<PAGE>
 
                                                                   EXHIBIT 10.4

                         TRANSITION SERVICES AGREEMENT

          THIS TRANSITION SERVICES AGREEMENT is made as of May 14, 1998 by and
between Sony Pictures Entertainment Inc. ("SPE"), Sony Corporation of America
("SCA") and Loews Cineplex Entertainment Corporation ("Loews Cineplex").

          WHEREAS, SPE, LTM Holdings, Inc. and Cineplex Odeon Corporation
("Cineplex Odeon"), have entered into an Amended and Restated Master Agreement
dated as of September 30, 1997 (the "Master Agreement"), pursuant to which LTM
Holdings, Inc. and Cineplex Odeon engaged in a series of transactions (the
"Transactions") that resulted in the combination of the businesses of LTM
Holdings, Inc. and Cineplex Odeon and the name of LTM Holdings, Inc. was changed
to "Loews Cineplex Entertainment Corporation"; and

          WHEREAS, the Master Agreement contemplates that SCA and SPE will
provide Loews Cineplex with certain services that are currently performed by SCA
or affiliates of SCA on behalf of Loews Cineplex for a limited period following
the closing date of the Transactions (the "Closing Date"), and SCA and SPE are
willing to provide such services subject to the terms and conditions set forth
in this Transition Services Agreement.

          NOW THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, SCA, SPE and Loews Cineplex agree as follows:

          Section 1.  Definitions.  Unless otherwise specified herein, terms
                      -----------                                           
used in this Transition Services Agreement and defined in the Master Agreement
shall have the same meanings as set out in the Master Agreement.

          Section 2.  Services.  Commencing on the Closing Date and until
                      --------                                           
terminated as described in Section 3 hereof, SCA and its Affiliates shall make
available to Loews Cineplex the services (the "Services") described on Schedule
I hereto.  Notwithstanding the foregoing, and for an abundance of caution, SPE
and SCA shall only be responsible for providing the services set forth opposite
their respective names on Schedule I hereto.

          Section 3.  Term and Termination.  (a) Except as provided in Section
                      --------------------                                    
3(b) hereof, this Transition Services Agreement shall take effect as of the
Closing Date and shall terminate, with respect to each Service, on the earlier
of (i) July 1, 1999 or (ii) 90 days from receipt of a written notice of
termination of such Service from any party to the other parties.

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          (b) In the event Loews Cineplex is in default or fails to perform any
obligation under this Transition Services Agreement, and such default is not
cured within 30 business days after receipt of written notice of such default,
or if any proceeding is commenced by or against Loews Cineplex for the purpose
of subjecting the assets of Loews Cineplex to any law relating to bankruptcy or
insolvency or for the appointment of a receiver for the business, property,
affairs or revenues of the party, or if either party makes a general assignment
of its assets for the benefit of creditors, then and in any such event, SCA and
SPE may, at their option without further notice to or demand of, in addition to
all other rights and remedies provided at law or in equity, terminate this
Transition Services Agreement and all rights, privileges and licenses granted or
created hereunder.

          Section 4.  Prices; Invoices.  Loews Cineplex shall pay to SPE and SCA
                      ----------------                                          
the rates set forth on Schedule I hereto for those Services requested and
received by Loews Cineplex.  SPE and SCA shall send Loews Cineplex a monthly
statement accounting for any Services received by Loews Cineplex during such
month.  SCA and SPE shall provide Loews Cineplex with such documents and records
as Loews Cineplex may reasonably request to confirm the invoiced Services and
amounts therefor.  Invoices shall be due and payable 30 days from the date of
receipt.

          Section 5.  Confidentiality.  Except as otherwise required under
                      ---------------                                     
applicable law, SCA, SPE and Loews Cineplex agree to maintain as confidential
and not to disclose to any third party any information provided by one party to
the other or otherwise obtained by one party from the other in the performance
of this Transition Services Agreement.

          Section 6.  Force Majeure.  SCA and SPE, and their respective
                      -------------                                    
Affiliates, shall be excused from failure to provide any Services to the extent
that such failure is directly or indirectly caused by any occurrence beyond its
control and commonly known as force majeure, including, without limitation,
                              ----- -------                                
delays arising out of acts of God, acts or orders of a government, agency or
instrumentality thereof, acts of public enemy, riots, embargoes, strikes
(whether of SCA, SPE or other persons) or any other causes, circumstances or
contingencies which are beyond the control of SCA and SPE, and their respective
Affiliates.  Notwithstanding any events operating to excuse the performance by
SCA and SPE, and their respective Affiliates, this Transition Services Agreement
shall continue in full force until its termination as provided in Section 3
above.

