Proposed
Transaction"), we have reviewed the business plans for GC previously provided
to us through the date of this letter, met with members of the management team
of GC, reviewed certain documents provided by GC, reviewed selected financial
and operating data provided by GC and analyzed other business information
regarding GC and its industry.
THIS LETTER IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A
SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN. SUCH OFFER OR SOLICITATION
WOULD BE
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(1) As between Onex and Oaktree, Onex would have the controlling interest in the
New Common Stock.
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MADE IN COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE AND
SECURITIES LAWS.
Sponsors' commitment includes the following:
I. SPONSORS INVESTMENT PRICE AND COMMITMENT. We commit to acquire 100% of
the New Common Stock of Reorganized GC pursuant to the Plan based upon a $36.6
million purchase price valuation for 100% of the New Common Stock of
Reorganized GC.(2) As provided herein, on the Plan's effective date (the
"Effective Date") we will make the Sponsors Investment and receive 100% of the
New Common Stock, subject to pro rata dilution of such New Common Stock under
Section III.E.(c) below.
II. DEFINITIVE AGREEMENT. The purchase and sale of the New Common Stock
will be effected pursuant to a definitive stock purchase agreement (the
"Definitive Agreement") mutually acceptable to GC and Sponsors. The parties
shall use their reasonable efforts to negotiate the terms of the Definitive
Agreement, which agreement shall include the terms set forth herein and other
usual and customary terms, as promptly as practicable and in any event no later
than 10 days prior to the hearing to consider approval of the disclosure
statement for the Plan (the "Disclosure Statement Hearing"). GC shall continue
to provide Sponsors with information reasonably requested by Sponsors
concerning GC or any subsidiary or affiliate of GC and shall grant
representatives of Sponsors access on a reasonable basis to key employees of GC
or any subsidiary or affiliate of GC as reasonably promptly as practicable.
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(2) The Proposed Transaction does not contemplate Reorganized GC's retention of
GC's Investment Portfolio. GC's Investment Portfolio shall be transferred to
and held by "Newinvestmentco", a newly formed trust or company, and amounts
realized therefrom (less amounts used to reimburse Newinvestmentco for the
reasonable and documented fees and expenses, including professional fees and
expenses, incurred by Newinvestmentco in connection with the distribution of
GC's Investment Portfolio and the issuance of notes to holders of Class 4
Claims in the allowed amount of the Class 4 Claims ("Class 4 Claims Notes"))
shall be distributed as follows:
(i) The first $50 million realized from GC's Investment Portfolio
shall be used to repay the Class 4 Claims Notes;
(ii) Aggregate realizations in excess of $50 million but less than
$90 million (e.g., additional realization in an amount not to exceed $40
million) shall be distributed 50% to Harcourt and 50% to repay remaining
amounts outstanding under the Class 4 Claims Notes, and, after full payment
thereof, 50% to Reorganized GC; and
(iii) Aggregate realizations in excess of $90 million shall be
distributed to the holders of Common Stock Interests.
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A. Conditions to Sponsors' Obligation to Close the Proposed
Transaction. The Definitive Agreement will contain the following
conditions to Sponsors' obligation to consummate the Proposed Transaction.
(a) GC shall have filed the Plan and disclosure statement
therefor (the "Disclosure Statement") in the Bankruptcy Court
on or before July 11, 2001, and the Bankruptcy Court shall
have entered an order approving the disclosure statement for
the Plan on or before September 11, 2001.
(b) The Plan shall have been confirmed by October 31, 2001 and
shall have become effective in accordance with its terms; the
material terms of the Plan shall include, among other terms,
substantially the same terms as the material terms contained
in Section III hereof; and the Plan shall otherwise be
reasonably satisfactory to GC and Sponsors.
(c) GC shall have maintained its exclusive period to solicit
acceptances of a plan through October 31, 2001, and GC shall
not have either (i) filed or sought confirmation of a chapter
11 plan providing for the acquisition of GC (or a substantial
portion of its ownership or assets) by a person or entity
other than Sponsors, (ii) sought Bankruptcy Court approval of
an acquisition of GC (or a substantial portion of its
ownership or assets) other than by Sponsors, or (iii) filed
or sought confirmation of a chapter 11 plan providing for an
internal reorganization of GC.
(d) Senior management of Reorganized GC shall be reasonably
acceptable to Sponsors (i.e., Reorganized GC shall retain at
least the senior management team identified to GC by
Sponsors).(3)
(e) Satisfactory completion, at Sponsors' sole discretion, of
Sponsor's due diligence on GC, including without limitation
GC's international assets and GC's funding requirements with
respect thereto.
(f) No material adverse change (or event or condition that could
result in a material adverse change) shall have
- ----------------------------------
(3) Onex shall use its good faith efforts to agree to mutually acceptable
employment terms with such persons on or before 10 days before the
Disclosure Statement Hearing. Nothing in this letter or any agreement
between Onex and such members of GC's senior management shall prohibit such
persons from serving or not serving, as senior management if the Plan is not
confirmed.
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19
occurred in the theatre industry or GC's business, condition (financial or
otherwise), prospects, operations, assets or liabilities or in financial
markets generally ("Material Adverse Change") between March 31, 2001 and
the Effective Date. Without limiting the foregoing, increase in the
required amount of the $21.8 million New Financing or a call by a third
party after the date of this letter on any international guaranty provided
by GC shall be a Material Adverse Change.
(g) On or before June 22, 2001, GC shall have moved for and obtained, on or
before July 11, 2001, an order of the Bankruptcy Court in form acceptable
to GC and Sponsors (the "Overbid Order") that approves, among other terms
and without material modification, the Overbid Procedures (as defined in
Section XI below) and the obligation of GC to pay the Expense Reimbursement
and the Termination Fee (each as defined below) on the terms and conditions
described in Section XI hereof. The Overbid Order shall remain in full
force and effect, and shall not be stayed, vacated, modified or
supplemented without Sponsors' prior written consent. GC shall have
complied with the terms of the Overbid Order.
(h) GC shall have operated its business in the ordinary course and paid ongoing
ordinary course liabilities (including estimated taxes and assessments)
consistent with past practices and substantially consistent with its
present Debtor in Possession Financing Budget through the Effective Date,
and shall not have assumed or rejected any theater lease or associated
executory contract after the date of this letter absent the prior written
consent of Sponsors, which consent shall not be unreasonably withheld.
