IMAX CORPORATION

EXHIBIT 10.1

 

 

 

SUBSCRIPTION AGREEMENT

among

IMAX CHINA HOLDING, INC.,

IMAX CORPORATION,

IMAX (BARBADOS) HOLDING, INC.,

CHINA MOVIE ENTERTAINMENT FV LIMITED,

CMCCP DOME HOLDINGS LIMITED

and

CHINA MOVIE ENTERTAINMENT CMC LIMITED

 

 

Dated April 7, 2014

 

 

 

 

 

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TABLE OF CONTENTS

 

         Page   SECTION 1   INTERPRETATION      2    SECTION 2   SUBSCRIPTION
FOR SHARES      8    SECTION 3   CONDITIONS PRECEDENT TO COMPLETION      9   
SECTION 4   COMPLETION AND POST-COMPLETION ACTIONS      9    SECTION 5  
REPRESENTATIONS AND WARRANTIES      16    SECTION 6   CONFIDENTIALITY;
RESTRICTION ON ANNOUNCEMENTS      17    SECTION 7   EXPENSES      18    SECTION
8   INDEMNIFICATION      18    SECTION 9   EFFECTIVE DATE AND TERMINATION     
23    SECTION 10   NOTICES      24    SECTION 11   MISCELLANEOUS      26   
SECTION 12   GOVERNING LAW AND JURISDICTION      28   

 

SCHEDULES    SCHEDULE 1    PARTICULARS OF THE GROUP SCHEDULE 2    DISCLOSURE
SCHEDULE SCHEDULE 3    COLLECTIVE WARRANTIES SCHEDULE 4    INVESTOR WARRANTIES
EXHIBITS    EXHIBIT A    FORM OF RESTATED ARTICLES EXHIBIT B    FUNDS FLOW
MEMORANDUM

 

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SUBSCRIPTION AGREEMENT (this “Agreement”) made on the 7th day of April, 2014

AMONG:

 

(1) IMAX CHINA HOLDING, INC., an exempted company with limited liability
incorporated and existing under the laws of the Cayman Islands whose registered
address is at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
(the “Company”);

 

(2) IMAX CORPORATION, a corporation incorporated pursuant to the laws of Canada
whose registered office is at 2525 Speakman Drive, Mississauga, Ontario, Canada
L5K 1B1 (“IMAX Corp”);

 

(3) IMAX (BARBADOS) HOLDING, INC., an international business company
incorporated pursuant to the laws of Barbados whose registered office is at The
Phoenix Centre, George Street, Belleview, St. Michael, Barbados (“IMAX
Barbados”);

 

(4) CHINA MOVIE ENTERTAINMENT FV LIMITED, an exempted company with limited
liability incorporated and existing under the laws of the Cayman Islands whose
registered office is at the office of Intertrust Corporate Services (Cayman)
Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands.
(“FV”); and

 

(5) CMCCP DOME HOLDINGS LIMITED (“CMCCP”), and CHINA MOVIE ENTERTAINMENT CMC
LIMITED (“CME”), exempted companies with limited liability incorporated and
existing under the laws of the Cayman Islands whose registered office is at the
office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, P.O. Box
2547, 69 Dr. Roy’s Drive, George Town, Grand Cayman KY1-1104, Cayman Islands
(together, “CMC”; CMC together with FV, the “Investors” and each an “Investor”).
For purposes of this Agreement, any references to CMC in this Agreement shall
refer to CMCCP and CME on a joint and several basis.

(together the “Parties” and each a “Party”).

RECITALS:

 

(A) The Company is an exempted company with limited liability incorporated and
existing under the laws of the Cayman Islands. Further particulars of the
Company are set forth in Part A of Schedule 1.

 

(B) On the date hereof, IMAX Barbados holds 100% of the issued and outstanding
Class A Shares (as defined below) of the Company.

 

(C) The Parties agree that, upon the terms and subject to the conditions set
forth herein, the Company shall allot and issue to the Investors, and the
Investors shall subscribe for certain Class C Shares.

 

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AGREEMENT:

SECTION 1

INTERPRETATION

 

1.1 Definitions. In this Agreement, unless the context otherwise requires the
following words and expressions have the following meanings:

“Actual Net Deficit” means the amount derived by (a) the First Completion IMAX
Trade Payables owed by the Group to IMAX Corp plus (b) the actual amount of the
Financial Indebtedness of the Group plus (c) the Notes minus (d) the actual
amount of Cash of the Group minus (e) net proceeds of the FV First Subscription
Price and the CMC First Subscription Price (after deducting the payment of 50%
of the aggregate amount of expenses incurred by the Parties pursuant to
Section 7.1) and minus (f) the IMAX Corp Note, in each case, as of the First
Completion Date immediately after giving effect to the transactions set forth in
Sections 4.2(a)(ii), 4.2(a)(iii) and 4.2(a)(iv) (as illustrated in Steps 1 to 4
of the Funds Flow Memo). For the avoidance of doubt, for purposes of calculating
the “Actual Net Deficit”, the amounts in respect of the foregoing clauses (a),
(b), (c) (d) and (f) shall be the actual amounts of each of the First Completion
IMAX Trade Payables, the Financial Indebtedness, the Notes, Cash and IMAX Corp
Note as shown on the Opening Day Balance Sheet.

“Affiliate” of a Person (the “Subject Person”) means a Person that directly or
indirectly through one or more intermediaries Controls or is Controlled by or is
under common Control with the Subject Person.

“Assigned Contracts” means the contracts set forth in Schedule 1 to the
Assignment Agreement.

“Assigned Rights” means all of IMAX Corp’s economic rights and benefits in and
to the Delegated Contracts.

“Assignment Agreement” means the assignment, delegation and services agreement
entered into by and between IMAX Corp and HKCo effective as of January 1, 2014.

“Basic Documents” means this Agreement, the Shareholders’ Agreement, the
Restated Articles, the Indemnity Agreement, the Letter of Undertaking and the
Assignment Agreement.

“Board” means the board of directors of the Company.

“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks located in the Cayman Islands, the United States of America,
Canada, the PRC or Hong Kong are authorized or required by law or executive
order to be closed and on which no tropical cyclone warning no. 8 or above and
no “black” rainstorm warning signal is hoisted in Hong Kong at any time between
8:00 a.m. and 6:00 p.m. Hong Kong time.

“Cash” shall have the meaning set forth in the Shareholders’ Agreement.

 

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“China” or the “PRC” means the People’s Republic of China, and for purposes of
this Agreement excluding Hong Kong and Macau Special Administrative Regions of
the PRC and Taiwan.

“Class A Shares” means Common A shares of par value US$0.01 each in the
authorized capital of the Company.

“Class C Shares” means Common C shares of par value US$0.01 each in the
authorized capital of the Company.

“CMC Shares” means collectively the CMC First Completion Shares and the CMC
Second Completion Shares.

“Collective Warranties” means the representations and warranties undertakings of
the Company and IMAX Corp set forth in Schedule 3.

“Control” of a Person means (a) ownership of more than 50% of the shares in
issue or other equity interests or registered capital of such Person or (b) the
power to direct the management or policies of such Person, whether through the
ownership of more than 50% of the voting power of such Person, through the power
to appoint a majority of the members of the board of directors or similar
governing body of such Person, through contractual arrangements or otherwise.

“Delegated Contracts” means the contracts set forth in Schedule 2 to the
Assignment Agreement.

“Disclosure Schedule” means the disclosure schedule set forth in Schedule 2.

“Equity Securities” means, with respect to any Person, such Person’s capital
stock, membership interests, partnership interests, registered or share capital,
joint venture or other ownership interests or any options, warrants or other
securities that are directly or indirectly convertible into, or exercisable or
exchangeable for, such capital stock, membership interests, partnership
interests, registered or share capital, joint venture or other ownership
interest (whether or not such derivative securities are issued by such Person).

“Financial Indebtedness” shall have the meaning set forth in the Shareholders’
Agreement.

“First Completion” means the completion of the subscription for and issuance of
FV First Completion Shares and the CMC First Completion Shares in accordance
with Section 2.1.

“First Completion Date” means the date that is one (1) Business Day after the
date of this Agreement.

“First Completion IMAX Trade Payables” means the actual net trade payables
payable by the Group to IMAX Corp as of the First Completion Date, which is
equal to the total amount of net trade payables due to IMAX Corp from each of
HKCo and WFOE, including any related Group consolidation net payables
adjustments as of the First Completion Date.

 

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“Funds Flow Memo” means the Funds Flow Memorandum attached hereto as Exhibit B.

“FV Shares” means collectively the FV First Completion Shares and the FV Second
Completion Shares.

“Governmental Authority” means any government or subdivision thereof; any
department, agency or instrumentality of any government or subdivision thereof;
and the governing body of any securities exchange.

“Group” means collectively the Company and its Subsidiaries, and “Group Company”
means any of them.

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC.

“HKCo” means IMAX China (Hong Kong), Limited, a company limited by shares
incorporated and existing under the laws of Hong Kong with its registered office
at 12/F Ruttonjee House, 11 Duddell Street, Central, Hong Kong and a
wholly-owned subsidiary of the Company.

“HKCo Trade Payables” means net trade payables with an outstanding amount of
approximately US$3,200,000 owed by HKCo to IMAX Corp as of December 31, 2013.

“HK$” means Hong Kong Dollars, the lawful currency of Hong Kong.

“IMAX Trade Payables” means the net trade payables that is the total amount of
HKCo Trade Payables and WFOE Trade Payables as of December 31, 2013.

“Indemnity Agreement” means the indemnity agreement entered into by and between
IMAX Corp and the Company on the date hereof.

“Investor Warranties” means the representations and warranties undertakings of
the Investors set forth in Schedule 4.

“Letter of Undertaking” means the letter of undertaking entered into by and
among IMAX Corp, HKCo and WFOE on the date hereof.

“Management Accounts” shall have the meaning set forth in Schedule 3.

“Net Asset Value” means the difference between total assets and total
liabilities of the Company on a consolidated basis as of the First Completion
Date after giving effect to the transactions set forth in Sections 4.2(a)(ii),
4.2(a)(iii), 4.2(a)(iv), 4.2(a)(v) and 4.3(b) (as illustrated in Steps 1 to 8 of
the Funds Flow Memo). Net Asset Value shall include any impact of the fair value
increment adjustments that are related to the transfer of assets and liabilities

 

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pursuant to the Assignment Agreement (being US$9,641,000 as of January 1, 2014).
For the avoidance of doubt, for purposes of this calculation, the fair value
increment adjustments shall be included, whereas for purposes of the Group
consolidation financial statements under US GAAP, the fair value increment
adjustments shall be eliminated and have a net zero impact.

“Net Deficit” means negative US four million dollars (- US$4,000,000), derived
by (a) the amount of the IMAX Trade Payables (being US$34,500,000) due from the
Group to IMAX Corp plus (b) the Financial Indebtedness of the Group (being US$0)
plus (c) the Notes (being US$13,500,000 due from the Group to IMAX Corp,
assuming Note II is offset and capitalized pursuant to Section 4.2(a)(iii))
minus (d) Cash of the Group (being US$10,000,000) minus (e) net proceeds of the
FV First Subscription Price and the CMC First Subscription Price, after
deducting the payment of 50% of the aggregate amount of expenses incurred by the
Parties pursuant to Section 7.1 (being US$38,000,000) and minus (f) the IMAX
Corp Note, in each case with respect to clauses (a), (b), and (d) as of
December 31, 2013, and with respect to clause (c) and (f), as of January 1,
2014.

“Note I” means the promissory note with face value $13,500,000 issued by HKCo to
IMAX Corp on the First Completion Date, prior to First Completion.

“Note II” means the promissory note with face value $3,338,341 issued by HKCo to
IMAX Corp on the First Completion Date, prior to First Completion.

“Notes” means, collectively, Note I and Note II; provided, that to the extent
Note II is offset and capitalized pursuant to Section 4.2(a)(iii), the reference
to “Notes” in the definition of “Actual Net Deficit” shall be deemed to refer
only to Note I.

“Person” means any natural person, firm, company, Governmental Authority, joint
venture, partnership, association or other entity (whether or not having
separate legal personality).

“Restated Articles” means the Third Amended and Restated Memorandum and Articles
of Association of the Company, in the form of Exhibit A, to be adopted by the
Company at or prior to First Completion.

“Second Completion” means the completion of the subscription for and issuance of
the FV Second Completion Shares and the CMC Second Completion Shares in
accordance with Section 2.2.

“Second Completion Date” means the date that is the ten (10)-month anniversary
of the First Completion Date; provided that if such date is not a Business Day,
the Second Completion Date shall be the next succeeding Business Day or on a
subsequent Business Day agreed among the Parties.

“Shareholders’ Agreement” means the shareholders’ agreement entered into by and
among IMAX Corp, IMAX Barbados, the Company, FV and CMC on the date hereof.

 

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“Subscribed Shares” means collectively the FV Shares and the CMC Shares.

“Subsidiary” at any time means, in respect of any Person (the “Parent”), any
other Person in which the Parent directly or indirectly holds more than 50% of
the ownership interests or voting power represented by the Equity Securities of
such Person and any Person in respect of which the Parent has the power to
appoint a majority of the board of directors or similar governing body of such
Person.

“Term Sheet” means the term sheet entered into by and among IMAX Corp,
FountainVest Partners (Asia) Limited and China Media Capital (Shanghai) Center
L.P. on May 22, 2013.

“US$” means United States Dollars, the lawful currency of the United States of
America.

“Warranties” means the Collective Warranties and the Investor Warranties.

“WFOE” means IMAX (Shanghai) Multimedia Technology Co., Ltd. LOGO
[g707876ex10_1pg08.jpg] , a wholly-foreign owned enterprise organized and
existing under the laws of the PRC with its registered address at Room A421,
No. 389, Nanjing West Road, Huangpu District, Shanghai, PRC and a wholly-owned
subsidiary of HKCo.

“WFOE Trade Payables” means the net trade payables with an outstanding amount of
approximately US$31,300,000 owed by WFOE to IMAX Corp as of December 31, 2013.

