424B2
The information in this preliminary prospectus supplement is not complete and may be changed. This
preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these
securities and we are not soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
Filed pursuant to
Rule 424(b)(2)
File No. 333-157300
SUBJECT TO COMPLETION, DATED AUGUST 11, 2009
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated April 8, 2009)
Shares
IMAX Corporation
Common Shares
We are offering common shares, no par value. We have granted the underwriter an
option to purchase up to additional common shares to cover over-allotments, if any, within 30 days of the date of this
prospectus supplement.
Our common shares trade on the NASDAQ Global Market (NASDAQ) under the symbol IMAX and on
the Toronto Stock Exchange (the TSX) under the symbol IMX. On August 10, 2009, the last reported
sale price of our common shares on NASDAQ and the TSX was $9.05 and Cdn$9.85, respectively.
INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE RISK FACTORS BEGINNING ON PAGE S-3 OF
THIS PROSPECTUS SUPPLEMENT.
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The underwriter expects to deliver the common shares to purchasers on or about August , 2009
through the book-entry facilities of The Depository Trust Company.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
Roth Capital Partners
The date of this prospectus supplement is , 2009.
TABLE OF CONTENTS
Prospectus Supplement
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Prospectus
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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ABOUT THIS PROSPECTUS
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SUMMARY
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RISK FACTORS
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RATIO OF EARNINGS TO FIXED CHARGES
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USE OF PROCEEDS
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DESCRIPTION OF DEBT SECURITIES
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LEGAL OWNERSHIP OF SECURITIES
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DESCRIPTION OF PREFERRED SHARES
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DESCRIPTION OF COMMON SHARES
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DESCRIPTION OF WARRANTS
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
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DESCRIPTION OF UNITS
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PLAN OF DISTRIBUTION
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LEGAL MATTERS
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EXPERTS
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WHERE YOU CAN FIND MORE INFORMATION
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You should rely only on the information contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus. We have not authorized anyone else to
provide you with different information. If anyone provides you with different information, you
should not rely on it. The securities are not being offered in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information contained in this prospectus
supplement and the accompanying prospectus is accurate on any date subsequent to the date set forth
on the front of the document or that any information we have incorporated by reference is correct
on any date subsequent to the date of the document incorporated by reference, even though this
prospectus supplement and the accompanying prospectus is delivered or common shares sold on a later
date.
CANADA HAS NO SYSTEM OF EXCHANGE CONTROLS. THERE ARE NO CANADIAN RESTRICTIONS ON THE
REPATRIATION OF CAPITAL OR EARNINGS OF A CANADIAN PUBLIC COMPANY TO NON-RESIDENT INVESTORS. THERE
ARE NO CANADIAN LAWS OR EXCHANGE RESTRICTIONS AFFECTING THE REMITTANCE OF DIVIDENDS, INTEREST,
ROYALTIES OR SIMILAR PAYMENTS TO NON-RESIDENT HOLDERS OF OUR SECURITIES, EXCEPT FOR INCOME TAX
PROVISIONS WHICH MAY APPLY TO PARTICULAR SECURITIES TO BE DESCRIBED IN THE APPLICABLE PROSPECTUS
SUPPLEMENT.
Unless the context requires otherwise or otherwise as expressly stated, the terms we, our,
us, IMAX and the Company refer to IMAX Corporation, a corporation incorporated under the
federal laws of Canada, and its consolidated subsidiaries.
IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3D Dome,
Experience It In IMAX®, The IMAX Experience®, An IMAX Experience®,
IMAX DMR®, DMR®, IMAX MPX®, IMAX think big® and think
big® are trademarks and trade names of the Company or its subsidiaries that are
registered or otherwise protected under laws of various jurisdictions.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this prospectus may constitute
forward-looking statements within the meaning of the United States Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but are not limited to, references to
future capital expenditures (including the amount and nature thereof), business and technology
strategies and measures to implement strategies, competitive strengths, goals, expansion and growth
of business, operations and technology, plans and references to the future success of IMAX
Corporation together with its wholly-owned subsidiaries and expectations regarding the Companys
future operating, financial and technological results. These forward-looking statements are based
on certain assumptions and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future developments, as well as
other factors it believes are appropriate in the circumstances. However, whether actual results and
developments will conform with the expectations and predictions of the Company is subject to a
number of risks and uncertainties, including, but not limited to: general economic, market or
business conditions, including the length and severity of the current economic downturn; the effect
of the current economic downturn and credit market disruption on the Companys ability to refinance
its existing indebtedness and on the Companys movie exhibitor customers; the opportunities (or
lack thereof) that may be presented to and pursued by the Company; competitive actions by other
companies; the performance of IMAX DMR films; conditions in the in-home and out-of-home
entertainment industries; the signing of theater system agreements; changes in laws or regulations;
conditions, changes and developments in the commercial exhibition industry; the failure to convert
theater system backlog into revenue; risks associated with the Companys transition to a
digitally-based projector; risks associated with investments and operations in foreign
jurisdictions and any future international expansion, including those related to economic,
political and regulatory policies of local governments and laws and policies of the United States
and Canada; the potential impact of increased competition in the markets the Company operates
within; risks related to foreign currency fluctuations; risks related to the Companys prior
restatements and the related litigation and ongoing inquiries by the Securities and Exchange
Commission (the SEC) and the Ontario Securities Commission (the OSC); and other factors, many
of which are beyond the control of the Company. Consequently, all of the forward-looking statements
included or incorporated by reference in this prospectus are qualified by these cautionary
statements, and actual results or anticipated developments by the Company may not be realized, and
even if substantially realized, may not have the expected consequences to, or effects on, the
Company. We urge you to review carefully the section entitled Risk Factors in this prospectus
supplement for additional details about risks that may affect these forward-looking statements. The
Company undertakes no obligation to update publicly or otherwise revise any forward-looking
information, whether as a result of new information, future events or otherwise.
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement relates to a prospectus which is a part of a registration statement
that we have filed with the SEC utilizing a shelf registration process. Under this shelf
registration process, we may sell the securities described in the accompanying prospectus in one or
more offerings. The accompanying prospectus provides you with a general description of the
securities we may offer. This prospectus supplement contains specific information about the terms
of this offering. This prospectus supplement may add, update or change information contained in
the accompanying prospectus. Please carefully read both this prospectus supplement and the
accompanying prospectus in addition to the information described in the section of this prospectus
supplement entitled Where You Can Find More Information.
If the description of this offering varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information in this prospectus supplement. In
various places in this prospectus supplement and the accompanying prospectus, we refer you to
sections of other documents for additional information by indicating the caption heading of the
other sections. All cross-references in this prospectus supplement are to captions contained in
this prospectus supplement and not in the accompanying prospectus, unless otherwise indicated.
S-i
SUMMARY
This summary is not complete and does not contain all of the information that you should
consider before buying our common shares. You should read the entire prospectus supplement and
accompanying prospectus carefully including, in particular, the section entitled Risk Factors
beginning on page S-3 and the more detailed information and financial statements and related notes
appearing elsewhere or incorporated by reference in this prospectus supplement before making an
investment decision.
IMAX Corporation
We are one of the worlds leading entertainment technology companies, specializing in motion
picture technologies and large-format motion picture presentations. Our principal business is (i)
the design and manufacture of large-format digital and film-based theater systems (IMAX theater
systems), (ii) the sale or lease of such systems or the contribution of IMAX theater systems under
revenue-sharing arrangements and (iii) the conversion of two-dimensional and three-dimensional
Hollywood feature films for exhibition on IMAX theater systems around the world. IMAX theater
systems are based on proprietary and patented technology for both large-format 15-perforation film
frame, 70mm format projectors. Our customers who purchase, lease or otherwise acquire our theater
systems are theater exhibitors that operate commercial theaters (particularly multiplexes),
museums, science centers, or destination entertainment sites. We generally do not own IMAX
theaters, but we license the use of our trademarks along with the sale, lease or contribution of
our equipment. We refer to all theaters using the IMAX theater system as IMAX theaters.
We were formed in March 1994 as a result of an amalgamation between WGIM Acquisition Corp. and
our predecessor, IMAX Corporation. The predecessor IMAX was incorporated in 1967.
Our principal executive offices are located in: Mississauga, Ontario, Canada; New York, New
York; and Santa Monica, California. The address and phone number for our Mississauga office is as
follows: 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, (905) 403-6500. The address
and phone number for our New York office is as follows: 115 E. 59th Street, Suite 2100, New York,
New York, 10022, (212) 821-0100. The address and telephone number for our Santa Monica office is
as follows: 3003 Exposition Blvd., Santa Monica, California, 90405, (310) 255-5500.
S-1
THE OFFERING
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Issuer
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IMAX Corporation |
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Common shares offered
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shares |
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Over-allotment option
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We have granted the underwriter an
option to purchase up to
additional common shares to cover
over-allotments, if any, within 30
days of the date of this prospectus
supplement. |
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Common shares estimated to be
outstanding immediately after this
offering
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( if the
underwriter exercises in full its
option to purchase
additional common shares) |
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Use of proceeds
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We estimate that the net proceeds
to us from this offering after
commissions and expenses will be
approximately $ million, or
approximately $ million if
the underwriter exercises its
over-allotment in full. We intend
to use the net proceeds from the
sale of our common shares offered
by this prospectus supplement for
the repayment of debt, including a
portion of our 9 5/8% Senior Notes
due December 2010 (the Senior
Notes). See Use of Proceeds. |
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Risk factors
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See Risk Factors beginning on
page S-3 of this prospectus
supplement for a discussion of
factors you should carefully
consider before deciding to invest
in our common shares. |
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NASDAQ Global Market Symbol
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IMAX |
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Toronto Stock Exchange Symbol
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IMX |
The number of our common shares outstanding after this offering is based on approximately
55,206,261 shares outstanding as of July 31, 2009. Unless otherwise indicated, the number of
common shares outstanding presented in this prospectus supplement excludes:
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11,041,252 common shares reserved for future stock option grants under our equity
compensation plans as of July 31, 2009; |
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6,374,681 common shares issuable upon the exercise of outstanding stock options as of
July 31, 2009 at a weighted average exercise price of $ 6.03 per share; |
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160,000 common shares issuable upon the exercise of restricted stock awards as of July
31, 2009; and |
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common shares that may be purchased by the underwriter to cover over-allotments, if any. |
S-2
RISK FACTORS
An investment in our common shares involves a high degree of risk. Prior to making a decision
about investing in our common shares, you should carefully consider the risks described below and
in the Companys most recent Annual Report on Form 10-K filed with the SEC, in each case as these
risk factors are amended or supplemented by subsequent Quarterly Reports on Form 10-Q. The
occurrence of any of these risks could materially adversely affect our business, operating results
and financial condition. As a result the trading price of our common shares may decline, and you
might lose part or all of your investment.
The risks and uncertainties we describe are not the only ones facing our Company. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business or operations. Any adverse effect on our business, financial condition or
operating results could result in a decline in the value of our common shares and the loss of all
or part of your investment.
RISKS RELATED TO THE COMPANYS FINANCIAL PERFORMANCE OR CONDITION
The Company is highly leveraged, which may make it difficult to refinance its existing
indebtedness and obtain new financing and which limits cash flow available for its operations.
The Company is highly leveraged. As at June 30, 2009, its total indebtedness was $135.7
million and the Companys shareholders deficit was $18.1 million. The Companys high leverage has
important possible consequences. It may:
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make it more difficult for the Company to refinance its existing indebtedness; |
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lead to dilution of the Companys shares if the Company elects to reduce existing
indebtedness through use of its equity; |
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limit the Companys ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes; |
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require the Company to dedicate all or a substantial portion of its cash flow from
operations to the payment of principal and interest on its indebtedness, resulting in less
cash available for its operations and other purposes; |
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impede the Companys research and development initiatives; |
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limit the Companys ability to rapidly adjust to changing market conditions; and |
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increase the Companys vulnerability to downturns in its business or in general economic
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The Companys ability to satisfy its obligations and to reduce its total debt depends in large
part on its future operating performance. The Companys future operating performance is subject to
many factors, including economic, financial and competitive factors, which may be beyond its
control and, as a result, the Company may be unable to provide sufficient net proceeds to meet
these obligations. In addition, the capital markets are currently experiencing a period of
volatility, as evidenced by a lack of liquidity in both the equity and debt capital markets,
significant write-offs in the financial services sector, the repricing of credit risk in the
broadly syndicated credit market and the failure of certain major financial institutions. These
events have contributed to worsening general economic conditions that are materially and adversely
affecting the broad financial and credit markets and reducing the availability and increasing the
price of debt and equity capital. The Senior Notes and the Companys Credit Facility mature on
December 1, 2010 and October 31, 2010, respectively. In addition, the Company has an unfunded U.S.
defined benefit pension plan, the SERP, covering Messrs. Gelfond and Wechsler and current SERP
assumptions include that approximately $15.3 million will be paid out in August 2010. In light of
current credit conditions, there can be no assurance that the Company will be successful in
refinancing its existing indebtedness or in obtaining new financing on a timely basis or on
satisfactory terms or at all. If the Company is unable to refinance its indebtedness or obtain
other financing, the Company will face substantial liquidity challenges and there is no guarantee
that the Company will have sufficient cash flow or capital resources to meet its repayment and
other obligations.
Even if the Company is able to refinance its existing indebtedness or to obtain new financing
in the short term, continued volatility and disruptions in the capital and credit markets as result
of uncertainty, changing or increased regulation of financial institutions,
S-3
reduced alternatives or failures of significant financial institutions could adversely affect
the Companys access to liquidity needed for its business in the longer term. As a result, the
Company could be required to fund its business without significant outside capital. In such an
event, the Company may have to conserve cash by significantly reducing its spending and limiting
certain operational and strategic initiatives, including, potentially, the execution of future
joint revenue sharing arrangements and by forgoing business opportunities that are in the Companys
best interests until the markets stabilize or until alternative credit arrangements or other
funding for the Companys business needs can be arranged. The inability to carry out such
initiatives or pursue business opportunities could adversely affect the Companys operating
results, cash flows and financial position over the longer term.
The Company may not generate cash flow sufficient to service all of its obligations.