(i) All conditions precedent to closing the New Financing (other than the
occurrence of the Effective Date) shall have been satisfied or waived and
the New Financing shall have been consummated in accordance with the
material terms contained in the Financing Commitment Letter (as defined
below). The final documentation with respect to the New Financing shall
otherwise be satisfactory to GC and Sponsors in all material respects.
(j) The final documentation with respect to the New Notes (as defined below)
shall be satisfactory to GC and Sponsors in all material respects.
4
20
(k) GC shall not have breached individually or in the aggregate in any
material respect any of the material representations, warranties
or covenants to be given by GC in the Definitive Agreement.
(l) Receipt of all required third party approvals (including, but not
limited to, governmental approvals).
(m) To the extent contemplated hereby, entry by Reorganized GC and
Newleaseco (defined below) into a management agreement consistent
with the terms hereof acceptable to GC, Sponsors and Harcourt.
(n) The unexpired leases and executory contracts designated by
Sponsors after the date of this letter for assumption or rejection
as provided herein shall be so assumed or rejected, as the case
may be, by final order satisfactory to GC and Sponsors. Cure
claims in respect of executory contracts and unexpired leases
designated by Sponsors to be assumed shall not exceed $4.8 million
in the aggregate.
(o) Such other conditions as may be agreed to by the parties as set
forth in the Definitive Agreement.
B. Representations and Warranties. The Definitive Agreement will provide
that GC will make customary representations and warranties for transactions of
this type, including, without limitation, accuracy of financial statements
provided; no material actions taken or payments received out of the ordinary
course; no Material Adverse Change; ownership of property; accuracy of
disclosure; corporate existence; corporate power and authority; subsidiaries;
compliance with laws; to GC's knowledge, no pending or threatened claims which,
if successful, would result in a Material Adverse Change, including, without
limitation, no pending or threatened claims against GC or, to GC's knowledge,
its affiliates or subsidiaries which if successful would materially interfere
with GC's business or the performance of its obligations under any contract or
agreement; to the knowledge of GC, no pending or threatened claim against any
third party which, if successful, would in the reasonable business judgment of
GC evidence a material risk with respect to GC's business or the performance of
its obligations under any contract or agreement; no conflict with laws or
contractual obligations.
C. Executory Contracts and Unexpired Leases. The Definitive Agreement will
provide that Sponsors will have until 10 days before the hearing on confirmation
of the Plan (the "Confirmation Hearing") to designate the previously nonassumed
executory contracts and unexpired leases that it wishes GC to assume and those
that it wishes GC to reject, as well as any modified terms for such contracts
and leases (or proposed determinations of contested issues) upon which it is
prepared to designate that such contracts and leases that otherwise would be
rejected should be assumed. Sponsors will work with GC to review the nonassumed
executory contracts and
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21
unexpired leases for the purpose of determining whether such nonassumed
executory contracts and unexpired leases will be assumed or rejected and/or the
proposed modifications thereto, as well as with respect to any extension of the
date pursuant to section 365(d)(1) to assume or reject unexpired leases.
III. PLAN. Unless GC and Sponsors agree otherwise, the Plan will include
the following terms:
A. Classification and Treatment of Claims and Interests
(a) Unclassified Claims (not entitled to vote)
Administrative Claims: On the Effective Date, or as soon thereafter
as practicable, each holder of an Allowed
Administrative Claim will receive payment in
full in cash of the unpaid portion of such
Allowed Administrative Claim; provided,
that, the aggregate amount of the Allowed
Administrative Claims for professional fees,
closing expenses and capital calls (but
exclusive of cure claims and operating
expenses paid in the ordinary course) shall
not exceed $10 million.
DIP Financing Claims: On the Effective Date, or as soon thereafter
as practicable, the holders thereof will
receive payment in full in cash of the
Allowed DIP Financing Claim.
Priority Tax Claims: At the option of GC, each holder of an
Allowed Priority Tax Claim will receive
either (i) payment in full (in cash) on the
Effective Date or as soon thereafter as
practicable, or (ii) payment over a six year
period from the date of assessment as
provided in section 1129(a)(9)(C) of the
Bankruptcy Code with interest payable at 7%
annual or at such other rate agreed to by GC
and the holder of such claim or determined
by the Bankruptcy Court.
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22
(b) Unimpaired Claims (deemed to accept)
Class 1 - Other Priority On the Effective Date, or as soon thereafter as
Claims: practicable, each holder of an Allowed Other Priority
Claim will receive payment in full in cash of such
Allowed Other Priority Claim.
Class 2 - Secured At the option of GC, GC will either (1) reinstate
Claims (other than each Allowed Secured Claim (other than Banks, Heller
Banks, Heller and and GECC) by curing all outstanding defaults with all
GECC): legal, equitable, and contractual rights remaining
unaltered, (2) pay in full such Allowed Secured Claim
in cash on the Effective Date or as soon thereafter
as practicable or (3) satisfy such Allowed Secured
Claim by delivering to the claimant the collateral
securing such claim.
(c) Impaired Claims (entitled to vote)
Class 3 - Secured On the Effective Date, or as soon thereafter as
Claims (Banks, Heller practicable, the holders of Class 3 Claims (Allowed
and GECC) Secured Claims of Banks, Heller and GECC) shall
receive their pro rata share of $114.3 million of New
Notes. The New Notes for each holder of a Class 3
Claim shall be secured by and share in a pool
consisting of the respective collateral securing each
such Allowed Secured Claim, junior to any security
interest therein securing the Exit Facility, and shall
otherwise have the basic terms set forth on Exhibit 1
hereto. We are assuming that as of June 30, 2001 the
Allowed Secured Claims of the Banks, Heller and GECC
were in the amount of $33.8 million, $27.4 million and
$53.1 million, respectively.
Class 4 - General On the Effective Date, or as soon thereafter as
Unsecured Claims practicable, the holders of
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23
(other than Harcourt), Allowed General Unsecured Claims
but including (deficiency claims of Banks and GECC,
deficiency claims of and other unsecured claims, but
Banks and GECC): excluding Harcourt) will receive a pro
rata share of (1) $18.5 million of cash
from the Sponsors Investment, and (2)
Class 4 Claim Notes (to be realized from
100% of GC's Investment Portfolio up to
$50 million plus 50% of Investment
Portfolio realization between $50
million and $90 million, until Allowed
General Unsecured Claims are paid in
full).
