<PAGE> 1
As filed with the Securities and Exchange Commission on September 30th, 1997
REGISTRATION NO. 333 - _________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------
HOLLYWOOD THEATERS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7832 75-2598844
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
2911 TURTLE CREEK BOULEVARD, SUITE 1150
DALLAS, TEXAS 75219
(214) 528-9500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
THOMAS W. STEPHENSON, JR.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
HOLLYWOOD THEATERS, INC.
2911 TURTLE CREEK BOULEVARD, SUITE 1150
DALLAS, TEXAS 75219
(214) 528-9500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
COPY TO:
MICHAEL A. SASLAW
BAKER & BOTTS, L.L.P.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED NOTE(1) PRICE(1) FEE(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 5/8% Senior Subordinated
Notes due August 1, 2007... $110,000,000 100.0% $110,000,000 $33,334
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1997
PROSPECTUS
HOLLYWOOD THEATERS, INC.
OFFER TO EXCHANGE ITS 10 5/8% SENIOR
SUBORDINATED NOTES DUE AUGUST 1, 2007 FOR ANY AND ALL OF ITS
OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE AUGUST 1, 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
Hollywood Theaters, Inc., a Delaware corporation, (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 10 5/8%
Senior Subordinated Notes due August 1, 2007 (the "Exchange Notes"), which will
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each $1,000 principal amount of its outstanding 10
5/8% Senior Subordinated Notes due August 1, 2007 (the "Old Notes"), of which
$110,000,000 principal amount is outstanding. The form and terms of the
Exchange Notes are the same as the form and terms of the Old Notes (which they
replace) except that the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting their
transfer, will not contain terms with respect to the special interest payments
described herein and will not be entitled to registration rights or other
rights under the Registration Rights Agreement (as defined herein). See "The
Exchange Offer." The Exchange Notes will evidence the same debt as the Old
Notes (which they replace) and will be issued under and be entitled to the
benefits of the Indenture (the "Indenture") dated August 7, 1997 between the
Company and U.S. Trust Company of Texas, N.A., as Trustee (the "Trustee"),
governing the Old Notes. See "The Exchange Offer" and "Description of Exchange
Notes."
Interest on the Exchange Notes will be payable on February 1 and August 1
of each year, commencing February 1, 1998. The Exchange Notes will mature on
August 1, 2007. The Exchange Notes will be redeemable, in whole or in part, at
the option of the Company at any time on or after August 1, 2002 at the
redemption prices set forth herein, plus accrued and unpaid interest to the
date of redemption. In addition, on or before August 1, 2000, the Company may,
at its option and subject to certain requirements, use an amount equal to the
net cash proceeds of one or more Public Equity Offerings to redeem up to an
aggregate of 30% of the principal mount of the Exchange Notes originally issued
at a redemption price equal to 110.625% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption. Upon the
occurrence of a Change of Control, the Company is required to offer to
repurchase all outstanding Exchange Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. See "Description of Exchange Notes."
(Cover text continued on next page)
SEE "RISK FACTORS" ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is _____________, 1997
<PAGE> 3
The Exchange Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future senior indebtedness
of the Company, and senior to or pari passu with all existing and future
subordinated indebtedness of the Company. At August 1, 1997, the Company had
approximately $113.8 million of indebtedness outstanding, of which $3.8 million
was senior indebtedness. See "Description of Exchange Notes -- Subordination."
The Exchange Notes, like the Old Notes, will be guaranteed by the Company's
parent, subsidiary and any future Restricted Subsidiary of the Company. The
Guarantees will be subordinated obligations of the parent and subsidiary and
will be junior to all senior indebtedness of the parent and subsidiary,
including the parent's and subsidiary's guarantees of borrowings under the New
Senior Bank Facility. See "Description of New Senior Bank Facility." The
indenture pursuant to which the Exchange Notes will be issued permits the
Company to incur additional indebtedness, including senior indebtedness,
subject to certain limitations. See "Description of Exchange Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York time, on
, 1997, unless extended by the Company in its sole discretion (the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.
on the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Old Notes were sold by the Company on August 7, 1997 to the
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon an exemption under the Securities Act. The
Purchasers subsequently placed the Old Notes in the United States with
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act and outside the United States with non-U.S. persons in reliance on
Regulation S under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered hereunder in order to satisfy the obligations of the
Company under the Registration Rights Agreement entered into by the Company in
connection with the offering of the Old Notes. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer" and "-- Resale of the
Exchange Notes." Each broker-dealer (a "Participating Broker-Dealer") that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
There has not previously been any public market for the Old Notes or the
Exchange Notes. Although the Purchasers have informed the Company that they
intend to make a market in the Exchange Notes, they are not obligated to do so,
and any such market-making activities with respect to the Exchange Notes may be
interrupted or discontinued at any time without notice. The Company does not
intend to list the Exchange Notes on any securities exchange or to seek
approval for quotation through any automated quotation system.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. See "Risk Factors --
Exchange Offer Procedures" and "Exchange Offer -- Consequences of Failure to
Exchange."
ii
<PAGE> 4
The Exchange Notes issued in exchange for Old Notes will be issued in the
form of one or more Global Notes (as defined herein), in fully registered form
without coupons, deposited with a custodian for and registered in the name of a
nominee of The Depository Trust Company. Beneficial interests in such Global
Note representing the Exchange Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its direct and indirect
participants. Except as described herein, the Exchange Notes will not be
available in definitive form. The Exchange Notes will be issued only in
registered form in denominations of $1,000 and integral multiples thereof. See
"Description of Exchange Notes -- Book Entry, Delivery and Form."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer- manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
iii
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all
of the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices
of the commission at 75 Park Place, New York, New York 10007 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Additionally, the Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission including the Company.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports
and other information with the Commission. In addition the Company has agreed
that prior to the time the Company becomes subject to Section 13(a) or 15(d) of
the Exchange Act, the Company shall provide to all holders and file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) or any successor provision thereto if the
Company were so required, such documents to be mailed to holders and filed with
the Trustee on or prior to the respective dates by which the Company would have
been required so to file such documents if the Company were so required. After
the Company commences filing such reports, and so long as any of the Notes are
outstanding, the Company shall file with the Commission the annual reports,
quarterly reports and other documents which the Company is required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 or any successor provisions thereto. Under the Indenture,
the Company will furnish periodic reports to the Trustee, which will make them
available upon request to the holders of the Exchange Notes. To permit
compliance with Rule 144A in connection with resales of Old Notes, the Company
will furnish upon the request of a holder of an Old Note and a prospective
purchaser designated by such holder the information required to be delivered
under Rule 144A(d)(4) under the Securities Act if at the time of such request
the Company is not a reporting company under Section 13 or 15(d) of the
Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder.
iv
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements included elsewhere in this
Prospectus. Unless the context otherwise requires, references in this
Prospectus to the "Company" include the Company and its subsidiary, Crown
Theater Corp. ("Crown").
THE COMPANY
The Company is a leading operator of theaters in small and mid-sized
markets in the Southwestern and Midwestern regions of the United States. The
Company's strategy is to provide a superior entertainment experience to its
customers through the development and operation of theaters with stadium-style
seating, state-of-the-art digital sound systems and modern, attractive lobby
and concession areas. Management believes that this strategy has increased
movie attendance at its theaters and allowed the Company to increase the
revenues it receives from patrons both at the box office and at the concession
stand. As of August 1, 1997, the Company operated 77 theaters with a total of
395 screens, located principally in Texas, Oklahoma, Kansas and Missouri. For
the twelve months ended June 30, 1997, on a pro forma basis after giving effect
to the Old Notes Offering and certain acquisitions, the Company generated
revenue and EBITDA of approximately $88.8 million and $13.3 million,
respectively.
The Company actively targets small and mid-sized markets which it
believes are under-served and where the Company believes it can become the
leading movie exhibitor. Management believes that its new stadium-style
multiplex theaters can become the primary entertainment choice in such markets.
In acquiring and building theaters, the Company seeks to identify markets where
it can develop clusters of theaters, enabling it to realize operating
efficiencies. By strategically selecting its target markets and focusing on
providing a superior entertainment experience, the Company has been able to
achieve a leading position in many of the markets in which it operates.
Management believes that in 78% of the markets in which the Company operates,
its theaters either face no competition or hold the leading market share.
Founded in June 1995, the Company has grown rapidly by: (i) acquiring
theaters and improving operations at these theaters; (ii) building new,
state-of-the-art stadium-style multiplexes in targeted markets and (iii) adding
stadium-style auditoriums and state-of-the-art sight and sound systems to its
existing theaters.
The Company's management has a proven record of integrating acquired
theaters and improving operations and profit margins. For example, for the two
major groups of theaters acquired by the Company in the fourth quarter of 1996,
per capita box office receipts and per capita concessions have increased by
approximately 9% and 11%, respectively, from the first half of 1996 to the
first half of 1997. In the Company's original first run theaters (purchased in
July 1995), the Company has increased per capita box office receipts by 16%
from June 1995 to June 1997 and per capita concessions revenues by 19% over the
same period. The Company believes that its policy of offering incentive
programs to its employees aligns their interests with those of management in
increasing revenues and improving operations.
The Company is a wholly-owned subsidiary of Hollywood Theater
Holdings, Inc. ("Holdings") and enjoys strong equity sponsorship. The principal
stockholders of Holdings include The Beacon Group III -- Focus Value Fund, L.P.
("Beacon"), Stratford Capital Partners, L.P. (an affiliate of Hicks, Muse, Tate
& Furst) ("Stratford") and several entities associated with the Hoak
Communications Funds (the "Hoak Entities"). See "Principal Stockholders."
The Company is a Delaware corporation with its principal executive
offices located at 2911 Turtle Creek Boulevard, Suite 1150, Dallas, Texas 75219
and its telephone number at that location is (214) 528-9500.
Business Strategy
The Company's strategy is to increase its revenues and cash flow by
(i) providing a superior entertainment experience designed to attract larger
audiences to its theaters, (ii) becoming the premier movie exhibitor in
selected small to mid-sized markets through the acquisition of existing
theaters and the development of new stadium-style seating multiplex theaters
and (iii) increasing per capita box office and concession revenues. Key
elements of the Company's operating strategy include:
1
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PROVIDING A SUPERIOR SIGHT AND SOUND PRESENTATION. The Company's
objective is to create an entertainment experience in its theaters that is
superior to its local competitors. The Company believes it can achieve this
goal through the development and operation of state-of-the-art multiplex
theaters featuring stadium-style seating, which offers moviegoers clear,
unobstructed sight lines to the movie screen as a result of the steeper incline
of the seating. The Company has developed a new design for its multiplex
stadium-style auditoriums that utilizes "black-box" auditorium design elements
(all black auditorium interiors with maximum size screens to enhance the
viewing experience). These new stadium-style theaters offer digital sound in
all of the currently available formats (Digital Theater Sound Systems, Dolby(R)
Digital Sound and SONY Dynamic Digital Sound(TM)), THX(R) sound systems,
comfortable high-back chairs with wider seating and armrests with cupholders,
modern, attractive lobby and concession areas and attentive housekeeping both
inside and outside the theaters.
TARGETING SMALL AND MID-SIZED MARKETS AND DEVELOPING CLUSTERS OF
THEATERS. The Company focuses on small and mid-sized markets which it believes
are under-served. The Company aims to develop clusters of theaters in each of
its markets by acquiring theaters and developing new stadium-style multiplex
theaters in order to become the leading movie exhibitor in such markets. The
Company believes that its ability to develop stadium-style theaters in such
markets enables it to rapidly capture a significant share of such markets.
Before determining whether to develop a new theater in a particular location,
the Company carefully evaluates such market's potential.
CAPITALIZING ON THE COMPETITIVE ADVANTAGES OF STADIUM-STYLE MULTIPLEX
THEATERS. The Company intends to focus on the development of state-of-the-art
multiplex theaters featuring "black-box" auditoriums with stadium-style seating
configurations. By year-end 1997, the Company expects that its ratio of
stadium-style auditoriums to its total screen count will be among the highest
in the industry. The Company believes that the current trend in the United
States movie exhibition industry toward the development of multiplexes
featuring stadium-style auditoriums has put competitive pressure on many
existing theaters by setting new standards for moviegoers. The Company believes
that customers have clearly indicated their preference for the more attractive
surroundings, wider variety of films, better customer services and more
comfortable seating typical of stadium-style multiplexes. These theaters also
enhance the Company's ability to increase attendance and concession sales while
taking advantage of economies of scale by enabling it to exhibit concurrently a
wide variety of films.
INCREASING CONCESSION SALES THROUGH IMPROVED PRODUCT OFFERINGS,
FACILITY DESIGN AND STAFF INCENTIVES. Concession sales are the Company's
second largest revenue source after box office revenues and consistently yield
gross margins in excess of 80%. The Company actively works to promote
concession sales. In order to increase sales and margins at its concession
stands, the Company has introduced new products, offered larger sized products,
improved presentation, created additional satellite concession stands in its
theaters and added color video monitors and video walls featuring movie
trailers at many of its concession areas. In addition, the Company bases a
portion of theater managers' compensation on the level of concessions sales at
their theaters.
PROVIDING INCENTIVES TO MANAGEMENT THROUGH PERFORMANCE-BASED,
GOAL-ORIENTED COMPENSATION PACKAGES. The Company maintains an incentive program
for its district managers and theater managers which rewards management for
incremental improvements in theater profitability. The Company believes that
its incentive program is an important source of motivation for its employees
and aligns the employees' interests with those of the Company.
GROWING THROUGH STRATEGIC ACQUISITIONS AND ADDITIONS. The Company
intends to continue its program of acquiring and expanding theaters, primarily
through the opportunistic acquisition from regional or national chains of
groups of theaters located in the Company's target markets. Where appropriate,
the Company will also add "stadium-style" seating auditoriums and
state-of-the-art audio systems to selected existing theaters or reconfigure
existing auditoriums to the stadium-style seating format. The Company believes
that such selective acquisitions, add-ons and reconfigurations will enhance and
protect the Company's position as the sole or leading exhibitor in many of its
markets and enable the Company to become a leading exhibitor in other markets.
2
<PAGE> 8
NEW THEATER DEVELOPMENT
The Company's construction program focuses on building stadium-style
seating multiplexes with an average of 10 to 14 screens and adding
stadium-style seating auditoriums to selected existing theaters. The Company
times its theater construction efforts to allow for theater openings that can
take advantage of peak summer and year-end holiday film seasons. In July 1996,
the Company added two auditoriums with stadium-style seating to its existing
theater in Burleson, Texas. In November 1996, the Company opened its first new
multiplex theater with all stadium-style seating and an aggregate of 10 screens
in Midland, Texas.
In May 1997, the Company completed the construction of three
additional all stadium-style seating multiplex theaters with an aggregate of 34
screens in Beaumont and Tyler, Texas and Lawrence, Kansas. These new theaters
opened during the 1997 Memorial Day holiday weekend.
At August 1, 1997, the Company had three new all stadium-style
theaters under construction in Oklahoma and Missouri with an aggregate of 40
screens. At August 1, 1997, the Company also had five stadium-style
auditoriums under development at the Company's existing theater in Heath, Ohio.
The new theaters and the new auditoriums are scheduled to open for the 1997
year-end holiday season. In addition, during the remainder of 1997, the Company
is scheduled to begin construction of three all stadium-style theaters with 35
screens and eight stadium-style auditoriums at three existing theaters. See
"Business -- New Theater Development."
RECENT AND PENDING ACQUISITIONS
In May 1997, the Company acquired two theaters with an aggregate of 12
screens in Beaumont and Port Arthur, Texas from the United Artists Corporation
("United Artists") for a purchase price of $3.4 million (the "Beaumont/Port
Arthur Acquisition"). The Company expects these newly acquired theaters to
complement the Company's existing theaters in Beaumont.
In June 1997, the Company acquired two theaters with an aggregate of
14 screens in Killeen, Texas from Escape Theatres, Inc. ("Escape") for a
purchase price of $8.5 million (the "Killeen Acquisition").
In August 1997, the Company acquired from General Cinema Corp. of
Oklahoma, Inc. ("General Cinema") seven theaters with an aggregate of 50
screens located in Tulsa and Oklahoma City, Oklahoma for a purchase price of
approximately $15.8 million (the "Oklahoma Acquisition").
In August 1997, the Company entered into a definitive agreement with
Dickinson, Inc. ("Dickinson") pursuant to which the Company will exchange six
theaters it operates in Kansas and Missouri for five theaters owned by
Dickinson in the same states and cash of approximately $1.2 million (the
"Dickinson Exchange"). The Company expects the exchange to complement the
Company's existing theaters in Lawrence, Topeka and Joplin. The exchange is
subject to certain conditions and is expected to close in September 1997.
In October 1997, the Company expects to acquire a newly-built all
stadium-style seating multiplex theater with an aggregate of 16 screens in
Waco, Texas for a purchase price of $8.7 million (the "Waco Acquisition") plus
the cost of furniture and fixtures (approximately $2.1 million). The Company
expects the new theater to complement the Company's existing theater in Waco.
Upon completion of the Dickinson Exchange and the opening of the new
theaters and auditoriums that were under construction or development as of
August 1, 1997 as described above, the Company will operate 87 theaters with a
total of 501 screens.
PRO FORMA PRESENTATION
Unless otherwise specified, the pro forma income statement data
presented herein reflects adjustments to the historical consolidated financial
statements of Holdings to give effect to (i) the consummation of the Old Notes
Offering,
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<PAGE> 9
(ii) the Beaumont/Port Arthur Acquisition, (iii) the Killeen Acquisition and
(iv) the Oklahoma Acquisition, in each case, as if such events had occurred on
July 1, 1996.
The summary pro forma balance sheet data reflects adjustments to the
historical consolidated financial statements of Holdings to give effect to (i)
the consummation of the Old Notes Offering, (ii) the Oklahoma Acquisition and
(iii) the Waco Acquisition, in each case, as if such events had occurred on
June 30, 1997.
NEW SENIOR BANK FACILITY
Concurrently with the consummation of the Old Notes Offering, the
Company repaid all of the existing indebtedness under the Existing Senior Bank
Facility and entered into the New Senior Bank Facility. The New Senior Bank
Facility provides for a revolving credit facility of $50.0 million with a five
year term. The Company also has the right at any time prior to June 30, 1999 to
solicit on predetermined terms and conditions from one or more of the banks
funding the New Senior Bank Facility additional commitments to increase the
amount of the New Senior Bank Facility to an amount not to exceed $75.0
million. The banks are under no obligation to provide any such additional
commitment. The New Senior Bank Facility is funded by a syndicate of banks for
whom Bank of America National Trust and Savings Association ("Bank of America
NT&SA") (an affiliate of BancAmerica Securities, Inc.) has acted as agent. The
New Senior Bank Facility is secured by substantially all of the assets of the
Company and is guaranteed by Holdings and Crown (and any other future material
subsidiaries of the Company), which guarantees are secured by substantially all
of their respective assets. As of August 1, 1997, no amounts were borrowed
under the New Senior Bank Facility. At such date, the Company had the ability
to borrow approximately $7.0 million under such facility, all of which would
constitute senior indebtedness. See "Use of Proceeds," "Capitalization" and
"Description of New Senior Bank Facility."
4
<PAGE> 10
THE OLD NOTES OFFERING
Old Notes . . . . . . . . . . . . . . . The Old Notes were sold by the Company
on August 7, 1997 to Goldman, Sachs &
Co. and BancAmerica Securities, Inc.
(the "Purchasers") pursuant to a
Purchase Agreement (the "Purchase
Agreement") dated July 31, 1997 (the
"Old Notes Offering"). The Purchasers
subsequently resold the Old Notes in
the United States to qualified
institutional buyers in reliance on
Rule 144A under the Securities Act and
outside the United States to non-U.S.
persons in reliance on Regulation S
under the Securities Act.
Registration Rights Agreement . . . . . Pursuant to the Purchase Agreement, the
Company and the Purchasers entered into
an Exchange and Registration Rights
Agreement dated August 7, 1997 (the
"Registration Rights Agreement"), which
grants the holders of the Old Notes
certain exchange and registration
rights. The Exchange Offer is intended
to satisfy such exchange rights, which
terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities Offered . . . . . . . . . . $110,000,000 principal amount of 10
5/8% Senior Subordinated Notes due
August 1, 2007 (the "Exchange Notes").
The Exchange Offer . . . . . . . . . . $1,000 principal amount of the Exchange
Notes in exchange for each $1,000
principal amount of Old Notes. As of
the date hereof, $110,000,000 aggregate
principal amount of Old Notes are
outstanding. The Company will issue the
Exchange Notes to holders on or
promptly after the Expiration Date. See
"The Exchange Offer."
Based on an interpretation by the staff
of the Commission set forth in
no-action letters issued to third
parties, the Company believes that
Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old
Notes may be offered for resale, resold
and otherwise transferred by any holder
thereof (other than any such holder
which is an "affiliate" of the Company
within the meaning of Rule 405 under
the Securities Act) without compliance
with the registration and prospectus
delivery provisions of the Securities
Act, provided that such Exchange Notes
are acquired in the ordinary course of
such holder's business and that such
holder does not intend to participate
and has no arrangement or understanding
with any person to participate in the
distribution of such Exchange Notes.
Each Participating Broker-Dealer that
receives Exchange Notes for its own
account pursuant to the Exchange Offer
must acknowledge that it will deliver a
prospectus in
5
<PAGE> 11
connection with any resale of such
Exchange Notes. The Letter of
Transmittal states that by so
acknowledging and by delivering a
prospectus, a Participating
Broker-Dealer will not be deemed to
admit that it is an "underwriter"
within the meaning of the Securities
Act. This Prospectus, as it may be
amended or supplemented from time to
time, may be used by a Participating
Broker-Dealer in connection with
resales of Exchange Notes received in
exchange for Old Notes where such Old
Notes were acquired by such
Participating Broker-Dealer as a result
of market-making activities or other
trading activities (other than a resale
of an unsold allotment from the
original sale of Old Notes). The
Company has agreed that, for a period
of 180 days after the Expiration Date,
it will make this Prospectus available
to any Participating Broker-Dealer for
use in connection with any such resale.
See "Plan of Distribution."
Any holder who tenders in the Exchange
Offer with the intention to
participate, or for the purpose of
participating, in a distribution of the
Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in
the absence of an exemption therefrom,
must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any
resale transaction. Failure to comply
with such requirements in such instance
may result in such holder incurring
liability under the Securities Act for
which the holder is not indemnified by
the Company. See "The Exchange Offer --
Resale of the Exchange Notes."
Expiration Date . . . . . . . . . . . . 5:00 p.m., New York time, on
____________, 1997 unless the Exchange
Offer is extended, in which case the
term "Expiration Date" means the latest
date and time to which the Exchange
Offer is extended.
Accrued Interest on the Exchange
Notes and the Old . . . . . . . . . . . Each Exchange Note will bear interest
from the most recent date to which
interest has been paid or duly provided
for on the Old Note surrendered in
exchange for such Exchange Note or, if
no interest has been paid or duly
provided for on such Old Note, from
August 7, 1997. Interest on the
Exchange Notes is payable on February 1
and August 1 of each year, commencing
on February 1, 1998.
Holders of Old Notes whose Old Notes
are accepted for exchange will not
receive accrued interest on such Old
Notes for any period from and after the
last date to which interest has been
paid or duly provided for on the Old
Notes prior to the original issue date
of the Exchange Notes or, if no such
interest has been paid or duly provided
for, will not receive any accrued
interest on such Old Notes, and will be
deemed to have waived the right
6
<PAGE> 12
to receive any interest on such Old
Notes accrued from and after the last
date to which interest has been paid or
duly provided for on the Old Notes or,
if no such interest has been paid or
duly provided for, from and after
August 7, 1997. See "The Exchange Offer
-- Interest on the Exchange Notes."
Conditions to the Exchange Offer . . . The Exchange Offer is subject to
certain customary conditions, which may
be waived by the Company. See "The
Exchange Offer -- Conditions.
"Procedures for Tendering Old Notes . . Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the
accompanying Letter of Transmittal, or
a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver
such Letter of Transmittal, or such
facsimile, together with the Old Notes
and any other required documentation to
U.S. Trust Company of Texas, N.A., as
exchange agent, at the address set
forth herein. By executing the Letter
of Transmittal, each holder will
represent to the Company that, among
other things, the Exchange Notes
acquired pursuant to the Exchange Offer
are being obtained in the ordinary
course of business of the person
receiving such Exchange Notes, whether
or not such person is the holder, that
neither the holder nor any such other
person has any arrangement or
understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the
holder nor any such other person is an
"affiliate," as defined under Rule 405
of the Securities Act. See "The
Exchange Offer -- Purpose and Effect of
the Exchange Offer" and "The Exchange
Offer -- Procedures for Tendering.
"Untendered Old Notes; Consequences
of Failure to Exchange . . . . . . . . Following the consummation of the
Exchange Offer, holders of Old Notes
eligible to participate but who do not
tender their Old Notes will not have
any further exchange rights and such
Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the
market for such Old Notes could be
adversely affected. The Old Notes that
are not exchanged pursuant to the
Exchange Offer will remain restricted
securities. Accordingly, such Old Notes
may be resold only (i) to the Company,
(ii) pursuant to Rule 144A or Rule 144
under the Securities Act, (iii)
pursuant to some other exemption under
the Securities Act, (iv) outside the
United States to a foreign person
pursuant to the requirements of Rule
904 under the Securities Act, or (v)
pursuant to an effective registration
statement under the Securities Act. See
"The Exchange Offer -- Consequences of
Failure to Exchange."
Shelf Registration Statement . . . . . In the event that (i) on or before the
Expiration Date,
7
<PAGE> 13
existing Commission interpretations are
changed such that the Exchange Notes
are not or would not be, upon receipt,
freely transferable (except for the
requirement that Participating
Broker-Dealers deliver a prospectus),
(ii) the Exchange Offer is not
consummated within 210 days of the
closing of the Old Notes Offering, or
(iii) the Exchange Offer is not
available to any holders of the Old
Notes (other than certain restricted
holders), the Company will use its
reasonable best efforts to cause to be
filed with the Commission, no later
than 60 days after the completion of
the Old Notes Offering, a shelf
registration statement (the "Shelf
Registration Statement"). If required,
the Company will use its reasonable
best efforts to cause the Shelf
Registration Statement to be declared
effective on or before the 180th day
after the Old Notes Offering. The
Company has agreed to maintain the
effectiveness of the Shelf Registration
Statement, under certain circumstances,
for a maximum of two years following
the effective date of the Shelf
Registration Statement.
Special Procedures for Beneficial
Owners . . . . . . . . . . . . . . . . Any beneficial owner whose Old Notes
are registered in the name of a broker,
dealer, commercial bank, trust company
or other nominee and who wishes to
tender should contact such registered
holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on
such owner's own behalf, such owner
must, prior to completing and executing
the Letter of Transmittal and
delivering its Old Notes, either make
appropriate arrangements to register
ownership of the Old Notes in such
owner's name or obtain a properly
completed bond power from the
registered holder. The transfer of
registered ownership may take
considerable time. The Company will
keep the Exchange Offer open for not
less than 30 days in order to provide
for the transfer of registered
ownership. See "The Exchange Offer --
Procedures for Tendering."
Guaranteed Delivery Procedures . . . . Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are
not immediately available or who cannot
deliver their Old Notes, the Letter of
Transmittal or any other documents
required by the Letter of Transmittal
to the Exchange Agent (or comply with
the procedures for book-entry transfer)
prior to the Expiration Date must
tender their Old Notes according to the
guaranteed delivery procedures set
forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights . . . . . . . . . . . Tenders may be withdrawn at any time
prior to 5:00 p.m., New York time, on
the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
8
<PAGE> 14
Acceptance of Notes and Delivery
of Exchange Notes . . . . . . . . . . . The Company will accept for exchange,
subject to the conditions described
under "The Exchange Offer --
Conditions," any and all Old Notes
which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New
York time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the
Exchange Offer."
Use of Proceeds . . . . . . . . . . . There will be no cash proceeds to the
Company from the exchange pursuant to
the Exchange Offer. See "Use of
Proceeds."
Exchange Agent . . . . . . . . . . . . U.S. Trust Company of Texas, N.A. The
Exchange Agent also serves as trustee
under the Indenture.
THE EXCHANGE NOTES
General . . . . . . . . . . . . . . . . The form and terms of the Exchange
Notes are the same as the form and
terms of the Old Notes (which they
replace) except that (i) the Exchange
Notes have been registered under the
Securities Act and, therefore, will not
bear legends restricting the transfer
thereof and (ii) the holders of
Exchange Notes will not be entitled to
certain rights under the Registration
Rights Agreement, including the
provisions providing for an increase in
the interest rate on the Old Notes in
certain circumstances, which rights
will terminate when the Exchange Offer
is consummated. See "The Exchange Offer
-- Purpose and Effect of the Exchange
Offer." The Exchange Notes will
evidence the same debt as the Old Notes
and will be entitled to the benefits of
the Indenture. See "Description of
Exchange Notes." The Old Notes and the
Exchange Notes are referred to herein
collectively as the "Notes."
Securities Offered . . . . . . . . . . $110,000,000 principal amount of 10
5/8% Senior Subordinated Notes due
August 1, 2007.
Maturity Date . . . . . . . . . . . . . August 1, 2007
Interest Payment Dates . . . . . . . . February 1 and August of each year,
commencing February 1, 1998.
Optional Redemption . . . . . . . . . . The Exchange Notes will be redeemable,
in whole or in part, at the option of
the Company at any time on or after
August 1, 2002 at the redemption prices
set forth herein, plus accrued and
unpaid interest, if any, to the date of
redemption. In addition, on or before
August 1, 2000, the Company may, at its
option and subject to certain
requirements, use an amount equal to
the net cash proceeds from one or more
Public Equity Offerings (as defined) to
redeem up to an aggregate of 30% of the
principal amount of the Exchange Notes
originally issued
9
<PAGE> 15
at a redemption price equal to 110.625%
of the principal amount thereof, plus
accrued and unpaid interest, if any, to
the date of redemption. See
"Description of Exchange Notes --
Optional Redemption."
Change of Control . . . . . . . . . . . Upon the occurrence of a Change of
Control (as defined), the Company is
required to offer to repurchase all
outstanding Exchange Notes at a price
equal to 101% of the principal amount
thereof, plus accrued and unpaid
interest, if any, to the date of
repurchase. See "Description of
Exchange Notes -- Covenants -- Change
of Control."
Sinking Fund . . . . . . . . . . . . . None
Ranking . . . . . . . . . . . . . . . . The Exchange Notes will constitute
general unsecured indebtedness of the
Company, subordinated in right of
payment to all existing and future
senior indebtedness of the Company,
including borrowings under the New
Senior Bank Facility. At August 1,
1997, the Company had approximately
$113.8 million of indebtedness
outstanding, of which $3.8 million was
senior indebtedness. The Indenture
pursuant to which the Exchange Notes
will be issued permits the Company to
incur additional indebtedness,
including senior indebtedness, subject
to certain limitations. See
"Capitalization" and "Description of
Exchange Notes -- Subordination."
Guarantees . . . . . . . . . . . . . . The Exchange Notes will be guaranteed
by Holdings and Crown and will be
guaranteed by any future Restricted
Subsidiary (as defined) of the Company.
The guarantees will be subordinated
obligations of Holdings and Crown and
will be junior to all senior
indebtedness of such companies,
including their guarantees of
borrowings under the New Senior Bank
Facility. See "Description of New
Senior Bank Facility."
Certain Covenants . . . . . . . . . . . The Indenture contains certain
covenants which, among other things,
restricts the ability of the Company
and its Restricted Subsidiaries to
incur additional indebtedness, pay
dividends or make distributions in
respect of the Company's capital stock
or make other restricted payments, sell
assets, create certain liens or enter
into certain transactions with
affiliates. See "Description of
Exchange Notes -- Covenants."
RISK FACTORS
For a discussion of certain factors that should be considered by
prospective purchasers in evaluating an investment in the Notes, see "Risk
Factors."
10
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated
financial information for Holdings for the period from July 11, 1995 through
December 31, 1995, for the fiscal year ended December 31, 1996 and for the six
month periods ended June 30, 1996 and 1997 and pro forma financial information
for the twelve months ended June 30, 1997. The financial statements of Holdings
are identical to those of the Company, except for long-term debt (Holdings'
balance sheet includes an additional $137,000 of long-term debt at June 30,
1997) and differences in the components of stockholders' equity. See
"Capitalization." The consolidated financial information for the two fiscal
years in the period ended December 31, 1996 and the balance sheet information
as of December 31, 1996 and 1995 were derived from the audited consolidated
financial statements of Holdings which have been audited by Arthur Andersen
LLP, independent public accountants. The fiscal years ended December 31, 1996
and 1995 are not directly comparable due to the shortened period Holdings and
the Company were in operation during 1995, the effects of theater acquisitions
and theater developments and the impact of the debt service associated with the
debt incurred in connection with theater acquisitions and development. This
information should be read in conjunction with "Selected Consolidated Financial
Information", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and pro forma financial
information, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED PRO FORMA
DECEMBER 31, JUNE 30, TWELVE MONTHS
----------------------------- ----------------------------------
ENDED
1995(1) 1996 1996 1997 JUNE 30, 1997(2)
-------------- ------------- ----------------- --------------- -----------------
(IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $6,334 $24,879 $ 6,496 $32,243 $88,786
Direct theater costs 5,296 20,798 5,871 26,885 71,723
General and administrative
expenses 743 1,601 646 2,358 3,762
Depreciation and amortization 739 3,152 825 4,946 10,127
------ ------- ------- ------- -------
Operating (loss) income (444) (672) (846) (1,946) 3,174
Interest expense, net 463 2,121 437 2,247 11,688
------ ------- ------- ------- -------
Net loss $(907) $(2,793) $(1,283) $(4,193) $(8,514)
====== ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(3) $444 $2,954 $120 $3,295 $13,300
Capital expenditures and
acquisitions 9,905 71,157 6,225 39,093 130,625
Net long-term debt(4) 7,978 46,941 9,061 63,558 94,870
Deficiency of earnings to fixed
charges(5) (907) (2,793) (1,283) (4,193)
PRO FORMA FINANCIAL DATA:
Ratio of EBITDA to net interest
expense 1.1x
-------
Ratio of net long-term debt to
EBITDA 7.1x
OPERATING DATA (AT PERIOD
END):
Number of theaters operated 11 72 17 77 84
------- ------- -------
Number of screens operated 70 342 103 395 445
------- ------- -------
Average screens per theater 6.4 4.8 6.1 5.1 5.3
------- ------- -------
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
----------------------------- ---------------------------
1995 1996 HISTORICAL PRO FORMA(2)
--------------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . $ 447 $ 3,559 $ 4,878 $ 19,079
Properties and equipment -- net . . . . . . . . 3,642 43,116 72,864 88,399
Total assets . . . . . . . . . . . . . . . . . 12,930 92,355 129,946 174,957
Total long-term debt, including current 8,877 50,669 68,437 113,949
maturities . . . . . . . . . . . . . . . .
Stockholders' equity . . . . . . . . . . . . . 1,838 6,544 7,433 7,433
</TABLE>
- ---------------
(1) For the period from inception (July 11, 1995) through December 31,
1995.
(2) The summary pro forma income statement and other financial data
presented reflects adjustments to the historical consolidated
financial statements of Holdings to give effect to (i) the
consummation of the Old Notes Offering, (ii) the Beaumont/Port Arthur
Acquisition, (iii) the Killeen Acquisition and (iv) the Oklahoma
Acquisition, in each case as if such events had occurred on July 1,
1996. The summary pro forma balance sheet data reflects adjustments to
the historical consolidated financial statements of Holdings to give
effect to (i) the consummation of the Old Notes Offering, (ii) the
Oklahoma Acquisition and (iii) the Waco Acquisition, in each case, as
if such events had occurred on June 30, 1997. The summary pro forma
financial information presented is not necessarily indicative of
either future results of operations or the results that might have
occurred had such events taken place at such dates.
(3) Represents income before interest, taxes, depreciation, amortization,
and deferred rent. EBITDA is a financial measure commonly used in the
Company's industry and should not be construed as an alternative to
operating income (as determined in accordance with GAAP), an indicator
of operating performance, an alternative to cash flows from operating
activities (as determined in accordance with GAAP) or a measure of
liquidity.
(4) Net long-term debt represents long-term debt minus cash and cash
equivalents.
(5) Earnings consist of net loss, plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs, and
one-third of rent expense on operating leases treated as
representative of the interest factor attributable to rent expense.
12
<PAGE> 18
RISK FACTORS
An investment in the Exchange Notes offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating an
investment in the Exchange Notes offered hereby.
SUBSTANTIAL INDEBTEDNESS
The Company is highly leveraged. At August 1, 1997, the Company had
$113.8 million of indebtedness outstanding, of which $3.8 million was senior
indebtedness. At the same date, the Company had the ability to borrow an
additional approximately $7.0 million under the New Senior Bank Facility, all
of which would constitute senior indebtedness. The degree to which the Company
is leveraged could have important consequences to holders of Exchange Notes,
including: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of interest on the Exchange Notes and other
indebtedness and (ii) such leverage could limit the Company's ability to fund
future growth. The Company's ability to make scheduled payments or to
refinance its indebtedness depends on its financial and operating performance,
which, in turn, is subject to prevailing economic conditions and to financial,
business, competitive and other factors beyond its control. Although the
Company's cash flow from operations has historically been sufficient to meet
its debt service obligations, there can be no assurance that the Company's
operating results will continue to be sufficient for payment of the Company's
indebtedness, including indebtedness under the Exchange Notes. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
SUBSTANTIAL CAPITAL EXPENDITURES
During 1997, the Company plans to open or acquire approximately 18
theaters with 166 screens. Since January 1, 1997 the Company has acquired 11
theaters with 76 screens, opened three newly built theaters with 34 screens,
and has entered into definitive agreements to purchase a newly-built all
stadium-style seating multiplex theater with an aggregate of 16 screens in
Waco, Texas, and to exchange six theaters for five theaters and $1.2 million in
cash. At August 1, 1997, the Company had three theaters with 40 screens under
construction. In addition, the Company has five new screens under construction
at an existing theater and is scheduled to begin construction during 1997 of
three additional theaters with 35 screens and eight additional screens at three
existing theaters. See "Business -- New Theater Development" and "Business --
Recent and Pending Acquisitions." The Company estimates that capital
expenditures in connection with such acquisitions and theater development in
1997 will be approximately $91.2 million, of which approximately $43.7 million
had already been invested as of August 1, 1997. The Company expects to fund the
balance of these capital expenditures from the proceeds of the Old Notes
Offering, cash flow from operations and with available borrowings under the New
Senior Bank Facility. There can be no assurance, however, that the Company's
business will generate sufficient cash flow from operations or that future
borrowings will be available under the New Senior Bank Facility in an amount
sufficient to enable the Company to make these anticipated capital
expenditures. In addition, the Company intends to continue its expansion over
the next several years. Any future theater development and future acquisitions
may require financing in addition to cash generated from operations and future
borrowings under the New Senior Bank Facility. There can be no assurance that
such additional financing will be available to the Company on acceptable terms
or at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Description of
New Senior Bank Facility."
RESTRICTIONS IMPOSED BY THE NEW SENIOR BANK FACILITY
The New Senior Bank Facility requires the Company to maintain
specified financial ratios and to meet certain financial tests. In addition,
the New Senior Bank Facility restricts among other things, the Company's
ability to incur additional indebtedness, make acquisitions or asset
dispositions, create or incur liens on its assets, make certain payments and
dividends or merge or consolidate. A failure to comply with the restrictions
contained in the New Senior Bank Facility could lead to an event of default
thereunder, which could result in an acceleration of such indebtedness. There
can be no assurance that the Company will have sufficient resources or have
access to sufficient resources to pay its
13
<PAGE> 19
obligations under the New Senior Bank Facility or the Exchange Notes if such
indebtedness is accelerated. See "Description of New Senior Bank Facility."
UNCERTAINTIES RELATED TO FUTURE EXPANSION
The Company intends to pursue a strategy of expansion that will
involve the development of new theaters certain of which may be larger and more
costly than those developed by the Company to date. In addition, the Company's
strategy of expansion may involve acquisitions of existing theaters and theater
circuits. There is significant competition for potential site locations and
existing theater and theater circuit acquisition opportunities. As a result of
such competition, the Company may be unable to acquire attractive site
locations or existing theaters or theater circuits on terms the Company
considers acceptable. The development of new theaters involves certain risks,
including the possibility of construction cost overruns and delays, uncertainty
of site acquisition costs and availability, uncertainties as to market
potential, market deterioration after commencement of development and the
emergence of market competition from unanticipated sources. Additionally,
expansion of the Company's theater circuit, whether through theater development
or acquisitions, involves the risk that the Company might not effectively
manage such growth or that the Company's information or other systems might not
be sufficient in light of such growth. Although the Company manages its theater
development projects and acquisitions with a view towards minimizing these
risks, the Company may determine not to proceed, or not be able to proceed,
with its planned theater development projects or acquisitions and, accordingly,
no assurance can be given that any of the projected new theater developments
will open or that such developments or any acquisitions will perform in
accordance with the Company's expectations, or that any failure to manage
expansion generally will not have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Competition."
DEPENDENCE UPON MOTION PICTURE PRODUCTION AND PERFORMANCE; RELATIONSHIP WITH
FILM DISTRIBUTORS
The Company's business is dependent upon a number of factors, among
the most important of which are the availability of suitable motion pictures
for exhibition in its theaters and the performance of such films in the
Company's markets. Poor performance of films or a disruption or reduction in
the production of motion pictures by the major studios and/or independent
producers could have a material adverse effect on the Company's business and
its results of operations. Since the major film distributors have historically
released those films which they anticipate will be the most successful during
the summer and year-end holiday seasons, poor performance of such films or a
disruption or reduction in the number of films released during such periods
could adversely affect the Company's results for a particular quarter.
Moreover, to the extent that certain "event" films are distributed more widely
than in the past, the Company's margins may be hurt as a result of the higher
film licensing fees payable during the early period of a film's run. In
addition, the Company's business depends to a significant degree on maintaining
good relations with the major film distributors who are responsible for
allocating films to the Company's theaters. If the Company's relationship with
one or more of the major film distributors were to deteriorate for any reason,
the Company could find it more difficult to schedule the most commercially
successful films in its theaters, thereby adversely affecting the Company's
results of operations. See "Business -- Film Licensing."
COMPETITION
The motion picture exhibition industry is highly competitive. The
Company competes against a number of local, regional and national exhibitors,
most of which have been in existence significantly longer than the Company and
many of which have substantially greater financial resources than the Company.
The motion picture exhibition industry faces competition from a number
of motion picture exhibition delivery systems such as network, syndicated,
cable and satellite television, pay-per-view and home video systems. However,
the full extent to which these alternative motion picture delivery systems will
compete with traditional theatrical release may not be known for several years,
and there can be no assurance that these alternative motion picture exhibition
delivery systems will not in the future adversely affect attendance at the
Company's theaters. In addition, the entertainment industry is one which has
experienced rapid technological change. As a result, the Company may face
competition in
14
<PAGE> 20
the future from new technologies that are not yet developed. Movie theaters
also face competition from other forms of entertainment competing for the
public's leisure time and disposable income. See "Business -- Competition."
SUBORDINATION OF NOTES
The Exchange Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all existing and future senior
indebtedness of the Company, including indebtedness under the New Senior Bank
Facility. At August 1, 1997, the Company had $113.8 million of indebtedness
outstanding, of which $3.8 million was senior indebtedness. Subject to certain
limitations, the Indenture will permit the Company to incur additional
indebtedness, including senior indebtedness (including up to $75.0 million of
senior indebtedness under the New Senior Bank Facility). See "Description of
Exchange Notes -- Covenants". In addition, under certain circumstances, if any
non-payment default exists with respect to indebtedness under the New Senior
Bank Facility, the Company may not make any payments on the Exchange Notes for
a specified period of time, unless such default is cured or waived or such
senior indebtedness has been repaid in full. If the Company fails to make any
payment on the Exchange Notes when due or within any applicable grace period,
whether or not on account of the payment blockage provisions referred to above,
such failure would constitute an event of default under the Indenture and would
generally entitle the holders of the Exchange Notes to accelerate the maturity
thereof. See "Description of Exchange Notes -- Subordination". As a result of
the subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency of the Company, the assets of the Company will be
available to pay obligations on the Exchange Notes only after all senior
indebtedness and indebtedness of the Company's existing subsidiary (or any
future subsidiary) have been paid in full, and therefore there may not be
sufficient assets remaining to pay amounts due on any or all of the Exchange
Notes then outstanding. In addition, substantially all of the current assets of
the Company will be pledged, and future assets may be pledged, to secure
indebtedness under the New Senior Bank Facility. See "Description of Exchange
Notes" and "Description of New Senior Bank Facility."
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend, in large part, on the efforts,
abilities and experience of its executive officers and other key employees of
the Company. The loss of the services of one or more of such individuals could
have a material adverse effect on the Company's business. See "Management."
REPURCHASE OF THE NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined), the Company
will be required to make an offer to repurchase the Exchange Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date or repurchase. Certain events involving a Change
of Control will result in an event of default under the New Senior Bank
Facility and may result in an event of default under other indebtedness of the
Company that may be incurred in the future. An event of default under the New
Senior Bank Facility or other future senior indebtedness could result in an
acceleration of such indebtedness, in which case the subordination provisions
of the Exchange Notes would require payment in full of such senior indebtedness
before repurchase of the Exchange Notes. See "Description of Exchange Notes --
Subordination," "-- Covenants -- Change of Control" and "Description of New
Senior Bank Facility". It is unlikely that the Company would have sufficient
resources to repurchase the Exchange Notes or pay its obligations if the
indebtedness under the New Senior Bank Facility or other future senior
indebtedness were accelerated upon the occurrence of a Change of Control. The
inability of the Company to repurchase all of the tendered Exchange Notes would
constitute an Event of Default under the Indenture. These provisions may be
deemed to have anti- takeover effects and may delay, defer or prevent a merger,
tender offer or other takeover attempt. Further, the provisions of the
Indenture may not afford holders of Exchange Notes protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders of Exchange
Notes, if such transaction does not result in a Change of Control. No
assurance can be given that the terms of any future indebtedness will not
contain cross default provisions based upon Change of Control or other defaults
under such debt instruments.
15
<PAGE> 21
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's revenues have historically been seasonal, coinciding
with the timing of releases of motion pictures by the major distributors.
Generally, the most marketable films have been released during the summer and
the year-end holiday season. The Company's quarterly results may also be
affected by the timing of the development or acquisition of theaters.
LIMITED OPERATING HISTORY; NET LOSSES
The Company was organized in June 1995 and, accordingly, has a limited
operating history. In addition, the Company has experienced net losses since
its inception. Net losses for the period July 11, 1995 through December 31,
1995 and the fiscal year ended December 31, 1996 were approximately $907,000
and $2.8 million, respectively, and the net loss for the six months ended June
30, 1997 was approximately $4.2 million. There can be no assurance that the
Company's future operations will generate operating income, net income or
sufficient cash flow to pay its obligations. See "Selected Consolidated
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will constitute a new issue of securities for which
there is currently no established trading market. The Exchange Notes will not
be listed on any securities exchange and will not be approved for inclusion in
any automated quotation system. If the Exchange Notes are traded after their
initial issuance, they may trade at a discount from their principal amount,
depending upon prevailing interest rates, the market for similar securities,
the performance of the Company and other factors. The Company has been advised
by the Purchasers that they intend to make a market in the Exchange Notes after
the consummation of the Exchange Offer; however, the Purchasers are not
obligated to do so, and any such market making activities may be discontinued
at any time without notice. There can be no assurance that a trading market
for the Exchange Notes will develop.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included in this
Prospectus, including, without limitation, certain statements under "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" (including, without limitation, those
related to the acquisition and development of additional theaters by the
Company) may constitute forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed in this Prospectus, including, without limitation, in conjunction
with the forward-looking statements included in this Prospectus and under "Risk
Factors" (including, without limitation, the risk factors related to
"Substantial Capital Expenditures" and "Uncertainties Related to Future
Expansion"). All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for the Old Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company
of such Old Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, holders of the Old Notes desiring
to tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, upon
consummation of the Exchange Offer, registration rights under the Registration
Rights Agreement generally will terminate. In addition, any holder of Old
Notes who tenders in the
16
<PAGE> 22
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transactions.
Each Participating Broker-Dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
To the extent that Old Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Old Notes could
be adversely affected. See "The Exchange Offer."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. The Exchange Offer is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement.
The Old Notes surrendered in Exchange for the Exchange Notes will be retired
and canceled and cannot be reissued. Accordingly, the issuance of the Exchange
Notes will not result in any increase in the outstanding debt of the Company.
The net proceeds to the Company from the sale of the Old Notes were
approximately $105.7 million, after deducting discounts and estimated expenses
of the Old Notes Offering. The proceeds were used by the Company to repay all
of the outstanding indebtedness under the Existing Senior Bank Facility
(approximately $64.5 million at June 30, 1997) and to finance the Waco and
Oklahoma Acquisitions ($10.8 million and $15.8 million, respectively). The
balance of the net proceeds will be used to pay a portion of construction and
other expenses relating to the Company's 1997 theater building program and for
general corporate purposes.
Borrowings under the Existing Senior Bank Facility were incurred to
repay all of the indebtedness under the Company's 1995 bank facility and to
finance (i) the acquisition of Crown Theaters, Inc., (ii) the acquisition of
certain theaters from United Artists, (iii) the acquisition of two theaters
from General Cinema Corporation of Texas, Inc., (iv) the Beaumont/Port Arthur
Acquisition, (v) the Killeen Acquisition and (vi) the construction of certain
theaters described under "Business -- New Theater Development." At June 15,
1997, the interest rate under the Existing Senior Bank Facility was
approximately 8.4% per annum.
17
<PAGE> 23
CAPITALIZATION
The following table sets forth, as of June 30, 1997, the consolidated
capitalization of the Company and the consolidated capitalization of the
Company as adjusted to give effect to the Old Notes Offering and the use of
proceeds therefrom. This table should be read in conjunction with "Use of
Proceeds," "Selected Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the financial statements and pro forma financial information, including the
notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------
ACTUAL AS ADJUSTED
----------------- ------------
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
Cash and cash equivalents $ 4,878 $ 19,079
============ ===========
Long-term debt (including current maturities):
Existing Senior Bank Facility(1)
Revolving Credit Facility. 14,500 --
Term Loan Facility 50,000 --
New Senior Bank Facility(1)
Old Notes -- 110,000
Capital lease obligations 12 12
Other debt 3,800 3,800
------------ -----------
Total long-term debt, including current maturities 68,312 113,812
Stockholder's equity:
Common stock, $.01 par value; 100,000 shares authorized; 9,250 shares issued and
outstanding 1 1
Additional paid-in capital 63,257 63,257
Accumulated deficit (10,328) (10,328)
------------ -----------
Total stockholder's equity 52,930 52,930
------------ -----------
Total capitalization(2) $ 121,242 $ 166,742
============ ===========
</TABLE>
- -------------
(1) Upon consummation of the Old Notes Offering, the Company repaid all of
the existing indebtedness under the Existing Senior Bank Facility
($64.5 million as of June 30, 1997) and entered into the New Senior
Bank Facility. At August 1, 1997, the Company had no borrowings
outstanding under the New Senior Bank Facility.
(2) The consolidated capitalization of Holdings as of June 30, 1997 would
reflect an additional $137,000 in long- term debt. For more
information regarding Holding's capital structure, see "Description of
Capital Stock -- Holdings Capital Stock."
18
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated
financial information for Holdings for the period from July 11, 1995 through
December 31, 1995, for the fiscal year ended December 31, 1996 and for the six
month periods ended June 30, 1996 and 1997 and pro forma financial information
for the twelve months ended June 30, 1997. The financial statements of Holdings
are identical to those of the Company, except for long-term debt (Holdings'
balance sheet includes an additional $137,000 of long-term debt at June 30,
1997) and differences in the components of stockholders' equity. See
"Capitalization." The consolidated financial information for the two fiscal
years in the period ended December 31, 1996 and the balance sheet information
as of December 31, 1996 and 1995 were derived from the audited consolidated
financial statements of Holdings which have been audited by Arthur Andersen
LLP, independent public accountants. The fiscal years ended December 31, 1996
and 1995 are not directly comparable due to the shortened period Holdings and
the Company were in operation during 1995, the effects of theater acquisitions
and theater developments and the impact of the debt service associated with the
debt incurred in connection with theater acquisitions and development. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and pro forma financial information, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, PRO FORMA
--------------------- --------------------- TWELVE MONTHS
ENDED
1995(1) 1996 1996 1997 JUNE 30, 1997(2)
------ ------- ------- ------- ----------------
(IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues . . . . . . . . . . . . $6,334 $24,879 $6,496 $32,243 $88,786
Direct theater costs . . . . . . 5,296 20,798 5,871 26,885 71,723
General and administrative
expenses . . . . . . . . . . . 743 1,601 646 2,358 3,762
Depreciation and amortization . . 739 3,152 825 4,946 10,127
------ ------- ------- ------- -------
Operating (loss) income . . . . . (444) (672) (846) (1,946) 3,174
Interest expense, net . . . . . . 463 2,121 437 2,247 11,688
------ ------- ------- ------- -------
Net loss . . . . . . . . . . . . $ (907) $(2,793) $(1,283) $(4,193) $(8,514)
====== ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(3) . . . . . . . . . . . . $444 $2,954 $120 $3,295 $13,300
Capital expenditures and
acquisitions . . . . . . . . . 9,905 71,157 6,225 39,093 130,625
Net long-term debt(4) . . . . . . 7,978 46,941 9,061 63,558 94,870
Deficiency of earnings to fixed
charges(5) . . . . . . . . . . (907) (2,793) (1,283) (4,193)
PRO FORMA FINANCIAL DATA:
Ratio of EBITDA to net interest
expense . . . . . . . . . . . . 1.1x
-------
Ratio of net long-term debt to
EBITDA . . . . . . . . . . . . 7.1x
-------
OPERATING DATA (AT PERIOD
END):
Number of theaters operated . . . 11 72 17 77 84
------- ------- -------
Number of screens operated . . . 70 342 103 395 445
------- ------- -------
Average screens per theater . . . 6.4 4.8 6.1 5.1 5.3
------- ------- -------
</TABLE>
19
<PAGE> 25
<TABLE>
<CAPTION>
AT DECEMBER 31, JUNE 30, 1997
------------------- --------------------------
1995 1996 HISTORICAL PRO FORMA(2)
------- ------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 447 $ 3,559 $ 4,878 $ 19,079
Properties and equipment -- net 3,642 43,116 72,864 88,399
Total assets 12,930 92,355 129,946 174,957
Total long-term debt, including current
maturities 8,877 50,669 68,437 113,949
Stockholders' equity 1,838 6,544 7,433 7,433
</TABLE>
- ---------------
(1) For the period from inception (July 11, 1995) through December 31,
1995.
(2) The selected pro forma income statement and other financial data
presented reflects adjustments to the historical consolidated
financial statements of Holdings to give effect to (i) the
consummation of the Old Notes Offering, (ii) the Beaumont/Port Arthur
Acquisition, (iii) the Killeen Acquisition and (iv) the Oklahoma
Acquisition, in each case as if such events had occurred on July 1,
1996. The selected pro forma balance sheet data reflects adjustments
to the historical consolidated financial statements of Holdings to
give effect to (i) the consummation of the Old Notes Offering, (ii)
the Oklahoma Acquisition and (iii) the Waco Acquisition, in each case,
as if such events had occurred on June 30, 1997. The selected pro
forma financial information presented is not necessarily indicative of
either future results of operations or the results that might have
occurred had such events taken place at such dates.
(3) Represents income before interest, taxes, depreciation, amortization,
and deferred rent. EBITDA is a financial measure commonly used in the
Company's industry and should not be construed as an alternative to
operating income (as determined in accordance with GAAP), an indicator
of operating performance, an alternative to cash flows from operating
activities (as determined in accordance with GAAP) or a measure of
liquidity.
(4) Net long-term debt represents long-term debt minus cash and cash
equivalents.
(5) Earnings consist of net loss, plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and
one-third of rent expense on operating leases treated as
representative of the interest factor attributable to rent expense.
20
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results
of operations of the Company. This discussion should be read in conjunction
with the financial statements, including the notes thereto, appearing elsewhere
in this Prospectus.
OVERVIEW
The Company's revenues are generated primarily from box office
receipts and concession sales which constituted approximately 62% and 35% of
1996 revenues, respectively. Additional revenues are generated by electronic
video games located adjacent to the lobbies of certain of the Company's
theaters and by on-screen advertisements shown prior to each feature film. The
Company's revenues are principally affected by changes in attendance and
average admission and concession revenues per patron. Attendance is primarily
affected by the commercial appeal of the films released by distributors and, to
a lesser extent, by the comfort and quality of the theater and competition and
population growth in the geographic markets the Company serves.
The Company's principal costs of operations are film rentals,
concessions costs and theater operating expenses, such as theater lease
rentals, payroll, utilities, advertising costs and insurance.
The Company has experienced rapid revenue growth through theater
acquisitions and the development of new theaters. During fiscal year 1996, the
Company acquired 62 theaters with 270 screens, constructed one theater with 10
screens and added two screens to an existing theater. The results of operations
of the acquired and newly-built theaters are included in Holdings' Consolidated
Financial Statements from their respective dates of acquisition or opening
dates. The Company capitalizes costs associated with the opening of new
theaters and expenses such costs over a one year period.
The period from July 11, 1995 through December 31, 1995 and the fiscal
year ended December 31, 1996 are not directly comparable due to the shortened
period the Company was in operation during 1995, the effects of theater
acquisitions and theater developments and the impact of the debt service
associated with the debt incurred in connection with theater acquisitions and
development.
The Company currently operates 19 discount theaters (theaters which
exhibit second run movies and charge lower admission prices) with an aggregate
of 85 screens as compared to 5 theaters and 27 screens at the end of 1995.
Discount theaters represented a smaller percentage of the Company's total
theaters in 1996 as compared to 1995. This reduction affected the comparability
of the Company's results of operation for such periods. Management believes
that the percentage of discount theaters in the Company's theater circuit will
decline as new multiplex theaters are opened.
Admission and concession revenues are subject to seasonal fluctuations
which affect all motion picture exhibitors. These fluctuations are the result
of the distribution practice of the major motion picture studios, which have
historically concentrated the release of the most marketable films during the
summer and year-end holiday seasons when more people have tended to go to the
movies. As a result, the Company's second and fourth fiscal quarters have been
historically stronger compared to its first and third fiscal quarters.
21
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth a summary of operating revenues and
expenses for the year ended December 31, 1996, the period from July 11, 1995
through December 31, 1995 and for the six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------- ----------------------------
1995(1) 1996 1996 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Admissions . . . . . . . . . . . . . . $3,912,596 $15,334,877 $3,993,767 $20,884,284
Concessions . . . . . . . . . . . . . . 2,304,860 8,709,985 2,426,522 11,098,949
Other operating revenues, net . . . . . 116,205 834,378 75,447 259,775
---------- ----------- ----------- -----------
Total revenues . . . . . . . . 6,333,661 24,879,240 6,495,736 32,243,008
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Film rental and advertising
costs . . . . . . . . . . . . . . . 2,336,535 8,387,938 2,374,164 11,447,954
Cost of concessions and other . . . . . 339,476 1,411,869 363,742 1,754,273
Theater operating expenses . . . . . . 2,620,045 10,998,455 3,132,613 13,682,876
General and administrative
expenses . . . . . . . . . . . . . . 742,605 1,601,185 645,910 2,358,316
Depreciation and amortization . . . . . 739,028 3,151,582 825,195 4,946,254
---------- ----------- ----------- -----------
Total operating
expenses . . . . . . . . . . 6,777,689 25,551,029 7,341,624 34,189,673
---------- ----------- ----------- -----------
Operating Loss . . . . . . . . . . . . . (444,028) (671,789) (845,888) (1,946,665)
Interest Expense, Net . . . . . . . . . . 463,464 2,120,722 (437,412) (2,246,953)
---------- ----------- ----------- -----------
Net Loss . . . . . . . . . . . . . . . . $ (907,492) $(2,792,511) $(1,283,300) $(4,193,618)
========== =========== =========== ===========
EBITDA . . . . . . . . . . . . . . . . . $ 443,940 $ 2,953,843 $ 120,345 $ 3,295,364
</TABLE>
- -----------
(1) For the period from inception (July 11, 1995) through December 31, 1995.