The Companys ability to make payments on and to refinance its indebtedness and to fund its
operations, working capital and capital expenditures depends in large part on its ability to
generate positive cash flows in the future. The Companys cash flow is subject to general economic,
industry, financial, competitive, technological, operating, regulatory and other factors, many of
which are beyond its control. The Companys business may not generate cash flow in an amount
sufficient to enable it to repay its indebtedness or to fund its other liquidity needs.
Current economic conditions beyond the Companys control could materially affect the Companys
business by reducing both revenue generated from existing IMAX theater systems and the demand for
new IMAX theater systems.
The global macro-economic environment for 2009 is volatile and the U.S. and global economies
could remain significantly challenged for an indeterminate period of time. While historically the
movie industry has proved to be somewhat resistant to economic downturns, and while the Company has
taken steps to mitigate the effect of the economic downturn on its operations, present economic
conditions, which are beyond the Companys control, could lead to a decrease in discretionary
consumer spending. It is difficult to predict the severity and the duration of any decrease in
discretionary consumer spending resulting from the economic downturn and what affect it may have on
the movie industry, in general, and box office results of the Companys films in particular.
The Companys revenues are increasingly dependent on box-office revenues. The Companys sale
and sales-type lease agreements typically provide for additional revenues based on a percentage of
theater box-office receipts when attendance at an IMAX theater exceeds a minimum threshold. In
addition, the Company receives a percentage of the gross box-office receipts of its IMAX DMR films.
The Companys joint revenue sharing arrangements typically provide it with a portion of exhibitors
IMAX box-office and concession revenue in lieu of receiving significant payments at the beginning
of a contract term. As the Company continues to install theater systems under joint revenue sharing
arrangements, the Companys revenues will be more directly dependent on the box-office performance
of IMAX films. Accordingly, any decline in attendance at commercial IMAX theaters could materially
and adversely affect the Companys future revenues and cash flows.
The Company also depends on the sale and lease of IMAX theater systems to commercial movie
exhibitors to generate revenue. Commercial movie exhibitors generate revenues from consumer
attendance at their theaters, which depends on the willingness of consumers to spend discretionary
income at movie theaters. While in the past the movie industry has proven to be somewhat resistant
to economic downturns, in the event of declining box office and concession revenue, commercial
exhibitors may be less willing to invest capital in new IMAX theaters. In addition, as a result of
the continued disruptions in the capital and credit markets that may limit exhibitors access to
capital, exhibitors may be unable to invest capital in new IMAX theaters. A decline in demand for
new IMAX theater systems could materially and adversely affect the Companys results of operations.
Under the Companys joint revenue sharing arrangement with American Multi-Cinema, Inc.
(AMC), the obligation of AMC to accept the delivery of additional theater systems is subject to
certain box-office performance thresholds. Although such thresholds have been significantly
exceeded to date, there is no guarantee that they will continue to be, and the failure to achieve
box-office performance thresholds could result in fewer theater systems being installed under the
Companys agreement with AMC.
There is collection risk associated with payments to be received over the terms of the
Companys theater system agreements.
The Company is dependent in part on the viability of its exhibitors for collections under
long-term leases, sales financing agreements and joint revenue sharing arrangements. Exhibitors or
other operators may experience financial difficulties, particularly given current economic
conditions, that could cause them to be unable to fulfill their contractual payment obligations to
the Company. As a result, the Companys future revenues and cash flows could be adversely affected.
S-4
The Company may not convert all of its backlog into revenue and cash flows.
At June 30, 2009, the Companys sales backlog included 171 theater systems, consisting of
arrangements for 104 sales and lease systems and 67 theater systems under joint revenue sharing
arrangements. The Company lists signed contracts for theater systems for which revenue has not been
recognized as sales backlog prior to the time of revenue recognition. The total value of the sales
backlog represents all signed theater system sale or lease agreements that are expected to be
recognized as revenue in the future (other than those under joint revenue sharing arrangements) and
includes initial fees along with the present value of fixed minimum ongoing fees due over the term,
but excludes contingent fees in excess of fixed minimum ongoing fees that might be received in the
future and maintenance and extended warranty fees. Notwithstanding the legal obligation to do so,
not all of the Companys customers with which it has signed contracts may accept delivery of
theater systems that are included in the Companys backlog. This could adversely affect the
Companys future revenues and cash flows. In addition, customers with theater system obligations in
backlog sometimes request that the Company agree to modify or reduce such obligations, which the
Company has agreed to in the past under certain circumstances. Customer requested delays in the
installation of theater systems in backlog remain a recurring and unpredictable part of the
Companys business. These slippages and delays could impact the timing of revenue recognition.
The Company depends on commercial movie exhibitors to purchase or lease its IMAX theater
systems, to supply revenue under joint revenue sharing arrangements as well as to provide
additional revenues under its sales and sales-type lease agreements and to supply venues in which
to exhibit its IMAX DMR films.
The Companys primary customers are commercial multiplex exhibitors. The Company is unable to
predict if, or when, they or other exhibitors will purchase or lease IMAX theater systems or enter
into joint revenue sharing arrangements with the Company, or whether any of the Companys existing
customers will continue to do any of the foregoing. If exhibitors choose to reduce their levels of
expansion or decide not to purchase or lease IMAX theater systems or enter into joint revenue
sharing arrangements with the Company, including as a result of the current economic downturn, the
Companys revenues would not increase at the anticipated rate and motion picture studios may be less
willing to reformat Hollywood 35mm films into the Companys film format for exhibition in
commercial IMAX theaters. As a result, the Companys future revenues and cash flows could be
adversely affected.
The success of the IMAX theater network is directly related to the availability and success of
IMAX DMR films.
An important factor affecting the growth and success of the IMAX theater network is the
availability of films for IMAX theaters. The Company produces only a small number of such films
and, as a result, the Company relies principally on films produced by third party filmmakers and
studios, particularly Hollywood features converted from 35mm format using the Companys IMAX DMR
technology. There is no guarantee that these filmmakers and studios will continue to release IMAX
films, or that the films they produce will be commercially successful. The steady flow and
successful box office performance of IMAX DMR releases becomes more important to the Companys
financial performance as the number of joint revenue sharing arrangements included in the overall
IMAX network grows. The Companys revenues from joint revenue sharing arrangements are driven
directly by exhibitors box-office results, which are dependent on commercial acceptance of IMAX
DMR films. Moreover films can be subject to delays in production or changes in release schedule,
which can negatively impact the number, timing and quality of IMAX DMR and IMAX original films
released to the IMAX theater network.
The Companys theater system revenue can vary significantly from its cash flows under theater
system sales or lease agreements.
The Companys theater systems revenue can vary significantly from the associated cash flows.
The Company generally provides financing to customers for theater systems on a long-term basis
through long-term leases or notes receivables. The terms of leases or notes receivable are
typically 10 to 20 years. The Companys sale and lease-type agreements typically provide for three
major sources of cash flow related to theater systems:
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initial fees, which are paid in installments generally commencing upon the signing of the
agreement until installation of the theater systems; |
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ongoing fees, which are paid monthly after all theater systems have been installed and
are generally equal to the greater of a fixed minimum amount per annum and a percentage of
box-office receipts; and |
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ongoing annual maintenance and extended warranty fees, which are generally payable
commencing in the second year of theater operations. |
S-5
Initial fees generally make up a majority of cash received for a theater arrangement.
For sales and sales-type leases, the revenue recorded is generally equal to the sum of initial
fees and the present value of minimum ongoing fees due under the agreement. Cash received from
initial fees in advance of meeting the revenue recognition criteria for the theater systems is
recorded as deferred revenue. Contingent fees are recognized as they are reported by the theaters
after annual minimum fixed fees are exceeded.
Leases that do not transfer substantially all of the benefits and risks of ownership to the
customer are classified as operating leases. For these leases, initial fees and minimum fixed
ongoing fees are recognized as revenue on a straight-line basis over the lease term. Contingent
fees are recognized as they are reported by the theaters after annual minimum fixed fees are
exceeded.
As a result of the above, the revenue set forth in the Companys financial statements does not
necessarily correlate with the Companys cash flow or cash position. Revenues include the present
value of future contracted cash payments and there is no guarantee that the Company will receive
such payments under its lease and sale agreements if its customers default on their payment
obligations.
There are several risks associated with the Companys transition to a digitally-based
projector, including technical risks and business risks, such as the risk that movie studios may be
unwilling to pay the higher costs of IMAX film prints, particularly for certain under-performing
movie theaters outside the United States and Canada.
In 2008, the Company completed the development of its proprietary digitally-based projector,
which the Company predicts will ultimately supplant and replace its film-based projector for a
large portion of its commercial theater customer base. As of June 30, 2009, the Company has
installed 102 digitally-based projectors, including 14 digital upgrades, all of which are currently
in operation, and has signed contracts for the installation of an additional 132 digitally-based
projectors in future periods. As the number of digitally-based projectors in the commercial IMAX
theater network grows, movie studios may be unwilling to continue to pay the high costs of IMAX
film prints, particularly those intended for under-performing theaters located outside the United
States and Canada. While the Company is actively seeking solutions to ensure that IMAX film prints
will be delivered to such theaters, there can be no assurance that these measures will be adequate
to ensure that all IMAX theaters will continue to receive film prints.
In addition, while to date the digitally-based projectors have been highly reliable, technical
flaws or bugs may become apparent in the future which would require repairs or modifications to the
projector. Competitors may design digitally-based projectors which are more attractive to the
consumer and/or are more cost effective than the Companys, and may make the Companys projectors
less competitive. As a result of this competition, the Company could lose market share if demand
for its products declines, which could seriously harm its business and operating results. In
addition, the need for additional research and development and/or for capital to finance the
replacement of certain theater systems and associated conversion costs could require the Company to
raise additional capital, which capital may not be available to the Company on attractive terms, or
at all.
The Companys operating results and cash flow can vary substantially from quarter to quarter
and could increase the volatility of its share price.
The Companys operating results and cash flow can fluctuate substantially from quarter to
quarter. In particular, fluctuations in theater system installations can materially affect
operating results. Factors that have affected the Companys operating results and cash flow in the
past, and are likely to affect its operating results and cash flow in the future, include, among
other things:
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the timing of signing and installation of new theater systems; |
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|
the demand for, and acceptance of, its products and services; |
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|
the recognition of revenue of sales and sales-type leases; |
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the classification of leases as sales-type versus operating leases; |
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the volume of orders received and that can be filled in the quarter; |
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the level of its sales backlog; |
S-6
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|
the timing and commercial success of films produced and distributed by the Company and
others; |
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|
the signing of film distribution agreements; |
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|
the financial performance of IMAX theaters operated by the Companys customers and by the
Company; |
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|
|
|
financial difficulties faced by customers, particularly customers in the commercial
exhibition industry; |
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|
the magnitude and timing of spending in relation to the Companys research and
development efforts; and |
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|
the number and timing of joint revenue sharing arrangement installations, related capital
expenditures and timing of related cash receipts. |
Most of the Companys operating expenses are fixed in the short term. The Company may be
unable to rapidly adjust its spending to compensate for any unexpected sales shortfall, which would
harm quarterly operating results, although the results of any quarterly period are not necessarily
indicative of its results for any other quarter or for a full fiscal year.
The Company may not be able to generate profits in the future.
Though the Company was profitable for the three months ended June 30, 2009, the Company had
significant losses in each of 2008, 2007 and 2006 and for the three months ended March 31, 2009. The
Company may not be able to generate profits in any future period. If the Company does not generate
profits in future periods, it may be unable to finance the operations of its business or meet its
debt obligations.
The Companys revenues from existing customers are derived in part from financial reporting
provided by its customers, which may be inaccurate or incomplete, resulting in lost or delayed
revenues.
The Companys revenue under its joint revenue sharing arrangements, a portion of the Companys
payments under lease or sales arrangements and its film license fees are based upon financial
reporting provided by its customers. If such reporting is inaccurate, incomplete or withheld, the
Companys ability to receive the appropriate payments in a timely fashion that are due to it may be
impaired. The Companys contractual audits of IMAX theaters may not rectify payments lost or
delayed as a result of customers not fulfilling their contractual obligations with respect to
financial reporting.
The agreements governing the Companys indebtedness contain significant restrictions that
limit its operating and financial flexibility.
The agreements governing the Companys indebtedness including the agreement governing its
credit facility and the Indenture governing the Senior Notes, contain certain restrictive covenants
that, among other things, limit its ability to:
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incur additional indebtedness; |
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pay dividends and make distributions; |
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repurchase stock; |
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make certain investments; |
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transfer or sell assets; |
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create liens; |
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enter into transactions with affiliates; |
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issue or sell stock of subsidiaries; |
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create dividend or other payment restrictions affecting restricted subsidiaries; and |
S-7
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merge, consolidate, amalgamate or sell all or substantially all of its assets to another
person. |
These restrictive covenants impose operating and financial restrictions on the Company that
limit the Companys ability to engage in acts that may be in the Companys long-term best
interests.
The introduction of new products and technologies and changes in the way the Companys
competitors operate could harm the Companys business.
The out-of-home entertainment industry is very competitive, and the Company faces a number of
challenges. In addition to existing large-format film projection competitors, the Company may also
face competition in the future from companies in the entertainment industry with new technologies
and/or substantially greater capital resources. The Company also faces competition from a number of
alternative motion picture distribution channels such as home video, pay-per-view, video-on-demand,
DVD, Internet and syndicated and broadcast television. The Company also competes for the publics
leisure time and disposable income with other forms of entertainment, including sporting events,
concerts, live theater and restaurants.
Furthermore, the out-of-home entertainment industry in general is undergoing significant
changes. Primarily due to technological developments and changing consumer tastes, numerous
companies are developing, and are expected to continue to develop, new entertainment products for
the out-of-home entertainment industry, which may compete directly with the Companys products.
Competitors may design products which are more attractive to the consumer and/or are more cost
effective than the Companys and may make its products less competitive. As a result of this
competition, the Company could lose market share if demand for its products declines, which could
seriously harm its business and operating results.