Class 5 - General On the Effective Date, or as soon
Unsecured Claim of thereafter as practicable, Harcourt will
Harcourt receive on account of its Allowed
General Unsecured Claim (1) 100% of the
stock of Newleaseco, which shall be
capitalized with (a) the leases (subject
to Harcourt's existing guaranty)
identified on Exhibit 2 hereto, (b) an
arms-length, management contract
pursuant to which Reorganized GC shall
manage Newleaseco; provided that
Reorganized GC shall receive an annual
management fee for such services
calculated as $150,000 per location, not
to exceed an aggregate annual fee of $1
million, and (c) to the extent, if any,
necessary to provide adequate assurance
of future performance of such assigned
leases, Harcourt's agreement to provide
credit support to Newleaseco; and (2)
50% of the realization from GC's
Investment Portfolio in excess of $50
million and less than $90 million.
Class 6 - Common On the Effective Date, or as soon
Stock Interests thereafter as practicable, the holders
(including any Allowed of Allowed Common Stock Interests will
Claims subordinated to receive their pro rata share of any
the level of common realizations from GC's Investment
stock under Portfolio in excess of $90 million.
8
24
section 510(b) of the
Bankruptcy (Code)
Class 7 -- Common The holders of Common Stock Options
Stock Options shall receive no distribution. On
the Effective Date all Common Stock
Options and any other equity
interests will be canceled.
B. Conditions to the Confirmation and/or Effective Date of Plan:
(a) Confirmation of the Plan on or before October 31, 2001
(b) All conditions precedent under the Definitive Agreement
other than the occurrence of the Effective Date shall
have been satisfied or waived as set forth therein.
(c) The Confirmation Order shall be in a form satisfactory
to GC and Sponsors, in full effect, and unstayed.
(d) The Effective Date shall have occurred within 30 days
following the Confirmation Date.
(e) All conditions precedent to closing the New Financing
(other than the occurrence of the Effective Date) shall
have been satisfied or waived and the New Financing shall
have been consummated.
(f) GC and Sponsors shall each have approved the form and
substance of each of the amended certificate of
incorporation, the amended by-laws, the New Common Stock,
the New Notes, the Management Employment Agreements (as
defined below) and the Management Incentive Plan (as
defined below).
C. Releases, Indemnification. The Plan shall provide for general
releases from GC and Reorganized GC for the benefit of all
current directors and officers. In addition, all
indemnification provisions currently in place for directors
and officers (whether in GC's by-laws, contractual or
otherwise) shall survive confirmation of the Plan and shall
not be impaired thereby.
D. Other Plan Provisions. In addition to the foregoing
provisions relating to classification and treatment of claims and interests,
the Plan shall contain provisions appropriate under the circumstances
concerning, among other things: (i) disputed claims and reserves therefor, (ii)
the assumption or rejection, as the case may be, of executory contracts and
unexpired leases (consistent with this letter), (iii) inability to amend or
modify the Plan's provisions relating to Sponsors or the Proposed
9
25
Transaction without Sponsors' consent and (iv) retention of jurisdiction by the
Bankruptcy Court for certain purposes. The Plan shall also contain the
conditions to the Effective Date described in Section III.D., above.
E. Management of Reorganized GC.
(a) Board of Directors. The Board of Directors of Reorganized GC
shall consist of four persons appointed by Sponsors and one
member of senior management.
(b) Senior Management. Sponsors contemplate that Reorganized GC
will offer employment to substantially all of GC's present
senior management pursuant to business plan to be discussed
between Sponsors and senior management. See Section II.A.(d)
hereof.
(c) Management Equity Incentive Plan. The Plan shall provide for
the establishment of an equity incentive plan (the
"Management Equity Incentive Plan") promptly after the Plan
Effective Date for members of Reorganized GC's management on
terms that are otherwise mutually acceptable to Reorganized
GC and Sponsors. Management Equity Incentive Plan to be
discussed by Sponsors and management team. It is
contemplated that this plan will provide for 6% dilution of
the New Common Stock on the Effective Date which shall be
issued as options that will vest over time in accordance
with the terms, and subject to the satisfaction of
performance standards, that are mutually acceptable to
Reorganized GC and Sponsors.
(d) Management Fee: Sponsors contemplate that Reorganized GC
shall pay Sponsors an annual management fee ("Management
Fee") equal to $1 million in exchange for the performance of
certain management services.
IV. NEW FINANCING. Sponsors and GC shall obtain on or prior to 10 days
prior to the Confirmation Hearing mutually acceptable commitments and/or
agreements (the "Financing Commitment Letter") from a financial institution
with respect to a revolver/working capital facility of at least $21.8 million
(the "New Financing") that would be available to Reorganized GC under the Plan.
GC will be responsible for paying the financial institution's reasonable
transaction costs/closing expenses in connection with the New Financing. In
addition to the New Financing, Reorganized GC shall receive $18.1 million of
cash from the Sponsors Investment which shall be held by Reorganized GC in a
separate fund to be used solely to meet future capital expenditure and/or exit
financing requirements.
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26
V. TERMINATION. This letter may be terminated by Sponsors, at
Sponsors' sole discretion, at any time upon written notice to GC if, through no
material fault of Sponsors, (a) the Overbid Order is not entered on or before
July 11, 2001 (b) GC shall not have filed the Plan by July 11, 2001 or any of
the other conditions set forth in Section II.A. have not occurred, or (c) the
Definitive Agreement shall has not been executed on or before the date that is
10 days prior to the Disclosure Statement Hearing. This letter may be terminated
by GC following the entry of the Overbid Order or after July 11, 2001 if the
Overbid Order is not entered on or before such date subject only to GC's
obligations under the Overbid Order, as described herein and Overbid Procedures
(defined below). Upon any such termination, any obligations under this letter
will terminate and no party shall have any liability whatsoever to any other
party; provided, however, that notwithstanding any such termination (i) this
Section V shall remain in full force and effect, and no party shall be relieved
of liability for any breach and (ii) in addition, GC shall remain liable for
payment of the Expense Reimbursement and Termination Fee to the extent required
under the terms of the Overbid Order.