          Section 7.  Indemnity.  With respect to all Services provided
                      ---------                                        
hereunder, Loews Cineplex shall indemnify and hold SCA, SPE and their Affiliates
(including the employees, agents, officers, and directors of all such

                                      -2-
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companies) harmless from any damages from third parties that SCA and SPE, and
their respective Affiliates, may incur as a result the provision of any such
Services.

          Section 8.  Disclaimer of Warranty; Limitation of Remedies.  (a) ALL
                      ----------------------------------------------          
WARRANTIES, EXPRESS OR IMPLIED, ARE DISCLAIMED AND EXCLUDED BY SCA AND SPE,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

          (b) SCA's and SPE's entire liability and Loews Cineplex' exclusive
remedies for SCA's and SPE's liability of any kind (including liability for
negligence) for the services covered by this Transition Services Agreement and
all other performance, nonperformance or delays in performance by SCA and/or SPE
under or related to this Transition Services Agreement shall not exceed the
total amount billed or billable to Loews Cineplex for the particular service or
part thereof which gave rise to the loss or damage.  This limitation of SCA's
and SPE's liability does not apply to claims for personal injury and damage to
tangible personal property caused solely by SCA's or SPE's negligence.

          (c) IN NO EVENT SHALL SCA OR SPE BE LIABLE TO LOEWS CINEPLEX, ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR AFFILIATES FOR INDIRECT, SPECIAL
CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF
PROFITS OR DAMAGE TO OR LOSS OF USE OF ANY PROPERTY.

          Section 9.  Miscellaneous.  All "Miscellaneous" provisions contained
                      -------------                                           
in Article IX of the Master Agreement are, to the extent relevant, fully
applicable hereto and are incorporated by reference as though fully set forth
herein.

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          IN WITNESS WHEREOF, this Transition Services Agreement has been
executed on behalf of each of the parties hereto as of the day and year first
above written.

                                  Sony Pictures Entertainment Inc.
 
 
                                  By:  /s/ Leah Weil
                                       -----------------------------
                                  Its: Assistant Secretary
                                       -----------------------------

                                  Sony Corporation of America
 
 
                                  By:  /s/ Marinus N. Henny
                                       ----------------------------- 
                                  Its: Executive Vice President
                                       -----------------------------

                                  Loews Cineplex Entertainment
                                  Corporation
 
 
                                  By:  /s/ John C. McBride, Jr.
                                       -----------------------------
                                  Its: Senior Vice President,
                                       -----------------------------
                                       General Counsel and 
                                       -----------------------------
                                       Assistant Secretary
                                       -----------------------------

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<PAGE>
 
                             LOEWS-CINEPLEX MERGER
      SUMMARY OF TRANSITION SERVICES BETWEEN SPE, SCA AND LOEWS CINEPLEX

<TABLE>
<CAPTION>
=============================================================================================================== 
   PARTY PROVIDING SERVICE          SERVICE PROVIDED        ANNUAL COST (INCOME) OF SERVICE   PAYMENT FREQUENCY
---------------------------------------------------------------------------------------------------------------
<S>                            <C>                          <C>                               <C>
Sony Pictures Entertainment    Payroll Processing                       $   275,000                Monthly
--------------------------------------------------------------------------------------------------------------- 
Sony Pictures Entertainment    Fringe Benefits                23% Home Office Base Salary          Monthly
                                                            20% Field Operations Base Salary
--------------------------------------------------------------------------------------------------------------- 
Sony Pictures Entertainment    Benefits Administration                  $    75,000                Monthly
--------------------------------------------------------------------------------------------------------------- 
Sony Pictures Entertainment    Legal Retainer/1/                        $   100,000/2/             Monthly
--------------------------------------------------------------------------------------------------------------- 
Sony Corporation of America    Tax Return Preparation and               $   500,000                Monthly
                               Compliance
--------------------------------------------------------------------------------------------------------------- 
Sony Corporation of America    Check Stock and Printing                 $    61,000                Monthly
                               of Payroll Checks
---------------------------------------------------------------------------------------------------------------
Sony Corporation of America    Telecommunications/3/                    $   275,000                Monthly
---------------------------------------------------------------------------------------------------------------

===============================================================================================================
</TABLE>

Notes:

1.   The legal retainer covers only consultation with SPE lawyers and general
     supervision of day-to-day matters and does not include any out-of-pocket
     expenses or outside legal fees.

2.   Additional Services may be retained for specific projects if necessary. Any
     additional requirements for legal services will be negotiated separately
     and are not covered as part of the legal retainer.

3.   Reflects costs associated with usage of telephone system including system
     maintenance and equipment rental. Local, long distance and teleconferencing
     phone usage charges are paid to Sony Corporation of America based on actual
     vendor billings. Reflects costs associated with WAN and Web support, as
     well.