The motion picture exhibition industry is in the early stages of conversion from film-based
media to electronic-based media. The Company has developed a proprietary digitally-based projector
that can be utilized in IMAX theaters, and is currently available for sale. The Companys digital
roll-out has been successful to date. The Company installed 102 digitally-based projectors as at
June 30, 2009 and has signed contracts for the installation of an additional 132 digital
projectors. There are several risks associated with the Companys transition to a digitally-based
projector. See Risk Factors Risks Related to the Companys Financial Performance or Condition
There are several risks associated with the Companys transition to a digitally-based projector,
including technical risks and business risks, such as the risk that movie studios may be unwilling
to pay the higher costs of IMAX film prints, particularly for certain under-performing movie
theaters outside the United States and Canada.
The Company conducts business internationally, which exposes it to uncertainties and risks
that could negatively affect its operations and sales.
A significant portion of the Companys sales are made to customers located outside the United
States and Canada. Approximately 31%, 35% and 36% of its revenues were derived outside of the
United States and Canada in 2008, 2007 and 2006, respectively. The Company expects its
international operations to continue to account for a significant portion of its revenues in the
future and plans to expand into new markets in the future. The Company does not have significant
experience in operating in certain foreign countries and is subject to the risks associated with
doing business in those countries. The Company currently has theater systems installations
projected in countries where economies have been unstable in recent years. The economies of other
foreign countries important to the Companys operations could also suffer slower economic growth or
instability in the future. The following are among the risks that could negatively affect the
Companys operations and sales in foreign markets:
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new restrictions on access to markets, both for theater systems and films; |
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unusual or burdensome foreign laws or regulatory requirements or unexpected changes to
those laws or requirements; |
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fluctuations in the value of foreign currency versus the U.S. dollar and potential
currency devaluations; |
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new tariffs, trade protection measures, import or export licensing requirements, trade
embargoes and other trade barriers; |
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imposition of foreign exchange controls in such foreign jurisdictions; |
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dependence on foreign distributors and their sales channels; |
S-8
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difficulties in staffing and managing foreign operations; |
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adverse changes in monetary and/or tax policies; |
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poor recognition of intellectual property rights; |
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inflation; |
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requirements to provide performance bonds and letters of credit to international
customers to secure system component deliveries; and |
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political, economic and social instability. |
The Company may still be able to incur more indebtedness, which could further exacerbate the
risks associated with its existing indebtedness.
In spite of the current state of the capital and credit markets, the Company may be able to
incur substantial additional indebtedness in the future. Although the agreements governing the
indebtedness contain restrictions on the incurrence of additional indebtedness, debt incurred in
compliance with these restrictions could be substantial. If additional indebtedness is added to its
current indebtedness levels, the related risks that the Company faces would be magnified.
The Company may experience adverse effects due to exchange rate fluctuations.
A substantial portion of the Companys revenues are denominated in U.S. dollars, while a
substantial portion of its expenses are denominated in Canadian dollars. The Company also generates
revenues in Euros and Japanese Yen. While the Company entered into a forward contract with the Bank
of Montreal to hedge its exposure to exchange rate fluctuations between the U.S. and the Canadian
dollar, the Company may not be successful in reducing its exposure to these fluctuations. The use
of derivative contracts is intended to mitigate or reduce transactional level volatility in the
results of foreign operations, but does not completely eliminate volatility.
The Company is subject to impairment losses on its film assets.
The Company amortizes its film assets, including IMAX DMR costs capitalized using the
individual film forecast method, whereby the costs of film assets are amortized and participation
costs are accrued for each film in the ratio of revenues earned in the current period to
managements estimate of total revenues ultimately expected to be received for that title.
Management regularly reviews, and revises when necessary, its estimates of ultimate revenues on a
title-by-title basis, which may result in a change in the rate of amortization of the film assets
and write-downs or impairments of film assets. Results of operations in future years depend upon
the amortization of the Companys film assets and may be significantly affected by periodic
adjustments in amortization rates.
The Company is subject to impairment losses on its inventories.
The Company records provisions for excess and obsolete inventory based upon current estimates
of future events and conditions, including the anticipated installation dates for the current
backlog of theater system contracts, technological developments, signings in negotiation and
anticipated market acceptance of the Companys current and pending theater systems. The Company
recently introduced a proprietary digitally-based IMAX projection system. Increased customer
acceptance and preference for the Companys digital projection system may subject existing
film-based inventories to further write-downs (resulting in lower margins) as these theater systems
become less desirable in the future.
S-9
If the Companys goodwill or long lived assets become impaired the Company may be required to
record a significant charge to earnings.
Under U.S. GAAP, the Company reviews its long lived assets for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required
to be tested for impairment annually or when events or changes in circumstances indicate an
impairment test is required. Factors that may be considered a change in circumstances include (but
are not limited to) a decline in stock price and market capitalization, declines in future cash
flows, and slower growth rates in the Companys industry. The Company may be required to record a
significant charge to earnings in its financial statements during the period in which any
impairment of its goodwill or long lived assets is determined.
Changes in accounting and changes in managements estimates may affect the Companys reported
earnings and operating income.
U.S. GAAP and accompanying accounting pronouncements, implementation guidelines and
interpretations for many aspects of the Companys business, such as revenue recognition, film
accounting, accounting for pensions, accounting for income taxes, and treatment of goodwill or long
lived assets, are highly complex and involve many subjective judgments. Changes in these rules,
their interpretation, managements estimates, or changes in the Companys products or business
could significantly change its reported future earnings and operating income and could add
significant volatility to those measures, without a comparable underlying change in cash flow from
operations. See Critical Accounting Policies in Item 7 of the Companys Annual Report on Form
10-K.
The Company relies on its key personnel, and the loss of one or more of those personnel could
harm its ability to carry out its business strategy.
The Companys operations and prospects depend in large part on the performance and continued
service of its senior management team. The Company may not find qualified replacements for any of
these individuals if their services are no longer available. The loss of the services of one or
more members of the Companys senior management team could adversely affect its ability to
effectively pursue its business strategy.
The Companys ability to adequately protect its intellectual property is limited, and
competitors may misappropriate its technology, which could weaken its competitive position.
The Company depends on its proprietary knowledge regarding IMAX theater systems and digital
and film technology. The Company relies principally upon a combination of copyright, trademark,
patent and trade secret laws, restrictions on disclosures and contractual provisions to protect its
proprietary and intellectual property rights. These laws and procedures may not be adequate to
prevent unauthorized parties from attempting to copy or otherwise obtain the Companys processes
and technology or deter others from developing similar processes or technology, which could weaken
the Companys competitive position. The protection provided to the Companys proprietary technology
by the laws of foreign jurisdictions may not protect it as fully as the laws of Canada or the
United States. Some of the underlying technologies of the Companys products and system components
are not covered by patents or patent applications.
The Company has patents issued and patent applications pending, including those covering its
digital projector and digital conversion technology. The Companys patents are filed in the United
States, often with corresponding patents or filed applications in other jurisdictions, such as
Canada, Belgium, Japan, France, Germany and the United Kingdom. The patents may not be issued or
provide the Company with any competitive advantages. The patent applications may also be challenged
by third parties. Several of the Companys issued patents in the United States, Canada and Japan
for improvements to IMAX projectors, IMAX 3D Dome and sound system components expire between 2009
and 2024. Any claims or litigation initiated by the Company to protect its proprietary technology
could be time consuming, costly and divert the attention of its technical and management resources.
The Company faces risks in connection with the continued expansion of its business in China
and other parts of Asia.
The first IMAX theater system in a theater in China was installed in December 2001, there were
18 IMAX theaters in China as at June 30, 2009, and 25 additional IMAX theater systems are scheduled
to be installed in China by 2013. However, the geopolitical instability of the region comprising
China, Taiwan, North Korea and South Korea could result in economic embargoes, disruptions in
shipping or even military hostilities, which could interfere with both the fulfillment of the
Companys existing contracts and its pursuit of additional contracts in China.
S-10
Because the Company is incorporated in Canada, it may be difficult for plaintiffs to enforce
against the Company liabilities based solely upon U.S. federal securities laws.
The Company is incorporated under the federal laws of Canada, some of its directors and
officers are residents of Canada and a substantial portion of its assets and the assets of such
directors and officers are located outside the United States. As a result, it may be difficult for
U.S. plaintiffs to effect service within the United States upon those directors or officers who are
not residents of the United States, or to realize against them or the Company in the United States
upon judgments of courts of the United States predicated upon the civil liability under the U.S.
federal securities laws. In addition, it may be difficult for plaintiffs to bring an original
action outside of the United States against the Company to enforce liabilities based solely on U.S.
federal securities laws.
RISKS RELATED TO THE COMPANYS PRIOR RESTATEMENTS AND RELATED MATTERS
The Company is subject to ongoing informal inquiries by regulatory authorities in the U.S. and
Canada, and it cannot predict the timing of developments and outcomes in these matters.
The Company is the subject of informal inquiries by the SEC and the OSC; these inquiries focus
on the Companys accounting policies and related matters. In a letter dated December 13, 2007, the
Staff of the Division of Corporation Finance of the SEC notified the Company that it had completed
its review of the Companys Form 10-K and related filings, and did not, at that time, have any
further comments; however, other inquiries remain ongoing. The Company cannot predict when these
inquiries will be completed or the further timing of any other developments in connection with the
inquiries. The Company also cannot predict the results or outcomes of these inquiries.
Expenses incurred in connection with these informal inquiries (which include substantial fees
of lawyers and other professional advisors) continue to adversely affect the Companys cash
position and profitability. The Company may also have potential obligations to indemnify officers
and directors who could, at a future date, be parties to such inquiries.
The informal inquiries may adversely affect the course of the pending litigation against the
Company. The Company is currently defending a consolidated class-action lawsuit in the U.S. and a
class-action lawsuit in Ontario (see Item 3. Legal Proceedings in the Companys Annual Repot on
Form 10-K). Negative developments or outcomes in the informal inquiries could have an adverse
effect on the Companys defense of lawsuits. Finally, the SEC and/or OSC could impose sanctions
and/or fines on the Company or its officers in connection with the aforementioned inquiries. The
indenture dated as at December 4, 2003, and as thereafter amended and supplemented, governing the
Companys 9.625% Senior Notes due 2010 contains a covenant requiring the timely filing of its
financial statements with regulatory agencies. Additional changes to the Companys accounting
policies and/or additional restatements could result in the failure of the Company to meet these
deadlines and cause the holders of its Senior Notes to accelerate payment. In addition, these
informal investigations could divert the attention of the Companys management and other personnel
for significant periods of time.
The Company is subject to lawsuits that could divert its resources and result in the payment
of significant damages and other remedies.
The Companys industry is characterized by frequent claims and related litigation regarding
breach of contract and related issues. The Company is subject to a number of legal proceedings and
claims that arise in the ordinary course of its business. In addition, the Company is engaged as a
defendant in several class action lawsuits filed by certain shareholders of the Company and one
action filed by a bondholder of the Company. Since March 2007, this bondholder has repeatedly and
unsuccessfully attempted to trigger a default or acceleration under the Indenture. The Company
cannot assure that it will succeed in defending any claims, that judgments will not be entered
against it with respect to any litigation or that reserves the Company may set aside will be
adequate to cover any such judgments. If any of these actions or proceedings against the Company is
successful, it may be subject to significant damages awards. In addition, the Company is the
plaintiff in a number of lawsuits in which it seeks the recovery of substantial payments. The
Company is incurring legal fees in prosecuting and defending its lawsuits, and it may not
ultimately prevail in such lawsuits or be able to collect on such judgments if it does.
Although the Companys directors and officers liability insurance is deemed to provide
coverage for the class-action and bondholder lawsuits the Company is defending (see Item 3. Legal
Proceedings in the Companys Annual Report on Form 10-K), the damages in such lawsuits could be
significant. Additionally, the defense of these claims (as with the defense or prosecution of all
of the Companys litigation) could divert the attention of the Companys management and other
personnel for significant periods of time.
S-11
The Company has been the subject of anti-trust complaints and investigations in the past and
may be sued or investigated on similar grounds in the future.
Continued negative publicity has affected and may continue to adversely affect the Companys
business and the market price of its publicly traded common shares.
The Company has been the subject of continuing negative publicity in part as a result of the
ongoing informal SEC and OSC inquiries and its prior delay in filing financial statements and
restatements of prior results. Continuing negative publicity could have an adverse effect on the
Companys business and the market price of the Companys publicly traded securities.
RISKS RELATING TO THE COMPANYS COMMON SHARES AND THE OFFERING
The Companys stock price has historically been volatile and declines in market price,
including as a result of the current market downturn, may negatively affect its ability to raise
capital, issue debt, secure customer business and retain employees.
The Companys publicly traded shares have in the past experienced, and may continue to
experience, significant price and volume fluctuations. This market volatility could reduce the
market price of its common shares, regardless of the Companys operating performance. In addition,
in recent months, conditions in the public equity markets have declined significantly in general,
resulting in exceptional volatility in equity prices of some companies. A continued decline in the
capital markets generally, or an adjustment in the market price or trading volumes of the Companys
publicly traded securities, may negatively affect its ability to raise capital, issue debt, secure
customer business or retain employees. These factors, as well as general economic and geopolitical
conditions, may have a material adverse effect on the market price of the Companys publicly traded
securities, including the common shares you purchase in the offering.
There may be future sales or other dilution of the Companys equity, which may adversely
affect the market price of our common shares.
The Company is not generally restricted from issuing additional common shares, or any
securities that are convertible into or exchangeable for, or that represent the right to receive,
common shares. The issuance of any additional common shares or preferred stock or securities
convertible into, exchangeable for or that represent the right to receive common shares or the
exercise of such securities could be substantially dilutive to holders of the Companys common
shares. The market price of the Companys common shares could decline as a result of this offering
as well as sales of the Companys common shares made after this offering or the perception that
such sales could occur. Because the Companys decision to issue securities in any future offering
will depend on market conditions and other factors beyond its control, the Company cannot predict
or estimate the amount, timing or nature of future offerings. Thus, the Companys shareholders bear
the risk of future offerings reducing the market price of the Companys common shares and diluting
their shareholdings in the Company.
The issuance of the Companys common shares could result in the loss of the Companys ability
to use certain of the Companys net operating losses.