VI. MISCELLANEOUS. The terms set forth in this letter are a part of a
comprehensive agreement, each element of which is an integral aspect of the
Proposed Transaction and, as such, are non-severable.
VII. GOVERNING LAW. This letter shall be governed by and construed in
accordance with the internal laws of the State of New York and any applicable
provision of the Bankruptcy Code, without regard to the principles of conflict
of laws that would provide for application of another law.
VIII. CONCERNING REMEDIES. Each of the parties acknowledges and agrees
that no failure or delay in exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any single or partial exercise
thereof preclude any other right, power or privilege hereunder.
IX. PRESS RELEASES, DISCLOSURE. The parties will cooperate in the
issuance of any press releases or otherwise in making any public statements with
respect to the Proposed Transaction. Neither Sponsors nor GC will issue any
press release or other public statement regarding the Proposed Transaction
without the other party's prior written consent, which consent shall not be
unreasonably withheld. Sponsors acknowledge and agree that GC may provide copies
of this letter and attachments to parties in interest in GC's chapter 11 case,
and those parties GC determines it is necessary to provide copies to in
connection with the Auction described Section XI below and in the Overbid Order
or as otherwise necessary in connection with its bankruptcy case. GC also shall
be entitled to file copies with the Bankruptcy Court or as otherwise required by
law.
X. ENTIRE AGREEMENT, AMENDMENTS, COUNTERPARTS. This letter,
including all Exhibits and Schedules hereto, which are incorporated herein and
made a part hereof by reference, sets forth the entire agreement among the
parties with respect to the subject matter hereof, with the exception of the
Overbid Procedures as approved by the Overbid Order, and may be amended only by
a writing executed by Sponsors and GC. This letter
11
27
may be executed in counterparts, each of which when taken together shall
constitute an original of this letter.
It is understood that this letter does not contain all matters upon which
agreement must be reached in order for the Proposed Transaction to be
consummated. Notwithstanding the foregoing, the provisions of Section XI of
this letter and the terms of the Overbid Procedures and Overbid Order, as
described hereunder, are acknowledged and agreed to be fully binding on the
parties hereto.
XI. OVERBID PROCEDURES. GC acknowledges that Sponsors have expended and
will continue to expend considerable time and money in developing the Proposed
Transaction, which it is not prepared to continue, however, except upon the
terms hereof. GC and Sponsors therefore agree that the following overbid
procedures (the "Overbid Procedures"), among others, shall be employed with
respect to the Plan or any other chapter 11 plan for GC that incorporates the
Sponsors Investment:
A. Nonsolicitation. After the execution and delivery of this letter
neither GC nor any of its respective directors, employees, accountants or other
agents and representatives (collectively, "Representatives") shall, directly or
indirectly, solicit a competitive bid or proposal from a third party to purchase
all or any portion of the assets of GC or the New Common Stock of Reorganized
GC, whether in a separate transaction or as part of a plan of reorganization for
GC (an "Acquisition"), or engage in or continue any discussions or negotiations
with any party that has made or who may make such a competitive bid for such New
Common Stock or assets of GC until after entry of the Overbid Order.
Notwithstanding the foregoing, after the motion to approve the Overbid Order has
been filed, GC and its Representatives may receive, but not solicit, proposals
from third parties relating to such an Acquisition (an "Acquisition Proposal");
provided, that prior to the entry of the Overbid Order, GC and its
Representatives shall not solicit, discuss or negotiate any Acquisition Proposal
with any such third party but may provide information, subject to appropriate
confidentiality provisions, to any such third party. After the entry of the
Overbid Order, GC and its Representatives shall be entitled to solicit
Acquisition Proposals from third parties, to provide information, subject to
appropriate confidentiality provisions, to such third parties and to discuss and
negotiate any such Acquisition Proposal with such third parties. GC shall keep
Sponsors informed on a current basis of the identity of the parties to whom GC
provides information and of the status of all written Acquisition Proposals
(including drafts or other preliminary indications of interest) received and
provide Sponsors with copies of any such Written Acquisition Proposals
(including such drafts and indications of interest) within 1 business day after
receipt thereof.
B. Expense Reimbursement. GC shall be required to reimburse
Sponsors' reasonable and documented out-of-pocket expenses incurred in
connection with the Sponsors Investment, the New Financing, the Plan and the
transactions contemplated thereby (including Sponsors' continued due diligence
in connection therewith), including the reasonable fees and expenses of
Sponsors' professionals, not to exceed $1 million (the "Expense
Reimbursement"), provided that Sponsors have not
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28
breached this agreement, which obligation shall constitute an allowed
administrative claim against GC under sections 503 and 507(a) of the Bankruptcy
Code, if and when:
(a) (i) GC seeks approval of, or the Bankruptcy Court approves, any
agreement with a third party for the sale of all or any
substantial portion of the business or assets of GC or an
investment in or underwriting of post-confirmation securities of
GC, whether pursuant to a chapter 11 plan for GC or under section
363(b) of the Bankruptcy Code, or (ii) GC seeks confirmation of,
or the Bankruptcy Court confirms, a chapter 11 plan that does not
contain the Sponsors Investment and implement the Proposed
Transaction (each of (i) and (ii), an "Alternative Transaction");
and
(b) The Plan is not confirmed on or before October 31, 2001: provided
that Sponsors shall not have breached its obligations under this
letter or the Plan.
C. Termination Fee. GC shall be required to pay Sponsors a termination
fee of $3 million (the "Termination Fee") upon the consummation of an
Alternative Transaction, which obligation shall constitute an allowed
administrative claim against GC under sections 503 and 507(a) of the Bankruptcy
Code; provided, that Sponsors shall not be entitled to the Termination Fee if it
(1) shall have breached its obligations under this letter or the Plan in any
material respect or (2) shall have terminated the Proposed Transaction as a
result of its due diligence.