 

1.2 Terms Defined Elsewhere in this Agreement. The following terms are defined
in this Agreement as follows:

 

Term

  

Section

“Adjustment Amount”    Section 4.7(b) “Agreement”    Preamble “Arbitration
Notice”    Section 12.2(a) “CMC”    Preamble “CMC First Completion Shares”   
Section 2.1(ii) “CMC First Subscription Price”    Section 2.1(ii) “CMC Second
Completion Shares”    Section 2.2(b) “CMC Second Subscription Price”    Section
2.2(b) “CMCCP”    Preamble “CME”    Preamble “Company”    Preamble “Confidential
Information”    Section 6.1 “First Subscription Price”    Section 2.1(ii)
“Fundamental Warranties”    Section 5.6 “FV”    Preamble “FV First Completion
Shares”    Section 2.1(i) “FV First Subscription Price”    Section 2.1(i) “FV
Second Completion Shares”    Section 2.2(a) “FV Second Subscription Price”   
Section 2.2(a)

 

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“HKIAC”    Section 12.2(b) “IMAX Cayman Account”    Section 4.2(b)(i) “IMAX
Corp”    Preamble “IMAX Corp Note”    Section 4.2(a)(iv) “Indemnified Party”   
Section 8.1 “Indemnifying Party”    Section 8.1 “Investor” or “Investors”   
Preamble “Losses”    Section 8.1 “Notices”    Section 10.1 “Opening Day Balance
Sheet”    Section 4.3(c) “Party” or “Parties”    Preamble “Registered Capital
Increase “    Section 4.3(a) “Representatives”    Section 6.1 “Second
Subscription Price”    Section 2.2(b) “Survival Period”    Section 5.6 “Third
Party Claim”    Section 8.4(b)(i) “Transaction Fees”    Section 7.1

 

1.3 Interpretation.

 

  (a) Directly or Indirectly. The phrase “directly or indirectly” means
directly, or indirectly through one or more intermediate Persons or through
contractual or other arrangements, and “direct or indirect” has the correlative
meaning.

 

  (b) Gender and Number. Unless the context otherwise requires, all words
(whether gender-specific or gender neutral) shall be deemed to include each of
the masculine, feminine and neuter genders, and words importing the singular
include the plural and vice versa.

 

  (c) Headings. Headings are included for convenience only and shall not affect
the construction of any provision of this Agreement.

 

  (d) Include not Limiting. “Include,” “including,” “are inclusive of” and
similar expressions are not expressions of limitation and shall be construed as
if followed by the words “without limitation.”

 

  (e) “Or” not Exclusive. Unless the context clearly requires otherwise, “or”
shall be inclusive and not exclusive.

 

  (f) Law. References to “law” shall include all applicable laws, regulations,
rules and orders of any Governmental Authority, securities exchange or other
self-regulating body, any common or customary law, constitution, code,
ordinance, statute or other legislative measure and any regulation, rule,
treaty, order, decree or judgment; and “lawful” shall be construed accordingly.

 

  (g)

References to Documents. References to this Agreement include the Schedules and
Exhibits, which form an integral part hereof. A reference to any Section,
Schedule or Exhibit is, unless otherwise specified, to such Section of, or
Schedule or Exhibit to this Agreement.

 

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The words “hereof,” “hereunder” and “hereto,” and words of like shall, unless
the context requires otherwise, refer to this Agreement as a whole and not to
any particular Section hereof or Schedule or Exhibit hereto. Unless specified
otherwise, a reference to any document (including this Agreement) is to that
document as amended, consolidated, supplemented, novated or replaced from time
to time.

 

  (h) Time. If a period of time and dates from a given day or the day of a given
act or event is specified, such period shall be calculated inclusive of that
day.

SECTION 2

SUBSCRIPTION FOR SHARES

 

2.1 First Subscription. On the First Completion Date, upon the terms and subject
to the conditions of this Agreement:

 

  (i) FV shall subscribe for, and the Company shall allot and issue to FV,
168,750 Class C Shares (the “FV First Completion Shares”) for an aggregate
subscription price of US$20,000,000 (the “FV First Subscription Price”); and

 

  (ii) CMC shall subscribe for, and the Company shall allot and issue to CMC,
168,750 Class C Shares (the “CMC First Completion Shares”), to be allocated on
an equal basis between CMCCP and CME, for an aggregate subscription price of
US$20,000,000 (the “CMC First Subscription Price”, together with the FV First
Subscription Price, the “First Subscription Price”).

Completion of the subscription of all the Class C Shares pursuant to this
Section 2.1 shall take place simultaneously.

 

2.2 Second Subscription. On the Second Completion Date, subject to the First
Completion having occurred, upon the terms and subject to the conditions of this
Agreement:

 

  (a) FV shall subscribe for, and the Company shall allot and issue to FV,
168,750 Class C Shares (the “FV Second Completion Shares”) for an aggregate
subscription price of US$20,000,000 (the “FV Second Subscription Price”); and

 

  (b) CMC shall subscribe for, and the Company shall allot and issue to CMC,
168,750 Class C Shares (the “CMC Second Completion Shares”), to be allocated on
an equal basis between CMCCP and CME, for an aggregate subscription price of
US$20,000,000 (the “CMC Second Subscription Price”, together with the FV Second
Subscription Price, the “Second Subscription Price”).

Completion of the subscription of all the Class C Shares pursuant to this
Section 2.2 shall take place simultaneously.

 

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SECTION 3

CONDITIONS PRECEDENT TO COMPLETION

 

3.1 No Conditions Precedent to First Completion. There shall be no conditions to
the obligations of each Party to proceed with the First Completion provided that
all the items set out in Sections 4.2(a) and 4.2(b) are fulfilled at, or prior
to, the First Completion.

 

3.2 Conditions Precedent to Obligations of Investors to Second Completion. The
obligation of each Investor to complete the subscription for the FV Second
Completion Shares or the CMC Second Completion Shares, as applicable, is
conditional upon the satisfaction (or, where legally permissible, waiver by each
Investor) of the following conditions:

 

  (a) there is no case, proceeding or other action (i) under any bankruptcy,
insolvency or similar law seeking to have an order of relief entered with
respect to the Company, IMAX Barbados or IMAX Corp or seeking to adjudicate the
Company, IMAX Barbados or IMAX Corp bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or other relief with respect to the Company, IMAX Barbados or IMAX
Corp or the debts of the Company or IMAX Corp or (ii) seeking appointment of a
receiver, trustee, custodian or other similar official for the Company, IMAX
Barbados or IMAX Corp or all or substantial part of each of their property;

 

  (b) there is no general assignment for the benefit of the creditors of the
Company, IMAX Barbados or IMAX Corp; and

 

  (c) there is no admission in writing of the inability of the Company, IMAX
Barbados or IMAX Corp to pay its debts when they become due.

SECTION 4

COMPLETION AND POST-COMPLETION ACTIONS

 

4.1 Time and Place of First Completion. The First Completion shall take place at
the Hong Kong office of Paul, Weiss, Rifkind, Wharton & Garrison on the First
Completion Date, or at such other time and place as the Parties may agree.

 

4.2 Actions at First Completion and after First Completion.

 

  (a) At First Completion, the Company shall, and IMAX Corp and IMAX Barbados
shall, as applicable:

 

  (i) adopt and cause to be filed with the Registrar of Companies of the Cayman
Islands the Restated Articles (to the extent such has not already been adopted
and filed at or prior to First Completion);

 

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  (ii) to the extent not already done, complete the assignment transactions
contemplated under the Assignment Agreement;

 

  (iii) to the extent not already done, upon completion of the assignments
pursuant to the Assignment Agreement, (x) IMAX Corp shall transfer Note II to
IMAX Barbados in consideration of the issuance of 2 new shares in IMAX Barbados
to IMAX Corp, (y) upon completion of the transfer in the foregoing sub-clause
(x), IMAX Barbados shall transfer Note II to the Company in consideration of the
issuance of 699,899 new Class A Shares in the Company to IMAX Barbados and
(z) upon completion of the transfer in the foregoing sub-clause (y), the Company
shall transfer Note II to HKCo in consideration of the issuance of 2 new shares
in HKCo to the Company, the net result of which is the offsetting and
extinguishment in full of the balance of Note II;

 

  (iv) to the extent not already done, upon completion of the actions in
Section 4.2(a)(iii) above, (x) IMAX Corp shall subscribe for 1 new share in IMAX
Barbados in consideration for the issuance of a promissory note with value
US$4,000,000 (“IMAX Corp Note”) in favor of IMAX Barbados and (y) IMAX Barbados
shall transfer the IMAX Corp Note to the Company in consideration of the
issuance of 100 new Class A Shares in the Company;

 

  (v) to the extent not already done, upon completion of the actions in
Section 4.2(a)(iv) above, the Company shall transfer the IMAX Corp Note to HKCo
in consideration of the issuance of 2 new shares in HKCo to the Company;

 

  (vi) allot and issue the FV First Completion Shares to FV;

 

  (vii) allot and issue the CMC First Completion Shares to CMC;

 

  (viii) deliver to FV and CMC a certificate from IMAX Corp signed by a duly
authorized officer of IMAX Corp confirming (i) all Assigned Contracts and
Assigned Rights have been duly assigned as of the First Completion Date, and
(ii) the matters set out in Section 4.2(a)(ii) and that all of the Collective
Warranties are true, correct and complete as of the First Completion Date;

 

  (ix) deliver to each of the Investors a copy of the Board and shareholder
resolutions of the Company, in form and substance reasonably satisfactory to the
Investors, (a) authorizing the execution and performance of the Basic Documents
and the transactions contemplated thereby (including but not limited to the
allotment and issuance of the Subscribed Shares to the Investors) and
(b) approving the adoption of the Restated Articles; and

 

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  (x) deliver to the Investors a year-end unaudited balance sheet of the Company
as of December 31, 2013 which is pro forma adjusted for the First Completion and
Second Completion and the actions and adjustments outlined in Sections 4.1 to
4.6.

 

  (b) At First Completion:

 

  (i) FV shall pay the FV First Subscription Price in immediately available
cleared funds and in US$ to the following account of the Company (the “IMAX
Cayman Account”):

 

Correspondent bank:   

The Bank of New York Mellon, NY

SWIFT BIC Code: IRVTUS3N

Aba No.: 021 000 018

Beneficiary Bank:   

Butterfield Bank (Cayman) Limited, Grand Cayman

12 Albert Panton Street, P.O. Box 705,

Grand Cayman KY1-1107

Cayman Islands

SWIFT BIC Code: BNTBKYKYXXX

Account: 803 326 5086

For final credit:   

IMAX China Holding, Inc.

PO Box 309, Ugland House, South Church Street,

George Town, Grand Cayman, KY1-1104

Cayman Islands

Account: 8401416290011

 

  (ii) FV and CMC shall each deliver to the Company a certificate from FV and
CMC (as the case may be) signed by a duly authorized officer of FV or CMC (as
the case may be) confirming that all of the Investor Warranties with respect to
itself are true, correct and complete as of the First Completion Date;

 

  (iii) CMC shall pay the CMC First Subscription Price in immediately available
cleared funds and in US$ to the IMAX Cayman Account; and

 

  (iv) each Investor shall deliver to IMAX Corp and the Company a copy of the
Board resolutions and shareholder resolutions (if necessary) of each Investor
authorizing the execution and performance of the Basic Documents to which they
are a party and the transactions contemplated thereby (including but not limited
to subscription of the relevant number of Subscribed Shares by each Investor).

 

  (c) Within two (2) Business Days after the First Completion Date, the Company
shall:

 

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  (i) deliver to each Investor a copy of the register of members of the Company
with each Investor duly registered thereon;

 

  (ii) deliver to FV a share certificate, duly issued in the name of FV and
reflecting FV’s ownership of the FV First Completion Shares; and

 

  (iii) deliver to CMC share certificates, duly issued in the name of CMCCP and
CME (as applicable), and reflecting CMC’s ownership of the CMC First Completion
Shares.

 

  (d) On the first Business Day immediately following the First Completion Date,
the Company shall appoint: (i) Frank Kui Tang of FV as a director on the Board,
(ii) one nominee of FV as a non-voting observer on the Board, (iii) Li Rui Gang
of CMC as a director on the Board, (iv) one nominee of CMC as a non-voting
observer on the Board, (v) one nominee of IMAX Barbados, who shall be reasonably
satisfactory to FV and CMC, as an independent director on the Board, and
(vi) six nominees of IMAX Barbados as directors on the Board (to the extent this
has not already been done). For the avoidance of doubt, the total number of
directors on the Board immediately after First Completion shall be nine.

 

4.3 Actions after First Completion.

 

  (a) The Company shall procure that, as soon as practicable after the date of
this Agreement, WFOE apply to the relevant Governmental Authority to increase
its registered capital from US$5,000,000 to up to US$17,000,000 and its total
investment amount from US$12,500,000 to up to US$45,000,000 (the “Registered
Capital Increase”).

 

  (b) As soon as practicable after the First Completion Date, and subject to
regulatory requirements applicable to WFOE’s incurring of debt, the Company and
the relevant parties shall complete Steps 6 to 9 set out in the Funds Flow Memo,
including:

 

  (i) the Company shall lend US$7,500,000 to WFOE under a committed facility and
shall procure that WFOE shall use the US$7,500,000 proceeds to partially repay
the WFOE Trade Payables owing to IMAX Corp;

 

  (ii) the Company shall remit US$20,200,000 to HKCo to subscribe for 8 new
shares in HKCo; and

 

  (iii) the Company shall procure that HKCo shall remit $16,700,000 to IMAX Corp
to pay off and extinguish in full the HKCo Trade Payables of US$3,200,000 and
Note I of US$13,500,000.

 

  (c)

As soon as practicable after the First Completion Date but in any event within 5
Business Days thereafter, IMAX Corp shall assign, transfer and convey to the
Company the China-Equivalent TCL JV Interest (as

 

12

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  such term is defined in Exhibit A of the Shareholders’ Agreement, which
interest shall be subject to adjustment as contemplated in Exhibit A of the
Shareholders’ Agreement) by procuring that IMAX (Hong Kong) Holding, Limited
issue one preferred share to HKCo, in consideration of which HKCo shall transfer
to IMAX (Hong Kong) Holding, Limited the IMAX Corp Note received pursuant to
Section 4.2(a)(v) above.

 

  (d) Within 45 days after the First Completion Date, the Company shall deliver
to the Investors a balance sheet that sets out: (A) an “opening day” balance
sheet as of the date immediately prior to the First Completion Date, prepared on
the same basis and applying the same accounting principles, policies and
practices used to prepare the Company’s Management Accounts, and (B) a pro-forma
“opening day” balance sheet as of the First Completion Date (the “Opening Day
Balance Sheet”), prepared on the same basis and applying the same accounting
principles, policies and practices used to prepare the Company’s Management
Accounts, and assuming that the flow of funds as set forth in Section 4.3(b) (as
illustrated in Steps 6 to 9 of the Funds Flow Memo) have been completed.

 

  (e) IMAX Corp shall, in accordance with and as and when required under the
joint venture agreement among Sino Leader (Hong Kong) Limited, IMAX (Hong Kong)
Holding, Limited and TCL-IMAX Entertainment Co., Ltd. dated October 29, 2013,
contribute an aggregate amount of US$12,500,000 (in cash and in kind), to the
extent any amount thereof has not been contributed by IMAX Corp prior to the
date of this Agreement.

