By G. Kendrick Macdowell, NATO Vice President, General Counsel and Director of Government Affairs
On Thursday, Oct. 26, members of the Cinema Buying Group LLC convened for the last time. They voted to terminate their for-profit corporate entity. When these folks get together again, it will be as the reconstituted Cinema Buying Group - a program of the National Association of Theatre Owners. As we witness the birth of digital cinema, perhaps no program is as important to the viability of independent theatres as the Cinema Buying Group. I address below some of the questions you may have about CBG's transition to a NATO program.
Continuing as an independent for-profit entity would have been very costly — for example, in obtaining necessary insurance and paying substantially greater costs for accounting and legal work. Managing director Wayne Anderson sought independent legal advice from a specialist in taxation and tax-exempt organization law. The specialist recommended that CBG use the existing 501(c)(6) non-profit trade association — NATO — and thereby greatly
simplify CBG’s organizational and financial burdens.
Did the CBG LLC follow legal and contractual
requirements to terminate and become a NATO program?
Yes. First, at the annual meeting in Dana Point, the
NATO board of directors voted to accept the CBG into NATO. Second, at a
special meeting of CBG members convened during ShowEast, CBG members
voted to terminate CBG LLC, become a NATO program, and transfer CBG
assets to the NATO program. CBG managers determined that a 2/3 vote of
all CBG members was necessary to terminate CBG LLC. Counting proxies,
the vote well exceeded the 2/3 requirement. (Indeed, only one person
voted no.)
What happens to the assets of the CBG?
CBG assets will be transferred to NATO — but placed in a
separate account that will not be employed for any purpose other than
administration of the CBG program. The arrangement is similar to the
arrangement for the camcorder reward program operated by the MPAA and
NATO. NATO has a separate account for the program, and the program is
entirely self-sustaining. NATO neither contributes funds nor uses the
camcorder reward program funds for any purpose other than the camcorder
reward program. CBG will continue to be a self-sustaining program.
What happens to the shareholder agreement that CBG
members must sign?
As an independent for-profit entity organized under
Delaware law, CBG had an operating agreement (sort of an organizational
charter, akin to bylaws), and also entered into contracts (the
Shareholder Agreement) with each CBG member. Many of the issues
covered in these documents are no longer relevant (for example, detailed
provisions on distributions, events that trigger dissolution of the
company). Some provisions, however, remain highly relevant (for
example, the provisions specifically addressing digital cinema
equipment). Essential and relevant provisions of the operating agreement
and shareholder agreement will therefore be distilled into a much
shorter document, which CBG members will sign, just as they signed the
original shareholder agreement. We do not anticipate that any
substantive rights and responsibilities will materially change.
Will NATO now run the Cinema Buying Group?
No. NATO will exercise nominal oversight, consistent
with its obligation to ensure quality membership services and financial
integrity. But the program will be run, and decisions made, by CBG’s
managing director (currently Wayne Anderson), officers, and membership
as appropriate.
Will NATO decide on digital cinema vendors for the CBG
members?
No. NATO will not participate in any respect in the
selection or promotion of any vendors, including digital cinema vendors
— other than to support the general goals of the CBG program. All
decisions concerning vendors will be made by CBG’s managing director,
officers, and membership as appropriate.
How can I join the Cinema Buying Group?
Click Here
Do I have to be a member of NATO to join the Cinema
Buying Group?
No. Participation in NATO’s CBG program is open to any
exhibitor, regardless of membership in NATO or any regional association.
As is customary with trade association programs, however, NATO members
may be eligible for a discount on CBG dues. Decisions on CBG dues and
discounts will be made by CBG’s managing director, officers, and
membership as appropriate.
Who should join the Cinema Buying Group?
Every independent theatre owner in North America. There
is strength in numbers — a fact never more important than today, with
relatively complex questions of digital cinema technology and financing.