D. Participation Requirements. Unless otherwise ordered by the Bankruptcy
Court for cause shown, to participate in any bidding process, each potential
bidder (a "Potential Bidder") must deliver (unless previously delivered) to GC:
(i) an executed confidentiality agreement in form and substance satisfactory to
GC; and (ii) such financial disclosure and other information acceptable to GC
and its financial advisor that demonstrates such party's financial and other
ability to consummate an Alternative Transaction. A Potential Bidder shall be
considered to be a qualified bidder (a "Qualified Bidder") if it delivers the
documents described in subparagraphs (i) and (ii) above and GC determines it is
reasonably likely (based on availability of financing, experience and other
considerations) to be able to consummate a purchase of GC, if selected as the
successful bidder. Sponsors are a Qualified Bidder.
E. Bid Requirements. Any Qualified Bidder that desires to make a
Qualified Bid (as defined below) shall, among other things, deliver 8 written
copies of its Qualified bid to GC's bankruptcy counsel not later than 4:00 p.m.
(East Coast time) on the date that is 10 business days before the first
Disclosure Statement Hearing on the adequacy of the Disclosure Statement for the
Plan (the "Bid Deadline"), who shall then distribute a copy of the bid to (i) GC
and its financial advisor, (ii) counsel for Creditors' Committee, (iii) counsel
for Sponsors, and (iv) all other Qualified Bidders. A bid
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29
received from a qualified Bidder shall be a "Qualified Bid" if such bid meets
the following requirements:
(a) The bid shall be a letter from such Qualified Bidder stating that
(i) the bidder offers to acquire GC upon the terms and conditions
set forth herein or the Plan marked to show those amendments and
modifications to this letter or the Plan, including price and
terms, that the Qualified Bidder proposes (the "Marked Applicable
Agreement") and (ii) such Qualified Bidder's offer is irrevocable
until the conclusion of any scheduled Auction and, if accepted as
the winning bid at such Auction, until the conclusion of the
hearing on approval of such Alternative Transaction. Each
Qualified Bidder shall accompany its bid with written evidence of
a commitment for financing or other evidence of ability to
consummate the applicable transaction.
(b) GC will consider a bid only if the bid provides for consideration
of at least $5 million greater than the consideration set forth
in this letter and the Plan.
(c) Upon the Sponsors Commitment Date, this letter and the Plan, if
filed, shall be deemed to be a Qualified Bid.
F. Auction. If there is at least one Qualified Bid (other than from
Sponsors), GC may conduct an auction (the "Auction"). The Auction shall take
place 3 business days before the Disclosure Statement Hearing, at the offices
of GC's bankruptcy counsel. Unless the Bankruptcy Court determines otherwise,
only a Qualified Bidder who has submitted a Qualified Bid is eligible to
participate in the Auction. The bidding shall start at the purchase price
stated in the highest or best Qualified Bid and be based upon such Qualified
Bidder's Marked Applicable Agreement (subject to non-material modifications)
for the respective assets and continue in increments of at least $500,000. Upon
conclusion of the auction or, if GC determines not to hold an auction, then
promptly following the Bid Deadline, GC, after consultation with the Creditors
Committee, shall review each Qualified Bid on the basis of financial and
contractual terms and the factors relevant to the sale and chapter 11 process,
including those factors affecting the speed and certainty of consummating the
transaction. GC shall present to the Bankruptcy court for consideration and
approval the Qualified Bid (or the Plan if no other Qualified Bid is received)
which GC determines in the aggregate constitutes the highest or otherwise best
offer.
G. Additional Buyer Protection. In addition to procedures and terms set
forth herein, including, but not limited to the Expense Reimbursement and
Termination Fee, the Overbid Procedures described in the Overbid Order shall
contain such other appropriate buyer protection provisions as may be requested
by Sponsors, such as provisions providing for requirements for competing bids
and open auction procedures.
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XII. Fiduciary Duties. Nothing in this letter is intended to waive or
abrogate any fiduciary duties.
XIII. Time of the Essence. Time is of the essence with respect to this
proposal. Unless accepted, this proposal will expire at 5:00 p.m. East Coast
time on June 12, 2001 (the "Expiration Date").
We look forward to working with you on this transaction.
Onex Corporation
By: /s/ Anthony Munk
-------------------------
Title: Managing Director
Oaktree Capital Management, LLC, on
behalf of certain investment funds and
accounts managed by it
By: /s/ Kenneth Liang
-------------------------
Title: Managing Director
By: /s/ Mariusz J. Mazurek
-------------------------
Title: Senior Vice President
Agreed:
GC Companies, Inc.
By: /s/ G. Gail Edwards
-------------------------
Title: President & COO
15
31
EXHIBIT 1
REORGANIZED GC - NEW NOTES
INDICATIVE SUMMARY OF TERMS
Principal Amount: The New Notes will have an initial face amount of $114.3
million in the Plan.
Maturity: The New Notes will have a term of 5 years from their issue
date or the Effective Date.
Amortization: The New Notes will have a scheduled amortization of $5
million per year.
Interest: The New Notes will bear interest at the rate of 8.5% per
annum.
Collateral and The New Notes shall be secured by a pool consisting of the
Subordination: respective collateral securing each such Allowed Secured
Claim, junior to any security interest therein securing the
Exit Facility.