 

4.4 Time and Place of Second Completion. The Second Completion shall take place
at the Hong Kong office of Paul, Weiss, Rifkind, Wharton & Garrison on the
Second Completion Date, or at such other time and place as the Parties may
agree.

 

4.5 Actions at Second Completion and after Second Completion; Use of Proceeds
from Second Completion.

 

  (a) At Second Completion, the Company shall, and IMAX Corp and IMAX Barbados
shall:

 

  (i) allot and issue the FV Second Completion Shares to FV;

 

  (ii) allot and issue the CMC Second Completion Shares to CMC.

 

  (iii) immediately after receipt of the FV Second Subscription Price and CMC
Second Subscription Price by the Company:

 

  (1)

at the Company’s election, the Company shall remit US$23,800,000 to HKCo, either
in whole or in part in the form of subscription for new shares in HKCo or in
whole or in part as a shareholder’s loan (provided that

 

13

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  any loan shall be in the form of a promissory note with substantially the same
commercial terms as Note I);

 

  (2) upon HKCo’s receipt of the funds in Section 4.5(a)(iii)(1) above and
subject to WFOE’s receipt of the relevant approvals from the Governmental
Authority for the Registered Capital Increase, the Company shall procure that
(x) HKCo shall lend US$16,700,000 to WFOE as a loan under a committed facility
and (y) HKCo shall contribute US$7,100,000 in cash to WFOE to subscribe for
additional registered capital in WFOE; and

 

  (3) upon WFOE’s receipt of the funds in Section 4.5(a)(iii)(2) above, the
Company shall procure that WFOE shall repay the remaining balance of
US$23,800,000 of WFOE Trade Payables, thereby extinguishing in full the
approximately $31,300,000 in net trade payables owed by WFOE to IMAX Corp as of
December 31, 2013.

 

  (b) At Second Completion:

 

  (i) FV shall pay the FV Second Subscription Price to the IMAX Cayman Account;
and

 

  (ii) CMC shall pay the CMC Second Subscription Price to the IMAX Cayman
Account.

 

  (c) Within two (2) Business Days after the Second Completion Date, the Company
shall:

 

  (i) deliver to each Investor a copy of the updated register of members of the
Company reflecting each Investor’s ownership of the Class C Shares acquired at
the Second Completion;

 

  (ii) deliver to FV a share certificate, duly issued in the name of FV and
reflecting FV’s ownership of the FV Second Completion Shares; and

 

  (iii) deliver to CMC share certificates, duly issued in the name of CMCCP and
CME (as applicable), and reflecting CMC’s ownership of the CMC Second Completion
Shares.

 

4.6 Consequences of No Second Completion. The Parties agree that if the First
Completion has taken place but the Second Completion has not taken place by the
Second Completion Date solely due to a default of the Investors of their
obligations to proceed with Second Completion, the rights of the Investors shall
be revised in accordance with Section 2.3 of the Shareholders’ Agreement.

 

4.7 Adjustment.

 

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  (a) IMAX Corp and IMAX Barbados agree that, as of the First Completion Date,
(i) the Actual Net Deficit should equal the Net Deficit and (ii) the Net Asset
Value of the Company on a consolidated basis should be no less than
US$54,000,000 (after giving effect to the transactions set forth in Sections
4.2(a)(ii), 4.2(a)(iii), 4.2(a)(iv), 4.2(a)(v) and 4.3(b) (as illustrated in
Steps 1 to 8 of the Funds Flow Memo)). If, on the First Completion Date, the
Actual Net Deficit is not equal to the Net Deficit, and/or the Net Asset Value
is less than US$54,000,000, the adjustment mechanism set forth in Sections
4.7(b) and 4.7(c) below shall apply. IMAX Corp and IMAX Barbados also agree and
covenant that immediately following the transactions set forth in Sections
4.2(a)(ii), 4.2(a)(iii), 4.2(a)(iv), 4.2(a)(v) and 4.3(b) (as illustrated in
Steps 1 to 8 of the Funds Flow Memo), and after deducting the payment of 50% of
the aggregate amount of expenses incurred by the Parties pursuant to
Section 7.1, the amount of Cash in the Group shall be no less than
US$19,000,000.

 

  (b) If (i) the Actual Net Deficit of the Group is greater than the Net Deficit
and/or (ii) the Net Asset Value of the Group is less than US$54,000,000 (the
greater of the difference in amounts derived pursuant to clause (i) and clause
(ii), the “Adjustment Amount”), IMAX Corp shall, at its discretion, offset the
Adjustment Amount on a dollar for dollar basis against either: (1) the amounts
which will be required to be remitted by the Company, HKCo, or WFOE (as
applicable) as set forth in Section 4.5, and/or (2) the amounts required to be
repaid by HKCo under Section 4.3(b)(iii) (including Note I) by capitalizing all
or part of the Adjustment Amount to the capital surplus of the Company. For the
avoidance of doubt, if both clauses (i) and (ii) in the first sentence of this
Section 4.7(b) are true, IMAX Corp shall not be required to make adjustments for
both the increase in the Actual Net Deficit and the decrease in the Net Asset
Value. Where the mechanism of adjustment to be used by IMAX Corp in respect of
the Adjustment Amount pursuant to this Section 4.7(b) is neither the method set
forth in (1) or (2) above, such mechanism shall be mutually agreed between IMAX
Corp and the Class C Shareholders.

 

  (c)

If the Actual Net Deficit is less than the Net Deficit, IMAX Corp shall make
upward adjustments on a dollar for dollar basis by (1) adding such amount to the
amounts to be remitted by the Company, HKCo or WFOE (as applicable), (2) a
repayment of contributed surplus equal to such amount to the Class A
shareholder, and/or (3) the Company declaring a dividend equal to such amount to
the Class A Shareholder, in each case subject to the Net Asset Value being equal
to or greater than US$54,000,000 and the amount of Cash in the Group being no
less than US $19,000,000, in each case after giving effect to (x) such upward
adjustments and (y) the transactions set forth in Sections 4.2(a)(ii),
4.2(a)(iii), 4.2(a)(iv), 4.2(a)(v) and 4.3(b) (as illustrated in Steps 1 to 8 of
the Funds Flow Memo). Any other mechanism in which the upward adjustment will be
made pursuant to this Section

 

15

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  4.7(c) shall be mutually agreed between IMAX Corp and the Class C
Shareholders.

 

  (d) In the event that the Actual Net Deficit deviates from the Net Deficit or
the Net Asset Value is less than US$54,000,000, the adjustments to be made in
this Section 4.7 shall be the sole and exclusive remedy for all Parties.

SECTION 5

REPRESENTATIONS AND WARRANTIES

 

5.1 Collective Warranties. The Company hereby represents, warrants and
undertakes to each Investor in the terms set forth in Schedule 3 and
acknowledges that each Investor in entering into this Agreement is relying on
such representations, warranties and undertakings.

 

5.2 Investor Warranties. Each Investor hereby represents, warrants and
undertakes to the Company in the terms set forth in Schedule 4 and acknowledges
that the Company in entering into this Agreement is relying on such
representations, warranties and undertakings.

 

5.3 Knowledge of Claims. The Collective Warranties are given subject to the
matters in respect of any Collective Warranty (i) disclosed in the Disclosure
Schedule (including the schedules and appendices thereof) or (ii) otherwise
“Disclosed”, as such term is defined in Schedule 3 herein.

 

5.4 No Implied Representations or Warranties. The representations and warranties
made by the Parties in this Agreement are in lieu of and are exclusive of all
other representations and warranties, including any implied warranties of any
kind whatsoever. The Parties hereby expressly disclaim any and all such other or
implied representations or warranties.

 

5.5 Bring-Down to First Completion. Each of the Parties shall procure that the
Warranties given by it are true and accurate on the date hereof and on the First
Completion Date.

 

5.6 Survival. The Collective Warranties shall survive for a period up to and
including the date that is 18 months after the First Completion Date (the
“Survival Period”); provided that (A) Collective Warranties 1.1, 1.3, 1.4, 1.5
and 1.6(a) in Section 1 of Schedule 3 and Collective Warranties 2.1 to 2.4 in
Section 2 of Schedule 3 shall survive indefinitely (collectively the
“Fundamental Warranties”), (B) if a written notice is delivered to the Company,
IMAX Barbados or IMAX Corp pursuant to Section 8.4 with respect to a claim made
under Section 8.1 prior to the expiration of the Survival Period, each
Collective Warranty identified in such notice of claim shall survive until such
claim is finally resolved or is deemed to be withdrawn pursuant to Section 8,
whichever is earlier. The Investor Warranties in paragraphs 1, 2 and 6 of
Schedule 4 shall survive indefinitely, and the Investor Warranties in paragraphs
3, 4 and 5 of Schedule 4 shall survive for the Survival Period.

 

16

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SECTION 6

CONFIDENTIALITY; RESTRICTION ON ANNOUNCEMENTS

 

6.1 General Obligation. Each Party undertakes to the other Parties that it shall
not reveal, and that it shall procure that its respective directors, equity
interest holders, officers, employees, agents, counsel and advisors who are in
receipt of any Confidential Information (as defined below) (collectively,
“Representatives”) do not reveal, to any third party any Confidential
Information without the prior written consent of the Company or the concerned
Party, as the case may be, or use any Confidential Information in such manner
that is detrimental to the Company or the concerned Party, as the case may be.
For the avoidance of doubt, a Party shall be liable for any breach by such
Party’s Representative of the confidentiality obligations contained in this
Section 6. The term “Confidential Information” as used in this Section 6.1
means, (a) any information concerning the organization, structure or business of
any Party or its Affiliates; (b) the terms of any of the Basic Documents, and
the identities of the Parties and their respective Affiliates; and (c) any other
information or material prepared by a Party or its Representatives that contains
or otherwise reflects, or is generated from, Confidential Information.

 

6.2 Exceptions. The provisions of Section 6.1 shall not apply to:

 

  (a) disclosure of Confidential Information that is or becomes generally
available to the public other than as a result of disclosure by or at the
direction of a Party or any of the Representatives in violation of this
Agreement;

 

  (b) disclosure of information that becomes available to a Party on a
non-confidential basis from a source other than the other Parties or its
Representatives, provided that (i) such source is not known by such Party to be
bound by a legal, fiduciary or contractual obligation of confidentiality or
secrecy to the other Parties and (ii) subject to subparagraphs (a), (c) and
(d) of this Section 6.2, the receiving Party will use reasonable efforts to keep
such information confidential;

 

  (c) disclosure by a Party (A) to a Representative, an Affiliate or such
Party’s direct or indirect equity holders (including its limited partners or
limited partners of any of its feeder or co-investment funds) in accordance with
its customary reporting obligations to such direct or indirect equity holders
(including its limited partners or limited partners of any of its feeder or
co-investment funds), provided that such Affiliates and Representatives are
under an obligation of confidentiality (whether professional or contractual), or
(B) for customary fund-raising purposes, it being understood that, for purposes
of clause (B) only, such information shall include the items set forth on
Schedule 3 of the Shareholders’ Agreement only, provided that the recipient of
any Confidential Information is obligated to keep such information confidential
pursuant to a customary confidentiality agreement; and

 

17

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  (d) disclosure, after giving prior notice to the other Parties to the extent
and as soon as reasonably practicable under the circumstances and subject to any
practicable arrangements to protect confidentiality, to the extent required
under the rules of any stock or securities exchange on which the shares of a
Party or its parent company are listed or by applicable laws or governmental
regulations or judicial or regulatory process or in connection with any judicial
process regarding any legal action, suit or proceeding arising out of or
relating to this Agreement; provided that no prior notice to any Party shall be
required to be given under this Section 6.2(d) with respect to any dispute
arising out of or relating to this Agreement.

 

6.3 Publicity. Save as required by law or by any Governmental Authority
including any relevant stock or securities exchange or otherwise agreed by all
the Parties, no publicity release or public announcement concerning the
relationship or involvement of the Parties shall be made by any Party or its
parent company; provided that any initial press release or initial public
announcement in connection with this Agreement or any transaction contemplated
hereunder (whether required by any Governmental Authority, stock exchange or
otherwise) shall be reviewed and agreed in writing by all Parties hereto prior
to its release or announcement.

SECTION 7

EXPENSES

 

7.1 Fees and Expenses. All Parties shall bear their own respective expenses
incurred in connection with the preparation, execution, negotiation and
performance of this Agreement and the other Basic Documents and the transactions
contemplated hereby and thereby, including all fees and expenses of advisors,
representatives, counsels and accountants (“Transaction Fees”). Notwithstanding
the first sentence of this Section 7.1, 50% of Transaction Fees payable by the
Company (including fees and expenses of the Company’s legal and financial
advisors) shall be reflected as a reduction to the cash remitted to IMAX Corp
consistent with the treatment of Transaction Fees contemplated in the Funds Flow
Memo.

SECTION 8

INDEMNIFICATION

 

8.1

Indemnification. Subject to the provisions of this Section 8, the Company, IMAX
Barbados and IMAX Corp (each an “Indemnifying Party”) shall, jointly and
severally, indemnify, defend and hold harmless each Investor, its Affiliates and
their respective directors, officers, employees, permitted successors and
assigns (including any transferee of the Subscribed Shares) (each an
“Indemnified Party”) from and against any and all losses, damages, liabilities,
claims, proceedings, costs and expenses (including the fees, disbursements and
other charges of counsel actually and reasonably incurred by an Indemnified
Party in any action between any Indemnifying Party and an Indemnified Party or
between an Indemnified Party and any third party in connection with any
investigation, evaluation or defense of a claim or otherwise), demands or
actions (collectively, “Losses”) resulting from or

 

18

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  arising out of any breach by any Indemnifying Party of any of the Collective
Warranties. Without prejudice to the Indemnified Parties’ rights hereunder or
the Indemnifying Parties’ obligations hereunder, if the Indemnifying Party
disputes the amount of Losses claimed by an Indemnified Party pursuant to an
indemnity claim, and the Indemnifying Party initiates arbitration in accordance
with Section 12.2 in relation to such claim, the Indemnifying Party shall not be
obligated to pay indemnification for such Losses until the amount thereof has
been finally determined by the arbitration tribunal; provided that, with respect
to any amount under such claim that is not in dispute, the Indemnifying Party
shall promptly indemnify and pay or reimbursement such amount to the Indemnified
Parties.

 

8.2 Breach of Collective Warranties. Subject to Sections 8.3, 8.4 and 8.5, any
indemnity as referred to in Section 8.1 for breach of a Collective Warranty
shall be such as to place an Indemnified Party in the same position (and not
better) as it would have been had there not been any breach of the Collective
Warranty under which such Indemnified Party is to be indemnified.