(2) Represents income before interest, taxes, depreciation, amortization,
and deferred rent. EBITDA is a financial measure commonly used in the
Company's industry and should not be construed as an alternative to
operating income (as determined in accordance with GAAP), an indicator
of operating performance, an alternative to cash flows from operating
activities (as determined in accordance with GAAP) or a measure of
liquidity.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
TOTAL REVENUES. Total revenues were $32.2 million for the six months
ended June 30, 1997 as compared to $6.5 million for the six months ended June
30, 1996. Total revenues were $16.4 million in the second quarter of 1997 as
compared with $3.8 million in the second quarter of 1996. This increase in
revenues during the six-month period and the second quarter was principally due
to the Company's acquisition of 56 theaters (with an aggregate of 237 screens)
during 1996, all of which were acquired after the first half of 1996, and the
construction of three all stadium-style seating theaters (with an aggregate of
34 screens) which were opened at the end of May 1997. Of the $25.7 million
increase in revenues during the first six months of 1997, $23.2 million was
attributable to theaters acquired by the Company after the first half of 1996,
and $1.4 million was attributable to the three all stadium-style seating
theaters opened in May 1997.
The average price of a ticket for the Company's first run and discount
theaters was $4.28 and $1.24, respectively, during the first six months of 1997
and $3.99 and $1.24, respectively, during the first six months of 1996. Average
concession sales per customer in the Company's theaters increased approximately
7% during the first six months of 1997, reflecting both an increase in
consumption and, to a lesser extent, an increase in prices.
DIRECT THEATER COSTS. Film rental and advertising costs were $11.5
million for the six months ended June 30, 1997 as compared to $2.4 million for
the six months ended June 30, 1996. Film rental and advertising costs were
$5.7 million during the second quarter of 1997 as compared to $1.4 million in
the second quarter of 1996. Cost of concessions increased from $363,742 during
the first six months of 1996 to $1,754,273 during the first six months of 1997.
Cost of concessions also increased from $218,560 during the second quarter of
1996 to $901,199 during the second quarter of 1997. Theater operating expenses
increased from $3.1 million during the first six months of 1996 to $13.7
million during the first six months of 1997 and from $1.8 million in the second
quarter of 1996 to $7.0 million in the second quarter of 1997. Each of these
increases was principally due to the Company's acquisition of theaters during
the latter part of 1996.
Direct theater costs (consisting of film rental and advertising costs,
cost of concessions and other theater operating expenses) as a percentage of
total revenues decreased from 90% in the first half of 1996 to 83% in the first
half of 1997 as a result of the decrease in discount theaters as a percentage of
the Company's total theaters and improved operations.
22
<PAGE> 28
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the six months ended June 30, 1997 increased to $2.4 million from
$645,910 in the six months ended June 30, 1996. General and administrative
expenses for the second quarter of 1997 increased to $1.3 million from $336,620
in the second quarter of 1996. This increase was principally due to the
Company's acquisition of theaters during the latter part of 1996.
General and administrative expenses as a percentage of total revenues
decreased to approximately 7% during the first six months of 1997 from
approximately 10% during the first six months of 1996 as a result of such
expenses being spread over a greater number of theaters in the 1997 period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $4.9 million in the first six months of 1997 from $825,195 in the
first six months of 1996. Depreciation and amortization expense increased to
$2.4 million in the second quarter of 1997 from $412,597 in the second quarter
of 1996. The increase was principally due to Company's acquisition of theaters
during the latter part of 1996.
INTEREST EXPENSE, NET. Interest expense, net increased to $2.2
million for the first six months of 1997 from $437,412 for the first six months
of 1996 and to $1.3 million in the second quarter of 1997 from $218,299 in the
second quarter of 1996. The increase was due to increased borrowing by the
Company to finance acquisitions and the construction of theaters.
NET LOSS. The Company's net loss grew to $4.2 million for the first
six months of 1997 from $1.3 for the first six months of 1996. Net loss for
the second quarter of 1997 increased to $2.2 million from $619,621 in the
second quarter of 1996.
EBITDA. EBITDA increased to $3.3 million for the first six months of
1997 from $120,345 for the first six months of 1996. The increase was
primarily due to the Company's acquisition of 56 theaters during 1996, all of
which were acquired after the first half of 1996.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD JULY 11, 1995
THROUGH DECEMBER 31, 1995
The period from July 11, 1995 to December 31, 1995 and the fiscal year
ended December 31, 1996 are not directly comparable due to the shortened period
the Company was in operation during 1995, the effects of theater acquisitions
and theater developments and the impact of the debt service associated with the
debt incurred in connection with theater acquisitions and development.
TOTAL REVENUES. Total revenues were $24.9 million in 1996 as compared
to $6.3 million in the shorter 1995 period. This increase was principally due
to the Company's acquisition of 62 theaters with an aggregate of 270 screens
during 1996 and, to a lesser extent, to operating improvements in the Company's
theaters. Of the $18.5 million increase in revenues, $12.6 million was
attributable to theaters acquired by the Company during 1996 and $5.9 million
was attributable to theaters acquired by the Company in 1995.
The average price of a ticket at the Company's first run and discount
theaters was $4.13 and $1.26, respectively, during 1996 and $3.89 and $1.14,
respectively, during 1995. Average concession sales per customer increased
approximately 10% during the period, reflecting both an increase in consumption
and, to a lesser extent, an increase in concession prices. The contribution
from 62 new theaters acquired by the Company in 1996 is not fully reflected in
the Company's results for 1996, as 54 of these theaters were not acquired by
the Company until after October 1996.
DIRECT THEATER COSTS. Film rental and advertising costs were $8.4
million in 1996 as compared to $2.3 million in 1995. Cost of concessions in
1996 rose to $1.4 million from $339,476 in 1995. Theater operating expenses
also rose over the period to $11.0 million in 1996 from $2.6 million in 1995.
Each of these increases was principally due to the Company's acquisition of
theaters during 1996.
Direct theater costs (consisting of film rental and advertising costs,
cost of concessions and other theater operating expenses) as a percentage of
total revenues remained constant at approximately 84% over the entire period.
23
<PAGE> 29
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses in 1996 increased to $1.6 million from $742,605 in the shorter 1995
period. The increase was principally due to the Company's acquisition of
theaters during 1996.
General and administrative expenses as a percentage of total revenues
decreased to approximately 6% in 1996 from approximately 12% in 1995 as a
result of such expenses being spread over a greater number of theaters during
1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $3.2 million in 1996 from $739,028 in the shorter 1995 period. The
increase was principally due to the Company's acquisition of theaters during
1996.
INTEREST EXPENSE, NET. Interest expense, net increased to $2.1
million in 1996 from $463,464 in the shortened 1995 period. The increase was
due to increased borrowing by the Company to finance acquisitions and the
construction of theaters.
NET LOSS. The Company's net loss grew to $2.8 million in 1996 from
$907,492 in the shorter 1995 period.
EBITDA. EBITDA increased to approximately $3.0 million in 1996 from
approximately $443,940 in the shorter 1995 period. The increase was primarily
due to the Company's acquisition of 62 theaters during 1996, 54 of which were
acquired in the fourth quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, primarily through box
office receipts and concession sales. The Company's film rentals for a given
film are ordinarily paid to film distributors 15 to 45 days following receipt
of admissions revenues. As a result of this timing difference, as well as the
lack of significant inventory and accounts receivable, the Company has
generally operated with a negative working capital position for its ongoing
theater operations.
The Company's primary capital requirements are for theater
acquisitions and development, and for remodeling, expansion and maintenance of
existing theaters. The Company has historically funded its capital expansion
needs through capital contributions from its parent, the Company's bank lines
of credit and funds generated from its operations. On November 1, 1996, the
Company entered into the Existing Senior Credit Facility comprised of a $25.0
million revolving credit agreement and a $50.0 million term note borrowing
agreement. The Company used the proceeds of the Old Notes Offering to repay all
of the outstanding indebtedness under the Existing Senior Bank Facility
(approximately $64.5 million at June 30, 1997).
Concurrently with the consummation of the Old Notes Offering, the
Company entered into the New Senior Bank Facility to fund working capital
requirements and capital expenditures. The New Senior Bank Facility provides
for a $50.0 million revolving credit facility. The Company also has the right
at any time prior to June 30, 1999 to solicit on predetermined terms and
conditions from one or more of the banks funding the New Senior Bank Facility
additional commitments to increase the amount of the New Senior Bank Facility
to an amount not to exceed $75.0 million. The banks are under no obligation to
provide any such additional commitment. Borrowings under the New Senior Bank
Facility are conditioned upon the Company achieving and maintaining certain
financial ratios. As of August 1, 1997, no amounts were borrowed under the New
Senior Bank Facility. At the same date, the Company had the ability to borrow
approximately $7.0 million under such facility, all of which would constitute
senior indebtedness. See "Description of New Senior Bank Facility."
Since its inception in 1995, the Company has received capital
contributions from Holdings totaling $62.3 million. Since Holdings has no
independent operations, these capital contributions represented the proceeds of
equity issuances by Holdings. Holdings currently has two classes of preferred
stock outstanding, the Series B Convertible Preferred Stock (the "Holdings
Series B Preferred Stock") and the Series C Convertible Preferred Stock (the
"Holdings Series C Preferred Stock"). See "Description of Capital Stock --
Holdings Equity Issuances". Each such series may be redeemed, under certain
circumstances, at the holder's option, no earlier than the fourth quarter of
2003. If all of the
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<PAGE> 30
currently outstanding shares of Holdings Series B Preferred Stock and Holdings
Series C Preferred Stock were to be redeemed, it would result in a payment of
approximately $43.9 by Holdings to the holders of such preferred stock. In the
event of an initial public offering by Holdings of Holdings Common Stock, each
share of Holdings Series B Preferred Stock and Holdings Series C Preferred
Stock would be automatically converted into a fixed number of shares of
Holdings Common Stock. See "Principal Stockholders -- Redemption of Holdings
Series B Preferred Stock and Holdings Series C Preferred Stock." In addition,
at any time on or after October 31, 2001, and provided that an offering of
Holdings Common Stock has not then occurred, Richard M. Durwood and/or the
Richard M. Durwood Revocable Trust may require the Company to repurchase not
less than all of the shares of Holdings Common Stock held by each at the fair
market value at the time of repurchase (which based on recent valuations of
Holdings Common Stock would have resulted in an aggregate payment of
approximately $3.1 million).
During 1997, the Company plans to open or acquire approximately 18
theaters with 166 screens. Since January 1, 1997 the Company has acquired 11
theaters with 76 screens, opened three newly built theaters with 34 screens,
and has entered into definitive agreements to purchase a newly-built all
stadium-style seating multiplex theater with an aggregate of 16 screens in
Waco, Texas, and to exchange six theaters for five theaters and $1.2 million in
cash. At August 1, 1997, the Company had three theaters with 40 screens under
construction. In addition, the Company has five new screens under construction
at an existing theater and is scheduled to begin construction during 1997 of
three additional theaters with 35 screens and eight additional screens at two
existing theaters. See "Business -- New Theater Development" and "-- Recent and
Pending Acquisitions." The Company estimates that capital expenditures in
connection with such acquisitions and theater development in 1997 will be
approximately $91.2 million, of which approximately $43.7 million had already
been invested as of August 1, 1997. The Company expects to fund the balance of
these capital expenditures from the proceeds of the Old Notes Offering, cash
flow from operations and with available borrowings under the New Senior Bank
Facility. However, the Company's business may not generate sufficient cash flow
from operations and future borrowings may not be available under the New Senior
Bank Facility in an amount sufficient to enable the Company to make these
anticipated capital expenditures. In addition, the Company intends to continue
its expansion over the next several years. Any future theater development and
future acquisitions may require financing in addition to cash generated from
operations and future borrowings under the New Senior Bank Facility. There can
be no assurance that such additional financing will be available to the Company
on acceptable terms or at all.
Based upon the Company's current level of operations and anticipated
growth, management believes that cash flow from operations and the proceeds
from the Old Notes Offering, together with available borrowings under the New
Senior Bank Facility, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures, scheduled lease
payments and scheduled payments of interest on its indebtedness, including the
Exchange Notes. However, the Company's business may not generate sufficient
cash flow from operations and future borrowings may not be available under the
New Senior Bank Facility in an amount sufficient to enable the Company to
service its indebtedness, including the Exchange Notes, or make anticipated
capital expenditures. Furthermore, the Company's theater development program
and future acquisitions may require financing sources in addition to cash
generated from operations and future borrowings under the New Senior Bank
Facility. There can be no assurances that such additional financing will be
available to the Company on acceptable terms or at all.
25
<PAGE> 31
BUSINESS
The Company is a leading operator of theaters in small and mid-sized
markets in the Southwestern and Midwestern regions of the United States. The
Company's strategy is to provide a superior entertainment experience to its
customers through the development and operation of theaters with stadium-style
seating, state-of-the-art digital sound systems and modern, attractive lobby
and concession areas. Management believes that this strategy has increased
movie attendance at its theaters and allowed the Company to increase the
revenues it receives from patrons both at the box office and at the concession
stand. As of August 1, 1997, the Company operated 77 theaters with a total of
395 screens, located principally in Texas, Oklahoma, Kansas and Missouri. For
the twelve months ended June 30, 1997, on a pro forma basis after giving effect
to the Old Notes Offering and certain acquisitions, the Company generated
revenue and EBITDA of approximately $88.8 million and $13.3 million,
respectively.
The Company actively targets small and mid-sized markets which it
believes are under-served and where the Company believes it can become the
leading movie exhibitor. Management believes that its new stadium-style
multiplex theaters can become the primary entertainment choice in such markets.
In acquiring and building theaters, the Company seeks to identify markets where
it can develop clusters of theaters, enabling it to realize operating
efficiencies. By strategically selecting its target markets and focusing on
providing a superior entertainment experience, the Company has been able to
achieve a leading position in many of the markets in which it operates.
Management believes that in 78% of the markets in which the Company operates,
its theaters either face no competition or hold the leading market share.
Founded in June 1995, the Company has grown rapidly by: (i) acquiring
theaters and improving operations at these theaters; (ii) building new,
state-of-the-art stadium-style multiplexes in targeted markets and (iii) adding
stadium-style auditoriums and state-of-the-art sight and sound systems to its
existing theaters.
The Company's management has a proven record of integrating acquired
theaters and improving operations and profit margins. For example, for the two
major groups of theaters acquired by the Company in the fourth quarter of 1996,
per capita box office receipts and per capita concessions have increased by
approximately 9% and 11%, respectively, from the first half of 1996 to the
first half of 1997. In the Company's original first run theaters (purchased in
July 1995), the Company has increased per capita box office receipts by 16%
from June 1995 to June 1997 and per capita concessions revenues by 19% over the
same period. The Company believes that its policy of offering incentive
programs to its employees aligns their interests with those of management in
increasing revenues and improving operations.
The Company is a wholly-owned subsidiary of Holdings and enjoys strong
equity sponsorship. The principal stockholders of Holdings include Beacon,
Stratford and the Hoak Entities. See "Principal Stockholders". The Company is a
Delaware corporation with its principal executive offices located at 2911
Turtle Creek Boulevard, Suite 1150, Dallas, Texas 75219 and its telephone
number at that location is (214) 528-9500.
BUSINESS STRATEGY
The Company's strategy is to increase its revenues and cash flow by
(i) providing a superior entertainment experience designed to attract larger
audiences to its theaters, (ii) becoming the premier movie exhibitor in
selected small to mid-sized markets through the acquisition of existing
theaters and the development of new stadium-style seating multiplex theaters
and (iii) increasing per capita box office and concession revenues. Key
elements of the Company's operating strategy include:
PROVIDING A SUPERIOR SIGHT AND SOUND PRESENTATION. The Company's
objective is to create an entertainment experience in its theaters that is
superior to its local competitors. The Company believes it can achieve this
goal through the development and operation of state-of-the-art multiplex
theaters featuring stadium-style seating, which offers moviegoers clear,
unobstructed sight lines to the movie screen as a result of the steeper incline
of the seating. The Company has developed a new design for its multiplex
stadium-style auditoriums that utilizes "black-box" auditorium design elements
(all black auditorium interiors with maximum size screens to enhance the
viewing experience). These new stadium-style theaters offer digital sound in
all of the currently available formats (Digital Theater Sound Systems, Dolby(R)
Digital Sound and SONY Dynamic Digital Sound(TM)) THX(R) sound systems,
comfortable high-back chairs with
26
<PAGE> 32
wider seating and armrests with cupholders, modern, attractive lobby and
concession areas and attentive housekeeping both inside and outside the
theaters.
TARGETING SMALL AND MID-SIZED MARKETS AND DEVELOPING CLUSTERS OF
THEATERS. The Company focuses on small and mid-sized markets which it believes
are under-served. The Company aims to develop clusters of theaters in each of
its markets by acquiring theaters and developing new stadium-style multiplex
theaters in order to become the leading movie exhibitor in such markets. The
Company believes that its ability to develop stadium-style theaters in such
markets enables it to rapidly capture a significant share of such markets.
Before determining whether to develop a new theater in a particular location,
the Company carefully evaluates such market's potential.
CAPITALIZING ON THE COMPETITIVE ADVANTAGES OF STADIUM-STYLE MULTIPLEX
THEATERS. The Company intends to focus on the development of state-of-the-art
multiplex theaters featuring "black-box" auditoriums with stadium-style seating
configurations. By year-end 1997, the Company expects that its ratio of
stadium-style auditoriums to its total screen count will be among the highest
in the industry. The Company believes that the current trend in the United
States movie exhibition industry toward the development of multiplexes
featuring stadium-style auditoriums has put competitive pressure on many
existing theaters by setting new standards for moviegoers. The Company believes
that customers have clearly indicated their preference for the more attractive
surroundings, wider variety of films, better customer services and more
comfortable seating typical of stadium-style multiplexes. These theaters also
enhance the Company's ability to increase attendance and concession sales while
taking advantage of economies of scale by enabling it to exhibit concurrently a
wide variety of films.
INCREASING CONCESSION SALES THROUGH IMPROVED PRODUCT OFFERINGS,
FACILITY DESIGN AND STAFF INCENTIVES. Concession sales are the Company's
second largest revenue source after box office revenues and consistently yield
gross margins in excess of 80%. The Company actively works to promote
concession sales. In order to increase sales and margins at its concession
stands, the Company has introduced new products, offered larger sized products,
improved presentation, created additional satellite concession stands in its
theaters and added color video monitors and video walls featuring movie
trailers at many of its concession areas. In addition, the Company bases a
portion of theater managers' compensation on the level of concessions sales at
their theaters.
PROVIDING INCENTIVES TO MANAGEMENT THROUGH PERFORMANCE-BASED,
GOAL-ORIENTED COMPENSATION PACKAGES. The Company maintains an incentive program
for its district managers and theater managers which rewards management for
incremental improvements in theater profitability. The Company believes that
its incentive program is an important source of motivation for its employees
and aligns the employees' interests with those of the Company.
GROWING THROUGH STRATEGIC ACQUISITIONS AND ADDITIONS. The Company
intends to continue its program of acquiring and expanding theaters, primarily
through the opportunistic acquisition from regional or national chains of
groups of theaters located in the Company's target markets. Where appropriate,
the Company will also add stadium-style seating auditoriums and
state-of-the-art audio systems to selected existing theaters or reconfigure
existing auditoriums to the stadium-style seating format. The Company believes
that such selective acquisitions, add-ons and reconfigurations will enhance and
protect the Company's position as the sole or leading exhibitor in many of its
markets and enable the Company to become a leading exhibitor in other markets.
NEW THEATER DEVELOPMENT
The Company's construction program focuses on building stadium-style
seating multiplexes with an average of 10 to 14 screens and adding
stadium-style seating auditoriums to selected existing theaters. The Company
times its theater construction efforts to allow for theater openings that can
take advantage of peak summer and year-end holiday film seasons. In July 1996,
the Company added two auditoriums with stadium-style seating to its existing
theater in Burleson, Texas. In November 1996, the Company opened its first new
multiplex theater with all stadium-style seating and an aggregate of 10 screens
in Midland, Texas.
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<PAGE> 33
In May 1997, the Company completed the construction of three
additional all stadium-style seating multiplex theaters with an aggregate of 34
screens in Beaumont and Tyler, Texas and Lawrence, Kansas. These new theaters
opened during the 1997 Memorial Day holiday weekend.
At August 1, 1997, the Company had three new all stadium-style
theaters under construction in Oklahoma and Missouri with an aggregate of 40
screens. At August 1, 1997, the Company also had five stadium-style auditoriums
under development at the Company's existing theater in Heath, Ohio. The new
theaters and the new auditoriums are scheduled to open for the 1997 year-end
holiday season. In addition, during the remainder of 1997, the Company is
scheduled to begin construction of three all stadium-style theaters with 35
screens and eight stadium-style auditoriums at three existing theaters.
The following tables set forth the Company's completed and pending
stadium-style auditorium developments since its inception in July 1995,
including the development of new stadium-seat multiplex theaters and the
addition of stadium-style auditoriums to existing theaters.
STADIUM-STYLE THEATER DEVELOPMENT
NEW THEATERS
<TABLE>
<CAPTION>
OPENING DATE LOCATION NUMBER OF THEATERS NUMBER OF SCREENS
------------ -------- ------------------ -----------------
<S> <C> <C> <C>
November 1996 Midland, Texas 1 theater 10 screens
May 1997 Beaumont, Texas 1 theater 12 screens
May 1997 Tyler, Texas 1 theater 10 screens
May 1997 Lawrence, Kansas 1 theater 12 screens
December 1997* Norman, Oklahoma 1 theater 14 screens
December 1997* Columbia, Missouri 1 theater 14 screens
December 1997* Tulsa, Oklahoma 1 theater 12 screens
April 1998* Odessa, Texas 1 theater 11 screens
April 1998* Killeen, Texas 1 theater 14 screens
April 1998* San Angelo, Texas 1 theater 10 screens
--------- ----------
Total 10 theaters 119 screens
Average number of screens per theater 11.9 screens
</TABLE>
- -----------
* Projected
SCREEN ADDITIONS
<TABLE>
<CAPTION>
NUMBER OF SCREENS
ADDED TO
OPENING DATE LOCATION EXISTING THEATERS TOTAL RESULTING SCREENS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 1996 Burleson, Texas 2 screens 10 screens
November 1997* Heath, Ohio 5 screens 11 screens
December 1997* Burleson, Texas 4 screens 14 screens
April 1998* Longview, Texas 1 screen 10 screens
April 1998* Topeka, Kansas 3 screens 17 screens
---------
Total 15 screens
</TABLE>
- -----------
* Projected
RECENT AND PENDING ACQUISITIONS
In May 1997, the Company acquired two theaters with an aggregate of 12
screens in Beaumont and Port Arthur, Texas from the United Artists Corporation
("United Artists") for a purchase price of $3.4 million (the "Beaumont/Port
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<PAGE> 34
Arthur Acquisition"). The Company expects these newly acquired theaters to
complement the Company's existing theaters in Beaumont.
In June 1997, the Company acquired two theaters with an aggregate of
14 screens in Killeen, Texas from Escape Theatres, Inc. ("Escape") for a
purchase price of $8.5 million (the "Killeen Acquisition").
In August 1997, the Company acquired from General Cinema Corp. of
Oklahoma, Inc. ("General Cinema") seven theaters with an aggregate of 50
screens located in Tulsa and Oklahoma City, Oklahoma for a purchase price of
approximately $15.8 million (the "Oklahoma Acquisition").
In August 1997, the Company entered into a definitive agreement with
Dickinson, Inc. ("Dickinson") pursuant to which the Company will exchange six
theaters it operates in Kansas and Missouri for five theaters owned by
Dickinson in the same states and cash of approximately $1.2 million (the
"Dickinson Exchange"). The Company expects the exchange to complement the
Company's existing theaters in Lawrence, Topeka and Joplin. The exchange is
subject to certain conditions and is expected to close in September 1997.
In October 1997, the Company expects to acquire a newly-built all
stadium-style seating multiplex theater with an aggregate of 16 screens in
Waco, Texas for a purchase price of $8.7 million (the "Waco Acquisition") plus
the cost of furniture and fixtures (approximately $2.1 million). The Company
expects the new theater to complement the Company's existing theater in Waco.
Upon completion of the Dickinson Exchange and the opening of the new
theaters and auditoriums that were under construction or development as of
August 1, 1997 and other acquisitions as described above, the Company will
operate 87 theaters with a total of 501 screens.
Since its inception, most of the Company's growth has come through the
acquisition of existing theaters. The following table sets forth the Company's
completed and pending acquisitions since its inception in July 1995:
COMPLETED AND PENDING ACQUISITIONS SINCE INCEPTION
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
DATE OF ACQUISITION ACQUISITION THEATERS ACQUIRED SCREENS ACQUIRED LOCATION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 1995 Trans Texas 11 Theaters 70 Screens Texas, Oklahoma
April 1996 Cinemore 6 Theaters 33 Screens Texas
August 1996 Beaumont Cinema Ventures 2 Theaters 5 Screens Texas
November 1996 Crown Theater 33 Theaters 138 Screens Kansas, Missouri, Ohio
November 1996 United Artists 19 Theaters 86 Screens Texas, Oklahoma, Idaho
November 1996 General Cinema 2 Theaters 8 Screens Texas
May 1997 United Artists 2 Theaters 12 Screens Texas
June 1997 Escape Theatres 2 Theaters 14 Screens Texas
August 1997 General Cinema 7 Theaters 50 Screens Oklahoma
September 1997* Dickinson 5 Theaters++ 22 Screens Kansas, Missouri
October 1997* Waco City Lights 1 Theater 16 Screens Texas
</TABLE>
- ---------
* Pending acquisition.
++ Theaters to be acquired in exchange for six theaters operated by the
Company.
The Company has a proven record of integrating acquired theaters and
improving operations and profit margins. The following table sets forth the
percentage growth of per capita box office receipts and concessions between the
first half of 1996 and the first half of 1997 for the two major theater groups
acquired by the Company in the fourth quarter of 1996:
29
<PAGE> 35
OPERATING IMPROVEMENTS AT RECENTLY ACQUIRED THEATERS
<TABLE>
<CAPTION>
DATE OF PERCENTAGE GROWTH PERCENTAGE GROWTH
ACQUISITION ACQUISITION OF PER CAPITA BOX OFFICE RECEIPTS OF PER CAPITA CONCESSIONS
- -------------------- ----------------- ---------------------------------- ----------------------------
<S> <C> <C> <C>
Crown Theater November 1996 10.6% 12.9%
United Artists November 1996 5.6% 6.5%
</TABLE>
THEATER OPERATIONS
As of August 1, 1997, the Company operated 77 theaters with an
aggregate of 395 screens in six states. The following table profiles the
Company's theaters at August 1, 1997:
PROFILE OF COMPANY THEATERS
FIRST RUN THEATERS
<TABLE>
<CAPTION>
AVERAGE SCREENS
STATE TOTAL SCREENS TOTAL THEATERS PER THEATER
----- ------------- -------------- ---------------
<S> <C> <C> <C>
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 18 6.8
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . 53 10 5.3
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 16 4.9
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11 3.9
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.0
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 3.5
----- ---- ------
Total First Run . . . . . . . . . . . . . . . . . . . . 310 58 5.3
</TABLE>
DISCOUNT THEATERS
<TABLE>
<CAPTION>
AVERAGE SCREENS
STATE TOTAL SCREENS TOTAL THEATERS PER THEATER
----- ------------- -------------- ---------------
<S> <C> <C> <C>
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 12 4.9
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.0
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3 3.3
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.0
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.0
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2.0
------- ------ -------
Total Discount . . . . . . . . . . . . . . . . . . . . . 85 19 4.5
------- ------ -------
Total Circuit . . . . . . . . . . . . . . . . . . . 95 77 5.1
======= ====== =======
</TABLE>
The Company's first run theaters contributed approximately 76% and
approximately 94% of the Company's revenues and EBITDA, respectively, in 1996
and approximately 94% and approximately 97% of the Company's revenues and
EBITDA, respectively, in the twelve months ended June 30, 1997.
The Company is committed to providing customers in both its first run
and discount theaters with a premium moviegoing experience by emphasizing
clean, conveniently located and modern facilities with state-of-the-art
equipment at all of its theaters. The Company has undertaken improvements in
screens and projection systems, as well as lobby facilities and design. The
Company has added comfortable seats with armrests and cup holders in all of its
first run theaters. The Company also invests in high quality projection and
stereo sound equipment to enhance the moviegoing experience. Technical sound
enhancements adopted by the Company include Digital Theater Sound Systems,
Dolby(R) Digital Sound and SONY Dynamic Digital Sound(TM). Management estimates
that a majority of the films produced in 1997 will have digital soundtracks
available as an alternative to the standard stereo soundtrack. At June 30,
1997, more than 80% of the Company's first run auditoriums are equipped with
stereo sound, and nearly one-quarter of all auditoriums have digital sound
capabilities. The Company plans to add digital sound capabilities to additional
theaters during 1997. In addition, the Company has an attentive housekeeping
program to maintain the cleanliness of both the inside and the outside of its
theaters.
The Company operates 19 discount theaters with an aggregate of 85
screens which exhibit second run movies and charge lower admission prices
(typically $1.00-$1.50). The terminology "second run" is an industry term for
the showing of movies after the film has been shown for varying periods of time
at other theaters. These movies are the same
30
<PAGE> 36
high quality films shown at the Company's first run theaters but due to the
film's second run status the Company pays lower film rental costs. The
Company's discount theaters contributed approximately 24% and 6% of the
Company's revenues and EBITDA, respectively, in 1996 and approximately 6% and
3% of the Company's revenues and EBITDA, respectively, in the twelve months
ended June 30, 1997. The Company has undertaken a program to upgrade the sound,
concessions and environment of its discount theaters. Management believes the
percentage of discount theaters in the Company's theater circuit will decline
as new multiplex theaters are opened.
The Company's corporate office, which employed approximately 57
individuals as of June 30, 1997, is responsible for theater development and
site selection, lease negotiation, theater design and construction, film
licensing and settlements, concession vendor negotiations and financial and
accounting activities. The Company's theater operations are divided into six
geographic divisions, each of which is headed by a district manager. The
Company's district managers are responsible for implementing Company operating
policies and supervising the managers of the individual theaters. Theater
managers are responsible for the day-to-day operations of the Company's
theaters including optimizing staffing, developing theater promotions, ordering
concession inventory, maintaining a clean and functioning facility and training
theater staff. The Company maintains an incentive compensation program for its
district managers, theater managers and assistant managers, which rewards
managers for incremental improvements in theater profitability. In addition,
employees who directly sell concessions are also rewarded for increased
concession sales through theater-based bonuses and contests sponsored by
individual theater managers.
THEATER DEVELOPMENT
The Company's strategy emphasizes the development of new multiplex
theaters with stadium-style auditoriums showing first-run feature films. The
Company has designed prototype multiplex theaters, which can be adapted to suit
the size requirements of a particular location and the availability of parking.
The Company believes the fully designed prototypes will result in significant
construction and operating cost savings. The Company's multiplex theaters are
designed to create an inviting and patron-friendly experience for the customer.
The multiplex theaters typically contain auditoriums having from 100 to 300
seats each and feature stadium-style seating for enhanced viewing, comfortable
highback seats with cupholder armrests, "black-box" auditorium interiors (all
black auditorium interiors to enhance viewing), maximum size screens and
digital stereo surround-sound. The exterior and common areas of these theaters
are designed with neon and tile, and common areas include multiple concession
stands, video game areas and private party rooms adjacent to the theater lobby.
The Company believes that stadium-style auditoriums with black-box interior and
digital sound will provide an entertainment experience which is superior to
that available at a conventional theater. More importantly, the Company
believes that construction and operation of high quality theaters provides
significant competitive advantages as theater patrons and film distributors
have demonstrated a preference for multiplex theaters and the premium
moviegoing experience they can provide.
Multiplex theaters generally increase per screen revenues and
operating margins and enhance the Company's operating efficiency. Multiplex
theaters enable the Company to offer a wide selection of films attractive to a
diverse group of patrons residing within the drawing area of a particular
theater complex. Because the percentage amount of film rental fees decreases
over the course of a run, varied auditorium seating capacities within the same
theater enable the Company to reduce average film rental costs (and thereby
increase operating margins) by exhibiting films for a longer period of time
through the shifting of films to smaller auditoriums to meet changing
attendance levels. In addition, operating efficiencies are realized through the
economies of having common box office, concession, projection, lobby and
restroom facilities, which enable the Company to spread certain costs, such as
payroll, advertising and rent, across a higher revenue base. Staggered movie
starting times also minimize staffing requirements, reduce lobby congestion and
contribute to more desirable parking and traffic flow patterns.
The Company continually evaluates existing and new markets for
potential theater locations. The Company generally seeks to develop theaters in
film licensing zones that are underserved as a result of changing demographic
trends or that are served by aging theater facilities. Some of the factors the
Company considers in determining whether to develop a theater in a particular
location are the market's population and average household income, proximity to
retail corridors, convenient roadway access and proximity to competing
theaters.
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<PAGE> 37
CONCESSIONS
Concession sales are the Company's second largest revenue source after
box office revenues, representing approximately 35% of total revenues for 1996.
The Company has devoted considerable management effort to increasing concession
sales and margins. The Company's primary concession products are Coca Cola(R)
beverages, popcorn, hot dogs, nachos and candy.
The Company has also continued to introduce new concession products
designed to attract additional concession purchases. New offerings have
recently included bottled water, specialty coffees and frozen carbonated
beverages such as Icees(R). In addition, the Company continues to look for new
selling techniques to boost concessions sales. For instance, in an effort to
increase concession revenues per patron, the Company has increased the sizes
and upgraded the containers in which its concession products are sold. The
Company now also includes sales tax in the price of its concession products,
rounding up the price to the nearest twenty-five cents, in order to serve
customers more rapidly.
The Company has found that the placement, design and appearance of
concession stands are also key factors in improving sales. Accordingly, the
Company's new theaters are designed to include larger concession stands, with
each stand having multiple service stations to make it easier to serve larger
numbers of customers rapidly. The optimal placement of large concession stands
within theaters also heightens their visibility, aids in reducing the length of
concession lines and improves traffic flow around the concession stands. The
Company has redesigned the concession areas in most of its older theaters to
incorporate many of these features. In addition, the Company has installed
color video monitors in the concession areas of most of its first run theaters
so that customers may watch trailers of coming attractions while waiting in
line. The Company bases a portion of theater managers' compensation on the
level of concession sales at their theaters. In addition, employees who
directly sell concessions are also rewarded for increased concession sales
through theater-based bonuses and contests sponsored by individual theater
managers.
These improvements in the Company's concession operations have led to
an increase of 2.6% in the per capita concession revenues in the Company's
first run theaters during the six month period ended June 30, 1997 as compared
to the same period in 1996.
In order to control the cost of concession items, the Company
negotiates prices for its concession supplies directly with concession vendors
on a bulk rate basis and distributes its concession supplies through two
concession contract distributors. The Company's largest concession vendor is
The Coca Cola Company. In April 1997, the Company signed a five-year supply
contract with The Coca Cola Company to supply soft drinks and other products to
all of its theaters.
FILM LICENSING
The Company licenses films from distributors owned by major film
production companies and from independent film distributors that typically
distribute films for smaller production companies. Film licensing is done on a
film-by-film and theater-by-theater basis. Prior to negotiating for a film
license, the Company's film buyers evaluate the prospects for upcoming films.
The criteria considered for each film include cast, director, plot, performance
of similar films, estimated film rental expense, expected Motion Picture
Association of America rating and the outlook for other upcoming films.
Successful licensing depends greatly upon the exhibitor's knowledge of trends
and historical film preferences of the residents in markets served by each
theater, as well as on the availability of commercially successful motion
pictures.
For first run films, film distributors typically establish geographic
zones and offer each available film to theaters within that zone. The size of a
film zone is generally determined by the population density, demographics and
box office potential of a particular market or region, and can range from a
radius of three to five miles in major metropolitan and suburban areas to up to
15 miles in small towns. Each film, regardless of the distributor, is generally
licensed to only one theater in each zone. New film releases are licensed at
the discretion of the film distributors on an allocation or previewed bid
basis. In film zones where the Company has little or no competition, the
Company selects films from among those offered, permitting the Company to
exhibit many of the most commercially successful films in these zones. In film
zones where the Company faces competition, the Company usually licenses films
on an allocation basis. Under an allocation
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<PAGE> 38
process, a distributor will decide on a picture-by-picture, theater-by-theater
basis which exhibitor will be offered a movie and then that exhibitor will
negotiate directly with the distributor for the film. In recent years,
distributors have generally used this allocation process rather than a bidding
process to license their films. At June 30, 1997, approximately 71% of the
Company's theaters were located in film licensing zones in which the Company
was the sole exhibitor, and approximately 7% of its theaters were located in
zones in which management believes that the Company is the leading exhibitor.
For second run films, film distributors establish availability on a
market-by-market basis after the completion of exhibition at first run
theaters, and permit each theater within a market to exhibit such films without
regard to film zones.
The Company licenses films through its booking office located at the
Company's corporate headquarters in Dallas, Texas. All of the major motion
picture studios and distributors also maintain offices in Dallas. The Company's
film bookers have significant experience in the theater industry and have
developed long-standing relationships with the film distributors. Each film
booker is responsible for a geographic region and maintains relationships with
representatives of each of the major motion picture studios and distributors
having responsibility for their respective geographic regions. The Company
licenses films from all of the major distributors and is not dependent on any
one studio for motion picture product.
A film license typically specifies rental fees to be paid to the
distributor based on the higher of either a gross receipts formula or a theater
admissions revenue sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentage generally declining over the term of the run. First run film rental
percentages usually begin at 70% of box office receipts and gradually decline
to as low as 30% over a period of four to seven weeks. Under the theater
admissions revenue sharing formula (commonly known as the "90/10" clause), the
distributor receives a specified percentage (i.e., 90%) of the excess of box
office receipts over a negotiated reimbursement for theater expenses. Second
run film rental percentages typically begin at 35% of box office receipts and
decline to 30% after the first week. Most distributors follow an industry
practice of adjusting or renegotiating the terms of a film license after the
exhibition of the film based upon the film's success.
The Company's business is dependent upon the availability of
commercially successful movies and upon its relationship with motion picture
distributors. During 1996, there were seven major distributors whose films
accounted for a substantial portion of admission revenues and top grossing
films. These are Buena Vista Distribution (Disney), Miramax, Paramount
Pictures, Sony Releases, Twentieth Century Fox, Universal Film Exchanges, Inc.
and Warner Bros. Distribution. There are numerous other smaller distributors
and no single distributor dominates the market. From year to year, the
Company's revenues attributable to individual distributors may vary
significantly depending on the commercial success of such distributor's films
in any given year. In 1996, no single distributor accounted for more than 29%
of the motion pictures licensed by the Company or for more than 29% of the
Company's box office admissions. The Company believes that its relationships
with its film distributors are good.
MARKETING
In order to attract customers, the Company relies principally upon
newspaper display advertisements (substantially paid for by film distributors)
and newspaper directory film schedules (generally paid for the by the
exhibitor) to inform patrons of film titles and show times. Newspaper directory
film display advertisements are typically displayed in a single group for all
of the Company's theaters located in the newspaper's circulation area. Radio
and television advertising spots (generally paid for by film distributors) are
used to promote certain movies and special events. The Company also exhibits
previews in its theaters of coming attractions and films presently playing on
the other screens which it operates in the same theater or market. Upon the
opening of a new theater, the Company undertakes additional one-time marketing
efforts, such as special promotions, advertising and contests.
MANAGEMENT INFORMATION SYSTEMS
The Company has made a significant commitment to its management
information systems in order to enhance its ability to control costs and
efficiently manage the Company's theaters. The Company's management information
system provides corporate management by 8:00 a.m. each day with detailed
admission and concession revenue
33
<PAGE> 39
information as well as attendance figures from the previous day. This
information allows management to make quick adjustments to movie schedules,
including prolonging runs or adding screens for movies with higher gross
revenues and substituting films when gross revenues cease to meet goals.
Real-time seating and box office information is available to box office
personnel, making it possible for theater management to avoid overselling a
particular film and providing faster and more accurate response to customer
inquiries regarding showings and available seating. The information system also
tracks concession sales and total deposits, leading to better inventory
management and control.
INDUSTRY OVERVIEW
The North American motion picture exhibition industry is comprised of
approximately 475 exhibitors, approximately 250 of which operate four or more
total screens. At December 31, 1996, the ten largest exhibitors operated
approximately 50% of the total screens in operation, with no one exhibitor
operating more than 10% of the total screens. From 1986 through 1996, the net
number of screens in operation in the United States increased from
approximately 20,000 to approximately 28,000.
One of the most important industry trends in recent years is the
development of multiplex theaters with stadium-style seating and digital sound.
These theaters set new standards for moviegoers, who have demonstrated a
preference for the more modern facilities, wider variety of films, better
customer service and more comfortable seating typical of these newer
multiplexes.
Theatrical exhibition is the primary distribution channel for new
motion picture releases. The Company believes that the successful theatrical
release of a movie abroad and in "downstream" distribution channels, such as
home video and pay-per-view, network, syndicated and satellite television, is
largely dependent on its successful theatrical release in the United States.
The Company further believes that the emergence of new motion picture
distribution channels has not adversely affected attendance at theaters and
that these distribution channels do not provide an experience comparable to the
out-of-home experience of viewing a movie in a theater. The Company believes
that the public will continue to recognize the advantages of viewing a movie on
a large screen with superior audio and visual quality, while enjoying a variety
of concessions and sharing the experience with a large audience. In addition,
when compared with other forms of entertainment, such as many sporting events
and cultural events, movies remain one of the best entertainment values for
families.
According to data released by the Motion Picture Association of
America, the U.S. box office sales of approximately $5.9 billion in 1996 was a
record for the industry. Overall attendance has remained relatively stable
during the most recent seven year period. The Company believes that the primary
reason for the variances in the year-to- year attendance is the overall
audience appeal of the films released and to a lesser extent general economic
conditions. The following table represents the results of a survey by the
Motion Picture Association of America outlining the historical trends in U.S.
theater attendance, average ticket prices and box office sales for the last
seven years.
<TABLE>
<CAPTION>
U.S. BOX
AVERAGE OFFICE
ATTENDANCE TICKET SALES
YEAR (MILLIONS) PRICE (BILLIONS)
- ----------------------------------------------------- ---------- ------- ----------
<S> <C> <C> <C>
1990 . . . . . . . . . . . . . . . . . . . . . . . . 1,189 $4.23 $5.02
1991 . . . . . . . . . . . . . . . . . . . . . . . . 1,141 4.21 4.80
1992 . . . . . . . . . . . . . . . . . . . . . . . . 1,173 4.15 4.87
1993 . . . . . . . . . . . . . . . . . . . . . . . . 1,244 4.14 5.15
1994 . . . . . . . . . . . . . . . . . . . . . . . . 1,292 4.18 5.40
1995 . . . . . . . . . . . . . . . . . . . . . . . . 1,263 4.35 5.49
1996 . . . . . . . . . . . . . . . . . . . . . . . . 1,339 4.42 5.91
</TABLE>
The Company believes that as a result of increased revenues from the
successful release of films in both movie theaters and other distribution
channels, film production companies have increased the number of films being
produced in recent years. Film producers have increased their revenues from
these distribution channels by more than 250% over the past ten years to $20.0
billion in 1996. The increased revenue potential from film distribution in
recent years can be
34
<PAGE> 40
attributed to increased demand resulting from the domestic and international
growth of the movie theater industry and the home video industry, and the
significantly increased channel capacity created by enhanced cable and
satellite-based transmission systems. Moreover, the Company believes
independent producers and distributors, such as Gramercy Pictures, New Line
Cinemas, Castle Rock Entertainment and Dreamworks SKG, the highly-publicized
partnership among Jeffrey Katzenberg, Steven Spielberg and David Geffen, should
help increase motion picture production. The Company believes that an
increasing supply of quality feature films and "event" films exhibited with
advanced projection and stereo sound equipment, such as Digital Theater Sound
Systems, Dolby(R) Digital Sound and SONY Dynamic Digital Sound(TM) and THX(R)
sound systems will enhance the moviegoing experience and will increase the
theater attendance of exhibitors, such as the Company, with modern multiplex
theaters designed to exhibit such motion pictures. In addition, the Company
believes that the trend towards such films complements the Company's focus on
the development of multiplex theaters with stadium-style seating, "black box"
auditoriums and state-of-the-art projection and sound.
COMPETITION
The motion picture exhibition industry is highly competitive,
particularly in licensing films, attracting patrons and finding new theater
sites. There are approximately 475 participants in the North American motion
picture exhibition industry. Industry participants vary substantially in size,
from small independent operators of a single screen theater to large national
chains of multi-screen theaters affiliated with entertainment conglomerates.
The Company competes against local, regional and national exhibitors, most of
which have been in existence significantly longer than the Company and many of
which have substantially greater financial resources than the Company.
In film zones where the Company has little or no competition, the
Company selects films it thinks will be most commercially successful from those
offered. In film zones where the Company faces competition, the Company usually
licenses films on an allocation basis. The Company believes that the principal
competitive factors in licensing films include licensing terms, the seating
capacity, location, quality and reputation of an exhibitor's theaters, the
quality of projection and sound equipment at the theaters and the exhibitor's
ability and willingness to promote the films. See "-- Film Licensing."
Competition for patrons is dependent upon factors such as the availability of
popular films, the location of theaters, the comfort and quality of theaters
and ticket prices.
Some of the Company's competitors have also sought to increase the
number of theaters and screens in operation. Such increases may cause certain
local markets or portions thereof to have too many screens for the population,
thereby negatively affecting the earnings of all the theaters in the market.
The Company does not believe that to date overbuilding has affected the
Company's business to any material extent. At the same time, there has been a
reduction in the number of theater locations and a consolidation among
exhibitors. At December 31, 1996, the ten largest motion picture exhibition
companies operated approximately 50% of the total screens in operation, with no
one exhibitor operating more than 10% of the total screens.
The motion picture exhibition industry faces competition from a number
of motion picture exhibition delivery systems such as network, syndicated,
cable and satellite television, pay-per-view and home video systems. Despite
the proliferation of these delivery systems, theater admission revenues have
increased during each of the last four years. However, the full extent to
which these alternative motion picture delivery systems will compete with
traditional theatrical release may not be known for several years, and there
can be no assurance that these alternative motion picture exhibition delivery
systems will not in the future adversely affect attendance at the Company's
theaters. In addition, the entertainment industry is one which has experienced
rapid technological change. As a result, the Company may face competition in
the future from new technologies that are not yet developed. Movie theaters
also face competition from other forms of entertainment competing for the
public's leisure time and disposable income.
REGULATION
The distribution of motion pictures is in large part regulated by
federal and state antitrust laws and has been the subject of numerous antitrust
cases. The consent decrees resulting from those cases, to which the Company was
not a party, bind certain major motion picture distributors and require the
films of such distributors to be offered and licensed to exhibitors, including
the Company, on a film-by-film and theater-by-theater basis. Consequently, the
Company cannot
35
<PAGE> 41
assure itself of a supply of motion pictures by entering into long-term
arrangements with major distributors, but must compete for its licenses on a
film-by-film and theater-by-theater basis. See " -- Film Licensing."
The Company is subject to various general regulations applicable to
its operations including the Americans with Disabilities Act (the "ADA"). The
Company has evaluated the Company's existing theaters and its specifications
for new theaters and made changes to such theaters and specifications to comply
with the regulations of the ADA. The Company develops its new theaters in
substantial compliance with the ADA. The Company believes that the continuing
cost of complying with the ADA will not be material.
EMPLOYEES
As of August 1, 1997, the Company had approximately 1,700 employees,
of which approximately 90% are part time employees who are paid on an hourly
basis. None of the Company's employees are members of unions or covered by
collective bargaining agreements. The Company believes its relations with its
employees are good.
PROPERTIES
Of the 77 theaters operated by the Company at August 1, 1997, 14
theaters (74 screens) were owned and 63 theaters (321 screens) were leased. The
Company's leases typically have remaining terms from 4 to 20 years, with
options to extend the lease for up to ten additional years. The leases
typically require escalating minimum annual rent payments during the term of
the lease which are negotiated at the signing of the lease. During the next
five years approximately 40 theater leases (representing 169 screens) will
expire, representing approximately 52% of all the Company's theaters (43% of
all screens). Of those coming due within the next five years, leases at 21
theaters (representing 97 screens) will be subject to renewal options. In
addition, the Company has purchased two lots for the development of new
theaters and has entered into a ground lease for another development site.
The Company leases office space in Dallas, Texas for its corporate
headquarters.
LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings arising
from the ordinary course of its business operations. The Company does not
believe that the resolution of these proceedings will have a material adverse
effect on the Company's financial condition and results of operations.
MANAGEMENT
The following table sets forth certain information regarding the
Company's and Holdings' directors and executive officers, including their
respective ages.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas W. Stephenson, Jr . . . . . . . . . . . . . . . 42 President, Chief Executive Officer and
Chairman of the Board
Robert E. Painter . . . . . . . . . . . . . . . . . . . 51 Chief Operating Officer and Assistant
Secretary
James R. Featherstone . . . . . . . . . . . . . . . . . 42 Chief Financial Officer, Vice President,
Secretary and Treasurer
John G. Farmer . . . . . . . . . . . . . . . . . . . . 49 Director
Thomas L. Harrison . . . . . . . . . . . . . . . . . . 46 Director
Thomas G. Mendell . . . . . . . . . . . . . . . . . . . 51 Director
Harold W. Pote . . . . . . . . . . . . . . . . . . . . 51 Director
Eric R. Wilkinson . . . . . . . . . . . . . . . . . . . 41 Director
</TABLE>
THOMAS W. STEPHENSON, JR. has served as a director and the President
and Chief Executive Officer of the Company and Holdings since June 1995. From
1987 to 1995, Mr. Stephenson was President of LSI Capital, L.L.C., an
36
<PAGE> 42
acquisition and advisory group, which he founded in 1987. During 1986, Mr.
Stephenson was President of Inwood Capital, a real estate merchant banking
firm. From 1984 to 1987, Mr. Stephenson was a partner and Chief Financial
Officer of Criswell Development Company, a real estate investment company. From
1978 to 1984, Mr. Stephenson was employed by the investment bank of Merrill
Lynch.
ROBERT E. PAINTER has served as Chief Operating Officer of the Company
and Holdings since September 1996. Prior to that time, Mr. Painter was a
consultant for the IMAX Corporation from 1995 to 1996. From 1991 to 1995, Mr.
Painter was employed by General Cinema Theatres as its Senior Vice President of
Operations. From 1989 to 1991, Mr. Painter served as Senior Operations Officer
for Staff Builders Health Care, Inc. From 1967 to 1989, Mr. Painter was
employed by General Cinema Theatres, most recently as its Senior Vice President
of Operations.
JAMES R. FEATHERSTONE has served as Chief Financial Officer of the
Company and Holdings since July 1996. From April 1996 to June 1996, Mr.
Featherstone served as a consultant to the Company. From June 1982 to July
1995, Mr. Featherstone served as Vice President of Citicorp and later as
Managing Director of Citicorp Securities.
JOHN G. FARMER has served as a director of the Company and Holdings
since May 1996. In addition, since October 1994, Mr. Farmer has served as
Managing Director of Stratford Capital Partners, L.P. and Stratford Equity
Partners, L.P. From June 1990 to October 1994, Mr. Farmer served as Senior
Vice President of GE Capital Corporation, Corporate Finance Group.
THOMAS L. HARRISON has served as a director of the Company and
Holdings since May 1997. Since 1995, Mr. Harrison has also served as a
Principal and President of Hoak Capital Corporation. From 1989 to 1995, Mr.
Harrison served as a Principal and as Managing Director of Haas, Wheat &
Harrison, Incorporated and from 1984 to 1989, he served as a Principal and as
Senior Vice President of Hicks & Haas, Incorporated.
THOMAS G. MENDELL has been a director of the Company and Holdings
since September 1996. In addition, since April 1994, Mr. Mendell has been a
Partner of The Beacon Group, L.L.C. and serves as director of Catalina
Marketing Corp oration (NYSE) and several private companies. From November 1986
to December 1993, Mr. Mendell was a Partner of Goldman Sachs & Co.
HAROLD W. POTE has been a director of the Company and Holdings since
September 1996. Since January 1993, Mr. Pote also has been a Partner of The
Beacon Group L.L.C. Prior to the formation of The Beacon Group, L.L.C., Mr.
Pote was Chief Executive Officer of First Fidelity Bancorporation. Mr. Pote
currently serves as a director of Norfolk Southern Corp. and previously served
as director of Smith Klein-Beecham, Inc.
ERIC R. WILKINSON has been a director of the Company and Holdings
since September 1996. In addition, since December 1995, Mr. Wilkinson has been
a Partner of The Beacon Group L.L.C. From March 1994 to December 1995, Mr.
Wilkinson served as a Principal of The Beacon Group L.L.C. From March 1989 to
March 1994, Mr. Wilkinson served as a Partner and a director of Apax Partners,
a $300.0 million private overseas equity fund.
Each director of Holdings and the Company holds office until the next
annual meeting of stockholders of the Company or until his successor is duly
elected and qualified. All officers are elected annually and serve at the
discretion of the respective Board of Directors. The number of members on each
Board of Directors is fixed by the affirmative vote of a majority of the
members at any time constituting such Board of Directors. Presently, the Board
of Directors of each of Holdings and the Company consists of six members.
Directors on each such Board are reimbursed for all expenses actually incurred
for each Board meeting which such directors attend. Each director may receive
additional compensation for his services as the respective Board of Directors
may determine. The executive officers of the Company and Holdings are elected
by the respective Board of Directors to serve at the discretion of such Board.
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<PAGE> 43
EXECUTIVE COMPENSATION
The following table sets forth the compensation for fiscal year 1996
awarded to or earned by the chief executive officer of the Company and the two
other most highly compensated executive officers of the Company whose
contractual base salary and bonus exceeded $100,000 for services rendered in
all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------
ALL OTHER
NAME SALARY BONUS(2) COMPENSATION
---- -------- -------- ------------
<S> <C> <C> <C>
Thomas W. Stephenson, Jr . . . . . . . . . . . . . . . . . . . . $182,065 $225,000 --
Robert E. Painter(3) . . . . . . . . . . . . . . . . . . . . . . 47,580 60,000 --
James R. Featherstone(3) . . . . . . . . . . . . . . . . . . . . 52,515 50,000 --
</TABLE>
- -----------
(1) The named executive officers did not receive annual compensation not
properly categorized as salary or bonus, except for certain
perquisites and other personal benefits which are not shown because
the aggregate amount of such compensation for each of the named
executive officers during the fiscal year did not exceed the lesser of
$50,000 or 10% of total salary and bonus reported for such executive
officer.
(2) Represents a cash bonus earned in 1996, but paid in 1997.
(3) Mr. Painter and Mr. Featherstone joined the Company in September 1996
and July 1996, respectively.
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<PAGE> 44
The table below sets forth information concerning grants of stock
options for shares of common stock, par value $.01 per share, of Holdings
("Holdings Common Stock") made by the Company to each of the executive officers
of the Company named in the Summary Compensation Table during 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF EXERCISE
UNDERLYING TOTAL OPTIONS PRICE
NAME OPTIONS GRANTED GRANTED IN 1996 PER SHARE EXPIRATION DATE
---- ---------------- --------------- --------- ----------------
<S> <C> <C> <C> <C>
Thomas W. Stephenson, Jr . . . . . . . 14,603 57.1% $175 September 30, 2006
Robert E. Painter . . . . . . . . . . . 7,302 28.6% 175 September 30, 2006
James R. Featherstone . . . . . . . . . 3,651 14.3% 175 September 30, 2006
</TABLE>
The table below sets forth information concerning each exercise of
options for Holdings Common Stock, during 1996 by the executive officers named
in the Summary Compensation Table, the number of exercisable and unexercisable
options for Holdings Common Stock held by them and the fiscal year-end value of
such exercisable and unexercisable options.
AGGREGATED HOLDINGS OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(1) AT FISCAL YEAR-END(1)
SHARES --------------------------- ---------------------------
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Stephenson, Jr -- -- -- 14,603 -- $292,057
Robert E. Painter . . . -- -- -- 7,302 -- 146,040
James R. Featherstone . -- -- -- 3,651 -- 73,020
</TABLE>
- ----------
(1) Assumes a current fair market value of $195 per share of Holdings
Common Stock, the price at which Holdings last issued shares of
Holdings Common Stock in May 1997.
1996 STOCK OPTION AND STOCK AWARD PLAN
Certain eligible employees and non-employee directors of the Company
and its subsidiaries may be granted stock options ("Options"), stock
appreciation rights ("SARS"), restricted stock, performance units or
performance shares and phantom stock rights (collectively, the "Incentive
Awards") pursuant to the Hollywood Theater Holdings, Inc. 1996 Stock Option and
Stock Award Plan (the "Stock Award Plan"). The aggregate number of shares of
Holdings Common Stock that may be issued, transferred or exercised pursuant to
Incentive Awards under the Stock Award Plan is 37,000 shares (subject to
certain adjustments). The Stock Award Plan is administered by a committee, the
members of which are appointed by the Board of Directors of the Company (the
"Committee"). Presently, the members of the Committee consist of John G.
Farmer, Thomas L. Harrison, Thomas G. Mendell and Thomas W. Stephenson.
The Committee has the ability to determine, among other things, which
individuals will be granted awards pursuant to the Stock Award Plan and such
Committee has the ability to determine the number of shares of Holdings Common
Stock, options, SARs, restricted stock awards, performance units or shares or
phantom stock rights that will be subject to each Incentive Award and to
determine the terms and provisions of each Incentive Award.
The Committee may grant either incentive stock options or
non-qualified stock options to eligible employees. The Committee will not
grant any incentive stock options to an eligible employee who owns or would own
immediately after the grant of such incentive stock option, directly or
indirectly, stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company (unless at the time of such grant, the
incentive stock option
39
<PAGE> 45
price is at least 110% of fair market value and such option is not exercisable
after the expiration of five years from the date of grant). The purchase price
for non-qualified stock options will be equal to at least the greater of (i)
the par value of the Holdings Common Stock or (ii) 50% of the fair market value
of the Holdings Common Stock on the date of grant. The purchase price for an
incentive stock option will be at least equal to fair market value of the
Holdings Common Stock on the date of grant and the term of such option will not
be greater than 10 years.
The Committee may grant an eligible employee SARs that are connected
to an Option or SARs without relation to an Option. Payment upon exercise of a
SAR may be made in shares of Holdings Common Stock valued at fair market value
on the date of exercise or in cash (or a combination of both). Payment upon
exercise of a SAR may be limited by the Committee on the date of the grant.