As of June 30, 2009, the Company had approximately $35 million of consolidated or separate
U.S. federal tax and state tax net operating loss carryforwards as well as approximately $44
million of U.S. federal branch return loss carryforwards. Realization of any benefit from these
U.S. tax net operating losses is dependent on: 1) the Companys ability to generate future taxable
income and 2) the absence of certain future ownership changes of the Companys common shares. An
ownership change, as defined in the applicable federal income tax rules, would place significant
limitations, on an annual basis, on the use of such net operating losses to offset any future
taxable income that the Company may generate. Such limitations, in conjunction with the net
operating loss expiration provisions, could significantly reduce or effectively eliminate the
Companys ability to use its U.S. net operating losses to offset any future taxable income. The
issuance of common shares in the offering could cause an ownership change. Such transactions
include the issuance of common shares upon future conversion or exercise of outstanding options,
warrants and convertible preferred stock.
The Companys Canadian loss carryforwards, available future deductions and tax credits, which
are also significant, would be assessed for future utilization based on income tax rules outlined
in the Canadian Income Tax Act. The issuance of common shares would generally not result in the
loss of the Companys ability to use these Canadian tax attributes.
S-12
The Company does not anticipate paying cash dividends on its common shares. Investors in this
offering may never obtain a return on their investment.
You should not rely on an investment in the Companys common shares to provide dividend
income, as the Company has not paid any cash dividends on its common shares and does not plan to
pay any in the foreseeable future. Accordingly, investors must rely on sales of their common shares
after price appreciation, which may never occur, as the only way to realize any return on their
investment.
The Companys board of directors may issue, without shareholder approval, special shares with
rights and preferences superior to those applicable to our common shares.
The Companys Articles of Amalgamation includes a provision for the issuance of special
shares, which may be issued in one or more series, with each series containing such rights and
preferences as the board of directors may determine from time to time, without prior notice to or
approval of shareholders. Among others, such rights and preferences might include the rights to
dividends, superior voting rights, liquidation preferences and rights to convert into common
shares. The rights and preferences of any such series of special shares, if issued, may be
superior to the rights and preferences applicable to the common shares and might result in a
decrease in the price of the Companys common shares.
You will incur immediate and substantial dilution in the net tangible book value of your
shares.
If you purchase shares in the offering, the value of your shares based on the Companys actual
book value immediately will be less than the price you paid. This reduction in the value of your
equity is known as dilution. This dilution occurs in large part because our earlier investors paid
less than the price you will pay when you purchase our common shares. If the underwriter exercises
its over-allotment option, or if outstanding options to purchase the Companys common stock are
exercised, investors will experience additional dilution. For more information, see Dilution.
The Company will have broad discretion in applying the net proceeds of the offering and may
not use those proceeds in ways that will enhance the market value of the Companys common shares.
Subject to certain restrictions imposed by our financing facilities, the Company has
significant flexibility in applying the net proceeds it will receive in the offering. The Company
will use some of the proceeds that its receives from the sale of common shares in the offering to
repay outstanding indebtedness, and will use the remainder to pay the expenses of the offering and
for general corporate purposes. For more information, see Use of Proceeds. As part of your
investment decision, you will not be able to assess or direct how the Company applies these net
proceeds. If the Company does not apply these funds effectively, it may lose significant business
opportunities. Furthermore, the price of the Companys common shares could decline if the market
does not view the Companys use of the net proceeds from the offering favorably.
S-13
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering after commissions and expenses will
be approximately $ million, or approximately $ million if the
underwriter exercises its over-allotment in full. We intend to use the net proceeds from the sale
of our common shares offered by this prospectus supplement for the repayment of debt, including a
portion of the Senior Notes. The Company intends to refinance the
remainder of its existing indebtedness through cash flow from
operations and future debt financings.
Pending application of the net proceeds, we will temporarily invest any proceeds that are not
immediately applied to the above purposes in U.S. government or agency obligations, commercial
paper, money market funds, taxable and tax-exempt notes and bonds, variable-rate demand
obligations, bank certificates of deposits or repurchase agreements collateralized by U.S.
government or agency obligations or we may also deposit the proceeds with banks.
S-14
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of June 30,
2009:
|
|
|
on an actual basis; and |
|
|
|
|
on an as adjusted basis to effect (1) the repurchase of $6.0 million principal amount
of the Senior Notes in July 2009, and (2) our sale of common
shares in this offering, based on the public offering price of
$ per share,
and after deducting underwriting commissions and estimated offering expenses paid by us,
assuming the underwriter does not exercise its over-allotment option. |
This table should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations and our financial statements and notes thereto that
are incorporated by reference in this prospectus supplement and the accompanying prospectus.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Actual |
|
|
As Adjusted |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
49,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Indebtedness: |
|
|
|
|
|
|
|
|
Bank indebtedness |
|
$ |
20,000 |
|
|
$ |
20,000 |
|
9.625% Senior Notes due December 2010 |
|
|
115,662 |
|
|
|
109,662 |
|
|
|
|
|
|
|
|
Total indebtedness |
|
|
135,662 |
|
|
|
129,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders deficiency: |
|
|
|
|
|
|
|
|
Common shares, no par value, unlimited number authorized |
|
|
218,895 |
|
|
|
|
|
55,023,590
shares issued and outstanding, historical
shares issued and outstanding, as adjusted |
|
|
|
|
|
|
|
|
Other equity |
|
|
6,266 |
|
|
|
|
|
Deficit |
|
|
(247,089 |
) |
|
|
|
|
Accumulated other comprehensive income |
|
|
3,791 |
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders deficiency |
|
|
(18,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization |
|
$ |
117,525 |
|
|
$ |
|
|
|
|
|
|
|
|
|
S-15
MARKET PRICE OF COMMON SHARES
Our common shares trade on the NASDAQ under the symbol IMAX and on the TSX under the symbol
IMX. On August 10, 2009, the last reported sale price of our common shares on NASDAQ and the TSX
was $9.05 and Cdn$9.85, respectively. The following tables present quarterly information on the
price range of our common shares. This information indicates the high and low sale prices reported
by the NASDAQ and the TSX, respectively. As of July 31, 2009, there were approximately 289 holders
of record of our common shares.
NASDAQ:
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars |
|
|
|
High |
|
|
Low |
|
|
Fiscal year ended December 31, 2009 |
|
|
|
|
|
|
|
|
First quarter |
|
$ |
5.49 |
|
|
$ |
3.74 |
|
Second quarter |
|
$ |
8.49 |
|
|
$ |
4.28 |
|
Third
quarter (through August 10, 2009) |
|
$ |
10.06 |
|
|
$ |
7.14 |
|
Fiscal year ended December 31, 2008 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
5.94 |
|
|
$ |
2.41 |
|
Third quarter |
|
$ |
8.28 |
|
|
$ |
5.58 |
|
Second quarter |
|
$ |
7.74 |
|
|
$ |
6.45 |
|
First quarter |
|
$ |
7.39 |
|
|
$ |
5.27 |
|
Fiscal year ended December 31, 2007 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
7.94 |
|
|
$ |
4.05 |
|
Third quarter |
|
$ |
5.21 |
|
|
$ |
3.72 |
|
Second quarter |
|
$ |
5.68 |
|
|
$ |
4.05 |
|
First quarter |
|
$ |
5.47 |
|
|
$ |
3.61 |
|
TSX:
|
|
|
|
|
|
|
|
|
|
|
Canadian Dollars |
|
|
|
High |
|
|
Low |
|
|
Fiscal year ended December 31, 2009 |
|
|
|
|
|
|
|
|
First quarter |
|
$ |
6.66 |
|
|
$ |
4.89 |
|
Second quarter |
|
$ |
9.77 |
|
|
$ |
5.45 |
|
Third
quarter (through August 10, 2009) |
|
$ |
10.76 |
|
|
$ |
8.39 |
|
Fiscal year ended December 31, 2008 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
6.33 |
|
|
$ |
3.10 |
|
Third quarter |
|
$ |
8.32 |
|
|
$ |
5.87 |
|
Second quarter |
|
$ |
7.82 |
|
|
$ |
6.51 |
|
First quarter |
|
$ |
7.54 |
|
|
$ |
5.37 |
|
Fiscal year ended December 31, 2007 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
7.99 |
|
|
$ |
3.89 |
|
Third quarter |
|
$ |
5.49 |
|
|
$ |
3.98 |
|
Second quarter |
|
$ |
6.26 |
|
|
$ |
4.35 |
|
First quarter |
|
$ |
6.39 |
|
|
$ |
4.22 |
|
DIVIDEND POLICY
We have never paid cash dividends and have no current plans to pay any dividends on our common
shares. The payment of dividends is subject to restrictions under the terms of our indebtedness.
The payment of any future dividends will be determined by our board of directors in light of
conditions then existing, including our financial condition and requirements, future prospects,
restrictions in financing agreements, business conditions and other factors deemed relevant by our
board of directors.
S-16
DILUTION
If you invest in our common shares, you will experience dilution to the extent of the
difference between the public offering price per share you pay in this offering and the net
tangible book deficit per common share immediately after this offering. Net tangible book deficit
represents the amount of our total tangible assets reduced by our total liabilities. Our net
tangible book deficit as of June 30, 2009 was approximately $76,409,592, or $1.39 per common share.
After deducting the estimated underwriters commission and estimated offering expenses paid by us,
our net tangible book deficit, as adjusted for the offering (assuming no exercise by the
underwriter of its over-allotment option), as of June 30, 2009, would have been $ , or
$ per common share. Assuming the occurrence of this offering as of June 30, 2009, this
represents an immediate decrease in net tangible book deficit of $ per common share to
our existing shareholders and an immediate dilution of $ per common share to new
investors purchasing our common shares in this offering.
The following table illustrates the estimated per share dilution:
|
|
|
|
|
Public offering price per common share |
|
$ |
|
|
Net tangible book deficit per common share as of June 30, 2009 |
|
$ |
1.39 |
|
Increase per share attributable to the offering |
|
|
|
|
As adjusted net tangible book deficit per share after the offering |
|
|
|
|
Dilution to new investors purchasing common shares in the offering |
|
|
|
|
If the underwriter exercises its over-allotment option in full, the as adjusted net tangible
book deficit would decrease to approximately $ per share, representing an immediate
increase in net tangible book deficit of $ per common share to our existing shareholders
and an immediate dilution of $ per common share to new investors purchasing our common
shares in this offering.
The exercise of outstanding options and warrants having an exercise price less than the public
offering price will increase dilution to new investors.
S-17
UNDERWRITING
We have entered into an underwriting agreement with Roth Capital Partners, LLC with respect to
the common shares subject to this offering. Subject to certain conditions, we have agreed to sell
to the underwriter, and the underwriter has agreed to purchase from
us common shares.
Our common shares trade on the NASDAQ under the symbol IMAX and on the TSX under the symbol
IMX.
The underwriting agreement provides that the obligation of the underwriter to purchase the
shares offered hereby is subject to certain conditions and that the underwriter is obligated to
purchase all of the common shares offered hereby if any of the shares are purchased.
If the underwriter sells more shares than the above number, the underwriter has an option for
30 days from the date of this prospectus supplement to buy up to an additional common shares from
us at the public offering price less the underwriting commissions to cover these
sales.
The underwriter proposes to offer to the public the common shares purchased pursuant to the
underwriting agreement at the public offering price on the cover page of this prospectus
supplement. After the shares are released for sale to the public, the underwriter may change the
offering price and other selling terms at various times. In connection with the sale of the common
shares to be purchased by the underwriter, the underwriter will be deemed to have received
compensation in the form of underwriting commissions.
The following table summarizes the compensation and estimated expenses we will pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share |
|
|
Total |
|
|
|
Without |
|
|
With |
|
|
Without |
|
|
With |
|
|
|
Over-allotment |
|
|
Over-allotment |
|
|
Over-allotment |
|
|
Over-allotment |
|
Underwriting commissions paid by us |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
We have agreed not to offer, sell, contract to sell or otherwise issue any common shares or
securities exchangeable or convertible into common shares, without the prior written consent of
Roth Capital Partners, LLC, for a period of 90 days, subject to an 18 day extension under certain
circumstances, following the date of this prospectus supplement, subject to certain exceptions. In
addition, Richard Gelfond, our chief executive officer and a member of our Board of Directors, has
entered into a lock-up agreement with the underwriter. Under this lock-up agreement, subject to
exceptions, Mr. Gelfond may not, directly or indirectly, offer, sell, contract to sell, pledge or
otherwise dispose of or hedge any common shares or securities convertible into or exchangeable for
common shares, or publicly announce to do any of the foregoing, without the prior written consent
of Roth Capital Partners, LLC, for a period of 90 days, subject to an 18 day extension under
certain circumstances, from the date of this prospectus. This consent may be given at any time
without public notice. Mr. Gelfonds lock-up is subject to exceptions for certain gifts and
dispositions intended to generate proceeds to cover tax liabilities arising from the vesting of
restricted stock.
Pursuant to the underwriting agreement, we have agreed to indemnify the underwriter against
certain liabilities, including liabilities under the Securities Act, or to contribute to payments
which the underwriter or such other indemnified parties may be required to make in respect of any
such liabilities.
We estimate that total expenses payable by us with respect to this offering, excluding
underwriting discounts, will be approximately $300,000.
The underwriter and its affiliates have provided, and may in the future provide, various
investment banking, commercial banking and other financial services for us for which services they
have received, and may receive in the future, customary fees.
In connection with the offering the underwriter may engage in stabilizing transactions,
over-allotment transactions, syndicate covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act.
|
|
|
Stabilizing transactions permit bids to purchase the underlying security so long as
the stabilizing bids do not exceed a specified maximum. |
S-18
|
|
|
Over-allotment involves sales by the underwriter of shares in excess of the number of
shares the underwriters are obligated to purchase, which creates a syndicate short
position. The short position may be either a covered short position or a naked short
position. In a covered short position, the number of shares over-allotted by the
underwriters is not greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option. The underwriters may
close out any covered short position by either exercising their over-allotment option
and/or purchasing shares in the open market. |
|
|
|
|
Syndicate covering transactions involve purchases of the common shares in the open
market after the distribution has been completed in order to cover syndicate short
positions. In determining the source of shares to close out the short position, the
underwriters will consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which they may purchase shares
through the over-allotment option. A naked short position occurs if the underwriters sell more shares than could be
covered by the over-allotment option. This position can only be
closed out by buying shares in the open market. A naked short position is more likely to
be created if the underwriters are concerned that there could be downward pressure on
the price of the shares in the open market after pricing that could adversely affect
investors who purchase in the offering. |
|
|
|
|
Penalty bids permit the representative to reclaim a selling concession from a
syndicate member when the common shares originally sold by the syndicate member is
purchased in a stabilizing or syndicate covering transaction to cover syndicate short
positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the
effect of raising or maintaining the market price of our common shares or preventing or retarding a
decline in the market price of the common shares. As a result the price of our common shares may be
higher than the price that might otherwise exist in the open market. These transactions may be
discontinued at any time.