 

8.3 Indemnification Cap and Minimum Claim. Notwithstanding anything to the
contrary herein:

 

  (a) In no event shall any Indemnifying Party be liable under this Agreement
for any indirect or unforeseeable, speculative, exemplary or punitive damages of
such Indemnified Party.

 

  (b) An Indemnifying Party shall not be liable in respect of any claim for any
Losses (or a series of claims arising from substantially similar facts or
circumstances) for any breach of the Collective Warranties (other than any
breach of any Fundamental Warranties) unless and until the amount that would
otherwise be recoverable from the Indemnifying Party (but for this
Section 8.3(b)) in respect of any such claim or series of claims arising from
substantially similar facts or circumstances in aggregate exceeds US$50,000.

 

  (c) An Indemnifying Party shall not be liable in respect of a claim for any
Losses for any breach of the Collective Warranties (other than any breach of any
Fundamental Warranties) unless and until the amount that would be otherwise
recoverable from the Indemnifying Party (but for this Section 8.3(c)) in respect
of such claim, when aggregated with any other amount or amounts recoverable from
the Indemnifying Party in respect of other claims (excluding any amounts in
respect of a claim for which the Indemnifying Party has no liability because of
Section 8.3(b)), exceeds US$2,000,000. In such an event, the Indemnifying Party
shall be liable for the entire amount of any such Loss.

 

  (d)

For the avoidance of doubt and notwithstanding any other provision in this
Agreement, in no circumstance shall the Indemnifying Parties’ aggregate
liability in respect of all Losses resulting from or arising out of any breach
by any Indemnifying Party of the Collective Warranties (other than any breach of
any Fundamental Warranties) exceed the

 

19

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  aggregate amount actually received by the Company from the Investors pursuant
to Section 2.

 

  (e) Each Investor shall procure and ensure that all commercially reasonable
steps are taken and all commercially reasonable assistance is given to avoid or
mitigate any Losses which in the absence of mitigation would give rise to a
liability in respect of any claim under this Agreement.

 

  (f) For the avoidance of doubt, any claim for a breach of a Collective
Warranty shall be qualified by and subject to any relevant disclosure made in
the Disclosure Schedule or otherwise “Disclosed”, as such term is defined in
Schedule 3, against on such Collective Warranties.

Notwithstanding the above provisions of this Section 8.3, the limitation
provided in this Section 8.3 shall not apply to any Losses incurred by any
Indemnified Party as a result of any Indemnifying Party’s fraud, bad faith or
willful misconduct.

 

8.4 Claim Procedure.

 

  (a) Direct Claims. If an Indemnified Party shall have a claim for
indemnification hereunder for any claim other than a claim asserted by a third
party, the Indemnified Party shall, as promptly as is practicable, but in any
event no later than twenty (20) days following such Indemnified Party’s
knowledge of such claim, give written notice of the claim to the Indemnifying
Parties (stating in reasonable detail the nature of the claim, the basis on
which such claim is being made, the material facts related thereto, and the
amount of the claim asserted and, if practicable, the amount claimed). The
failure to make timely delivery of such written notice by the Indemnified Party
to the Indemnifying Parties shall not relieve the Indemnifying Parties from any
liability under Section 8.1 with respect to such matter, except to the extent
the Indemnifying Parties are actually materially prejudiced by failure to give
such notice. For the avoidance of doubt, any claim notified in accordance with
this Section 8.4(a) and not satisfied, settled, withdrawn or otherwise in the
process of being resolved pursuant to Section 12.2 is deemed withdrawn against
the applicable Indemnifying Party on the expiry of the period of 12 months
starting on the day of notification of the claim (or in the case of a claim in
respect of a contingent liability, 12 months after such contingent liability
becomes an actual liability and is due and payable), unless proceedings in
respect of the claim have been issued and served on the applicable Indemnifying
Party prior to such date.

 

  (b) Third Party Claims.

 

  (i)

If an Indemnified Party receives notice or otherwise obtains knowledge of any
matter that may give rise to an indemnification claim against the Indemnified
Party by a third party (“Third Party Claim”), then the Indemnified Party shall

 

20

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  promptly, but in no event more than twenty (20) days following such
Indemnified Party’s receipt of a Third Party Claim, deliver to the Indemnifying
Parties a written notice describing, to the extent practicable, such matter in
reasonable detail, including the amount or the estimated amount of damages
sought thereunder to the extent then ascertainable (which estimate shall not be
conclusive of the final amount of such Third Party Claim), any other remedy
sought thereunder, any relevant time constraints relating thereto and, to the
extent practicable, any other material details pertaining thereto. The failure
to make timely delivery of such written notice by the Indemnified Party to the
Indemnifying Parties shall not relieve the Indemnifying Parties from any
liability under Section 8.1 with respect to such matter, except to the extent
the Indemnifying Parties are actually materially prejudiced by failure to give
such notice. The Indemnifying Parties shall have twenty (20) days after receipt
of such written notice to notify the Indemnified Parties that they wish to
assume the defense of any such matter with its own counsel, and shall proceed
diligently to defend such matter after its notification to the Indemnified
Parties.

 

  (ii) If any Indemnifying Party elects to assume the defense of any such
matter, then:

 

  (1) the Indemnifying Party shall have the right to defend the Indemnified
Party by appropriate proceedings and shall have the sole power to direct and
control such defense at its expense (subject to sub-clauses (3) and (4) below);

 

  (2) the Indemnified Party shall have no obligation to participate in any such
defense and, shall have the obligation to assist in such defense as reasonably
requested by the Indemnifying Party at the expense of the Indemnifying Party;

 

  (3) subject to sub-clause (1) above, the Indemnified Party shall have the
right to be informed of the status of such defense on a reasonably timely basis
and may provide input to the Indemnifying Party from time to time;

 

  (4)

notwithstanding anything to the contrary contained in this Agreement, such
Indemnifying Party shall not be required to pay or otherwise indemnify the
Indemnified Party against any attorneys’ fees or other expenses incurred by the
Indemnified Party in connection with such matter following such Indemnifying
Party’s election to assume the defense of such matter, unless the Indemnified
Party reasonably shall have concluded (upon written advice of its counsel) that,
with respect to such claims, the Indemnified Party and such Indemnifying Party
may have

 

21

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  different, conflicting, or adverse legal positions or interests; and

 

  (5) such Indemnifying Party shall not, without the written consent of the
Indemnified Party, which shall not be unreasonably withheld or delayed, settle
or compromise any pending or threatened litigation in respect of which
indemnification may be sought hereunder (whether or not the Indemnified Party is
an actual or potential party to such litigation) or consent to the entry of any
judgment which (x) does not, to the extent that the Indemnified Party may have
any liability with respect to such litigation, include an unconditional release
of the Indemnified Party from all liability in respect of such litigation,
(y) includes any statement as to or an admission of fact, culpability or a
failure to act, by or on behalf of the Indemnified Party, or (z) in any manner
involves any injunctive relief against the Indemnified Party.

 

  (iii) If any Indemnifying Party elects not to assume the defense of such
matter, then the Indemnified Party shall proceed diligently to defend such
matter with the assistance of counsel reasonably satisfactory to the such
Indemnifying Party; provided, that the Indemnifying Party shall promptly pay all
fees and expenses of such counsel, and provided, further, the Indemnified Party
shall not settle, adjust or compromise such matter, or admit any liability with
respect to such matter, without the prior written consent of such Indemnifying
Party, such consent not to be unreasonably withheld or delayed.

 

  (iv) The procedures in this Section 8.4(b) shall not apply to direct claims of
an Indemnified Party.

 

  (c) The Indemnifying Parties shall pay or cause to be paid to the Indemnified
Party the amount of all Losses by cash wire transfer in immediately available
cleared funds to a bank account designated by the Indemnified Party within five
(5) Business Days after final determination that such Loss is indemnifiable
pursuant to and subject to the limitations and procedures set forth in this
Section 8.

 

8.5 Specific Limitations.

 

  (a)

The Indemnifying Parties are not liable in respect of any Losses to the extent
that the matter giving rise to such Losses would not have arisen but for the
passing of, or a change in, after the date of this Agreement, a law, rule,
regulation, interpretation of the law or administrative practice of a
government, governmental department, agency or regulatory body or an increase in
the Tax (as defined in Schedule 3) rates or an imposition of Tax or a change in
the generally accepted accounting principles the relevant Group Company is
subject to, in

 

22

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  each case not actually or prospectively in force on the date of this
Agreement.

 

  (b) The Indemnifying Parties are not liable in respect of any Losses to the
extent that:

 

  (i) the liability has been adequately provided for or reserved or was
reasonably apparent as a liability in the Management Accounts;

 

  (ii) payment or discharge of the relevant matter has been taken into account
and reflected in the accounts referred to in Section 8.5(b)(i); or

 

  (iii) in respect of any liability which is contingent, unless and until such
contingent liability becomes as actual liability.

 

  (c) The Indemnifying Parties shall not have any liability under this Section 8
in connection with any particular event, development or fact to the extent that
(i) such liability is covered by insurance for the benefit of, and insurance
proceeds are actually recovered by, the Indemnifying Parties or (ii) the
Indemnified Parties are otherwise entitled to, and have actually recovered,
reimbursement or payment from a third party in respect of such liability.

 

  (d) The rights to indemnification under Section 8 shall not be subject to
set-off against any obligations or amounts due to the Indemnifying Parties from
the Investors, including, without limitation, under any provisions of this
Agreement or any other Basic Document.

 

  (e) No Indemnified Party shall be entitled to recover more than once in
respect of any Losses suffered by such Indemnified Party.

 

8.6 Exclusive Remedy Post First Completion. After the First Completion, the
Investors’ exclusive remedy for breach of the Collective Warranties by any
Indemnifying Party is to make a claim under this Section 8, and each of the
Investors acknowledges and agrees that it shall not have any other right to make
any other claim against the Company, IMAX Corp or IMAX Barbados and hereby
waives all rights to make any such claim in respect of such breach; provided
that this exclusive remedy for Losses does not preclude any Investor from
pursuing remedies under applicable laws for fraud, bad faith or willful
misconduct.

SECTION 9

EFFECTIVE DATE AND TERMINATION

 

9.1 Effective Date. This Agreement shall become effective upon execution hereof
by all of the Parties and shall continue in force until terminated in accordance
with Section 9.2.

 

9.2 Termination. This Agreement may be terminated at any time upon the mutual
written consent of each of the Parties.

 

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9.3 Survival. If this Agreement is terminated in accordance with Section 9.2, it
shall become void and of no further force and effect, except for the provisions
of Section 6 (Confidentiality; Restriction on Announcements), Section 7
(Expenses), Section 9.2 (Termination), this Section 9.3 (Survival), Section 10
(Notices), Section 11 (Miscellaneous) and Section 12 (Governing Law and
Jurisdiction); provided, however, that such termination shall, unless otherwise
agreed by the Parties, be without prejudice to the rights of any Party in
respect of a breach of this Agreement prior to such termination.

SECTION 10

NOTICES

 

10.1 Notice Addresses and Method of Delivery. All notices, requests, demands,
consents and other communications (“Notices”) required to be given by any Party
to any other Party shall be in writing and delivered by hand delivery or
courier; prepaid registered letter sent by first class mail (express courier if
to an address in a country other than the country in which the sender is
situated), return receipt request or facsimile or email to the applicable Party
at the address or facsimile number stated below:

 

If to the Company:    IMAX China Holding Inc.    PO Box 309, Ugland House, Grand
Cayman, KY1-    1105, Cayman Islands    Attention: Maples Corporate Services
Limited    Facsimile No.: +1 345 949 8080    with a copy to:    Paul, Weiss,
Rifkind, Wharton & Garrison    12th Floor, Hong Kong Club Building,    3A Chater
Road,    Central,    Hong Kong    Attention: Jeanette K. Chan    Facsimile No.:
+852 2840 4300 if to IMAX Barbados or IMAX Corp:    IMAX Corporation    2525
Speakman Drive, Mississauga, Ontario,    Canada L5K 1B1    Attention: General
Counsel    Facsimile No.: +1 905 403 6468    with a copy to:    Paul, Weiss,
Rifkind, Wharton & Garrison    12th Floor, Hong Kong Club Building,    3A Chater
Road,    Central,

 

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   Hong Kong    Attention: Jeanette K. Chan    Facsimile No.: +852 2840 4300 if
to FV:    China Movie Entertainment FV Limited    Intertrust Corporate Services
(Cayman) Limited    190 Elgin Avenue,    George Town,    Grand Cayman KY1-9005
   Cayman Islands    Attention: Neil Gray & Kareen Watler    Fascimile No.: +1
345 945 4757    with a copy to:    FountainVest Partners (Asia) Limited    Suite
705-708, ICBC Tower    3 Garden Road Central, Hong Kong    Attention: Mr. Alex
Zhang / Mr. Leon Xu / Mr.    Brian Lee    Email: alexzhang@fountainvest.com /   
leonxu@fountainvest.com /    brianlee@fountainvest.com    Fascimile No.: +852
3107 2490    with a copy to:    Fried, Frank, Harris, Shriver & Jacobson    1601
Chater House    8 Connaught Road Central    Hong Kong    Attention: Douglas
Freeman / Victor Chen    Facsimile No.: +852 3760-3611    Email:
douglas.freeman@friedfrank.com /    victor.chen@friedfrank.com if to CMC:    CMC
Capital Partners    Unit 3607-3608, The Center, No. 989 Changle Road,    Xuhui
District, Shanghai    Attention: Clark Xu    Facsimile No.: +86 21 5466-1250   
with a copy to:    Fried, Frank, Harris, Shriver & Jacobson    1601 Chater House
   8 Connaught Road Central    Hong Kong    Attention: Douglas Freeman / Victor
Chen    Facsimile No.: +852 3760-3611

 

25

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   Email: douglas.freeman@friedfrank.com /    victor.chen@friedfrank.com

or, as to each Party, at such other address or facsimile number as shall be
designated by such Party in a notice to the other Party containing the new
information in the same format as the information set out above and complying as
to delivery with the terms of this Section 10.

 

10.2 Time of Delivery. Any Notice delivered:

 

  (a) by hand delivery shall be deemed to have been delivered on the date of
actual delivery;

 

  (b) by prepaid registered letter or express courier shall be deemed to have
been delivered four (4) Business Days after the date of posting or delivery to
the courier (if by prepaid registered letter to an address in a country other
than the country in which the sender is situated, shall be deemed to have been
delivered eight (8) Business Days after the date of posting);

 

  (c) by facsimile shall be deemed to have been delivered on the day the
transmission is sent (as long as the sender has a confirmation report specifying
a facsimile, a facsimile number of the recipient, the number of pages sent and
the date of the transmission); and

 

  (d) by electronic mail shall be deemed to have been delivered upon
confirmation of successful transmission.