The Committee may grant an eligible employee shares of restricted
stock pursuant to the Stock Award Plan. Shares of restricted stock may not be
disposed of until the restrictions are removed or expire. The Committee may
grant an eligible employee Performance Units or Performance Shares. Such Units
and Shares may be granted in such a manner that more than one performance
period may be in progress simultaneously. The Committee may, at any time,
modify the performance measures as it considers appropriate and equitable.
Payments will be made in cash or Holdings Common Stock (or a combination of
both) following the close of the applicable performance period.
Pursuant to the Stock Award Plan, an eligible employee may be granted
a phantom stock right, which entitles such employee, upon conversion, to
receive payment of cash or in shares of Holdings Common Stock (or both). Such
payment of shares upon conversion of a phantom stock right may be made in
shares of restricted stock.
Incentive Awards (whether or not vested) shall expire immediately
and/or be forfeited upon termination of such employee's employment with the
Company or any subsidiary employing such employee for any reason other than
death, disability or retirement. If any employee ceases to be in the employ of
the Company or any of its subsidiaries by reason of death, disability or upon
retirement, any unexercised options or SARs or outstanding phantom stock units
will terminate on the date that is 90 days following the date of death,
retirement or disability (unless it expires by its terms on an earlier date).
With respect to Performance Units or Performance Shares, in the event of death,
disability or retirement, the Performance Units or Shares will continue after
the date of the applicable event for such period of time as determined by the
Committee, subject to the terms of any applicable agreement. Performance shares
and phantom stock rights will be exercisable for cash only in such events.
If an eligible employee who has purchased restricted stock under the
Stock Award Plan terminates employment with the Company for any reason, then
all shares of restricted stock that have not previously vested will be
repurchased by the Company at the cost paid by such employee. In addition, upon
an eligible employee's termination of employment with the Company and all of
its subsidiaries for any reason (including by reason of death or disability),
the Company has the right to purchase from such employee all shares of Holdings
Common Stock hereunder on the terms and conditions set forth in the applicable
Incentive Award.
Pursuant to the Stock Award Plan, upon the dissolution or liquidation
of the Company; certain types of reorganizations, mergers or consolidations;
the sale of all or substantially all of the assets of the Company; or a "change
of control," the Committee may determine (without shareholder approval) that
all or some Incentive Awards then outstanding under the Stock Award Plan will
be fully vested and exercisable or convertible, as applicable; determine that
some or all restrictions on restricted stock lapse immediately; or determine
that there will be a substitution of new Incentive Awards by such successor
employer corporation or a parent or subsidiary company thereof. In addition, in
the event of a change of control, the Committee may take certain actions,
without shareholder approval, including without limitation acceleration of the
exercise dates of any outstanding SARS or Options or immediate vesting;
acceleration of the restriction (lapse of forfeiture provision) period of any
restricted stock award; grants of SARs to holders of outstanding Options;
payment of cash to holders of Options in exchange for the cancellation of their
outstanding Options; payment for outstanding Performance Units or Shares;
acceleration of the conversion dates of outstanding phantom stock rights;
grants of new Incentive Awards; or other adjustments or amendments to
outstanding Incentive Awards.
40
<PAGE> 46
Pursuant to the Stock Award Plan, so long as the Holdings Common Stock
has not been publicly traded for at least 90 days, any Holdings Common Stock
obtained pursuant to an Incentive Award will be subject to the Company's right
of first purchase if the holder of such shares intends to transfer them. In
addition, upon an employee's death, the Company has the right to purchase all
or some of the Holdings Common Stock that such employee obtained pursuant to an
Incentive Award at its fair market value within nine months of the employee's
death.
401(K) PLAN
The Company maintains a 401(k) Savings Plan (the "401(k) Plan") under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code").
All salaried employees of the Company are eligible to participate in the 401(k)
Plan following such employee's attainment of age 21 and completion of 90 days
of employment with the Company. All hourly employees of the Company are
eligible to participate in the 401(k) Plan following such employee's attainment
of age 21 and completion of one year of employment with the Company. Employees
may elect to make pre-tax contributions to the 401(k) Plan, subject to
applicable statutory maximum limits. The Company makes matching contributions
(subject to statutory limits) in an amount equal to a discretionary percentage
of a participant's contributions that does not exceed 4% of such participant's
compensation. In addition, the Company may make additional contributions in
such amounts as it may elect. Company contributions vest 20% in the third year,
40% in the fourth year, 60% in the fifth year, 80% in the sixth year and 100%
in the seventh year of service. Contributions also will vest fully if the
employee reaches retirement age, becomes permanently disabled or dies (even if
such employee has not completed seven years of service). If employment is
terminated before such employee's contributions have fully vested, the
nonvested portion of such contributions will be forfeited.
EMPLOYMENT AGREEMENTS
Thomas W. Stephenson, the Company's Chairman of the Board, President
and Chief Executive Officer, James R. Featherstone, the Company's Vice
President and Chief Financial Officer and Robert E. Painter, the Company's
Chief Operating Officer (each an "Employee") have each entered into an
employment agreement with the Company.
Each of Messrs. Stephenson's, Featherstone's and Painter's employment
agreements with the Company will expire (unless renewed) on September 30, 1998.
Each of such employment agreements provides for a one year automatic renewal
(unless terminated for "due cause") and subsequent one year renewals by mutual
consent of the Employee and the Board of Directors. Each of the employment
agreements for Messrs. Stephenson, Featherstone and Painter provides for an
annual salary of not less than $275,000, $110,000 and $175,000, respectively,
each of which may be increased annually in the sole discretion of the Board of
Directors, and discretionary annual bonus awards based upon performance
criteria established from time to time by the Board of Directors. Each of
Messrs. Stephenson, Featherstone and Painter was also granted under the Stock
Award Plan options to purchase a number of shares equal to 6.0%, 1.5% and 3.0%,
respectively, of Holdings Common Stock (on a fully diluted basis) outstanding
as of November 1, 1996.
Pursuant to the terms of such employment agreements, if an Employee's
employment is terminated by the Company at the end of an employment term, such
Employee will be entitled to receive his full annual salary for a period of one
year from the date of termination. If the Employee's employment is terminated
for "due cause", the Employee will be entitled to receive his annual salary on
a pro rata basis to the date of termination. If the Company terminates the
Employee's employment other than for due cause or because of a disability, the
Company will be obligated to pay his full annual salary for a period of one
year from the date of termination. In the event of the Employee's death or
disability, the employment agreement will be terminated and the Employee's
estate or the Employee will be entitled to receive his annual salary through
the end of the month in which he died or became disabled and a cash payment
equal to the pro rata portion (through the end of the month in which he died or
became disabled) of the annual bonus, if any, received by the Employee in
respect of the full calendar year next preceding his death or disability.
Pursuant to such employment agreements, if the Employee's employment
is terminated for due cause or by the Company's failure to renew the Employee's
employment agreement (after the first automatic renewal period), or if the
Employee voluntarily terminates his employment, for a period of one year
thereafter, the Employee will be prohibited from accepting employment or
rendering service to any person, firm or corporation that is engaged in a
business directly
41
<PAGE> 47
competitive with the business then engaged in by the Company in the states of
Texas, Oklahoma, Kansas, Missouri, Ohio, Idaho and any other state in which the
Company owns, leases or operates motion picture theaters at the time of
termination, and from directly or indirectly entering into or in any manner
taking part in or lending his name, counsel or assistance to any venture,
enterprise, business or endeavor, either as proprietor, principal, investor,
partner, director, officer, employee, consultant, advisor, agent, independent
contractor, or in any other capacity whatsoever, for any purpose that would be
competitive with the business of the Company in such states.
Pursuant to Mr. Painter's employment agreement, Mr. Painter is
entitled to reimbursement for certain costs associated with his relocation to
Dallas, Texas.
INDEMNIFICATION AGREEMENT OF THOMAS W. STEPHENSON
Thomas W. Stephenson has entered into an indemnification agreement
with the Company and Holdings in connection with certain personal guarantees
made by Mr. Stephenson for obligations of the Company under certain agreements,
including, but not limited to theater leases and film rental agreements and
other similar agreements that Mr. Stephenson may be required to guarantee in
the future (the "Stephenson Guarantees"). Pursuant to such indemnification
agreement, the Company and Holdings have agreed to indemnify Mr. Stephenson
against any and all payments, liabilities, obligations, claims, losses,
damages, commitments, costs, deficiencies, expenses paid or incurred by Mr.
Stephenson under any Stephenson Guarantee and against any and all expenses
(including attorneys' fees), costs, liabilities and obligations paid or
incurred in connection with or as a result of such payments under the
Stephenson Guarantees.
REGISTRATION RIGHTS AGREEMENTS
Holdings and certain of its stockholders, including Beacon, Stratford,
Richard M. Durwood, as trustee for the Richard M. Durwood Revocable Trust (the
"Durwood Trust") and the Hoak Entities, have entered into separate registration
rights agreements (the "Registration Rights Agreements"). Pursuant to the terms
of the Registration Rights Agreements, at any time after the earlier of either
the closing of an initial public offering of Holdings Common Stock or October
1999, such stockholders holding at least 10% of all of the outstanding Holdings
Common Stock (the "Demanding Stockholders") at such date, or the Durwood Trust
in certain limited circumstances, have the right to require Holdings (the
"Demand Registration Right") at Holdings' sole cost and expense, to register
under the Securities Act all or part of the Holdings Common Stock and Holdings
Preferred Stock and any shares issuable upon conversion of the Holdings
Preferred Stock, held by such Demanding Stockholders (the "Registrable
Securities"). Each Demanding Stockholder, other than the Durwood Trust, will
have three such Demand Registration Rights. The other stockholders holding
Registrable Securities are entitled to participate in such demand
registrations, subject to certain limitations. In connection with such
registrations, Holdings will agree to indemnify all holders of Registrable
Securities against certain liabilities, including liabilities under the
Securities Act and applicable state securities laws.
SHAREHOLDERS' AND VOTING AGREEMENT
Holdings entered into a Shareholders' and Voting Agreement (the
"Shareholders' Agreement") with certain holders of Holdings Common Stock (or
securities convertible into, or exchangeable or exercisable for Holdings Common
Stock) which contains provisions with respect to the voting, transfer and
registration of the Holdings Common Stock (or securities convertible,
exchangeable or exercisable for Holdings Common Stock) held by the parties.
Pursuant to the Shareholders' Agreement, if at any time prior to a
public offering of the shares of Holdings Common Stock, Beacon holds (i) at
least 50% of the outstanding Holdings Common Stock or any shares of Holdings
Series A Preferred Stock, Beacon will have the right to designate three persons
to serve on the Board of Directors of Holdings, (ii) 25% or more of the
outstanding Holdings Common Stock but less than 50%, Beacon will have the right
to designate two directors to serve on the Board of Directors of Holdings and
(iii) 5% or more of the outstanding Holdings Common Stock but less than 25%,
Beacon will have the right to designate one person to serve on the Board of
Directors of Holdings. If at any time prior to a public offering of the shares
of Holdings Common Stock, Stratford holds 5% or more of the outstanding
Holdings Common Stock, Stratford will have the right to designate one person to
serve on the Board of Directors of Holdings. If at any time prior to a public
offering of the shares of Holdings Common
42
<PAGE> 48
Stock, the Hoak Entities hold 5% or more of the outstanding Holdings Common
Stock, the Hoak Entities will have the right to designate one person to serve
on the Board of Directors of Holdings. In addition, the Chief Executive Officer
of Holdings will serve as a member of the Board of Directors of Holdings at any
time prior to a public offering of the Holdings Common Stock.
From and after a public offering of the Holdings Common Stock, so long
as Beacon holds 25% or more of the outstanding Holdings Common Stock, all of
the parties to the Shareholders' Agreement will be required to vote for at
least two persons who are designated by Beacon. If Beacon holds 5% or more (but
less than 25%) of the outstanding Holdings Common Stock, all of the parties to
the Shareholders' Agreement will be required to vote for at least one person
who is designated by Beacon. Each stockholder that is a party to the
Shareholders' Agreement has granted Beacon an irrevocable proxy to vote such
stockholder's shares for the election of those directors that are designated by
Beacon pursuant to the Shareholders' Agreement. Pursuant to the Shareholders'
Agreement, the Board of Directors of Holdings will be composed of no more than
six directors. A director designated by Beacon, Stratford or the Hoak Entities
cannot be removed without the consent of Beacon, Stratford or the Hoak Entities
as applicable. Beacon, Stratford and the Hoak Entities may remove its designee
from the Board of Directors at any time with or without cause.
If, for any reason, a designee of Beacon or Stratford or the Hoak
Entities is not on the Board of Directors, and Beacon, Stratford and the Hoak
Entities each holds 5% or more of the outstanding Holdings Common Stock, each
of Beacon, Stratford and the Hoak Entities will be entitled to have one
observer selected by each of them present at all meetings of the Board of
Directors of Holdings. In addition, if a director of Holdings or an observer is
a designee of Beacon, Stratford or the Hoak Entities and such director or
observer is not able to attend the respective Board of Directors meeting,
Beacon, Stratford and the Hoak Entities have the right to designate a
representative to attend and observe such meeting on behalf of such director or
observer.
The Shareholders' Agreement requires each party to give Holdings and
each other stockholder who is a party to the Shareholders' Agreement certain
notices with respect to any proposed sales or transfers of Holdings Common
Stock (or securities convertible, exchangeable or exercisable for Holdings
Common Stock) and to offer to Holdings and each of the stockholders who is a
party to the Shareholders' Agreement, the right to purchase such stock which
the party otherwise proposes to sell or transfer. In addition, if any
stockholder desires to sell a number of shares of Holdings Common Stock (or
securities convertible, exchangeable or exercisable for Holdings Common Stock)
which in the aggregate represent at least 5% of the outstanding Holdings Common
Stock, then such stockholder must give certain notices with respect to the
proposed sale or sales and each of the stockholders who is a party to the
Shareholders' Agreement will have the right to sell a proportionate amount of
its Holdings Common Stock (or securities convertible, exchangeable or
exercisable for Holdings Common Stock). If Beacon elects to transfer or
exchange all of the shares of Holdings Common Stock (or securities convertible,
exchangeable or exercisable for Holdings Common Stock) that it holds at a price
of at least $200 per share, then, upon 30 days notice, each other stockholder
(that is a party to the Shareholders' Agreement) will be obligated to sell or
transfer to such third party, all of his or her shares of Holdings Common Stock
(or securities convertible, exchangeable or exercisable for Holdings Common
Stock) in the same transaction.
Pursuant to the Shareholders' Agreement, any stockholder that is a
party to the Shareholders' Agreement and that owns more than 5% of the Holdings
Common Stock at the time Holdings proposes to issue additional shares of
Holdings Common Stock or Holdings Preferred Stock (as defined), will have
preemptive rights with respect to such shares. In addition, at any time on or
after October 31, 2001, and provided that an offering of Holdings Common Stock
has not then occurred, the Richard M. Durwood Revocable Trust may require
Holdings to repurchase not less than all of the shares of Holdings Common Stock
held by each at the fair market value at the time of repurchase.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company is
responsible for determining executive officer compensation. The members of the
Compensation Committee are John G. Farmer, Thomas G. Mendell and Thomas W.
Stephenson. Mr. Stephenson serves as both a member of the Compensation
Committee and the President and Chief Executive Officer of the Company.
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<PAGE> 49
PRINCIPAL STOCKHOLDERS
The Company is a wholly-owned subsidiary of Holdings. The following
table and the accompanying footnotes set forth, as of September 15, 1997, the
beneficial ownership of Holdings's capital stock by (i) each person who is
known to the Company to own beneficially more than 5% of outstanding (x)
Holdings Common Stock, (y) Holdings Series B Preferred Stock, or (z) Holdings
Series C Preferred Stock, (ii) each director and named executive officer of the
Company and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the persons or entities set forth in the
table below have sole investment and voting power with respect to all shares
shown as beneficially owned, subject to community property laws, where
applicable. The business address of each executive officer is c/o Hollywood
Theaters, Inc., 2911 Turtle Creek Blvd., Suite 1150, Dallas, Texas, 75219.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
--------------------------------- ---------------------------------------
COMMON STOCK PREFERRED STOCK COMMON STOCK(1) PREFERRED STOCK
------------ ------------------- --------------- -----------------------
NAME AND ADDRESS SERIES B SERIES C SERIES B SERIES C
- ----------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Stephenson, Jr.(2) . . . . 2,305 111 -- 2.0% * --
John G. Farmer(3) . . . . . . . . . . -- -- -- -- -- --
c/o Stratford Capital Partners, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Thomas L. Harrison(4) . . . . . . . . -- -- -- -- -- --
c/o Hoak Capital Corporation
One Galleria Tower
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Thomas G. Mendell(5)(6) . . . . . . . 868 59 -- * * --
c/o The Beacon Group III-
Focus Value Fund, L.P.
399 Park Avenue, 17th Floor
New York, New York 10152
Eric R. Wilkinson(7) . . . . . . . . -- -- -- -- -- --
c/o The Beacon Group III-
Focus Value Fund, L.P.
399 Park Avenue, 17th Floor
New York, New York 10152
Harold W. Pote(8) . . . . . . . . . . -- -- -- -- -- --
c/o The Beacon Group III-
Focus Value Fund, L.P.
399 Park Avenue, 17th Floor
New York, New York 10152
James R. Featherstone(9) . . . . . . -- -- -- -- -- --
Robert E. Painter(10) . . . . . . . . -- -- -- -- -- --
The Beacon Group III-
Focus Value Fund, L.P.(11)(12) . . . 239,774 131,349 35,897 84.6% 80.4% 45.5%
399 Park Avenue, 17th Floor
New York, New York 10152
</TABLE>
44
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Hoak Communications Partners,
L.P.(13)(14) . . . . . . . . . . . 51,282 -- 35,897 33.7% -- 45.5%
c/o Hoak Capital Corporation
One Galleria Tower
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Stratford Capital Partners, L.P.(15) 36,357 26,101 7,179 24.3% 16.0% 9.0%
200 Crescent Court, Suite 1650
Dallas, Texas 75201
All of the directors and executive
officers as a group . . . . . . . . 3,173 170 -- 2.7% * --
</TABLE>
- ----------
* Less than one percent (1%).
(1) The following reflects the total voting power represented by the
capital stock held by each of the indicated persons: Mr. Stephenson --
0.6%; Mr. Farmer -- 0%; Mr. Mendell -- 0.2%; Mr. Wilkinson -- 0%; Mr.
Pote -- 0%; Mr. Featherstone -- 0%; Mr. Painter -- 0%; Beacon --
66.9%; Hoak -- 14.3%; Stratford -- 10.1%; and all directors and
officers as a group -- 0.9%.
(2) Includes 111 shares of Holdings Common Stock that Mr. Stephenson has a
right to acquire at any time by converting the shares of Holdings
Series B Preferred Stock owned by Mr. Stephenson. Does not include the
14,603 shares of Holdings Common Stock that Mr. Stephenson has the
right to acquire pursuant to outstanding employee stock options which
are not presently exercisable.
(3) Does not include 3,077 shares of Holdings Common Stock, 26,101 shares
of Holdings Series B Preferred Stock, 7,179 shares of Holdings Series
C Stock, all of which are owned of record by Stratford, an affiliate
of Mr. Farmer, and the number of shares of Holdings Common Stock
issuable upon conversion of such shares of Holdings Preferred Stock
owned of record by Stratford, as to which Mr. Farmer disclaims
beneficial ownership.
(4) Does not include 51,282 shares of Holdings Common Stock or 35,897
shares of Holdings Series C Preferred Stock beneficially owned by Hoak
Communications Partners, L.P. ("Hoak Communications"), an affiliate of
Mr. Harrison, as to which Mr. Harrison disclaims beneficial ownership.
(5) Does not include 239,774 shares of Holdings Common Stock, 131,349
shares of Holdings Series B Preferred Stock and 35,897 shares of
Holdings Series C Preferred Stock, all of which are owned beneficially
by Beacon, an affiliate of Mr. Mendell, as to which Mr. Mendell
disclaims beneficial ownership.
(6) Includes 59 shares of Holdings Common Stock that Mr. Mendell has a
right to acquire at any time by converting the shares of Holdings
Series B Preferred Stock owned by Mr. Mendell.
(7) Does not include 239,774 shares of Holdings Common Stock, 131,349
shares of Holdings Series B Preferred Stock and 35,897 shares of
Holdings Series C Preferred Stock, all of which are owned beneficially
by Beacon, an affiliate of Mr. Wilkinson, as to which Mr. Wilkinson
disclaims beneficial ownership.
(8) Does not include 239,774 shares of Holdings Common Stock, 131,349
shares of Holdings Series B Preferred Stock and 35,897 shares of
Holdings Series C Preferred Stock, all of which are owned beneficially
by Beacon, an affiliate of Mr. Pote, as to which Mr. Pote disclaims
beneficial ownership.
45
<PAGE> 51
(9) Does not include the 3,651 shares of Holdings Common Stock that Mr.
Featherstone has the right to acquire pursuant to outstanding employee
stock options which are not presently exercisable.
(10) Does not include the 7,302 shares of Holdings Common Stock that Mr.
Painter has the right to acquire pursuant to outstanding employee
stock options which are not presently exercisable.
(11) Does not include 809 shares of Holdings Common Stock owned of record
by Mr. Mendell, an affiliate of Beacon, as to which Beacon disclaims
beneficial ownership. Includes 167,246 shares of Holdings Common Stock
that Beacon has a right to acquire at any time by converting the
shares of Holdings Series B Preferred Stock and shares of Holdings
Series C Preferred beneficially owned by Beacon.
(12) Does not include 59 shares of Holdings Series B Preferred Stock owned
of record by Mr. Mendell, an affiliate of Beacon, as to which Beacon
disclaims beneficial ownership.
(13) Includes 1,212 and 77 shares of Holdings Common Stock owned of record
by each of the Hoak Capital Fund, L.P. and the HCP 1997 Authorized
Employee Fund, L.P., respectively. Includes 32,891, 2,827 and 179
shares of Holdings Series C Preferred Stock owned of record by each of
Hoak Communications, the Hoak Capital Fund and the Hoak Employee Fund,
respectively, all of which are immediately convertible into shares of
Holdings Common Stock.
(14) Includes 2,827 shares of Holdings Series C Preferred Stock owned of
record by Hoak Capital Fund and 179 shares of Holdings Series C
Preferred Stock owned of record by Hoak Employee Fund, all of which
are immediately convertible into shares of Holdings Common Stock.
(15) Includes 33,280 shares of Holdings Common Stock that Stratford has a
right to acquire at any time by converting the shares of Holdings
Series B Preferred Stock and shares of Holdings Series C Preferred
Stock owned by Stratford.
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<PAGE> 52
DESCRIPTION OF CAPITAL STOCK
COMPANY CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000 shares
of common stock, par value $.01 per share (the "Company Common Stock").
Currently there are 9,250 shares of Company Common Stock outstanding, all of
which are owned of record and beneficially by Holdings.
HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of 1,000,000 shares
of Holdings Common Stock, 400,000 shares of Holdings Series B Preferred Stock
and 400,000 shares of Holdings Series C Preferred Stock. Of the authorized
shares, (i) 116,336 shares of Holdings Common Stock are issued and outstanding,
(ii) 163,319 shares of Holdings Series B Preferred Stock are issued and
outstanding and (iii) 78,973 shares of Holdings Series C Preferred Stock are
issued and outstanding. Each outstanding share of Holdings Common Stock is
entitled to one vote. Each outstanding share of Holdings Series B and Holdings
Series C Preferred Stock is also entitled to one vote based on a conversion
ratio, which is subject to adjustment from time to time.
HOLDINGS EQUITY ISSUANCES
Since its inception in July 1995, the Company has received capital
contributions from its parent, Holdings, totaling approximately $62.3 million.
To fund these capital contributions, Holdings has issued both its common stock
and several series of preferred stock in a number of transactions. The
following table sets forth the principal equity issuances by Holdings:
<TABLE>
<CAPTION>
DATE OF PROCEEDS PURCHASING
EQUITY ISSUANCES ISSUANCE TO HOLDINGS PRINCIPAL STOCKHOLDER(S)
---------------- -------- ----------- ------------------------
<S> <C> <C> <C>
50,000 shares of Holdings Series April 1996 $ 5,000,000 Stratford and Precept
A Preferred Stock* Investors, Inc. ("Precept")
128,240 shares of Holdings Series October 1996 $25,000,000 Beacon
B Preferred Stock and 57,143
shares of Holdings Common Stock
43,076 shares of Holdings Series April 1997 $12,000,000 Beacon and Stratford
C Preferred Stock and 18,462
shares of Holdings Common Stock
35,897 shares of Holdings Series May 1997 $10,000,000 Hoak Entities
C Preferred Stock and 15,385
shares of Holdings Common Stock
</TABLE>
- -------------
* Exchanged for Holdings Common Stock and Holdings Series B Preferred Stock in
October 1996.
REDEMPTION OF HOLDINGS SERIES B PREFERRED STOCK AND HOLDINGS SERIES C
PREFERRED STOCK
Holders of shares of Holdings Series B Preferred Stock and Holdings
Series C Preferred Stock (the "Holdings Preferred Stock") may, at their option,
require Holdings to redeem any or all of such shares under certain conditions.
The Holdings Series B Preferred Stock may be redeemed on or after October 31,
2003, if and only if an Initial Public Offering (as defined below) has not
occurred, for a redemption price of $175 per share, plus accrued and unpaid
dividends to the date of redemption. The Holdings Series C Preferred Stock may
be redeemed on or after November 1, 2003, if and only if an Initial Public
Offering has not occurred, for a redemption price of $195, plus accrued and
unpaid dividends to the date of redemption. Upon any Initial Public Offering,
both the Holdings Series B Preferred Stock and the Holdings Series C Preferred
Stock shall be automatically converted into a fixed number of shares of
Holdings Common Stock. As used herein, "Initial Public Offering" means an
underwritten offering by Holdings of Holdings
47
<PAGE> 53
Common Stock to the public pursuant to an effective registration statement
under the Securities Act resulting in at least $25.0 million of net proceeds to
Holdings (after deducting all underwriting discounts and commissions and all
other offering expenses) and a per share offering price of at least $300
(subject to adjustment for stock splits, combinations or reclassifications).
CERTAIN TRANSACTIONS
Holdings has entered into an agreement with The Beacon Group Capital
Services, L.L.C. ("Beacon Group Capital Services") pursuant to which Beacon
Group Capital Services has the right to perform certain investment banking
services for Holdings or any of its affiliates (including, without limitation,
in connection with the sale of Holdings of any of its subsidiaries), in each
case, upon customary terms. The retention of Beacon Group Capital Services is
subject to the approval of a majority of the members of the Board of Directors
of Holdings (excluding any directors who are designees of Beacon).
DESCRIPTION OF NEW SENIOR BANK FACILITY
Concurrently with the consummation of the Old Notes Offering, the
Company and Holdings, as guarantor, entered into the New Senior Bank Facility
with a syndicate of banks for whom Bank of America NT&SA is acting as agent.
The following description is a summary of the material terms and conditions of
the New Senior Bank Facility. This summary does not purport to be complete and
is subject to the detailed provisions of the loan agreement and various related
documents entered into in connection with the New Senior Bank Facility.
The New Senior Bank Facility provides for a revolving credit facility
of $50.0 million with a five year term. The Company has the right at any time
prior to June 30, 1999 to solicit from one or more of the banks funding the New
Senior Bank Facility additional commitments to increase the amount of the New
Senior Bank Facility to an amount not to exceed $75.0 million. The banks are
under no obligation to provide any such additional commitment. Borrowings under
the New Senior Bank Facility are subject to various conditions precedent.
Borrowings under the New Senior Bank Facility bear interest, at the option of
the Company, at either (i) the Eurodollar Rate (as defined therein) or (ii) the
Base Rate (as defined therein), as the case may be, plus the Applicable Margin
(as defined therein). The Company is required to pay certain fees in connection
with the New Senior Bank Facility, including a commitment fee of up to 0.50%
per annum on the undrawn portion of the revolving credit facility commitment.
The New Senior Bank Facility includes several financial covenants. The
Company's total leverage ratio (total debt less cash balances to operating cash
flow) shall not exceed (i) 5.50x from the closing of the Old Notes Offering to
December 30, 1998, (ii) 5.25x from December 31, 1998 to June 29, 1999, (iii)
5.00x from June 30, 1999 to December 30, 1999, (iv) 4.75x from December 31,
1999 to December 30, 2000, (v) 4.50x from December 31, 2000 to December 30,
2001 and (vi) 4.25x from December 31, 2001 and thereafter. In addition, the
Company's "senior leverage ratio" (senior debt to operating cash flow) shall
not exceed (i) 2.50x from the closing of the Old Notes Offering to December 30,
1998, (ii) 2.25x from December 31, 1998 to June 29, 1999 and (iii) 2.00x from
June 30, 1999 and thereafter. The Company's "interest coverage ratio" (operating
cash flow to cash interest expense) shall not be less than (i) 1.50x from the
closing of the Old Notes Offering to December 30, 1997, (ii) 1.75x from January
1, 1998 to December 30, 1998, (iii) 2.00x from December 31, 1998 to June 29,
1999, (iv) 2.25x from June 30, 1999 to December 30, 1999, (v) 2.50x from
December 31, 1999 to December 30, 2000 and (vi) 2.75x from December 31, 2000 and
thereafter. The New Senior Bank Facility limits the "fixed charge coverage
ratio" (operating cash flow to fixed charges) to not less than 1.10x. The New
Senior Bank Facility also provides that screens under construction or under
operation for less than six months must represent no more than 30% of total
screens through June 30, 1998 and no more than 20% thereafter. Mergers and
acquisitions are permitted provided that (i) the merged or acquired properties
are in the theatrical business, (ii) the Company is the surviving entity in the
case of a merger, (iii) no event of default exists and (iv) acquisitions cannot
exceed $40.0 million for any consecutive 12 months.
The New Senior Bank Facility contains customary representations and
warranties and requires compliance by the Company and Holdings with certain
other covenants, including, among other things, covenants limiting (i)
incurrence of indebtedness, (ii) imposition of liens on assets of the Company,
(iii) capital expenditures, (iv) consolidations and mergers, (v) loans and
investments, including acquisitions of assets, (vi) payment of dividends and
other distributions,
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(vii) construction of new screens, (viii) land acquisition contracts, (ix)
transactions with affiliates and (x) use of proceeds to invest in margin stock
or other Ineligible Securities (as defined therein).
Events of default under the New Senior Bank Facility include, among
other things, (i) non-payment of the principal amount of any loan, or amounts
due under any Specified Swap Contract (as defined therein) or any interest, fee
or any other amount payable under a Loan Document (as defined therein), (ii)
material inaccuracy of any representation or warranty given by the Company,
Holdings or any subsidiary in the New Senior Bank Facility or any Loan
Document, (iii) breach by the Company, Holdings or any subsidiary of certain
terms, covenants or agreements in the New Senior Bank Facility or any Loan
Document, (iv) acceleration of certain indebtedness prior to its stated
maturity or the occurrence of an event of default or early termination of
certain contracts, (v) insolvency of the Company, Holdings or any subsidiary,
(v) certain liabilities that exist or that arise with respect to a pension plan
or a multi-employer plan, (vi) certain monetary judgements involving in the
aggregate a liability of $2.0 million or more entered against the Company,
Holdings or any subsidiary, (vii) a "change of control," with respect to
Holdings' ownership in the Company and Beacon's and Mr. Stephenson's ownership
in Holdings, (viii) Mr. Stephenson ceasing to be the chief executive officer of
the Company, and (ix) provisions of any Collateral Document (as defined
therein) ceasing to be valid and binding or cease to create a valid security
interest in the collateral covered thereby.
Bank of America NT&SA, the agent under the New Senior Bank Facility,
is an affiliate of BancAmerica Securities, Inc., who was a Purchaser in the Old
Notes Offering.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on August 7, 1997 to
the Purchasers pursuant to the Purchase Agreement. The Purchasers subsequently
resold the Old Notes in the United States to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and outside the United States to
non-U.S. persons in reliance on Regulation S under the Securities Act. As a
condition to the completion of the Old Notes Offering, the Company entered into
the Registration Rights Agreement with the Purchasers pursuant to which the
Company agreed to use its reasonable best efforts to cause to be filed with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Old Notes for
Exchange Notes. The Exchange Notes will be substantially identical to the Old
Notes, except that the Exchange Notes will have been registered under the
Securities Act and, therefore will not contain terms with respect to transfer
restrictions (other than those that might be imposed by state securities laws),
will not contain terms with respect to the special interest payments described
herein and will not be entitled to registration rights or other rights under
the Registration Rights Agreement. In the event that (i) on or before the
Expiration Date, existing Commission interpretations are changed such that the
Exchange Notes are not or would not be, upon receipt, freely transferable
(except for the requirement that Participating Broker- Dealers deliver a
prospectus), (ii) the Exchange Offer is not consummated within 210 days of the
closing of the Old Notes Offering, or (iii) the Exchange Offer is not available
to any holders of the Old Notes (other than certain restricted holders), the
Company will use its reasonable best efforts to cause to be filed with the
Commission, no later than 60 days after the completion of the Old Notes
Offering, the Shelf Registration Statement. The Company will use its best
efforts to cause the Shelf Registration Statement to be declared effective
within 180 days after the closing of the Old Notes Offering and shall maintain
the effectiveness of the Shelf Registration Statement, under certain
circumstances, for a maximum of two years following the effectiveness of the
Shelf Registration Statement.
Under existing interpretations of the staff of the Commission, the
Exchange Notes would, in general, be freely transferable after the Exchange
Offer without further registration under the Securities Act. However, any
purchaser of Old Notes who is an "affiliate" of the Company or intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes (i) will not be able to rely on the interpretations of the staff of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Old Notes, unless such sale or transfer is made pursuant to an exemption
from such requirements.
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<PAGE> 55
Each holder who wishes to exchange such Old Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including representations that (i) it is not an affiliate of the Company, (ii)
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the
Exchange Notes and (iii) it is acquiring the Exchange Notes in its ordinary
course of business. In addition, broker-dealers receiving Exchange Notes in
the Exchange Offer will have a prospectus delivery requirement with respect to
resales of Exchange Notes. The Commission has taken the position that such
broker-dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of Old Notes) with this Prospectus. Under the Registration
Rights Agreement, the Company is required to allow such broker-dealers to use
this Prospectus in connection with the resale of such Exchange Notes for a
period of 180 days after the Expiration Date.
The Registration Rights Agreement provides that (i) the Company will
use its reasonable best efforts to file with the Commission an Exchange Offer
Registration Statement within 60 days after the completion of the Old Notes
Offering, (ii) the Company will use its reasonable best efforts to cause such
Exchange Offer Registration Statement to be declared effective under the
Securities Act by the Commission no later than 180 days after the completion of
the Old Notes Offering, (iii) the Company shall use its reasonable best efforts
to commence and complete the Exchange Offer promptly after the Exchange Offer
Registration Statement has become effective and to hold open the Exchange Offer
for at least 30 days, and (iv) the Company, if it is obligated to cause the
Shelf Registration Statement to be filed with the Commission, will use its
reasonable best efforts to file the Shelf Registration Statement with the
Commission no later than 60 days after the completion of the Old Notes
Offering, and use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective by the Commission within 180 days of the
closing of the Old Notes Offering. The Company also agreed to use its
reasonable best efforts to keep such Shelf Registration Statement continuously
effective for two years after the effective date of the Shelf Registration
Statement or such shorter period that will terminate when all the securities
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement.
In the event that (i) the Company has not filed the Exchange Offer
Registration Statement (or, if applicable, the Shelf Registration Statement)
within 60 days following the closing of the Old Notes Offering, (ii) such
Exchange Offer Registration Statement or Shelf Registration Statement has not
been declared effective by the Commission within 180 days following the Old
Notes Offering, (iii) the Exchange Offer, has not been consummated within 30
business days after the effective date of the Exchange Offer Registration
Statement, or (iv) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but shall thereafter either be
withdrawn or shall become subject to an effective stop order (except in certain
cases) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv) above, a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then the per annum interest rate on the Old Notes will increase, for
the period from the occurrence of the Registration Default until such time as
no Registration Default is in effect (at which time the interest rate will be
reduced to its initial rate) by 0.5% during the first 90-day period following
the occurrence of such Registration Default, and by an additional 0.5%
thereafter (up to a maximum of 1.0%).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Old Notes will not have any further registration rights and such
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
time, on
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<PAGE> 56
the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes except that (i) the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (ii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Old Notes
in certain circumstances, all of which rights generally will terminate when the
Exchange Offer is terminated. See -- "Purpose and Effect of Exchange Offer."
The Exchange Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered. As of the date of this Prospectus, $110,000,000
aggregate principal amount of Old Notes were outstanding.
Holders of Old Notes do not have any appraisal or dissenters rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Old Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time, on
_________,1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
time, on the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, to (i) delay
accepting any Old Notes, (ii) to extend the Exchange Offer, (iii) to terminate
the Exchange Offer if any of the conditions set forth below under " --
Conditions" shall not have been satisfied, or (iv) to amend the terms of the
Exchange Offer in any manner by giving oral or written notice of such delay,
extension, termination or amendment to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
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<PAGE> 57
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the most recent date to
which interest has been paid or duly provided for on the Old Note surrendered
in exchange for such Exchange Note or, if no interest has been paid or duly
provided for on such Old Note, from August 7, 1997. Interest on the Exchange
Notes is payable semi-annually on each February 1 and August 1 of each year,
commencing on February 1, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will
not receive accrued interest on such Old Notes for any period from and after
the last date to which interest has been paid or duly provided for on the Old
Notes prior to the original issue date of the Exchange Notes or, if no such
interest has been paid or duly provided for will not receive any accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after the last date to
which interest has been paid or duly provided for on the Old Notes or, if no
such interest has been paid or duly provided for, from and after August 7,
1997.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties (for example, the letters of the commission to (i) Exxon Capital
Holdings Corporation, available May 13, 1988, (ii) Morgan Stanley & Co., Inc.
available June 5, 1991 and (iii) Shearson & Sterling, available July 2, 1993),
the Company believes that a holder or other person (other than a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available.
Each Participating Broker-Dealer that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Based on the position taken by the staff of the Division
of Corporation Finance of the Commission in the interpretive letters referred
to above, the Company believes that Participating Broker-Dealers who acquired
Old Notes for their own accounts as a result of market-making activities or
other trading activities may fulfill their prospectus delivery requirements
with respect to the Exchange Notes received upon exchange of such Old Notes
(other than Old Notes which represent an unsold allotment from the original
sale of the Old Notes) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Notes. Subject to certain provisions set forth in
the Registration Rights Agreement, the Company has agreed that this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such Exchange Notes
for a period ending 180 days after the Expiration Date. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Notes received in exchange for Old Notes pursuant
to the Exchange Offer must notify the Company, or cause the Company to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one
of the addresses set forth in the Letter of Transmittal. See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
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PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantee, or (in the case
of a book-entry transfer), an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must be received by the Exchange
Agent at the address set forth in the Letter of Transmittal prior to 5:00 p.m.,
New York time, on the Expiration Date. In addition, prior to 5:00 p.m., New
York time, on the Expiration Date, either (a) certificates for tendered Old
Notes must be received by the Exchange Agent at such address or (b) such Old
Notes must be transferred pursuant to the procedures for book-entry transfer
described below (and a confirmation of such tender received by the Exchange
Agent, including an Agent's Message if the tendering holder has not delivered a
Letter of Transmittal).
The term "Agent's Message" means a message transmitted by the
Depository, received by the Exchange Agent and forming part of the confirmation
of a book-entry transfer, which states that the Depository has received an
express acknowledgment from the participant in the Depository tendering Old
Notes which are the subject of such book-entry confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Company may enforce such agreement against such
participant. In the case of an Agent's Message relating to guaranteed
delivery, the term means a message transmitted by the Depository and received
by the Exchange Agent, which states that the Depository has received an express
acknowledgment from the participant in the Depository tendering Old Notes that
such participant has received and agrees to be bound by the Notice of
Guaranteed Delivery.
By tendering Old Notes pursuant to the procedures set forth above,
each holder will make to the Company the representations set forth above in the
third paragraph under the heading " -- Purpose and Effect of the Exchange
Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instruction to Registered Holder and/or Book-Entry Transfer Facility
Participant from Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect
to the Old Notes at the book-entry transfer facility, The Depository Trust
Company ("DTC" or the "Book-Entry Transfer Facility"), for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee, or, in the case of a book-entry transfer, an Agent's Message in lieu
of the Letter of Transmittal and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its
address set forth in the Letter of Transmittal on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Old Notes to the Exchange Agent in accordance with
DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends, to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent or (iii)
who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of such Old Notes and the principal
amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or
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<PAGE> 60
facsimile thereof) together with the certificate(s) representing the
Old Notes (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of
Transmittal (of facsimile thereof), as well as the certificates
representing all tendered Old Notes in proper form for transfer (or a
confirmation of book- entry transfer of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and all
other documents required by the Letter of Transmittal are received by
the Exchange Agent upon five New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration
Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth in the Letter of Transmittal
prior to 5:00 p.m., New York time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number(s) and principal amount of such Old
Notes, or, in the case of Old Notes transferred by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Old Notes may be retendered by
following one of the procedures described above under " -- Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company
shall not be required to accept any Old Notes for exchange, and may terminate
the Exchange Offer as provided herein before the acceptance of such Old Notes,
if:
(a) any statute, rule or regulation shall have been
enacted, or any action shall have been taken by any court or
governmental authority which, in the sole judgment of the Company,
would prohibit, restrict or otherwise render illegal consummation of
the Exchange Offer, or
(b) there shall occur a change in the current
interpretation by the staff of the Commission which permits the
Exchange Notes issued pursuant to the Exchange Offer in exchange for
Old Notes to be offered for resale, resold and otherwise transferred
by holders thereof (other than broker-dealers and any such holder
which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that
such Exchange Notes
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are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
The Company expressly reserves the right to terminate the Exchange
Offer and not accept for exchange any Old Notes upon the occurrence of either
of the foregoing conditions (which represent all of the material conditions to
the acceptance by the Company of properly tendered Old Notes). In addition,
the Company may amend the Exchange Offer at any time prior to the Expiration
Date.
The foregoing conditions are for the sole benefit of the Company and
may be waived by the Company, in whole or in part, in its sole discretion,
although the Company has no current intention of doing so. Any determination
made by the Company concerning an event, development or circumstance described
or referred to above will be final and binding on all parties.
EXCHANGE AGENT
United States Trust Company of Texas, N.A. has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor- Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0841
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
By Facsimile:
(212) 420-6504
The Exchange Agent also serves as Trustee under the Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Old Notes, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
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purposes will be recognized by the Company. The expenses of the Exchange Offer
will be expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary and holders of Old
Notes should carefully consider whether to accept. Holders of Old Notes are
urged to consult their financial and tax advisors in making their own decisions
on what action to take.
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, (iii) pursuant to another
exemption from the registration requirements of the Securities Act, (iv)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (v) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
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DESCRIPTION OF EXCHANGE NOTES
The Old Notes were issued and the Exchange Notes are to be issued under
an Indenture (the "Indenture") between the Company, U.S. Trust Company of
Texas, N.A., as trustee (the "Trustee"), and Holdings and Crown as guarantors.
The statements under this caption relating to the Notes and the Indenture are
summaries and do not purport to be complete, and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein. The Indenture is
by its terms subject to and governed by the Trust Indenture Act of 1939, as
amended. Unless otherwise indicated, references under this caption to sections,
"Section " or articles are references to the Indenture. Where reference is made
to particular provisions of the Indenture or to defined terms not otherwise
defined herein, such provisions or defined terms are incorporated herein by
reference. Copies of the Indenture will be available at the corporate trust
office of the Trustee. The Old Notes and the Exchange Notes are collectively
referred to herein as the "Notes."
GENERAL
The Old Notes are, and the Exchange Notes will be, unsecured obligations
of the Company, limited to $110.0 million aggregate principal amount and will
mature on August 1, 2007.
The Old Notes are, and the Exchange Notes will be unconditionally
guaranteed by the existing Restricted Subsidiaries of the Company, and the
Company will covenant to cause any future Restricted Subsidiaries to
unconditionally guarantee the Exchange Notes, in each case, jointly and
severally on a subordinated basis (such guarantees, the "Guarantees" and such
guarantors, the "Guarantors"), provided that each such Restricted Subsidiary
will cease to be a Guarantor when it ceases to be a Restricted Subsidiary. The
ranking and effectiveness of the Guarantees are subject to certain legal
considerations and are therefore uncertain.
Exchange Notes will bear interest at the rate of 10 5/8% per annum and
will be payable semi-annually on February 1 and August 1 of each year,
commencing February 1, 1998, to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the preceding
January 15 or July 15, as the case may be. Settlement for the Exchange Notes
will be made in immediately available funds and payments by the Company in
respect of the Exchange Notes (including principal, premium, if any, and
interest) will be made in immediately available funds. Interest on the Exchange
Notes will be computed on the basis of a 360-day year comprised of twelve
30-day months. (Sections 301, 306 and 309)
Principal of and premium, if any, and interest on the Exchange Notes
will be payable, and the Notes may be presented for registration of transfer
and exchange, at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, provided that at the
option of the Company, payment of interest on the Notes may be made by check
mailed to the address of the Person entitled thereto as it appears in the Note
Register. Until otherwise designated by the Company, such office or agency
will be the corporate trust office of the Trustee, as Paying Agent and
Registrar. (Sections 301, 304 and 1002)
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Exchange Notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and integral multiples thereof.
Notes will not be issued in bearer form. Notes sold in the Exchange Offer will
be issued only against payment in immediately available funds.
GLOBAL NOTE. The Exchange Notes initially will be represented by one or
more Exchange Notes in registered, global form without interest coupons
(collectively, the "Global Note") and will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York. The Global Note will be held by DTC on behalf of its account holders
(each a "DTC Participant").
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial
interest in a Global Note may not be exchanged for an Exchange Note in
certificated form unless (i) DTC (x) notifies the Company that it is unwilling
or
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unable to continue as Depositary for the Global Note or (y) has ceased to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in either case the Company thereupon fails to
appoint a successor Depositary, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of the Notes in
certificated form or (iii) there shall have occurred and be continuing an Event
of Default with respect to the Notes. In all cases, certificated Notes
delivered in exchange for any Global Note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the Depositary (in accordance with its customary
procedures). Any such exchange will be effected through the DWAC System and an
appropriate adjustment will be made in the records of the Security Registrar to
reflect a decrease in the principal amount of the relevant Global Note.
CERTAIN BOOK-ENTRY PROCEDURES. The descriptions of the operations and
procedures of DTC, Euroclear and CEDEL that follow are provided solely as a
matter of convenience. These operations and procedures are solely within the
control of the respective settlement systems and are subject to changes by them
from time to time. The Company takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Company that its current practice, upon the issuance
of the Global Note, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Note to the accounts with DTC of the participants through which such
interests are to be held. Ownership of beneficial interests in the Global Note
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominees (with respect to interests
of participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL
NOTE, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE
OWNER AND HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES
UNDER THE INDENTURE AND THE NOTES. Except in the limited circumstances
described above under "-- Exchanges of Book-Entry Notes for Certificated
Notes," owners of beneficial interests in a Global Note will not be entitled to
have any portions of such Global Note registered in their names, will not
receive or be entitled to receive physical delivery of Notes in definitive form
and will not be considered the owners or Holders of the Global Note (or any
Note represented thereby) under the Indenture or the Notes.
Investors may hold their interests in the Global Note directly through
DTC, if they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are participants in such
system. All interest in a Global Note, including those held through Euroclear
or CEDEL, will be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or CEDEL will also be subject to the
procedures and requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may
be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
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Payments of the principal of, premium, if any, and interest on Global
Note will be made to DTC or its nominee as the registered owner thereof.
Neither the Company, the Trustee nor any of their respective agents will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note representing any Notes
held by it or its nominee, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note for such Notes as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in "street name." Such payment will be the responsibility of such
participants.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Note will trade in DTC's Settlement System and
secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures
of DTC and its participants. Transfers between participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in same-day
funds. Transfers between participants in Euroclear and CEDEL will be effected
in the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer and exchange provisions
applicable to the Notes described elsewhere herein, cross-market transfers
between DTC participants, on the one hand, and Euroclear or CEDEL participants,
on the other hand, will be effected by DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions
to Euroclear or CEDEL, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or CEDEL, as the case may
be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depository to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and CEDEL participants may not deliver instructions directly to
the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear
or CEDEL participant purchasing an interest in a Global Note from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Note by or through a
Euroclear or CEDEL participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Euroclear or
CEDEL cash account only as of the business day for Euroclear or CEDEL following
the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below and the conversion of Notes) only at the direction of one or
more participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default (as defined below)
under the Notes, the Global Note will be exchanged for Notes in certificated
form, and distributed to DTC's participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures in order to facilitate transfers of beneficial ownership interests
in the Global Note among participants of DTC, Euroclear and CEDEL, they are
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC, Euroclear and CEDEL, their participants or indirect
participants of their respective obligations under the rules
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and procedures governing their operations, including maintaining, supervising
or reviewing the records relating to, or payments made on account of,
beneficial ownership interests in Global Note.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of the Company,
in whole or in part, at any time on or after August 1, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the Note
Register, in amounts of $1,000 or an integral multiple of $1,000, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to but excluding the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period beginning August 1 of the years
indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
- ---- -------------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.312%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.542%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.771%
2005 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(Sections 203, 1101, 1105 and 1107)
In addition, if on or before August 1, 2000 the Company receives net
proceeds from the sale of its Common Stock or the Common Stock of Holdings in
one or more Public Equity Offerings, the Company may, at its option, use an
amount equal to all or a portion of any such net proceeds to redeem Notes in an
aggregate principal amount of up to 30% of the original aggregate principal
amount of the Notes, provided, however, that Notes having a principal amount
equal to at least 70% of the original aggregate principal amount of the Notes
remain outstanding after such redemption. Such redemption must occur on a
Redemption Date within 90 days of such sale and upon not less than 30 nor more
than 60 days' notice mailed to each Holder of Notes to be redeemed at such
Holder's address appearing in the Note Register, in amounts of $1,000 or an
integral multiple of $1,000, at a redemption price equal to 110.625% of the
principal amount of the Notes plus accrued interest to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the particular
Notes to be redeemed or any portion thereof that is an integral multiple of
$1,000. (Section 1104)
The Notes will not have the benefit of any sinking fund.
SUBORDINATION
The indebtedness evidenced by the Notes will, to the extent set forth
in the Indenture, be subordinate in right of payment to the prior payment in
full of all Senior Debt. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company,
whether voluntary or involuntary, or any bankruptcy, insolvency, receivership
or similar proceedings of the Company, the holders of all Senior Debt will
first be entitled to receive payment in full of such Senior Debt, or provision
made for such payment, before the Holders of the Notes will be entitled to
receive any payment in respect of the principal of or premium, if any, or
interest on, or any obligation to repurchase, the Notes. In the event that
notwithstanding the foregoing, the Trustee or the Holder of any Note receives
any payment or distribution of assets of the Company of any kind or character
(including any such payment or distribution which may be payable or deliverable
by the reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Notes), before all the Senior Debt is so
paid in full, then such payment or distribution will be required to be paid
over or delivered forthwith to the trustee in bankruptcy or other person making
payment or distribution of assets of the Company for application to the payment
of all Senior Debt remaining unpaid, to the extent necessary to pay the Senior
Debt in full.
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No payments on account of principal of, premium, if any, or interest
on, or in respect of the purchase or other acquisition of, the Notes, and no
defeasance of the Notes, may be made if there shall have occurred and be
continuing a Senior Payment Default. "Senior Payment Default" means any default
in the payment of any principal of or premium, if any, or interest on
Designated Senior Debt when due, whether at the stated maturity of any such
payment or by declaration of acceleration, call for redemption or otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt of
written notice by the Company and the Trustee of the occurrence of such Senior
Nonmonetary Default from any holder of Designated Senior Debt (or any trustee,
agent or other representative for such holder) which is the subject of such
Senior Nonmonetary Default, no payments on account of principal of, premium, if
any, or interest on, or in respect of the purchase or other acquisition of, the
Notes, and no defeasance of the Notes, may be made for a period (the "Payment
Blockage Period") commencing on the date of the receipt of such notice and
ending the earlier of (i) the date on which such Senior Nonmonetary Default
shall have been cured or waived or ceased to exist or all Designated Senior
Debt the subject of such Senior Nonmonetary Default shall have been discharged
and (ii) the 179th day after the date of the receipt of such notice. In any
event, no more than one Payment Blockage Period may be commenced during any
360-day period and there shall be a period of at least 181 days during each
360-day period when no Payment Blockage Period is in effect. In addition, no
Senior Nonmonetary Default that existed or was continuing on the date of the
commencement of a Payment Blockage Period may be made the basis of the
commencement of a subsequent Payment Blockage Period whether or not within a
period of 360 consecutive days, unless such Senior Nonmonetary Default shall
have been cured for a period of not less than 90 consecutive days. "Senior
Nonmonetary Default" means the occurrence or existence and continuance of an
event of default with respect to Senior Debt, other than a Senior Payment
Default, permitting the holders of the Designated Senior Debt (or a trustee or
other agent on behalf of the holders thereof) then to declare such Designated
Senior Debt due and payable prior to the date on which it would otherwise
become due and payable.
The failure to make any payment on the Notes by reason of the
provisions of the Indenture described under this caption "Subordination" will
not be construed as preventing the occurrence of an Event of Default with
respect to the Notes arising from any such failure to make payment. Upon
termination of any period of payment blockage the Company shall resume making
any and all required payments in respect of the Notes, including any missed
payments.
"Senior Debt" means (i) the principal of (and premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities and
fees relating to, the New Senior Bank Facility and (ii) the principal of (and
premium, if any) and interest on Debt of the Company for money borrowed,
whether Incurred on or prior to the date of original issuance of the Notes or
thereafter, and any amendments, renewals, extensions, modifications,
refinancings and refundings of any such Debt and (iii) Permitted Interest Rate
Agreements and Permitted Currency Agreements entered into with respect to Debt
described in clauses (i) and (ii) above; provided, however, that the following
shall not constitute Senior Debt: (1) any Debt as to which the terms of the
instrument creating or evidencing the same provide that such Debt is not
superior in right of payment to the Notes, (2) any Debt which is subordinated
in right of payment in any respect to any other Debt of the Company, (3) Debt
evidenced by the Exchange Notes, (4) Debt evidenced by the Old Notes, (5) any
Debt owed to a Person when such Person is a Subsidiary of the Company, (6) any
obligation of the Company arising from Redeemable Stock of the Company, (7)
that portion of any Debt which is Incurred in violation of the Indenture and
(8) Debt which, when Incurred and without respect to any election under Section
1111(b) of Title 11, United States Code, is without recourse to the Company.
By reason of such subordination, in the event of insolvency, creditors
of the Company who are not holders of Senior Debt or of the Notes may recover
less, ratably, than holders of Senior Debt and more, ratably, than Holders of
the Notes.
The subordination provisions described above will not be applicable to
payments in respect of the Notes from a defeasance trust established in
connection with any defeasance or covenant defeasance of the Notes as described
under "-- Defeasance." (Article 13)
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COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, Incur any Debt unless immediately after giving pro forma effect
to the incurrence of such Debt and the receipt and application of the proceeds
thereof, the Consolidated Cash Flow Coverage Ratio of the Company would be
greater than 2.0 to 1; provided that if the Debt which is the subject of the
determination under this provision is Acquired Debt, the Consolidated Cash Flow
Coverage Ratio of the Company shall be determined by giving effect (on a pro
forma basis, as if the transaction had occurred at the beginning of the
immediately preceding four-quarter period) to both the incurrence or assumption
of such Acquired Debt by the Company and the inclusion in the Consolidated Cash
Flow Available for Fixed Charges of the Person whose Debt would constitute
Acquired Debt.