32
EXHIBIT 2
NEWLEASECO LEASES AND RELATED CONTRACTS
UNIT
COUNT UNIT NAME
1 Plaza at Chapel
2 Erie Commons
3 Springfield
4 Westwood Town
5 Northwoods
6 Ridge Park
7 Westgate 6
8 West Market
9 Sunland Park
10 Renton Village
11 Beverly
12 Midway Mall
13 Centennial
14 Hollywood
15 Towson Commons
33
EXHIBIT B
REPRESENTATIVE LISTING OF BREAK UP FEES APPROVED IN DELAWARE CASES
- ----------------------------------------------------------------------------------------------------------------------------------
No. Case Name & No. Date of Motion Proposed Break-Up Expense Overbid
(Docket No.), Purchase Price Fee Reimbursement
Date of Order
(Docket No.),
Date of
Auction,
Time Elapsed
between Order
and Auction
- ----------------------------------------------------------------------------------------------------------------------------------
1 Anchor Glass, et Motion- Approx. $365 $3 million None $8 million initial
al. 10/4/96 (93) million overbid; $5 million
Case No. 96-1434 & Order- increments thereafter
96-1516 (PJW) 10/15/96 (188)
Auction-
11/15/96
31 days
- ----------------------------------------------------------------------------------------------------------------------------------
2 APS Holding Corp. Motion- $113.5 million $2.84 million Up to $3.7 million initial
Case No. 98-197 9/11/98 (534) $350,000 overbid; $500,000
(PJW) Order- 9/22/98 increments thereafter
(575)
Auction-
10/7/98
15 days
- ----------------------------------------------------------------------------------------------------------------------------------
3 Buddy L. Inc. Motion- 3/8/95 $40-45 million $800,000 Up to None
Case No. 95-235 (30) plus $445,000
(HSB) Order- 4/7/95 contingent
(115) upside
Auction- 5/2/95
25 days
- ----------------------------------------------------------------------------------------------------------------------------------
4 Burlington Motor Motion- Approx. $160 $500,000 Up to $750,000 initial
Holdings 5/22/96 (337) million $250,000 overbid; $100,00
Case No. 95-1559 Order- 6/6/96 increments thereafter
(HSB) (376)
Auction-
6/24/96
18 days
34
- ----------------------------------------------------------------------------------------------------------------------------------
No. Case Name & No. Date of Motion Proposed Break-Up Expense Overbid
(Docket No.), Purchase Price Fee Reimbursement
Date of Order
(Docket No.),
Date of
Auction,
Time Elapsed
between Order
and Auction
- ----------------------------------------------------------------------------------------------------------------------------------
5 Continental Motion- $61 million $1.5 million None exceed Buyer's bid by
Airlines, Inc. 11/22/91 (2847) at least 5%
Case Nos. 90-932 Order-
through 90-984 12/11/91 (2847
(HSB) attached to
Motion),
1/7/92 (sale
hearing)
- ----------------------------------------------------------------------------------------------------------------------------------
6 Favorite Brands Motion- $475.0 million $8.3 million actual and price offered in Asset
International 9/29/99 (396) reasonable Purchase Agreement
Holding Corp., et Order- 10/8/00 fees and ($475.0 million) plus
al. (406) expenses of $12.0 million
99-726 (PJW) counsel (continuing bid
(not to increments of $1.0
exceed million
$650,000) thereafter)
- ----------------------------------------------------------------------------------------------------------------------------------
7 Fruehauf Trailer Motion- Approx. $49 $1.5 million Up to Minimum increments
Corporation 3/12/97 (589) million $250,000 equal to $350,000 plus
Case No. 96-1563 Modified aggregate of break-up
(PJW) Bidding fee and maximum
Procedures expense reimbursement
established by ($1.75 million);
Motion (479) minimum bidding
and Order increments of $100,000
entered on to $500,000
2/26/97 (516) established on various
Order- 3/14/97 other asset packages
(623)
Auction-
3/17/97
3 days
- ----------------------------------------------------------------------------------------------------------------------------------
8 Hechinger Motion- 3% of the maximum purchase actual, no less than 10% of
Investment Company 9/14/99 (680) price received from reasonable the amount of the
of Delaware, Inc., Order- 10/1/99 Designated Lead Bidder expenses in Designated Lead Bid -
et al. (811) an amount however, if such
Case No. 99-2261 Auction- not to Designated Lead Bid is
(PJW) 10/11/99 exceed a bid on a package of
10 days $150,000 properties, the
Debtors reserve the
right to set a higher
Overbid Minimum with
respect to one or more
of the properties
identified in such
Designated Lead Bid
35
- ----------------------------------------------------------------------------------------------------------------------------------
No. Case Name & No. Date of Motion Proposed Break-Up Expense Overbid
(Docket No.), Purchase Price Fee Reimbursement
Date of Order
(Docket No.),
Date of
Auction,
Time Elapsed
between Order
and Auction
- ----------------------------------------------------------------------------------------------------------------------------------
9 Hechinger Motion- 3% of the amount of the up to "a minimum overbid
Investment Company 10/22/99 (993) selected "Stalking Horse" $150,000 amount on both a
of Delaware, Inc., Order- 11/1/99 bid Package Bid basis and
et al. (1055) an individual Property
Case No. 99-2261 Auction- Bid basis, as set by
(PJW) 11/30/99 the Debtors in their
29 days sole discretion" (sole
discretion shall be
deemed to be after
consultation with the
Committee's
professionals)
- ----------------------------------------------------------------------------------------------------------------------------------
10 Just for Feet, Motion- 2% of the Bid Price for None initial minimum bid of
Inc., et al. 12/14/99 (240) each lease set forth in specified 105% of the original
Case No. 99-4110 Order- the Stalking Horse bid price for each
(RRM) 12/22/99 (319) Agreement applied in the lease set forth in
Auction-2/24/00 following manner: Stalking Horse
64 days (i) for single lease bids Agreement (bidding
- applied to each lease increments thereafter
individually are at the discretion
(ii) for Packaged Bids of of auctioneer, Debtor
two or more leases - the and Committee prior to
break up fee is payable auction)
for all leases in the
Packaged Bid provided that
the aggregate amount
payable by the Successful
Bidder must exceed
aggregate amount set forth
in Stalking Horse Agreement
- ----------------------------------------------------------------------------------------------------------------------------------
11 Lomas Financial Motion- $150 million The greater of (A) $3 Included in $3 million initial
Corporation 10/10/95 (28) plus million or (B) 50% of the break-up fee overbid; increments of
Case No. 95-1235 Order- assumption of amount by which the $1.5 million thereafter
(PJW) 10/10/95 (28A) obligations Winning Bid exceeds $150
11/21/95 (sale under million, up to a maximum
hearing) executory of $5 million as
contracts liquidated damages for