This prospectus supplement and the accompanying prospectus may be made available in electronic
format on the Internet sites or through other online services maintained by the underwriter
participating in the offering or by its affiliates. In those cases, prospective investors may view
offering terms online and prospective investors may be allowed to place orders online. Other than
the prospectus supplement and the accompanying prospectus in electronic format, the information on
the underwriters or our website and any information contained in any other website maintained by
the underwriter or by us is not part of the prospectus supplement, the accompanying prospectus or
the registration statement of which this prospectus supplement and the accompanying prospectus form
a part, has not been approved and/or endorsed by us or the underwriter in its capacity as
underwriter and should not be relied upon by investors.
S-19
LEGAL MATTERS
Certain Canadian legal matters in connection with this offering of our common shares will be
passed upon for us by McCarthy Tétrault LLP. We have been represented with respect to U.S. legal
matters in connection with this offering of our common shares by Shearman & Sterling LLP. DLA
Piper LLP (US) is counsel for the underwriter in connection with this offering.
EXPERTS
The audited financial statements, the related financial statement schedules and managements
assessment of the effectiveness of internal control over financial reporting (which is included in
Managements Report on Internal Control Over Financial Reporting), incorporated in this prospectus
by reference to our Annual Report on Form 10-K for the year ended December 31, 2008 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as
amended, or the Exchange Act. You may read and copy this information, or obtain copies of the
information by mail, at the following location of the SEC:
Public Reference Room
100 F Street, N.E.
Room 1580
Washington, DC 20549
You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a website that contains reports, proxy statements and other information
about issuers, like IMAX, that file electronically with the SEC. The address of the site is
www.sec.gov.
We are incorporating by reference into this prospectus supplement certain information we
file with the SEC, which means that we are disclosing important information to you by referring you
to those documents. The information we incorporate by reference in this prospectus supplement is
legally deemed to be a part of this prospectus, and later information that we file with the SEC
will automatically update and supersede the information included in this prospectus supplement and
the documents listed below. We incorporate the documents listed below:
|
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed on March
13, 2009; |
|
|
|
|
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009 filed on May
7, 2009; |
|
|
|
|
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009 filed on August
6, 2009; |
|
|
|
|
Proxy Statement on Schedule 14A related to our Annual Meeting of Shareholders held on
June 3, 2009, filed on April 8, 2009; |
|
|
|
|
Current Reports on Form 8-K filed on May 15, 2009, June 3, 2009, June 11, 2009 and June
25, 2009 (other than any information contained in these reports that has been furnished
under Item 2.02 or Item 7.01 of Form 8-K, which information is not incorporated by
reference into this prospectus); |
|
|
|
|
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the initial registration statement of which this prospectus
forms a part until all of the securities being offered under this prospectus or any
prospectus supplement are sold (other than current reports furnished under Item 2.02 or
Item 7.01 of Form 8-K); and |
S-20
|
|
|
The description of our common shares contained in the Registration Statement on Form
20-F/A No. 2 filed with the SEC on June 7, 1994, including any amendment or report filed
for the purposes of updating such description. |
You may request a copy of these filings, at no cost, by writing or calling us at the following
address or telephone number:
Investor Relations Department
IMAX Corporation
110 East 59th Street, Suite 2100
New York, New York 10022
Tel: (212) 821-0100
Exhibits to the filings will not be sent, however, unless those exhibits have specifically
been incorporated by reference in such filings.
You may also obtain these filings from our website at www.imax.com. Except for the documents
specifically incorporated by reference in the prospectus, the information contained on our website
does not constitute a part of this prospectus.
S-21
Prospectus
IMAX Corporation
$250,000,000
Debt Securities
Guarantees of Debt Securities
Preferred Shares
Common Shares
Warrants
Stock Purchase Contracts
Units
We may offer and sell, from time to time in one or more offerings, any combination of debt and
equity securities that we describe in this prospectus having an aggregate initial offering price of
up to $250,000,000.
Our debt securities may be guaranteed by certain of our U.S. and Canadian subsidiaries on an
unsecured basis.
This prospectus provides a general description of the securities we may offer. Each time we
sell securities, we will provide specific terms of the securities offered in a supplement to this
prospectus. The prospectus supplement may also add, update or change information contained in this
prospectus. Any statement contained in this prospectus is deemed modified or superseded by any
inconsistent statement contained in an accompanying prospectus supplement. You should read this
prospectus and any prospectus supplement, as well as the documents incorporated by reference into
this prospectus, carefully before you invest.
Our common shares trade on the NASDAQ Global Market under the symbol IMAX and on the Toronto
Stock Exchange under the symbol IMX. On April 7, 2009, the last reported sale price of our common
shares on NASDAQ and the TSX was $4.57 and Cdn
$5.63, respectively.
We have not yet determined whether any of the debt securities or any of our preferred shares,
warrants, stock purchase contracts, or units will be listed on any exchange or over-the-counter
market. If we decide to seek listing of these securities, a prospectus supplement relating to such
securities will identify the exchange or market.
INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE RISK FACTORS BEGINNING ON PAGE 2 OF THIS
PROSPECTUS.
This prospectus may not be used to offer to sell any securities unless accompanied by a
prospectus supplement.
We will sell these securities directly to investors, through agents designated from time to
time or to or through underwriters or dealers. For additional information on the methods of sale,
you should refer to the section entitled Plan of Distribution in this prospectus. If any
underwriters are involved in the sale of any securities with respect to which this prospectus is
being delivered, the names of such underwriters and any applicable commissions or discounts will be
set forth in a prospectus supplement. The price to the public of such securities and the net
proceeds we expect to receive from such sale will also be set forth in a prospectus supplement.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The
date of this prospectus is April 8, 2009.
TABLE
OF CONTENTS
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3 |
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10 |
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13 |
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15 |
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16 |
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17 |
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You should rely only on the information contained or incorporated by reference in this
prospectus. We have not authorized anyone else to provide you with different information. If anyone
provides you with different information, you should not rely on it. The securities are not being
offered in any jurisdiction where the offer or sale is not permitted. You should not assume that
the information contained in this prospectus and the accompanying prospectus supplement is accurate
on any date subsequent to the date set forth on the front of the document or that any information
we have incorporated by reference is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus and any accompanying prospectus supplement
is delivered or securities sold on a later date.
CANADA HAS NO SYSTEM OF EXCHANGE CONTROLS. THERE ARE NO CANADIAN RESTRICTIONS ON THE
REPATRIATION OF CAPITAL OR EARNINGS OF A CANADIAN PUBLIC COMPANY TO NON-RESIDENT INVESTORS. THERE
ARE NO CANADIAN LAWS OR EXCHANGE RESTRICTIONS AFFECTING THE REMITTANCE OF DIVIDENDS, INTEREST,
ROYALTIES OR SIMILAR PAYMENTS TO NON-RESIDENT HOLDERS OF OUR SECURITIES, EXCEPT FOR INCOME TAX
PROVISIONS WHICH MAY APPLY TO PARTICULAR SECURITIES TO BE DESCRIBED IN THE APPLICABLE PROSPECTUS
SUPPLEMENT.
Unless the context requires otherwise or otherwise as expressly stated, the terms we, our,
us, IMAX and the Company refer to IMAX Corporation, a corporation incorporated under the
federal laws of Canada, and its consolidated subsidiaries.
IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3D Dome, The
IMAX Experience®, An IMAX Experience®, IMAX DMR®, IMAX
MPX®, IMAX think big® and think big® are trademarks and trade
names of the Company or its subsidiaries that are registered or otherwise protected under laws of
various jurisdictions.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this prospectus may constitute
forward-looking statements within the meaning of the United States Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but are not limited to, references to
future capital expenditures (including the amount and nature thereof), business and technology
strategies and measures to implement strategies, competitive strengths, goals, expansion and growth
of business, operations and technology, plans and references to the future success of the Company
together with its wholly-owned subsidiaries and expectations regarding the Companys future
operating, financial and technological results. These forward-looking statements are based on
certain assumptions and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments, as well as other factors
it believes are appropriate in the circumstances. However, whether actual results and developments
will conform with the expectations and predictions of the Company is subject to a number of risks
and uncertainties, including, but not limited to, general economic, market or business conditions;
the opportunities (or lack thereof) that may be presented to and pursued by the Company;
competitive actions by other companies; U.S. and Canadian regulatory inquiries; conditions in the
in-home and out-of-home entertainment industries; changes in laws or regulations; conditions,
changes and developments in the commercial exhibition industry; risks associated with the
performance of the Companys new technologies; risks associated with investments and operations in
foreign jurisdictions and any future international expansion, including those related to economic,
political and regulatory policies of local governments and laws and policies of the United States
and Canada; the potential impact of increased competition in the markets the Company operates
within; and other factors, many of which are beyond the control of the Company. Consequently, all
of the forward-looking statements included or incorporated by reference in this prospectus are
qualified by these cautionary statements, and actual results or anticipated developments by the
Company may not be realized, and even if substantially realized, may not have the expected
consequences to, or effects on, the Company. We urge you to review carefully the section entitled
Risk Factors in this prospectus and any prospectus supplement for additional details about risks
that may affect these forward-looking statements. The Company undertakes no obligation to update
publicly or otherwise revise any forward-looking information, whether as a result of new
information, future events or otherwise.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we filed with the
Securities and Exchange Commission, or SEC, using the shelf registration process. Under this
shelf registration process, we may sell any combination of the securities described in this
prospectus from time to time in one or more offerings up to an aggregate initial offering price of
$250,000,000. This prospectus provides you with a general description of the securities we may
offer. Each time we sell any securities under this prospectus, we will provide a prospectus
supplement containing specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this prospectus. To the extent
there is a conflict between the information contained in this prospectus and the prospectus
supplement, you should rely on the information in the prospectus supplement, provided that if any
statement in one of these documents is inconsistent with a statement in another document having a
later datefor example, a document incorporated by reference in this prospectus or any prospectus
supplementthe statement in the later-dated document modifies or supersedes the earlier statement.
You should read both this prospectus and any applicable prospectus supplement together with
the additional information about our company to which we refer you in the sections of this
prospectus entitled Where You Can Find More Information.
i
SUMMARY
This summary is not complete and does not contain all of the information that you should
consider before buying our securities. You should read the entire prospectus carefully including,
in particular, the section entitled Risk Factors beginning on page 2 and the more detailed
information and financial statements and related notes appearing elsewhere or incorporated by
reference in this prospectus before making an investment decision.
IMAX Corporation
We, together with our wholly-owned subsidiaries, are one of the worlds leading entertainment
technology companies, specializing in digital and film-based motion picture technologies and
large-format two-dimensional and three-dimensional film presentations. Our principal business is
the design, manufacture, sale and lease of theater systems based on proprietary and patented
technology for large format theaters, including commercial theaters, museums and science centers,
and destination entertainment sites. The majority of these theaters are operated by third parties.
We generally do not own IMAX theaters, but we license the use of our trademarks along with the sale
or lease of our equipment. We refer to all theaters using the IMAX theater system as IMAX theaters.
We are also engaged in the production, digital re-mastering, post-production and distribution
of large-format films, the operation of IMAX theaters and the provision of services in support of
IMAX theaters and the IMAX theater network.
We were formed in March 1994 as a result of an amalgamation between WGIM Acquisition Corp. and
our predecessor, IMAX Corporation. The predecessor IMAX was incorporated in 1967.
Our principal executive offices are located in: Mississauga, Ontario, Canada; New York, New
York; and Santa Monica, California. The address and phone number for our Mississauga office is as
follows: 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, (905) 403-6500. The address
and phone number for our New York office is as follows: 115 E. 59th Street, Suite 2100, New York,
New York, 10022, (212) 821-0100. The address and telephone number for our Santa Monica office is
as follows: 3003 Exposition Blvd., Santa Monica, California, 90405, (310) 255-5500.
1
RISK FACTORS
An investment in our securities involves a high degree of risk. Prior to making a decision
about investing in our securities, you should carefully consider the risks described in the section
entitled Risk Factors in any prospectus supplement and the risks described in the Companys most
recent Annual Report on Form 10-K filed with the SEC, in each case as these risk factors are
amended or supplemented by subsequent Quarterly Reports on Form 10-Q. The occurrence of any of
these risks could materially adversely affect our business, operating results and financial
condition.
The risks and uncertainties we describe are not the only ones facing our Company. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business or operations. Any adverse effect on our business, financial condition or
operating results could result in a decline in the value of the securities and the loss of all or
part of your investment.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of our earnings to fixed charges for the periods indicated is set forth below. The
information set forth below should be read together with the financial statements and the
accompanying notes and Managements Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the year ended December 31, 2008
incorporated by reference into this prospectus.
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Years ended December 31, |
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2008 |
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2007 |
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2006 |
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2005 |
|
2004 |
Ratio of earnings to fixed charges |
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|
(0.78 |
) |
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(0.56 |
) |
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|
0.33 |
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|
1.39 |
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1.36 |
|
For the purposes of these computations, earnings have been calculated as the sum of (i) income
(loss) from continuing operations before income taxes, equity income (losses) in affiliates,
minority interest, cumulative effect of change in accounting principle and extraordinary gain on
acquisition of minority interest and (ii) fixed charges. Fixed charges consist of the sum of (i)
interest cost (whether expensed or capitalized), amortized premiums, discounted and capitalized
expenses related to indebtedness and (ii) an estimate of the interest within rental expense. The
ratio of earnings to fixed charges was less than 1:1 for the year ended December 31, 2006. In
order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate an
additional $11.9 million in earnings in the year ended December 31, 2006. The ratio of earnings to
fixed charges was less than 1:1 for the year ended December 31, 2007. In order to achieve a ratio
of earnings to fixed charges of 1:1, we would have had to generate an additional $28.5 million in
earnings in the year ended December 31, 2007. The ratio of earnings to fixed charges was less than
1:1 for the year ended December 31, 2008. In order to achieve a ratio of earnings to fixed
charges
of 1:1, we would have had to generate an additional $33.5 million in earnings in the year ended
December 31, 2008.