Notwithstanding the foregoing limitation, the Company may, and may
permit any Restricted Subsidiary to, incur the following Debt:
(i) Debt under the New Senior Bank Facility in an aggregate
principal amount at any one time not to exceed $75.0 million, less any
amounts by which any revolving credit facility commitments under the
New Senior Bank Facility are permanently reduced pursuant to the
"Limitation on Asset Dispositions" covenant below (so long as and to
the extent that any required payments in connection therewith are
actually made);
(ii) the original issuance by the Company of the Debt
evidenced by the Notes (including any Exchange Notes);
(iii) Debt (other than Debt described in another clause of
this paragraph) outstanding on the date of original issuance of the
Notes after giving effect to the application of the proceeds of the
Notes, as described in a schedule to the Indenture;
(iv) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Subsidiary of the Company
to the Company or a Wholly Owned Restricted Subsidiary of the Company;
provided, however, that (a) any such Debt owing by the Company to a
Wholly Owned Restricted Subsidiary shall be Subordinated Debt
evidenced by an intercompany promissory note and (b) upon either (1)
the transfer or other disposition by such Wholly Owned Restricted
Subsidiary or the Company of any Debt so permitted to a Person other
than the Company or another Wholly Owned Restricted Subsidiary of the
Company or (2) the issuance (other than directors' qualifying shares),
sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Wholly Owned Restricted
Subsidiary to a Person other than the Company or another such Wholly
Owned Restricted Subsidiary, the provisions of this clause (iv) shall
no longer be applicable to such Debt and such Debt shall be deemed to
have been Incurred at the time of such transfer or other disposition;
(v) Debt consisting of Permitted Interest Rate, Currency or
Commodity Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are
used to refinance or refund, or any extension or renewal of,
outstanding Debt Incurred pursuant to the preceding paragraph or
clauses (ii) or (iii) of this paragraph (each of the foregoing, a
"refinancing") in an aggregate principal amount not to exceed the
principal amount of the Debt so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt so refinanced or the amount of any
premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the expenses of the Company or the
Restricted Subsidiary, as the case may be, incurred in connection with
such refinancing; provided, however, that (A) Debt the proceeds of
which are used to refinance the Notes or Debt which is pari passu with
or subordinate in right of payment to the Notes shall
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only be permitted if (x) in the case of any refinancing of the Notes
or Debt which is pari passu to the Notes, the refinancing Debt is made
pari passu to the Notes or subordinated to the Notes, and (y) in the
case of any refinancing of Debt which is subordinated to the Notes,
the refinancing Debt constitutes Subordinated Debt; (B) the
refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (1) does not provide
for payments of principal of such Debt at the stated maturity thereof
or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof
(including any redemption, defeasance, retirement or repurchase which
is contingent upon events or circumstances, but excluding any
retirement required by virtue of acceleration of such Debt upon any
event of default thereunder), in each case prior to the stated
maturity of the Debt being refinanced and (2) does not permit
redemption or other retirement (including pursuant to an offer to
purchase) of such debt at the option of the holder thereof prior to
the final stated maturity of the Debt being refinanced), other than a
redemption or other retirement at the option of the holder of such
Debt (including pursuant to an offer to purchase) which is conditioned
upon provisions substantially similar to those described under "--
Change of Control" and "-- Limitation on Asset Dispositions"; and (C)
in the case of any refinancing of Debt Incurred by the Company, the
refinancing Debt may be Incurred only by the Company, and in the case
of any refinancing of Debt Incurred by a Restricted Subsidiary, the
refinancing Debt may be Incurred only by such Restricted Subsidiary;
provided, further, that Debt Incurred pursuant to this clause (vi) may
not be Incurred more than 45 days prior to the application of the
proceeds to repay the Debt to be refinanced;
(vii) Acquired Debt, provided that such Debt if incurred by
the Company would be in compliance with the first paragraph of this
covenant; and
(viii) Debt not otherwise permitted to be Incurred pursuant to
clauses (i) through (vii) above, which, together with any other
outstanding Debt Incurred pursuant to this clause (viii), has an
aggregate principal amount not in excess of $5.0 million at any time
outstanding. (Section 1008)
LIMITATION ON SENIOR SUBORDINATED DEBT
The Company may not Incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in right of
payment to the Notes. (Section 1009)
LIMITATION ON ISSUANCE OF GUARANTEES OF SUBORDINATED DEBT
The Company may not permit any Restricted Subsidiary, directly or
indirectly, to assume, guarantee or in any other manner become liable with
respect to any Debt of the Company that by its terms is pari passu or junior in
right of payment to the Notes. (Section 1010)
LIMITATION ON LIENS
The Company may not, and may not permit any Subsidiary to, create,
incur, assume or suffer to exist any Lien on or with respect to any property or
assets of the Company or any such Restricted Subsidiary now owned or hereafter
acquired except for (i) Liens incurred after the date of the Indenture securing
Debt of the Company that ranks pari passu or junior in right of payment to the
Notes, if the Notes are secured equally and ratably with such Debt, (ii) Liens
outstanding on the date of the Indenture, (iii) Liens for taxes, assessments,
governmental charges or claims not yet delinquent or which are being contested
in good faith by appropriate proceedings, provided, that adequate reserves with
respect thereto are maintained on the books of the Company or its Restricted
Subsidiaries, as the case may be, in conformity with generally accepted
accounting principles, (iv) landlords' carriers', warehousemen's, mechanics',
material men's, repairmen's or the like Liens arising by contract or statute in
the ordinary course of business and with respect to amount which are not yet
delinquent or are being contested in good faith by appropriate proceedings, (v)
pledges or deposits made in the ordinary course of business (A) in connection
with leases, performance bonds and similar obligations, or (B) in connection
with workers' compensation, unemployment insurance and other social security
legislation, (vi) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar encumbrances which, in the aggregate,
do not materially detract from the value of the property subject thereto or
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materially interfere with the ordinary conduct of the business of the Company
or such Restricted Subsidiary, (vii) any attachment or judgment Lien that does
not constitute an Event of Default, (viii) Liens securing Acquired Debt,
provided, that such Liens attach solely to the acquired assets or the assets of
the acquired entity and do not extend to or cover any other assets of the
Company or any of its Restricted Subsidiaries, (ix) Liens to secure Senior
Debt, (x) Liens in favor of the Trustee for its own benefit and for the benefit
of the Holders, (xi) any interest or title of a lessor pursuant to a lease
constituting a Capital Lease Obligation, (xii) pledges or deposits made in
connection with acquisition agreements or letters of intent entered into in
respect of a proposed acquisition; (xiii) Liens in favor of prior holders of
leases on property acquired by the Company or of sublessors under leases on the
Company property; (xiv) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory or regulatory obligations,
banker's acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a similar nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (xv) Liens (including extensions and renewals
thereof) upon real or personal property acquired after the date of the
Indenture; provided that (a) such Lien is created solely for the purpose of
securing Debt incurred, in accordance with the "Limitation on Consolidated
Debt" covenant, (1) to finance the cost (including the cost of improvement or
construction) of the item property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Debt previously so secured,
(b) the principal amount of the Debt secured by such Lien does not exceed 100%
of such cost and (c) any such Lien shall not extend to or cover any property or
assets other than such item of property or assets and any improvements on such
item; (xvi) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole; (xvii) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xviii) Liens on
property of, or on shares of stock or Debt of, any Person existing at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary, provided
that such Liens do not extend to or cover any property or assets of the Company
or any Restricted Subsidiary other than the property or assets acquired; (xix)
Liens in favor of the Company or any Restricted Subsidiary; (xx) Liens
encumbering deposits securing Debt under Permitted Interest Rate, Currency or
Commodity Price Agreements; (xxi) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of the Company and its
Restricted Subsidiaries; (xxii) Liens on or sales of receivables; (xxiii) the
rights of film distributors under film licensing contracts entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
businesses on a basis customary in the movie exhibition industry; and (xxiv)
any renewal of or substitution of any Liens permitted by any of the preceding
clauses, provided that the Debt secured is not increased (other than by any
premium and accrued interest, plus customary fees, expenses and costs related
to such renewal or substitution of Liens or the incurrence of any related
refinancing of Debt) nor the Liens extended to any additional assets (other
than proceeds and accessions). This covenant does not authorize the incurrence
of any Debt not otherwise permitted by the "Limitation on Consolidated Debt"
covenant. (Section 1011)
LIMITATION ON RESTRICTED PAYMENTS
The Company (i) may not, directly or indirectly, declare or pay any
dividend or make any distribution (including any payment in connection with any
merger or consolidation derived from assets of the Company or any Restricted
Subsidiary) in respect of its Capital Stock or to the holders thereof,
excluding any dividends or distributions by the Company payable solely in
shares of its Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to acquire its Capital Stock (other than Redeemable
Stock), (ii) may not, and may not permit any Restricted Subsidiary to,
purchase, redeem, or otherwise acquire or retire for value (a) any Capital
Stock of the Company or any Related Person of the Company or (b) any options,
warrants or other rights to acquire shares of Capital Stock of the Company or
any Related Person of the Company or any securities convertible or exchangeable
into shares of Capital Stock of the Company or any Related Person of the
Company, (iii) may not make, or permit any Restricted Subsidiary to make, any
Investment other than a Permitted Investment, and (iv) may not, and may not
permit any Restricted Subsidiary to, redeem, repurchase, defease or otherwise
acquire or retire for value prior to any scheduled maturity, repayment or
sinking fund payment Debt of the Company which is subordinate in right of
payment to the Notes (each of clauses (i) through (iv) being a "Restricted
Payment") if: (1) an Event of Default, or an event that with the passing of
time or the giving of notice, or both, would constitute an Event of Default,
shall have occurred and is continuing or would result from such Restricted
Payment, or (2) after giving pro forma effect to such Restricted Payment as if
such Restricted
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Payment had been made at the beginning of the applicable four-fiscal-quarter
period, the Company could not Incur at least $1.00 of additional Debt pursuant
to the terms of the Indenture described in the first paragraph of "Limitation
on Consolidated Debt" above, or (3) upon giving effect to such Restricted
Payment, the aggregate of all Restricted Payments from the date of issuance of
the Notes exceeds the sum of: (a) 50% of cumulative Consolidated Net Income
(or, in the case Consolidated Net Income shall be negative, less 100% of such
deficit) of the Company since the date of issuance of the Notes through the
last day of the last full fiscal quarter ending immediately preceding the date
of such Restricted Payment for which quarterly or annual financial statements
are available (taken as a single accounting period); plus (b) 100% of the
aggregate net proceeds received by the Company after the date of original
issuance of the Notes, including the fair market value of property other than
cash (determined in good faith by the Board of Directors as evidenced by a
resolution of the Board of Directors filed with the Trustee), from
contributions of capital or the issuance and sale (other than to a Restricted
Subsidiary) of Capital Stock (other than Redeemable Stock) of the Company,
options, warrants or other rights to acquire Capital Stock (other than
Redeemable Stock) of the Company and Debt of the Company that has been
converted into or exchanged for Capital Stock (other than Redeemable Stock and
other than by or from a Restricted Subsidiary) of the Company after the date of
original issuance of the Notes, provided that any such net proceeds received by
the Company from an employee stock ownership plan financed by loans from the
Company or a Restricted Subsidiary of the Company shall be included only to the
extent such loans have been repaid with cash on or prior to the date of
determination; plus (c) $5.0 million. Prior to the making of any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
setting forth the computations by which the determinations required by clauses
(2) and (3) above were made and stating that no Event of Default, or event that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default, has occurred and is continuing or will result from such
Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or would
result therefrom, (i) the Company may pay any dividend on Capital Stock of any
class within 60 days after the declaration thereof if, on the date when the
dividend was declared, the Company could have paid such dividend in accordance
with the foregoing provisions; (ii) the Company may refinance any Debt
otherwise permitted by clause (vi) of the second paragraph under "Limitation on
Consolidated Debt" above or solely in exchange for or out of the net proceeds
of the substantially concurrent sale (other than from or to a Restricted
Subsidiary or from or to an employee stock ownership plan financed by loans
from the Company or a Restricted Subsidiary of the Company) of shares of
Capital Stock (other than Redeemable Stock) of the Company, provided that the
amount of net proceeds from such exchange or sale shall be excluded from the
calculation of the amount available for Restricted Payments pursuant to the
preceding paragraph; (iii) the Company may purchase, redeem, acquire or retire
any shares of Capital Stock of the Company solely in exchange for or out of the
net proceeds of the substantially concurrent sale (other than from or to a
Restricted Subsidiary or from or to an employee stock ownership plan financed
by loans from the Company or a Restricted Subsidiary of the Company) of shares
of Capital Stock (other than Redeemable Stock) of the Company; and (iv) the
Company or a Restricted Subsidiary may purchase or redeem any Debt from Net
Available Proceeds to the extent permitted under "Limitation on Asset
Dispositions." Any payment made pursuant to clause (i) or (iii) of this
paragraph shall be a Restricted Payment for purposes of calculating aggregate
Restricted Payments pursuant to the preceding paragraph. (Section 1012)
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company (i) to pay dividends (in cash or otherwise) or make
any other distributions in respect of its Capital Stock or pay any Debt or
other obligation owed to the Company or any other Restricted Subsidiary; (ii)
to make loans or advances to the Company or any other Restricted Subsidiary; or
(iii) to transfer any of its property or assets to the Company or any other
Restricted Subsidiary. Notwithstanding the foregoing, the Company may, and may
permit any Restricted Subsidiary to, suffer to exist any such encumbrance or
restriction (a) pursuant to any agreement in effect on the date of original
issuance of the Notes as described in a schedule to the Indenture; (b) pursuant
to an agreement relating to any Debt Incurred by a Person (other than a
Restricted Subsidiary of the Company existing on the date of original issuance
of the Notes or any Restricted Subsidiary carrying on any of the businesses of
any such Restricted Subsidiary) prior to the date on which such Person became a
Restricted Subsidiary of the Company and outstanding on such date and not
Incurred in anticipation of becoming a Restricted Subsidiary, which encumbrance
or restriction is not
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applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired; (c) pursuant to an agreement effecting a renewal,
refunding or extension of Debt Incurred pursuant to an agreement referred to in
clause (a) or (b) above, provided, however, that the provisions contained in
such renewal, refunding or extension agreement relating to such encumbrance or
restriction are no more restrictive in any material respect than the provisions
contained in the agreement the subject thereof, as determined in good faith by
the Board of Directors and evidenced by a resolution of the Board of Directors
filed with the Trustee; (d) in the case of clause (iii) above, restrictions
contained in any security agreement (including a capital lease) securing Debt
of a Restricted Subsidiary otherwise permitted under the Indenture, but only to
the extent such restrictions restrict the transfer of the property subject to
such security agreement; (e) in the case of clause (iii) above, customary
nonassignment provisions entered into in the ordinary course of business
consistent with past practices in leases and other contracts to the extent such
provisions restrict the transfer or subletting of any such lease or the
assignment of rights under any such contract; (f) any restriction with respect
to a Restricted Subsidiary of the Company imposed pursuant to an agreement
which has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in an Event of Default or an
event that, with the passing of time or the giving of notice or both, would
constitute an Event of Default, that such restriction terminates if such
transaction is closed or abandoned and that the closing or abandonment of such
transaction occurs within one year of the date such agreement was entered into;
or (g) such encumbrance or restriction is the result of applicable corporate
law or regulation relating to the payment of dividends or distributions.
(Section 1013)
LIMITATION ON ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary to,
make any Asset Disposition in one or more related transactions unless: (i) the
Company or the Restricted Subsidiary, as the case may be, receives
consideration for such disposition at least equal to the fair market value for
the assets sold or disposed of as determined by the Board of Directors in good
faith and evidenced by a resolution of the Board of Directors filed with the
Trustee; (ii) at least 75% of the consideration for such disposition consists
of cash or readily marketable cash equivalents or Qualifying Theater Assets or
the assumption of Debt (other than Debt that is subordinated to the Notes)
relating to such assets and release from all liability on the Debt assumed; and
(iii) all Net Available Proceeds, less any amounts invested within 360 days of
such disposition in assets related to the business of the Company, are applied
within 360 days of such disposition (1) first, to the permanent repayment or
reduction of Senior Debt then outstanding under any agreements or instruments
which would require such application or prohibit payments pursuant to clause
(2) following, (2) second, to the extent of remaining Net Available Proceeds,
to make an Offer to Purchase outstanding Notes at 100% of their principal
amount plus accrued interest to the date of purchase and, to the extent
required by the terms thereof, any other Debt of the Company that is pari passu
with the Notes at a price no greater than 100% of the principal amount thereof
plus accrued interest to the date of purchase, (3) third, to the extent of any
remaining Net Available Proceeds following the completion of the Offer to
Purchase, to the repayment of other Debt of the Company or Debt of a Restricted
Subsidiary of the Company, to the extent permitted under the terms thereof and
(4) fourth, to the extent of any remaining Net Available Proceeds, to any other
use as determined by the Company which is not otherwise prohibited by the
Indenture. (Section 1014)
TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, enter into any transaction (or series of related transactions)
with an Affiliate or Related Person of the Company (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), including any Investment,
either directly or indirectly, unless such transaction is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with an entity that is not an
Affiliate or Related Person. For any transaction that involves in excess of
$100,000 but less than or equal to $1,000,000, the Chief Executive Officer of
the Company shall determine that the transaction satisfies the above criteria
and shall evidence such a determination by a certificate filed with the
Trustee. For any transaction that involves in excess of $1,000,000, a majority
of the disinterested members of the Board of Directors shall determine that the
transaction satisfies the above criteria and shall evidence such a
determination by a Board Resolution filed with the Trustee. For any transaction
that involves in excess of $5,000,000, the Company shall also obtain an opinion
from a nationally recognized expert with experience in
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appraising the terms and conditions of the type of transaction (or series of
related transactions) for which the opinion is required stating that such
transaction (or series of related transactions) is on terms no less favorable
to the Company or such Restricted Subsidiary than those that could be obtained
in a comparable arm's-length transaction with an entity that is not an
Affiliate or Related Person of the Company, which opinion shall be filed with
the Trustee. (Section 1015)
Notwithstanding anything to the contrary contained in the Indenture,
the foregoing provisions shall not apply to (i) transactions with any employee,
officer or director of the Company or any of its Restricted Subsidiaries
pursuant to employee benefit plans or compensation arrangements or agreements
entered into in the ordinary course of business, (ii) transactions with any
Affiliate or Related Person in which such Affiliate or Related Person acquires
or purchases the capital stock of the Company or any Restricted Subsidiary at
fair market value or (iii) transactions with any Affiliate or Related Person in
which such Affiliate or Related Person receives a customary finder's fee or
other advisory fee for services rendered to the Company or any Restricted
Subsidiary.
CHANGE OF CONTROL
Within 30 days of the occurrence of a Change of Control, the Company
will be required to make an Offer to Purchase all Outstanding Notes at a
purchase price equal to 101% of their principal amount plus accrued interest to
the date of purchase. A "Change of Control" will be deemed to have occurred at
such time as either (a) any Person (other than a Permitted Holder) or any
Persons acting together that would constitute a "group" (a "Group") for
purposes of Section 13(d) of the Securities Exchange Act of 1934, or any
successor provision thereto (other than Permitted Holders), together with any
Affiliates or Related Persons thereof, shall beneficially own (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, or any
successor provision thereto), directly or indirectly, at least 50% of the
aggregate voting power of all classes of Voting Stock of the Company (for the
purposes of this clause (a) a person shall be deemed to beneficially own the
Voting Stock of a corporation that is beneficially owned (as defined above) by
another corporation (a "parent corporation"), if such person beneficially owns
(as defined above) at least 50% of the aggregate voting power of all classes of
Voting Stock of such parent corporation); or (b) any Person or Group (other
than Permitted Holders), together with any Affiliates or Related Persons
thereof, shall succeed in having a sufficient number of its nominees elected to
the Board of Directors of the Company such that such nominees, when added to
any existing director remaining on the Board of Directors of the Company after
such election who was a nominee of or is an Affiliate or Related Person of such
Person or Group, will constitute a majority of the Board of Directors of the
Company. (Section 1016)
The foregoing provisions will not prevent the Company from entering
into transactions of the types described above with management or their
affiliates. In addition, such provisions may not necessarily afford the
holders of the Exchange Notes protection in the event of a highly leveraged
transaction, including a reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect the holders because
such transactions may not involve a shift in voting power or beneficial
ownership, or even if they do, may not involve a shift of the magnitude
required under the definition of Change of Control to trigger the provisions.
Nonetheless, such provisions may have the effect of deterring certain mergers,
tender offers, takeover attempts or similar transactions by increasing the cost
of such a transaction and may limit the Company's ability to obtain additional
equity financing in the future.
In the event that the Company makes an Offer to Purchase the Notes,
the Company intends to comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Securities Exchange Act of 1934.
PROVISION OF FINANCIAL INFORMATION
Prior to the time the Company becomes subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, the Company shall provide to all
Holders and file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Company were so required, such documents to be mailed
to Holders and filed with the Trustee on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so required. After the Company
commences filing such reports, and so long as any of the Notes are outstanding,
the Company, or if the Company is not
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required to file, Holdings shall file with the Commission the annual reports,
quarterly reports and other documents which the Company is required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 or any successor provisions thereto. (Section 1017)
UNRESTRICTED SUBSIDIARIES
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. "Unrestricted
Subsidiary" means (1) any Subsidiary designated as such by the Board of
Directors as set forth below where (a) neither the Company nor any of its other
Subsidiaries (other than another Unrestricted Subsidiary) (i) provides credit
support for, or any Guarantee of, any Debt of such Subsidiary or any Subsidiary
of such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or (ii) is directly or indirectly liable for any Debt of
such Subsidiary or any Subsidiary of such Subsidiary, and (b) no default with
respect to any Debt of such Subsidiary or any Subsidiary of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company and its Subsidiaries (other
than another Unrestricted Subsidiary) to declare a default on such other Debt
or cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary to be so designated has
total assets of $1,000 or less or (y) immediately after giving effect to such
designation, the Company could incur at least $1.00 of additional Debt pursuant
to the first paragraph under " -- Limitation on Consolidated Debt" and
provided, further, that the Company could make a Restricted Payment in an
amount equal to the greater of the fair market value and book value of such
Subsidiary pursuant to "Limitation on Restricted Payments" and such amount is
thereafter treated as a Restricted Payment for the purpose of calculating the
aggregate amount available for Restricted Payments thereunder. (Section 1018)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Company and (ii) directly or
indirectly, transfer, sell, lease or otherwise dispose of all or substantially
all of its assets unless: (1) in a transaction in which the Company does not
survive or in which the Company sells, leases or otherwise disposes of all or
substantially all of its assets, the successor entity to the Company is
organized under the laws of the United States of America or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, all of the Company's obligations under the Indenture; (2) immediately
before and after giving effect to such transaction and treating any Debt which
becomes an obligation of the Company or a Restricted Subsidiary as a result of
such transaction as having been Incurred by the Company or such Restricted
Subsidiary at the time of the transaction, no Event of Default or event that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default shall have occurred and be continuing; (3) immediately after
giving effect to such transaction, the Consolidated Net Worth of the Company
(or other successor entity to the Company) is equal to or greater than that of
the Company immediately prior to the transaction; (4) immediately after giving
effect to such transaction and treating any Debt which becomes an obligation of
the Company or a Restricted Subsidiary as a result of such transaction as
having been Incurred by the Company or such Restricted Subsidiary at the time
of the transaction, the Company (including any successor entity to the Company)
could Incur at least $1.00 of additional Debt pursuant to the provisions of the
Indenture described in the first paragraph under "Limitation on Consolidated
Debt" above; and (5) certain other conditions are met. (Section 801)
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the Indenture. Reference is made to the Indenture for the full definition of
all such terms, as well as any other terms used herein for which no definition
is provided. (Section 101)
"Acquired Debt" of any particular Person means Debt of any other
Person existing at the time such other Person merged with or into or became a
Subsidiary of such Particular Person or assumed by such particular Person in
connection with the acquisition of assets from any other Person, and not
Incurred by such other Person in connection with, or in contemplation of, such
other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including any issuance or sale by a Restricted Subsidiary of
Capital Stock of such Restricted Subsidiary, and including a consolidation or
merger or other sale of any such Restricted Subsidiary with, into or to another
Person in a transaction in which such Restricted Subsidiary ceases to be a
Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary
of such Person to such Person or a Wholly Owned Restricted Subsidiary of such
Person or by such Person to a Wholly Owned Restricted Subsidiary of such
Person) of (i) shares of Capital Stock (other than directors' qualifying
shares) or other ownership interests of a Restricted Subsidiary of such Person,
(ii) substantially all of the assets of such Person or any of its Restricted
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Restricted Subsidiaries outside of the
ordinary course of business, provided in each case that the aggregate
consideration for such transfer, conveyance, sale, lease or other disposition
is equal to $1.0 million or more. The term "Asset Disposition" shall not
include (i) any sale and leaseback of Qualifying Theater Assets effected at
fair market value, and (ii) any swap or exchange of Qualifying Theater Assets
of the Company or its Subsidiaries for Qualifying Theater Assets of another
Person, provided that if the fair market value of the assets exchanged by the
Company or its Subsidiary exceeds the fair market value of the assets to be
received, in each case as determined in good faith by the Board of Directors of
the Company, such excess shall be subject to the "Limitation on Asset
Dispositions" covenant.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with generally
accepted accounting principles. The stated maturity of such obligation shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty. The principal amount of such obligation shall be
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general
or limited, of such Person.
"Cash Equivalents" means (i) direct obligations of the United States
of America or any agency thereof having maturities of not more than one year
from the date of acquisition, (ii) time deposits and certificates of deposit of
any domestic commercial bank or recognized standing having capital and surplus
in excess of $500 million, with maturities of not more than one year from the
date of acquisition, (iii) repurchase obligations issued by any bank described
in clause (ii) above with a term not to exceed 30 days; (iv) commercial paper
rated at least A-1 or the equivalent thereof by S&P
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or at least P-1 or the equivalent thereof by Moody's, in each case maturing
within one year after the date of acquisition and (v) shares of any money
market mutual fund, or similar fund, in each case having excess of $500
million, which invests predominantly in investments of the types describes in
clauses (i) through (iv) above.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Consolidated Cash Flow Available for Fixed Charges" for any period
means the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated Interest
Expense of the Company and its Restricted Subsidiaries for such period, plus
(ii) Consolidated Income Tax Expense of the Company and its Restricted
Subsidiaries for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of the Company and its
Restricted Subsidiaries for such period, plus (iv) all other non-cash items
reducing Consolidated Net Income of the Company and its Restricted
Subsidiaries, less all non-cash items increasing Consolidated Net Income of the
Company and its Restricted Subsidiaries; provided, however, that there shall be
excluded therefrom the Consolidated Cash Flow Available for Fixed Charges (if
positive) of any Restricted Subsidiary of the Company (calculated separately
for such Restricted Subsidiary in the same manner as provided above for the
Company) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Company or another Restricted
Subsidiary of the Company to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) Consolidated Cash Flow Available for Fixed
Charges of the Company and its Restricted Subsidiaries for the period of the
most recently completed four consecutive fiscal quarters for which quarterly or
annual financial statements are available to (ii) Consolidated Fixed Charges of
the Company and its Restricted Subsidiaries for such period; provided, however,
that Consolidated Fixed Charges shall be adjusted to give effect on a pro forma
basis to any Debt that has been Incurred by the Company or any Restricted
Subsidiary since the beginning of such period that remains outstanding and to
any Debt that is proposed to be Incurred by the Company or any Restricted
Subsidiary as if in each case such Debt had been Incurred on the first day of
such period and as if any Debt that (i) is or will no longer be outstanding as
the result of the Incurrence of any such Debt or (ii) had been repaid or
retired during such period had not been outstanding as of the first day of such
period; provided, however, that in making such computation, the Consolidated
Interest Expense of the Company and its Restricted Subsidiaries attributable to
interest on any proposed Debt bearing a floating interest rate shall be
computed on a pro forma basis as if the rate in effect on the date of
computation had been the applicable rate for the entire period; and provided
further that, in the event the Company or any of its Restricted Subsidiaries
has made Asset Dispositions or acquisitions of assets not in the ordinary
course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during or after such period, such
computation shall be made on a pro forma basis as if the Asset Dispositions or
acquisitions had taken place on the first day of such period.
"Consolidated Fixed Charges" for any period means the sum of (i)
Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Company and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit,
bankers' acceptances or similar facilities; (iii) fees with respect to interest
rate swap or similar agreements or foreign currency hedge, exchange or similar
agreements; (iv) Preferred Stock dividends of Restricted Subsidiaries of the
Company (other than with respect to Redeemable Stock) declared and paid or
payable to persons other than the Company or any Restricted Subsidiary; (v)
accrued Redeemable
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Stock dividends of the Company and its Restricted Subsidiaries payable to
persons other than the Company or any Restricted Subsidiary, whether or not
declared or paid; (vi) interest on Debt guaranteed by the Company and its
Restricted Subsidiaries; and (vii) the portion of any rental obligation
allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by of the Company or a Restricted
Subsidiary of the Company in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Subsidiary of the Company except to the extent of the
amount of dividends or other distributions actually paid to the Company or a
Subsidiary of the Company by such Person during such period, (c) gains or
losses on Asset Dispositions by the Company or its Restricted Subsidiaries, (d)
all extraordinary gains and extraordinary losses, (e) the cumulative effect of
changes in accounting principles and (f) the tax effect of any of the items
described in clauses (a) through (e) above; provided, further, that for
purposes of any determination pursuant to the provisions described under
"Limitation on Restricted Payments," there shall further be excluded therefrom
the net income (but not net loss) of any Restricted Subsidiary of the Company
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary of the
Company to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with respect to
the Company, adjustments following the date of the Indenture to the accounting
books and records of the Company in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting
from the acquisition of control of the Company by another Person shall not be
given effect to.
"Consolidated Tangible Assets" of any Person means, as of any date,
the amount which, in accordance with GAAP, would be set forth under the caption
"Total Assets" (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries, less all intangible assets, including,
without limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all Redeemable Stock
issued by such Person, (viii) Preferred Stock of Restricted Subsidiaries of
such Person held by Persons other than such Person or one of its Wholly Owned
Restricted Subsidiaries, (ix) every obligation under Interest Rate, Currency or
Commodity Price Agreements of such Person and (x) every obligation of the type
referred to in clauses (i) through (ix) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise. The "amount" or "principal amount" of Debt at any time of
determination as used herein represented by (a) any Receivables Sale, shall be
the amount of the unrecovered capital or principal investment of the purchaser
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company)
thereof, excluding amounts representative of yield or interest earned on such
investment and (b) any Redeemable Stock, shall be the maximum fixed redemption
or repurchase price in respect thereof.
"Designated Senior Debt" shall mean (i) the obligations of the Company
under the New Senior Bank Facility and (ii) any other Senior Debt of the
Company permitted under the Indenture the principal amount of which at original
issuance is $25.0 million or more and that has been designated by the Company
as Designated Senior Debt.
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"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay
such Debt (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); provided, however, that the Guaranty by any
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
"Holdings" means Hollywood Theater Holdings, Inc. or any successor
thereto.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall
not be deemed an Incurrence of such Debt.
"Interest Rate, Currency or Commodity Price Agreement" of any Person
means any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates, currency exchange rates or commodity prices or indices
(excluding contracts for the purchase or sale of goods in the ordinary course
of business).
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of Debt
issued by, any other Person, including any payment on a Guarantee of any
obligation of such other Person.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, instalment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its Restricted Subsidiaries on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments made to minority interest holders in Restricted Subsidiaries of such
Person or joint ventures as a result of such Asset Disposition and (iv)
appropriate amounts to be provided by such Person or any Restricted Subsidiary
thereof, as the case may be, as a reserve in accordance with generally accepted
accounting principles against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and
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severance and other employee termination costs associated with such Asset
Disposition, in each case as determined by the Board of Directors, in its
reasonable good faith judgment evidenced by a resolution of the Board of
Directors filed with the Trustee; provided, however, that any reduction in such
reserve following the consummation of such Asset Disposition will be treated
for all purposes of the Indenture and the Notes as a new Asset Disposition at
the time of such reduction with Net Available Proceeds equal to the amount of
such reduction.
"New Senior Bank Facility" means the Reducing Revolving Credit
Agreement to be entered into between the Company and certain of its affiliates
and Bank of America NT&SA, as Agent, and the banks named therein, as it may be
amended or restated from time to time, and any renewal, extension, refinancing,
refunding or replacement thereof.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Note Register on the date of the Offer offering to purchase up
to the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Notes within five Business Days after the Expiration
Date. The Company shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain information
concerning the business of the Company and its Restricted Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
the Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such
financial statements referred to in clause (i) (including a description of the
events requiring the Company to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer to
Purchase and the events requiring the Company to make the Offer to Purchase and
(iv) any other information required by applicable law to be included therein.
The Offer shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Offer to Purchase. The Offer shall also
state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes
offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such has
been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
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(8) that on the Purchase Date the Purchase Price will become due
and payable upon each Note being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on
and after the Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the
Offer to Purchase will be required to surrender such Note at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing);
(10) that Holders will be entitled to withdraw all or any portion
of Notes tendered if the Company (or their Paying Agent) receives, not
later than the close of business on the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder tendered, the
certificate number of the Note the Holder tendered and a statement
that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Notes and (b) if Notes in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only
Notes in denominations of $1,000 or integral multiples thereof shall
be purchased); and
(12) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service charge, a new
Note or Notes, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for
the unpurchased portion of the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Permitted Holder" means each of The Beacon Group III -- Focus Value
Fund, L.P., Stratford Capital Partners, L.P., Hoak Communications Fund and
members of senior management of Holdings which have been such members for at
least one year and beneficially own (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, or any successor provision thereto) shares of
Capital Stock of Holdings.
"Permitted Interest Rate, Currency or Commodity Price Agreement" of
any Person means any Interest Rate, Currency or Commodity Price Agreement
entered into with one or more financial institutions in the ordinary course of
business that is designed to protect such Person against fluctuations in
interest rates or currency exchange rates with respect to Debt Incurred and
which shall have a notional amount no greater than the payments due with
respect to the Debt being hedged thereby, or in the case of currency or
commodity protection agreements, against currency exchange rate or commodity
price fluctuations in the ordinary course of business relating to then existing
financial obligations or then existing or sold production and not for purposes
of speculation.
"Permitted Investments" means (i) an Investment in the Company or a
Restricted Subsidiary of the Company; (ii) an Investment in a Person, if such
Person or a Subsidiary of such Person will, as a result of the making of such
Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary of the Company or be merged or consolidated with or into
transfer or convey all or substantially all its assets to the Company or a
Restricted Subsidiary of the Company; (iii) a Temporary Cash Investment; (iv)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses in accordance with
generally accepted accounting principles; (v) stock, obligations or securities
received in settlement of debts owing to the Company or a Restricted Subsidiary
of the Company as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection, enforcement or agreement in lieu of foreclosure of any
Lien in favor of the Company or a Restricted Subsidiary of the Company; (vi)
refundable construction advances made with respect to the construction of
properties
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of a nature or type that are used in a business or similar or related to the
business of the Company or its Restricted Subsidiaries in the ordinary course
of business; (vii) advances or extensions of credit on terms customary in the
industry in the form of accounts or other receivables incurred, or pre-paid
film rentals, and loans and advances made in settlement of such accounts
receivable, all in the ordinary course of business; (viii) Investments in the
Notes; (ix) any consolidation or merger of a Wholly-Owned Restricted Subsidiary
of the Company to the extent otherwise permitted under the Indenture; (x)
Investments in Permitted Interest Rate, Currency or Commodity Price Agreements
and (xi) other Investments not to exceed $3.0 million.
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of the Company or (if Holdings owns all the outstanding Common
Stock of the Company) of Holdings pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
"Qualifying Theater Assets" means all motion picture theaters (whether
owned in fee or leased), all other motion picture theater assets, including,
without limitation, theater furniture and fixtures, all real property acquired
for the purpose of motion picture theater development or construction, and
joint venture interests or partnership interests in Persons owning, leasing,
developing or constructing motion picture theaters or principally engaged in
the business of exhibiting motion pictures.
"Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto
or a disposition of defaulted Receivables for purpose of collection and not as
a financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon the
occurrence of an event) matures or is required to be redeemed (pursuant to any
sinking fund obligation or otherwise) or is convertible into or exchangeable
for Debt or is redeemable at the option of the holder thereof, in whole or in
part, at any time prior to the final Stated Maturity of the Notes; provided
that "Redeemable Stock" shall not include any Capital Stock that is payable at
maturity, or upon required redemption or redemption at the option of the holder
thereof, or that is automatically convertible or exchangeable, solely in or
into Common Stock of such Person.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the Outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the
equity interest in such Person) or (b) 5% or more of the combined voting power
of the Voting Stock of such Person.
"Restricted Subsidiary" means any Subsidiary, whether existing on or
after the date of the Indenture, unless such Subsidiary is an Unrestricted
Subsidiary.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment
in full of the Notes to at least the following extent: (i) no payments of
principal of (or premium, if any) or interest on or otherwise due in respect of
such Debt may be permitted for so long as any default in the payment of
principal (or premium, if any) or interest on the Notes exists; (ii) in the
event that any other default that with the passing of time or the giving of
notice, or both, would constitute an event of default exists with respect to
the Notes, upon notice by 25% or more in principal amount of the Notes to the
Trustee, the Trustee shall have the right to give notice to the Company and the
holders of such Debt (or trustees or agents therefor) of a payment blockage,
and thereafter no payments of principal of (or premium, if
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any) or interest on or otherwise due in respect of such Debt may be made for a
period of 179 days from the date of such notice; and (iii) such Debt may not
(x) provide for payments of principal of such Debt at the stated maturity
thereof or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue
of acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Notes or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Notes, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change of control of
the Company pursuant to provisions substantially similar to those described
under "Change of Control" (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to the Company's repurchase of
the Notes required to be repurchased by the Company pursuant to the provisions
described under "Change of Control").
"Subsidiary" of any Person means (i) a corporation more than 50% of
the combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Temporary Cash Investments" means any Investment in the following
kinds of instruments: (A) readily marketable obligations issued or
unconditionally guaranteed as to principal and interest by the United States of
America or by any agency or authority controlled or supervised by and acting as
an instrumentality of the United States of America if, on the date of purchase
or other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof
or the District of Columbia, provided that (1) such instrument has a final
maturity nor more than one year from the date of purchase thereof by the
Company or any Restricted Subsidiary of the Company and (2) such depository
institution or trust company has at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment, (x) capital, surplus and undivided profits (as of the date
such institution's most recently published financial statements) in excess of
$100 million and (y) the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a Person other than such
institution) of such institution, at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment, are rated in the highest rating category of both Standard
& Poor's Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), and Moody's
Investors Service, Inc. ("Moody's"); (C) commercial paper issued by any
corporation, if such commercial paper has, at the time of the Company's or any
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment credit ratings of at least A-1 by S&P and P-1 by Moody's;
(D) money market mutual or similar funds having assets in excess of $100
million; (E) readily marketable debt obligations issued by any corporation, if
at the time of the Company's or and Restricted Subsidiary's Investment therein
or contractual commitment providing for such Investment (1) the remaining term
to maturity is not more than two years and (2) such debt obligations are rated
in one of the two highest rating categories of both S&P and Moody's; (F) demand
or time deposit accounts used in the ordinary course of business with
commercial banks the balances in which are at all times fully insured as to
principal and interest by the Federal Deposit Insurance Corporation or any
successor thereto; and (G) to the extent not otherwise included herein, Cash
Equivalents. In the event that either S&P or Moody's ceases to publish ratings
of the type provided herein, a replacement rating agency shall be selected by
the Company with the consent of the Trustee, and in each case the rating of
such replacement rating agency most nearly equivalent to the corresponding S&P
or Moody's rating, as the case may be, shall be used for purposes hereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
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"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a)
failure to pay principal of (or premium, if any, on) any Note when due; (b)
failure to pay any interest on any Note when due, continued for 30 days; (c)
default in the payment of principal and interest on Notes required to be
purchased pursuant to an Offer to Purchase as described under "Change of
Control" and "Limitation on Certain Asset Dispositions" when due and payable;
(d) failure to perform or comply with the provisions described under "Merger,
Consolidation and Certain Sales of Assets"; (e) failure to perform any other
covenant or agreement of the Company under the Indenture or the Notes continued
for 60 days after written notice to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of Outstanding Notes; (f) default under
the terms of any instrument evidencing or securing Debt for money borrowed by
the Company or any Restricted Subsidiary having an outstanding principal amount
of $2.0 million individually or in the aggregate which default results in the
acceleration of the payment of such indebtedness or constitutes the failure to
pay such indebtedness when due; (g) the rendering of a final judgment or
judgments (not subject to appeal) against the Company or any Restricted
Subsidiary in an amount in excess of $2.0 million which remains undischarged or
unstayed for a period of 60 days after the date on which the right to appeal
has expired; and (h) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any Restricted Subsidiary. (Section 501) Subject to
the provisions of the Indenture relating to the duties of the Trustee in case
an Event of Default (as defined) shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Notes 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. (Section 512)
If an Event of Default (other than an Event of Default described in
Clause (h) above) shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding Notes
may accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of Outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal, have been
cured or waived as provided in the Indenture. If an Event of Default specified
in Clause (h) above occurs, the Outstanding Notes will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. (Section 502) For information as to waiver of
defaults, see "Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default (as defined) and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in aggregate principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Section 507) However, such limitations do not
apply to a suit instituted by a Holder of a Note for enforcement of payment of
the principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note. (Section 508)
The Company will be required to furnish to the Trustee quarterly a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (Section 1019)
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SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders to
receive payment of principal and interest on the Notes, (iv) rights,
obligations and immunities of the Trustee under the Indenture and (v) rights of
the Holders of the Notes as beneficiaries of the Indenture with respect to any
property deposited with the Trustee payable to all or any of them), if (x) the
Company will have paid or caused to be paid the principal of and interest on
the Notes as and when the same will have become due and payable or (y) all
outstanding Notes (except lost, stolen or destroyed Notes which have been
replaced or paid) have been delivered to the Trustee for cancellation.
DEFEASANCE
The Indenture will provide that, at the option of the Company, (a) if
applicable, the Company will be discharged from any and all obligations in
respect of the Outstanding Notes or (b) if applicable, the Company may omit to
comply with certain restrictive covenants, that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, in either
case (A) or (B) upon irrevocable deposit with the Trustee, in trust, of money
and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the Outstanding Notes. With respect to
clause (B), the obligations under the Indenture other than with respect to such
covenants and the Events of Default other than the Events of Default relating
to such covenants above shall remain in full force and effect. Such trust may
only be established if, among other things (i) with respect to clause (A), the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or there has been a change in law, which in the Opinion of
Counsel provides that Holders of the Notes will not recognize gain or loss for
Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (B), the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the Notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount, in the same manner and at the same times
as would have been the case if such deposit and defeasance had not occurred;
(ii) no Event of Default or event that with the passing of time or the giving
of notice, or both, shall constitute an Event of Default shall have occurred or
be continuing; (iii) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that such deposit shall not cause the Trustee or the
trust so created to be subject to the Investment Company Act of 1940; and (iv)
certain other customary conditions precedent are satisfied. (Sections 1301,
1302, 1303 and 1304)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of, (or the premium) or interest on, any Note, (c) change the
place or currency of payment of principal of (or premium), or interest on, any
Note, (d) impair the right to institute suit for the enforcement of any payment
on or with respect to any Note, (e) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture, (f) reduce the
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (g) modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of past defaults or
covenants, except as otherwise specified, or (h) following the mailing of any
Offer to Purchase, modify any Offer to Purchase for the Notes required under
the "Limitation on Asset Dispositions" and the "Change of Control" covenants
contained in the Indenture in a manner materially adverse to the Holders
thereof. (Section 902)
The Holders of a majority in aggregate principal amount of the
Outstanding Notes, on behalf of all Holders of Notes, may waive compliance by
the Company with certain restrictive provisions of the Indenture. (Section
1020) Subject to
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certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Notes, on behalf of
all Holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Note tendered pursuant to an Offer to Purchase.
(Section 513)
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State
of New York.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. (Section 601)
The Indenture and provisions of the Trust Indenture Act incorporated
by reference therein contain limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or any Affiliate, provided, however, that if it
acquires any conflicting interest (as defined in the Indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign. (Sections 608, 613)
CERTAIN U.S. FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of Exchange Notes by a non-U.S.
holder who acquires and owns such Exchange Notes as a capital asset within the
meaning of Section 1221 of the Code. A "non-U.S. holder" is any person other
than (i) a resident (within the meaning of Section 7701(b) of the Code) or
current or former citizen of the United States, (ii) a corporation, limited
liability company, or partnership created or organized in the United States or
under the laws of the United States or of any state, or (iii) an estate or
trust whose income is includable in gross income for U.S. federal income tax
purposes regardless of its source. The discussion is based on laws and
regulations presently in force and does not take account of any possible
changes in such laws or regulations. Moreover, the discussion does not discuss
every aspect of U.S. federal taxation that may be relevant to a particular
taxpayer under special circumstances or to persons who are otherwise subject to
a special tax treatment (including, without limitation, banks, insurance
companies, pension and other employee benefit plans, and tax exempt
organizations and entities) and it does not discuss the effect of any
applicable U.S. state and local or non-U.S. tax laws. EACH PROSPECTIVE NON-U.S.
HOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE U.S.
FEDERAL TAX CONSEQUENCES OF HOLDING AND DISPOSING OF EXCHANGE NOTES, AS WELL AS
ANY TAX CONSEQUENCES APPLICABLE UNDER THE LAWS OF ANY U.S. STATE, LOCAL, OR
NON-U.S. TAXING JURISDICTION.
INTEREST
In general, interest paid to a non-U.S. holder of Exchange Notes will
be subject to U.S. federal income tax or regular withholding tax so long as (a)
the interest is not effectively connected with the conduct of a trade or
business within the United States, (b) the non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the company entitled to vote, (c) the Non-U.S. Holder is
not a controlled foreign corporation that is related to the Company actually or
constructively through stock ownership and (d) either (i) the beneficial owner
of the Exchange Note certifies to the Company or its agent, under penalties of
perjury, that it is not a U.S. Holder and provides its name and address on U.S.
Treasury Form W-8 (or a suitable substitute form) or (ii) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Exchange Note certifies under penalties of perjury
that
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such a Form W-8 (or suitable substitute form) has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (d) above. The Proposed
Regulations also would require, in the case of Exchange Notes held by a foreign
partnership, that (x) the certification described in clause (d) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for
payments made after December 31, 1997. There can be no assurance that the
Proposed Regulations will be adopted or as to the provisions that they will
include if and when adopted in temporary or final form.
DISPOSITION OF EXCHANGE NOTES
Non-U.S. holders generally will not be subject to U.S. federal income
taxation on gain recognized on a disposition of Exchange Notes so long as (i)
the gain is not effectively connected with the conduct by the non-U.S. holder
of a trade or business within the United States and (ii) in the case of a
non-U.S. holder who is an individual, either such holder is not present in the
United States for 183 days or more in the taxable year of disposition or such
holder does not (a) have a "tax home" (within the meaning of section 911(d)(3)
of the Code) in the United States or (b) maintain an office or fixed place of
business in the United States to which the gain is attributable.
FEDERAL ESTATE TAXES
An Exchange Note held by an individual who, at the time of death, is
not a citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the U.S. federal estate tax as a
result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and if, at the time of the
individual's death, payments with respect to such Exchange Note would not have
been effectively connected with the conduct by such individual of a trade or
business in the United States.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Generally, payments of interest, premium or principal on the Exchange
Notes to Non-U.S. Holders will not be subject to information reporting or
backup withholding (assuming the income is otherwise exempt from United States
federal income tax) if the non-U.S. holder complies with the certification
requirements set forth in clause (d) under "Certain U.S. Federal Tax
Consequences To Non-U.S. Holders -- Interest" above.
Non-U.S. holders will not be subject to information reporting or
backup withholding with respect to the payment of proceeds from the disposition
of Exchange Notes effected by, to or through the foreign office of a broker;
provided, however, that if the broker is a U.S. person or a U.S.-related
person, information reporting (but not backup withholding) would apply unless
the broker has documentary evidence in its records as to the non-U.S. holder's
foreign status (and has no actual knowledge to the contrary), or the non-U.S.
holder certifies as to its non-U.S. status under penalty of perjury or
otherwise establishes an exemption. Non-U.S. holders will be subject to
information reporting and backup withholding at a rate of 31% with respect to
the payment of proceeds from the disposition of Exchange Notes effected by, to
or through the United States office of a broker, unless the non-U.S. holder
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute
a separate U.S. federal income tax. Rather, amounts withheld under the backup
withholding rules from a payment to a non-U.S. holder will be allowed as a
credit against such non-U.S. holder's U.S. federal income tax liability and any
amounts withheld in excess of such non- U.S. holder's U.S. federal income tax
liability would be refunded, provided that the required information is
furnished to the IRS.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its
own account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealers for
their own accounts as a result of market- making activities or other trading
activities (other than a resale of an unsold allotment from the original sale
of Old Notes). The Company has agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Notes for a period
ending 180 days from the Expiration Date. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Notes received in exchange for Old Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth in the Letter of Transmittal. See "The Exchange Offer -- Resales of
Exchange Notes."
The Company will not receive any proceeds from the issuance of the
Exchange Notes offered hereby. Exchange Notes received by Participating
Broker-Dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any Participating Broker- Dealer that
resells Exchange Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates
in a distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act, and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period ending 180 days from the Expiration Date, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
VALIDITY OF THE EXCHANGE NOTES
The validity of the Exchange Notes will be passed upon for the Company
by Baker & Botts, L.L.P., Dallas, Texas, counsel for the Company.
EXPERTS
The audited consolidated financial statements included in this
Prospectus, to the extent and for the periods indicated in their reports, have
been audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving such reports.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . F-4
Consolidated Statements of Operations for the Year Ended
December 31, 1996 and for the period from inception
(July 11, 1995), through December 31, 1995 . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity for the
Year Ended December 31, 1996 and for the period from
inception (July 11, 1995), through December 31, 1995 . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1996 and for the period from inception
(July 11, 1995), through December 31, 1995 . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . F-8
Unaudited Condensed Consolidated Balance Sheet as of
June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Unaudited Condensed Consolidated Statements of Operations
for the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . F-20
Unaudited Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . F-21
Notes to Unaudited Interim Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
HOLLYWOOD THEATER HOLDINGS, INC. AND
SUBSIDIARIES -- ACQUISITIONS
THEATERS ACQUIRED FROM GC COMPANIES, INC.
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . F-24
Statement of Assets Acquired as of October 31, 1996 . . . . . . . . . . . . . F-25
Statements of Revenues and Direct Operating Expenses for
the Years Ended October 31, 1996 and 1995 . . . . . . . . . . . . . . . . F-26
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-27
Unaudited Statement of Assets Acquired as of July 31, 1997 . . . . . . . . . F-29
Unaudited Interim Statements of Revenues and Direct
Operating Expenses for the Three and Nine Months Ended
July 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . F-30
Notes to Unaudited Interim Financial Statements . . . . . . . . . . . . . . . F-31
ESCAPE THEATRES, INC.
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . F-32
Balance Sheet as of September 30, 1996 . . . . . . . . . . . . . . . . . . . F-33
Statement of Operations for the Year Ended September 30, 1996 . . . . . . . . F-34
Statement of Cash Flows for the Year Ended September 30, 1996 . . . . . . . . F-35
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-36
Unaudited Condensed Balance Sheet as of March 31, 1997 . . . . . . . . . . . F-39
Unaudited Condensed Statements of Operations for the Three
and Six Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . F-40
Unaudited Condensed Statements of Cash Flows for the Three
and Six Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . F-41
Notes to Unaudited Interim Condensed Financial Statements . . . . . . . . . . F-42
THEATERS ACQUIRED FROM UNITED ARTISTS THEATRE CIRCUIT, INC.
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . F-43
Statements of Revenues and Direct Operating Expenses for the
Nine Months Ended September 30, 1996 and the Year
Ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . F-44
Notes to Statements of Revenues and Direct Operating
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-45
</TABLE>
F-1
<PAGE> 89
<TABLE>
<S> <C>
THEATERS ACQUIRED FROM CROWN CINEMA CORPORATION AND CROWN
THEATRE CORPORATION
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . F-47
Statements of Revenues and Direct Operating Expenses for
the Nine Months Ended September 30, 1996 and the Years
Ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . F-48
Notes to Statements of Revenues and Direct Operating Expenses . . . . . . . . F-49
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Pro Forma Condensed Consolidated Financial
Statements Headnote . . . . . . . . . . . . . . . . . . . . . . . . . . . P-1
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1996 . . . . . . . . . . . . . P-2
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Six Months Ended June 30, 1997 . . . . . . . . . . . . P-3
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . P-4
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . P-5
FINANCIAL STATEMENT SCHEDULE
Report of Independent Public Accountants on
Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . S-1
Schedule II - Valuation and Qualifying Accounts -
for the Year Ended December 31, 1996
and for the Period from Inception
(July 11, 1995), through December 31, 1995 . . . . . . . . . . . . . . . . S-2
</TABLE>
F-2
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hollywood Theater Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of
Hollywood Theater Holdings, Inc. (a Delaware corporation) and subsidiaries as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year ended December
31, 1996, and for the period from inception (July 11, 1995), through December
31, 1995. These financial statements are the responsibility of Hollywood
Theater Holdings, Inc.'s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Hollywood Theater
Holdings, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the year ended December
31, 1996, and for the period from inception (July 11, 1995), through December
31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
April 29, 1997
F-3
<PAGE> 91
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 3,559,454 $ 447,343
Accounts receivable ....................................................... 366,142 49,762
Accounts receivable -- related parties .................................... 634,300 --
Inventories ............................................................... 446,180 --
Prepaid and other current assets .......................................... 1,267,255 119,288
Deposits .................................................................. 1,564,046 20,679
------------ ------------
Total current assets ............................................... 7,837,377 637,072
Property and equipment:
Buildings ................................................................. 15,645,107 --
Furniture and equipment ................................................... 14,045,128 2,609,741
Leasehold improvements .................................................... 8,448,726 1,351,295
Land ...................................................................... 4,889,288 --
Land improvements ......................................................... 428,965 --
Construction in progress .................................................. 1,100,970 --
------------ ------------
44,558,184 3,961,036
Less -- Accumulated depreciation and amortization ......................... (1,442,624) (319,249)
------------ ------------
Property and equipment, net ........................................ 43,115,560 3,641,787
Other assets:
Goodwill, net ............................................................. 30,782,899 7,044,691
Intangible assets, net .................................................... 10,619,457 1,606,517
------------ ------------
Total other assets ................................................. 41,402,356 8,651,208
------------ ------------
Total assets ....................................................... $ 92,355,293 $ 12,930,067
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ..................................... $ 5,887,458 $ 1,602,853
Federal income taxes payable .............................................. 17,550 400,802
Note payable .............................................................. -- 100,000
Current maturities of long-term debt ...................................... 136,680 375,000
Current maturities of capital lease obligation ............................ 32,432 44,329
------------ ------------
Total current liabilities .......................................... 6,074,120 2,522,984
Other liabilities:
Long-term debt, net of current maturities ................................. 50,500,000 8,425,000
Capital lease obligation, net of current maturities ....................... -- 32,432
Deferred lease expenses ................................................... 657,888 112,143
------------ ------------
Total liabilities .................................................. 57,232,008 11,092,559
Commitments and contingencies (Note 11)
Convertible preferred stock, $.01 par value, 500,000 shares
authorized:
Series B Preferred Stock, $.01 par value, 163,319 shares
issued and outstanding in 1996, none in 1995 ............................ 1,633 --
Additional paid-in capital ................................................ 28,577,697 --
Stockholders' equity
Series A Preferred Stock, 5,090 shares issued and
outstanding in 1995, none in 1996 ....................................... -- 51
Common stock, $.01 par value, 500,000 and 100,000 shares
authorized in 1996 and 1995, respectively; 82,489 and
22,622 shares issued and outstanding in 1996 and 1995, respectively ..... 825 226
Additional paid-in capital ................................................ 11,160,881 2,744,723
Accumulated deficit ....................................................... (4,617,751) (907,492)
------------ ------------
Total stockholders' equity ......................................... 6,543,955 1,837,508
------------ ------------
Total liabilities and stockholders' equity ......................... $ 92,355,293 $ 12,930,067
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE> 92
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM INCEPTION (JULY 11, 1995), THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Admissions .................................................................. $ 15,334,877 $ 3,912,596
Concessions ................................................................. 8,709,985 2,304,860
Other operating revenues .................................................... 834,378 116,205
------------ ------------
Total revenues ...................................................... 24,879,240 6,333,661
------------ ------------
Operating expenses:
Film rental and advertising costs ........................................... 8,387,938 2,336,535
Cost of concessions and other ............................................... 1,411,869 339,476
Theater operating expenses .................................................. 10,998,455 2,620,045
General and administrative expenses ......................................... 1,601,185 742,605
Depreciation and amortization ............................................... 3,151,582 739,028
------------ ------------
Total operating expenses ............................................ 25,551,029 6,777,689
------------ ------------
Operating loss ................................................................ (671,789) (444,028)
Interest expense, net ......................................................... 2,120,722 463,464
------------ ------------
Net loss ...................................................................... $ (2,792,511) $ (907,492)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 93
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM INCEPTION (JULY 11, 1995), THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK
------------------------ ------------------------
ADDITIONAL
SHARES SHARES PAID-IN ACCUMULATED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL DEFICIT TOTAL
------------ -------- ------------ -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 11, 1995 .. -- $ -- -- $ -- $ -- $ -- $ --
Initial
capitalization ...... 5,090 51 22,622 226 2,544,723 -- 2,545,000
Issuance of detachable
warrants ............ -- -- -- -- 200,000 -- 200,000
Net loss .............. -- -- -- -- -- (907,492) (907,492)
------------ -------- ------------ -------- ------------ ------------ ------------
Balance, December 31,
1995 ................. 5,090 51 22,622 226 2,744,723 (907,492) 1,837,508
Issuance of stock ..... 85,000 850 90,040 901 22,753,365 -- 22,755,116
Retirement of stock ... (90,090) (901) (30,173) (302) (14,137,207) -- (14,138,410)
Retirement of warrant . -- -- -- -- (200,000) (140,850) (340,850)
Stock dividend ........ -- -- -- -- -- (422,355) (422,355)
Cash dividend ......... -- -- -- -- -- (354,543) (354,543)
Net loss .............. -- -- -- -- -- (2,792,511) (2,792,511)
------------ -------- ------------ -------- ------------ ------------ ------------
Balance, December 31,
1996 ................. -- $ -- 82,489 $ 825 $ 11,160,881 $ (4,617,751) $ 6,543,955
============ ======== ============ ======== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 94
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM INCEPTION (JULY 11, 1995), THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (2,792,511) $ (907,492)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization .......................................... 3,151,582 739,028
Deferred lease expenses ................................................ 545,745 148,940
Changes in assets and liabilities
Increase in accounts receivable ...................................... (950,680) (49,762)
Increase in prepaids and other current assets ........................ (963,192) (22,190)
Increase in inventories .............................................. (316,369) --
Decrease in other assets ............................................. -- 15,897
Increase in deposits ................................................. (1,543,367) --
Increase in accounts payable and accrued expenses .................... 4,284,605 258,051
Decrease in federal income taxes payable ............................. (383,252) --
------------ ------------
Net cash provided by operating activities ......................... 1,032,561 182,472
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ....................................... (10,734,244) (805,177)
Payments for business acquisitions, net of cash
acquired ............................................................... (58,986,124) (9,863,792)
------------ ------------
Net cash used in investing activities ............................. (69,720,368) (10,668,969)
------------ ------------
Cash flows from financing activities:
Borrowings under note payable ............................................. -- 100,000
Borrowings under long-term debt ........................................... 58,427,734 9,000,000
Payment of financing fees ................................................. (3,718,121) --
Repayments of capital lease obligation .................................... (44,329) (20,563)
Repayments of note payable and long-term debt ............................. (16,691,054) (690,597)
Proceeds from issuance of stock ........................................... 48,659,491 2,545,000
Repurchase of stock ....................................................... (14,138,410) --
Retirement of warrants .................................................... (340,850) --
Dividends paid ............................................................ (354,543) --
------------ ------------
Net cash provided by financing activities ......................... 71,799,918 10,933,840
------------ ------------
Net increase in cash ........................................................ 3,112,111 447,343
Cash and cash equivalents, beginning of period .............................. 447,343 --
------------ ------------
Cash and cash equivalents, at year-end ...................................... $ 3,559,454 $ 447,343
============ ============
Supplemental information:
Cash paid for interest .................................................... $ 2,088,838 $ 386,631
============ ============
Noncash transactions:
Issuance of detachable warrants for common stock .......................... $ -- $ 200,000
============ ============
Stock dividend ............................................................ $ 422,355 $ --
============ ============
Issuance of stock in connection with business
acquisitions ........................................................... $ 2,252,600 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 95
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION
Hollywood Theater Holdings, Inc. and its wholly owned subsidiary,
Hollywood Theaters, Inc. (HTI), both Delaware corporations, were formed in June
1995 to purchase all of the outstanding shares of Trans Texas Amusements, Inc.
("TransTexas") and affiliates. Crown Theatre Corporation became a wholly owned
subsidiary of Hollywood Theater Holdings, Inc. when it was acquired on November
1, 1996, the effective date of the purchase. Hollywood Theater Holdings, Inc.,
Hollywood Theaters, Inc., and Crown Theatre Corporation (collectively
"Holdings") owned and operated 72 motion picture theaters at December 31, 1996.
Holdings currently operates theaters in Idaho, Kansas, Missouri, Ohio,
Oklahoma, and Texas.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of
Hollywood Theater Holdings, Inc., and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of operating funds held in financial
institutions and petty cash held by the theaters. The Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
Deposits
Deposits consist of funds held in escrow in accordance with certain
purchase agreements.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of concession products and theater supplies.
Accounts Receivable
Accounts receivable are due primarily from vendors and film companies
for reimbursable vendor promotion costs and film advertising costs. Film
advertising reimbursements are generally credited against the film rental
expense. Vendor promotion reimbursements are included in other income.
Prepaid and Other Current Assets
Prepaid and other current assets consist of prepaid insurance and
theater start-up costs. Theater start-up costs are amortized over a one-year
period.
Property and Equipment
Property and equipment are stated at cost. Depreciation of furniture
and equipment, and buildings is provided using the straight-line method over an
eight-year period and thirty-year period, respectively. Leasehold improvements
F-8
<PAGE> 96
are amortized using the straight-line method over the lesser of the lease
period or the estimated useful lives of the leasehold improvements.
Intangible Assets
Intangible assets include deferred finance costs and covenants
not-to-compete which are amortized using the straight-line method over a five
year period.
Goodwill
Goodwill is recorded as the excess of cost over fair value of assets
acquired and is amortized over 15 years. Accumulated amortization of goodwill
was approximately $1,213,000 and $246,000 at December 31, 1996 and 1995,
respectively.
Holdings reviews the carrying value of goodwill at least annually on a
market-by-market basis to determine if facts and circumstances exist which
would suggest the goodwill may be impaired or that the amortization period
needs to be modified. Among the factors Holdings considers in making the
evaluation are changes in Holdings' market position, reputation, profitability
and geographic penetration. If indicators are present which may indicate
impairment is probable, Holdings will prepare a projection of the undiscounted
cash flows of the specific market and determine if goodwill is recoverable
based on these undiscounted cash flows. If impairment is indicated, then an
adjustment will be made to reduce the carrying amount of the goodwill to its
fair value. Similar reviews are made of other long-lived assets. No such
adjustments were required at December 31, 1996 or 1995.