costs and expenses
- ----------------------------------------------------------------------------------------------------------------------------------
12 Mid-American Waste Motion- Approx. $188 $6 million (Termination $1 million initial overbid of at
Systems, Inc., et 1/21/97 (31) million plus Fee) least $1 million plus
al., Case Nos. Order- 1/21/97 assumption of amount of expense
97-104 through (32) certain reimbursement and
97-135 (PJW) Auction- liabilities termination fee;
2/26/97 increments of $1
36 days million thereafter
36
- ----------------------------------------------------------------------------------------------------------------------------------
No. Case Name & No. Date of Motion Proposed Break-Up Expense Overbid
(Docket No.), Purchase Price Fee Reimbursement
Date of Order
(Docket No.),
Date of
Auction,
Time Elapsed
between Order
and Auction
- ----------------------------------------------------------------------------------------------------------------------------------
13 Mondi of America, Motion- 3% of the Bid Price for None initial minimum bid of
Inc., et al. 11/23/99 (128) each lease set forth in specified 105% of the original
Case No. 99-3986 Order- 12/3/99 the Stalking Horse bid price for each
(PJW) (166) Agreement applied in the lease set forth in
Auction- following manner: Stalking Horse
12/17/99 (i) for single lease bids Agreement (bidding
14 days - applied to each lease increments thereafter
individually are at the discretion
(ii) for Packaged Bids of of auctioneer, Debtor
two or more leases - the and Committee prior to
break up fee is payable auction)
for all leases in the
Packaged Bid provided that
the aggregate amount
payable by the Successful
Bidder must exceed
aggregate amount set forth
in Stalking Horse Agreement
- ----------------------------------------------------------------------------------------------------------------------------------
14 PennCorp Financial Motion- 2/9/00 $260.0 million $5.2 million an amount Purchase Price set
Group, Inc. (17) equal to forth in the Stock
Case No. 00-888 Order- 2/28/00 the Purchase Agreement
(SLR) (58) reasonable plus $7.0
out of million
pocket
expenses,
including
attorney's
fees (not
to exceed
$800,000)
- ----------------------------------------------------------------------------------------------------------------------------------
15 Presidio Oil Motion- 8/8/96 $183 million $5,490,000 Up to $2 $7 million initial
Company, et al. (32) (consisting of million overbid; no minimum
Case Nos. 96-1208 Order- 9/9/96 approx. $101 (provided increments thereafter
through 96-1211 (103) million in that the
(HSB) 8/29/96 (sale cash and $82 aggregate
hearing) million in the of the
Buyer's common break-up
stock, plus fee and
the assumption expense
of certain reimbursement
liabilities) may not
exceed $7
million)
- ----------------------------------------------------------------------------------------------------------------------------------
16 Venture Stores, Motion- $95 million $1.75 million None $2.25 million initial
Inc. 4/27/98 (405) overbid; $250,000
Case No. 98-101 Order- 5/7/98 increments thereafter
(RRM) (437)
Auction-
5/30/98
23 days
- ----------------------------------------------------------------------------------------------------------------------------------
37
EXHIBIT C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------
) Chapter 11
In re: ) Case Nos. 00-3897 through
) 00-3927 (EIK)
GC COMPANIES, INC., et al. ) (Jointly Administered)
)
) BID DEADLINE: ______/01 4:00 P.M.
) PROPOSED AUCTION DATE: _____/01____.M.
Debtors. )
- -----------------------------------)
NOTICE OF PROPOSED SALE OF 100% OF THE COMMON STOCK
OF REORGANIZED GC COMPANIES, INC. BY CHAPTER 11 PLAN
On June __, 2001, GC Companies, Inc. ("GCX") and its affiliated
debtors-in-possession (collectively, the "Debtors") filed their Motion for an
Order (A) Establishing Bidding Procedures in Connection with the Solicitation of
Higher or Better Offers for the Acquisition of 100% of the Common Stock of
Reorganized GC Companies Inc. (the "New Common Stock") by Chapter 11 Plan, and
(B) Approving the Form and Manner of Notice Thereof (the "Bidding Procedures
Motion").
On July __, 2001, the Court entered an order approving the Bidding
Procedures Motion (the "Order"). The Bidding Procedures Motion and Order were
served on all parties entitled to notice thereof. If you would like a copy of
the Bidding Procedures Motion and/or Order please contact ______________ at
_______________.
PLEASE TAKE NOTICE that, in accordance with the Order, the deadline to
submit competing bids for the New Common Stock is 4:00 p.m. Eastern Time on ,
2001. Competing bids, conforming to the requirements of the Order, should be
submitted to be received no later than __________, to:
Daniel M. Glosband, P.C.
Goodwin Procter LLP
Exchange Place
Boston, MA 02019
If any Qualified Bids (as defined in the Bidding Procedures Motion) for the New
Common Stock are received in accordance with the Order by 4:00 p.m. Eastern
Standard Time on _____ 2001, an auction of the New Common Stock will be
conducted at the offices of Goodwin Procter LLP,
38
Exchange Place, Boston, MA 02109 on ________, 2001, beginning at ____ _.m.
PARTIES INTERESTED IN SUBMITTING QUALIFIED BIDS AND PARTICIPATING IN THAT
AUCTION SHOULD CAREFULLY REVIEW THE ORDER FOR PROCEDURES FOR SUBMISSION OF BIDS
AND THE CONDUCT OF THE AUCTION. Any party wishing to conduct due diligence with
respect to the New Common Stock should contact _________ at______________.
Dated: ______, 2001 _________________________________
David M. Fournier (Bar No. 2812)
Pepper Hamilton LLP
1201 Market Street, Suite 1600
P.O. Box 1709
Wilmington, DE 19899-1709
(302) 777-6500
-and-
Daniel M. Glosband, P.C.
Colleen A. Murphy, Esq.
Philip F. Coppinger, Esq.
GOODWIN PROCTER LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000
39
EXHIBIT D
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------
)
In re ) Chapter 11
)
GC COMPANIES, INC., et al. ) Case Nos. 00-3897
) through 00-3927 (EIK)
Debtor. )
) (Jointly Administered)
)
- ------------------------------------
ORDER ON MOTION OF DEBTORS AND DEBTORS IN POSSESSION
FOR AN ORDER (A) ESTABLISHING BIDDING PROCEDURES IN
CONNECTION WITH THE SOLICITATION OF HIGHER OR BETTER
OFFERS FOR THE ACQUISITION OF 100% OF THE COMMON STOCK
OF REORGANIZED GC COMPANIES, INC. BY CHAPTER 11 PLAN,
AND (B) APPROVING THE FORM AND MANNER OF NOTICE THEREOF
Upon consideration of the motion of GC Companies, Inc. ("GCX") and its
affiliated debtors-in-possession the ("Debtors") for an order (A) Establishing
Bidding Procedures in Connection with the Solicitation of Higher or Better
Offers for the Acquisition of 100% of the Common Stock of Reorganized GC
Companies, Inc. by Chapter 11 Plan, and (B) Approving the Form and Manner of
Notice Thereof (the "Motion"), and after notice and an initial hearing thereon;
it is hereby ORDERED that:
1. The Motion is hereby GRANTED. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Motion.
2. The following procedures shall govern the sale of the New Common
Stock:
(a) To participate in any bidding process, each potential bidder must
deliver (unless previously delivered) to the Debtors: (i) an executed
confidentiality agreement in form and substance satisfactory to GCX;
and (ii) such financial disclosure and other information acceptable to
GCX and
40
its financial advisor that demonstrates such party's financial and
other ability to consummate an Overbid. A potential bidder shall be
considered to be a qualified bidder ("Qualified Bidder") if it delivers
the documents described in subparagraphs (i) and (ii) above and GCX
determines it is reasonably likely (based on availability of financing,
experience and other considerations) to be able to consummate a
purchase of the New Common Stock, if selected as the successful bidder.
Onex/Oaktree is a Qualified Bidder and the Onex/Oaktree Agreement is a
Qualified Bid, as described below.
(b) To be considered a "Qualified Bid," each competing offer for an Overbid
must: (i) be made by a party satisfying the conditions described in the
preceding paragraph (a) (i.e., be a "Qualified Bidder"); ---- (ii) be
in the form of a letter from such Qualified Bidder stating that (A) the
Bidder offers to acquire the new Common Stock upon the terms and
conditions set forth in the Definitive Agreement or the Plan, marked to
show those amendments and modifications to the Onex/Oaktree Agreement
or the Plan, including price and terms, that the Qualified Bidder
proposes (the "Marked Applicable Agreement") and (B) such Qualified
Bidder's offer is irrevocable until the conclusion of any scheduled
Auction and, if accepted as the Final Accepted Offer at such Auction,
until the effective date of the Plan. Each Qualified Bidder shall
accompany its bid with written evidence satisfactory to the Debtors of
available funds to complete the transaction. Upon the entry of the
Overbid Order, the Onex/Oaktree Agreement (and the Plan, when filed and
the Definitive Agreement with Onex/Oaktree when completed shall be
deemed to be a Qualified Bid; (iii) (A) provide the Debtors' review of
the Qualified Bidder's draft submissions relating to approval of the
Qualified Bidder's acquisition of the New Common Stock by the Federal
Trade Commission ("FTC") in accordance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, if required to
consummate the Overbid transaction; (B) represent that the Qualified
Bidder is prepared to immediately initiate all actions necessary to
obtain FTC approval for the competing bid; and (C) provide its best
estimate of the time within which such FTC approval will be obtained;
(iv) provide for aggregate consideration to the Debtors' estates of at
least $5 million in excess of the Onex/Oaktree Investment; (v) not be
conditioned on the outcome of due diligence; and (vi) be submitted by
delivering fifteen complete written copies of its Qualified Bid to
Daniel M. Glosband, P.C., Goodwin Procter LLP, Exchange Place, Boston,
Massachusetts 02109, not later than 4:00 p.m. Eastern Time on the date
(which the Debtors assume, subject to the Court's calendar, will be
August 24, 2001) that is 10 business days before the first Disclosure
Statement Hearing on the adequacy of the Disclosure Statement for the
Plan (the "Bid Deadline);
41
(c) Overbids shall not contain any conditions or contingencies to closing
other than such conditions as are stated in the Oaktree/Onex Agreement,
and the acceptance by the Debtors of any such Overbids shall invalidate
all such conditions and contingencies without affecting any other terms
of the Overbid. All bids made before or at the Auction shall remain
open, binding on the bidder and subject to acceptance by the Debtors
until the earlier of Court approval of another bid or_____, 2001.
(d) If any Overbids are received, an Auction will be conducted at the
offices of Goodwin Procter LLP, Exchange Place, Boston, Massachusetts
02109, or such other location as the Debtors shall designate, on
_________, 2001, beginning at ____ _.m. The Debtors' counsel and their
designated representatives, may conduct the Auction without the
assistance of an outside auctioneer. At the Auction, Onex/Oaktree and
all Qualified Bidders shall be permitted to bid. The Debtors shall be
required to specify at the commencement of the Auction which bid they
deem to be the highest and best bid at that time and the material terms
of such bid.
(e) At the Auction, the Debtors shall solicit competing bids from Qualified
Bidders, including Onex/Oaktree. After the Debtors have determined and
announced which Overbid they believe is the highest and best offer,
Qualified Bidders shall be permitted to make subsequent Overbids, until
the Debtors determine that one or more Overbids constitute(s) the
highest and best value for the New Common Stock. All subsequent
Overbids shall have a readily ascertainable fair market value of
$500,000 in excess of the highest existing Overbid.
(f) In the event of a sale of the New Common Stock to a party other than
Onex/Oaktree, Onex/Oaktree shall be paid from the proceeds of such
alternative sale a flat fee payment (the "Break-Up Fee") in the amount
of $3,000,000, and reimbursed reasonable out-of-pocket expenses up to
$1,000,000 (the "Expense Reimbursement").
(g) The Debtors shall determine in their sole discretion whether an Overbid
meets the qualifications described herein and whether a submitted
Overbid constitutes the highest and best offer.
3. Within two business days following entry of this Order, the Debtors
shall serve by first-class mail, postage pre-paid:
(a) A copy of this Order establishing bidding procedures upon: (i) the
United States Trustee; (ii) the Debtors' 20 largest unsecured
42
creditors; (iii) counsel for the Creditors' Committee; (iv) counsel to
Fleet Bank, N.A., the Bank of Nova Scotia, General Electric Capital
Corporation, Reliastar, Bank Leumi, Harcourt General, Inc. and Heller
EMX, Inc.; (v) all parties who have filed with the Court a request for
notices in this case; (vi) The Securities and Exchange Commission;
(vii) the Internal Revenue Service; (viii) counsel to Onex Oaktree; and
(ix) all potential bidders with whom the Debtors have been in contact.
(b) A copy of the Motion upon all potential bidders who previously have
expressed to the Debtors an interest in acquiring the New Common Stock.
Dated: July __, 2001 ______________________________________
UNITED STATES BANKRUPTCY JUDGE