 

10.3 Proof of Delivery. In proving delivery of any Notice it shall be
sufficient:

 

  (a) in the case of delivery by hand delivery or courier, to prove that the
Notice was properly addressed and delivered;

 

  (b) in the case of delivery by prepaid registered letter, to prove that the
Notice was properly addressed and posted; and

 

  (c) in the case of delivery by facsimile transmission, to prove that the
transmission was confirmed as sent by the originating machine to the facsimile
number of the recipient, on the date specified.

SECTION 11

MISCELLANEOUS

 

11.1 No Partnership. The Parties expressly do not intend hereby to form a
partnership, either general or limited, under any jurisdiction’s partnership
law. The Parties do not intend to be partners one to another, or partners as to
any third party, or create any fiduciary relationship among themselves, solely
by virtue of each Investor’s status as the holder of the Class C Shares.

 

11.2 Amendment. This Agreement may not be amended, modified or supplemented
except by a written instrument executed by each of the Parties.

 

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11.3 Waiver. No waiver of any provision of this Agreement shall be effective
unless set forth in a written instrument signed by the Party waiving such
provision. No failure or delay by a Party in exercising any right, power or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of the same preclude any further exercise thereof or
the exercise of any other right, power or remedy. Without limiting the
foregoing, no waiver by a Party of any breach by the other Party of any
provision hereof shall be deemed to be a waiver of any subsequent breach of that
or any other provision hereof.

 

11.4 Entire Agreement. This Agreement (together with the other Basic Documents)
constitutes the whole agreement between the Parties relating to the subject
matter hereof and supersedes any prior agreements or understandings (including
the Term Sheet) relating to such subject matter.

 

11.5 Severability. Each and every obligation under this Agreement shall be
treated as a separate obligation and shall be severally enforceable as such and
in the event of any obligation or obligations being or becoming unenforceable in
whole or in part. To the extent that any provision or provisions of this
Agreement are unenforceable, they shall be deemed to be deleted from this
Agreement, and any such deletion shall not affect the enforceability of this
Agreement as remain not so deleted.

 

11.6 Counterparts. This Agreement may be executed in one or more counterparts
including counterparts transmitted by e-mail (with any attachments in pdf
format) or facsimile, each of which shall be deemed an original, but all of
which signed and taken together, shall constitute one document.

 

11.7 Transfer; No Assignment. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns of the Parties. The
Investors shall not be permitted to assign any of their rights or obligations
under this Agreement to any Person except with the prior written consent of the
Company; provided, that notwithstanding the foregoing, (a) prior to Second
Completion, none of the Investors may assign its rights and obligations under
this Agreement other than in accordance with Section 3.4(a) of the Shareholders’
Agreement, and (b) after the Second Completion, each of the Investors may assign
its rights and obligations under this Agreement to one or more of its Affiliates
without the prior written consent of the Company.

 

11.8 Specific Performance. Each Party shall have the right, in addition to any
other rights and remedies existing in their favor under this Agreement, to
enforce their rights and obligations of the other Parties hereunder by an action
or actions for specific performance, injunctive and/or other equitable relief.
If any such action is brought by a Party to enforce this Agreement, the other
Parties hereby waive the defense that there is an adequate remedy at law and any
requirement under any law to post a bond or other security as a prerequisite to
obtaining equitable relief.

 

11.9

Further Assurance. If at any time after the First Completion and the Second
Completion any further action is necessary or desirable to fully effect the
transactions contemplated hereby, each of the Parties shall take such further

 

27

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  action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request.

SECTION 12

GOVERNING LAW AND JURISDICTION

 

12.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW THEREUNDER.

 

12.2 Arbitration.

 

  (a) Any dispute, controversy or claim arising out of, in connection with or
relating to this Agreement (or the interpretation, breach, termination or
validity thereof) shall be resolved through arbitration. A dispute may be
submitted to arbitration upon the request of any Party with written notice to
the other Parties (the “Arbitration Notice”).

 

  (b) The arbitration shall be conducted in Hong Kong and administered by the
Hong Kong International Arbitration Centre (the “HKIAC”) under the UNCITRAL
Arbitration Rules in force at the time of the initiation of the arbitration.
There shall be three arbitrators. No arbitrator shall be a national of Canada or
the PRC. The claimants to the dispute shall collectively choose one arbitrator,
and the respondents shall collectively choose one arbitrator, within thirty
(30) days after the delivery of the Arbitration Notice to the other Parties.
Both arbitrators shall agree on the third arbitrator within thirty (30) days of
their appointment. If any of the members of the arbitral tribunal have not been
appointed within thirty (30) days after the Arbitration Notice is given, the
relevant appointment shall be made by the Secretary General of the HKIAC. The
arbitration shall be conducted in English.

 

  (c) If an arbitration panel has already been formed under any other Basic
Document and is in existence at the time a demand for arbitration is made under
this Agreement, the Parties shall submit the dispute to the same panel.

 

  (d) Each Party shall cooperate with the other in making full disclosure of and
providing complete access to all information and documents requested by the
other in connection with such arbitration proceedings, subject only to any
doctrine of legal privilege or any confidentiality obligations binding on such
Party.

 

  (e) The costs of arbitration shall be borne by the losing Party, unless
otherwise determined by the arbitration tribunal.

 

  (f) When any dispute occurs and when any dispute is under arbitration, except
for the matters in dispute, the Parties shall continue to fulfill their
respective obligations and shall be entitled to exercise their rights under this
Agreement.

 

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  (g) The award of the arbitration tribunal shall be final and binding upon the
Parties, and the prevailing Party may apply to a court of competent jurisdiction
for enforcement of such award.

 

  (h) Either Party shall be entitled to seek preliminary injunctive relief from
any court of competent jurisdiction pending the constitution of the arbitration
tribunal.

[Remainder of this page intentionally left blank.]

 

29

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IN WITNESS WHEREOF this Agreement has been executed on the day and year first
above written.

 

IMAX CORPORATION By:  

/s/ Joseph Sparacio

  Name:   Joseph Sparacio   Title:   Executive Vice President and     Chief
Financial Officer By:  

/s/ Ed MacNeil

  Name:   Ed MacNeil   Title:   Senior Vice President, Finance IMAX CHINA
HOLDING, INC. By:  

/s/ G. Mary Ruby

  Name:   G. Mary Ruby   Title:   Sole Director IMAX (BARBADOS) HOLDING, INC.
By:  

/s/ G. Mary Ruby

  Name:   G. Mary Ruby   Title:   Sole Director CHINA MOVIE ENTERTAINMENT FV
LIMITED By:  

/s/ Neil Gray

  Name:   Neil Gray   Title:   Director CMCCP DOME HOLDINGS LIMITED By:  

/s/ Ruigang Li

  Name:   Ruigang Li   Title:   Authorized Signatory

--------------------------------------------------------------------------------

CHINA MOVIE ENTERTAINMENT CMC LIMITED By:  

/s/ Clark Xu

  Name:   Clark Xu   Title:   Authorized Signatory

--------------------------------------------------------------------------------

SCHEDULE 1

PARTICULARS OF THE GROUP

PART A – DETAILS OF THE COMPANY AT SIGNING

 

Name:    IMAX China Holding, Inc. Registered Number:    MC-244792 Date of
Incorporation:    August 30, 2010 Place of Incorporation:    Cayman Islands
Registered Office:   

PO Box 309, Ugland House, Grand Cayman

KY1-1104, Cayman Islands

Authorized share capital:   

Prior to adoption of Restated Articles:

 

US$50,000 divided into (i) 4,700,000 voting Common A Shares of par value US$0.01
each, (ii) 300,000 non-voting Common B Shares of par value US$0.01 each.

 

After adoption of Restated Articles:

 

US$62,562.50 divided into (i) 4,700,000 voting Common A Shares of par value
US$0.01 each, (ii) 300,000 non-voting Common B Shares of par value US$0.01 each,
(iii) 750,000 voting Common C Shares of par value US$0.01 each and 506,250
Common D Shares of par value US$0.01 each.

Issued share capital:    2,000,001 Common A Shares Shareholders:   

IMAX (Barbados) Holding, Inc.

– 2,000,001 Common A Shares

Directors:    G. Mary Ruby Secretary:    G. Mary Ruby Outstanding Charges:   
75% of the issued shares of the Company are mortgaged and charged by IMAX
Barbados in favor of Wells Fargo Bank, National Association, pursuant to a share
mortgage dated February 7, 2013, as amended from time to time. Subsidiaries (and
percentage of    IMAX China (Hong Kong), Limited – 100%

 

32

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shareholding):    IMAX (Shanghai) Multimedia Technology Co., Ltd. – 100%

PART B – DETAILS OF THE COMPANY’S SHAREHOLDING IMMEDIATELY AFTER FIRST
COMPLETION

 

1. Immediately after First Completion

 

  (a) Capitalization Table

 

Type of Shares

  Number of Authorized Shares     Number of Issued and Outstanding Shares  

Common A

    4,700,000        2,700,000   

Common B

    300,000        0   

Common C

    750,000        337,500   

Common D

    506,250        0     

 

 

   

 

 

 

Total

    6,256,250        3,037,500     

 

 

   

 

 

 

 

  (b) Shareholding

 

Registered Shareholder

  No. of Shares     Type of Shares   Percentage of Shareholding  

IMAX (Barbados) Holding, Inc.

    2,700,000      Common A     88.89 % 

China Movie Entertainment FV Limited

    168,750      Common C     5.56 % 

CMCCP Dome Holdings Limited

    84,375      Common C     2.78 % 

China Movie Entertainment CMC Limited

    84,375      Common C     2.78 % 

 

2. Immediately after Second Completion (assuming Second Completion occurs)

 

  (c) Capitalization Table

 

Type of Shares

  Number of Authorized Shares     Number of Issued and Outstanding Shares  

Common A

    4,700,000        2,700,000   

Common B

    300,000        0   

Common C

    750,000        675,000   

Common D

    506,250        0     

 

 

   

 

 

 

Total

    6,256,250        3,375,000     

 

 

   

 

 

 

 

  (d) Shareholding

 

Registered Shareholder

  No. of Shares     Type of Shares   Percentage of Shareholding  

IMAX (Barbados) Holding, Inc.

    2,700,000      Common A     80 % 

China Movie Entertainment FV Limited

    337,500      Common C     10 % 

CMCCP Dome Holdings Limited

    168,750      Common C     5 % 

China Movie Entertainment CMC Limited

    168,750      Common C     5 % 

 

33

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PART C – DETAILS OF HKCO AT SIGNING

 

Name:    IMAX China (Hong Kong), Limited Registered Number:    1528022 Date of
Incorporation:    November 12, 2010 Place of Incorporation:    Hong Kong
Registered Office:   

12/F Ruttonjee House, 11 Duddell

Street, Central, Hong Kong

Authorized share capital:    HK$10,000.00 divided into 10,000 shares Issued
share capital:    2 shares Shareholders:    IMAX China Holding, Inc. – 2 shares
Directors:   

1 – Richard Lewis Gelfond

 

2 – Joseph Sparacio

 

3 – Robert Darin Lister

Secretary:    Ace Secretaries Limited Outstanding Charges:    NIL Subsidiaries
(and percentage of shareholding):   

IMAX (Shanghai) Multimedia

Technology Co., Ltd. – 100%

 

34

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PART D – DETAILS OF WFOE AT SIGNING

 

Chinese Name:    LOGO [g707876ex10_1pg37.jpg] English Name:   

IMAX (Shanghai) Multimedia

Technology Co., Ltd.

Registration No:    310000400652178 (Huangpu) Registered with:   

Shanghai Administration for Industry

and Commerce

License No.:    01000002201105310010 Enterprise Identity:   
000000022011053100299 Date of Incorporation:    May 31, 2011 Place of
Incorporation:    PRC Registered Office:   

Room A421, No. 389, Nanjing West

Road, Huangpu District, Shanghai

Registered Capital:    US$5,000,000 Paid-in Capital:    US$5,000,000 Total
Investment Amount:    US$12,500,000 Shareholders (Promoter):    IMAX China (Hong
Kong), Limited Term of Operation:   

30 years:

 

May 31, 2011 to May 30, 2041

Scope of Business:    Technical research and development, technical consulting,
technical training and marketing in relation to movie theater systems and
multimedia technology and provision of after-sales services (including
installation); lease, wholesale, import, maintenance and repair of movie theater
machinery, equipment, systems and software; research and development of software
and hardware (the commodities which are subject to any quota or permit should
follow the relevant regulations) (any business which is subject to an
administrative permit should be operated after obtaining such permit).

 

35

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Legal Representative:    Robert Darin Lister Directors:   

1 – Robert Darin Lister

 

2 – Joseph Sparacio

 

3 – Richard Lewis Gelfond

Supervisors:    Edward Paul MacNeil Outstanding Charges:    NIL Subsidiaries
(and percentage of shareholding):    NIL

 

36

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SCHEDULE 2

DISCLOSURE SCHEDULE

[see attached]

 

37

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SCHEDULE 3

COLLECTIVE WARRANTIES

Definitions

In this Schedule 3 and Schedule 4, capitalized terms not otherwise defined have
the meanings set forth in this Agreement, and the following terms have the
meanings specified:

“Action” shall be as defined in Section 11.1 of this Schedule 3.

“Approvals” means any consent, permit, approval, authorization, waiver, grant,
concession, license, exemption, order, registration or certificate granted by
any governmental, administrative or regulatory body, department, agency, court
or commission in respect of the filings, documents, reports or notices submitted
to such governmental, administrative or regulatory body, department, agency,
court or commission.

“Assets” means all assets, rights and privileges of any nature and all goodwill
associated therewith, including without limitation all rights in respect of
Contracts, all Intellectual Property, and Equipment used in the conduct of the
Principal Business of the Group Companies, but excluding rights in respect of
real property.

“Contracts” means all contracts, agreements, licenses, engagements, leases,
financial instruments, purchase orders, commitments and other contractual
arrangements, which are currently subsisting and effective and which have not
been terminated or completed.

“Disclosed” means, in respect of any Collective Warranty (subject to the proviso
in sub-clause (iv) below), disclosed in (i) the Disclosure Schedule (including
the schedules and appendices thereof) or (ii) all matters reasonably apparent in
the Basic Documents, (iii) all matters reasonably apparent in the Management
Accounts, (iv) all matters reasonably apparent in the report produced by
PriceWaterhouseCoopers in relation to the Management Accounts (but only
disclosed against Collective Warranties in Sections 8.1 and 10.1 to 10.5(a) of
this Schedule 3) or (v) the public filings for financial years 2011, 2012 and
2013 on the website of the United States Securities and Exchange Commission or
EDGAR (Electronic Data Gathering, Analysis, and Retrieval), excluding for (v),
“risk factor” sections or any language in such filings that are cautionary,
predictive or forward-looking in nature, in each case other than any specific
factual information contained therein.