Deferred Lease Expenses
Rent expense is recognized on a straight-line basis after considering
the effect of rent escalation provisions.
Revenues
Revenues are recognized when admissions and concessions sales are
received at the theaters. Film rental costs are accrued based on the applicable
box office receipts and the terms of the film licenses.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior year statements
to conform them to the current year presentation.
F-9
<PAGE> 97
3. INTANGIBLE ASSETS
A summary of intangible assets at December 31, 1996 and 1995, is as
follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Covenants not-to-compete ................................................ $ 7,098,827 1,000,000
Deferred finance and other costs ........................................ 4,674,016 774,176
------------ ------------
11,772,843 1,774,176
Less- Accumulated amortization ......................................... (1,153,386) (167,659)
------------ ------------
$ 10,619,457 $ 1,606,517
============ ============
</TABLE>
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Senior term note payable to a bank; interest of prime
plus 1.5% (10.25% at December 31, 1995), payable
monthly; principal payable in quarterly installments,
with a final maturity on December 31, 2000; paid in
1996 ................................................................. $ -- 6,500,000
Subordinated term note payable to an individual;
interest ranging from 9%-11.5% payable quarterly;
principal due June 30, 2002; paid in 1996 ............................. -- 2,500,000
Term note payable to a bank; interest of LIBOR plus
2.75% or base rate plus 1.75% (10% at December 31,
1996), payable monthly; principal payments beginning
March, 1998; final maturity on December 31, 2001 ...................... 50,000,000 --
Revolving credit agreement, interest at LIBOR plus 2.75%
or the base rate plus 1.75% (weighted average of 10%
at December 31, 1996); due 2001 ....................................... 500,000 --
Promissory note payable to a bank; interest of prime
plus 1% (9.25% at December 31, 1996); principal and
accrued interest due on November 1, 1997 ............................. 136,680 --
------------ ------------
Total long-term debt .................................................... 50,636,680 9,000,000
Less --
Current maturities .................................................... (136,680) (375,000)
Discount on long-term debt ............................................ -- (200,000)
------------ ------------
Long-term debt .......................................................... $ 50,500,000 $ 8,425,000
============ ============
</TABLE>
At December 31, 1995, Holdings had a working capital line of credit
agreement with a lender that allowed borrowings of up to $100,000 with interest
at prime plus 1.5%. On November 1, 1996, Holdings entered into a $25.0 million
revolving credit agreement and a $50.0 million term note borrowing agreement
with a financial institution which replaced Holdings' prior line of credit
agreement. The proceeds from the term note and revolving credit agreement were
primarily used to retire existing debt and to fund the acquisition of certain
assets from Crown Cinema Corporation and United Artists Theatre Circuit, Inc.
The agreement stipulates that total borrowings are not to exceed 4.75 times
Holdings' "trailing" twelve-month cash flow and certain other restrictions. As
of December 31, 1996, management believes Holdings was in compliance with these
covenants. All borrowings under this agreement are secured by the assets and
all shares of the capital stock of Holdings.
Long-term debt at December 31, 1996, matures as follows:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,680
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 11,250,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 12,750,000
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 20,500,000
-----------
$50,636,680
===========
</TABLE>
F-10
<PAGE> 98
5. LEASES
Holdings leases certain of its theater premises with lease terms of 4
to 20 years. Additionally, certain leases provide for contingent rentals based
on operating results and require the payment of taxes, insurance, and other
costs applicable to the property. Holdings, at its option, may renew a
substantial portion of the leases at defined or then fair rental rates for
various periods. Some leases also provide for escalating rent payments
throughout the lease term. A deferred lease expenses accrual of $657,888 and
$112,143 in 1996 and 1995, respectively has been provided to account for these
leases on a straight-line basis. Rent expense for the periods ended December
31, 1996 and 1995, totaled $2,964,755, and $965,033, respectively.
Future minimum payments under noncancelable leases with initial or
remaining terms in excess of one year at December 31, 1996, are due as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- -------
<S> <C> <C>
1997 ...................................................... $ 6,700,000 $32,802
1998 ...................................................... 6,600,000 --
1999 ...................................................... 6,400,000 --
2000 ...................................................... 5,800,000 --
2001 ...................................................... 5,000,000 --
Thereafter ................................................ 35,600,000 --
----------- -------
Total ........................................... 66,100,000 32,802
Less -- Amount representing interest ...................... -- (337)
----------- -------
$66,100,000 $32,465
=========== =======
</TABLE>
6. INCOME TAXES
As of December 31, 1996, Holdings has a net operating loss (NOL)
carryforward of approximately $2,525,363 for tax reporting purposes which
begins to expire in calendar year 2010. In October 1996, Holdings underwent an
ownership change pursuant to Internal Revenue Code Section 382. Therefore, the
NOL carryforward to future years will be limited. Due to the lack of an
earnings history, the tax benefits normally associated with this NOL
carryforward and other tax assets have been fully valued and have not been
recorded in the accompanying financial statements.
Holdings' deferred income taxes at December 31, 1996 and 1995,
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets --
Amortization ...................................................... $ 112,697 $ 42,256
Deferred lease expenses ........................................... 223,682 50,640
Net operating loss carryforward ................................... 858,623 180,941
Depreciation ...................................................... 48,102 29,443
----------- -----------
Total assets .............................................. 1,243,104 303,280
Less -- Valuation allowance ....................................... (1,243,104) (303,280)
----------- -----------
Total deferred income taxes ............................... $ -- $ --
=========== ===========
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires all entities to disclose
the estimated fair value of its financial instrument assets and liabilities.
Cash and cash equivalents, accounts receivable, and accounts payable and
accrued liabilities are reflected in the consolidated financial statements at
fair value because of the short-term maturity of these instruments. In
addition, the fair value of Holdings' long-term debt and capital lease
obligations were determined to approximate its carrying value since (i) a
substantial amount of the December 31, 1996, long-term debt and capital lease
obligations were issued at fair market value during 1996 and (ii) long-term
debt amounts are interest rate variable in nature.
Changes in the assumptions or estimation methodologies may have a
material effect on these estimated fair values.
F-11
<PAGE> 99
8. STOCKHOLDERS' EQUITY
In April 1996, Holdings issued 50,000 shares of Series A Preferred
Stock ($.01 par value) to Precept Investors, Inc. and Stratford Capital
Partners L.P. (collectively "Precept/Stratford") for proceeds of $5.0 million.
In October 1996, The Beacon Group III Focus Value Fund, L.P.
("Beacon") purchased 35,000 shares of Series A Preferred Stock for $3.5
million.
In November 1996, Beacon purchased approximately $21.5 million of
common stock and shares of a new class of Series B Convertible Redeemable
Preferred Stock ("Series B Preferred Stock"). The Series B Preferred Stock is
redeemable after the seventh anniversary of the issue date by the holders, as
long as a qualifying initial public offering of the common stock has not
occurred. The preferred shares are automatically converted into common stock,
upon completion of a qualifying initial public offering. The Series B Preferred
Stock is convertible, initially on a one-for-one basis, subject to adjustment
to reflect specified antidilution events, including without limitation, stock
splits, stock combinations, certain issuances of equity and certain business
combination transactions. In connection with the transaction, Holdings offered
to purchase the outstanding common stock from existing stockholders for $170
per share. Shareholders sold 30,173 shares to Holdings for a total cost of
approximately $5.0 million. In addition, Holdings exchanged Beacon's and
Precept/Stratford's Series A Preferred Stock for the newly authorized Series B
Preferred Stock at a ratio of 1.75/1.00 shares.
The Board of Directors authorized a 9% preferred stock dividend of
Series B Preferred Stock on December 15, 1996, for $422,355 which was paid in
kind.
In anticipation of the adoption of a stock option plan, 37,000 shares
of common stock have been reserved for issuance.
At December 31, 1995, shares of common stock were reserved for
warrants for the purchase of up to 750 shares of common stock of 10,000 shares
issued and outstanding of Hollywood Theaters, Inc. The exercise price is $0.01
per share and the warrants expire July 11, 2002. The warrants were carried at
their estimated fair value at their issue date. The unexercised warrants were
retired for $340,850 in 1996.
9. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following are condensed consolidating financial statements of
Hollywood Theater Holdings, Inc. and Hollywood Theaters, Inc. (in thousands).
These statements are presented to provide financial information with respect to
Hollywood Theaters, Inc.
F-12
<PAGE> 100
<TABLE>
<CAPTION>
HOLLYWOOD HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1995 THEATER HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
----------------- --------------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash investments . . . . . . $ -- $ 447 $ -- $ 447
Other current assets . . . . . . . . . -- 190 -- 190
--------- -------- ------------- --------
Total current assets . . . . . . . . . -- 637 -- 637
Property, plant and equipment, net . . -- 3,642 -- 3,642
Investment in subsidiaries . . . . . . 1,838 -- (1,838) --
Other noncurrent assets . . . . . . . -- 8,651 -- 8,651
--------- -------- ------------- --------
$ 1,838 $ 12,930 $ (1,838) $ 12,930
========= ======== ============= ========
Liabilities and Equity:
Current liabilities . . . . . . . . . $ -- $ 2,523 $ -- $ 2,523
Long-term debt . . . . . . . . . . . . -- 8,425 -- 8,425
Other noncurrent liabilities . . . . . -- 144 -- 144
Stockholders' equity . . . . . . . . . 1,838 1,838 (1,838) 1,838
--------- -------- ------------- --------
$ 1,838 $ 12,930 $ (1,838) $ 12,930
========= ======== ============= ========
</TABLE>
<TABLE>
<CAPTION>
HOLLYWOOD HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1996 THEATER HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
----------------- --------------------- -------------- ------------- --------
<S> <C> <C> <C> <C>
Assets:
Cash and cash investments . . . . . . . $ -- $ 3,559 $ -- $ 3,559
Other current assets . . . . . . . . . -- 4,278 -- 4,278
--------- -------- ------------- --------
Total current assets . . . . . . . . . -- 7,837 -- 7,837
Property, plant and equipment, net . . -- 43,116 -- 43,116
Investment in subsidiaries . . . . . . 35,260 -- (35,260) --
Other noncurrent assets . . . . . . . -- 41,402 -- 41,402
--------- -------- ------------- --------
$ 35,260 92,355 $ (35,260) $ 92,355
========= ======== ============= ========
Liabilities and Equity:
Current liabilities . . . . . . . . . $ 137 $ 5,937 $ -- $ 6,074
Long-term debt . . . . . . . . . . . . -- 50,500 -- 50,500
Other noncurrent liabilities . . . . . -- 658 -- 658
Convertible Preferred Stock . . . . . 28,579 -- -- 28,579
Stockholders' equity . . . . . . . . . 6,544 35,260 (35,260) 6,544
--------- -------- ------------- --------
$ 35,260 $ 92,355 $ (35,260) $92,355
========= ======== ============= ========
</TABLE>
F-13
<PAGE> 101
<TABLE>
<CAPTION>
HOLLYWOOD HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1995 THEATER HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
- ----------------- --------------------- -------------- ------------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $6,334 $ -- $6,334
------ ------ ------ ------
Costs and Expenses:
Direct theater costs . . . . . . . . . . . . . . . . . . . . . -- 5,296 -- 5,296
General and administrative . . . . . . . . . . . . . . . . . . -- 743 -- 743
Depreciation and amortization . . . . . . . . . . . . . . . . -- 739 -- 739
------ ------ ------ ------
-- 6,778 -- 6,778
------ ------ ------ ------
Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . -- (444) -- (444)
------ ------ ------ ------
Interest expense, net of interest income . . . . . . . . . . . . -- 463 -- 463
------ ------ ------ ------
Equity in loss of subsidiaries. . . . . . . . . . . . . . . . . . (907) -- 907 --
------ ------ ------ ------
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (907) $ (907) $ 907 $ (907)
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
HOLLYWOOD HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1996 THEATER HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
- ----------------- --------------------- -------------- ------------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $24,879 $ -- $24,879
------- ------- ------- -------
Costs and Expenses:
Direct theater costs . . . . . . . . . . . . . . . . . . . . . -- 20,798 -- 20,798
General and administrative . . . . . . . . . . . . . . . . . . -- 1,601 -- 1,601
Depreciation and amortization . . . . . . . . . . . . . . . . -- 3,152 -- 3,152
------- ------- ------- -------
-- 25,551 -- 25,551
------- ------- ------- -------
Operating Loss. . . . . . . . . . . . . . . . . . . . . . . . . . -- (672) -- (672)
------- ------- ------- -------
Interest expense, net of interest income . . . . . . . . . . . . -- 2,121 -- 2,121
------- ------- ------- -------
Equity in loss of subsidiaries. . . . . . . . . . . . . . . . . . (2,793) -- 2,793 --
------- ------- ------- -------
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,793) $(2,793) $ 2,793 $(2,793)
======= ======= ======= =======
</TABLE>
F-14
<PAGE> 102
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEARS ENDED:
<TABLE>
<CAPTION>
HOLLYWOOD THEATER HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1995 HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
- ----------------- ----------------- -------------- ------------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities . . . . . . . . . . . . . . $ -- $ 182 $ -- $ 182
Cash Flows from Investing Activities:
Purchases of property and equipment . . . . . . . . . . . . . -- (805) -- (805)
Payments for business acquisitions, net of cash acquired . . . -- (9,864) -- (9,864)
Contributions to subsidiaries . . . . . . . . . . . . . . . . . (2,545) -- 2,545 --
---------- -------- --------- --------
(2,545) (10,669) 2,545 (10,669)
Cash Flows from Financing Activities:
Borrowings under note payable and long-term debt. . . . . . . . 9,100 -- 9,100
Repayments of note payable and long-term debt . . . . . . . . . -- (691) -- (691)
Proceeds from issuance of stock . . . . . . . . . . . . . . . . 2,545 2,545 (2,545) 2,545
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (20) -- (20)
---------- -------- --------- --------
2,545 10,934 (2,545) 10,934
---------- -------- --------- --------
Net Increase in Cash . . . . . . . . . . . . . . . . . . . . . . $ -- $ 447 $ -- $ 447
========== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
HOLLYWOOD THEATER HOLLYWOOD CONSOLIDATING HOLDINGS
DECEMBER 31, 1996 HOLDINGS INC. THEATERS, INC. ENTRIES CONSOL'D
- ----------------- ----------------- -------------- ------------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities . . . . . . . . . . . . . . $ -- $ 1,032 $ -- $ 1,032
---------- -------- --------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment . . . . . . . . . . . . . -- (10,734) -- (10,734)
Payments for business acquisitions, net of cash acquired . . . -- (58,986) -- (58,986)
Contributions to subsidiaries . . . . . . . . . . . . . . . . . (48,659) -- 48,659 --
---------- -------- --------- --------
(48,659) (69,720) 48,659 (69,720)
Cash Flows from Financing Activities:
Borrowings under note payable and long-term debt -- 58,428 -- 58,428
Repayments of note payable and long-term debt -- (16,691) -- (16,691)
Proceeds from issuance of stock . . . . . . . . . . . . . . . 48,659 48,659 (48,659) 48,659
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (18,596) -- (18,596)
---------- -------- --------- --------
48,659 71,800 (48,659) 71,800
---------- -------- --------- --------
Net Increase in Cash . . . . . . . . . . . . . . . . . . . . . . $ -- $ 3,112 $ -- $ 3,112
========== ======== ========= ========
</TABLE>
F-15
<PAGE> 103
Notes to Condensed Consolidated Financial Statements
(a) These condensed consolidating financial statements should be read in
conjunction with the consolidated financial statements of Holdings and
notes thereto of which this note is an integral part.
(b) As of December 31, 1995, Holdings owns 100% interest in Hollywood
Theaters, Inc.. These condensed consolidating financial statements
present Holdings' investment in its subsidiaries using the equity
method. Under this method, investments are recorded at cost and
adjusted for the parent company's ownership share of the subsidiary's
cumulative results of operations. In addition, investments increase in
the amount of contributions to subsidiaries and decrease in the amount
of distributions from subsidiaries.
10. RETIREMENT SAVINGS PLAN
Holdings has a 401(k) profit sharing plan for the benefit of all
eligible employees and makes contributions as determined annually by the Board
of Directors. No contributions were made in 1996 or 1995.
11. ACQUISITIONS
Effective July 11, 1995, Holdings acquired for approximately
$6,600,000 in cash and $2,500,000 in debt, all of the outstanding capital stock
of TransTexas, which includes 11 theaters in Texas and Oklahoma.
Effective April 11, 1996, Holdings acquired, for $3,264,000 in cash,
six theaters in Texas from Cinemore, Inc. and related entities.
Effective August 12, 1996, Holdings acquired, for $1,798,000 in cash,
two theaters in Texas from Beaumont Cinema Ventures, L.P.
Effective November 1, 1996, Holdings acquired 33 theaters primarily in
Kansas, Missouri, and Ohio from Crown Cinema Corporation and Crown Theatre
Corporation. Holdings issued 12,872 shares of its common stock to the seller,
at a fair market value of $2,252,600, and paid cash of $41,123,000 to the
seller for these acquisitions. As specified in the Crown Cinema Corporation
purchase agreement, an adjustment will be made to the purchase price based upon
the performance of the acquired theaters between September 8, 1996, and October
31, 1996. As of December 31, 1996, the amount of this adjustment had not been
finalized. Therefore, the purchase price allocation used to ascertain the
associated value of goodwill, and other acquired assets is preliminary.
Potentially, 3,218 shares of additional common stock may be issued to the
former stakeholder of Crown Cinema Corporation upon final agreement of the
purchase price. The former stakeholder of Crown Cinema Corporation is now a
stockholder and consultant with Holdings.
Effective November 14, 1996, Holdings acquired, for $700,000 in cash,
two theaters in Texas from General Cinema Corp. of Texas.
Effective in November and December 1996, Holdings acquired, for
$11,285,000 in cash, 19 theaters in Idaho, Oklahoma, and Texas from United
Artists Theatre Circuit Inc. and related entities.
The 1996 and 1995 acquisitions have been accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the assets acquired (including all identifiable intangible assets, if material)
based upon their estimated fair values at the dates of acquisition in
accordance with APB No. 16. The results of operations of the acquired theaters
are included in the consolidated financial statements from the respective dates
of acquisition. None of the acquisition agreements contain any significant
earn-out provisions with the sellers.
F-16
<PAGE> 104
The following is a summary of the net assets acquired and liabilities
assumed in connection with the foregoing acquisitions in 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets acquired:
Cash and cash equivalents ......................................... $ 55,661 $ --
Inventories ....................................................... 129,844 71,370
Prepaid current assets and other .................................. 442,026 106,649
----------- -----------
Total current assets ...................................... 627,531 178,019
Furniture and equipment ........................................... 9,011,295 2,122,221
Leasehold improvements ............................................ 6,123,077 594,313
Building .......................................................... 10,963,717 --
Land .............................................................. 2,989,902 --
Land improvements ................................................. 436,254 --
Construction-in-progress .......................................... 117,297 --
Covenants not-to-compete .......................................... 6,098,827 1,000,000
----------- -----------
Total other assets ........................................ 35,740,369 3,716,534
----------- -----------
Total assets acquired ..................................... 36,367,900 3,894,553
----------- -----------
Liabilities assumed:
Accounts payable .................................................. -- 1,808,315
Note payable ...................................................... -- 690,597
----------- -----------
Total liabilities assumed ................................. -- 2,498,912
----------- -----------
Net assets acquired ....................................... 36,367,900 1,395,641
Purchase price, including acquisition costs ......................... 61,073,027 9,089,620
----------- -----------
Goodwill ............................................................ $24,705,127 $ 7,693,979
=========== ===========
</TABLE>
Pro Forma Information
The following unaudited pro forma information reflects the effect on
the consolidated statements of operations assuming that significant
acquisitions were consummated as of January 1, 1996 and 1995. This information
may not be indicative of the results that would have actually been obtained if
the acquisitions had occurred on such dates. Therefore, pro forma information
cannot be considered indicative of future operations. The unaudited pro forma
information for the year ended December 31, 1996 and the period from inception
(July 11, 1995), through December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Total revenues ...................................................... $78,710,000 $37,830,000
Net income .......................................................... 4,323,000 3,102,000
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
Holdings, in the normal course of business, is party to various
matters of litigation. Management is of the opinion that the eventual outcome
of these matters will not have a material adverse effect on Holdings' financial
position or results of operations.
13. RELATED-PARTY TRANSACTIONS
Precept Investors, Inc. ("Precept"), one of Holdings' shareholders,
has been engaged by Holdings to construct various theaters. During 1996,
Precept was involved in the construction of one theater and the improvements to
one existing theater, and was paid approximately $4,600,000 for these services.
At December 31, 1996, approximately $1,200,000 was owed to Precept and is
included in accounts payable and accrued expenses on the accompanying balance
sheet.
At December 31, 1996, Holdings was owed approximately $615,000 by a
current shareholder and consultant with Holdings, who is a former stakeholder
of Crown Cinema Corporation and Crown Theatre Corporation. The receivable
primarily represents costs paid by Holdings for services performed prior to the
acquisition of the theaters by Holdings.
14. SUBSEQUENT EVENTS - Loan, Theater Development, and Equity Issuances
In March 1997, Holdings received a commitment for a long-term, first
mortgage loan of $3.8 million from a financial institution. The proceeds will
be used to construct a theater in Lawrence, Kansas. Holdings began construction
in January 1997, with completion in May 1997.
F-17
<PAGE> 105
In March 1997, Holdings entered into a purchase contract for $8.7
million to acquire a 16-screen theater under construction in Waco, Texas (the
"Waco Acquisition"). Additionally, Holdings has committed $2.1 million for the
purchase of furniture, fixtures, and equipment for this theater. The purchase
will be accounted for using the purchase method of accounting. Construction
should be completed in August 1997. Holdings also signed a contract to buy land
in Norman, Oklahoma, for $2.9 million.
In April 1997, Holdings signed a letter of intent to buy two theaters
for $8.5 million. The purchase will be accounted for using the purchase method
of accounting. Additionally, the Board of Directors approved 200,000 shares of
$.01 par value Series C Convertible Redeemable Preferred Stock. Additionally,
Holdings sold 43,076 shares of this preferred stock and 18,462 of common stock.
Net proceeds from the sale of the 61,500 shares were approximately $12.0
million and were used to finance the above transactions and current
construction activity.
15. SUBSEQUENT EVENTS (UNAUDITED) - Senior Subordinated Notes Offering and
Acquisitions
On August 1, 1997, HTI completed a $110.0 million offering of Senior
Subordinated Notes. The Notes bear interest at 10 5/8% and are due 2007. The
Notes are redeemable at HTI's option and upon the occurrence of certain events
in the future. The Notes also include certain restrictive covenants relative
to the maintenance of financial ratios and the incurrence of additional
indebtedness.
During the six months ended June 30, 1997, HTI paid approximately $12.0
million consideration in connection with acquisitions. The acquisitions
will be accounted for under the Purchase Method of Accounting.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the year ended
December 31, 1996, and the period from inception (July 11, 1995) through
December 31, 1995, are as follows:
Year Ended December 31, 1996
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues .................................. 2,716,463 $ 3,779,273 $ 4,908,796 $ 13,474,708
Operating expenses .................................. 3,161,029 4,180,596 5,006,021 13,203,383
------------ ------------ ------------ ------------
Operating income (loss) ............................. (444,566) (401,323) (97,225) 271,325
Interest expense, net ............................... 219,113 218,298 275,959 1,407,352
------------ ------------ ------------ ------------
Net loss .................................. $ (663,679) $ (619,621) $ (373,184) $ (1,136,027)
============ ============ ============ ============
</TABLE>
Period from Inception (July 11, 1995), Through December 31, 1995
<TABLE>
<CAPTION>
THIRD FOURTH
QUARTER QUARTER
----------- -----------
<S> <C> <C>
Operating revenues ...................................................... $ 3,219,016 $ 3,114,645
Operating expenses ...................................................... 3,220,023 3,557,666
----------- -----------
Operating loss .......................................................... (1,007) (443,021)
Interest expense, net ................................................... 226,910 236,554
----------- -----------
Net loss ................................................................ $ (227,917) $ (679,575)
=========== ===========
</TABLE>
F-18
<PAGE> 106
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1997
-------------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents ................................................................... $ 4,878,312
Accounts receivable ......................................................................... 1,047,661
Inventories ................................................................................. 734,366
Prepaid and other current assets ............................................................ 1,845,419
Deposits .................................................................................... 2,195,072
-------------
Total current assets ................................................................ 10,700,830
Property and equipment:
Buildings ................................................................................... 28,844,827
Furniture and equipment ..................................................................... 20,819,117
Leasehold improvements ...................................................................... 13,352,081
Land and land improvements .................................................................. 12,385,820
Construction in progress .................................................................... 1,597,353
-------------
76,999,198
Less -- Accumulated depreciation and amortization ........................................... (4,135,364)
-------------
Property and equipment, net ......................................................... 72,863,834
Other assets:
Goodwill, net ............................................................................... 35,176,687
Intangible assets, net ...................................................................... 11,204,701
-------------
Total other assets .................................................................. 46,381,388
-------------
Total assets ........................................................................ $ 129,946,052
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....................................................... $ 7,596,743
Current maturities of long-term debt ........................................................ 3,936,680
Other current liabilities ................................................................... 29,399
-------------
Total current liabilities ........................................................... 11,562,822
Other liabilities:
Long-term debt .............................................................................. 64,500,000
Deferred lease expenses ..................................................................... 953,662
-------------
Total other liabilities ............................................................. 65,453,663
-------------
Total liabilities ................................................................... 77,016,485
Commitments and contingencies
Convertible preferred stock
Series B preferred stock, $ 01 par value, 400,000 shares authorized, 163,319 shares
issued and outstanding in 1997 ........................................................... 1,633
Series C preferred stock, $ 01 par value, 400,000 shares authorized, 78,973 shares
issued and outstanding in 1997 ........................................................... 790
Additional paid-in capital .................................................................. 45,493,707
Stockholders' equity
Common stock, $ 01 par value, 1,000,000 shares authorized in
1997; 116,336 shares issued and outstanding .............................................. 1,163
Additional paid-in capital .................................................................. 17,760,708
Accumulated deficit ......................................................................... (10,328,434)
-------------
Total stockholders' equity .......................................................... 7,433,437
-------------
Total liabilities and stockholders' equity .......................................... $ 129,946,052
=============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-19
<PAGE> 107
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
---------------------------- ----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Admissions and other operating revenue .......... $ 10,713,565 $ 2,358,260 $ 21,144,059 $ 4,069,214
Concessions ..................................... 5,677,361 1,421,013 11,098,949 2,426,522
------------ ------------ ------------ ------------
Total revenues .......................... 16,390,926 3,779,273 32,243,008 6,495,736
------------ ------------ ------------ ------------
Operating expenses:
Film rental and advertising costs ............... 5,721,357 1,432,013 11,447,954 2,374,164
Cost of concessions and other ................... 901,199 218,560 1,754,273 363,742
Theater operating expenses ...................... 7,040,444 1,780,805 13,682,876 3,132,613
General and administrative expenses ............. 1,271,247 336,620 2,358,316 645,910
Depreciation and amortization ................... 2,392,649 412,597 4,946,254 825,195
------------ ------------ ------------ ------------
Total operating expenses ................ 17,326,896 4,180,595 34,189,673 7,341,624
------------ ------------ ------------ ------------
Operating loss .................................... (935,970) (401,322) (1,946,665) (845,888)
Interest expense, net ............................. 1,302,338 218,299 2,246,953 437,412
------------ ------------ ------------ ------------
Net loss .......................................... $ (2,238,308) $ (619,621) $ (4,193,618) $ (1,283,300)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 108
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net cash used in operating activities ........................... $ (411,887) $ (963,953)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ..................................... (27,141,050) (2,310,797)
Payments for business acquisitions, net of cash acquired ................ (11,951,849) (3,914,378)
------------ ------------
Net cash used in investing activities ........................... (39,092,899) (6,225,175)
------------ ------------
Cash flows from financing activities:
Borrowings under line of credit ......................................... 17,800,000 828,490
Repayments of capital lease obligations ................................. (20,616) (221,611)
Payment of financing fees ............................................... (472,705) --
Proceeds from issuance of stock ......................................... 23,516,965 6,802,516
------------ ------------
Net cash provided by financing activities ....................... 40,823,644 7,409,395
------------ ------------
Net increase in cash ...................................................... 1,318,858 220,267
Cash and cash equivalents, beginning of period ............................ 3,559,454 447,343
------------ ------------
Cash and cash equivalents, end of period .................................. $ 4,878,312 $ 667,610
============ ============
Noncash transactions:
Stock dividend .......................................................... 1,517,065 112,015
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 109
HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Condensed
Consolidated Financial Statements of Hollywood Theater Holdings, Inc. and
subsidiaries ("Holdings") include all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly Holdings' financial position
as of June 30, 1997, and the results of its operations for the three months
ended June 30, 1997 and 1996. Due to the seasonality of Holdings' operations,
the results of its operations for the interim period ended June 30, 1997 and
1996, may not be indicative of total results for the full year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission. The unaudited Interim Condensed
Consolidated Financial Statements should be read in conjunction with the
audited Consolidated Financial Statements of Hollywood Theater Holdings, Inc.
and accompanying notes for the years ended December 31, 1996 and 1995.
2. FINANCING ARRANGEMENTS
At June 30, 1996, Holdings had a working capital line of credit
agreement with a lender that allowed borrowings of up to $100,000 with interest
at prime plus 1.5%. On November 1, 1996, Holdings entered into a $25.0 million
revolving credit agreement and a $50.0 million term note borrowing agreement
with a financial institution which replaced Holdings' prior line of credit
agreement. The proceeds from the term note and revolving credit agreement were
primarily used to retire existing debt and to fund the acquisition of certain
assets from Crown Cinema Corporation and United Artists Theatre Circuit, Inc.
The agreement stipulates that total borrowings are not to exceed 4.75 times
Holdings' "trailing" twelve-month cash flow and certain other restrictions. As
of June 30, 1997, management believes Holdings was in compliance with these
covenants. All borrowings under this agreement are secured by the assets and
all shares of the capital stock of Holdings.
3. ACQUISITIONS
In March 1997, Holdings entered into a purchase contract for $8.7
million to acquire a 16-screen theater under construction in Waco, Texas (The
"Waco Acquisition"). Additionally, Holdings has committed $2.1 million for the
purchase of furniture, fixtures, and equipment for this theater. The purchase
will be accounted for using the purchase method of accounting. Construction
should be completed in August 1997. Holdings also signed a contract to buy land
in Norman, Oklahoma, for $2.9 million.
In May 1997, Holdings completed the Beaumont/Port Arthur Acquisition,
pursuant to which it acquired two theaters with an aggregate of 12 screens in
Beaumont and Port Arthur, Texas from United Artists Theatre Circuit Inc. for a
purchase price of $3.4 million. Holdings expects these newly acquired theaters
to complement the Company's existing theaters in Beaumont.
In June 1997, Holdings completed the acquisition of two theaters with
an aggregate of 14 screens in Killeen, Texas from Escape Theatres, Inc. for a
purchase price of $8.5 million.
In June 1997, Holdings entered into a letter of intent with respect to
the purchase of seven theaters with an aggregate of 50 screens located in Tulsa
and Oklahoma City, Oklahoma from GC Companies, Inc. for a purchase price of
approximately $15.8 million. This acquisition is subject to certain conditions
and is expected to close in the third quarter of 1997.
F-22
<PAGE> 110
Pro Forma Information
The following unaudited pro forma information reflects the effect on
the consolidated statements of operations assuming that significant
acquisitions were consummated as of January 1, 1997 and 1996. This information
may not be indicative of the results that would have actually been obtained if
the acquisitions had occurred on such dates. Therefore, pro forma information
cannot be considered indicative of future operations. The unaudited pro forma
information for the six months ended June 30, 1997 and the six months ended
June 30, 1996 is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
Total revenues . . . . . . . . . . . $42,865,000 $37,380,000
Net loss . . . . . . . . . . . . . . (3,661,000) (4,050,000)
</TABLE>
4. EQUITY ISSUANCES
In April 1997, Holdings issued 43,076 shares of Series C Preferred
Stock ($.01 par value) ("Series C") and 18,462 shares of common stock ($.01 par
value) to the Beacon Group III Focus Value Fund, L.P. and Stratford Capital
Patners, L.P. for approximately $12.0 million.
In May 1997, Holdings issued 35,897 shares of Series C and 15,385
shares of common stock for approximately $10.0 million.
5. COMMITMENTS AND CONTINGENCIES
Holdings, in the normal course of business, is party to various
matters of litigation. Management is of the opinion that the eventual outcome
of these matters will not have a material adverse effect on Holdings' financial
position or results of operations.
6. SENIOR SUBORDINATED NOTES OFFERING
Hollywood Theaters, Inc. ("HTI"), a wholly owned subsidiary of
Holdings, completed an offering of $110.0 million of Senior Subordinated Notes
(the "Offering") in August 1997. The notes bear interest at 10 5/8% and are due
2007. The notes are redeemable at HTI's option and upon the occurrence of
certain events in the future. The notes also include certain restrictive
covenants relative to the maintenance of financial ratios and the incurrence of
additional indebtedness. HTI used the net proceeds from the Offering to repay
all of the existing indebtedness under its existing facility and to finance the
Waco Acquisition and certain theaters in Oklahoma. The balance of the net
proceeds will be used to pay a portion of construction and other expenses
relating to Holdings' 1997 theater building program and for general corporate
purposes.
F-23
<PAGE> 111
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hollywood Theater Holdings, Inc.:
We have audited the accompanying statement of assets acquired of the
theaters acquired (the "Acquired Theaters") from GC Companies, Inc. as of
October 31, 1996, and the related statements of revenues and direct operating
expenses for the years ended October 31, 1996 and 1995. These financial
statements are the responsibility of GC Companies, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The statements of assets acquired and revenues and direct operating
expenses for the Acquired Theaters were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1, and are not intended to be a complete presentation of
assets, revenues, and expenses.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the assets acquired of the Acquired Theaters
as of October 31, 1996, and the revenues and direct operating expenses for the
years ended October 31, 1996 and October 31, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
July 30, 1997
F-24
<PAGE> 112
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
STATEMENT OF ASSETS ACQUIRED
AS OF OCTOBER 31, 1996
<TABLE>
<S> <C>
Cash and cash equivalents .................................. $ 129,091
Inventories ................................................ 61,322
Property and equipment ..................................... 4,782,667
----------
Total assets acquired ............................ $4,973,080
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-25
<PAGE> 113
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Admissions .......................................... $10,973,332 $10,096,860
Concessions ......................................... 4,987,201 4,464,015
Other operating revenues ............................ 214,137 167,072
----------- -----------
Total revenues .............................. 16,174,670 14,727,947
Operating expenses:
Film rental and advertising costs ................... 6,366,263 5,835,820
Cost of concessions and other ....................... 743,146 741,061
Theater operating expenses .......................... 5,719,805 5,702,602
----------- -----------
Total operating expenses .................... 12,829,214 12,279,483
----------- -----------
Excess of revenues over direct operating expenses ..... $ 3,345,456 $ 2,448,464
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 114
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 AND 1995
1. BASIS OF PRESENTATION
Seven theaters (the "Acquired Theaters") owned by GC Companies, Inc.
are in the process of being acquired by Hollywood Theaters, Inc. The
transaction is expected to close by July 31, 1997.
The accompanying statements of assets acquired and revenues and direct
operating expenses were derived from the historical accounting records of the
Acquired Theaters and are presented for purposes of complying with the rules
and regulations of the Securities and Exchange Commission. The statements do
not include depreciation and amortization expense, general and administrative
expense, interest expense or income taxes as these costs may not be comparable
to the expenses expected to be incurred.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenues
Revenues are recognized when admissions and concessions sales are
received at the theaters. Film rental costs are accrued based on the applicable
box office receipts and the terms of the film licenses. Other revenues consist
primarily of on-screen and slide advertising and electronic video games located
in theater lobbies.
Operating Costs and Expenses
Film rental and advertising costs include film rental and co-op and
directory advertising costs. Film advertising costs are expensed as incurred.
Cost of concession consist solely of direct concession product costs. Other
operating expenses include joint facility costs such as employee costs, theater
rental and utilities which are common to both ticket sales and concession
operations. Rental expense for operating leases which provide for escalating
minimum annual rentals during the term of the lease are accounted for on a
straight-line basis over the terms of the underlying leases and reported as a
component of theater operating expenses.
Cash and Cash Equivalents
Cash and cash equivalents consist of operating funds held in financial
institutions and petty cash held by the theaters. The Acquired Theaters
consider all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of concession products and theater supplies.
Property and Equipment
Property and equipment are stated at cost. Depreciation of furniture
and equipment, and buildings is provided using the straight-line method over a
3 to 20-year period and 20 to 30-year period, respectively. Leasehold
improvements are amortized using the straight-line method over the lesser of
the lease period or the estimated useful lives of the leasehold improvements.
F-27
<PAGE> 115
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. LEASES
The Acquired Theaters lease certain of its theater premises with lease
terms of 20 to 30 years. Additionally, certain leases provide for contingent
rentals based on operating results and require the payment of taxes, insurance,
and other costs applicable to the property. The Acquired Theaters, at its
option, may renew a substantial portion of the leases at defined or then fair
rental rates for various periods. Some leases also provide for escalating rent
payments throughout the lease term. Rent expense for the period ending October
31, 1996 and 1995, totaled $2,056,070, and $2,453,539, respectively.
Future minimum payments under noncancelable leases with initial or
remaining terms in excess of one year at October 31, 1996, are due as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1997 ............................................... $ 2,416,556
1998 ............................................... 2,416,556
1999 ............................................... 2,488,322
2000 ............................................... 2,521,478
2001 ............................................... 2,521,478
Thereafter ......................................... 19,677,775
-----------
Total ..................................... $32,042,165
===========
</TABLE>
F-28
<PAGE> 116
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
STATEMENT OF ASSETS ACQUIRED
AS OF JULY 31, 1997
<TABLE>
<CAPTION>
JULY 31,
1997
----------
(UNAUDITED)
<S> <C>
Cash and cash equivalents ....................................... $ 118,602
Inventories ..................................................... 56,922
Property and equipment .......................................... 9,569,075
----------
Total assets acquired ................................. $9,744,599
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-29
<PAGE> 117
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
INTERIM STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Admissions ...................................... $ 3,520,986 $ 4,383,784 $ 9,644,267 $ 8,895,960
Concessions ..................................... 1,683,345 2,011,747 4,509,435 4,026,622
Other operating revenues ........................ 129,532 83,225 227,394 160,750
----------- ----------- ----------- -----------
Total revenues .......................... 5,333,863 6,478,756 14,381,096 13,083,332
----------- ----------- ----------- -----------
Operating expenses:
Film rental and advertising costs ............... 2,192,746 2,699,199 5,699,600 5,272,949
Cost of concessions and other ................... 384,031 217,365 782,224 523,130
Theater operating expenses ...................... 1,914,126 1,998,124 5,229,508 4,774,986
----------- ----------- ----------- -----------
Total operating expenses ................ 4,490,903 4,914,688 11,711,332 10,571,065
----------- ----------- ----------- -----------
Operating income .................................. $ 842,960 $ 1,564,068 $ 2,669,764 $ 2,512,267
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 118
FOR THE THEATERS ACQUIRED FROM GC COMPANIES, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1997
1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim statements of
assets acquired and revenues and direct operating expenses of the theaters
acquired from GC Companies, Inc. (the "Acquired Theaters") include all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Acquired Theaters' assets to be acquired as of July 31,
1997, and the revenues and direct operating expenses for the three months ended
July 31, 1997 and 1996. Due to the seasonality of the Acquired Theaters'
operations, the revenues and direct operating expenses for the interim period
ended July 31, 1997 and 1996, may not be indicative of total results for the
full year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission. The unaudited interim
statements of assets acquired and revenues and direct operating expenses should
be read in conjunction with the financial statements of the theaters acquired
from GC Companies, Inc. and accompanying notes for the years ended October 31,
1996 and 1995.
The accompanying statements of assets acquired and revenues and direct
operating expenses were derived from the historical accounting records of the
Acquired Theaters and are presented for purposes of complying with the rules
and regulations of the Securities and Exchange Commission. The statements do
not include depreciation and amortization expense, general and administrative
expense, interest expense or income taxes as these costs may not be comparable
to the expenses expected to be incurred.
2. SUBSEQUENT EVENTS
In August 1997, the Acquired Theaters were acquired by Hollywood
Theaters, Inc. for approximately $15.8 million.
F-31
<PAGE> 119
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hollywood Theaters, Inc.:
We have audited the accompanying balance sheet of Escape Theatres,
Inc. (a Texas corporation) as of September 30, 1996, and the related statements
of operations and cash flows for the year ended September 30, 1996. These
financial statements are the responsibility of Escape Theatres, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Escape Theatres,
Inc. as of September 30, 1996, and the results of their operations and cash
flows for the year ended September 30, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
July 1, 1997
F-32
<PAGE> 120
ESCAPE THEATRES, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1996
ASSETS
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Current assets:
Cash and cash equivalents ........................................ $ 402,140
Inventories and other current assets ............................. 20,828
-----------
Total current assets ..................................... 422,968
Property and equipment:
Building ......................................................... 2,058,876
Furniture and equipment .......................................... 1,219,534
Land ............................................................. 220,000
-----------
3,498,410
Less -- Accumulated depreciation ................................. (702,256)
-----------
Property and equipment, net .............................. 2,796,154
Other assets:
Goodwill, net .................................................... 905,440
-----------
Total other assets ....................................... 905,440
-----------
Total assets ............................................. $ 4,124,562
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................ $ 155,120
Federal income taxes payable ..................................... 16,554
Notes payable .................................................... 775,089
Current maturities of long-term debt ............................. 43,332
-----------
Total current liabilities ................................ 990,095
Other liabilities:
Long-term debt, net of current maturities ........................ 1,073,429
-----------
Total liabilities ........................................ 2,063,524
Stockholder's Equity
Common stock, no par value, 2,000,000 shares authorized;
105,001 shares issued and outstanding ......................... 1,050,010
Retained earnings ................................................ 1,011,028
-----------
Total stockholders' equity ............................... 2,061,038
-----------
Total liabilities and stockholders' equity ............... $ 4,124,562
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-33
<PAGE> 121
ESCAPE THEATRES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Revenues:
Admissions ............................................... $2,806,347
Concessions .............................................. 1,245,367
Other operating revenues ................................. 64,974
----------
Total revenues ................................... 4,116,688
Operating expenses:
Film rental and advertising costs ........................ 1,535,815
Cost of concessions and other ............................ 318,372
Theater operating expenses ............................... 1,134,509
General and administrative expenses ...................... 83,302
Depreciation and amortization ............................ 202,738
----------
Total operating expenses ......................... 3,274,736
----------
Operating income ........................................... 841,952
Interest expense, net ...................................... 145,745
Federal income tax provision ............................... 211,554
----------
Net income ................................................. $ 484,653
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-34
<PAGE> 122
ESCAPE THEATRES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Cash flows from operating activities:
Net income ...................................................... $ 484,653
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization ................................ 202,738
Changes in assets and liabilities --
Decrease in inventories and other current assets ............. 3,395
Decrease in accounts payable and accrued expenses ............ (33,091)
Decrease in federal income taxes payable (100,680)
---------
Net cash used in operating activities ................... 557,015
---------
Cash flows from investing activities:
Purchases of property and equipment ............................. (171,671)
---------
Net cash used in investing activities ................... (171,671)
---------
Cash flows from financing activities:
Proceeds from note payable ...................................... 270,000
Repayments of long-term debt .................................... (538,332)
---------
Net cash provided by financing activities ............... (268,332)
---------
Net increase in cash .............................................. 117,012
Cash and cash equivalents, beginning of year ...................... 285,128
---------
Cash and cash equivalents, end of year ............................ $ 402,140
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-35
<PAGE> 123
ESCAPE THEATRES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION
Escape Theatres, Inc., ("Escape") is a Texas corporation formed to own
and operate motion picture theaters in Texas. Escape was incorporated on June
5, 1990, and began operations on November 30, 1990, by acquiring the operating
assets and land of United Artists Theatre Circuit Inc. in Killeen, Texas. At
September 30, 1996, Escape operated three theaters in Killeen, Texas.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consists of operating funds held in
financial institutions and petty cash held by the theaters. Escape considers
all highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Inventories and Other Current Assets
Inventories are stated at cost and consist primarily of concession
products and theater supplies. Other current assets consist primarily of
advanced film rental payments which are required by various film distributors
prior to the release of a highly anticipated film.
Property and Equipment
Property and equipment are stated at cost. Depreciation of furniture,
equipment, and buildings is provided using the straight-line method over a
five-year period, ten-year period, and thirty five-year period, respectively.
Goodwill
Goodwill is recorded as the excess of cost over fair value of assets
acquired and is amortized over 40 years. Accumulated amortization of goodwill
was approximately $26,250 at September 30, 1996.
Revenues
Revenues are recognized when admissions and concessions sales are
received at the theaters.
Rent Expense
Rent expense is recognized on a straight-line basis after considering
the effect of rent escalation provisions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-36
<PAGE> 124
3. LONG-TERM DEBT
Long-term debt at September 30, 1996, consisted of the following:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Term note payable to a bank; interest of eight and
one-quarter percent (8.25% per annum, interest and
principal payable monthly, with a maturity on September
30, 1998) ..................................................... 1,116,761
Less --
Current maturities ............................................ 43,332
----------
Long-term debt .................................................. $1,073,429
==========
</TABLE>
4. LEASES
Escape leases certain of its theater premises with lease terms of 5 to
20 years. Additionally, certain leases provide for contingent rentals based on
operating results and require the payment of taxes, insurance, and other costs
applicable to the property. Escape, at its option, may renew a substantial
portion of the leases at defined or then fair rental rates for various periods.
Some leases also provide for escalating rent payments throughout the lease
term. Rent expense for the period ending September 30, 1996, totaled $115,933.
Future minimum payments under noncancelable leases with initial or
remaining terms in excess of one year at September 30, 1996, are due as
follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1997 ............................................................... $ 101,508
1998 ............................................................... 89,433
1999 ............................................................... 89,433
2000 ............................................................... 89,433
2001 ............................................................... 52,169
Thereafter .........................................................
---------
Total .................................................... $ 421,976
=========
</TABLE>
5. INCOME TAXES
Escape's deferred income taxes at September 30, 1996, consisted of the
following:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Assets --
Capital loss carryforward ................................. $ 27,000
Other ..................................................... 3,000
--------
Total assets ...................................... 30,000
Less -- Valuation allowance ............................... (30,000)
--------
Total deferred income taxes ....................... $ --
========
</TABLE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires all entities to disclose
the estimated fair value of its financial instrument assets and liabilities.
Cash and cash equivalents, accounts receivable, and accounts payable and
accrued liabilities are reflected in the consolidated financial statements at
fair value because of the short-term maturity of those instruments. In
addition, the fair value of Escape's long-term debt and capital lease
obligations were determined to approximate its carrying value since (i) a
substantial amount of the September 30, 1996, long-term debt and capital lease
obligations were issued at fair market value during 1996 and (ii) long-term
debt amounts are interest rate variable in nature.
Changes in the assumptions or estimation methodologies may have a
material effect on these estimated fair values.
F-37
<PAGE> 125
7. STOCKHOLDERS' EQUITY
Escape has authorized 2,000,000 shares of no par value common stock.
As of September 30, 1996, 105,001 shares are outstanding. The principal
stockholder is John A. Treadwell, President of Escape, who holds 62,501 shares.
8. RELATED-PARTY TRANSACTIONS
At September 30, 1996, Escape owed approximately $575,000 to the
President of Escape. The liability primarily represents cash provided by the
President to fund operations of Escape. These liabilities consist of a $100,000
note payable, a $200,000 note payable, and a $275,000 note payable due November
1996, May 1997, and upon demand, respectively.
At September 30, 1996, Escape also owed approximately $100,000 to an
Escape Stockholder. This liability primarily represents cash provided by the
Stockholder to fund operations of Escape. The note payable is due November
1996.
9. SUBSEQUENT EVENTS
Effective March 31, 1997, Escape entered into a sale contract for
$10,000 for the sale of its Showplace Theater to an individual.
F-38
<PAGE> 126
ESCAPE THEATRES, INC.
CONDENSED BALANCE SHEET
AS OF MARCH 31, 1997
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents .................................... $ 710,265
Inventories and other current assets ......................... 67,372
-----------
Total current assets ................................. 777,637
Property and equipment:
Building ..................................................... 2,058,876
Furniture and equipment ...................................... 1,219,534
Land ......................................................... 220,000
-----------
3,498,410
Less -- Accumulated depreciation ............................. (762,448)
-----------
Property and equipment, net .......................... 2,735,962
Other assets:
Goodwill, net ................................................ 892,192
-----------
Total other assets ................................... 892,192
-----------
Total assets ......................................... $ 4,405,791
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................ $ 276,604
Note payable ................................................. 675,089
Current maturities of long-term debt ......................... 43,332
-----------
Total current liabilities ............................ 995,025
Other liabilities:
Long-term debt, net of current maturities .................... 1,051,763
-----------
Total liabilities .................................... 2,046,788
Stockholder's equity
Common stock, $10 par value, 2,000,000 shares authorized;
105,001 shares issued and outstanding ..................... 1,050,010
Retained earnings ............................................ 1,308,993
-----------
Total stockholders' equity ........................... 2,359,003
-----------
Total liabilities and stockholders' equity ........... $ 4,405,791
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-39
<PAGE> 127
ESCAPE THEATRES, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Admissions and other operating
revenue .................................... $ 682,213 $ 583,193 1,325,236 1,235,906
Concessions ................................... 300,720 257,402 574,214 538,839
---------- ---------- ---------- ----------
Total revenues ........................ 982,933 840,595 1,899,450 1,774,745
Operating Expenses:
Film rental and advertising costs ............. 361,957 335,615 668,700 620,030
Cost of concessions ........................... 64,907 58,222 111,620 107,676
Theater operating expenses .................... 267,703 270,864 539,621 503,203
General and administrative expenses ........... 23,949 19,025 43,898 37,758
Depreciation and amortization ................. 36,720 45,293 73,440 90,587
---------- ---------- ---------- ----------
Total operating expenses .............. 755,236 729,019 1,437,279 1,359,254
Operating income ................................ 227,697 111,576 462,171 415,491
Interest expense, net ........................... 69,465 36,069 102,352 111,848
---------- ---------- ---------- ----------
Income before income taxes ...................... 158,232 75,507 359,819 303,643
Federal income tax provision .................... -- -- 40,000 119,000
---------- ---------- ---------- ----------
Net income ...................................... $ 158,232 $ 75,507 $ 319,819 $ 184,643
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 128
ESCAPE THEATRES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by operating
activities .............................. $ 250,762 $ 105,698 $ 429,791 $ 228,566
Cash flows from investing activities:
Purchase of property and equipment ................ -- -- -- (171,671)
--------- --------- --------- ---------
Net cash used in investing
activities .............................. -- -- -- (171,671)
--------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under note payable ..................... -- -- -- 220,000
Repayments of note payable ........................ -- (26,591) (100,000) --
Repayments of long-term debt ...................... (10,833) (14,444) (21,666) (344,166)
--------- --------- --------- ---------
Net cash used in financing
activities .............................. (10,833) (41,035) (121,666) (124,166)
--------- --------- --------- ---------
Net increase (decrease) in cash ..................... 239,929 64,663 308,125 (67,271)
Cash and cash equivalents, beginning of
period ............................................ 470,336 153,194 402,140 285,128
--------- --------- --------- ---------
Cash and cash equivalents, end of
period ............................................ $ 710,265 $ 217,857 $ 710,265 $ 217,857
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 129
ESCAPE THEATRES, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Condensed
Financial Statements of Escape Theatres, Inc. ("Escape") include all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly Escape's financial position as of March 31, 1997, and the
results of its operations for the three and six months ended March 31, 1997 and
1996. Due to the seasonality of Escape's operations, the results of its
operations for the interim periods ended March 31, 1997 and 1996, may not be
indicative of total results for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the Securities and
Exchange Commission. The unaudited Interim Condensed Financial Statements
should be read in conjunction with the audited Financial Statements of Escape
Theatres, Inc. and accompanying notes for the year ended September 30, 1996.
2. COMMITMENTS AND CONTINGENCIES
Escape, in the normal course of business, is party to various matters
of litigation. Management is of the opinion that the eventual outcome of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
3. DISPOSITIONS
Effective March 31, 1997, Escape entered into a sale contract for
$10,000 for the sale of its Showplace theater to an individual.
4. SUBSEQUENT EVENTS
In June 1997, Escape was acquired by Hollywood Theaters, Inc. for
approximately $8.5 million.
F-42
<PAGE> 130
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hollywood Theaters, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses of the theaters acquired (the "Acquired Theaters") from
United Artists Theatre Circuit, Inc. ("UATCI") for the nine months ended
September 30, 1996, and the year ended December 31, 1995. These financial
statements are the responsibility of UATCI's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The statements of revenues and direct operating expenses for the
Acquired Theaters were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission as described in Note 1,
and are not intended to be a complete presentation of revenues and expenses.
In our opinion, the statements of revenues and direct operating
expenses referred to above present fairly, in all material respects, the
revenues and direct operating expenses of the Acquired Theaters for the nine
months ended September 30, 1996, and the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
July 18, 1997
F-43
<PAGE> 131
FOR THE THEATERS ACQUIRED FROM UNITED ARTISTS THEATRE CIRCUIT, INC.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Admissions ..................................... $ 7,763,118 $10,221,538
Concessions .................................... 3,733,338 4,770,019
Other operating revenues ....................... 212,800 99,880
----------- -----------
Total revenues ......................... 11,709,256 15,091,437
----------- -----------
Direct operating expenses:
Film rental and advertising costs .............. 4,396,998 5,714,361
Cost of concessions ............................ 610,181 789,874
Other operating expenses ....................... 4,919,465 6,466,978
----------- -----------
Total direct operating expenses ........ 9,926,644 12,971,213
----------- -----------
Revenues in Excess of Direct Operating Expenses .. $ 1,782,612 $ 2,120,224
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 132
FOR THE THEATERS ACQUIRED FROM UNITED ARTISTS THEATRE CIRCUIT, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
1. BASIS OF PRESENTATION
Effective in November and December 1996, Hollywood Theaters, Inc. (the
"Company") closed acquisitions of 19 theaters (the "Acquired Theaters") from
United Artists Theatre Circuit, Inc. ("UATCI").
The accompanying statements of revenues and direct operating expenses
were derived from the historical accounting records of the Acquired Theaters
and are presented for purposes of complying with the rules and regulations of
the Securities and Exchange Commission. The statements do not include
depreciation and amortization expense, general and administrative expense,
interest expense or income taxes as these costs may not be comparable to the
expenses expected to be incurred.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenues
Admissions and concessions revenues are recognized when such sales are
received at the theaters. Other revenues consist primarily of on-screen and
slide advertising and electronic video games located in theater lobbies.
Operating Costs and Expenses
Film rental and advertising costs include film rental and co-op and
directory advertising costs. Film advertising costs are expensed as incurred.
Cost of concessions consists solely of direct concession product costs. Other
operating expenses include joint facility costs such as employee costs, theater
rental and utilities which are common to both ticket sales and concession
operations. Rental expense for operating leases which provide for escalating
minimum annual rentals during the term of the lease are accounted for on a
straight-line basis over the terms of the underlying leases and reported as a
component of theater operating expenses.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. COMMITMENTS AND CONTINGENCIES
Certain of the Acquired Theaters premises are leased with
noncancelable lease terms expiring at various dates after September 30, 1996.
Additionally, certain leases provide for contingent rentals based on operating
results and require the payment of taxes, insurance, and other costs applicable
to the property. A substantial portion of the leases may be renewed at defined
or then fair rental rates for various periods. Some leases also provide for
escalating rent payments throughout the lease term. Rent expense for the period
ending September 30, 1996 and December 31, 1995, totaled $1,612,929 and
$1,803,561, respectively.
F-45
<PAGE> 133
Future minimum payments under noncancelable leases with initial or
remaining terms in excess of one year at September 30, 1996, are due as
follows:
<TABLE>
<S> <C>
1997 ................................................. $1,705,000
1998 ................................................. 1,592,000
1999 ................................................. 1,403,000
2000 ................................................. 1,150,000
2001 ................................................. 271,000
----------
$6,121,000
==========
</TABLE>
F-46
<PAGE> 134
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hollywood Theaters, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses of the theaters acquired (the "Acquired Theaters") from
Crown Cinema Corporation and Crown Theatre Corporation (both Missouri
corporations) for the nine months ended September 30, 1996, and the years ended
December 31, 1995 and 1994. These financial statements are the responsibility
of the Acquired Theaters' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The statements of revenues and direct operating expenses for the
Acquired Theaters were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission as described in Note 1,
and are not intended to be a complete presentation of revenues and expenses.
In our opinion, the statements of revenues and direct operating
expenses referred to above present fairly, in all material respects, the
revenues and direct operating expenses of the Acquired Theaters for the nine
months ended September 30, 1996, and the years ended December 31, 1995 and
1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
June 3, 1997
F-47
<PAGE> 135
FOR THE THEATERS ACQUIRED FROM CROWN
CINEMA CORPORATION AND CROWN THEATRE CORPORATION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Admissions .................................................. $13,008,317 $16,941,418 $16,197,090
Concessions ................................................. 6,371,109 7,928,452 7,279,178
Other operating revenues .................................... 161,454 342,454 362,934
----------- ----------- -----------
Total revenues ...................................... 19,540,880 25,212,324 23,839,202
Direct operating expenses:
Film rental and advertising costs ........................... 7,080,995 9,478,043 9,117,416
Cost of concessions and other ............................... 1,206,008 1,546,354 1,408,553
Theater operating expenses .................................. 7,099,107 9,147,913 8,577,873
----------- ----------- -----------
Total direct operating expenses ..................... 15,386,110 20,172,310 19,103,842
----------- ----------- -----------
Operating income .............................................. $ 4,154,770 $ 5,040,014 $ 4,735,360
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE> 136
FOR THE THEATERS ACQUIRED FROM CROWN
CINEMA CORPORATION AND CROWN THEATRE CORPORATION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 AND 1994
1. ORGANIZATION
Crown Cinema Corporation (CCC) is a Missouri corporation, and was
incorporated in August 1976. CCC owned and operated 33 motion picture theaters
in Kansas and Missouri at September 30, 1996. Crown Theatre Corporation (CTC)
is a Missouri corporation and was incorporated in December 1989. CTC owned and
operated three motion picture theaters in Missouri and Ohio at September 30,
1996. CCC and CTC ("Crown Combined") jointly rent a corporate office located in
Kansas City, Missouri.
On November 1, 1996, Hollywood Theaters, Inc. closed an acquisition of
33 theaters (the "Acquired Theaters") from Crown Combined.
The accompanying statements of revenues and direct operating expenses
were derived from the historical accounting records of the Acquired Theaters
and are presented for purposes of complying with the rules and regulations of
the Securities and Exchange Commission. The statements do not include
depreciation and amortization expense, general and administrative expense,
interest expense or income taxes as these costs may not be comparable to the
expenses expected to be incurred.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenues
Revenues are recognized when admissions and concessions sales are
received at the theaters. Film rental costs are accrued based on the applicable
box office receipts and the terms of the film licenses. Other revenues consist
primarily of on-screen and slide advertising and electronic video games located
in theater lobbies.