If we use this prospectus to issue preferred shares, the prospectus supplement will include a
ratio of combined fixed charges and preferred dividends to earnings, as appropriate. We had no
preferred shares outstanding in any of the periods shown.
2
USE OF PROCEEDS
Unless we state otherwise in the applicable prospectus supplement, we will use the net
proceeds from the sale of the securities that may be offered by this prospectus and the applicable
prospectus supplement for general corporate purposes, which may include repayment of debt,
acquisitions, capital expenditures and working capital needs, and for repurchases of common shares.
We will determine the allocation of the net proceeds of an offering of securities to a specific
purpose, if any, at the time of the offering and we will describe such allocation in the applicable
prospectus supplement. If a material part of the net proceeds is to be used to repay indebtedness,
we will set forth the interest rate and maturity of such indebtedness in a prospectus supplement.
We may temporarily invest any proceeds that are not immediately applied to the above purposes
in U.S. government or agency obligations, commercial paper, money market funds, taxable and
tax-exempt notes and bonds, variable-rate demand obligations, bank certificates of deposits or
repurchase agreements collateralized by U.S. government or agency obligations. We may also deposit
the proceeds with banks.
3
DESCRIPTION OF DEBT SECURITIES
The following description, together with the additional information we include in any
applicable prospectus supplements, summarizes the material terms and provisions of the debt
securities that we may offer under this prospectus. While the terms we have summarized below will
apply generally to any future debt securities we may offer, we will describe the particular terms
of any debt securities that we may offer in more detail in the applicable prospectus supplement.
Because the terms of a specific series of debt securities may vary from the general information
that we have provided below, you should rely on information in the applicable prospectus supplement
that varies from any information below.
We may issue senior notes under a senior indenture to be entered into among, us, a trustee to
be named in the senior indenture and, if guaranteed, the subsidiary guarantors named therein. We
may issue subordinated notes under a subordinated indenture to be entered into among us, a trustee
to be named in the subordinated indenture and, if guaranteed, the subsidiary guarantors named
therein. We have filed forms of these documents as exhibits to the registration statement which
includes this prospectus. We use the term indentures to refer to both the senior indenture and
the subordinated indenture. The indentures will be qualified under the Trust Indenture Act of 1939,
or the Trust Indenture Act. We use the term trustee to refer to either the senior trustee or the
subordinated trustee, as applicable. We urge you to read the indenture applicable to your
investment because the indenture, and not this section, defines your rights as a holder of debt
securities.
The debt securities may be guaranteed by certain of our U.S. and Canadian subsidiaries.
Under applicable Canadian law, a Canadian licensed trust company may be required to be
appointed as co-trustee under any or all of the indentures in certain circumstances. In such
circumstances, it is anticipated that application will be made to the appropriate Canadian
regulatory authorities for exemptions from this and other requirements of Canadian law applicable
to the indentures. If such relief is not obtained, the applicable legislative requirements will be
complied with at the time of the applicable offering.
The following summaries of material provisions of senior notes, subordinated notes and the
indentures are subject to, and qualified in their entirety by reference to, the provisions of the
indenture applicable to a particular series of debt securities. Except as we may otherwise
indicate, the terms of the senior indenture and the subordinated indenture are identical.
General
We will describe in the applicable prospectus supplement terms relating to a series of notes
including, but not limited to, the following:
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the title; |
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any limit on the amount that may be issued; |
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whether or not we will issue the series of notes in global form, and, if so, who the depository will be; |
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the maturity date; |
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the annual interest rate, which may be fixed or variable, or the
method for determining the rate and the date interest will begin to
accrue, the interest payment dates and the regular record dates for
interest payment dates or the method for determining such dates; |
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whether the notes will be secured or unsecured, and the terms of any secured debt; |
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whether the notes will be guaranteed by our subsidiaries; |
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whether the notes and/or any guarantees will be senior or subordinated; |
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the terms of the subordination of any series of subordinated debt; |
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the place where payments will be payable; |
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our right, if any, to defer payment of interest and the maximum length of any such deferral period; |
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the date, if any, after which, and the price at which, we may, at our
option, redeem the series of notes pursuant to any optional redemption
provisions; |
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the date, if any, on which, and the price at which we are obligated,
pursuant to any mandatory sinking fund provisions or otherwise, to
redeem, or at the holders option to purchase, the series of notes; |
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whether the indenture will restrict our ability to pay dividends, or will require us to maintain any asset ratios or reserves; |
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a discussion on any material or preferred United States federal income tax considerations applicable to the notes; |
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whether and under what circumstances we will pay additional amounts to
non-Canadian holders in respect of any tax assessment or government
charge, and, if so, whether we will have the option to redeem the debt
securities rather than pay such additional amounts; |
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the denominations in which we will issue the series of notes, if other
than denominations of $1,000 and any integral multiple thereof; and |
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any other specific terms, preferences, rights or limitations of, or
restrictions on, the debt securities, including any deleted, modified
or additional events of default or remedies or additional covenants
with respect to the debt securities. |
We may issue the debt securities as original issue discount securities, which are securities
that are offered and sold at a substantial discount to their stated principal amount, or as
payment-in-kind securities which may constitute original issue discount securities for U.S. federal
income tax purposes. The prospectus supplement relating to the original issue discount securities
will describe U.S. federal income tax consequences and other special considerations applicable to
them. The debt securities may also be issued as indexed securities or securities denominated in
foreign currencies or currency units, as described in more detail in the prospectus supplement
relating to any of the particular debt securities. The prospectus supplement relating to any
specific debt securities will also describe any material additional tax considerations applicable
to such debt securities.
Debt Guarantees
Unless otherwise set forth in the applicable prospectus supplement, our notes will be
guaranteed by certain of our U.S. and Canadian subsidiaries. If a series of notes is guaranteed by
subsidiary guarantors, the guarantee will be set forth in the applicable indenture or in a
supplemental indenture.
Payments with respect to subsidiary guarantees of our subordinated notes will be subordinated
in right of payment to the prior payment in full of all senior indebtedness of each such subsidiary
guarantor to the same extent and manner that payments with respect to our subordinated notes are
subordinated in right of payment to the prior payment in full of all of our senior indebtedness.
Conversion or Exchange Rights
We will set forth in the applicable prospectus supplement the terms on which a series of notes
may be convertible into or exchangeable for common shares or other securities of ours. We will
include provisions as to whether conversion or exchange is mandatory, at the option of the holder
or at our option. We may include provisions pursuant to which the number of common shares or other
securities of ours that the holders of the series of notes receive would be subject to adjustment.
Consolidation, Merger or Sale
Unless otherwise described in the prospectus supplement of any series, we will not
consolidate, amalgamate or merge with or enter into any statutory arrangement with any other
corporation or effect any conveyance, transfer or lease of all or substantially all of our
properties and assets unless the following specified conditions are satisfied:
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the resulting entity must agree to be legally responsible for the debt
securities and be a corporation, partnership or trust organized and
existing under the laws of Canada or any province or territory
thereof, the United States, any state thereof or the District of
Columbia or, if such transaction would not impair your rights, any
other country provided the successor entity assumes our obligations
under the debt securities and the indenture to pay additional amounts; |
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the merger or sale of all or substantially all of our assets must not
cause a default on the debt securities, and we must not already be in
default (unless the merger or sale would cure the default) with
respect to the debt securities; and |
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we must satisfy any other requirements specified in the applicable
prospectus supplement relating to a particular series of debt
securities. |
5
Events of Default Under the Indenture
The following are events of default under the indentures with respect to any series of notes
that we may issue:
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if we fail to pay interest when due and our failure continues for 30
days and the time for payment has not been extended or deferred; |
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if we fail to pay the principal, or premium, if any, when due and the time for payment has not been extended or delayed; |
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if we, or one of our subsidiary guarantors, fail to observe or perform
any other covenant contained in the notes or the indentures, other
than a covenant specifically relating to another series of notes, and
our failure continues for 60 days after we receive notice from the
trustee or holders of at least 25% in aggregate principal amount of
the outstanding notes of the applicable series; and |
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if specified events of bankruptcy, insolvency or reorganization occur. |
If an event of default with respect to notes of any series occurs and is continuing, the
trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes of
that series, by notice to us in writing, and to the trustee if notice is given by such holders, may
declare the unpaid principal of, premium, if any, on and accrued interest, if any, on the notes due
and payable immediately.
The holders of a majority in principal amount of the outstanding notes of an affected series
may waive any default or event of default with respect to the series and its consequences, except
defaults or events of default regarding payment of principal, premium, if any, or interest, unless
we have cured the default or event of default in accordance with the indenture. Any waiver shall
cure the default or event of default.
Subject to the terms of the indentures, if an event of default under an indenture shall occur
and be continuing, the trustee will be under no obligation to exercise any of its rights or powers
under such indenture at the request or direction of any of the holders of the applicable series of
notes, unless such holders have offered the trustee reasonable indemnity. The holders of a majority
in principal amount of the outstanding notes of any series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the notes of that series,
provided that:
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the direction so given by the holder is not in conflict with any law or the applicable indenture; and |
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subject to its duties under the Trust Indenture Act, the trustee need
not take any action that might involve it in personal liability or
might be unduly prejudicial to the holders not involved in the
proceeding. |
A holder of the notes of any series will only have the right to institute a proceeding under
the indentures or to appoint a receiver or trustee, or to seek other remedies, if:
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the holder has given written notice to the trustee of a continuing event of default with respect to that series; |
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the holders of at least 25% in aggregate principal amount of the
outstanding notes of that series have made written request, and such
holders have offered reasonable indemnity to the trustee to institute
the proceeding as trustee; and |
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the trustee does not institute the proceeding, and does not receive
from the holders of a majority in aggregate principal amount of the
outstanding notes of that series other conflicting directions within
60 days after the notice, request and offer. |
These limitations do not apply to a suit instituted by a holder of notes if we default in the
payment of the principal of, premium, if any, or interest on, the notes.
We will periodically file statements with the trustee regarding our compliance with specified
covenants in the indentures.
6
Modification of Indenture
We and the trustee may change an indenture without the consent of any holders with respect to
specific matters, including:
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to fix any ambiguity, defect or inconsistency in the indenture; |
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to change anything that does not materially adversely affect the interests of any holder of notes of any series; and |
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other matters specified in the applicable prospectus supplement. |
In addition, under the indentures, the rights of holders of a series of notes may be changed
by us and the trustee with the written consent of the holders of at least a majority in aggregate
principal amount of the outstanding notes of each series that is affected. However, the following
changes require the consent of each holder of any outstanding notes affected:
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extending the fixed maturity of the series of notes; |
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reducing the principal amount, reducing the rate of interest, or any premium payable upon the redemption of any notes; |
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release a guarantor from its obligations under its guarantee, other than in accordance with the terms thereof; |
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reducing the minimum percentage of notes, the holders of which are required to consent to any amendment; or |
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other matters specified in the applicable prospectus supplement. |
Defeasance
The following provisions will be applicable to each series of debt securities unless we state
in the applicable prospectus supplement or term sheet that the provisions of covenant defeasance
and full defeasance will not be applicable to that series.
Covenant Defeasance. Under current United States federal tax law, we can make the deposit
described below and be released from some of the restrictive covenants in the indenture under which
the particular series was issued. This is called covenant defeasance. In that event, you would
lose the protection of those restrictive covenants but would gain the protection of having money
and government securities set aside in trust to repay your debt securities. In order to achieve
covenant defeasance, we must do the following:
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If the debt securities of the particular series are denominated in
U.S. dollars, deposit in trust for the benefit of all holders of such
debt securities a combination of money and United States government or
United States government agency debt securities or bonds that will
generate enough cash to make interest, principal and any other
payments on the debt securities on their various due dates. |
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Deliver to the trustee a legal opinion of our U.S. counsel confirming
that, under current United States federal income tax law, we may make
the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and
just repaid the debt securities ourselves at maturity. |
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Deliver to the trustee a legal opinion of our Canadian counsel or a
ruling from the Canada Revenue Agency confirming that, under current
Canadian federal or provincial income tax or other tax purposes, we
may make the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and
just repaid the debt securities ourselves at maturity. |
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Deliver to the trustee a legal opinion and officers certificate
stating that all conditions precedent to covenant defeasance have been
complied with. |
If we accomplish covenant defeasance, you can still look to us for repayment of the debt
securities if there were a shortfall in the trust deposit or the trustee is prevented from making
payment. In fact, if one of the remaining Events of Default occurred (such as our bankruptcy) and
the debt securities became immediately due and payable, there might be a shortfall. Depending on
the event causing the default, you may not be able to obtain payment of the shortfall.
Full Defeasance. If there is a change in United States federal tax law, as described below, we
can legally release ourselves from all payment and other obligations on the debt securities of a
particular series (called full defeasance) if we put in place the following other arrangements
for you to be repaid:
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If the debt securities of the particular series are denominated in
U.S. dollars, we must deposit in trust for the benefit of all holders
of such debt securities a combination of money and United States
government or United States government agency debt securities or bonds
that will generate enough cash to make interest, principal and any
other payments on the debt securities on their various due dates. |
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We must deliver to the trustee a legal opinion of U.S. counsel
confirming that there has been a change in current United States
federal tax law or an Internal Revenue Service ruling that allows us
to make the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and
just repaid the debt securities ourselves at maturity. Under current
United States federal tax law, the deposit and our legal release from
the debt securities would be treated as though we paid you your share
of the cash and debt securities or bonds at the time the cash and debt
securities or bonds were deposited in trust in exchange for your debt
securities and you would recognize gain or loss on the debt securities
at the time of the deposit. |
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We must deliver to the trustee a legal opinion of Canadian counsel
confirming that there has been a change in current Canadian federal or
provincial income tax law or a ruling from the Canada Revenue Agency
that allows us to make the above deposit without causing you to be
taxed on the debt securities any differently than if we did not make
the deposit and just repaid the debt securities ourselves at maturity.