“Encumbrances” means (a) any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, deed of trust, title retention,
security interest or other encumbrance of any kind securing, or conferring any
priority of payment in respect of, any obligation of any Person, including
without limitation any right granted by a transaction which, in legal terms, is
not the granting of security but which has an economic or financial effect
similar to the granting of security under applicable law, (b) any lease,
sub-lease, occupancy agreement, easement or covenant granting a right of use or
occupancy to any Person, (c) any proxy, power of attorney, voting trust
agreement, interest, option, right of first offer, negotiation or refusal or
transfer restriction in favor of any Person and (d) any adverse claim as to
title, possession or use.

--------------------------------------------------------------------------------

“Equipment” means all the plant and machinery, tools and equipment, vehicles and
office furniture, computer equipment and other tangible assets.

“ESOP” means the Company’s employee long term incentive plan adopted on
October 29, 2012.

“Greater China” means the PRC, Hong Kong and Macau Special Administrative
Regions of the PRC and Taiwan.

“IFRS” means International Financial Reporting Standards.

“Intellectual Property” means all letters patent, trademarks, service marks,
registered designs, domain names, copyrights, inventions and Know-how.

“Intercompany Agreements” means the agreements set forth on Schedule 2 of the
Shareholders’ Agreement and the Personnel Secondment Agreement dated as of
August 11, 2011 by and between IMAX Corp and the WFOE.

“IP Licenses” shall be as defined in Section 5.6(a) of this Schedule 3.

“Know-how” means all know-how, lists of customers or suppliers, trade secrets,
technical processes or other confidential information relating thereto.

“Knowledge of the Company” means the knowledge of the directors of the Company
after reasonable inquiry in circumstances in which a reasonably prudent person
in a similar position would conduct such inquiry.

“Leases” shall be as defined in Section 5.5 of this Schedule 3.

“Management Accounts” means (i) the unaudited pro forma balance sheet of the
Company as of the Management Accounts Date, and the unaudited pro forma
statement of income for the 9 month period ending on such date and (ii) the
unaudited pro forma balance sheet of the Company as of December 31, 2012 and the
unaudited pro forma statements of income for the year ended December 31, 2012
and (iii) the unaudited pro forma balance sheet of the Company as of
December 31, 2011 and the unaudited pro forma statements of income for the year
ended December 31, 2011.

“Management Accounts Date” means September 30, 2013.

“Material Adverse Effect” means (a) a material and adverse effect on the assets,
properties, business, conditions (financial or otherwise), liabilities or
results of operation of the Group taken as a whole; or (b) any event that
prevents or materially delays, or would reasonably be expected to prevent or
materially delay, consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations under this Agreement.

 

39

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“Material Contracts” means the following Contracts entered into by any Group
Company or to which any Asset, equity interest or shares of any Group Company is
subject to:

(i) all Contracts relating to any credit, loan or facility arrangement,
guarantee or other security arrangement, or indebtedness (other than
intercompany indebtedness) (whether or not incurred, assumed, guaranteed or
secured by any Asset of any Group Company) of more than US$5,000,000;

(ii) Contracts evidencing or relating to any obligations of any Group Company
with respect to the issuance, sale, repurchase or redemption of any Equity
Securities of any Group Company, excluding the ESOP and any grants of Equity
Securities made pursuant to the ESOP;

(iii) Contracts with any exhibitors, film studios and distributors which
involved payments to or from any Group Company in the most recent 12 month
period of in excess of US$2,000,000;

(iv) all real property leases, subleases or other occupancies used by any Group
Company or to which any of them is a party as lessee or lessor;

(v) all employment Contracts to which any Group Company is a party in excess of
US$250,000 per annum;

(vi) Contracts evidencing partnerships or joint ventures (in each case excluding
any revenue sharing arrangements) in which any Group Company has an interest;

(vii) Contracts by and between any Group Company, on the one hand, and any
Affiliate of any Group Company, any other Person with whom any Group Company is
not dealing at arm’s-length, any employee, officer or director of any Group
Company or any entity (to the Knowledge of the Company) controlled by any
employees, officers or directors of any Group Company, on the other hand;

(viii) leases of personal property under which any Group Company is the lessee
and is obligated to make payments more than US$125,000 per annum;

(ix) Contracts relating to the acquisition or disposition of any capital stock,
business or product line of any other Person entered into at any time during the
last three (3) years;

(x) Contracts limiting the freedom of any Group Company to engage in any line of
business, acquire any entity or compete with any Person or in any market or
geographical area, or to solicit any individual or class of individuals for
employment, other than theater agreements with theater operators entered into in
the ordinary course of business containing such market or geographical area
restrictions on IMAX theaters; and

(xi) any Contract not otherwise listed above involving payments to or from any
Group Company in excess of US$5,000,000 per annum, individually or in the
aggregate.

 

40

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“Permitted Encumbrances” means (i) Encumbrances in respect of Taxes, if due, the
validity of which is being contested in good faith by appropriate proceedings
during which collection or enforcement is stayed and for which adequate reserves
have been established in accordance with U.S. GAAP, or Encumbrances in respect
of Taxes not yet due and payable, (ii) mechanics’, carriers’, workmen’s,
repairmen’s or other like Encumbrances arising or incurred in the ordinary
course of business, and (iii) with respect to leasehold interests, mortgages and
other Encumbrances incurred, created, assumed or permitted to exist and arising
by, through or under a landlord or owner of the leased real property.

“Principal Business” has the meaning given in the defined term “Business” in
Section 2.1 of the Shareholders’ Agreement.

“Public Official” means any employee of a Governmental Authority, officer of a
public international organization, or officer or employee of a state-owned
enterprise.

“Related Party” means (a) IMAX Corp, IMAX Barbados or any other direct
shareholder of any Group Company, (b) any director or senior officer of any
Group Company, or (c) any Affiliate of any Group Company or any Person in (a) or
(b).

“Tax” means (a) any and all applicable tax and taxes (including any value added,
sales, franchise, excise, transfer, business, capital stock, income, windfall or
other profits, gross receipts, gains, asset values, payroll, employment
(including withholding obligations imposed on employer/payer), social security,
workers’ compensation, unemployment compensation or net worth, withholding,
estimated, use, registration, stamp, premium, property, or other tax, stamp or
other duty, levy, impost, tariff, charge, fee, deduction, or withholding of any
nature) imposed, levied, collected or assessed by any Governmental Authority in
the PRC or elsewhere and includes any interest and penalties for late or
non-payment of such tax or taxes and any additions thereto and (b) any liability
for the payment of any amounts described in this definition as a result of being
a member of an affiliated, consolidated, combined, unitary or similar group, as
a result of transferor or successor liability, or as a result of the operation
of Law; and (c) any liability for the payments of any amounts as a result of
being a party to any Tax Sharing Agreement.

“Tax Returns” means all Cayman Islands, Hong Kong and China returns,
declarations, claims for refunds, forms, statements, reports, schedules,
information returns or similar statements or documents, and any amendments
thereof (including any related or supporting information or schedule attached
thereto) filed or required to be filed (including electronically) with any
Taxing Authority in connection with the determination, assessment or collection
of any Tax or Taxes.

“Tax Sharing Agreement” means any Tax allocation agreement, Tax indemnification
agreement, Tax sharing agreement or similar contract or arrangement, whether or
not written.

“Taxing Authority” means any Governmental Authority responsible for or having
jurisdiction over the assessment, determination, collection or other imposition
of Taxes.

“U.S. GAAP” means generally accepted accounting principles in the United States.

 

41

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Collective Warranties

As a material inducement to the Investors to consummate the transactions
contained in this Agreement, the Company (for itself and on behalf of the other
Group Companies) and IMAX Corp (where applicable) represents, warrants and
undertakes to each Investor that the representations and warranties set forth in
this Schedule 3 are true, accurate and complete as of the date hereof and as of
the First Completion Date, other than as set forth in the Disclosure Schedule or
otherwise Disclosed:

SECTION 1

CORPORATE MATTERS

 

1.1 Organization, Good Standing and Qualification. Each of the Group Companies
has been duly incorporated and organized, and is validly existing in good
standing, under the laws of its place of incorporation. Each of the Group
Companies has the requisite capacity, power and authority to own and operate its
Assets in connection with the conduct of its business as it is currently
conducted and to carry on its business as it is currently conducted and as
contemplated under the Basic Documents. Each of the Group Companies is duly
qualified or licensed to do business in the jurisdiction in which such Group
Company currently conducts business that requires such qualification or
licensing, save for those matters that would not result in a Material Adverse
Effect.

 

1.2 Charter Documents. The copies of the charter or constitutional documents of
each Group Company that have been delivered to the Investors are true, complete
and accurate and have embodied therein or annexed to them a copy of every
resolution or agreement as is required by law to be embodied in or annexed to
it, and set out completely the rights and restrictions attaching to each class
of authorized share capital or equity holder of such Group Company. Such charter
or constitutional documents are in full force and effect on the date of this
Agreement, but shall be replaced on or prior to the First Completion Date by the
Restated Articles. All legal and procedural requirements and other formalities
concerning such charter or constitutional documents have been duly and properly
complied with in all material respects.

 

1.3 Capitalization and Other Particulars. The particulars of (a) the share
capital or registered capital, as the case may be, of each Group Company, in
each case set forth in Part A, Part C and Part D of Schedule 1 to this
Agreement, are true and accurate in all respects, (b) the other particulars of
each Group Company, in each case set forth in Part A, Part C and Part D of
Schedule 1 to this Agreement, are true and accurate in all material respects,
and (c) the information set forth in Part B of Schedule 1 to this Agreement are
true and accurate in all respects.

 

1.4 Options, Warrants and Reserved Shares.

 

  (a)

Section 1.4 of the Disclosure Schedule sets forth the following information with
respect to each award (including any option or cash award) granted pursuant to
the ESOP outstanding as of the date hereof: (i) the name of the award recipient;
(ii) the number of Shares (as

--------------------------------------------------------------------------------

  defined in the Shareholders’ Agreement) subject to such award (as applicable);
(iii) the exercise or purchase price of such award (as applicable); and (iv) the
date on which such award was granted. Each grant of such awards was properly
approved by the Board (or a duly authorized committee or subcommittee thereof)
in compliance with all applicable laws. There are no commitments or agreements
of any character to which IMAX Corp, the Company or any other Group Company is
bound obligating IMAX Corp, the Company or any other Group Company to accelerate
or otherwise alter the vesting of any award as a result of the transactions
contemplated by the Basic Documents. The Equity Reserved for Management (as
defined in the Shareholders’ Agreement) includes all of the outstanding awards
that have been granted pursuant to the ESOP.

 

  (b) Other than as set out in the Basic Documents, as set out in the ESOP, or
as required by applicable law, (a) there are no outstanding options, warrants,
rights (including conversion or preemption rights) or agreements for the
subscription for or purchase of any shares in the capital stock or registered
capital of any Group Company or any securities convertible into or ultimately
exchangeable or exercisable for any shares of capital stock or registered
capital of any Group Company, (b) no shares in the capital stock or registered
capital of any Group Company, or other shares issuable by any Group Company, are
subject to any preemptive rights, rights of first refusal or other rights to
subscribe for or purchase such shares (whether in favor of any Group Company or
any other Person), pursuant to any agreement or commitment of any Group Company,
and (c) all of the outstanding shares of each Group Company’s capital stock have
been duly authorized and are validly issued and outstanding, fully paid and
non-assessable and have been issued in full compliance with the charter or
constitutional documents and the requirements of all applicable laws and
regulations.

 

1.5 Equity Interest of the Group Companies. IMAX Corp is the legal and
beneficial owner of 100% of the issued shares in IMAX Barbados, which is the
legal and beneficial owner of 100% of the issued shares in the Company. The
Company is the legal and beneficial owner of 100% of the issued shares in HKCo.
HKCo is the legal and beneficial owner of 100% of the equity interest in WFOE.
Other than any options under the ESOP, there is no Encumbrance on, over or
affecting any part of the equity interests in any Group Company and there is no
agreement or commitment to give and create any Encumbrance over such equity
interests other than the Basic Documents and as provided under applicable law.
No claim has been made by any person to be entitled to any such Encumbrance and,
to the Knowledge of the Company, there is no event or circumstance that may give
rise to such claim.

 

1.6 Subsidiaries.

 

  (a)

Save for HKCo and WFOE, the Company does not own any Equity Securities of, or
other direct or indirect interest of any kind in, any other Person. Save for
WFOE, HKCo does not own any Equity

 

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  Securities of, or other direct or indirect interest of any kind in, any other
Person, and WFOE does not own any Equity Securities of, or other direct or
indirect interest of any kind in, any other Person.

 

  (b) Other than the Group Companies, IMAX Corp and its Affiliates (other than
the Group Companies) do not own any Equity Securities of, or other direct or
indirect interest of any kind in, any Person that develops, conducts or
otherwise engages in the Principal Business or any portion thereof in Greater
China.

 

1.7 Corporate Records. The books and records of each Group Company have been
maintained in accordance with good business practices and all applicable laws,
save where failure to maintain such books and records is immaterial. The minute
books of director (including committees thereof) and shareholder meetings of
each Group Company, as previously made available to the Investors, contain, in
all material respects, accurate and complete records of all such meetings and
accurately reflect, in all material respects, all other material corporate
action (whether taken by written consent or otherwise) of the shareholders and
directors of each Group Company.

SECTION 2

AUTHORIZATION AND VALIDITY OF TRANSACTIONS

 

2.1 Authorization. Each of IMAX Corp and the Company has the requisite capacity,
power and authority to execute, deliver and perform its obligations under this
Agreement and the other Basic Documents to which it is a party, and to
consummate the transactions contemplated hereby and thereby. All corporate
action on the part of IMAX Corp and the Company necessary for (a) the
authorization, execution, delivery of and the performance of all of the
obligations of IMAX Corp and the Company under this Agreement, and (b) the
authorization, issuance and allotment of the Class C Shares pursuant to this
Agreement has been taken.

 

2.2 Valid Issuance and Sale of Class C Shares. The Class C Shares when issued
and paid for as provided in this Agreement will upon First Completion or Second
Completion (as the case may be) be duly validly issued, fully paid and
non-assessable. The Class C Shares are free of Encumbrances other than those set
out in the Basic Documents and any applicable securities or corporate laws.

 

2.3 Enforceability. This Agreement and the other Basic Documents have been duly
and validly executed and delivered by IMAX Corp and the Company (only to the
extent they are parties) and constitute the legal, valid and binding obligation
of IMAX Corp and the Company enforceable against each of them in accordance with
their respective terms, except where such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally.