Operating Costs and Expenses
Film rental and advertising costs include film rental and co-op and
directory advertising costs. Film advertising costs are expensed as incurred.
Cost of concession consist solely of direct concession product costs. Other
operating expenses include joint facility costs such as employee costs, theater
rental and utilities which are common to both ticket sales and concession
operations. Rental expense for operating leases which provide for escalating
minimum annual rentals during the term of the lease are accounted for on a
straight-line basis over the terms of the underlying leases and reported as a
component of theater operating expenses.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. LEASES
Crown Combined leases certain of its theater premises with remaining
lease terms of one to twenty years. Additionally, certain leases provide for
contingent rentals based on operating results and require the payment of taxes,
insurance, and other costs applicable to the property. The Company, at its
option, may renew a substantial portion of the leases at defined or then fair
rental rates for various periods. Some leases also provide for escalating rent
payments
F-49
<PAGE> 137
throughout the lease term. Rent expense for the period ending September 30,
1996 and December 31, 1995, approximated $1,500,000 and $1,980,000,
respectively.
Future minimum payments under noncancelable leases with initial or
remaining terms in excess of one year at September 30, 1996, are due as
follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1997 ................................................ $ 2,036,717
1998 ................................................ 1,992,434
1999 ................................................ 2,023,912
2000 ................................................ 2,010,347
2001 ................................................ 1,972,956
Thereafter .......................................... 27,090,514
-----------
Total ..................................... $37,126,880
===========
</TABLE>
4. ACQUISITIONS
During January 1994, Crown Combined acquired the assets of three
theaters with 11 screens. Total consideration paid was $1,600,000 and was
funded with $1,200,000 term bank financing and $400,000 cash.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the consideration paid has been allocated at fair
value to the separately identifiable assets of the respective theater
locations. The results of operations of these locations have been included in
the combined financial statements for periods subsequent to the respective
acquisition dates. The excess of the purchase price over the estimated fair
values of the net assets acquired has been recorded as goodwill which will be
amortized over 20 years. The estimated fair values of assets acquired at the
acquisition date are summarized as follows:
<TABLE>
<CAPTION>
1994
----------
<S> <C>
Assets acquired:
Furniture and equipment .............................. $ 458,685
Leasehold improvements ............................... 805,918
Building ............................................. 235,397
----------
Total assets acquired ........................ 1,500,000
Purchase price ....................................... 1,600,000
----------
Goodwill ............................................. $ 100,000
==========
</TABLE>
5. SUBSEQUENT EVENTS
In November 1996, Hollywood Theaters, Inc. (the "Buyer") acquired 33
Crown Theaters with 134 screens in Missouri, Kansas, and Ohio. The Buyer's
parent company, Hollywood Theater Holdings, Inc., issued 12,872 shares of its
common stock to the seller, at a fair market value of $2,252,600, and paid cash
of $41,123,000 to Crown for these theaters.
F-50
<PAGE> 138
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-51
<PAGE> 139
PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1996 gives effect to (i) the 1996 acquisitions
of theaters from United Artists Theatre Circuit, Inc., Crown Cinema Corporation
and Crown Theatre Corporation, the 1997 acquisition of Escape Theatres, Inc.,
and the pending 1997 acquisition of theaters from General Cinema, collectively
the "Significant Acquisitions," and (ii) the receipt and application of the net
proceeds from the Offering of the Old Notes as if such transactions had
occurred on January 1, 1996. The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1997 gives effect to
(i) the June 1997 acquisition of Escape Theatres, Inc., and the August 1997
acquisition of theaters from General Cinema and (ii) the receipt and
application of the net proceeds from the Offering of the Old Notes as if such
transactions had occurred on January 1, 1996. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of June 30, 1997 reflects (i) the August 1997
acquisition of theaters from General Cinema and the Waco Acquisition and (ii)
the receipt and application of the net proceeds from the Offering of the Old
Notes as if such transactions had occurred on that date. The following Pro
Forma Financial Information should be read in conjunction with the historical
financial statements of Holdings, which are included elsewhere in this
Prospectus.
The Company usually implements significant changes to the operations
of the entities that it acquires to enhance profitability. The expected
benefits and cost reductions anticipated by the Company have not been reflected
in the following unaudited pro forma condensed consolidated financial
statements. Accordingly, these pro forma financial statements are not
necessarily indicative of the operating results that would have been achieved
had the Significant Acquisitions occurred on January 1, 1996.
The pro forma adjustments are based upon available information. The
Pro Forma Financial Information is based on the historical financial statements
of Holdings and the historical financial statements of the Significant
Acquisitions. These adjustments are directly attributable to the transactions
referenced above, and are expected to have a continuing impact on the Company's
business, results of operations, and financial position. The purchase of the
theaters acquired from General Cinema will be accounted for using the purchase
method of accounting, pursuant to which the total purchase costs of the
acquisition will be allocated to the tangible and intangible assets and
liabilities acquired based upon their estimated fair values. The final
allocation of the purchase price will be determined upon the receipt of final
appraisals of the acquired assets; however, such allocation is not expected to
differ materially from the preliminary allocation.
P-1
<PAGE> 140
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996
HOLDINGS SIGNIFICANT ACQUISITION PRO FORMA
HISTORICAL ACQUISITIONS(A) ADJUSTMENTS OFFERING AS ADJUSTED
------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Admissions ....................... $ 15,335 $ 32,748 $ -- $ -- $ 48,083
Concessions ...................... 8,710 15,391 -- -- 24,101
Other, net ....................... 834 615 -- -- 1,449
------------ ------------ ------------ ------------ ------------
24,879 48,754 -- -- 73,633
Operating expenses:
Film rental and advertising
costs ......................... 8,388 18,393 -- -- 26,781
Cost of concessions and other .... 1,412 2,678 -- -- 4,090
Theater operating expenses ....... 10,998 18,442 -- -- 29,440
General and administrative
expenses ...................... 1,601 -- -- -- 1,601
Depreciation and amortization .... 3,152 (14) 4,402(B) -- 7,540
------------ ------------ ------------ ------------ ------------
25,551 39,499 4,402 -- 69,452
------------ ------------ ------------ ------------ ------------
Operating income (loss) .. (672) 9,255 (4,402) -- 4,181
Interest, net ...................... 2,121 -- 4,156(C) 6,264(D) 12,541
------------ ------------ ------------ ------------ ------------
Net income (loss) .................. $ (2,793) $ 9,255 $ (8,558) $ (6,264) $ (8,360)
============ ============ ============ ============ ============
</TABLE>
P-2
<PAGE> 141
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997
HOLDINGS SIGNIFICANT ACQUISITION PRO FORMA
HISTORICAL ACQUISITIONS(A) ADJUSTMENTS OFFERING AS ADJUSTED
------------ --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Admissions and other operating
revenue ....................... $ 21,144 $ 7,329 $ -- $ -- $ 28,473
Concessions ...................... 11,099 3,293 -- -- 14,392
------------ ------------ ------------ ------------ -----------
32,243 10,622 -- -- 42,865
Operating expenses:
Film rental and advertising
costs ......................... 11,448 4,033 -- -- 15,481
Cost of concessions and other .... 1,754 492 -- -- 2,246
Theater operating expenses ....... 13,683 3,775 -- -- 17,458
General and administrative ....... 2,359 24 -- -- 2,383
Depreciation and amortization .... 4,946 37 720(B) -- 5,703
------------ ------------ ------------ ------------ -----------
34,190 8,361 720 -- 43,271
------------ ------------ ------------ ------------ -----------
Operating income (loss) ...... (1,947) 2,261 (720) -- (406)
Interest, net ...................... 2,247 39 969(C) 2,843(D) 6,098
------------ ------------ ------------ ------------ -----------
Net income (loss) .................. $ (4,194) $ 2,222 $ (1,689) $ (2,843) $ (6,504)
============ ============ ============ ============ ===========
</TABLE>
P-3
<PAGE> 142
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997
HISTORICAL SIGNIFICANT ACQUISITION PRO FORMA
HOLDINGS ACQUISITIONS(E) ADJUSTMENTS(F) OFFERING(G) AS ADJUSTED
------------ -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ............. $ 4,878 $ 145 $ (15,855) $ 29,911 $ 19,079
Accounts receivable ................... 1,048 9,899 (9,899) -- 1,048
Inventories ........................... 734 57 -- -- 791
Prepaid and other current assets ...... 1,846 199 (199) -- 1,846
Deposits .............................. 2,195 -- -- -- 2,195
------------ ------------ ------------ ------------ ------------
Total current assets ........... 10,701 10,300 (25,953) 29,911 24,959
Property and equipment, net ............. 72,864 4,624 111 10,800 88,399
Goodwill, net ........................... 35,176 -- 10,918 -- 46,094
Intangibles, net ........................ 11,205 -- -- 4,300 15,505
------------ ------------ ------------ ------------ ------------
Total assets ................... $ 129,946 $ 14,924 $ (14,924) $ 45,011 $ 174,957
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses ............................ $ 7,597 $ 4,538 $ (4,538) $ (489) $ 7,108
Other current liabilities ............. 3,829 -- -- -- 3,829
------------ ------------ ------------ ------------ ------------
Total current liabilities ...... 11,426 4,538 (4,538) (489) 10,937
New senior notes ........................ -- -- -- 110,000 110,000
Term note payable ....................... 50,000 -- -- (50,000) --
Revolving credit agreement .............. 14,500 -- -- (14,500) --
Other long-term debt .................... 137 -- -- -- 137
Deferred lease expenses ................. 953 -- -- -- 953
------------ ------------ ------------ ------------ ------------
Total liabilities .............. 77,016 4,538 (4,538) 45,011 122,027
Convertible Preferred Stock ............. 45,496 -- -- -- 45,496
Stockholders' equity:
Common stock .......................... 1 -- -- -- 1
Additional paid-in capital ............ 17,761 -- -- -- 17,761
Accumulated deficit ................... (10,328) 10,386 (10,386) -- (10,328)
Total stockholders'
equity ....................... 7,434 10,386 (10,386) -- 7,434
------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity ......... $ 129,946 $ 14,924 $ (14,924) $ 45,011 $ 174,957
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to pro forma financial information.
P-4
<PAGE> 143
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) Reflects the historical revenues and operating expenses recorded up to
the time of acquisition for the Significant Acquisitions on a combined
basis.
(B) Represents (i) incremental amortization of goodwill of $2,130,000 and
$452,000 for the year ended December 31, 1996 and the six months ended
June 30, 1997, respectively, based upon the Company's allocation of
purchase prices as if the Significant Acquisitions were all completed
on January 1, 1996 and (ii) depreciation of $2,272,000 and $268,000
for the year ended December 31, 1996 and the six months ended June 30,
1997, respectively, on the Significant Acquisitions for which no
depreciation was recorded in the historical revenues and operating
expenses recorded up to the time of acquisitions. Goodwill is being
amortized over a 15-year period, furniture and equipment is being
amortized over a 8-year period, and buildings are being amortized over
a 30-year period.
(C) Reflects the additional interest expense that would have been incurred
had the debt incurred to finance the Significant Acquisitions been
outstanding from the beginning of the period to the dates of
acquisition.
(D) Reflects the (i) elimination of the interest expense of $5,854,000 and
$3,216,000 for the year ended December 31, 1996 and the three months
ended June 30, 1997, respectively, on the Company's Existing Senior
Credit Facility, (ii) the interest expense of $11,688,000 and
$5,844,000 for the year ended December 31, 1996 and the six months
ended June 30, 1997, respectively, on the New Notes, and (iii) the
amortization of deferred debt issuance costs of $430,000 and $215,000
for the year ended December 31, 1996 and the six months ended June 30,
1997, respectively, related to the Notes.
(E) Represents the acquisition of theaters from General Cinema in 1997
based on the historical costs of the assets and liabilities acquired.
(F) Represents an adjustment for the application of the purchase method of
accounting of the Significant Acquisitions. The estimated fair values
reflected are based on preliminary estimates and assumptions and are
subject to revision. In management's opinion, the preliminary
allocation is not expected to be materially different from the final
allocation. Goodwill is being amortized over a 15-year period in
accordance with the provisions of APB No. 17. See Note 2 to Holding's
Consolidated Financial Statements for information regarding Holding's
periodic evaluation of recorded goodwill amounts and the related
amortization period.
(G) Reflects the estimated net proceeds from the Exchange Offer of $105.7
million (net of $4.3 million in offering costs) and the repayment of
$64.5 million on the Company's Existing Senior Credit Facility. The
Company also plans to use $10.8 million in connection with the
acquisition of the Waco theater.
P-5
<PAGE> 144
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
HOLLYWOOD THEATER HOLDINGS, INC.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of Hollywood Theater Holdings,
Inc. and subsidiaries included in this registration statement and have issued
our report thereon dated April 29, 1997. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the index at S-1 (Schedule II) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Dallas, Texas
April 29, 1997
S-1
<PAGE> 145
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1996 and
For the Period From Inception (July 11, 1995), Through December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Balance at
Classification: of Period Expenses End of Period
- ---------------
<S> <C> <C> <C>
December 31, 1996
Accumulated Amortization of Goodwill $246 $ 967 $1,213
Accumulated Amortization of Intangibles 168 986 1,154
Accumulated Amortization of Theater Start-up Costs 6 76 82
Total $420 $2,029 $2,449
December 31, 1995
Accumulated Amortization of Goodwill $ -- $ 246 $ 246
Accumulated Amortization of Intangibles -- 168 168
Accumulated Amortization of Theater Start-up Costs -- 6 6
Total $ -- $ 420 $ 420
</TABLE>
S-2
<PAGE> 146
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SUCH SECURITIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice to Investors ....................................................... (i)
Prospectus Summary ........................................................ 1
Risk Factors .............................................................. 13
Use of Proceeds ........................................................... 17
Capitalization ............................................................ 18
Selected Consolidated Financial Information ............................... 19
Management's Discussion and Analysis Of
Financial Condition and Results of Operations ......................... 21
Business .................................................................. 26
Management ................................................................ 36
Summary Compensation Table ................................................ 38
Option Grants in 1996 ..................................................... 39
Aggregated Holdings Option Exercises and Fiscal
Year-end Option Value ................................................. 39
Principal Stockholders .................................................... 44
Description of Capital Stock .............................................. 47
Certain Transactions ...................................................... 48
Description of New Senior Bank Facility ................................... 48
The Exchange Offer ........................................................ 49
Description of Exchange Notes ............................................. 58
Certain U S Federal Tax Consequences
to Non-U S Holders .................................................. 80
Plan of Distribution ...................................................... 82
Validity of the Exchange Notes ............................................ 82
Experts ................................................................... 82
Index to Financial Statements ............................................. F-1
</TABLE>
===============================================================================
===============================================================================
HOLLYWOOD THEATERS, INC.
OFFER TO EXCHANGE ITS
10 5/8% SENIOR SUBORDINATED
NOTES DUE AUGUST 1, 2007
FOR ANY AND ALL OF ITS OUTSTANDING
10 5/8% SENIOR SUBORDINATED
NOTES DUE AUGUST 1, 2007
----------------------
PROSPECTUS
----------------------
, 1997
------------
===============================================================================
<PAGE> 147
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
Section 145(c) of the DGCL provides that to the extent that a
director, officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 145(a) and (b), or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL provides that any indemnification under
Section 145(a) and (b) (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 145(a) and (b). Such determination shall be made (1) by a majority
vote of the directors who were not parties to such action, suit or proceeding,
even though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
Section 145. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
Section 145(f) of the DGCL provides that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall
not be deemed exclusive of any other rights to which those seeking
indemnification
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<PAGE> 148
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145(g) of the DGCL provides that a corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his capacity as such, whether or not the
corporation would have the power to indemnify him against such liability under
Section 145.
RESTATED CERTIFICATE OF INCORPORATION
Article Sixth of the Amended and Restated Certificate of Incorporation
of the Company, a copy of which is filed as Exhibit 3.1 to this Registration
Statement, provides that no director of the Company shall be personally liable
to the Company or any of its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such
director; provided, however, that such Article Sixth does not eliminate or
limit the liability of a director (1) for any breach of such director's duty of
loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL (which relates to certain unlawful
dividend payments or stock purchases or redemptions), as the same exists or may
hereafter be amended, supplemented or replaced, or (4) for a transaction from
which the director derived an improper personal benefit. If the DGCL is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Company, in addition to the
limitation on personal liability described above, shall be limited to the
fullest extent permitted by the DGCL, as so amended. Furthermore, any repeal
or modification of Article Sixth of the Amended and Restated Certificate of
Incorporation by the stockholders of the Company shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Company existing at the time of such repeal or modification.
BYLAWS
Article V, Section 1(a) of the Bylaws (the "Bylaws") of the Company
provides that the Company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Article V, Section 1(b) of the Bylaws provides that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Company to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Company unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all
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<PAGE> 149
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Article V, Section 1(c) of the Bylaws provides that to the extent that
a director, officer, employee or agent of the Company has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 1(a) or (b) of Article V of the Bylaws, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Article V, Section 1(d) of the Bylaws provides that any
indemnification under Section 1(a) or (b) of Article V of the Bylaws (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 1(a) or (b) of Article
V of the Bylaws. Such determination shall be made (1) by a majority vote of a
quorum consisting of the directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
Article V, Section 1(e) of the Bylaws provides that expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Company as authorized in Section V of the
Bylaws. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
Article V, Section 2 of the Bylaws provides that the indemnification
and advancement of expenses provided by, or granted pursuant to, Article V of
the Bylaws shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Article V, Section 3 of the Bylaws provides that the Company shall
have the power to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his capacity as such, whether or not the Company
would have the power to indemnify him against such liability under Article V of
the Bylaws.
INDEMNIFICATION AGREEMENT
Thomas W. Stephenson has entered into an indemnification agreement
with the Company and Holdings in connection with certain personal guarantees
made by Mr. Stephenson for obligations of the Company under certain agreements,
including, but not limited to theater leases and film rental agreements and
other similar agreements that Mr. Stephenson may be required to guarantee in
the future (the "Stephenson Guarantees"). Pursuant to such indemnification
agreement, the Company and Holdings have agreed to indemnify Mr. Stephenson
against any and all payments, liabilities, obligations, claims, losses,
damages, commitments, costs, deficiencies, expenses paid or incurred by Mr.
Stephenson under any Stephenson Guarantee and against any and all expenses
(including attorneys' fees), costs, liabilities and obligations paid or
incurred in connection with or as a result of such payments under the
Stephenson Guarantees.
INSURANCE
The Company has obtained and intends to maintain in effect directors'
and officers' liability insurance policies providing customary coverage for its
directors and officers against losses resulting from wrongful acts committed by
them in their capacities as directors and officers of the Company.
II-3
<PAGE> 150
The above discussion of Section 145 of the DGCL, the Company's
Restated Certificate of Incorporation and the Company's Bylaws is not intended
to be exhaustive and is respectively qualified in its entirety by such statute,
the Restated Certificate of Incorporation and the Bylaws.
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<PAGE> 151
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
3.1 Amended and Restated Certificate of Incorporation of Hollywood
Theaters, Inc.
3.2 By-laws of Hollywood Theaters, Inc.
4.1 Indenture dated as of August 7, 1997 between Hollywood
Theaters, Inc., Hollywood Theater Holdings, Inc. and Crown
Theatre Corporation and U.S. Trust Company of Texas, N.A.
4.2 Exchange and Registration Rights Agreement, dated as of August
7, 1997 among Hollywood Theaters, Inc., Hollywood Theater
Holdings, Inc., Goldman, Sachs & Co., and BancAmerica
Securities Inc.
4.3 Registration Rights Agreement, dated as of October 3, 1996 by
and between Hollywood Theater Holdings, Inc. and The Beacon
Group III - Focus Value Fund, L.P., as amended.
4.4 Amended and Restated Registration Rights Agreement, dated as
of October 3, 1996, by and among Hollywood Theater Holdings,
Inc., Stratford Capital Partners, L.P. and Precept Investors,
Inc.
4.5 Registration Rights Agreement, dated as of November 1, 1996,
by and between Hollywood Theater Holdings, Inc. and Richard M.
Durwood Revocable Trust.
4.6 Registration Rights Agreement, dated as of May 13, 1997, by
and among Hollywood Theater Holdings, Inc., Hoak
Communications Partners, L.P., HCP Capital Fund, L.P. and HCP
1997 Authorized Employee Fund, L.P.
4.7 Amended and Restated Agreement with respect to Registration
Rights, dated as of May 13, 1997, by and among Hollywood
Theater Holdings, Inc., Stratford Capital Partners, L.P.,
Precept Investors, Inc., The Beacon Group III - Focus Value
Fund, L.P., Hoak Communications Partners, L.P., HCP Capital
Fund, L.P. and HCP 1997 Authorized Employee Fund, L.P.
*5.1 Opinion and consent of Baker & Botts, L.L.P.
10.1 Purchase Agreement, dated as of July 31, 1997, by and among
Hollywood Theaters, Inc., Hollywood Theater Holdings, Inc.,
Crown Theater Corporation and Goldman, Sachs & Co.
10.2 Amended and Restated Credit Agreement, dated as of August 7,
1997, among Hollywood Theater Holdings, Inc., Hollywood
Theaters, Inc. and Bank of America National Trust and Savings
Associations.
10.3 Shareholders' and Voting Agreement, dated as of October 3,
1996, by and among Hollywood Theater Holdings, Inc., The
Beacon Group III - Focus Value Fund, L.P. and each of the
shareholders executing the signature pages thereto, as
amended.
10.4 Purchase and Assignment Agreement, dated as of July 25, 1997,
between General Cinema Corp. of Oklahoma, Inc. and Hollywood
Theaters, Inc., as amended by Amendment No. 1 to Purchase and
Assignment Agreement, dated as of July 30, 1997, between
General Cinema Corp. of Oklahoma, Inc. and Hollywood Theaters,
Inc.
10.5 Agreement of Purchase and Sale, dated as of July 22, 1996, by
and among United Artists Theatre Circuit, Inc., United Artists
Properties I Corp., Resort Amusement Corporation and Hollywood
Theaters, Inc., as amended.
10.6 Asset and Stock Purchase Agreement, dated as of August 26,
1996, between Crown Cinema Corporation, Crown Theatre
Corporation, Hollywood Theaters, Inc. and Hollywood Theater
Holdings, Inc., as amended.
10.7 Asset Purchase Agreement, dated as of August 19, 1997, between
Dickinson, Inc. and Hollywood Theaters, Inc.
10.8 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and Thomas W. Stephenson, Jr.
10.9 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and James R. Featherstone.
10.10 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and Robert E. Painter.
10.11 Hollywood Theaters, Inc. Savings and Profit Sharing Plan, as
amended and restated.
10.12 Hollywood Theater Holdings, Inc. 1996 Stock Option and Stock
Award Plan, dated as of December 15, 1996, as amended.
10.13 Hollywood Theaters, Inc. 401(k) Savings Plan, as amended.
II-5
<PAGE> 152
10.14 Indemnification Agreement, dated as of May 15, 1996, by and
between Hollywood Theaters, Inc., Hollywood Theater Holdings,
Inc. and Thomas W. Stephenson, Jr.
12.1 Statement of Computation of Ratios of Earnings to Fixed
Charges.
21.1 Subsidiaries of Hollywood Theaters, Inc.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
- ------------------
* To be filed by Amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
[TO COME]
All other Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are inapplicable and
therefore have been omitted.
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<PAGE> 153
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(2) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
(3) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act") may be
permitted to directors, officers and controlling persons of the
registrant pursuant to the provision described under Item 20 or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-7
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on September 26, 1997.
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
---------------------------------------
Thomas W. Stephenson, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas W. Stephenson, Jr., James R.
Featherstone and Robert E. Painter, and each individually, any one of whom may
act without the joinder of the others, as his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities (including his capacity as
a director and/or officer of Hollywood Theaters, Inc.), to sign any or all
amendments (including post-effective amendments) to this registration
statement, and to file this same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on September
26, 1997 in the capacities indicated:
<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<S> <C>
/s/ Thomas W. Stephenson, Jr. President and Chief Executive Officer, Chairman of the Board
------------------------------------------- (principal executive officer)
Thomas W. Stephenson, Jr.
/s/ James R. Featherstone Chief Financial Officer
------------------------------------------- (principal financial officer and accounting officer)
James R. Featherstone
/s/ Robert E. Painter Chief Operating Officer and Assistant Secretary
------------------------------------------- (principal administrative officer)
Robert E. Painter
/s/ John G. Farmer Director
-------------------------------------------
John G. Farmer
/s/ Thomas L. Harrison Director
-------------------------------------------
Thomas L. Harrison
</TABLE>
II-8
<PAGE> 155
<TABLE>
<S> <C>
/s/ Thomas G. Mendell Director
-------------------------------------------
Thomas G. Mendell
/s/ Harold W. Pote Director
-------------------------------------------
Harold W. Pote
/s/ Eric R. Wilkinson Director
-------------------------------------------
Eric R. Wilkinson
</TABLE>
II-9
<PAGE> 156
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of Hollywood
Theaters, Inc.
3.2 By-laws of Hollywood Theaters, Inc.
4.1 Indenture dated as of August 7, 1997 between Hollywood
Theaters, Inc., Hollywood Theater Holdings, Inc. and Crown
Theatre Corporation and U.S. Trust Company of Texas, N.A.
4.2 Exchange and Registration Rights Agreement, dated as of August
7, 1997 among Hollywood Theaters, Inc., Hollywood Theater
Holdings, Inc., Goldman, Sachs & Co., and BancAmerica
Securities Inc.
4.3 Registration Rights Agreement, dated as of October 3, 1996 by
and between Hollywood Theater Holdings, Inc. and The Beacon
Group III - Focus Value Fund, L.P., as amended.
4.4 Amended and Restated Registration Rights Agreement, dated as
of October 3, 1996, by and among Hollywood Theater Holdings,
Inc., Stratford Capital Partners, L.P. and Precept Investors,
Inc.
4.5 Registration Rights Agreement, dated as of November 1, 1996,
by and between Hollywood Theater Holdings, Inc. and Richard M.
Durwood Revocable Trust.
4.6 Registration Rights Agreement, dated as of May 13, 1997, by
and among Hollywood Theater Holdings, Inc., Hoak
Communications Partners, L.P., HCP Capital Fund, L.P. and HCP
1997 Authorized Employee Fund, L.P.
4.7 Amended and Restated Agreement with respect to Registration
Rights, dated as of May 13, 1997, by and among Hollywood
Theater Holdings, Inc., Stratford Capital Partners, L.P.,
Precept Investors, Inc., The Beacon Group III - Focus Value
Fund, L.P., Hoak Communications Partners, L.P., HCP Capital
Fund, L.P. and HCP 1997 Authorized Employee Fund, L.P.
*5.1 Opinion and consent of Baker & Botts, L.L.P.
10.1 Purchase Agreement, dated as of July 31, 1997, by and among
Hollywood Theaters, Inc., Hollywood Theater Holdings, Inc.,
Crown Theater Corporation and Goldman, Sachs & Co.
10.2 Amended and Restated Credit Agreement, dated as of August 7,
1997, among Hollywood Theater Holdings, Inc., Hollywood
Theaters, Inc. and Bank of America National Trust and Savings
Associations.
10.3 Shareholders' and Voting Agreement, dated as of October 3,
1996, by and among Hollywood Theater Holdings, Inc., The
Beacon Group III - Focus Value Fund, L.P. and each of the
shareholders executing the signature pages thereto, as
amended.
10.4 Purchase and Assignment Agreement, dated as of July 25, 1997,
between General Cinema Corp. of Oklahoma, Inc. and Hollywood
Theaters, Inc., as amended by Amendment No. 1 to Purchase and
Assignment Agreement, dated as of July 30, 1997, between
General Cinema Corp. of Oklahoma, Inc. and Hollywood Theaters,
Inc.
10.5 Agreement of Purchase and Sale, dated as of July 22, 1996, by
and among United Artists Theatre Circuit, Inc., United Artists
Properties I Corp., Resort Amusement Corporation and Hollywood
Theaters, Inc., as amended.
10.6 Asset and Stock Purchase Agreement, dated as of August 26,
1996, between Crown Cinema Corporation, Crown Theatre
Corporation, Hollywood Theaters, Inc. and Hollywood Theater
Holdings, Inc., as amended.
10.7 Asset Purchase Agreement, dated as of August 19, 1997, between
Dickinson, Inc. and Hollywood Theaters, Inc.
10.8 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and Thomas W. Stephenson, Jr.
10.9 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and James R. Featherstone.
10.10 Employment Agreement, dated as of October 1, 1996, between
Hollywood Theaters, Inc. and Robert E. Painter.
10.11 Hollywood Theaters, Inc. Savings and Profit Sharing Plan, as
amended and restated.
10.12 Hollywood Theater Holdings, Inc. 1996 Stock Option and Stock
Award Plan, dated as of December 15, 1996, as amended.
</TABLE>
<PAGE> 157
<TABLE>
<S> <C> <C>
10.13 Hollywood Theaters, Inc. 401(k) Savings Plan, as amended.
10.14 Indemnification Agreement, dated as of May 15, 1996, by and
between Hollywood Theaters, Inc., Hollywood Theater Holdings,
Inc. and Thomas W. Stephenson, Jr.
12.1 Statement of Computation of Ratios of Earnings to Fixed
Charges.
21.1 Subsidiaries of Hollywood Theaters, Inc.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF ELIMINATION WITH RESPECT
TO THE SERIES A PREFERRED STOCK
OF
HOLLYWOOD THEATERS, INC.
PURSUANT TO SECTION 151(g)
In accordance with Section 151(g) of the General Corporation Law of
the State of Delaware, Hollywood Theaters, Inc., a Delaware corporation (the
"Corporation"), does hereby certify that the following resolutions with respect
to its Series A Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock") were duly adopted by the Corporation's Board of Directors:
WHEREAS, pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware, the Corporation duly filed a Restated Certificate
of Incorporation on June 21, 1995 and a Certificate of Designation on June 22,
1995 with respect to its Series A Preferred Stock; and
WHEREAS, there are no shares of Series A Preferred Stock
outstanding, nor will any be issued subject to the Certificate of Designation.
NOW, THEREFORE, BE IT RESOLVED, that no shares of the
Corporation's Series A Preferred Stock are outstanding and no shares of the
Series A Preferred Stock will be issued subject to the Certificate of
Designation previously filed with respect to the Series A Preferred Stock; and
RESOLVED, that the officers of the Corporation are hereby
authorized and empowered to file with the Secretary of State of the State of
Delaware a certificate pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware setting forth these resolutions in order to
eliminate from the Corporation's certificate of incorporation all matters set
forth in the Certificate of Designation with respect to the Series A Preferred
Stock.
IN WITNESS WHEREOF, Hollywood Theaters, Inc. has caused this
certificate to be executed by the undersigned this 7th day of August, 1997.
HOLLYWOOD THEATERS, INC.
By: /s/ James R. Featherstone
-------------------------------------
James R. Featherstone
Vice President and Chief
Financial Officer
<PAGE> 2
CERTIFICATE OF OWNERSHIP AND MERGER OF
FOREIGN SUBSIDIARY CORPORATION INTO
DOMESTIC PARENT CORPORATION
Pursuant to the provisions of Section 253 of the Delaware General
Corporation Law ("DGCL"), the undersigned domestic corporation adopts the
following Certificate of Ownership and Merger for the purpose of merging one of
its subsidiary corporations into itself:
1. Hollywood Theaters, Inc., a Delaware corporation
("Hollywood"), owns 105,001 shares of Common Stock, no par value per share, of
Escape Theatres, Inc., a Texas corporation ("Escape"), which shares constitute
all of the issued and outstanding shares of each class of capital stock of
Escape.
2. A copy of the resolutions adopted by the Board of Directors of
Hollywood to merge Escape into Hollywood is attached hereto as Exhibit A.
Such resolutions were adopted as of July 23, 1997, and remain in full force and
effect as of the date hereof.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
duly executed on July 23, 1997.
HOLLYWOOD THEATERS, INC.
By: /s/ Jackie Lynn McClure
-------------------------------------
Jackie Lynn McClure, Assistant
Secretary
<PAGE> 3
CERTIFICATE OF MERGER
OF
TRANS-TEXAS AMUSEMENTS, INC.
(A TEXAS CORPORATION)
AND
TRANS TEXAS THEATRES, INC.
(A TEXAS CORPORATION)
WITH AND INTO
HOLLYWOOD THEATERS, INC.
(A DELAWARE CORPORATION)
This CERTIFICATE OF MERGER (the "Certificate") is being
executed and filed pursuant to Sections 252 and 103 of the Delaware General
Corporation Law (the "DGCL"). The undersigned, Hollywood Theaters, Inc., a
Delaware corporation (the "Corporation"), hereby certifies that:
FIRST: The name and state of incorporation of each of the
constituent corporations are as follows:
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Trans-Texas Amusements, Inc. Texas
Trans Texas Theatres, Inc. Texas
Hollywood Theaters, Inc. Delaware
</TABLE>
SECOND: An Agreement and Plan of Merger (the "Agreement and
Plan of Merger") has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance
with the provisions of Section 252 of the DGCL.
THIRD: The surviving corporation of the merger is Hollywood
Theaters, Inc., a Delaware corporation, which shall continue in
existence under the name "Hollywood Theaters, Inc."
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<PAGE> 4
FOURTH: The Certificate of Incorporation in effect for
Hollywood Theaters, Inc. immediately prior to the merger shall be the
Certificate of Incorporation for the surviving corporation.
FIFTH: The executed Agreement and Plan of Merger is on file
at the principal place of business of the Corporation, which is
located at 2911 Turtle Creek Blvd., Suite 1150, Dallas, Texas 75219.
The Corporation will furnish to any stockholder of a constituent
corporation, upon request and without cost, a copy of the Agreement
and Plan of Merger.
SIXTH: The authorized capital stock of Trans-Texas
Amusements, Inc., a Texas corporation, consists of 10,000 shares of
common stock, without par value. The authorized capital stock of
Trans Texas Theatres, Inc., a Texas corporation, consists of 10,000
shares of common stock, without par value.
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<PAGE> 5
IN WITNESS WHEREOF, the undersigned has caused this
Certificate to be executed as of July 10, 1995.
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
President
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<PAGE> 6
HOLLYWOOD THEATERS, INC.
Certificate of Designation, Preferences and Rights
of Preferred Stock by Resolution
of the Board of Directors Providing for
Issue of Preferred Stock Designated
"Series A Preferred Stock"
Pursuant to Section 151
of the
General Corporation Law of the State of Delaware
HOLLYWOOD THEATERS, INC. (hereinafter referred to as the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, does hereby certify that:
The Board of Directors of the Corporation has duly adopted
resolutions providing for the issuance of a series of Preferred Stock to be
designated "Series A Preferred Stock" in accordance with the provisions of
Sections 151 of the General Corporation Law of the State of Delaware. These
resolutions are as follows:
SERIES A PREFERRED STOCK
RESOLVED, that the Board of Directors of the Corporation,
pursuant to the authority conferred upon it by the Certificate of
Incorporation, does hereby create and provide for the issue of a series of the
Preferred Stock, par value $.01 per share, of the Corporation and does hereby
fix and herein state the designation, preferences and relative and other
special rights of such series, and the qualifications, limitations and
restrictions thereof, as follows:
1. Designation and Amount. There is hereby created a
series of Preferred Stock designated as "Series A Preferred Stock." The
number of shares constituting such series shall be 1,000. Such number of
shares may be increased or decreased from time to time by resolution of the
Board of Directors; provided, however, that no decrease shall reduce the number
of shares of Series A Preferred Stock to a number less than the number of
shares of such series then issued and outstanding, plus the number of shares of
such series reserved for issuance upon the exercise of outstanding rights,
options or warrants or upon the conversion or exchange of outstanding
securities issued by the Corporation.
2. Voting Rights. Except as may be provided under
applicable law, the holders of Series A Preferred Stock shall not be entitled
to vote on the election of directors of the Corporation or any other matter
submitted to a vote of the stockholders of the Corporation.
<PAGE> 7
3. Dividends. The holders of Series A Preferred Stock
shall not be entitled to receive any dividends thereon.
4. Liquidation. Each share of Series A Preferred Stock
shall rank prior to each share of Junior Stock with respect to the distribution
of assets upon a Liquidation. In the event of any Liquidation, each holder of
a share of Series A Preferred Stock shall be entitled to receive, before any
distribution shall be made to the holders of Junior Stock, an amount per share
equal to $1,000.00 (the "Series A Liquidation Preference"). In the event that
there are not sufficient assets available to permit payment in full of the
Series A Liquidation Preference to all holders of outstanding shares of Series
A Preferred Stock, then the remaining assets of the Corporation shall be
distributed to the holders of this series in proportion to the Series A
Liquidation Preferences of the shares of Series A Preferred Stock held by them.
After payment shall have been made in full to the holders of the Series A
Preferred Stock, the remaining assets and funds of the Corporation shall be
distributed among the holders of Junior Stock according to their respective
rights.
5. Redemption.
(a) Mandatory. Provided that the Corporation may then
redeem shares of Series A Preferred Stock in accordance with the
applicable provisions of the General Corporation Law of the State of
Delaware, and provided that the Corporation is not then in default
under any agreement with respect to indebtedness for borrowed money
and such redemption would not cause such a default, the Corporation
shall redeem shares of Series A Preferred Stock by paying a redemption
price in cash in an amount per share equal to the Series A Liquidation
Preference upon (i) the sale or other disposition of all or
substantially all of the assets of the Corporation;(ii) the merger or
consolidation of the Corporation with or into any other corporation
wherein, after giving effect to such merger or consolidation, (A) less
than 50% of the total voting power of the outstanding voting stock of
the surviving or resulting entity is then beneficially owned in the
aggregate by (x) the stockholders of the Corporation immediately prior
to such merger or consolidation or, (y) if a record date has been set
to determine the stockholders of the Corporation entitled to vote with
respect to such merger or consolidation, the stockholders of the
Corporation as of such record date and (B) any Person or group, other
than the Control Group, has become the direct or indirect beneficial
owner of more than 50% of the total voting power of the voting stock
of the surviving or resulting entity; or (iii) the payment of any
dividend or distribution in respect of shares of Junior Stock. For
purposes of this Section 5(a), the terms "person," "group" and
"beneficial owner" are used as defined for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended.
(b) Optional. At any time and from time to time, the
Corporation may, at its sole option by resolution of the Board of
Directors, call for redemption and redeem all or any part of the then
outstanding shares of Series A Preferred Stock by paying a redemption
price in cash in an amount per share equal to the Series A Liquidation
Preference; provided, that, if less than all of the then outstanding
shares of Series A Preferred Stock are to be redeemed,
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<PAGE> 8
the shares to be redeemed shall be allocated pro rata among the
holders of Series A Preferred Stock in proportion to the number of
shares held by them.
(c) Notice. At least 20 days prior to the redemption of
any shares of Series A Preferred Stock, the Corporation shall transmit
notice to each holder of record of the shares of Series A Preferred
Stock to be redeemed at such holder's address set forth in the stock
records of the Corporation. Such notice shall also state the date
fixed for redemption (the "Redemption Date") and the redemption price
and shall call upon the holder to surrender to the Corporation on the
Redemption Date at the place designated in the notice such holder's
certificate or certificates representing shares of Series A Preferred
Stock to be redeemed. On or after the Redemption Date, each holder of
shares of Series A Preferred Stock called for redemption shall
surrender the certificate or certificates evidencing such shares to
the Corporation at the place designated in such notice in exchange for
payment of the redemption price. If funds legally available for such
purpose are not sufficient for the redemption of the shares of Series
A Preferred Stock called for redemption, or if the Corporation is then
or would as a result of such redemption be in default under any
agreement with respect to indebtedness for borrowed money, then the
certificates representing shares of Preferred Stock surrendered of
redemption shall be deemed not to be surrendered and such shares shall
remain outstanding. If such notice of redemption shall have been duly
given, and if on the Redemption Date funds necessary for the
redemption shall be available therefor and the Corporation may
otherwise redeem shares of Series A Preferred Stock pursuant to this
Section 5, then, notwithstanding that any certificate evidencing
shares of Series A Preferred Stock called for redemption shall not
have been surrendered, the shares so called for redemption and
represented by such certificate shall be deemed to be no longer
outstanding and, except for the right of the holder thereof to receive
the redemption price (without interest) upon surrender of such
certificate, all rights with respect to the shares so called for
redemption shall forthwith cease and terminate as of the Redemption
Date.
6. Amendment. So long as any share or shares of Series
A Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock at the time outstanding, voting separately
as a class, amend, alter or repeal any of the rights, preferences or powers of
the holders of shares of Series A Preferred Stock so as to affect adversely any
such rights, preferences or powers.
7. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions set forth herein.
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<PAGE> 9
8. Certain Definitions. As used in the foregoing
resolutions, the terms set forth below shall have the following respective
meanings:
"Control Group" means the Persons, other than Hollywood
Theater Holdings, Inc., who are the original parties to that certain
Stockholders' Agreement to be entered into among Hollywood Theater Holdings,
Inc. and the Persons to whom shares of Series A Preferred Stock, par value $.01
per share, of Hollywood Theater Holdings, Inc. are first issued.
"Junior Stock" means Common Stock, par value $.01 per share,
of the Corporation and any other class or series of capital stock of the
Corporation that ranks junior to the Series A Preferred Stock with respect to
the payment of dividends or the distribution of assets upon a Liquidation.
"Liquidation" means any liquidation, dissolution or winding up
of the affairs of the Corporation; provided, however, that a merger or
consolidation of the Corporation into or with another corporation or a sale or
conveyance of all or any part of the assets of the Corporation (which shall not
in fact result in the liquidation of the Corporation and the distribution of
assets to its stockholders) shall not be deemed to constitute a liquidation,
dissolution or winding up of the affairs of the Corporation for purposes of
this definition.
"Person" means any individual, corporation, estate, trust,
association, company, partnership, joint venture or other entity or
organization.
"Preferred Stock" has the meaning set forth in the Certificate
of Incorporation of the Corporation, as amended from time to time.
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<PAGE> 10
IN WITNESS WHEREOF, Hollywood Theaters, Inc. has caused this
Certificate to be executed by the undersigned this 21st day of June, 1995.
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
President
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<PAGE> 11
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HOLLYWOOD THEATERS, INC.
UNDER SECTIONS 241 AND 245 OF THE
DELAWARE GENERAL CORPORATION LAW
HOLLYWOOD THEATERS, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, hereby adopts this Amended and Restated Certificate of
Incorporation that accurately restates and integrates the provisions of the
existing Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and further amends the provisions of the Certificate of
Incorporation as described below, and does hereby further certify that:
The name of the Corporation is Hollywood Theaters, Inc. The
Corporation was originally incorporated under the name "AF Acquisition, Inc."
The original certificate of incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on May 19, 1993.
The Corporation has not received any payment for any of its
stock. The sole director of the Corporation duly adopted the amendments to the
Certificate of Incorporation as described herein, in accordance with the
provisions of Section 241 and 245 of the General Corporation Law of the State
of Delaware.
The existing Certificate of Incorporation, as amended by this
Amended and Restated Certificate of Incorporation, is hereby superseded by this
Amended and Restated Certificate of Incorporation, which shall henceforth be
the Certificate of Incorporation of the Corporation.
The text of the Amended and Restated Certificate of
Incorporation is hereby restated and further amended to read in its entirety as
follows:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
FIRST: The name of the corporation is Hollywood Theaters,
Inc. (the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County
of New Castle, Delaware 19801. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
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<PAGE> 12
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware (the "General Corporation
Law").
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 110,000 shares
consisting of (i) 10,000 shares of preferred stock, par value $.01 per share
("Preferred Stock"), and (ii) 100,000 shares of common stock, par value $.01
per share ("Common Stock").
The powers, preferences and rights of each class of capital
stock, and the qualifications, limitations and restrictions thereof, are as
follows:
a. Preferred Stock. Shares of Preferred Stock may be
issued in such series as may from time to time be determined by the Board of
Directors. Prior to the issuance of a series, the Board of Directors by
resolution shall designate the series to distinguish it from any other classes
or series of capital stock of the Corporation, shall specify the number of
shares to be included in the series and shall fix the powers, preferences and
relative, participating, optional or other special rights of the series, and
the qualifications, limitations or restrictions thereof. Without limiting the
generality of the foregoing, any such resolution of the Board of Directors may
set forth the following characteristics of the series:
i. the designation of, and the number of shares of
Preferred Stock which shall constitute, the series, which number may
be increased (except as otherwise provided by the Board of Directors)
or decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors;
ii. the rate or rates and the date or dates at which (or
the method of determination thereof), and the terms and conditions
upon which, dividends, if any, on shares of the series shall be paid,
the nature of any preferences or the relative rights of priority of
such dividends to the dividends payable on any other class or classes
of capital stock of the Corporation or on any series of Preferred
Stock of the Corporation, and whether such dividends shall be
cumulative;
iii. whether shares of the series shall be convertible
into or exchangeable for shares of capital stock or other securities
or property of the Corporation or of any other corporation or entity,
and, if so, the terms and conditions of such conversion or exchange,
including any provisions for the adjustment of the conversion or
exchange rate upon the occurrence of such events as the Board of
Directors shall determine;
iv. whether shares of the series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable and the
amount and type of consideration payable upon redemption, which amount
may vary under different conditions and at different redemption dates;
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<PAGE> 13
v. whether shares of the series shall have a sinking
fund or redemption or purchase account for the redemption or purchase
of shares of the series, and if so, the terms, conditions and amount
of such sinking fund or redemption or purchase account;
vi. the rights of the holders of shares of the series
upon voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
Corporation;
vii. whether shares of the series shall have voting rights
in addition to the voting rights provided by law, which may include
(a) the right to more or less than one vote per share on any or all
matters submitted to a vote of the stockholders of the Corporation and
(b) the right to vote, as a series by itself or together with any
other series of Preferred Stock or together with all series of
Preferred Stock as a class or with the Common Stock as a class, upon
such matters, under such circumstances and upon such conditions as the
Board of Directors may fix (including, but not limited to, the right,
voting as a series by itself or together with any other series of
Preferred Stock or together with all series of Preferred Stock as a
class, to elect one or more directors of the Corporation in the event
there shall have been a default in the payment of dividends on any
series of Preferred Stock or under such other circumstances and upon
such other conditions as the Board of Directors may determine); and
viii. any other powers, preferences and relative,
participating, optional or other rights, and the qualifications,
limitations or restrictions thereof.
Subject to the express terms of any series of Preferred Stock outstanding at
any time, the vote or consent of the holders of Preferred Stock of any series
shall not be required for the issuance of any other series of Preferred Stock,
regardless of whether the powers, preferences and rights of such other series
shall be fixed by the Board of Directors as senior to, on a parity with or
junior to the powers, preferences and rights of such outstanding series.
b. Common Stock.
i. Dividends. Subject to the rights, if any, of the holders of
Preferred Stock with respect to the payment of dividends and the requirements,
if any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts for the benefit of such holders and subject to
any other conditions that may be fixed in accordance with the provisions of
paragraph A of this Article FOURTH, then, but not otherwise, the holders of
Common Stock shall be entitled to receive such dividends, if any, as may be
declared from time to time by the Board of Directors on the Common Stock out of
assets which are legally available therefor. Any such dividends shall be
distributed among the holders of the Common Stock pro rata in accordance with
the number of shares of such stock held by each such holder.
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<PAGE> 14
ii. Liquidation. In the event of any voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding-up of the
Corporation, after payment or provision for payment of the debts and
liabilities of the Corporation and after distribution to the holders of
Preferred Stock of the amounts fixed in accordance with the provisions of
paragraph A of this Article FOURTH, the holders of the Common Stock shall be
entitled to receive all the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to stockholders. Any
such distribution shall be made among the holders of Common Stock pro rata in
accordance with the number of shares of such stock held by each such holder.
iii. Voting. Except as may otherwise be required by law or the
provisions of any resolution or resolutions adopted by the Board of Directors
pursuant to paragraph A of this Article FOURTH, each holder of Common Stock
shall have one vote for each share of Common Stock held by such holder on each
matter submitted to a vote of the stockholders. Cumulative voting of shares of
Common Stock shall not be permitted.
FIFTH: The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In furtherance
and not in limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to adopt, amend or repeal the Bylaws of the
Corporation; provided, however, that the grant of such authority shall not
divest the stockholders of the power, nor limit their power to adopt, amend or
repeal the Bylaws. The number of directors that shall constitute the whole
Board of Directors of the Corporation shall be as from time to time fixed by,
or in the manner provided in, the Bylaws of the Corporation. The election of
directors need not be by written ballot, unless the Bylaws so provide. In
addition to the authority and powers hereinabove or by statute conferred upon
the directors, the directors are hereby authorized and empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject to the provisions of the General Corporation Law, this
Amended and Restated Certificate of Incorporation and any Bylaws adopted by the
stockholders of the Corporation; provided, however, that no Bylaws hereafter
adopted by the stockholders of the Corporation shall invalidate any prior act
of the directors that would have been valid if such Bylaws had not been
adopted.
SIXTH: No director of the Corporation shall be personally
liable to the Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director involving any act or omission of any
such director; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the General Corporation Law,
as the same exists or hereafter may be amended, or (d) for any transaction from
which the director derived an improper personal benefit. If the General
Corporation Law is amended after the date of filing of this Amended and
Restated Certificate of Incorporation to authorize corporate action further
limiting or eliminating the personal liability of directors, then the liability
of a director of the Corporation, in addition to the limitation on personal
liability provided for herein, shall be limited to the fullest extent permitted
by the General Corporation Law as so amended. Any
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<PAGE> 15
repeal or modification of this Article Sixth by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has executed this Amended
and Restated Certificate of Incorporation as of June 20, 1995 in his capacity
as sole director of Hollywood Theaters, Inc.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
Sole Director
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
HOLLYWOOD THEATERS, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of stockholders
of Hollywood Theaters, Inc. (the "Corporation") shall be held at such place,
either within or without the State of Delaware, as shall be designated from
time to time by the Board of Directors.
SECTION 2. Annual Meeting. An annual meeting of stockholders
shall be held for the election of directors on such date in each year and at
such time as shall be designated by the Board of Directors. At such annual
meeting the stockholders shall elect a Board of Directors, and transact such
other business as may properly be brought before the meeting. A failure to
hold the annual meeting at the designated time or to elect a sufficient number
of directors to conduct the business of the Corporation shall not affect
otherwise valid corporate acts or work a forfeiture or dissolution of the
Corporation, except as may be otherwise specifically provided by law. If the
annual meeting for election of directors is not held on the date designated
therefor, the directors shall cause the meeting to be held as soon thereafter
as convenient. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
SECTION 3. Special Meeting. Unless otherwise prescribed by
law or by the Certificate of Incorporation, a special meeting of the
stockholders, for any purpose or purposes, may be called by (i) the President,
(ii) any Vice President, if there be one, or (iii) the Secretary, and shall be
called by any such officer at the request in writing of a majority of the Board
of Directors. Any such request shall state the purpose or purposes of the
proposed meeting. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, notice is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
<PAGE> 2
SECTION 4. Quorum and Adjournment. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, the
presence, in person or represented by proxy, of the holders of a majority of
the voting power of the shares of capital stock of the Corporation entitled to
vote on any matter shall constitute a quorum for the purpose of considering
such matter at a meeting of the stockholders. If a meeting of stockholders
cannot be organized because a quorum has not attended, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting, until a quorum shall be present or represented.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting at which a
quorum shall be present or represented, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 5. Conduct of Meetings of Stockholders. At each
meeting of the stockholders, the President, or, in his absence, a chairman
chosen by a majority vote of the stockholders present in person or represented
by proxy and entitled to vote thereat, shall preside and act as chairman of the
meeting. The Secretary or, in his absence, an Assistant Secretary, or, in the
absence of the Secretary and all Assistant Secretaries, a person whom the
chairman of such meeting shall appoint, shall act as secretary of such meeting
and keep the minutes thereof. The Board of Directors may adopt such rules and
regulations as it determines are reasonably necessary or appropriate in
connection with the organization and conduct of any meeting of the
stockholders.
SECTION 6. Vote Required. Except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws and in all matters other
than the election of directors, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the
stockholders. Directors of the Corporation shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors.
SECTION 7. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
him by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
SECTION 8. Stockholder List. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a
2
<PAGE> 3
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept open at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. In lieu
of making and producing such list, the Corporation may make the information
therein available by any other means permitted by law.
SECTION 9. Stock Ledger. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list required by Section 8 of this Article or the books of the Corporation,
or to vote in person or by proxy at any meeting of stockholders.
SECTION 10. Action by Written Consent. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of stockholders of
the Corporation, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest dated consent delivered in the manner required by this
Section 10 to the Corporation, written consents signed by a sufficient number
of holders to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
SECTION 1. Board of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. The number of directors that shall
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constitute the whole Board of Directors of the Corporation shall be fixed by
the affirmative vote of a majority of the members at any time constituting the
Board of Directors, and such number may be increased or decreased from time to
time; provided, however, that no such decrease shall have the effect of
shortening the term of any incumbent director. Except as provided in Section 2
of this Article, directors shall be elected by a plurality of the votes cast at
the annual meetings of stockholders, and each director so elected shall hold
office until the next annual meeting of stockholders and until his successor is
duly elected and qualified or until the earliest of his death, resignation or
removal. Directors need not be stockholders.
SECTION 2. Vacancies and Newly Created Directorships.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the Certificate of Incorporation,
vacancies and newly created directorships of such class or classes or series
may be filled by a majority of the directors elected by such class or classes
or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death, resignation, removal or other cause, there
are no directors in office, then an election of directors may be held in the
manner provided by the General Corporation Law of the State of Delaware (the
"General Corporation Law"). When one or more directors shall resign from the
Board, effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this Section 2 in the filling of other vacancies.
SECTION 3. Removal. Any director or the entire Board of
Directors of the Corporation may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote at the election of
directors; provided, however, that whenever the holders of any class or series
of capital stock of the Corporation are entitled to elect one or more directors
by the provisions of the Certificate of Incorporation, the provisions of this
Section 3 shall apply, in respect of the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
such class or series of capital stock and not to the vote of the outstanding
shares as a whole.
SECTION 4. Resignation. Any director of the Corporation may
resign at any time by giving written notice of his resignation to the President
or the Secretary. Such resignation shall take effect at the date of receipt of
such notice by the President or the Secretary, or at any later time specified
therein. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. Compensation of Directors. The directors shall
receive such compensation for their services as the Board of Directors may from
time to time determine. No director shall be prevented from receiving
compensation for his services as a director by reason of
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the fact that he is also an officer of the Corporation. All directors shall be
reimbursed for their reasonable expenses of attendance at each regular or
special meeting of the Board of Directors. Members of any committee of
directors may be allowed like compensation and reimbursement for expenses for
serving as members of any such committee and for attending committee meetings.
SECTION 6. Place of Meetings. The Board of Directors of the
Corporation may hold its meetings, both regular and special, either within or
without the State of Delaware.
SECTION 7. Regular Meetings. Promptly after each annual
election of directors, the Board of Directors shall meet for the purpose of the
election of officers and the transaction of other business, at the place where
such annual election is held. The Board of Directors may also hold other
regular meetings at such time or times and at such place or places as shall be
designated by the Board of Directors from time to time. Notice of regular
meetings of the Board of Directors need not be given.
SECTION 8. Special Meetings. Special meetings of the Board
of Directors may be called by the President or by a majority of the Board of
Directors. Notice shall be sent to the last known address of each director, by
mail, telegram, cable or telex, at least two days before the meeting, or oral
notice may be substituted for such written notice if received not later than
the day preceding such meeting. Special meetings shall be called by the
President or by the Secretary in like manner and on like notice at the written
request of a majority of directors, and the place and time of such special
meeting shall be as designated in the notice of such meetings.
SECTION 9. Quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, at all meetings of the Board of
Directors a majority of the total number of directors in office shall
constitute a quorum for the transaction of business and the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
SECTION 10. Conduct of Meetings of Board of Directors. At
each meeting of the Board of Directors the President or, in his absence, a
director chosen by a majority of the directors present, shall act as chairman
of the meeting. The Secretary or, in his absence, a person whom the chairman
of such meeting shall appoint, shall act as secretary of such meeting and keep
the minutes thereof.
SECTION 11. Meetings by Telephone Conference. Members of the
Board of Directors of the Corporation may participate in a meeting of such
Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 11 shall constitute presence in person at such meeting.
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SECTION 12. Action by Written Consent. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing
setting forth the action so taken, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors or committee.
SECTION 13. Committees of Directors. The Board of Directors
may, by resolution passed by a majority of the whole Board of Directors,
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, unless otherwise provided in the
resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Notwithstanding
the foregoing, no committee shall have the power or authority to take any of
the following actions:
(a) amend the Certificate of Incorporation
(except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of any
series of capital stock of the Corporation adopted by the Board of
Directors as permitted by the General Corporation Law, fix the
designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of
such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series);
(b) adopt an agreement of merger or consolidation
under the General Corporation Law;
(c) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's property
and assets;
(d) recommend to the stockholders a dissolution
of the Corporation or a revocation of a dissolution; or
(e) amend the Bylaws of the Corporation.
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In addition, unless the resolution of the Board of Directors
designating the committee expressly so provides, no such committee shall have
the power or authority to take any of the following actions:
(i) declare a dividend;
(ii) authorize the issuance of stock; or
(iii) adopt a certificate of ownership and merger
pursuant to the General Corporation Law.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
SECTION 14. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE III
OFFICERS
SECTION 1. General. The officers of the Corporation shall
consist of a President, a Secretary and such other officers, including one or
more Vice Presidents and a Treasurer, as may be deemed necessary by the Board
of Directors. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide. The Board of
Directors at its first meeting held after each annual meeting of stockholders
shall elect the officers of the Corporation who shall hold their offices for
such terms and shall exercise such powers and
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perform such duties as shall be determined from time to time by the Board of
Directors. The Board of Directors may delegate to the President, any Vice
President, the Secretary and the Treasurer the power to appoint or remove any
subordinate officers, agents or employees. Each officer of the Corporation
shall hold his office until his successor is elected and qualified or until the
earliest of his death, resignation or removal.
SECTION 2. Removal. Any officer may be removed, either with
or without cause, by the affirmative vote of a majority of the directors then
in office at a meeting called for that purpose, or, except in the case of any
officer elected by the Board of Directors, by any officer upon whom the powers
of removal may be conferred by the Board of Directors.
SECTION 3. Resignation. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice by the Corporation, or at any later time specified therein. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4. Vacancies. A vacancy in any office resulting from
death, resignation, removal or any other cause shall be filled for the
unexpired portion of the term in the manner prescribed in these Bylaws for
regular election or appointment to such office.
SECTION 5. Officers' Salaries. The salaries of the officers
shall be fixed from time to time by the Board of Directors, and no officer
shall be prevented from receiving a salary by reason of the fact that he is
also a director of the Corporation.
SECTION 6. President. The President shall be the chief
executive officer of the Corporation and shall in general supervise and control
all of the business and affairs of the Corporation. He shall preside at all
meetings of the stockholders and of the Board of Directors and shall perform
such other duties as may be assigned to him from time to time by the Board of
Directors. He may execute certificates for shares of the Corporation, any
deeds, mortgages, bonds, contracts or other instruments that the Board of
Directors has authorized to be executed, except in cases where the execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation or shall be required
by law to be otherwise signed and executed. In addition, the President shall
perform, under the direction and subject to the control of the Board of
Directors, all such other duties as are incident to the office of President and
as may be prescribed by the Board of Directors from time to time.