Under current Canadian federal tax law, the deposit and our legal
release from the debt securities would be treated as though we paid
you your share of the cash and debt securities or bonds at the time
the cash and debt securities or bonds were deposited in trust in
exchange for your debt securities and you would recognize gain or loss
on the debt securities at the time of the deposit. |
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We must deliver to the trustee a legal opinion and officers
certificate stating that all conditions precedent to defeasance have
been complied with. |
If we ever did accomplish full defeasance, as described above, you would have to rely solely
on the trust deposit for repayment of the debt securities. You could not look to us for repayment
in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be
protected from claims of our lenders and other creditors if we ever became bankrupt or insolvent.
Discharge
Each indenture provides that we can elect, under certain circumstances, to be discharged from
our obligations with respect to one or more series of debt securities, except for obligations to:
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register the transfer or exchange of debt securities of the series; |
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replace stolen, lost or mutilated debt securities of the series; |
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maintain paying agencies; |
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hold monies for payment in trust; |
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compensate and indemnify the trustee; and |
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appoint any successor trustee. |
In order to exercise our rights to be discharged, we must deposit with the trustee money or
government obligations sufficient to pay all the principal of, any premium, if any, and interest
on, the debt securities of the series on the dates payments are due.
Form, Exchange and Transfer
We will issue the notes of each series only in fully registered form without coupons and,
unless we otherwise specify in the applicable prospectus supplement, in denominations of $1,000 and
any integral multiple thereof. The indentures provide that we may issue notes of a series in
temporary or permanent global form and as book-entry securities that will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York, known as DTC, or another depository
named by us and identified in a prospectus supplement with respect to that series. See Legal
Ownership of Securities for a further description of the terms relating to any book-entry
securities.
At the option of the holder, subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus supplement, the holder of
the notes of any series can exchange the notes for other notes of the same series, in any
authorized denomination and of like tenor and aggregate principal amount.
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Subject to the terms of the indentures and the limitations applicable to global securities set
forth in the applicable prospectus supplement, holders of the notes may present the notes for
exchange or for registration of transfer, duly endorsed or with the form of transfer endorsed
thereon duly executed if so required by us or the security registrar, at the office of the security
registrar or at the office of any transfer agent designated by us for this purpose. Unless
otherwise provided in the notes that the holder presents for transfer or exchange, we will not
require any payment for any registration of transfer or exchange, but we may require payment of any
taxes or other governmental charges.
We will name in the applicable prospectus supplement the security registrar, and any transfer
agent in addition to the security registrar, that we initially designate for any notes. We may at
any time designate additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment for the notes of each series.
If we elect to redeem the notes of any series, we will not be required to:
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issue, register the transfer of, or exchange any notes of that series
during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of any notes that may be
selected for redemption and ending at the close of business on the day
of the mailing; or |
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register the transfer of or exchange any notes so selected for
redemption, in whole or in part, except the unredeemed portion of any
notes we are redeeming in part. |
Information Concerning the Trustee
The trustee, other than during the occurrence and continuance of an event of default under an
indenture, undertakes to perform only those duties as are specifically set forth in the applicable
indenture. Upon an event of default under an indenture, the trustee must use the same degree of
care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the trustee is under no obligation to exercise any of the powers given to it by the
indentures at the request of any holder of notes unless it is offered reasonable security and
indemnity against the costs, expenses and liabilities that it might incur.
Payment and Paying Agents
Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of
the interest on any notes on any interest payment date to the person in whose name the notes, or
one or more predecessor securities, are registered at the close of business on the regular record
date for the interest payment.
We will pay principal of and any premium and interest on the notes of a particular series at
the office of the paying agents designated by us, except that unless we otherwise indicate in the
applicable prospectus supplement, will we make interest payments by check which we will mail to the
holder. Unless we otherwise indicate in a prospectus supplement, we will designate the corporate
trust office of the trustee in the city of New York as our sole paying agent for payments with
respect to notes of each series. We will name in the applicable prospectus supplement any other
paying agents that we initially designate for the notes of a particular series. We will maintain a
paying agent in each place of payment for the notes of a particular series.
All money we pay to a paying agent or the trustee for the payment of the principal of or any
premium or interest on any notes which remains unclaimed at the end of two years after such
principal, premium or interest has become due and payable will be repaid to us, and the holder of
the security thereafter may look only to us for payment thereof.
Governing Law
The indentures and the notes will be governed by and construed in accordance with the laws of
the State of New York.
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LEGAL OWNERSHIP OF SECURITIES
We can issue securities in registered form or in the form of one or more global securities. We
describe global securities in greater detail below. We refer to those persons who have securities
registered in their own names on the books that we or any applicable trustee maintain for this
purpose as the holders of those securities. These persons are the legal holders of the
securities. We refer to those persons who, indirectly through others, own beneficial interests in
securities that are not registered in their own names, as indirect holders of those securities.
As we discuss below, indirect holders are not legal holders, and investors in securities
issued in book-entry form or in street name will be indirect holders.
Book-Entry Holders
We may issue securities in book-entry form only, as we will specify in the applicable
prospectus supplement. This means securities may be represented by one or more global securities
registered in the name of a financial institution that holds them as depositary on behalf of other
financial institutions that participate in the depositarys book-entry system. These participating
institutions, which are referred to as participants, in turn hold beneficial interests in the
securities on behalf of themselves or their customers.
Only the person in whose name a security is registered is recognized as the holder of that
security. Securities issued in global form will be registered in the name of the depositary or its
participants. Consequently, for securities issued in global form, we will recognize only the
depositary as the holder of the securities, and we will make all payments on the securities to the
depositary. The depositary passes along the payments it receives to its participants, which in turn
pass the payments along to their customers who are the beneficial owners. The depositary and its
participants do so under agreements they have made with one another or with their customers; they
are not obligated to do so under the terms of the securities.
As a result, investors in a book-entry security will not own securities directly. Instead,
they will own beneficial interests in a global security, through a bank, broker or other financial
institution that participates in the depositarys book-entry system or holds an interest through a
participant. As long as the securities are issued in global form, investors will be indirect
holders, and not legal holders, of the securities.
Street Name Holders
We may terminate a global security or issue securities in non-global form. In these cases,
investors may choose to hold their securities in their own names or in street name. Securities
held by an investor in street name would be registered in the name of a bank, broker or other
financial institution that the investor chooses, and the investor would hold only a beneficial
interest in those securities through an account he or she maintains at that institution.
For securities held in street name, we will recognize only the intermediary banks, brokers and
other financial institutions in whose names the securities are registered as the holders of those
securities, and we will make all payments on those securities to them. These institutions pass
along the payments they receive to their customers who are the beneficial owners, but only because
they agree to do so in their customer agreements or because they are legally required to do so.
Investors who hold securities in street name will be indirect holders, not legal holders, of those
securities.
Legal Holders
Our obligations, as well as the obligations of any applicable trustee and of any third parties
employed by us or a trustee, run only to the legal holders of the securities. We do not have
obligations to investors who hold beneficial interests in global securities, in street name or by
any other indirect means. This will be the case whether an investor chooses to be an indirect
holder of a security or has no choice because we are issuing the securities only in global form.
For example, once we make a payment or give a notice to the holder, we have no further
responsibility for the payment or notice even if that holder is required, under agreements with
depositary participants or customers or by law, to pass it along to the indirect holders but does
not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to
relieve us of the consequences of a default or of our obligation to comply with a particular
provision of the indenture or for other purposes. In such an event, we would seek approval only
from the legal holders, and not the indirect holders, of the securities. Whether and how the
holders contact the indirect holders is up to the legal holders.
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Special Considerations for Indirect Holders
If you hold securities through a bank, broker or other financial institution, either in
book-entry form or in street name, you should check with your own institution to find out:
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how it handles securities payments and notices; |
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whether it imposes fees or charges; |
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how it would handle a request for the holders consent, if ever required; |
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whether and how you can instruct it to send you securities registered
in your own name so you can be a holder, if that is permitted in the
future; |
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how it would exercise rights under the securities if there were a
default or other event triggering the need for holders to act to
protect their interests; and |
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if the securities are in book-entry form, how the depositarys rules and procedures will affect these matters. |
Global Securities
A global security is a security that represents one or any other number of individual
securities held by a depositary. Generally, all securities represented by the same global
securities will have the same terms.
Each security issued in book-entry form will be represented by a global security that we
deposit with and register in the name of a financial institution or its nominee that we select. The
financial institution that we select for this purpose is called the depositary. Unless we specify
otherwise in the applicable prospectus supplement, Depository Trust Company, known as DTC, will be
the depositary for all securities issued in book-entry form.
A global security may not be transferred to or registered in the name of anyone other than the
depositary, its nominee or a successor depositary, unless special termination situations arise. We
describe those situations below under Special Situations When a Global Security Will Be
Terminated. As a result of these arrangements, the depositary, or its nominee, will be the sole
registered owner and legal holder of all securities represented by a global security, and investors
will be permitted to own only beneficial interests in a global security. Beneficial interests must
be held by means of an account with a broker, bank or other financial institution that in turn has
an account with the depositary or with another institution that does. Thus, an investor whose
security is represented by a global security will not be a legal holder of the security, but only
an indirect holder of a beneficial interest in the global security.
If the prospectus supplement for a particular security indicates that the security will be
issued in global form only, then the security will be represented by a global security at all times
unless and until the global security is terminated. If termination occurs, we may issue the
securities through another book-entry clearing system or decide that the securities may no longer
be held through any book-entry clearing system.
Special Considerations for Global Securities
As an indirect holder, an investors rights relating to a global security will be governed by
the account rules of the investors financial institution and of the depositary, as well as general
laws relating to securities transfers. We do not recognize an indirect holder as a legal holder of
securities and instead deal only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an investor should be aware of
the following:
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An investor cannot cause the securities to be registered in his or her
name and cannot obtain non-global certificates for his or her interest
in the securities, except in the special situations we describe below. |
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An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his or
her legal rights relating to the securities, as we describe above. |
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An investor may not be able to sell interests in the securities to
some insurance companies and to other institutions that are required
by law to own their securities in non-book-entry form. |
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An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective. |
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The depositarys policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to an
investors interest in a global security. We and any applicable
trustee have no responsibility for any aspect of the depositarys
actions or for its records of ownership interests in a global
security. We and the trustee also do not supervise the depositary in
any way. |
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The depositary may, and we understand that DTC will, require that
those who purchase and sell interests in a global security within its
book-entry system use immediately available funds, and your broker or
bank may require you to do so as well. |
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Financial institutions that participate in the depositarys book-entry
system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices
and other matters relating to the securities. There may be more than
one financial intermediary in the chain of ownership for an investor.
We do not monitor and are not responsible for the actions of any of
those intermediaries. |
Special Situations when a Global Security Will Be Terminated
In a few special situations described below, the global security will terminate, and interests
in it will be exchanged for physical certificates representing those interests. After that
exchange, the choice of whether to hold securities directly or in street name will be up to the
investor. Investors must consult their own banks or brokers to find out how to have their interests
in securities transferred to their own name, so that they will be direct holders. We have described
the rights of holders and street name investors above.
The global security will terminate when the following special situations occur:
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if the depositary notifies us that it is unwilling, unable or no
longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary within
90 days; |
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if we notify any applicable trustee that we wish to terminate that global security; or |
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if an event of default has occurred with regard to securities
represented by that global security and has not been cured or waived. |
The applicable prospectus supplement may also list additional situations for terminating a
global security that would apply only to the particular series of securities covered by the
prospectus supplement. When a global security terminates, the depositary, and not we or any
applicable trustee, is responsible for deciding the names of the institutions that will be the
initial direct holders.
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DESCRIPTION OF PREFERRED SHARES
We have the ability to issue an unlimited number of special shares, which we refer to herein
as preferred shares, in series with such terms as our board of directors may determine. Any such
series of special shares could have rights equal or superior to the rights of our common shares.
The following briefly summarizes the provisions of our articles that would be important to
holders of our special shares. The following description may not be complete and is subject to, and
qualified in its entirety by reference to, the terms and provisions of our articles which is an
exhibit to the registration statement which contains this prospectus. The description of most of
the financial and other specific terms of your series will be in the prospectus supplement
accompanying this prospectus. We encourage you to review complete copies of our articles and
by-law.
The specific terms of your series of special shares as described in your prospectus supplement
will supplement and, if applicable, may modify or replace the general terms described in this
section. If there are differences between your prospectus supplement and this prospectus, your
prospectus supplement will control. Thus, the statements we make in this section may not apply to
your series of special shares. The terms in your prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.
Our Authorized Special Shares
Under our articles, our board of directors is authorized, without further action by our
shareholders, to issue at any time an unlimited number of special shares. Our board of directors
may from time to time before the issue thereof fix the number of shares in, and determine the
designation, rights, privileges, restrictions and conditions attaching to, each series of special
shares. The special shares shall be entitled to priority over the common shares and all other
shares ranking junior to the special shares with respect to the payment of dividends and the
distribution of our assets in the event of any liquidation, dissolution or winding-up or other
distribution of our assets among our shareholders for the purpose of winding-up our affairs. Except
as otherwise provided by law or as may be required by the rules of the applicable national
securities exchange or quotation service, the holders of the special shares shall not, as such, be
entitled to receive notice of or to attend any meeting of our shareholders and shall not be
entitled to vote at any such meeting. Without limiting the generality of the foregoing, the holders
of the special shares shall not be entitled to vote separately as a class on any proposal to amend
our articles to:
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increase or decrease any maximum number of authorized special shares,
or increase any maximum number of authorized shares of a class having
rights or privileges equal or superior to the special shares; |
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effect an exchange, reclassification or cancellation of all or part of the special shares; or |
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create a new class of shares equal or superior to the special shares. |
The prospectus supplement relating to the particular series of special shares will contain a
description of the specific terms of that series as fixed by our board of directors, including, as
applicable:
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the offering price at which we will issue the special shares; |
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the title, designation of number of special shares and stated value of the special shares; |
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the dividend rate or method of calculation, the payment dates for
dividends and the place or places where the dividends will be paid,
whether dividends will be cumulative or noncumulative, and, if
cumulative, the dates from which dividends will begin to cumulate; |
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any conversion or exchange rights; |
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whether the special shares will be subject to redemption and the
redemption price and other terms and conditions relative to the
redemption rights; |
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any liquidation rights; |
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any voting rights; and |
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any other rights, preferences, privileges, limitations and
restrictions that are not inconsistent with the terms of our articles. |
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When we issue and receive payment for the special shares, the shares will be fully paid and
non-assessable, which means that the holders will have paid their purchase price in full and that
we may not ask them to surrender additional funds.