 

2.4 No Breach. Neither the execution and delivery by IMAX Corp and the Company
of this Agreement and the other Basic Documents to which it is a party and the
performance by IMAX Corp and the Company of their obligations under this
Agreement and the other Basic Documents nor the consummation of the transactions
contemplated hereby or thereby, will:

 

  (a) breach, or constitute a default under the charter or constitutional
documents of IMAX Corp or any Group Company (as applicable);

 

44

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  (b) result in a breach of, or constitute a default under, or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of any Encumbrance (other than Permitted Encumbrances) on any
real property or Assets of any Group Company pursuant to, any Contract to which
any Group Company is a party or by which any Group Company or its real property
or Assets are bound, save for those matters that would not result in a Material
Adverse Effect;

 

  (c) result in a violation, breach of or default under any law applicable to
IMAX Corp or any Group Company, or conflict with any order of any court,
Governmental Authority or arbitrator applicable to IMAX Corp or any Group
Company or any of the real property or Assets of IMAX Corp or any Group Company,
save for those matters that would not result in a Material Adverse Effect; or

 

  (d) require the Approval of any Person, save for those Approvals which are not
material and which would not reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereunder or the
performance of any Group Company of any of its obligations under this Agreement.

 

2.5 No Brokerage Fees. Save as set forth in Section 2.5 of the Disclosure
Schedule, no Person is entitled to receive from any Group Company any finder’s
fee, brokerage or commission in connection with this Agreement or anything
contained herein.

 

2.6 Wells Fargo Consent. IMAX Corp has obtained written consent from Wells Fargo
Bank, National Association (“Wells Fargo”) to the transactions contemplated
under the Basic Documents, which consent is required under the Third Amended and
Restated Credit Agreement entered into by IMAX Corp and Wells Fargo, among
others, on February 7, 2013 (as amended, the “Credit Agreement”), and the
Equitable Share Mortgage in Respect of Shares of IMAX China Holding, Inc.
entered into by IMAX Barbados and Wells Fargo on February 7, 2013 (as amended,
the “Share Mortgage”). The rights of the Class C Shareholders under the
Shareholders’ Agreement (including but not limited to the put rights in Sections
2.4, 2.5 and 8 thereof, the right to dividends in Section 6.1 thereof, and the
rights in Section 7 thereof) are not in any way restricted by the Credit
Agreement or the Share Mortgage.

 

45

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SECTION 3

LEGAL COMPLIANCE

 

3.1 Compliance with Laws.

 

  (a) Each Group Company has at all times carried on its business as currently
conducted in compliance with all applicable laws in all respects, save for those
matters that would not result in a Material Adverse Effect. There is no order,
decree or judgment of any court or any Governmental Authority outstanding
against any Group Company.

 

  (b) All Approvals have been obtained by each Group Company to enable such
Group Company to carry on its business in the places and in the manner in which
such business is now carried on and all such Approvals are valid and subsisting,
save for those matters that would not result in a Material Adverse Effect. To
the Knowledge of the Company, there is no fact or circumstance that would cause
any such Approval to be suspended, cancelled or revoked or not be renewed or
reissued upon or prior to their expiry.

 

3.2 Compliance with Anti-bribery, Anti-Corruption or Anti-money Laundering Laws.

 

  (a) None of the Group Companies and, to the Knowledge of the Company, no
director, officer, agent, employee, or any other Person acting for or on behalf
of the foregoing (individually and collectively, a “Company Affiliate”), has
violated the U.S. Foreign Corrupt Practices Act or any other applicable
anti-bribery or anti-corruption laws where such violation would have a Material
Adverse Effect, nor has any Company Affiliate offered, paid, promised to pay, or
authorized the payment of any money, or offered, given, promised to give, or
authorized the giving of anything of value, to any officer, employee or any
other person acting in an official capacity for any Governmental Authority, to
any political party or Public Official or to any person under circumstances
where such Company Affiliate knew or was aware of a high probability that all or
a portion of such money or thing of value would be offered, given or promised,
directly or indirectly, to any Public Official, for the purpose of:

 

  (i) (1) influencing any act or decision of such Public Official in his or her
official capacity, (2) inducing such Public Official to do or omit to do any act
in violation of his or her lawful duty, (3) securing any improper advantage, or
(4) inducing such Public Official to influence or affect any act or decision of
any Governmental Authority, or

 

  (ii) in order to assist any of the Group Companies in obtaining or retaining
business for or with, or directing business to any member of the Group.

 

  (b) None of the directors or shareholders of the Group Companies is a Public
Official.

 

3.3

Compliance with Economic Sanctions Laws. None of the Group Companies maintains
or conducts, and has not maintained or conducted, any business,

 

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  investment, operation or other activity in the conduct of the Principal
Business, and the ownership, operation or use of each of the Group Companies’
Assets in or with: (i) any country or Person targeted by any of the United
States economic sanctions laws administered by the United States Treasury
Department’s Office of Foreign Assets Control (“OFAC”); (ii) any Person
appearing on the list of Specially Designated Nationals and Blocked Persons
issued by OFAC; or (iii) any country or Person designated by the United States
Secretary of the Treasury pursuant to the USA PATRIOT Act as being of “primary
money laundering concern.”

 

3.4 Compliance with Export Control and Import Laws. In the past three (3) years,
none of the Group Companies has conducted any business, investment or operation
in violation of any applicable export control and import laws and has at all
times obtained appropriate Approvals in connection with the export and
importation of its products, except in each case matters which would not result
in a Material Adverse Effect.

SECTION 4

OPERATIONS

 

4.1 Activities since Management Accounts Date. Save as Disclosed, since the
Management Accounts Date, there has not been:

 

  (a) any interruption or alteration in the nature, scope or manner of the
business of any Group Company, which has been carried on lawfully and in the
ordinary and usual course of business, save for those matters that would not
result in a Material Adverse Effect;

 

  (b) any alteration to the charter or constitutional documents of any Group
Company or any other document or agreement establishing, evidencing or relating
to the constitution or operation of any Group Company, other than in connection
with the transactions contemplated hereunder;

 

  (c) save as otherwise contemplated in this Agreement or the other Basic
Documents, any (i) authorization for issuance, issue, grant, sale, delivery,
disposal of, pledge or other Encumbrance of any shares of its capital stock or
securities or other equity interests (or registered share capital) of any Group
Company or issuance of any rights to subscribe for or acquire any shares of
capital stock or securities or other equity interests (or registered share
capital) of any Group Company (other than the Class C Shares), (ii) split,
combination, subdivision or reclassification of the outstanding capital stock or
other equity interests (or registered share capital) of any Group Company or
(iii) purchase, redemption or other acquisition or disposal, directly or
indirectly, of any shares of the capital stock or other equity interests (or
registered share capital) or securities of any Group Company;

 

  (d) any adverse change in any customer relationship, the business, operations,
financial condition, position, assets or liabilities of any Group Company which
would result in a Material Adverse Effect and there has been no damage,
destruction or loss (whether or not covered by insurance) affecting any material
assets which would result in a Material Adverse Effect;

 

47

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  (e) material failure by any Group Company to pay its creditors in the ordinary
course of business;

 

  (f) failure by any Group Company to repay any loan in whole or in part when
due, nor has any Group Company become bound or liable to be called upon to repay
prematurely any loan or other borrowed monies;

 

  (g) except in the ordinary course of business, any acquisition, sale, transfer
or disposal of any Assets in excess of US$100,000;

 

  (h) any declaration or payment of any dividend or other distribution by any
Group Company;

 

  (i) any change in any accounting methods, principles or practice, except as
required by IFRS or U.S. GAAP (as applicable);

 

  (j) entry into any transaction other than on arms’ length terms and for full
and proper consideration;

 

  (k) discharge or satisfaction of any Encumbrance, or payment of any obligation
or liability (fixed or contingent), except in the ordinary course of business;

 

  (l) cancellation or compromise of any debt or claim or amendment,
cancellation, termination, relinquishment, waiver or release of any contract or
right except in the ordinary course of business;

 

  (m) any debt, obligation or liability incurred, assumed or guaranteed by any
Group Company, or any material reduction in the overall value of the Assets of
any Group Company, except for those amounts incurred in the ordinary course of
business;

 

  (n) any surrender relating to group relief or any surrender of a Tax refund
made or received by a Group Company, the making, changing or revoking of any
material Tax election or material method of Tax accounting, any filing of a
material amended Tax Return or a claim for refund of material Taxes, any
material ruling request, closing agreement, or similar agreement with respect to
Taxes entered into, or any material liability or assessment with respect to
Taxes entered into;

 

  (o) institution or settlement of any material legal proceeding; and

 

  (p) entry into any agreement, whether in writing or otherwise, to take any of
the actions set forth in paragraphs (b), (c) and (g) to (o) above.

 

4.2 The Group is engaged solely in the Principal Business and has no other
business activities.

 

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SECTION 5

ASSETS

 

5.1 Title to Assets. The Group Companies have good and valid title to, or a
valid leasehold interest in or contractual right to use, all material Assets,
free and clear from any Encumbrances other than Permitted Encumbrances. The
shares in HKCo and the equity interest in WFOE are free and clear from any
Encumbrances (other than those set out in the Basic Documents and under
applicable laws).

 

5.2 Sufficiency of Assets.

 

  (a) The Assets (including the rights in the Intercompany Agreements) are
sufficient for the continued conduct of the Principal Business after the First
Completion Date in substantially the same manner as it was conducted prior to
the First Completion Date and constitute all of the rights, property and assets
necessary to conduct the Principal Business as currently conducted or presently
proposed to be conducted.

 

  (b) Other than the Assets used under or pursuant to the Intercompany
Agreements, Section 5.2 of the Disclosure Schedule sets forth by category all
Assets currently used by the Group in the conduct of the Principal Business that
is jointly owned or used by, provided by or otherwise shared with (pursuant to a
Contract or otherwise), IMAX Corp or any of its Affiliates (other than the
Group).

 

  (c) Except as set forth in Section 5.2(c) of the Disclosure Schedule, all
Contracts with customers in the PRC, Taiwan, Hong Kong and Macau in the conduct
of the Principal Business, and to which IMAX Corp is currently a party, which
shall include, among others, all theatre agreements with exhibitors, have been
duly and properly assigned by IMAX Corp or its Affiliates (other than the Group)
to the relevant Group Company in accordance with the terms of such Contracts.
All Assigned Contracts and Delegated Contracts are direct sale agreements and
not revenue-sharing agreements (whether it is on full revenue-sharing or partial
revenue-sharing basis).

 

5.3 Real Property. No Group Company owns any land, land use rights, buildings or
real property.

 

5.4 Personal Property. All material tangible personal property used by any Group
Company in, or in connection with, the Principal Business are in good repair and
condition (taking into account their age, fair wear and tear and level of use),
are in satisfactory working order and have been regularly and properly serviced
and maintained.

 

5.5

Leases. Each of the Group Companies has good and valid leasehold interests in
each parcel of leased real property, free and clear of any Encumbrances other
than Permitted Encumbrances. All of the Group Company’s real property leases
(the “Leases”) are in full force and effect, are valid and effective in
accordance with their respective terms, subject to bankruptcy,

 

49

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  insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of generally applicability relating to or affecting creditors’ rights and to
general principles of equity, and there is no material default or event of
default (or event which, with notice or lapse of time, or both, would constitute
a default) by any Group Company or, to the Knowledge of the Company, by the
other party to any such Lease.

 

5.6 Intellectual Property Rights.

 

  (a) All of the Intellectual Property required for the conduct of the Principal
Business is (i) owned by IMAX Corp (and licensed to the relevant Group Company)
or the relevant Group Company as the sole legal and beneficial owner free from
Encumbrances (the “Owned IP”) or (ii) used by such Group Company in accordance
with the terms of a current license from the owner of that Intellectual Property
(the “IP Licenses”). None of such Intellectual Property has been wrongfully or
unlawfully acquired by the relevant Group Company and no such claim has been
made or threatened, nor, to the Knowledge of the Company, are there any grounds
on which such a claim could be made.

 

  (b) Other than generally available or shrinkwrap licenses, the material
particulars as to registration (and applications therefor) of the Owned IP,
including priority and renewal dates, and true copies of all IP Licenses have
been made available to the Investors. Except as provided in the IP Licenses, no
Group Company is obligated to pay any royalties or other payments to any Person
in respect of Intellectual Property used by the Group. No Group Company is in
breach of any IP License or of any agreement under which any confidential
business information was or is to be made available to it, save for those
matters that would not result in a Material Adverse Effect.

 

  (c) Except in the ordinary course of business (including the entering into of
trademark license agreements with theater exhibitors and distributors), no Group
Company has entered into any agreement, arrangement or understanding for the
licensing, or otherwise permitting the use or exploitation by any third party,
of the Owned IP or which prevents, restricts or otherwise inhibits any Group
Company’s freedom to use and exploit the Owned IP.

 

  (d) To the Knowledge of the Company, the processes and methods employed, the
services provided, the businesses conducted and the products manufactured, used
or dealt in by each Group Company does not, or at the time of being employed,
provided, conducted, manufactured, used or dealt in did not, infringe the rights
of any other Person in any Intellectual Property, save for those matters that
would not result in a Material Adverse Effect.

 

  (e) To the Knowledge of the Company, there is not, nor has there been at any
time, any unauthorized use or infringement by any Person of any of the
Intellectual Property owned, licensed, used or otherwise required for the
business of any Group Company, and, to the Knowledge of the Company, no Person
has threatened any such infringement, save for those matters that would not
result in a Material Adverse Effect.

 

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  (f) The Owned IP, and the validity or subsistence of IMAX Corp or the Group’s
right, title and interest therein, is not the subject of any current, pending or
threatened challenge, claim or proceedings, including for opposition,
cancellation, revocation or rectification, and there are no facts or matters
which might give rise to any such challenge, claim or proceedings, except for
such challenges, claims or proceedings which would not result in a Material
Adverse Effect.

 

  (g) Each of the Group Companies has taken all reasonable steps open to it to
preserve its Owned IP. All renewal fees regarding its Intellectual Property have
been paid in full, except for non-payment of such renewal fees which would not
result in a Material Adverse Effect.

SECTION 6

MATERIAL CONTRACTS

 

6.1 Material Contracts. True and complete copies of all of the Material
Contracts have been made available to the Investors. No Group Company is a party
to or bound by or has any material liability under any Material Contract other
than the Material Contracts that are set forth in the Disclosure Schedule. Each
Material Contract set forth in the Disclosure Schedule and the Assigned
Contracts and Delegated Contracts have been duly authorized, executed and
delivered by such Group Company, is in full force and effect, constitutes the
valid and binding obligation of such Group Company enforceable against such
Group Company and, to the Knowledge of the Company, constitutes the valid and
binding obligation of such other party enforceable against such other party in
accordance with its terms, except where such enforceability may be limited by
applicable bankruptcy, insolvency reorganization, moratorium or similar laws
affecting creditors’ rights generally.