SECTION 7. Vice President. Each Vice President, if there be
any, shall perform, under the direction and subject to the control of the Board
of Directors and the President, the usual and customary duties incident to such
office (but not any unusual or extraordinary duties or powers conferred by the
Board of Directors upon the President) and such other duties as may be assigned
to him from time to time by the Board of Directors or the President.
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SECTION 8. Secretary and Assistant Secretary. It shall be
the duty of the Secretary to attend all meetings of the stockholders and Board
of Directors and record correctly the proceedings held at such meetings in a
book suitable for that purpose. It shall also be the duty of the Secretary to
attest with his signature all stock certificates issued by the Corporation, to
keep a stock ledger in which shall be correctly recorded all transactions
pertaining to the capital stock of the Corporation and to attest with his
signature all deeds, conveyances or other instruments requiring the seal of the
Corporation. The Secretary shall have full power and authority on behalf of
the Corporation to execute any stockholders' consents and to attend and act and
to vote in person or by proxy at any meetings of the stockholders of any
corporation in which the Corporation may own stock, and at any such meetings
shall possess and may exercise any and all the rights and powers incident to
the ownership of such stock that as the owner thereof the Corporation might
have possessed and exercised if present. The Secretary shall also perform,
under the direction and subject to the control of the Board of Directors and
the President, the usual and customary duties incident to such office and such
other duties as may be assigned to him from time to time. The duties of the
Secretary may also be performed by any Assistant Secretary.
SECTION 9. Treasurer and Assistant Treasurer. The Treasurer,
if there be one, shall have the care and custody of all the funds and
securities of the Corporation that may come into his hands as Treasurer. He
may endorse checks, drafts and other instruments for the payment of money for
deposit or collection when necessary or proper and may deposit the same to the
credit of the Corporation in such bank or banks or depositary as the Board of
Directors may designate. In addition, he may endorse all commercial documents
requiring endorsements for or on behalf of the Corporation and may sign all
receipts and vouchers for the payments made to the Corporation. He shall enter
regularly in the books to be kept by him for that purpose a full and accurate
account of all monies received and paid by him on account of the Corporation
and shall render an account of his transactions to the Board of Directors as
often as the Board of Directors shall require. He shall when requested,
pursuant to a vote of the Board of Directors, give a bond to the Corporation
for the faithful performance of his duties, the expense of which bond shall be
borne by the Corporation. The Treasurer shall also perform, under the
direction and subject to the control of the Board of Directors and the
President, the usual and customary duties incident to such office and such
other duties as may be assigned to him from time to time. The duties of the
Treasurer may also be performed by any Assistant Treasurer.
SECTION 10. Delegation of Authority. In the case of any
absence of any officer of the Corporation or for any other reason that the
Board of Directors may deem sufficient, the Board of Directors may delegate
some or all of the powers or duties of such officer to any other officer or to
any director, employee, stockholder or agent for whatever period of time the
Board of Directors determines is necessary or appropriate.
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ARTICLE IV
STOCK AND STOCK CERTIFICATES
SECTION 1. Stockholders Entitled to Certificates. Every
holder of stock in the Corporation shall be entitled to have a certificate
representing the number of shares owned by him signed by or in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary of the Corporation. Any and all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may be issued by the
Corporation with the same effect as if such officer, transfer agent or
registrar continued to discharge said office or function at the date of
issuance.
SECTION 2. Lost, Stolen or Destroyed Stock Certificates.
The Corporation may issue a new stock certificate in place of any certificate
theretofore issued by it which is alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issuance of a new certificate or certificates, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof, require
that the owner of such lost, stolen or destroyed certificate or certificates,
or his legal representative, give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against the
Corporation on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 3. Transfers of Stock. Upon surrender to the
Corporation or the transfer agent or agents of the Corporation of a certificate
for shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Corporation shall issue a new
certificate to the person entitled thereto, cancel the certificate surrendered
to the Corporation and record the transaction upon its books.
SECTION 4. Fixing Record Date.
(a) Notice of Meeting; Vote. In order that the
Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be
more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the adjourned
meeting.
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(b) Written Consent. In order that the
Corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors
may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than ten days
after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed
by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
required by the General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall
be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by the General
Corporation Law, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors
adopts the resolution taking such prior action.
(c) Dividend; Distribution; Allotment of Rights.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for
any such purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
SECTION 5. Registered Stockholders. Except as otherwise
required by law, the Corporation shall be entitled to recognize the exclusive
right of the person registered on its books as the owner of shares to receive
dividends in respect of such shares and to vote as the owner thereof, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof.
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ARTICLE V
INDEMNIFICATION
SECTION 1. Indemnification and Advancement of Expenses.
(a) Indemnification in the Case of Proceedings
Other Than by or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) Indemnification in the Case of Proceedings by
or in the Right of the Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) Indemnification for Expenses. To the extent
that a director, officer, employee or agent of the Corporation has
been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in paragraph (a) or (b) of this Section
1, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Determination of Entitlement to
Indemnification. Any indemnification under paragraph (a) or (b) of
this Section 1 (unless ordered by a court) shall be made by the
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Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraph (a) or (b) of
this Section 1. Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable and a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders.
(e) Advancement of Expenses. Expenses (including
attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to
be indemnified by the Corporation as authorized in this Article V.
Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
SECTION 2. Indemnification and Advancement not Exclusive
Right. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article V shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
SECTION 3. Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article V.
SECTION 4. Certain Definitions. For purposes of this Article
V, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries. In addition, for purposes of this
Article V, a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation."
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SECTION 5. Continuation. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article V shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Amendments. The Bylaws may be altered, amended or
repealed, in whole or in part, or new Bylaws may be adopted by the stockholders
or by the Board of Directors; provided, however, that notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such meeting of stockholders or Board of Directors, as the case may
be. All such amendments must be approved by either the holders of a majority
of the outstanding capital stock entitled to vote thereon or by a majority of
the entire Board of Directors then in office.
SECTION 2. Waiver of Notice. Whenever notice is required to
be given under any provision of the General Corporation Law, the Certificate of
Incorporation or these Bylaws, a written waiver, signed by the person entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting of stockholders, in
person or by proxy, or at a meeting of the Board of Directors or committee
thereof shall constitute a waiver of notice of such meeting, except when the
person attends such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws.
SECTION 3. Fiscal Year. The fiscal year of the Corporation
shall end on the thirty-first day of December of each year, unless otherwise
provided by resolution of the Board of Directors.
SECTION 4. Offices. The registered office of the Corporation
in the State of Delaware shall be in care of The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
14
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EXHIBIT 4.1
------------------------------------------------------------
HOLLYWOOD THEATERS, INC.
As Issuer
and
The Guarantors Named Herein
As Guarantors
TO
U.S. Trust Company of Texas, N.A.
As Trustee
----------------
Indenture
Dated as of August 7, 1997
----------------
$110,000,000
10 5/8% Senior Subordinated Notes due August 1, 2007
------------------------------------------------------------
<PAGE> 2
.....................................
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of August 7, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
Section 310 (a)(1) ............................... 609
(a)(2) ............................... 609
(a)(3) ............................... Not
Applicable
(a)(4) ............................... Not
Applicable
(b) ............................... 608
610
Section 311 (a) ............................... 613(a)
(b) ............................... 613(b)
(b)(2) ............................... 703(a)(2)
703(b)
Section 312 (a) ............................... 701
702(a)
(b) ............................... 702(b)
(c) ............................... 702(c)
Section 313 (a) ............................... 703(a)
(b) ............................... 703(b)
(c) ............................... 703(a)
703(b)
(d) ............................... 703(c)
Section 314 (a) ............................... 704
(b) ............................... Not
Applicable
(c)(1) ............................... 102
(c)(2) ............................... 102
(c)(3) ............................... Not
Applicable
(d) ............................... Not
Applicable
(e) ............................... 102
Section 315 (a) ............................... 601(a)
(b) ............................... 602
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C> <C>
703(a)(6)
(c) ............................... 601(b)
(d) ............................... 601(c)
(d)(1) ............................... 601(a)(1)
(d)(2) ............................... 601(c)(2)
(d)(3) ............................... 601(c)(3)
(e) ............................... 514
Section 316 (a) ............................... 101
(a)(1)(A) ............................... 502
512
(a)(1)(B) ............................... 513
(a)(2) ............................... Not
Applicable
(b) ............................... 508
Section 317 (a)(1) ............................... 503
(a)(2) ............................... 504
(b) ............................... 1003
Section 318 (a) ............................... 107
</TABLE>
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company and the Guarantors . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
SECTION 101. Definitions:
Acquired Debt . . . . . . . . . . . . . . . . . . . . . 3
Act . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Affiliate . . . . . . . . . . . . . . . . . . . . . . . 3
Agent Member . . . . . . . . . . . . . . . . . . . . . . 3
Applicable Procedures . . . . . . . . . . . . . . . . . 4
Asset Disposition . . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . . . . . 5
Board Resolution . . . . . . . . . . . . . . . . . . . . 5
Business Day . . . . . . . . . . . . . . . . . . . . . . 5
Capital Lease Obligation . . . . . . . . . . . . . . . . 5
Capital Stock . . . . . . . . . . . . . . . . . . . . . 5
Cash Equivalents . . . . . . . . . . . . . . . . . . . . 6
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing Date . . . . . . . . . . . . . . . . . . . . . . 6
Commission . . . . . . . . . . . . . . . . . . . . . . . 6
Common Stock . . . . . . . . . . . . . . . . . . . . . . 6
Company . . . . . . . . . . . . . . . . . . . . . . . . 6
Company Request; Company Order . . . . . . . . . . . . . 7
Consolidated Cash Flow
Available for Fixed Charges . . . . . . . . . . . . . 7
Consolidated Cash Flow Ratio . . . . . . . . . . . . . . 7
Consolidated Fixed Charges . . . . . . . . . . . . . . . 8
Consolidated Income Tax Expense . . . . . . . . . . . . 8
</TABLE>
___________
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Interest Expense . . . . . . . . . . . . . 8
Consolidated Net Income . . . . . . . . . . . . . . . . 9
Consolidated Net Worth . . . . . . . . . . . . . . . . . 10
Consolidated Tangible Assets . . . . . . . . . . . . . . 10
Corporate Trust Office . . . . . . . . . . . . . . . . . 10
corporation . . . . . . . . . . . . . . . . . . . . . . 10
Crown . . . . . . . . . . . . . . . . . . . . . . . . . 10
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Depositary . . . . . . . . . . . . . . . . . . . . . . . 11
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Designated Senior Debt . . . . . . . . . . . . . . . . . 12
Euroclear . . . . . . . . . . . . . . . . . . . . . . . 12
Event of Default . . . . . . . . . . . . . . . . . . . . 12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . 12
Exchange and Registration Rights
Agreement . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Notes . . . . . . . . . . . . . . . . . . . . . 12
Exchange Offer . . . . . . . . . . . . . . . . . . . . . 12
Exchange Registration Statement . . . . . . . . . . . . 12
Global Note . . . . . . . . . . . . . . . . . . . . . . 13
Guarantee . . . . . . . . . . . . . . . . . . . . . . . 13
Guarantor Senior Debt . . . . . . . . . . . . . . . . . 13
Guarantors . . . . . . . . . . . . . . . . . . . . . . . 14
Holder . . . . . . . . . . . . . . . . . . . . . . . . . 14
Holdings . . . . . . . . . . . . . . . . . . . . . . . . 14
Initial Purchasers . . . . . . . . . . . . . . . . . . . 15
Incur . . . . . . . . . . . . . . . . . . . . . . . . . 14
Indenture . . . . . . . . . . . . . . . . . . . . . . . 14
Interest Payment Date . . . . . . . . . . . . . . . . . 15
Interest Rate, Currency
or Commodity Price Agreement . . . . . . . . . . . . . 15
Investment . . . . . . . . . . . . . . . . . . . . . . . 15
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Maturity . . . . . . . . . . . . . . . . . . . . . . . . 16
Moodys . . . . . . . . . . . . . . . . . . . . . . . . . 16
Net Available Proceeds . . . . . . . . . . . . . . . . . 16
New Senior Bank Facility . . . . . . . . . . . . . . . . 17
Note Purchase Agreement . . . . . . . . . . . . . . . . 13
Notes . . . . . . . . . . . . . . . . . . . . . . . . . 17
Offer to Purchase . . . . . . . . . . . . . . . . . . . 17
Officers' Certificate . . . . . . . . . . . . . . . . . 21
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
<S> <C>
Opinion of Counsel . . . . . . . . . . . . . . . . . . . 21
Original Notes . . . . . . . . . . . . . . . . . . . . . 21
Outstanding . . . . . . . . . . . . . . . . . . . . . . 21
Parent Guarantee . . . . . . . . . . . . . . . . . . . . 22
Paying Agent . . . . . . . . . . . . . . . . . . . . . . 22
Permitted Holder . . . . . . . . . . . . . . . . . . . . 22
Permitted Interest Rate, Currency
or Commodity Price Agreement . . . . . . . . . . . . 22
Permitted Investments . . . . . . . . . . . . . . . . . 23
Person . . . . . . . . . . . . . . . . . . . . . . . . . 23
Predecessor Note . . . . . . . . . . . . . . . . . . . . 24
Preferred Stock . . . . . . . . . . . . . . . . . . . . 24
Public Equity Offering . . . . . . . . . . . . . . . . . 24
Qualifying Theater Assets . . . . . . . . . . . . . . . 24
Receivables . . . . . . . . . . . . . . . . . . . . . . 25
Receivables Sale . . . . . . . . . . . . . . . . . . . . 25
Redeemable Stock . . . . . . . . . . . . . . . . . . . . 25
Redemption Date . . . . . . . . . . . . . . . . . . . . 25
Registration Default . . . . . . . . . . . . . . . . . . 25
Registration Default Period . . . . . . . . . . . . . . 25
Regulation S . . . . . . . . . . . . . . . . . . . . . . 26
Regulation S Certificate . . . . . . . . . . . . . . . . 26
Regulation S Global Note . . . . . . . . . . . . . . . . 26
Regulation S Legend . . . . . . . . . . . . . . . . . . 26
Regulation S Notes . . . . . . . . . . . . . . . . . . . 26
Related Person . . . . . . . . . . . . . . . . . . . . . 26
Responsible Officer . . . . . . . . . . . . . . . . . . 26
Restricted Period . . . . . . . . . . . . . . . . . . . 27
Restricted Notes . . . . . . . . . . . . . . . . . . . . 27
Restricted Notes Certificate . . . . . . . . . . . . . . 27
Restricted Notes Legend . . . . . . . . . . . . . . . . 27
Restricted Subsidiary . . . . . . . . . . . . . . . . . 27
Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . 27
Rule 144A Securities . . . . . . . . . . . . . . . . . . 27
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . 27
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Securities Act . . . . . . . . . . . . . . . . . . . . . 28
Securities Register . . . . . . . . . . . . . . . . . . 28
Senior Debt . . . . . . . . . . . . . . . . . . . . . . 28
Senior Subordinated Guarantees . . . . . . . . . . . . . 28
Shelf Registration Statement . . . . . . . . . . . . . . 29
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
Special Interest . . . . . . . . . . . . . . . . . . . . 29
Stated Maturity . . . . . . . . . . . . . . . . . . . . 29
Subordinated Debt . . . . . . . . . . . . . . . . . . . 29
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 30
Subsidiary Guarantees . . . . . . . . . . . . . . . . . 30
Subsidiary Guarantors . . . . . . . . . . . . . . . . . 30
Successor Note . . . . . . . . . . . . . . . . . . . . . 31
Temporary Cash Investments . . . . . . . . . . . . . . . 31
Trust Indenture Act . . . . . . . . . . . . . . . . . . 32
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 32
U.S. Person . . . . . . . . . . . . . . . . . . . . . . 32
Vice President . . . . . . . . . . . . . . . . . . . . . 33
Voting Stock . . . . . . . . . . . . . . . . . . . . . . 34
Wholly Owned Restricted Subsidiary . . . . . . . . . . . 34
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . 34
SECTION 103. Form of Documents Delivered
to Trustee . . . . . . . . . . . . . . . . . . . . . 35
SECTION 104. Acts of Holders; Record Date . . . . . . . . . . . . . . 36
SECTION 105. Notices, Etc., to Trustee, Company
and Guarantors . . . . . . . . . . . . . . . . . . . 38
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . 38
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . 39
SECTION 108. Effect of Headings and
Table of Contents . . . . . . . . . . . . . . . . . . 40
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . 40
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . 40
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . 40
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally; Initial Forms
of Rule 144A and Regulation S Notes . . . . . . . . . 41
SECTION 202. Form of Face of Note . . . . . . . . . . . . . . . . . . 43
SECTION 203. Form of Reverse of Note . . . . . . . . . . . . . . . . 48
SECTION 204. Form of Trustee's
Certificate of Authentication . . . . . . . . . . . . 55
SECTION 205. Form Senior Subordinated Guarantee . . . . . . . . . . . 55
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . 61
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . 62
SECTION 303. Execution, Authentication,
Delivery and Dating . . . . . . . . . . . . . . . . . 62
SECTION 304. Temporary Notes . . . . . . . . . . . . . . . . . . . . 64
SECTION 305. Global Notes . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 306. Registration, Registration of
Transfer and Exchange . . . . . . . . . . . . . . . . 67
SECTION 307. Mutilated, Destroyed,
Lost and Stolen Notes . . . . . . . . . . . . . . . . 73
</TABLE>
-vii-
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 308. Payment of Interest;
Interest Rights Preserved . . . . . . . . . . . . . . . 74
SECTION 309. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . 76
SECTION 310. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 311. Computation of Interest . . . . . . . . . . . . . . . . . . 77
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and
Discharge of Indenture . . . . . . . . . . . . . . . . . 78
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . 80
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . 80
SECTION 502. Acceleration of Maturity;
Rescission and Annulment . . . . . . . . . . . . . . . . 83
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . 86
SECTION 505. Trustee May Enforce Claims
Without Possession of Notes . . . . . . . . . . . . . . . 87
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . 87
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . 89
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . 90
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . 90
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . 90
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 91
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . 91
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 92
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and
Responsibilities . . . . . . . . . . . . . . . . . . . . 92
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 93
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . 93
SECTION 604. Not Responsible for Recitals
or Issuance of Securities . . . . . . . . . . . . . . . . 95
SECTION 605. May Hold Notes . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . 95
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . 96
</TABLE>
-ix-
<PAGE> 11
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 608. Disqualification; Conflicting
Interests . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 610. Resignation and Removal;
Appointment of Successor . . . . . . . . . . . . . . . . 97
SECTION 611. Acceptance of Appointment by
Successor . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business . . . . . . . . . . . . . . . . 100
SECTION 613. Preferential Collection of
Claims Against Company . . . . . . . . . . . . . . . . . 100
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders . . . . . . . . . . . . . . . . 100
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . . . . . . . . . . 101
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . 102
SECTION 704. Reports by Company and the Guarantors . . . . . . . . . . . 102
SECTION 705. Officers' Certificate with Respect
to Change in Interest Rates . . . . . . . . . . . . . . . 102
</TABLE>
-x-
<PAGE> 12
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc.,
Only on Certain Terms . . . . . . . . . . . . . . . . 103
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . 104
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . . . . 104
SECTION 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . . . . . . . . . 106
SECTION 903. Execution of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . 108
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . 108
SECTION 906. Reference in Notes to
Supplemental Indentures . . . . . . . . . . . . . . . 108
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . 109
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . 109
SECTION 1003. Money for Note Payments to
be Held in Trust . . . . . . . . . . . . . . . . . . . 110
</TABLE>
-xi-
<PAGE> 13
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 1005. Maintenance of Properties . . . . . . . . . . . . . . . 112
SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . 113
SECTION 1007. Maintenance of Insurance . . . . . . . . . . . . . . . . 113
SECTION 1008. Limitation on Consolidated Debt . . . . . . . . . . . . 114
SECTION 1009. Limitation on Senior Subordinated Debt . . . . . . . . . 118
SECTION 1010. Limitation on Issuance of
Guarantees of Subordinated Debt . . . . . . . . . . . . 118
SECTION 1011. Limitation on Liens . . . . . . . . . . . . . . . . . . 118
SECTION 1012. Limitation on Restricted Payments . . . . . . . . . . . 121
SECTION 1013. Limitations on Dividends
and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . . . 124
SECTION 1014. Limitation on Asset Disposition . . . . . . . . . . . . 125
SECTION 1015. Transactions with Affiliates and
Related Persons . . . . . . . . . . . . . . . . . . . . 126
SECTION 1016. Change of Control . . . . . . . . . . . . . . . . . . . 127
SECTION 1017. Provision of Financial Information . . . . . . . . . . . 128
SECTION 1018. Unrestricted Securities . . . . . . . . . . . . . . . . 129
SECTION 1019. Statement by Officers as to
Default; Compliance Certificates . . . . . . . . . . . 130
SECTION 1020. Waiver of Certain Covenants . . . . . . . . . . . . . . 130
</TABLE>
-xii-
<PAGE> 14
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . 131
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . 132
SECTION 1103. Election to Redeem; Notice
to Trustee . . . . . . . . . . . . . . . . . . . . . . 132
SECTION 1104. Selection by Trustee of
Notes to Be Redeemed . . . . . . . . . . . . . . . . . 133
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . 133
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . 134
SECTION 1107. Notes Payable on Redemption Date . . . . . . . . . . . . 135
SECTION 1108. Notes Redeemed in Part . . . . . . . . . . . . . . . . . 135
ARTICLE TWELVE
Senior Subordinated Guarantee
SECTION 1201. Senior Subordinated Guarantee . . . . . . . . . . . . . 136
SECTION 1202. Execution and Delivery
of Senior Subordinated Guarantee . . . . . . . . . . . . 140
SECTION 1203. Subsidiary Guarantors
May Consolidate, Etc. on Certain Terms . . . . . . . . . 141
SECTION 1204. Release of Guarantors . . . . . . . . . . . . . . . . . 142
SECTION 1205. Additional Guarantors . . . . . . . . . . . . . . . . . 143
</TABLE>
-xiii-
<PAGE> 15
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE THIRTEEN
Subordination of Notes and Senior Subordinated Guarantees
SECTION 1301. Notes Subordinate to Senior Debt . . . . . . . . . . . . 144
SECTION 1302. Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . . . . . . . 144
SECTION 1303. No Payment When Senior
Debt in Default . . . . . . . . . . . . . . . . . . . 147
SECTION 1304. Payment Permitted If No Default . . . . . . . . . . . . 150
SECTION 1305. Subrogation to Rights of Holders
of Senior Debt . . . . . . . . . . . . . . . . . . . . 151
SECTION 1306. Provisions Solely to Define
Relative Rights . . . . . . . . . . . . . . . . . . . 152
SECTION 1307. Trustee to Effectuate
Subordination . . . . . . . . . . . . . . . . . . . . 152
SECTION 1308. No Waiver of Subordination
Provisions . . . . . . . . . . . . . . . . . . . . . . 153
SECTION 1309. Notice to Trustee . . . . . . . . . . . . . . . . . . . 153
SECTION 1310. Reliance on Judicial Order or
Certificate of Liquidating
Agent . . . . . . . . . . . . . . . . . . . . . . . . 154
SECTION 1311. Trustee Not Fiduciary for Holders
of Senior Debt . . . . . . . . . . . . . . . . . . . . 155
SECTION 1312. Rights of Trustee as Holder of
Senior Debt; Preservation of
Trustee's Rights . . . . . . . . . . . . . . . . . . . 155
SECTION 1313. Article Applicable to Paying
Agents . . . . . . . . . . . . . . . . . . . . . . . . 156
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1314. Defeasance of this Article
Twelve . . . . . . . . . . . . . . . . . . . . . . . . 156
ARTICLE FOURTEEN
Defeasance and Covenant Defeasance
SECTION 1401. Company's Option to Effect
Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . . 156
SECTION 1402. Defeasance and Discharge . . . . . . . . . . . . . . . . 157
SECTION 1403. Covenant Defeasance . . . . . . . . . . . . . . . . . . 157
SECTION 1404. Conditions to Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . 158
SECTION 1405. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . 163
SECTION 1406. Reinstatement . . . . . . . . . . . . . . . . . . . . . 164
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . 165
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . 165
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 167
</TABLE>
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<PAGE> 17
INDENTURE, dated as of August 7, 1997, between Hollywood Theaters,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 2911
Turtle Creek Boulevard, Dallas, Texas 75219, each of the Guarantors (as
hereinafter defined) and U.S. Trust Company of Texas, N.A., a national banking
association duly organized and existing under the laws of the United States of
America, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTORS
The Company has duly authorized the creation of an issue of its 10
5/8% Senior Subordinated Notes due August 1, 2007 (the "Notes") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
Hollywood Theater Holdings, Inc. ("Holdings") owns beneficially and of
record 100% of the Capital Stock of the Company; the Company, directly or
indirectly, owns beneficially and of record 100% of the Capital Stock or other
ownership interests, as the case may be, of Crown Theatre Corporation
("Crown"); Holdings, the Company and Crown are members of the same consolidated
group of companies and are engaged in related businesses and Holdings and
Crown, as Guarantors, will derive direct and indirect economic benefit from the
issuance of the Securities. Accordingly, each of the Guarantors has duly
authorized the execution and delivery of this Indenture to provide for its
Senior Subordinated Guarantees with respect to the Securities as set forth in
this Indenture.
All things necessary (i) to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, (ii) to make the Senior
Subordinated Guarantees of each of the Guarantors, when executed by the
respective Guarantors and endorsed on the Securities executed, authenticated
and delivered hereunder, the valid obligations of the respective Guarantors,
and
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<PAGE> 18
(iii) to make this Indenture a valid agreement of the Company and each of the
Guarantors, all in accordance with their respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles (whether or not such is indicated herein), and, except as
otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted as consistently applied by the Company at the date of such
computation;
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<PAGE> 19
(4) unless otherwise specifically set forth herein, all calculations
or determinations of a Person shall be performed or made on a consolidated
basis in accordance with generally accepted accounting principles; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Acquired Debt" of any particular Person means Debt of any other
Person existing at the time such other Person merged with or into or became a
Subsidiary of such particular Person or assumed by such particular Person in
connection with the acquisition of assets from any other Person, and not
Incurred by such other Person in connection with, or in contemplation of, such
other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the rules
and procedures of the
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<PAGE> 20
Depositary, Euroclear or Cedel, for such Note, in each case to the extent
applicable to such transaction and as in effect at the time of such transfer or
transaction.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including any issuance or sale by a Restricted Subsidiary of
Capital Stock of such Restricted Subsidiary, and including a consolidation or
merger or other sale of any such Restricted Subsidiary with, into or to another
Person in a transaction in which such Restricted Subsidiary ceases to be a
Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary
of such Person to such Person or a Wholly Owned Restricted Subsidiary of such
Person or by such Person to a Wholly Owned Restricted Subsidiary of such
Person) of (i) shares of Capital Stock (other than directors' qualifying
shares) or other ownership interests of a Restricted Subsidiary of such Person,
(ii) substantially all of the assets of such Person or any of its Restricted
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Restricted Subsidiaries outside of the
ordinary course of business, provided in each case that the aggregate
consideration for such transfer, conveyance, sale, lease or other disposition
is equal to $1.0 million or more. The term "Asset Disposition" shall not
include (i) any sale and leaseback of Qualifying Theater Assets effected at
fair market value, and (ii) any swap or exchange of Qualifying Theater Assets
of the Company or its Subsidiaries for Qualifying Theater Assets of another
Person, provided that if the fair market value of the assets exchanged by the
Company or its Subsidiary exceeds the fair market value of the assets to be
received, in each case as determined in good faith by the Board of Directors of
the Company, such excess shall be subject to Section 1014 hereof.
"Board of Directors" means either the board of directors of the
Company or any Guarantor or any duly authorized committee of that board.
Except as otherwise provided or unless context otherwise requires, each
reference herein to the "Board of Directors" shall mean the Board of Directors
of the Company.
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<PAGE> 21
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or any Guarantor to have
been duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee. Except as
otherwise expressly provided or unless the context otherwise requires, each
reference herein to a "Board Resolution" shall mean a Board Resolution of the
Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
or in the city in which the Corporate Trust Office is located are authorized or
obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with generally
accepted accounting principles. The stated maturity of such obligation shall
be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty. The principal amount of such obligation
shall be the capitalized amount thereof that would appear on the face of a
balance sheet of such Person in accordance with generally accepted accounting
principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general
or limited, of such Person.
"Cash Equivalents" means (i) direct obligations of the United States
of America or any agency thereof having maturities of not more than one year
from the date of acquisition, (ii) time deposits and certificates of deposit of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million, with
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<PAGE> 22
maturities of not more than one year from the date of acquisition, (iii)
repurchase obligations issued by any bank described in clause (ii) above with a
term not to exceed 30 days; (iv) commercial paper rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
in each case maturing within one year after the date of acquisition and (v)
shares of any money market mutual fund, or similar fund, in each case having
excess of $500 million, which invests predominantly in investments of the types
describes in clauses (i) through (iv) above.
"Cedel" means Cedel, S.A. (or any successor securities clearing
agency).
"Closing Date" means August 7, 1997.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
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<PAGE> 23
Secretary or an Assistant Secretary and delivered to the Trustee.
"Consolidated Cash Flow Available for Fixed Charges" means for any
period the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated Interest
Expense of the Company and its Restricted Subsidiaries for such period, plus
(ii) Consolidated Income Tax Expense of the Company and its Restricted
Subsidiaries for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of the Company and its
Restricted Subsidiaries for such period, plus (iv) all other non-cash items
reducing Consolidated Net Income of the Company and its Restricted
Subsidiaries, less all non-cash items increasing Consolidated Net Income of the
Company and its Restricted Subsidiaries; provided, however, that there shall be
excluded therefrom the Consolidated Cash Flow Available for Fixed Charges (if
positive) of any Restricted Subsidiary of the Company (calculated separately
for such Restricted Subsidiary in the same manner as provided above for the
Company) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Company or another Restricted
Subsidiary of the Company to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) Consolidated Cash Flow Available for Fixed
Charges of the Company and its Restricted Subsidiaries for the period of the
most recently completed four consecutive fiscal quarters for which quarterly or
annual financial statements are available to (ii) Consolidated Fixed Charges of
the Company and its Restricted Subsidiaries for such period; provided, however,
that Consolidated Fixed Charges shall be adjusted to give effect on a pro forma
basis to any Debt that has been Incurred by the Company or any Restricted
Subsidiary since the beginning of such period that remains outstanding and to
any Debt that is proposed to be Incurred by the Company or any Restricted
Subsidiary as if in each case such Debt had been Incurred on the first day of
such period and as if any Debt that (i) is or will no longer be outstanding as
the result of the Incurrence of any such Debt or (ii) had been
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<PAGE> 24
repaid or retired during such period had not been outstanding as of the first
day of such period; provided, however, that in making such computation, the
Consolidated Interest Expense of the Company and its Restricted Subsidiaries
attributable to interest on any proposed Debt bearing a floating interest rate
shall be computed on a pro forma basis as if the rate in effect on the date of
computation had been the applicable rate for the entire period; and provided
further that, in the event the Company or any of its Restricted Subsidiaries
has made Asset Dispositions or acquisitions of assets not in the ordinary
course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during or after such period, such
computation shall be made on a pro forma basis as if the Asset Dispositions or
acquisitions had taken place on the first day of such period.
"Consolidated Fixed Charges" for any period means the sum of (i)
Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Company and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit,
bankers' acceptances or similar facilities; (iii) fees with respect to interest
rate swap or similar agreements or foreign currency hedge, exchange or similar
agreements; (iv) Preferred Stock dividends of
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<PAGE> 25
Restricted Subsidiaries of the Company (other than with respect to Redeemable
Stock) declared and paid or payable to persons other than the Company or any
Restricted Subsidiary; (v) accrued Redeemable Stock dividends of the Company
and its Restricted Subsidiaries payable to persons other than the Company or
any Restricted Subsidiary, whether or not declared or paid; (vi) interest on
Debt guaranteed by the Company and its Restricted Subsidiaries; and (vii) the
portion of any rental obligation allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Company or a Restricted
Subsidiary of the Company in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Subsidiary of the Company except to the extent of the
amount of dividends or other distributions actually paid to the Company or a
Subsidiary of the Company by such Person during such period, (c) gains or
losses on Asset Dispositions by the Company or its Restricted Subsidiaries, (d)
all extraordinary gains and extraordinary losses, (e) the cumulative effect of
changes in accounting principles and (f) the tax effect of any of the items
described in clauses (a) through (e) above; provided, further, that for
purposes of any determination pursuant to the provisions described under
Section 1012 hereof, there shall further be excluded therefrom the net income
(but not net loss) of any Restricted Subsidiary of the Company that is subject
to a restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary of the Company to
the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with respect
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<PAGE> 26
to the Company, adjustments following the date of this Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person shall not be given effect to.
"Consolidated Tangible Assets" of any Person means, as of any date,
the amount which, in accordance with GAAP, would be set forth under the caption
"Total Assets" (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries, less all intangible assets, including,
without limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered, which is, at the date as of which this Indenture is dated,
located at Suite 2700, 2001 Ross Avenue, Dallas, Texas 75201.
"corporation" means a corporation, association, company, joint-stock
company, partnership or business trust.
"Crown" means Crown Theatre Corporation or any successor thereto.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not
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<PAGE> 27
overdue or which are being contested in good faith), (v) every Capital Lease
Obligation of such Person, (vi) all Receivables Sales of such Person, together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith, (vii) all Redeemable Stock issued by such Person, (viii) Preferred
Stock of Restricted Subsidiaries of such Person held by Persons other than such
Person or one of its Wholly Owned Restricted Subsidiaries, (ix) every
obligation under Interest Rate, Currency or Commodity Price Agreements of such
Person and (x) every obligation of the type referred to in clauses (i) through
(ix) of another Person and all dividends of another Person the payment of
which, in either case, such Person has Guaranteed or is responsible or liable,
directly or indirectly, as obligor, Guarantor or otherwise. The "amount" or
"principal amount" of Debt at any time of determination as used herein
represented by (a) any Receivables Sale, shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment and (b) any
Redeemable Stock, shall be the maximum fixed redemption or repurchase price in
respect thereof.
"Depositary" means, with respect to any Notes, a clearing agency that
is registered as such under the Exchange Act and is designated by the Company
to act as Depositary for such Notes (or any successor securities clearing
agency so registered).
"Designated Senior Debt" shall mean (i) the obligations of the Company
under the New Senior Bank Facility and (ii) any other Senior Debt of the
Company permitted under the Indenture the principal amount of which at original
issuance is $25.0 million or more and that has been designated by the Company
as Designated Senior Debt.
"DTC" means The Depository Trust Company, a New York corporation.
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<PAGE> 28
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of August 7, 1997, among the Company,
Goldman, Sachs & Co. and BancAmerica Securities, Inc., as representatives of
the Initial Purchasers, and the Holders from time to time as provided therein,
as such agreement may be amended from time to time.
"Exchange Offer" means an offer made by the Company pursuant to the
Exchange and Registration Rights Agreement under the effective registration
statement under the Securities Act to exchange securities substantially
identical to Outstanding Notes (except for the differences provided for herein)
for Outstanding Notes.
"Exchange Registration Statement" means a registration statement of
the Company under the Securities Act registering Exchange Notes for
distribution pursuant to the Exchange Offer.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" refers to the Securities Exchange Act of 1934 as it may
be amended and any successor act thereto.
"Exchange Notes" means the Notes issued pursuant to the Exchange Offer
and their Successor Notes.
"Global Note" means a Note that is registered in the Security Register
in the name of a Depositary or a nominee thereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or
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<PAGE> 29
advance or supply funds for the purchase or payment of) such Debt or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Debt, (ii) to purchase property, securities or services for
the purpose of assuring the holder of such Debt of the payment of such Debt, or
(iii) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Debt (and "Guaranteed", "Guaranteeing" and "Guarantor"
shall have meanings correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Guarantor Designated Senior Debt" shall mean (i) the obligations of
the Guarantor under the New Senior Bank Facility and (ii) any other Guarantor
Senior Debt of the Guarantor permitted under the Indenture the principal amount
of which at original issue is $25.0 million or more and that has been
designated by each Guarantor as Guarantor Designated Senior Debt.
"Guarantor Senior Debt" means (i) the principal of (and premium, if
any) and interest on Debt of the Guarantor for money borrowed, whether incurred
on or prior to the date of original issuance of the Notes or thereafter, and
any amendments, renewals, extensions, modifications, refinancings and
refundings of any such Debt and (ii) Permitted Interest Rate Agreements and
Permitted Currency Agreements entered into with respect to Debt described in
clause (i) above; provided, however, that the following shall not constitute
Guarantor Senior Debt: (1) any Debt as to which the terms of the instrument
creating or evidencing the same provide that such Debt is not superior in right
of payment to the applicable Senior Subordinated Guarantee, (2) any Debt which
is subordinated in right of payment in any respect to any other Debt of the
Company, (3) any Debt owed to a Person when such Person is a Subsidiary of the
Company, (4) that portion of any Debt which is Incurred in violation of the
Indenture and (5) Debt which, when Incurred and without respect to any election
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<PAGE> 30
under Section 1111(b) of Title 11, United States Code, is without recourse to
such Guarantor.
"Guarantors" means Holdings and the Subsidiary Guarantors.
"Holder" means a Person in whose name a Note is registered in the Note
Register.
"Holdings" means Hollywood Theater Holdings, Inc. or any successor
thereto.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall
not be deemed an Incurrence of such Debt.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Goldman, Sachs & Co. and BancAmerica
Securities, Inc., as purchasers of the Notes from the Company pursuant to the
Note Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
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<PAGE> 31
"Interest Rate, Currency or Commodity Price Agreement" of any Person
means any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates, currency exchange rates or commodity prices or indices
(excluding contracts for the purchase or sale of goods in the ordinary course
of business).
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution to (by means of transfers
of cash or other property to others or payments for property or services for
the account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of Debt
issued by any other Person, including any payment on a Guarantee of any
obligation of such other Person.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Maturity", when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Moodys" means Moody's Investors Service, Inc.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting
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of a note, installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiree of Debt or
other obligations relating to such properties or assets) therefrom by such
Person, net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes required to be accrued as a liability as a consequence of such
Asset Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Debt which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the
terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition and (iv) appropriate amounts to be provided
by such Person or any Restricted Subsidiary thereof, as the case may be, as a
reserve in accordance with generally accepted accounting principles against any
liabilities associated with such assets and retained by such Person or any
Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the Board
of Directors, in its reasonable good faith judgment evidenced by a resolution
of the Board of Directors filed with the Trustee; provided, however, that any
reduction in such reserve following the consummation of such Asset Disposition
will be treated for all purposes of the Indenture and the Notes as a new Asset
Disposition at the time of such reduction with Net Available Proceeds equal to
the amount of such reduction.
"New Senior Bank Facility" means Reducing Revolving Credit Agreement
between the Company and certain of its affiliates and Bank of America NT&SA, as
agent, and the banks named therein, as it may be amended or restated from time
to time, and any renewal, extension, refinancing, refunding or replacement
thereof.
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"Note Purchase Agreement" means the Purchase Agreement, dated as of
July 31, 1997, between the Company and the Initial Purchasers, Crown and
Holdings, as such agreement may be amended from time to time.
"Notes" means notes designated in the first paragraph of the RECITALS
OF THE COMPANY.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Note Register on the date of the Offer offering to purchase up
to the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Notes within five Business Days after the Expiration
Date. The Company shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Restricted
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the documents required to be filed with the
Trustee pursuant to Section 1017 (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Company's business subsequent to the date of the
latest of such financial statements referred to in clause (i) (including a
description of the events requiring the Company to make the Offer to Purchase),
(iii) if applicable, appropriate pro
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forma financial information concerning the Offer to Purchase and the events
requiring the Company to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes offered to
be purchased by the Company pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such has been determined pursuant to
the Section hereof requiring the Offer to Purchase) (the "Purchase
Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
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(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration
Date (such Note being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or their Paying Agent) receives, not later
than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder tendered, the certificate number of
the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
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(12) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company or
any Guarantor, and delivered to the Trustee. Unless the context otherwise
requires, each reference herein to an "Officers' Certificate" shall mean an
Officers' Certificate of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who is reasonably acceptable to the Trustee.
"Original Notes" means all Notes other than Exchange Notes.
"Outstanding", when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture (including any Note represented by a Global Note), except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company or a Guarantor) in trust or set aside and
segregated in trust by the
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Company (if the Company shall act as its own Paying Agent) for the Holders
of such Notes; provided that, if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and
(iii) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or of such other obligor.
"Parent Guarantee" means the unconditional guarantee, on a senior
subordinated basis, by Holdings of the due and punctual payment of principal
(premium, if any,) and interest on the Notes, as provided pursuant to Article
Twelve.
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"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Notes on behalf of the
Company.
"Permitted Holder" means each of The Beacon Group III - Focus Value
Fund, L.P., Stratford Capital Partners, L.P., Hoak Communications Fund and
members of senior management of Holdings which have been such members for at
least one year and beneficially own (withing the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision thereto) shares of Capital Stock
of Holdings.
"Permitted Interest Rate, Currency or Commodity Price Agreement" of
any Person means any Interest Rate, Currency or Commodity Price Agreement
entered into with one or more financial institutions in the ordinary course of
business that is designed to protect such Person against fluctuations in
interest rates or currency exchange rates with respect to Debt Incurred and
which shall have a notional amount no greater than the payments due with
respect to the Debt being hedged thereby, or in the case of currency or
commodity protection agreements, against currency exchange rate or commodity
price fluctuations in the ordinary course of business relating to then existing
financial obligations or then existing or sold production and not for purposes
of speculation.
"Permitted Investments" means (i) an Investment in the Company or a
Restricted Subsidiary of the Company; (ii) an Investment in a Person, if such
Person or a Subsidiary of such Person will, as a result of the making of such
Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary of the Company or be merged or consolidated with or into
transfer or convey all or substantially all its assets to the Company or a
Restricted Subsidiary of the Company; (iii) a Temporary Cash Investment; (iv)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses in accordance with
generally accepted accounting principles; (v) stock, obligations or securities
received in settlement of debts owing to the Company or a Restricted Subsidiary
of the Company as a result of bankruptcy or insolvency proceedings
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or upon the foreclosure, perfection, enforcement or agreement in lieu of
foreclosure of any Lien in favor of the Company or a Restricted Subsidiary of
the Company; (vi) refundable construction advances made with respect to the
construction of properties of a nature or type that are used in a business or
similar or related to the business of the Company or its Restricted
Subsidiaries in the ordinary course of business; (vii) advances or extensions
of credit on terms customary in the industry in the form of accounts or other
receivables incurred, or pre-paid film rentals, and loans and advances made in
settlement of such accounts receivable, all in the ordinary course of business;
(viii) Investments in the Notes; (ix) any consolidation or merger of a
Wholly-Owned Restricted Subsidiary of the Company to the extent otherwise
permitted under the Indenture; (x) Investments in Permitted Interest Rate
Currency or Commodity Price Agreements and (xi) other Investments not to exceed
$3.0 million.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock", of any Person, means Capital Stock of such Person
of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of the Company or
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(if Holdings owns all the outstanding Common Stock of the Company) of Holdings
pursuant to an effective registration statement under the Securities Act of
1933, as amended.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the 15th of January or the 15th of July (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Purchase Date", when used with respect to any offer to Purchase,
means the date fixed for such purchase by or pursuant to this Indenture.
"Qualifying Theater Assets" means all motion picture theaters (whether
owned in fee or leased), all other motion picture theater assets, including,
without limitation, theater furniture and fixtures, all real property acquired
for the purpose of motion picture theater development or construction, and
joint venture interests or partnership interests in Persons owning, leasing,
developing or constructing motion picture theaters or principally engaged in
the business of exhibiting motion pictures.
"Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto
or a disposition of defaulted Receivables for purposes of collection and not as
a financing arrangement.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Redeemable Stock" of any Person means any Capital Stock of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon the
occurrence of an event) matures or is required to be redeemed (pursuant to
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any sinking fund obligation or otherwise) or is convertible into or
exchangeable for Debt or is redeemable at the option of the holder thereof, in
whole or in part, at any time prior to the final Stated Maturity of the Notes;
provided that "Redeemable Stock" shall not include any Capital Stock that is
payable at maturity, or upon required redemption or redemption at the option of
the holder thereof, or that is automatically convertible or exchangeable,
solely in or into Common Stock of such Person.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Registration Default" means that (i) the Company has not filed the
registration statement relating to the Exchange Offer (or, if applicable, the
Resale Registration) within 60 days following the Closing or (ii) such
registration statement has not become effective within 180 days following the
Closing or (iii) the Exchange Offer has not been consummated within 30 business
days after the effective date of the Exchange Offer Registration Statement or
(iv) any registration statement required by the Registration Rights Agreement
is filed and declared effective but shall thereafter cease to be effective
(except as specifically permitted therein) without being succeeded immediately
by an additional registration statement filed and declared effective.
"Registration Default Period" means any period during which a
Registration Default has occurred and is continuing.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" means a certificate substantially in the
form set forth in Annex A.
"Regulation S Global Note" has the meaning specified in Section 201.
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"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Note set forth in Section 202 to be placed upon
Regulation S Notes.
"Regulation S Notes" means all Notes required pursuant to Section
306(c) to bear a Regulation S Legend.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the Outstanding Common Stock of such Person
(or in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or
any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Period" means the period of 40 consecutive days beginning
on the later of (i) the day on which Notes are first offered to persons other
than distributors (as defined in Regulation S) in reliance on Regulation S and
(ii) the Closing Date.
"Restricted Notes" means all Notes required pursuant to Section 306(c)
to bear a Restricted Notes Legend. Such term includes the Restricted Global
Notes.
"Restricted Notes Certificate" means a certificate substantially in
for form set forth in Annex B.
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"Restricted Notes Legend" means a legend substantially in the form of
the legend required in the form of Note set forth in Section 202 to be placed
upon a Restricted Note.
"Restricted Subsidiary" means any Subsidiary, whether existing on or
after the date of this Indenture, unless such Subsidiary is an Unrestricted
Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Notes" means the Notes purchased by the Initial Purchasers
from the Company pursuant to the Note Purchase Agreement, other than the
Regulation S Notes.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Securities Act" means the Securities Act of 1933, as it may be
amended and any successor act thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 306(a).
"Senior Debt" means (i) the principal of (and premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities and
fees relating to, the New Senior Bank Facility and (ii) the principal of (and
premium, if any) and interest on Debt of the Company for money borrowed,
whether Incurred on or prior to the date of original issuance of the Notes or
thereafter, and any amendments, renewals, extensions, modifications,
refinancings and refundings of any such Debt and (iii) Permitted Interest Rate
Agreements and Permitted Currency Agreements entered into with respect to Debt
described in clauses (i)
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and (ii) above; provided, however, that the following shall not constitute
Senior Debt: (1) any Debt as to which the terms of the instrument creating or
evidencing the same provide that such Debt is not superior in right of payment
to the Notes, (2) any Debt which is subordinated in right of payment in any
respect to any other Debt of the Company, (3) Debt evidenced by the Notes, (4)
any Debt owed to a Person when such Person is a Subsidiary of the Company, (5)
any obligation of the Company arising from Redeemable Stock of the Company, (6)
that portion of any Debt which is Incurred in violation of the Indenture and
(7) Debt which, when Incurred and without respect to any election under Section
1111(b) of Title 11, United States Code, is without recourse to the Company.
"Senior Subordinated Guarantees" means the Parent Guarantee and the
Subsidiary Guarantees.
"Shelf Registration Statement" means a shelf registration statement
under the Securities Act filed by the Company, if required by, and meeting the
requirements of, the Exchange and Registration Rights Agreement, registering
Original Notes for resale.
"Special Interest Payments" has the meaning specified in the form of
Notes set forth in Section 202.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by Trustee pursuant to Section 308.
"Stated Maturity", when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment
in full of the Notes to at least the following extent: (i) no payments of
principal of (or premium, if any) or interest on
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or otherwise due in respect of such Debt may be permitted for so long as any
default in the payment of principal (or premium, if any) or interest on the
Notes exists; (ii) in the event that any other default that with the passing of
time or the giving of notice, or both, would constitute an event of default
exists with respect to the Notes, upon notice by 25% or more in principal
amount of the Notes to the Trustee, the Trustee shall have the right to give
notice to the Company and the holders of such Debt (or trustees or agents
therefor) of a payment blockage, and thereafter no payments of principal of (or
premium, if any) or interest on or otherwise due in respect of such Debt may be
made for a period of 179 days from the date of such notice; and (iii) such Debt
may not (x) provide for payments of principal of such Debt at the stated
maturity thereof or by way of a sinking fund applicable thereto or by way of
any mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue
of acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Notes or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Notes, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change of control of
the Company pursuant to provisions substantially similar to those contained in
Section 1016 hereof (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to the Company's repurchase of
the Notes required to be repurchased by the Company pursuant to the provisions
described under Section 1016).
"Subsidiary" of any Person means (i) a corporation more than 50% of
the combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other
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than a corporation) in which such Person, or one or more other Subsidiaries of
such Person or such Person and one or more other Subsidiaries thereof, directly
or indirectly, has at least a majority ownership and power to direct the
policies, management and affairs thereof.
"Subsidiary Guarantees" means the unconditional guarantees on a senior
subordinated basis by the respective Subsidiary Guarantors of the due and
punctual payment of principal, premium, if any, and interest on the Notes as
provided pursuant to Article Twelve.
"Subsidiary Guarantors", as of any time, each and all of the
Restricted Subsidiaries at such time, and as of the date of this Indenture
means Crown.
"Successor Note" of any particular Note means every Note issued after,
and evidencing all or a portion of the same debt as that evidenced by, such
particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Note.
"Temporary Cash Investments" means any Investment in the following
kinds of instruments: (A) readily marketable obligations issued or
unconditionally guaranteed as to principal and interest by the United States of
America or by any agency or authority controlled or supervised by and acting as
an instrumentality of the United States of America if, on the date of purchase
or other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof
or the District of Columbia, provided that (1) such instrument has a final
maturity not more than one year from the date of purchase thereof by the
Company or any Restricted Subsidiary of the
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Company and (2) such depository institution or trust company has at the time of
the Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, (x) capital, surplus and undivided
profits (as of the date such institution's most recently published financial
statements) in excess of $100 million and (y) the long-term unsecured debt
obligations (other than such obligations rated on the basis of the credit of a
Person other than such institution) of such institution, at the time of the
Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, are rated in the highest rating
category of both S&P and Moodys; (C) commercial paper issued by any
corporation, if such commercial paper has, at the time of the Company's or any
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment credit ratings of at least A-1 by S&P and P-1 by Moody's;
(D) money market mutual or similar funds having assets in excess of $100
million; (E) readily marketable debt obligations issued by any corporation, if
at the time of the Company's or Restricted Subsidiary's Investment therein or
contractual commitment providing for such Investment (1) the remaining term to
maturity is not more than two years and (2) such debt obligations are rated in
one of the two highest rating categories of both S&P and Moody's; (F) demand or
time deposit accounts used in the ordinary course of business with commercial
banks the balances in which are at all times fully insured as to principal and
interest by the Federal Deposit Insurance Corporation or any successor thereto;
and (G) to the extent not otherwise included herein, Cash Equivalents. In the
event that either S&P or Moody's ceases to publish ratings of the type provided
herein, a replacement rating agency shall be selected by the Company with the
consent of the Trustee, and in each case the rating of such replacement rating
agency most nearly equivalent to the corresponding S&P or Moody's rating, as
the case may be, shall be used for purposes hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 905; provided, however, that in the event the Trust Indenture Act
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of 1939 is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"U.S. Person" means (i) any individual resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is
a non-U.S. Person who has sole or shared investment discretion with respect to
its assets and no beneficiary of the trust (and no settlor if the Trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. Person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated, and owned, by accredited investors within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided, however, that the term "U.S. Person" does not
include (A) a branch or agency of a U.S. Person that is located and operating
outside the United States for valid business purposes as a locally regulated
branch or agency engaged in the banking or insurance business, (B) any
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employee benefit plan established and administered in accordance with the law,
customary practices and documentation of a foreign country and (C) the
international organizations set forth in Section 902(o)(7) of Regulation S
under the Securities Act and any other similar international organizations, and
their agencies, affiliates and pension plans.
"Vice President", when used with respect to the Company, any Guarantor
or the Trustee, means any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the
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exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as
the case may be, knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to the accounting
matters upon which his certificate, statement or opinion is based are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where
it is hereby expressly required, to the Company. Such instrument or
instruments (and the
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action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose
of this Indenture and (subject to Section 601) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that
the individual signing such instrument or writing acknowledged to him
the execution thereof. Where such execution is by a signer acting in
a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority.
The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or
to vote on any action, authorized or permitted to be given or taken by
Holders. If not set by the Company prior to the first solicitation of
a Holder made by any Person in respect of any such action, or, in the
case of any such vote, prior to such vote, the record date for any
such action or vote shall be the 30th day (or, if later, the date of
the most recent list of Holders required to be provided pursuant to
Section 701) prior to such first solicitation or vote, as the case may
be. With regard to any record date, only the Holders on such date (or
their duly designated proxies) shall be entitled to give or take, or
vote on, the relevant action.
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(d) The ownership of Notes shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind
every future Holder of the same Note and the Holder of every Note
issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reli ance
thereon, whether or not notation of such action is made upon such
Note.
SECTION 105. Notices, Etc., to Trustee, Company and Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Guarantor shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust, or
(2) the Company or any Guarantor by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid,
to the Company addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
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SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice
to Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have
been received by such Holder, whether or not such Holder actually receives such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act, then the Trust Indenture Act shall
control. Whether or not this Indenture is required to be qualified under the
Trust Indenture Act, the provisions of the Trust Indenture Act required to be
included in an indenture in order for such indenture to be so qualified shall
be deemed to be included in this Indenture with the same effect as if such
provisions
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were set forth herein and any provisions hereof which may not be included in an
indenture which is so qualified shall be deemed to be deleted or modified to
the extent such provisions would be required to be deleted or modified in an
indenture so qualified.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or any
Guarantor shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Notes or the Senior
Subordinated Guarantees shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes or the Senior Subordinated
Guarantees, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior Debt
(subject to Article Twelve hereof) and the Holders of Notes, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
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<PAGE> 56
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE NOTES AND THE SENIOR SUBORDINATED GUARANTEES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes or any
Senior Subordinated Guarantee) payment of interest or principal (and premium,
if any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, or Purchase Date, or at the Stated Maturity, as the case may be, provided
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Purchase Date or Stated Maturity, as the case
may be.
ARTICLE TWO
Note and Senior Subordinated Guarantee Forms
SECTION 201. Forms Generally; Initial Forms of Rule 144A and Regulation S
Notes.
The Notes, the Senior Subordinated Guarantees and the Trustee's
certificates of authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Notes or Senior Subordinated Guarantees, as evidenced
by their execution of the Notes.
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<PAGE> 57
The definitive Notes and Senior Subordinated Guarantees to be endorsed
thereon shall be printed, lithographed or engraved or produced by any
combination of these methods on steel engraved borders or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes or
Senior Subordinated Guarantees, as evidenced by their execution thereof.
Upon their original issuance, Rule 144A Notes shall be issued in the
form of one or more Global Notes without interest coupons registered in the
name of DTC, as Depositary, or its nominee and deposited with the Trustee, as
custodian for DTC, at its Corporate Trust Office, for credit by DTC to the
respective accounts of beneficial owners of the Notes represented thereby (or
such other accounts as they may direct). Such Global Notes, together with
their Successor Notes which are Global Notes other than the Restricted Global
Note are collectively herein called the "Regulation S Global Note".
Upon their original issuance, Regulation S Notes (herein called the
"Regulation S Temporary Global Note") shall be issued in the form of a single
temporary Global Note without coupons registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee at its Corporate
Trust Office, as custodian for DTC, for credit to Morgan Guaranty Trust
Company of New York, Brussels Office, as operator of the Euroclear, and Cedel
to the respective accounts of beneficial owners of the Notes represented
thereby (or such other accounts as they may direct) in accordance with the
rules thereof.
Beneficial interests in the Regulation S Temporary Global Note may
only be held through Euroclear and Cedel until such interests are exchanged for
corresponding interests in an unrestricted Global Note as provided in the next
sentence. A holder of a beneficial interest in the Regulation S Temporary
Global Note must provide written certification to Euroclear or CEDEL, as the
case may be, that the beneficial owner of the interest in such Global Note is
not a U.S. Person (an "Owner Securities Certification"), and Euroclear or
CEDEL, as the case may be,
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must provide to the Trustee a similar certificate in the form set form in Annex
C (a "Depositary Securities Certification"), prior to (i) the payment of
interest with respect to such holder's beneficial interest in the Regulation S
Temporary Global Note and (ii) any exchange of such beneficial interest for a
beneficial interest in the Regulation S Global Note.
SECTION 202. Form of Face of Note.
[IF THE NOTE IS A RESTRICTED NOTE, THEN INSERT -- THE NOTES EVIDENCED
HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO INSTITUTIONAL ACCREDITED INVESTORS IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS NOTE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER UNLESS THE
REGISTRAR OR TRANSFER AGENT IS SATISFIED THAT THE RESTRICTIONS ON TRANSFER SET
FORTH ABOVE HAVE BEEN COMPLIED WITH, ALL AS PROVIDED IN THE INDENTURE.]
[IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- THIS NOTE IS A GLOBAL
NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF
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<PAGE> 59
A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR
IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.]
[IF THE NOTE IS A GLOBAL NOTE AND THE DEPOSITORY TRUST COMPANY IS TO
BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[IF THE NOTE IS A REGULATION S NOTE, THEN INSERT -- THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 , AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OF BENEFIT OF, ANY U.S. PERSON, UNLESS THIS
NOTE IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
[IF THE NOTE IS A REGULATION S TEMPORARY GLOBAL NOTE, THEN INSERT
- --THIS NOTE IS A REGULATION S TEMPORARY GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. INTERESTS IN THIS REGULATION S TEMPORARY
GLOBAL NOTE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON PRIOR TO THE EXPIRATION
OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE) EXCEPT IN CERTAIN
LIMITED CIRCUMSTANCES IN ACCORDANCE WITH THE TERMS OF THE INDENTURE.]
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<PAGE> 60
HOLLYWOOD THEATERS, INC.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY HOLLYWOOD
THEATER HOLDINGS, INC. AND CERTAIN
SUBSIDIARIES OF HOLLYWOOD THEATERS, INC.