The rights of holders of the special shares offered may be adversely affected by the rights of
holders of any special shares that may be issued in the future. Our board of directors may cause
the special shares to be issued in public or private transactions for any proper corporate purposes
and may include issuances to obtain additional financing in connection with acquisitions, and
issuances to officers, directors and employees pursuant to benefit plans. Our board of directors
ability to issue special shares may discourage attempts by others to acquire control of us without
negotiation with our board of directors, as it may make it difficult for a person to acquire us
without negotiating with our board of directors.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for the special shares will be
stated in the applicable prospectus supplement.
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DESCRIPTION OF COMMON SHARES
Our authorized capital stock consists of an unlimited number of common shares. As of April
7, 2009, there were 43,730,631 common shares outstanding. Our common shares are quoted on the
NASDAQ Global Market under the symbol IMAX and are listed on the Toronto Stock Exchange under the
symbol IMX.
The following description of our common shares and provisions of our articles and by-law is
only a summary. The description may not be complete and is subject to, and qualified in its
entirety by reference to, the terms and provisions of our articles and by-law, which are exhibits
to the registration statement which contains this prospectus. We encourage you to review complete
copies of our articles and by-law.
Voting Rights
Each holder of our common shares is entitled to one vote for each share on all matters
submitted to a vote of our stockholders, including the election of our directors. The rights
attached to the common shares do not provide for cumulative voting rights or preemptive rights.
Accordingly, the holders of a majority of our outstanding common shares entitled to vote in any
election of directors can elect all of the directors standing for election, if they should so
choose.
Dividends
The holders of common shares are entitled to receive dividends if, as and when declared by our
board of directors, subject to the rights of the holders of any other class of our shares entitled
to receive dividends in priority to the common shares. Certain of the instruments governing our
existing indebtedness restrict our rights to pay dividends to the holders of the common shares.
Liquidation, Dissolution or Winding Up
If we liquidate, dissolve or wind up, the holders of our common shares are entitled to share
ratably in all assets legally available for distribution to stockholders after payment of any
liquidation or distribution preference payable with respect to any other then outstanding classes
of stock entitled to such preference.
Rights and Preferences
Our common shares have no preemptive, conversion or subscription rights. There are no
redemption or sinking fund provisions applicable to our common shares.
Board Classification
Under our articles, our board of directors is divided into three classes, each of which serves
for a three year term.
Change of Control
Under Canadian law, the affirmative vote of two-thirds of the votes cast is required for
shareholder approval of an amalgamation (other than certain short form amalgamations), for any
sale, lease or exchange of all, or substantially all, of our assets, if not in the ordinary course
of our business, and certain other fundamental changes including an amendment to the articles of
amalgamation. Other shareholder action is generally decided by a majority of the votes cast at a
meeting of shareholders.
There is no limitation imposed by Canadian law or by our articles or other charter documents
on the right of a non-resident to hold or vote common shares, other than as provided by the
Investment Canada Act, which requires notification and, in certain cases, advance review and
approval by the Government of Canada of the acquisition by a non-Canadian of control of a Canadian
business.
The authorization of undesignated special shares in our articles makes it possible for our
board of directors to issue special shares with rights or preferences that could impede the success
of any attempt to change control of us. These and other provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of us.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is Computershare Trust Company N.A. in
the United States and Computershare Investor Services Inc. in Canada.
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DESCRIPTION OF WARRANTS
The following description, together with the additional information we include in any
applicable prospectus supplement, summarizes the material terms and provisions of the warrants that
we may offer under this prospectus, which may consist of warrants to purchase common shares or debt
securities and which may be issued in one or more series. Warrants may be offered independently or
together with other securities offered by any prospectus supplement, and may be attached to or
separate from those securities. While the terms we have summarized below will generally apply to
any future warrants we may offer under this prospectus, we will describe the particular terms of
any warrants that we may offer in more detail in the applicable prospectus supplement. The terms of
any warrants we offer under a prospectus supplement may differ from the terms we describe below.
Each series of warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. We use the term warrant agreement to
refer to any of these warrant agreements. We use the term warrant agent to refer to the warrant
agent under any of these warrant agreements. The warrant agent will act solely as an agent of ours
in connection with the warrants and will not act as an agent for the holders or beneficial owners
of the warrants.
The following summaries of material provisions of the warrants and the warrant agreements are
subject to, and qualified in their entirety by reference to, all the provisions of the warrant
agreement applicable to a particular series of warrants. We urge you to read the applicable
prospectus supplement related to the warrants that we sell under this prospectus, as well as the
complete warrant agreements that contain the terms of the warrants, which we will file with the SEC
in connection with the offering of such warrants.
General
We will describe in the applicable prospectus supplement the terms relating to a series of
warrants, which may include some or all of the following:
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the title of the warrants; |
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the offering price and the aggregate number of warrants offered; |
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the currency or currencies in which the warrants are being offered; |
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the designation, number and terms of the debt securities, common
shares, or preferred shares that can be purchased if a holder
exercises a warrant and procedures by which the numbers may be
adjusted; |
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the exercise price of such warrants and the currency or currencies in which such exercise price is payable; |
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the terms of any rights to redeem or call the warrants; |
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the date on which the right to exercise the warrants begins and the date on which such right expires; |
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certain federal income tax consequences of holding or exercising the warrants; and |
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any other specific terms, preferences, rights or limitations of, or restrictions on, the warrants. |
Warrants will be in registered form only.
If the warrants are offered attached to common shares, preferred shares or debt securities,
the applicable prospectus supplement will also describe the date on and after which the holder of
the warrants can transfer them separately from the related common shares, preferred shares or debt
securities.
Governing Law
Each issue of warrants and the applicable warrant agreement will be governed by the laws of
the State of New York.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
We may issue stock purchase contracts, representing contracts obligating holders to purchase
from or sell to us, and obligating us to purchase from or sell to the holders, a specified number
of our common shares or preferred shares, as applicable, at a future date or dates. The price per
common share or preferred share, as applicable, may be fixed at the time the stock purchase
contracts are issued or may be determined by reference to a specific formula contained in the stock
purchase contracts. We may issue stock purchase contracts in such amounts and in as many distinct
series as we wish.
The applicable prospectus supplement may contain, where applicable, the following information
about the stock purchase contracts issued under it:
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whether the stock purchase contracts obligate the holder to purchase
or sell, or both purchase and sell, our common shares or preferred
shares, as applicable, and the nature and amount of each of those
securities, or the method of determining those amounts; |
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whether the stock purchase contracts are to be prepaid or not; |
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whether the stock purchase contracts are to be settled by delivery, or
by reference or linkage to the value, performance or level of our
common shares or preferred shares; |
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any acceleration, cancellation, termination or other provisions
relating to the settlement of the stock purchase contracts; and |
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whether the stock purchase contracts will be issued in fully registered or global form. |
The applicable prospectus supplement will describe the terms of any stock purchase contracts.
The preceding description and any description of stock purchase contracts in the applicable
prospectus supplement does not purport to be complete and is subject to and is qualified in its
entirety by reference to the stock purchase contract agreement and, if applicable, collateral
arrangements and depository arrangements relating to such stock purchase contracts.
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DESCRIPTION OF UNITS
We may issue units comprised of one or more of the other securities described in this
prospectus in any combination. Each unit will be issued so that the holder of the unit is also the
holder of each security included in the unit. Thus, the holder of a unit will have the rights and
obligations of a holder of each included security. The unit agreement under which a unit is issued
may provide that the securities included in the unit may not be held or transferred separately, at
any time or at any time before a specified date.
The applicable prospectus supplement may describe:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what circumstances
those securities may be held or transferred separately; |
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any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units; and |
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whether the units will be issued in fully registered or global form. |
The applicable prospectus supplement will describe the terms of any units. The preceding
description and any description of units in the applicable prospectus supplement does not purport
to be complete and is subject to and is qualified in its entirety by reference to the unit
agreement and, if applicable, collateral arrangements and depositary arrangements relating to such
units.
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PLAN OF DISTRIBUTION
We may sell the securities being offered hereby in one or more of the following ways from time
to time:
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through agents to the public or to investors; |
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to one or more underwriters for resale to the public or to investors; |
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in at the market offerings, within the meaning of Rule 415(a)(4) of
the Securities Act, to or through a market maker or into an existing
trading market, on an exchange or otherwise; |
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directly to purchasers; or |
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through a combination of these methods of sale. |
We will set forth in a prospectus supplement the terms of the offering of securities,
including:
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the name or names of any agents or underwriters; |
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the purchase price of the securities being offered and the proceeds we will receive from the sale; |
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any over-allotment options under which underwriters may purchase additional securities from us; |
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any agency fees or underwriting discounts and other items constituting agents or underwriters compensation; |
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the public offering price; |
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any discounts or concessions allowed or reallowed or paid to dealers; and |
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any securities exchanges on which such securities may be listed. |
If we use underwriters for a sale of securities, the underwriters will acquire the securities
for their own account. The underwriters may resell the securities in one or more transactions,
including negotiated transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase the securities will be subject
to the conditions set forth in the applicable underwriting agreement. The underwriters will be
obligated to purchase all the securities of the series offered if they purchase any of the
securities of that series. We may change from time to time any initial public offering price and
any discounts or concessions the underwriters allow or reallow or pay to dealers. We may use
underwriters with whom we have a material relationship. We will describe in the prospectus
supplement naming the underwriter the nature of any such relationship.
We may designate agents who agree to use their reasonable efforts to solicit purchases for the
period of their appointment or to sell securities on a continuing basis.
Underwriters, dealers and agents that participate in the distribution of the securities may be
underwriters as defined in the Securities Act and any discounts or commissions they receive from us
and any profit on their resale of the securities may be treated as underwriting discounts and
commissions under the Securities Act. We will identify in the applicable prospectus supplement any
underwriters, dealers or agents and will describe their compensation. We may have agreements with
the underwriters, dealers and agents to indemnify them against specified civil liabilities,
including liabilities under the Securities Act. Underwriters, dealers and agents may engage in
transactions with or perform services for us in the ordinary course of their businesses.
We will bear all costs, expenses and fees in connection with the registration of the
securities as well as the expenses of all commissions and discounts, if any, attributable to the
sales of securities by us.
Unless otherwise specified in the applicable prospectus supplement, each class or series of
securities will be a new issue with no established trading market, other than our common shares,
which are listed on the NASDAQ Global Market and on the Toronto Stock Exchange. We may elect to
list any other class or series of securities on any exchange, but we are not obligated to do so. It
is possible that one or more underwriters may make a market in a class or series of securities, but
the underwriters will not be obligated to do so and may discontinue any market making at any time
without notice. We cannot give any assurance as to the liquidity of the trading market for any of
the securities.
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LEGAL MATTERS
Unless otherwise specified in a prospectus supplement, certain Canadian legal matters in
connection with this offering of securities will be passed upon for us by McCarthy Tétrault LLP and
certain U.S. legal matters in connection with this offering of securities will be passed upon for
us by Shearman & Sterling LLP.
EXPERTS
The audited financial statements, the related financial statement schedules and managements
assessment of the effectiveness of internal control over financial reporting (which is included in
Managements Report on Internal Control Over Financial Reporting), incorporated in this prospectus
by reference to our Annual Report on Form 10-K for the year ended December 31, 2008 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as
amended, or the Exchange Act. You may read and copy this information, or obtain copies of the
information by mail, at the following location of the SEC:
Public Reference Room
100 F Street, N.E.
Room 1580
Washington, DC 20549
You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a website that contains reports, proxy statements and other information
about issuers, like IMAX, that file electronically with the SEC. The address of the site is
www.sec.gov.
In addition, we are subject to the filing requirements prescribed by the securities
legislation of all Canadian provinces. These filings are available electronically from the Canadian
System for Electronic Document Analysis and Retrieval at www.sedar.com, which is commonly known by
the acronym SEDAR. The address of the site is
www.sedar.com,
We are incorporating by reference into this prospectus certain information we file with the
SEC, which means that we are disclosing important information to you by referring you to those
documents. The information we incorporate by reference in this prospectus is legally deemed to be a
part of this prospectus, and later information that we file with the SEC will automatically update
and supersede the information included in this prospectus and the documents listed below. We
incorporate the documents listed below:
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Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed on March
13, 2009; |
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Proxy Statement on Schedule 14A related to our Annual Meeting of Shareholders to be held
on June 3, 2009, filed on April 8, 2009; |
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All documents filed by us pursuant to Sections 13(a), 13(
c), 14 or 15(d) of the Exchange
Act subsequent to the date of the initial registration statement of which this prospectus
forms a part until all of the securities being offered under this prospectus or any
prospectus supplement are sold (other than current reports furnished under Item 2.02 or
Item 7.01 of Form 8-K); and |
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The description of our common shares contained in the Registration Statement on Form
20-F/A No. 2 filed with
the SEC on June 7, 1994, including any amendment or report filed
for the purposes of updating such description. |
You may request a copy of these filings, at no cost, by writing or calling us at the following
address or telephone number:
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Investor Relations Department
IMAX Corporation
110 East 59th Street, Suite 2100
New York, New York 10022
Tel: (212) 821-0100
Exhibits to the filings will not be sent, however, unless those exhibits have specifically
been incorporated by reference in such filings.
You may also obtain these filings from our website at www.imax.com. Except for the documents
specifically incorporated by reference in the prospectus, the information contained on our website
does not constitute a part of this prospectus.
21
Shares
IMAX Corporation
Common Shares
Roth Capital Partners
Prospectus Supplement
, 2009