 

6.2 No Breach. None of the Group Companies or IMAX Corp, as applicable, and, to
the Knowledge of the Company, no counter party thereto is in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained in any Material Contract set forth in the Disclosure
Schedule, nor is any Group Company or IMAX Corp, as applicable, in receipt of
any claim (written or otherwise) of default. None of the Group Companies or IMAX
Corp, as applicable, and, to the Knowledge of the Company, no counter party
thereto is in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained in the Assigned Contracts
or Delegated Contracts, nor is any Group Company or IMAX Corp, as applicable, in
receipt of any claim (written or otherwise) of default. To the Knowledge of IMAX
Corp or the Company, as applicable, there is no invalidity or grounds for
termination, avoidance, rescission or repudiation of any Material Contract,
Assigned Contract or Delegated Contract to which any Group Company or IMAX Corp,
as applicable, is a party.

 

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6.3 Related Party Transactions. Save as set forth in Section 6.3 of the
Disclosure Schedule, there are no contracts, understandings or transactions
between any Group Company on the one hand and any Related Party of any Group
Company on the other hand and no Related Party of any Group Company is indebted
to any Group Company.

SECTION 7

EXHIBITORS, FILM STUDIOS AND DISTRIBUTORS

 

7.1 Exhibitors, Film Studios and Distributors. A list of the (a) ten
(10) largest exhibitors under theatre agreements with the Group (determined on
the basis of aggregate revenues recognized by the Group over the fiscal year
ended December 31, 2013) (each, a “Major Exhibitor”), (b) five (5) largest film
studios under DMR production services agreements with the Group (determined on
the basis of aggregate revenues recognized by the Group over the fiscal year
ended December 31, 2013) (each, a “Major Studio”), and five (5) largest
distributors under distribution agreements with the Group (determined on the
basis of aggregate revenues recognized by the Group over the fiscal year ended
December 31, 2013) (each, a “Major Distributor”) has been provided to the
Investors. None of the Group Companies has received any written notice or
communication from any Major Exhibitor, Major Studio or Major Distributor that
it intends to terminate, or not renew, its relationship with such Group Company.

SECTION 8

TAX MATTERS

 

8.1 Tax Matters.

 

  (a) All Taxes due and payable by the Group Companies in respect of all periods
ending on or prior to the First Completion Date, have been paid in accordance
with applicable tax laws. The liability for Taxes of the Group Companies as of
the First Completion Date reflected in the Management Accounts will be
sufficient in all material respects to provide for (i) all interest, penalties,
assessments or deficiencies, if any, which are due and unpaid and (ii) the
appropriate accrual for other unpaid Taxes not yet due.

 

  (b) All Tax Returns filed or required to be filed with respect to any period
up to the First Completion Date by or on behalf of the Group Companies have been
made in accordance with applicable law and are true, correct and complete in all
material respects and none of them is the subject of any open dispute with the
relevant Taxing Authority as of the date of this Agreement, except for any
defaults in filing which are not material.

 

  (c)

There are no material liabilities of Taxes in respect of which a Tax claim or
assertion of deficiency has been made against any Group Company from a Tax
Authority. To the Knowledge of the Company, no Tax Return of any Group Company
is currently being examined or audited by any Taxing Authority or is the subject
of any administrative

 

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  or judicial proceeding, no such audit or examination or other administrative
or judicial proceeding is threatened by any Taxing Authority, and there are no
outstanding agreements or waivers extending the statute of limitations
applicable to any Tax Return. Each Group Company has kept and preserved all
material records and information, according to the requirements of the relevant
laws, as may be needed to enable it to deliver correct and complete Tax Returns
to all relevant Taxing Authorities for all periods for which such Tax Returns
and declarations are required by relevant Tax laws.

 

  (d) All material transactions between the Group Companies have been and are on
fully arm’s length terms.

 

  (e) All material Taxes that the Group Companies are obligated to withhold or
collect from amounts owing to any employee, creditor or third party have been,
within the time and in the manner prescribed by applicable law, withheld or
collected and paid over to the proper Taxing Authority and the Group Companies
have complied in all material respects with applicable law relating to the
payment and withholding of Taxes and Tax information reporting, collection and
retention. No Group Company is currently, or has been, party to any Tax Sharing
Agreement.

 

  (f) No claim has been made by a Taxing Authority in any jurisdiction where any
Group Company does not file Tax Returns that such Group Company is or may be
subject to taxation by that jurisdiction or required to file Tax Returns in that
jurisdiction.

 

  (g) No Group Company will be a “passive foreign investment company” as defined
in the U.S. Internal Revenue Code of 1986, as amended, in the taxable year that
includes the First Completion Date.

 

  (h) No Group Company has requested or received any Tax ruling, transfer
pricing agreement, or similar agreement or entered into any closing agreement
with any Taxing Authority.

 

  (i) Save as Disclosed, no Group Company has effected any transactions in
respect of which any consent or clearance from any Taxing Authority was required
or required to be sought.

 

  (j) All documents to which each Group Company is a party or which form part of
such Group Company’s title to any asset or in the enforcement of which such
Group Company is or may be interested which are subject to stamp or similar duty
have been duly stamped and, where appropriate or necessary, adjudicated, except
for any defaults in stamping which are not material.

 

  (k) Each Group Company has been resident for Tax purposes in its jurisdiction
of incorporation and nowhere else at all times since its incorporation and will
be so resident at the First Completion Date.

 

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SECTION 9

EMPLOYEE MATTERS

 

9.1 Employee and Labor Relations.

Save as Disclosed:

 

  (a) Each Group Company has conducted, and conducts, the Principal Business
with respect to its employees in a manner that complies, in all material
respects, with all applicable laws relating to employment and employment
practices, terms and conditions of employment, immigration and wages and hours
and no claims, disputes, actions or proceedings are pending or threatened with
respect to the employees or former employees of any Group Company under such
laws or the employment of the employees.

 

  (b) There has not been in the last two years any strike, slowdown, work
stoppage or lockout or similar activity or, to the Knowledge of the Company,
threat thereof, involving the Principal Business.

 

  (c) No Group Company is a party to or bound by any collective bargaining
agreement or other labor union contract applicable to any employees of the Group
Companies. There are no labor unions or other organizations representing,
purporting to represent or attempting to represent any of the employees.

 

  (d) Except for the ESOP, no Group Company is a party to, or has issued any
shares or options over any shares to any of its employees pursuant to, any plan
providing incentives to any of its employees involving securities or which are
securities based, in which any employees can participate, including share option
plans, long term incentive plans, restricted share plans and share incentive
plans.

 

9.2 Employees. A complete list of the employees of the Group, whether as a
secondee or employee, has been made available to the Investors. Other than the
employees disclosed in the Disclosure Schedule or pursuant to the Intercompany
Agreements, no individual works for, whether as an employee or secondee, any of
the Group Companies.

 

9.3 ESOP. The Company has furnished or made available to the Investors a true
and complete copy of the ESOP. The ESOP has been administered in all material
respects in accordance with its terms. The Company has paid all amounts required
or has made adequate provision in the Management Accounts for the ESOP.

SECTION 10

FINANCIAL MATTERS

 

10.1

Pro Forma Accounts. The Company has made available or delivered to the Investors
copies of the Management Accounts. The Management Accounts have been prepared in
accordance with agreed-upon procedures between the

 

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  Company and the Investors and in accordance with U.S. GAAP (except as
otherwise agreed between the Company and the Investors), applied on a consistent
basis, timely and properly recorded and fairly present in all material respects
the financial condition and operating results of the Company as of the dates,
and for the periods, identified therein. The Management Accounts are complete,
accurate and not materially misleading and do not materially misstate the assets
and liabilities of the Group as of September 30 or December 31 (as applicable)
of the relevant year or the profit or loss of the Group as of the periods
covered thereby. The profits or losses of the Company for the periods covered by
the Management Accounts have not in any material way been affected by any
unusual or non-recurring or exceptional items or by any other matter which has
rendered such profits or losses unusually high or low.

 

10.2 Financial Books and Records. The financial books and records of the Group
Companies have been maintained in accordance with customary business practices
and fairly and accurately reflect, in all material respects, on a basis
consistent with past periods and throughout the periods involved, (i) the
consolidated financial position of the Group Companies and (ii) all transactions
of the Group Companies. The Company has not received any advice or notification
from its independent accountants that the Company has used any improper
accounting practice that would have the effect of not reflecting or incorrectly
reflecting in the books and records of any Group Company any properties, assets,
liabilities, revenues, expenses, equity accounts or other accounts.

 

10.3 Provision for Liabilities. Full provision has been made in the Management
Accounts for all actual liabilities of the Group and full provision (or note) in
accordance with the applicable generally accepted accounting principles and
practices and has been made therein for all other liabilities of the Group then
outstanding whether contingent, un-quantified or disputed or capital or
burdensome commitments and deferred or provisional Tax, other than immaterial
liabilities incurred in the ordinary course of business. The year-end balance
sheet of the Company as of December 31, 2013 delivered pursuant to
Section 4.2(a)(ix) is true and accurate in all material respects.

 

10.4 Provision for Taxes. Full provision or reserve has been made in the
Management Accounts for all Tax including deferred or provisional Tax in respect
of all accounting periods ending on or before the Management Accounts Date for
which the Group was then or might at any time thereafter become or have become
liable including Tax liable to be assessed, charged, or imposed:

 

  (a) on or in respect of or by reference to the profits, gains or income (as
computed for Tax purposes) arising or accruing or deemed to arise or accrue for
any period ended on or before the Management Accounts Date; or

 

  (b) in respect of any event occurring or deemed to occur before the Management
Accounts Date including distributions made or deemed to be made before, and
charges on profits, income or assets on or before, such date.

 

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10.5 Undisclosed Liabilities. The Group has no material liabilities, obligations
or commitments of any nature whatsoever, asserted or unasserted, known or
unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or
otherwise, except (a) those which are adequately reflected or reserved against
in the Management Accounts as of the Management Accounts Date, and (b) those
which have been incurred in the ordinary course of business consistent with past
practice since the Management Accounts Date and which are not, individually or
in the aggregate, material in amount.

SECTION 11

ACTIONS

 

11.1 Actions.

 

  (a) No Group Company is engaged in or the subject of any litigation,
arbitration, suit, claim, action, demand letter, or any judicial,
administrative, regulatory or criminal proceeding, hearing or investigation
(collectively, “Action”), whether as plaintiff, defendant or otherwise involving
an amount in excess of US$1 million. No Action which would result in a Material
Adverse Effect is pending, or, to the Knowledge of the Company, threatened or
expected by or against any Group Company and there is no fact or circumstance
likely to give rise to any Action which would result in a Material Adverse
Effect.

 

  (b) None of the Group Companies nor any material property or Asset of any
Group Company is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, any Governmental Authority,
or any writ, judgment, injunction, determination or award of any Governmental
Authority.

 

11.2 No Insolvency. No order has been made and no resolution has been passed for
the winding up of any Group Company or for a provisional liquidator to be
appointed in respect of any Group Company and no petition has been presented and
no meeting has been convened for the purpose of winding up or dissolving any
Group Company. No receiver has been appointed in respect of any Group Company or
all or any of its assets. No Group Company is insolvent or unable to pay its
debts as they fall due.

SECTION 12

INSURANCE

 

12.1

Insurance. True and complete copies of all insurance policies in respect of the
Group have been made available to the Investors. Such insurance policies are in
full force and effect and shall remain in full force and effect following the
consummation of the transactions contemplated by this Agreement. All such
insurance policies (a) are valid and binding in accordance with their terms;
(b) are of the type and in the amounts customarily carried by Persons conducting
a business similar to the Group and are sufficient for compliance with all

 

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  applicable laws and Contracts to which any of the Group Companies is a party
or by which the Assets are bound; and (c) have not been subject to any lapse in
coverage. There are no claims related to the Principal Business pending under
any such insurance policies as to which coverage has been questioned, denied or
disputed or in respect of which there is an outstanding reservation of rights.

 

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SCHEDULE 4

INVESTOR WARRANTIES

Each Investor represents, warrants and covenants to the Company that the
representations and warranties set forth in this Schedule 4 are true with
respect to itself as of the date hereof and as of the First Completion Date:

 

1. Authorization. The Investor has been duly incorporated and organized, and is
validly existing in good standing, under the laws of its place of incorporation.
The Investor has full power and authority to enter into this Agreement and the
other Basic Documents to which it is a party, and to consummate the transactions
contemplated hereby and thereby, and, assuming due and valid execution and
delivery hereof, this Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors’ rights generally, and
(b) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies. All corporate action on the part
of the Investor necessary for (a) the authorization, execution, delivery of and
the performance of all of the obligations of the Investor under this Agreement
and the other Basic Documents to which it is a party, and (b) the subscription
for the Subscribed Shares has been taken.

 

2. No Breach. The execution and delivery by the Investor of this Agreement and
the other Basic Documents to which it is a party and the performance by the
Investor of its obligations under this Agreement and the other Basic Documents
to which it is a party do not:

 

  (a) breach, or constitute a default under its charter or constitutional
documents;

 

  (b) result in a material breach of, or constitute a material default under,
any Contract to which it is a party or by which it or its real property or
assets are bound;

 

  (c) result in a material violation, breach of or default under any law
applicable to it; or

 

  (d) require the consent or approval of any Person, save for those consents or
approvals where failure to obtain such consents or approvals would prevent or
materially delay, or would reasonably be expected to prevent or materially
delay, consummation of the transactions contemplated hereby or the performance
by the Investor of any of its obligations under this Agreement.

 

3. Purchase Entirely for Own Account. The Class C Shares to be acquired pursuant
to this Agreement will be acquired by the Investor for investment for the
Investor’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.

 

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4. Restricted Securities. The Investor understands that the Class C Shares it is
subscribing for are characterized as “restricted securities” under U.S. federal
securities laws in as much as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the “Act”) only in certain limited
circumstances. In this connection, the Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.

 

5. Status of Investor. The Investor is (i) subscribing and purchasing the Class
C Shares outside the United States in reliance on an exemption from the
registration requirements of U.S. federal and state securities laws under
Regulation S under the Act or (ii) an “accredited investor” within the meaning
of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as
presently in effect, under the Act.

 

6. No restriction. There is no restriction upon the Investor with respect to the
applicable laws of the jurisdiction where the Investor is incorporated
preventing it from subscribing for or purchasing the Class C Shares.

 

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EXHIBIT A

FORM OF RESTATED ARTICLES

 

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EXHIBIT B

FUNDS FLOW MEMORANDUM

[see attached]

 

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