[If Restricted Global Note - CUSIP No. 43626PAA6]
[If Regulation S Temporary Global Note - CUSIP No. [U4377PAA6]
[If Regulation S Global Note - ISIN No. [____________]]
No. __________ $________
Hollywood Theaters, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________, or registered assigns,
the principal sum of ______________ Dollars (such amount the "principal amount"
of this Note) [IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- , or such other
principal amount (which, when taken together with the principal amounts of all
other Outstanding Notes, shall not exceed $110,000,000 in the aggregate at any
time) as may be set forth in the records of the Trustee hereinafter referred to
in accordance with the Indenture,] on August 1, 2007 (subject to earlier
redemption at the option of the Company) and to pay interest thereon from
August 7, 1997, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on February 1 and August 1 in
each year, commencing February 1, 1998, at the rate of 10.625% per annum, until
the principal hereof is paid or made available for payment; provided that, if
any Registration Default occurs under the Exchange and Registration Rights
Agreement, then the per annum interest rate on the Notes will increase for the
period from the occurrence of the Registration Default until such time as no
Registration Default is in effect (at which time the interest rate will be
reduced to its initial rate) at a per annum rate of 0.5% for the first 90-day
period following the occurrence of such Registration Default, and by an
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additional 0.5% thereafter (up to a maximum of 1.0%), and provided, further,
that any amount of interest on this Note which is overdue shall bear interest
(to the extent that payment thereof shall be legally enforceable) at the rate
per annum then borne by this Note from the date such amount is due to the day
it is paid or made available for payment, and such overdue interest shall be
payable on demand.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the January 15 or July 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date [IF THE NOTE IS AN ORIGINAL
NOTE, THEN INSERT --, provided that any accrued and unpaid interest (including
Special Interest Payments) on this Note upon the issuance of an Exchange Note
in exchange for this Note shall cease to be payable to the Holder hereof and
shall be payable on the next Interest Payment Date for such Exchange Note to
the Holder thereof on the related Regular Record Date]. Any such interest not
so punctually paid or duly provided for will forthwith cease to be payable to
the Holder on the relevant Regular Record Date and may either be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Notes not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in said Indenture. Interest on this Note shall be computed on the
basis set forth in the Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Note will be made at the office or agency of the Company in
the Borough of Manhattan, The City of New York, New York, maintained for such
purpose and at any other office or agency maintained by the Company
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for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Note Register; provided further that all payments
of the principal (and premium, if any) and interest on Notes, the Holders of
which have given wire transfer instructions to the Company or its agent at
least 10 Business Days prior to the applicable payment date will be required to
be made by wire transfer of immediately available funds to the accounts
specified by such Holders in such instructions. Notwithstanding the foregoing,
the final payment of principal shall be payable only upon surrender of this
Note to the Paying Agent.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
HOLLYWOOD THEATERS, INC.
[SEAL]
By
-----------------------------------
Attest:
- ------------------------------
SECTION 203. Form of Reverse of Note.
This Note is one of a duly authorized issue of Notes of the Company
designated as its 10 5/8% Senior Subordinated Notes due August 1, 2007 (herein
called the "Notes"), limited in aggregate principal amount to $110,000,000,
issued and to be issued under an Indenture, dated as of August 7, 1997 (herein
called the "Indenture", which term shall have the meaning assigned to it in
such instrument), among the Company, the Guarantors named therein and U.S.
Trust Company of Texas, N.A., as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which the
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Guarantors, the Trustee and the
Holders of the Notes and of the terms upon which the Notes with the Senior
Subordinated Guarantees endorsed thereon, are, and are to be, authenticated and
delivered.
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<PAGE> 64
The Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after August 1, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the
Security Register, in amounts of $1,000 or an integral multiple of $1,000, at
the following Redemption Prices (expressed as percentages of the principal
amount) plus accrued interest to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period beginning August 1 of the years
indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 ............................... 105.312%
2003 ............................... 103.542%
2004 ............................... 101.771%
2005 and thereafter ................ 100.000%
</TABLE>
In addition, if on or before August 1, 2000 the Company receives
net proceeds from the sale of its Common Stock or the Common Stock of Holdings
in one or more Public Equity Offerings, the Company may, at its option use an
amount equal to all or a portion of any such net proceeds to redeem Notes in an
aggregate principal amount of up to 30% of the original aggregate principal
amount of the Notes, provided, however, that Notes having a principal amount
equal to at least 70% of the original aggregate principal amount of the Notes
remain outstanding after such redemption. Such redemption must occur on a
Redemption Date within 90 days of such sale and upon not less than 30 nor more
than 60 days' notice mailed to each Holder of Notes to be redeemed at such
Holder's address appearing in the Security Register, in amounts of $1,000 or an
integral multiple of $1,000, at a redemption price of 110.625% of the principal
amount of the Notes plus accrued interest to but excluding the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to
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receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the particular
Notes to be redeemed or any portion thereof that is an integral multiple of
$1,000.
The Notes do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if
(i) certain Net Available Proceeds are available to the Company as a result of
Asset Dispositions or (ii) a Change of Control occurs, the Company shall be
required to make an Offer to Purchase for all or a specified portion of the
Notes.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Note in part only, a new Note or Notes of like tenor for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Note having been paid or discharged or (ii)
certain restrictive covenants and Events of Default with respect to this Note
having occurred, in each case upon compliance with certain conditions set forth
therein.
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of the Company under the Indenture and this
Note are Guaranteed, jointly and severally on a senior subordinated basis,
pursuant to Senior Subordinated Guarantees endorsed hereon as provided in the
Indenture. Each Holder, by holding this Note, agrees to all of the terms and
provisions
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of said Senior Subordinated Guarantees. The Indenture provides that a
Guarantor shall be released from its Senior Subordinated Guarantee upon
compliance with certain conditions.
The Notes and the Senior Subordinated Guarantees shall be
subordinated in right of payment to Senior Debt of the Company and the
Guarantors, respectively, as provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders of
the Notes under the Indenture at any time by the Company, the Guarantor and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Notes at the time Outstanding. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount
of the Notes at the time Outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.
As provided in and subject to the provisions of the Indenture,
the Holder of this Note shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee
or for any other remedy thereunder, unless such Holder shall have previously
given to the Trustee written notice of a continuing Event of Default with
respect to the Notes, the Holders of not less than 25% in aggregate principal
amount of the Notes at the time Outstanding shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default as
Trustee and offered the Trustee reasonable indemnity and the Trustee shall not
have received from the Holders of a majority in aggregate principal amount
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of Notes at the time Outstanding a direction inconsistent with such request and
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Note for the enforcement of any payment of principal hereof or
any premium (if any) or interest hereon on or after the respective due dates
expressed herein (or, in the case of redemption, on or after the Redemption
Date or, in the case of any purchase of this Note required to be made pursuant
to an Offer to Purchase, on the Purchase Date).
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Notes are exchangeable for a like aggregate principal amount of Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may
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require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Guarantors, the Trustee and any agent of the
Company, the Guarantors or the Trustee may treat the Person in whose name this
Note is registered as the owner hereof for all purposes (subject to the
provisions hereof with respect to determination of the Person to whom interest
is payable), whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Note shall be computed on the basis of a 360-day
year of twelve 30-month days.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE, THIS NOTE AND THE SENIOR SUBORDINATED GUARANTEES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety
by the Company pursuant to Section 1014 or 1016 of the Indenture, check the
box:
[ ]
If you want to elect to have only a part of this Note purchased
by the Company pursuant to Section 1014 or 1016 of the Indenture, state the
principal amount of this Note you want to elect to have so purchased by the
Company: $___________
Dated: Your Signature:
---------------- -------------------------
(Sign exactly as name
appears on the other
side of this Note)
Signature Guarantee:
---------------------------------------------------------
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Trustee in addition
to, or in substitution for STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
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SECTION 204. Form of Trustee's Certificate of
Authentication.
This is one of the Notes with the Senior Subordinated Guarantees
referred to in the within-mentioned Indenture.
------------------------------
as Trustee
By
---------------------------
Authorized Officer
SECTION 205. Form of Senior Subordinated Guarantee.
SENIOR SUBORDINATED GUARANTEE
For value received, each of the Guarantors named (or deemed
herein to be named) below hereby jointly and severally unconditionally
guarantees, on a senior subordinated basis to the Holder of the Note upon which
this Senior Subordinated Guarantee is endorsed, and to the Trustee on behalf of
such Holder, the due and punctual payment of the principal of (and premium, if
any) and interest on such Note when and as the same shall become due and
payable, whether at the Stated Maturity, by acceleration, call for redemption,
purchase or otherwise, according to the terms thereof and of the Indenture
referred to therein. In case of the failure of the Company punctually to make
any such payment, each of the Guarantors hereby jointly and severally agrees to
cause such payment to be made punctually when and as the same shall become due
and payable, whether at the Stated Maturity or by acceleration, call for
redemption, purchase or otherwise, and as if such payment were made by the
Company.
The Senior Subordinated Guarantee of each Guarantor shall be
subordinated in right of payment to the Senior Debt of such Guarantor as
provided in the Indenture.
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Each of the Guarantors hereby jointly and severally agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Note or the Indenture, the absence of any
action to enforce the same, any creation, exchange, release or non-perfection
of any Lien on any collateral for, or any release or amendment or waiver of any
term of any other Guarantee of, or any consent to departure from any
requirement of any other Guarantee of, all or of any of the Securities, the
election by the Trustee or any of the Holders in any proceeding under Chapter
11 of the Bankruptcy Code of the application of Section 1111(b)(2) of the
Bankruptcy Code, any borrowing or grant of a security interest by the Company,
as debtor-in-possession, under Section 364 of the Bankruptcy Code, the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion
of the claims of the Trustee or any of the Holders for payment of any of the
Notes, any waiver or consent by the Holder of such Note or by the Trustee or
either of them with respect to any provisions thereof or of the Indenture, the
obtaining of any judgment against the Company or any action to enforce the same
or any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor. Each of the Guarantors hereby
waives the benefits of diligence, presentment, demand of payment, any
requirement that the Trustee or any of the Holders protect, secure, perfect or
insure any security interest in or other Lien on any property subject thereto
or exhaust any right or take any action against the Company or any other Person
or any collateral, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest or notice with respect to such Note or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Senior
Subordinated Guarantee will not be discharged except by complete performance of
the obligations contained in such Note and in this Senior Subordinated
Guarantee. Each of the Guarantors hereby agrees that, in the event of a
default in payment of principal (or premium, if any) or interest on such Note,
whether at their Stated Maturity, by acceleration, call for redemption,
purchase or otherwise, legal proceedings may be instituted by the Trustee on
behalf of, or by, the Holder of such Note,
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subject to the terms and conditions set forth in the Indenture, directly
against each of the Guarantors to enforce this Senior Subordinated Guarantee
without first proceeding against the Company. Each Guarantor agrees that if,
after the occurrence and during the continuance of an Event of Default, the
Trustee or any of the Holders are prevented by applicable law from exercising
their respective rights to accelerate the maturity of the Notes, to collect
interest on the Notes, or to enforce or exercise any other right or remedy with
respect to the Notes, such Guarantor agrees to pay to the Trustee for the
account of the Holders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Holders.
No reference herein to the Indenture and no provision of this
Senior Subordinated Guarantee or of the Indenture shall alter or impair the
Senior Subordinated Guarantee of any Guarantor, which is absolute and
unconditional, of the due and punctual payment of the principal (and premium,
if any) and interest on the Note upon which this Senior Subordinated Guarantee
is endorsed.
Each Guarantor shall be subrogated to all rights of the Holder of
such Note against the Company in respect of any amounts paid by such Guarantor
on account of such Note pursuant to the provisions of its Senior Subordinated
Guarantee or the Indenture; provided, however, that such Guarantor shall not be
entitled to enforce or to receive any payments arising out of, or based upon,
such right of subrogation until the principal of (and premium, if any) and
interest on this Note and all other Notes issued under the Indenture shall have
been paid in full.
This Senior Subordinated Guarantee shall remain in full force and
effect and continue to be effective should any petition be filed by or against
the Company for liquidation or reorganization, should the Company become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Company's assets, and shall, to the fullest extent permitted by law, continue
to be effective or
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be reinstated, as the case may be, if at any time payment and performance of
the Notes are, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee on the Notes, whether as
a "voidable preference," "fraudulent transfer" or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Notes shall,
to the fullest extent permitted by law, be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Senior Subordinated Guarantee.
The obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Senior Subordinated Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Guarantor under the Senior Subordinated Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. Each Guarantor
that makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the net
worth of each Guarantor.
The Guarantors or any particular Guarantor shall be released from
this Senior Subordinated Guarantee upon the terms and subject to certain
conditions provided in the Indenture.
By delivery of a supplemental indenture to the Trustee in
accordance with the terms of the Indenture, each Person that becomes a
Guarantor after the date of the Indenture will be deemed to have executed and
delivered this Senior Subordinated Guarantee for the benefit of the Holder of
the Note upon which this Senior Subordinated Guarantee is
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endorsed, with the same effect as if such Guarantor was named below and had
executed and delivered this Senior Subordinated Guarantee.
All terms used in this Senior Subordinated Guarantee which are
defined in the Indenture referred to in the Note upon which this Senior
Subordinated Guarantee is endorsed shall have the meanings assigned to them in
such Indenture.
This Senior Subordinated Guarantee shall not be valid or
obligatory for any purpose until the certificate of authentication on the Note
upon which this Senior Subordinated Guarantee is endorsed shall have been
executed by the Trustee under the Indenture by manual signature.
Reference is made to Article Twelve of the Indenture for further
provisions with respect to this Senior Subordinated Guarantee.
THIS SENIOR SUBORDINATED GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, each of the Guarantors has caused this Senior
Subordinated Guarantee to be duly executed.
Hollywood Theater Holdings, Inc.,
As Guarantor
By:
------------------------------
[Officer]
Attest:
- ------------------------------
[Secretary]
[Assistant Secretary]
Crown Theatre Corporation
As Guarantor
By:
------------------------------
[Officer]
Attest:
- ------------------------------
[Secretary]
[Assistant Secretary]
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ARTICLE THREE
The Notes
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $110,000,000
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 304, 305,
306, 906 or 1108 or in connection with an Offer to Purchase pursuant to
Sections 1014 and 1016.
The Notes shall be known and designated as the "10_% Senior
Subordinated Notes due August 1, 2007" of the Company. Their Stated Maturity
shall be August 1, 2007 and they shall bear interest at the rate of 10_% per
annum, from August 7, 1997 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
semi-annually on February 1 and August 1, commencing February 1, 1998, until
the principal thereof is paid or made available for payment provided, if any
Registration Default occurs under the Exchange and Registration Rights
Agreement, then the per annum interest rate on the applicable will increase for
the period from the occurrence of the Registration Default until such time as
no Registration Default is in effect (at which time the interest rate will be
reduced to its initial rate) by a per annum rate of 0.5% for the first 90-day
period following the occurrence of such Registration Default, and by an
additional 0.5% thereafter (up to a maximum of 1.0%).
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Note Register.
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The Notes shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1014 and 1016.
The Notes shall be redeemable as provided in Article Eleven.
The Notes shall be Guaranteed by the Guarantors as provided in
Article Twelve.
The Notes and each of the Senior Subordinated Guarantees shall be
subordinated in right of payment to Senior Debt of the Company and each of the
Guarantors respectively, as provided in Article Thirteen.
The Notes shall be subject to defeasance at the option of the
Company as provided in Article Fourteen.
Unless the context otherwise requires, the Origi nal Notes and
the Exchange Notes shall constitute one series for all purposes under the
Indenture, including with respect to any amendment, waiver, acceleration or
other Act of Holders, redemption or Offer to Purchase.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1000 and integral multiples thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Notes may
be manual or facsimile.
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Notes bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company and having endorsed (by attachment or imprint) thereon the Senior
Subordinated Guarantees executed as provided in Article Twelve by the
Guarantors to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes with such Senior Subordinated
Guarantees endorsed thereon; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Notes with such Senior Subordinated
Guarantees endorsed thereon as in this Indenture provided and not otherwise.
At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may
deliver Exchange Notes executed by the Company, and having endorsed thereon the
Senior Subordinated Guarantees executed under Article Twelve by the Guarantors,
to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Exchange Notes and a like principal amount
of Original Notes for cancellation in accordance with Article Fourteen of this
Indenture, and the Trustee in accordance with the Company Order shall
authenticate and deliver such Notes, with the Senior Subordinated Guarantees
endorsed thereon. Prior to authenticating such Exchange Notes, and accepting
any additional responsibilities under this Indenture in relation to such Notes,
the Trustee shall be entitled to receive, if requested, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating in
substance that all conditions hereunder precedent to the authentication and
delivery of such Exchange Notes with the Senior Subordinated Guarantees of the
Guarantors endorsed
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thereon have been complied with and that such Exchange Notes and the Senior
Subordinated Guarantees of the Guarantors endorsed thereon, when such Notes
have been duly authenticated and delivered by the Trustee (and subject to any
other conditions specified in such Opinion of Counsel), have been duly issued
and delivered and will constitute valid and legally binding obligations of the
Company and the Guarantors, respectively, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
Each Note shall be dated the date of its authentication.
No Note or Senior Subordinated Guarantee endorsed thereon shall
be entitled to any benefit under this Indenture or be valid or obligatory for
any purpose unless there appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual
signature, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder and that each Senior Subordinated Guarantee endorsed thereon has been
duly endorsed thereon and delivered hereunder.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes and Senior
Subordinated Guarantees, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Notes with temporary Senior
Subordinated Guarantees endorsed thereon, which Notes and Senior Subordinated
Guarantees are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes and Senior Subordinated Guarantees, respectively, in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes and
Senior
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Subordinated Guarantees may determine, as evidenced by their execution thereof.
If temporary Notes are issued, the Company will cause definitive
Notes and Senior Subordinated Guarantees to be prepared without unreasonable
delay. After the preparation of definitive Notes and Senior Subordinated
Guarantees, the temporary Notes shall be exchangeable for definitive Notes with
definitive Senior Subordinated Guarantees endorsed thereon, upon surrender of
the temporary Notes at any office or agency of the Company designated pursuant
to Section 1002, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Notes the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations having endorsed thereon definitive
Senior Subordinated Guarantees executed by the Guarantors. Until so exchanged
the temporary Notes and Senior Subordinated Guarantees shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes and
Senior Subordinated Guarantees, respectively.
SECTION 305. Global Notes.
(a) Each Global Note authenticated under this Indenture shall be
registered in the name of the Depositary designated by the Company for such
Global Note or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Note shall constitute a
single Note for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Note may be exchanged in whole or in part for Notes registered, and no
transfer of a Global Note in whole or in part may be registered, in the name of
any Person other than the Depositary for such Global Note or a nominee thereof
unless (i) such Depositary (A) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Note or (B) has ceased to be a
clearing agency registered as such under the Exchange Act, and in either case
the Company fails to appoint a successor
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Depositary, (ii) the Company executes and delivers to the Trustee a Company
Order stating that it elects to cause the issuance of the Notes in certificated
form and that all Global Notes shall be exchanged in whole for Securities that
are not Global Notes (in which case such exchange shall be effected by the
Trustee) or (iii) there shall have occurred and be continuing an Event of
Default with respect to the Note.
(c) If any Global Note is to be exchanged for other Notes or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary
or its nominee to the Trustee, as Security Registrar, for exchange or
cancellation as provided in this Article Three. If any Global Note is to be
exchanged for other Notes or cancelled in part, or if another Note is to be
exchanged in whole or in part for a beneficial interest in any Global Note,
then either (i) such Global Note shall be so surrendered for exchange or
cancellation as provided in this Article Three or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or cancelled, or equal to the principal amount of such other
Note to be so exchanged for a beneficial interest therein, as the case may be,
by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Note, the Trustee shall, subject to Section 306(c) and
as otherwise provided in this Article Three, authenticate and deliver any Notes
issuable in exchange for such Global Note (or any portion thereof) to or upon
the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the Trustee
in connection with the occurrence of any of the events specified in the
preceding paragraph, the Company shall promptly make available to the Trustee a
reasonable supply of Notes that are not in the form of Global Notes. The
Trustee shall be entitled to rely upon any order, direction or request of the
Depositary or its authorized representative which is given or made pursuant to
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this Article Three if such order, direction or request is given or made in
accordance with the Applicable Procedures.
(d) Every Note authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Note or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Note, unless
such Note is registered in the name of a Person other than the Depositary for
such Global Note or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a
Global Note, shall be the Holder of such Global Note for all purposes under the
Indenture, the Notes and the Senior Subordinated Guarantees, and owners of
beneficial interests in a Global Note shall hold such interests pursuant to the
Applicable Procedures. Accordingly, any such owner's beneficial interest in a
Global Note will be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members.
SECTION 306. Registration, Registration of Transfer and Exchange Generally;
Restrictions on Transfer and Exchange; Securities Act Legends.
(a) Registration, Registration of Transfer and Exchange
Generally. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any
other office or agency of the Company designated pursuant to Section 1002 being
herein sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers and exchanges of Notes.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Notes and transfers and exchanges of Notes as herein provided.
Such Security Register shall distinguish between Original Notes and Exchange
Notes.
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Upon surrender for registration of transfer of any Note at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations, of a like aggregate principal amount
and bearing such restrictive legends as may be required by this Indenture, each
such new Note having endorsed thereon the Senior Subordinated Guarantee
executed by each Guarantor.
At the option of the Holder, and subject to the other provisions
of this Section 306, Notes may be exchanged for other Notes of any authorized
denominations, of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture, each such new Note
having endorsed thereon the Senior Subordinated Guarantee executed by each
Guarantor, upon surrender of the Notes to be exchanged at any such office or
agency. Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Notes which the
Holder making the exchange is entitled to receive.
All Notes and the Senior Subordinated Guarantees endorsed thereon
issued upon any registration of transfer or exchange of Notes shall be the
valid obligations of the Company and the respective Guarantors, evidencing the
same debt, and (except for the differences between Original Notes and Exchange
Notes provided for herein) entitled to the same benefits under this Indenture,
as the Notes and Senior Subordinated Guarantees endorsed thereon, respectively,
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Sections 304, 1014, 1016 or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of, or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 1105 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption, in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(b) Certain Transfers and Exchanges. Notwith standing any
other provision of this Indenture or the Notes, transfers and exchanges of
Notes and beneficial interests in a Global Note of the kinds specified in this
Section 306(b) shall be made only in accordance with this Section 306(b).
(i) Restricted Global Note to Regulation S Temporary
Global Note or Regulation S Global Note. If the owner of a beneficial
interest in the Restricted Global Note wishes at any time to transfer
such interest to a Person who wishes to acquire the same in the form of
a beneficial interest in the Regulation S Temporary Global Note (if
before the expiration of the Restricted Period) or in the Regulation S
Global Note (if thereafter), such transfer may be effected only in
accordance with the provisions of this Clause (b)(i) subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Regulation S
Temporary Global Note or Regulation S Temporary Global Note or(as
applicable) in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Restricted
Global Note in an equal principal amount be
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debited from another specified Agent Member's account and (B) a
Regulation S Certificate, satisfactory to the Trustee and duly executed
by the owner of such beneficial interest in the Restricted Global Note
or his attorney duly authorized in writing, then the Trustee, as
Security Registrar but subject to Clause (b)(iv) below, shall reduce the
principal amount of the Restricted Global Note and increase the
principal amount of the Regulation S Temporary Global Note or Regulation
S Global Note (as applicable) by such specified principal amount as
provided in Section 305(c).
(ii) Regulation S Temporary Global Note to Restricted
Global Note. If the owner of a beneficial interest in the Regulation S
Temporary Global Note wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a beneficial
interest in the Restricted Global Note, such transfer may be effected
only in accordance with this Clause (b)(ii) and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Restricted
Global Note in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Regulation
S Temporary Global Note in an equal principal amount be debited from
another specified Agent Member's account and (B) a Restricted Notes
Certificate, satisfactory to the Trustee and duly executed by the owner
of such beneficial interest in the Regulation S Temporary Global Note or
his attorney duly authorized in writing, then the Trustee, as Security
Registrar, shall reduce the principal amount of the Regulation S
Temporary Global Note and increase the principal amount of the
Restricted Global Note by such specified principal amount as provided in
Section 305(c).
(iii) Exchanges between Global Note and Non- Global Note.
A beneficial interest in a Global Note may be exchanged for a Note that
is not a Global Note
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as provided in Section 305, provided that, if such interest is a
beneficial interest in the Restricted Global Note, or if such interest
is a beneficial interest in the Regulation S Temporary Global Note, then
such interest shall be exchanged for a Restricted Note (subject in each
case to Section 306(c)).
(iv) Regulation S Temporary Global Note to be Held
Through Euroclear or Cedel during Restricted Period. The Company shall
use its best efforts to cause the Depositary to ensure that beneficial
interests in the Regulation S Temporary Global Note may be held only in
or through accounts maintained at the Depositary by Euroclear or Cedel
(or by Agent Members acting for the account thereof), and no person
shall be entitled to effect any transfer or exchange that would result
in any such interest being held otherwise than in or through such an
account; provided that this Clause (b)(iv) shall not prohibit any
transfer or exchange of such an interest in accordance with Clause
(b)(ii) above.
(c) Securities Act Legends. Rule 144A Notes and their
respective Successor Notes shall bear a Restricted Notes Legend, and Regulation
S Notes and their Successor Notes shall bear a Regulation S Legend, subject to
the following:
(i) subject to the following Clauses of this Section
306(c), a Note or any portion thereof which is exchanged, upon transfer
or otherwise, for a Global Note or any portion thereof shall bear the
Securities Act Legend borne by such Global Note while represented
thereby;
(ii) subject to the following Clauses of this Section
306(c), a new Note which is not a Global Note and is issued in exchange
for another Note (including a Global Note) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by
such other Note, provided that, if such new Note is required pursuant to
Section 306(b)(iii) to be issued in the form of a Restricted Note, it
shall bear a
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Restricted Notes Legend and, if such new Note is so required to be
issued in the form of a Regulation S Note, it shall bear a Regulation S
Legend;
(iii) Exchange Notes shall not bear a Securities Act
Legend;
(iv) at any time after the Notes may be freely
transferred without registration under the Securities Act or without
being subject to transfer restrictions pursuant to the Securities Act, a
new Note which does not bear a Securities Act Legend may be issued in
exchange for or in lieu of a Note (other than a Global Note) or any
portion thereof which bears such a legend if the Trustee has received an
Unrestricted Notes Certificate, satisfactory to the Trustee and duly
executed by the Holder of such legended Note or his attorney duly
authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new Note
in exchange for or in lieu of such other Note as provided in this
Article Three;
(v) a new Note which does not bear a Securities Act
Legend may be issued in exchange for or in lieu of a Note (other than a
Global Note) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Note is not
necessary to ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the direction of the Company, shall
authenticate and deliver such a new Note as provided in this Article
Three; and
(vi) notwithstanding the foregoing provisions of this
Section 306(c), a Successor Note of a Note that does not bear a
particular form of Securities Act Legend shall not bear such form of
legend unless the Company has reasonable cause to believe that such
Successor Note is a "restricted security" within the meaning of Rule
144, in which case the Trustee, at the direction of the Company, shall
authenticate and deliver a new Note bearing a Restricted Notes Legend in
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exchange for such Successor Note as provided in this Article Three.
SECTION 307. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Note of like tenor and principal amount, having endorsed thereon
the Senior Subordinated Guarantees extended by the Guarantors and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note
and (ii) such security or indemnity as may be required by either of them to
save each of them, each Guarantor, and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Note has
been acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Note, a new Note of like tenor and principal amount,
having endorsed thereon the Senior Subordinated Guarantees extended by the
Guarantors and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note and each Senior Subordinated Guarantee endorsed
thereon shall constitute an
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original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes and Senior Subordinated
Guarantees, respectively duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 308. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, which date shall not be less
than 60 days after receipt by the Trustee of the notice of the proposed
payment and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Note Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the
Notes (or their respective Predecessor Notes) are registered at the
close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
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(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 309. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer,
the Company, the Guarantors, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Note is registered as the owner
of such Note for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Section 308) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Company, the Guarantors, the Trustee nor any agent of the Company, any
Guarantor or the Trustee shall be affected by notice to the contrary.
None of the Company, the Trustee or any agent of the Company or
the Trustee shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Note in global form, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any Note in global form, nothing
herein shall prevent the Company or the Trustee, or any agent of the Company or
the Trustee, from giving effect to any written certification, proxy or other
authorization furnished by any Depositary (or
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its nominee), as a Holder, with respect to such Note in global form or impair,
as between such Depositary and owners of beneficial interests in such Note in
global form, the operation of customary practices governing the exercise of the
rights of such Depositary (or its nominee) as Holder of such Note in global
form.
SECTION 310. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange or any Offer to Purchase pursuant to Section 1014 or 1016
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and, together with the Senior Subordinated Guarantees endorsed thereon,
shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Notes so delivered shall, together with the Senior Subordinated Guarantees
endorsed thereon, be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes held by the Trustee, together with the Senior Subordinated Guarantees
endorsed thereon, shall be disposed of as directed by a Company Order.
SECTION 311. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360 day
year of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
(i) rights of registration of transfer and exchange and the Company's right of
optional redemption, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes, (iii) rights of Holders to receive payment of
principal and interest on the Notes, (iv) rights, obligations and immunities of
the Trustee under the Indenture and (v) rights of the Holders of the Notes as
beneficiaries of the Indenture with respect to any property deposited with the
Trustee payable to all or any of them), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture (including, but not limited to,
Article Twelve hereof), when
(1) either
(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 307
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
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(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited irrevocably or caused to be deposited with the Trustee
as trust funds in trust an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for principal (and premium, if
any) and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company and the Guarantors; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, the obligations of the Company to the Trustee under Section
607 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations
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of the Trustee under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) failure to pay the principal of (or premium, if any, on) any
Note at its Maturity; or
(2) failure to pay any interest upon any Note when it becomes
due and payable, and continuance of such default for a period of 30
days; or
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(3) default, on the applicable Purchase Date, in the purchase of
Notes required to be purchased by the Company pursuant to an Offer to
Purchase as described in Section 1014 herein and Section 1016 herein
when due and payable; or
(4) failure to perform or comply with the provisions of Section
801; or
(5) failure to perform any other covenant or agreement of the
Company in this Indenture or Notes (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Notes a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(6) default under the terms of any instrument evidencing or
securing Debt for money borrowed by the Company or any Restricted
Subsidiary having an outstanding principal amount of $2.0 million
individually or in the aggregate which default results in the
acceleration of the payment of such indebtedness or constitutes the
failure to pay such indebtedness when due; or
(7) a final judgment or judgments (not subject to appeal) for
the payment of money are entered against the Company or any Restricted
Subsidiary of the Company in an amount in excess of $2.0 million by a
court or courts of competent jurisdiction, which judgments remain
undischarged or unstayed for a period of 60 days after the right to
appeal all such judgments has expired; or
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(8) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any
Restricted Subsidiary of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging
the Company or any such Restricted Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
or any such Restricted Subsidiary under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any such
Restricted Subsidiary of any substantial part of the property of the
Company or any such Restricted Subsidiary, or ordering the winding up or
liquidation of the affairs of the Company or any such Subsidiary, and
the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(9) the commencement by the Company or any Restricted Subsidiary
of the Company of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by the Company or any such Restricted
Subsidiary to the entry of a decree or order for relief in respect of
the Company or any Restricted Subsidiary of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
the Company or any Restricted Subsidiary of the Company, or the filing
by the Company or any such Restricted Subsidiary of a petition or answer
or consent
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seeking reorganization or relief under any applicable Federal or State
law, or the consent by the Company or any such Restricted Subsidiary to
the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or any Restricted
Subsidiary of the Company of any substantial part of the property of the
Company or any Restricted Subsidiary of the Company, or the making by
the Company or any Restricted Subsidiary of the Company of an assignment
for the benefit of creditors, or the admission by the Company or any
such Restricted Subsidiary in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the
Company or any such Restricted Subsidiary in furtherance of any such
action.
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.
If an Event of Default (other than an Event of Default specified
in Section 501(8) or (9)) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in aggregate principal amount
of the Outstanding Notes may declare all of the Notes to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal and any accrued
interest, if any, shall become immediately due and payable. If an Event of
Default specified in Section 501(8) or (9) occurs, the principal and any
accrued interest on the Notes then Outstanding shall ipso facto become
immediately due and payable without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in aggregate principal amount of the Outstanding
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Notes, by written notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if
(1) the Company or any of the Guarantors has paid or deposited
with the Trustee a sum sufficient to pay
(A) all overdue interest on all Notes,
(B) the principal of (and premium, if any, on) any Notes
which have become due otherwise than by such declaration of
acceleration (including any Notes required to have been purchased
on the Purchase Date pursuant to an Offer to Purchase made by the
Company) and, to the extent that payment of such interest is
lawful, interest thereon at the rate provided by the Notes,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate provided by
the Notes, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Note
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof or, with respect
to any Note required to have been purchased pursuant to an Offer to
Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal (and premium, if any) and interest, and, to the extent that payment
of such interest shall be legally enforceable, interest on any overdue
principal (and premium, if any) and on any overdue interest, at the rate
provided by the Notes, if any, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and
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enforce its rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company, any
Guarantor or any other obligor upon the Notes, or upon the property of the
Company or its creditors or of any Guarantor or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes
or any Senior Subordinated Guarantee may be prosecuted and enforced by the
Trustee without the possession of any of the Notes or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the Notes
in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 607; and
SECOND: To the extent provided in Article Twelve, to the
holders of Senior Debt in accordance with Article Twelve; and
THIRD: To the payment of the amounts then due and unpaid
for principal of (and premium, if any) and interest on the Notes
in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on
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such Notes for principal (and premium, if any) and interest,
respectively.
SECTION 507. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to
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obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 306) interest on such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the Redemption Date
or in the case of an Offer to Purchase made by the Company and required to be
accepted as to such Note, on the Purchase Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or
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stolen Notes in the last paragraph of Section 307, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall 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, provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Note (including any Note which is required to have been
purchased pursuant to an Offer to Purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under
Article Ten cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or any Guarantor.
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SECTION 515. Waiver of Stay or Extension Laws.
Each of the Company and the Guarantors covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
Except during the continuance of an Event of Default, the duties
and responsibilities of the Trustee shall be as provided by the Indenture.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
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SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
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SECTION 604. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes and the Senior
Subordinated Guarantees except the Trustee's certificates of authentication,
shall be taken as the statements of the Company or the Guarantors, as the case
may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes or the Senior Subordinated Guarantees. The Trustee
shall not be accountable for the use or application by the Company of Notes or
the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company, any Guarantor in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to Sections 608 and 613,
may otherwise deal with the Company any Guarantor with the same rights it would
have if it were not Trustee, Paying Agent, Note Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company or any Guarantor, as the case may
be.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be
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limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 (or is a member or
subsidiary of a bank holding company system with aggregate combined capital and
surplus of at least $50,000,000) and an office in the Borough of Manhattan, The
City of New York.
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If such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in aggregate principal amount of the Outstanding Notes, delivered
to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after
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written request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Note for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the
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successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company, the Guarantors and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder. Upon request
of any such successor Trustee, the Company and the Guarantors shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on
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the part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes or any Senior Subordinated
Guarantee), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of claims against the Company (or any
such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders as of such Regular Record
Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
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excluding from any such list names and addresses received by the Trustee in its
capacity as Note Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Notes and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same,
agrees with the Company, the Guarantors and the Trustee that neither the
Company, the Guarantors nor the Trustee nor any agent of either of them shall
be held accountable by reason of any disclosure of information as to the names
and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Notes are listed, with the Commission and with the Company. The
Company will
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notify the Trustee when the Notes are listed on any stock exchange.
SECTION 704. Reports by Company and the Guarantors.
The Company and each of the Guarantors shall file with the
Trustee and the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
required to be filed with Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 30 days after the same is
so required to be filed with the Commission.
SECTION 705. Officers' Certificate with Respect to Change
in Interest Rates.
Within five days after the day on which any Special Interest
begins accruing, and within five days after any Special Interest ceases to
accrue, the Company shall deliver an Officers' Certificate to the Trustee
stating the interest rate thereupon in effect for the Unregistered Notes (if
any are Outstanding) and the date on which such rate became effective.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Mergers, Consolidations and Certain Sales of Assets.
The Company shall not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company and (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of
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all or substantially all of its assets unless: (1) in a transaction in which
the Company does not survive or in which the Company sells, leases or otherwise
disposes of all or substantially all of its assets, the successor entity to the
Company is organized under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately before and after giving effect to such transaction
and treating any Debt which becomes an obligation of the Company or a
Restricted Subsidiary as a result of such transaction as having been Incurred
by the Company or such Restricted Subsidiary at the time of the transaction, no
Event of Default or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default shall have occurred and
be continuing; (3) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Company (or other successor entity to the
Company) is equal to or greater than that of the Company immediately prior to
the transaction; (4) immediately after giving effect to such transaction and
treating any Debt which becomes an obligation of the Company or a Restricted
Subsidiary as a result of such transaction as having been Incurred by the
Company or such Restricted Subsidiary at the time of the transaction, the
Company (including any successor entity to the Company) could Incur at least
$1.00 of additional Debt pursuant to the provisions of the Indenture described
in the first paragraph under Section 1008 hereof; or (5) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer, lease or
acquisition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, complies with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with, and, with respect to such Officer's Certificate,
setting forth the manner of determination of the Consolidated Net Worth and the
ability to Incur Debt in accordance with Clause (4) of Section 801, the Company
or, if applicable, of the Successor Company as required pursuant to the
foregoing.
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SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any transfer, conveyance, sale, lease or
other disposition of all or substantially all of the properties and assets of
the Company as an entirety in accordance with Section 801, the Successor
Company shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized
by a Board Resolution of the Company, the Guarantors, and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the
Company herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
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(3) to secure the Notes pursuant to the requirements of
Section 1011 or otherwise; or
(4) to comply with any requirements of the Commission in order
to effect and maintain the qualification of this Indenture under the
Trust Indenture Act; or
(5) to cure any ambiguity or correct any mistake, to correct
or supplement any provision herein which may be inconsistent with any
other provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture, provided such action
pursuant to this Clause (4) shall not adversely affect the interests of
the Holders in any material respect.
(6) to add new Guarantors pursuant to Section 1205.
(7) to change or replace the existing Trustee with a new
Trustee pursuant to Section 610.
SECTION 902. Supplemental Indentures
with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution
of the Company, the Guarantors, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the
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Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon,
or change the place of payment where, or the coin or currency in which,
any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date or, in the case of an Offer to Purchase
which has been made, on or after the applicable Purchase Date), or
(2) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1020, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the
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Holder of each Outstanding Note affected thereby, or
(4) modify any of the provisions of this Indenture relating to
the subordination of the Notes in a manner adverse to the Holders, or
(5) following the mailing of an Offer with respect to an Offer
to Purchase pursuant to Sections 1014 and 1016, modify the provisions of
this Indenture with respect to such Offer to Purchase in a manner
materially adverse to such Holder.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every
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Holder of Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Notes to
Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Notes so modified as to conform, in the opinion of the Trustee
and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Notes in accordance with the terms of the
Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City
of New York, an office or agency where Notes may be presented or surrendered
for payment, where
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Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company or any Guarantor in respect of the
Notes, the Senior Subordinated Guarantees and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company and each Guarantor hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Money for Note
Payments to be Held in Trust.
The Company may change any Paying Agent without notice to any
Holder. The Company hereby initially appoints the Trustee as Paying Agent and
the Trustee hereby initially agrees so to act.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of interest on any of the
Notes, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be
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paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest on any Notes, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Notes in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and premium,
if any) or interest on any Note and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, or cause to be mailed to such Holder,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors in good faith shall
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determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and that the loss thereof is not disadvantageous
in any material respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary of the Company to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
Except with respect to immaterial items, the Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Subsidiaries or upon the income, profits
or property of the Company or any of its Subsidiaries, and (2) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become
a lien upon the property of the Company or any of its Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
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SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep at
all times all of their properties which are of an insurable nature insured
against loss or damage with insurers believed by the Company to be responsible
to the extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
good business practice. The Company shall, and shall cause its Subsidiaries
to, use the proceeds from any such insurance policy to repair, replace or
otherwise restore the property to which such proceeds relate.
SECTION 1008. Limitation on Consolidated Debt.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, incur any Debt unless immediately after giving pro forma effect
to the incurrence of such Debt and the receipt and application of the proceeds
thereof, the Consolidated Cash Flow Coverage Ratio of the Company would be
greater than 2.0 to 1; provided that if the Debt which is the subject of the
determination under this provision is Acquired Debt, the Consolidated Cash Flow
Coverage Ratio of the Company shall be determined by giving effect (on a pro
forma basis, as if the transaction had occurred at the beginning of the
immediately preceding four-quarter period) to both the incurrence or assumption
of such Acquired Debt by the Company and the inclusion in the Consolidated Cash
Flow Available for Fixed Charges of the Person whose Debt would constitute
Acquired Debt.
Notwithstanding the foregoing paragraph, the Company may, and may
permit any Restricted Subsidiary, to incur the following Debt:
(i) Debt under the New Senior Bank Facility in an aggregate
principal amount at any one time not to exceed $75.0 million, less any
amounts by which any revolving credit
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facility commitments under the New Senior Bank Facility are permanently
reduced pursuant to Section 1014 (so long as and to the extent that any
required payments in connection therewith are actually made);
(ii) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Subsidiary of the Company to
the Company or a Wholly Owned Restricted Subsidiary of the Company;
provided, however, that (a) any such Debt owing by the Company to a
Wholly Owned Restricted Subsidiary shall be Subordinated Debt evidenced
by an intercompany promissory note and (b) upon either (1) the transfer
or other disposition by such Wholly Owned Restricted Subsidiary or the
Company of any Debt so permitted to a Person other than the Company or
another Wholly Owned Restricted Subsidiary of the Company or (2) the
issuance (other than directors' qualifying shares), sale, lease,
transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Wholly Owned Restricted Subsidiary to a
Person other than the Company or another such Wholly Owned Restricted
Subsidiary, the provisions of this Clause (ii) shall no longer be
applicable to such Debt and such Debt shall be deemed to have been
Incurred at the time of such transfer or other disposition;
(iii) the original issuance by the Company of the Debt evidenced
by the Notes (including any Exchange Notes);
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(iv) Debt (other than Debt described in another clause of this
paragraph) outstanding on the date of original issuance of the Notes
after giving effect to the application of the proceeds of the Notes;
(v) Debt consisting of Permitted Interest Rate, Currency or
Commodity Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are
used to refinance or refund, or any extension or renewal of, outstanding
Debt Incurred pursuant to the preceding paragraph or clauses (iii) or
(iv) of this paragraph (each of the foregoing, a "refinancing") in an
aggregate principal amount not to exceed the principal amount of the
Debt so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Debt so
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase, plus the expenses of the
Company or the Restricted Subsidiary, as the case may be, incurred in
connection with such refinancing; provided, however, that (A) Debt the
proceeds of which are used to refinance the Notes or Debt which is pari
passu with or subordinate in right of payment to the Notes shall only be
permitted if (x) in the case
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of any refinancing of the Notes or Debt which is pari passu to the
Notes, the refinancing Debt is made pari passu to the Notes or
subordinated to the Notes, and (y) in the case of any refinancing of
Debt which is subordinated to the Notes, the refinancing Debt
constitutes Subordinated Debt; (B) the refinancing Debt by its terms, or
by the terms of any agreement or instrument pursuant to which such Debt
is issued, (1) does not provide for payments of principal of such Debt
at the stated maturity thereof or by way of a sinking fund applicable
thereto or by way of any mandatory redemption, defeasance, retirement or
repurchase thereof (including any redemption, defeasance, retirement or
repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Debt
upon any event of default thereunder), in each case prior to the stated
maturity of the Debt being refinanced and (2) does not permit redemption
or other retirement (including pursuant to an offer to purchase) of such
debt at the option of the holder thereof prior to the final stated
maturity of the Debt being refinanced), other than a redemption or other
retirement at the option of the holder of such Debt (including pursuant
to an offer to purchase) which is conditioned upon provisions
substantially similar to those described under Sections 1014 and 1016;
and (C) in the case of any refinancing of Debt Incurred by the Company,
the refinancing Debt may be Incurred only by the Company, and in the
case of any refinancing of Debt Incurred by a Restricted Subsidiary, the
refinancing Debt may
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be Incurred only by such Restricted Subsidiary; provided, further, that
Debt Incurred pursuant to this clause (vi) may not be Incurred more than
45 days prior to the application of the proceeds to repay the Debt to be
refinanced;
(vii) Acquired Debt, provided that such Debt if incurred by the
Company would be in compliance with the first paragraph of this
covenant; and
(viii) Debt not otherwise permitted to be Incurred pursuant to
Clauses (i) through (vii) above, which, together with any other
outstanding Debt Incurred pursuant to this Clause (viii), has an
aggregate principal amount not in excess of $5.0 million at any time
outstanding.
SECTION 1009. Limitation on Senior Subordinated Debt.
The Company shall not Incur any Debt which by its terms is both
(i) subordinated in right of payment to any Senior Debt and (ii) senior in
right of payment to the Notes.
SECTION 1010. Limitation on Issuance of Guarantees of Subordinated Debt.
The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to assume, guarantee or in any other manner become liable with
respect to any Debt
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of the Company that by its terms is pari passu or junior in right of payment to
the Notes.
SECTION 1011. Limitation on Liens.
The Company shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any Lien on or with respect to any
property or assets of the Company or any such Restricted Subsidiary now owned
or hereafter acquired except for (i) Liens incurred after the date of the
Indenture securing Debt of the Company that ranks pari passu or junior in right
of payment to the Notes, if the Notes are secured equally and ratably with such
Debt, (ii) Liens outstanding on the date of the Indenture, (iii) Liens for
taxes, assessments, governmental charges or claims not yet delinquent or which
are being contested in good faith by appropriate proceedings, provided, that
adequate reserves with respect thereto are maintained on the books of the
Company or its Restricted Subsidiaries, as the case may be, in conformity with
generally accepted accounting principles, (iv) landlords' carriers',
warehousemen's, mechanics', material men's, repairmen's or the like Liens
arising by contract or statute in the ordinary course of business and with
respect to amount which are not yet delinquent or are being contested in good
faith by appropriate proceedings, (v) pledges or deposits made in the ordinary
course of business (A) in connection with leases, performance bonds and similar
obligations, or (B) in connection with workers' compensation, unemployment
insurance and other social security legislation, (vi) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
encumbrances which, in the aggregate, do not materially detract from the value
of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or such Restricted Subsidiary, (vii) any
attachment or judgment Lien that does not constitute an Event of Default,
(viii) Liens securing Acquired Debt, provided, that such Liens attach solely to
the acquired assets or the assets of the acquired entity and do not extend to
or cover any other assets of the Company or any of its Restricted Subsidiaries,
(ix) Liens to secure Senior Debt, (x) Liens in
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favor of the Trustee for its own benefit and for the benefit of the Holders,
(xi) any interest or title of a lessor pursuant to a lease constituting a
Capital Lease Obligation, (xii) pledges or deposits made in connection with
acquisition agreements or letters of intent entered into in respect of a
proposed acquisition; (xiii) Liens in favor of prior holders of leases on
property acquired by the Company or of sublessors under leases on the Company
property; (xiv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, banker's
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (xv) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the date of the Indenture; provided
that (a) such Lien is created solely for the purpose of securing Debt incurred,
in accordance with Section 1008, (1) to finance the cost (including the cost of
improvement or construction) of the item property or assets subject thereto and
such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (2) to refinance any Debt previously so
secured, (b) the principal amount of the Debt secured by such Lien does not
exceed 100% of such cost and (c) any such Lien shall not extend to or cover any
property or assets other than such item of property or assets and any
improvements on such item; (xvi) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company
and its Restricted Subsidiaries, taken as a whole; (xvii) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xviii)
Liens on property of, or on shares of stock or Debt of, any Person existing at
the time such Person becomes, or becomes a part of, any Restricted Subsidiary,
provided that such Liens do not extend to or cover any property or assets of
the Company or any Restricted Subsidiary other than the property or assets
acquired; (xix) Liens in favor of the Company or any Restricted Subsidiary;
(xx) Liens encumbering deposits securing Debt under Permitted Interest Rate,
Currency or
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Commodity Price Agreements; (xxi) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of the Company and its
Restricted Subsidiaries; (xxii) Liens on or sales of receivables; (xxiii) the
rights of film distributors under film licensing contracts entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
businesses on a basis customary in the movie exhibition industry; and (xxiv)
any renewal of or substitution of any Liens permitted by any of the preceding
clauses, provided that the Debt secured is not increased (other than by any
premium and accrued interest, plus customary fees, expenses and costs related
to such renewal or substitution of Liens or the incurrence of any related
refinancing of Debt) nor the Liens extended to any additional assets (other
than proceeds and accessions). This covenant does not authorize the incurrence
of any Debt not otherwise permitted by Section 1008.
SECTION 1012. Limitation on Restricted Payments.
The Company (i) shall not, directly or indirectly, declare or pay
any dividend or make any distribution (including any payment in connection with
any merger or consolidation derived from assets of the Company or any
Restricted Subsidiary) in respect of its Capital Stock or to the holders
thereof, excluding any dividends or distributions by the Company payable solely
in shares of its Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to acquire its Capital Stock (other than Redeemable
Stock), (ii) shall not, and shall not permit any Restricted Subsidiary to,
purchase, redeem, or otherwise acquire or retire for value (a) any Capital
Stock of the Company or any Related Person of the Company or (b) any options,
warrants or other rights to acquire shares of Capital Stock of the Company or
any Related Person of the Company or any securities convertible or exchangeable
into shares of Capital Stock of the Company or any Related Person of the
Company, (iii) shall not make, or permit any Restricted Subsidiary to make, any
Investment other than a
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Permitted Investment, and (iv) shall not, and shall not permit any Restricted
Subsidiary to, redeem, repurchase, defease or otherwise acquire or retire for
value prior to any scheduled maturity, repayment or sinking fund payment Debt
of the Company which is subordinate in right of payment to the Notes (each of
clauses (i) through (iv) being a "Restricted Payment") if: (1) an Event of
Default, or an event that with the passing of time or the giving of notice, or
both, would constitute an Event of Default, shall have occurred and is
continuing or would result from such Restricted Payment, or (2) after giving
pro forma effect to such Restricted Payment as if such Restricted Payment had
been made at the beginning of the applicable four-fiscal- quarter period, the
Company could not Incur at least $1.00 of additional Debt pursuant to the terms
of the Indenture described in the first paragraph of Section 1008 hereof, or
(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments from the date of issuance of the Notes exceeds the sum of:
(a) 50% of cumulative Consolidated Net Income (or, in the case Consolidated Net
Income shall be negative, less 100% of such deficit) of the Company since the
date of issuance of the Notes through the last day of the last full fiscal
quarter ending immediately preceding the date of such Restricted Payment for
which quarterly or annual financial statements are available (taken as a single
accounting period); plus (b) 100% of the aggregate net proceeds received by the
Company after the date of original issuance of the Notes, including the fair
market value of property other than cash (determined in good faith by the Board
of Directors as evidenced by a resolution of the Board of Directors filed with
the Trustee), from contributions of capital or the issuance and sale (other
than to a Restricted Subsidiary) of Capital Stock (other than Redeemable Stock)
of the Company, options, warrants or other rights to acquire Capital Stock
(other than Redeemable Stock) of the Company and Debt of the Company that has
been converted into or exchanged for Capital Stock (other than Redeemable Stock
and other than by or from a Restricted Subsidiary) of the Company after the
date of original issuance of the Notes, provided that any such net proceeds
received by the Company from an employee stock ownership plan financed by loans
from the Company or a Restricted Subsidiary of the Company shall be included
only
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to the extent such loans have been repaid with cash on or prior to the date of
determination; plus (c) $5.0 million. Prior to the making of any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
setting forth the computations by which the determinations required by clauses
(2) and (3) above were made and stating that no Event of Default, or event that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default, has occurred and is continuing or will result from such
Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or would
result therefrom, (i) the Company may pay any dividend on Capital Stock of any
class within 60 days after the declaration thereof if, on the date when the
dividend was declared, the Company could have paid such dividend in accordance
with the foregoing provisions; (ii) the Company may refinance any Debt
otherwise permitted by clause (vi) of the second paragraph under Section 1008
above or solely in exchange for or out of the net proceeds of the substantially
concurrent sale (other than from or to a Restricted Subsidiary or from or to an
employee stock ownership plan financed by loans from the Company or a
Restricted Subsidiary of the Company) of shares of Capital Stock (other than
Redeemable Stock) of the Company, provided that the amount of net proceeds from
such exchange or sale shall be excluded from the calculation of the amount
available for Restricted Payments pursuant to the preceding paragraph; (iii)
the Company may purchase, redeem, acquire or retire any shares of Capital Stock
of the Company solely in exchange for or out of the net proceeds of the
substantially concurrent sale (other than from or to a Restricted Subsidiary or
from or to an employee stock ownership plan financed by loans from the Company
or a Restricted Subsidiary of the Company) of shares of Capital Stock (other
than Redeemable Stock) of the Company; and (iv) the Company or a Restricted
Subsidiary may purchase or redeem any Debt from Net Available Proceeds to the
extent permitted under Section 1014. Any payment made pursuant to clause (i)
or (iii) of this paragraph shall be a Restricted Payment for
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purposes of calculating aggregate Restricted Payments pursuant to the preceding
paragraph.
SECTION 1013. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay dividends (in cash or
otherwise) or make any other distributions in respect of its Capital Stock or
pay any Debt or other obligation owed to the Company or any other Restricted
Subsidiary; (ii) to make loans or advances to the Company or any other
Restricted Subsidiary; or (iii) to transfer any of its property or assets to
the Company or any other Restricted Subsidiary. Notwithstanding the foregoing,
the Company may, and may permit any Restricted Subsidiary to, suffer to exist
any such encumbrance or restriction (a) pursuant to any agreement in effect on
the date of original issuance of the Notes; (b) pursuant to an agreement
relating to any Debt Incurred by a Person (other than a Restricted Subsidiary
of the Company existing on the date of original issuance of the Notes or any
Restricted Subsidiary carrying on any of the businesses of any such Restricted
Subsidiary) prior to the date on which such Person became a Restricted
Subsidiary of the Company and outstanding on such date and not Incurred in
anticipation of becoming a Restricted Subsidiary, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired; (c) pursuant to an agreement
effecting a renewal, refunding or extension of Debt Incurred pursuant to an
agreement referred to in clause (a) or (b) above, provided, however, that the
provisions contained in such renewal, refunding or extension agreement relating
to such encumbrance or restriction are no more restrictive in any material
respect than the provisions contained in the agreement the subject thereof, as
determined in good faith by the Board of Directors and evidenced by a
resolution of the Board of Directors filed with the Trustee; (d) in the case of
clause (iii) above, restrictions contained in any
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security agreement (including a capital lease) securing Debt of a Restricted
Subsidiary otherwise permitted under this Indenture, but only to the extent
such restrictions restrict the transfer of the property subject to such
security agreement; (e) in the case of clause (iii) above, customary
nonassignment provisions entered into in the ordinary course of business
consistent with past practices in leases and other contracts to the extent such
provisions restrict the transfer or subletting of any such lease or the
assignment of rights under any such contract; (f) any restriction with respect
to a Restricted Subsidiary of the Company imposed pursuant to an agreement
which has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in an Event of Default or an
event that, with the passing of time or the giving of notice or both, would
constitute an Event of Default, that such restriction terminates if such
transaction is closed or abandoned and that the closing or abandonment of such
transaction occurs within one year of the date such agreement was entered into;
or (g) such encumbrance or restriction is the result of applicable corporate
law or regulation relating to the payment of dividends or distributions.
SECTION 1014. Limitation on Asset Disposition.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition in one or more related transactions
unless: (i) the Company or the Restricted Subsidiary, as the case may be,
receives consideration for such disposition at least equal to the fair market
value for the assets sold or disposed of as determined by the Board of
Directors in good faith and evidenced by a resolution of the Board of Directors
filed with the Trustee; (ii) at least 75% of the consideration for such
disposition consists of cash or readily marketable cash equivalents or
Qualifying Theater Assets or the assumption of Debt (other than Debt that is
subordinated to the Notes) relating to such assets and release from all
liability on the Debt assumed; and (iii) all Net Available Proceeds, less any
amounts invested within 360 days of such disposition in
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assets related to the business of the Company, are applied within 360 days of
such disposition (1) first, to the permanent repayment or reduction of Senior
Debt then outstanding under any agreements or instruments which would require
such application or prohibit payments pursuant to clause (2) following, (2)
second, to the extent of remaining Net Available Proceeds, to make an Offer to
Purchase outstanding Notes at 100% of their principal amount plus accrued
interest to the date of purchase and, to the extent required by the terms
thereof, any other Debt of the Company that is pari passu with the Notes at a
price no greater than 100% of the principal amount thereof plus accrued
interest to the date of purchase, (3) third, to the extent of any remaining Net
Available Proceeds following the completion of the Offer to Purchase, to the
repayment of other Debt of the Company or Debt of a Restricted Subsidiary of
the Company, to the extent permitted under the terms thereof and (4) fourth, to
the extent of any remaining Net Available Proceeds, to any other use as
determined by the Company which is not otherwise prohibited by the Indenture.
SECTION 1015. Transactions with Affiliates
and Related Persons.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, enter into any transaction (or series of related
transactions) with an Affiliate or Related Person of the Company (other than
the Company or a Wholly Owned Restricted Subsidiary of the Company), including
any Investment, either directly or indirectly, unless such transaction is on
terms no less favorable to the Company or such Restricted Subsidiary than those
that could be obtained in a comparable arm's-length transaction with an entity
that is not an Affiliate or Related Person. For any transaction that involves
in excess of $100,000 but less than or equal to $1,000,000, the Chief Executive
Officer of the Company shall determine that the transaction satisfies the above
criteria and shall evidence such a determination by a certificate filed with
the Trustee. For any transaction that involves in excess of $1,000,000, a
majority of the disinterested members of the Board of Directors shall determine
that the transaction
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satisfies the above criteria and shall evidence such a determination by a Board
Resolution filed with the Trustee. For any transaction that involves in excess
of $5,000,000, the Company shall also obtain an opinion from a nationally
recognized expert with experience in appraising the terms and conditions of the
type of transaction (or series of related transactions) for which the opinion
is required stating that such transaction (or series of related transactions)
is on terms no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained in a comparable arm's-length transaction with an
entity that is not an Affiliate or Related Person of the Company, which opinion
shall be filed with the Trustee.
Notwithstanding anything to the contrary contained in the
Indenture, the foregoing provisions shall not apply to (i) transactions with
any employee, officer or director of the Company or any of its Restricted
Subsidiaries pursuant to employee benefit plans or compensation arrangements or
agreements entered into in the ordinary course of business, (ii) transactions
with any Affiliate or Related Person in which such Affiliate or Related Person
acquires or purchases the capital stock of the Company or any Restricted
Subsidiary at fair market value or (iii) transactions with any Affiliate or
Related Person in which such Affiliate or Related Person receives a customary
finder's fee or other advisory fee for services rendered to the Company or any
Restricted Subsidiary.
SECTION 1016. Change of Control.
Within 30 days of the occurrence of a Change of Control, the
Company will be required to make an Offer to Purchase all Outstanding Notes at
a purchase price equal to 101% of their principal amount plus accrued interest
to the date of purchase. A "Change of Control" will be deemed to have occurred
at such time as either (a) any Person (other than a Permitted Holder) or any
Persons acting together that would constitute a "group" (a "Group") for
purposes of Section 13(d) of the Exchange Act, or any successor provision
thereto (other than Permitted Holders), together with any Affiliates or Related
Persons thereof, shall
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beneficially own (within the meaning of Rule 13d-3 under the Exchange Act, or
any successor provision thereto), directly or indirectly, at least 50% of the
aggregate voting power of all classes of Voting Stock of the Company (for the
purposes of this clause (a) a person shall be deemed to beneficially own the
Voting Stock of a corporation that is beneficially owned (as defined above) by
another corporation (a "parent corporation"), if such person beneficially owns
(as defined above) at least 50% of the aggregate voting power of all classes of
Voting Stock of such parent corporation); or (b) any Person or Group (other
than Permitted Holders), together with any Affiliates or Related Persons
thereof, shall succeed in having a sufficient number of its nominees elected to
the Board of Directors of the Company such that such nominees, when added to
any existing director remaining on the Board of Directors of the Company after
such election who was a nominee of or is an Affiliate or Related Person of such
Person or Group, will constitute a majority of the Board of Directors of the
Company.
In the event that the Company makes an Offer to Purchase the
Notes, the Company intends to comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act.
SECTION 1017. Provision of Financial Information.
Prior to the time the Company becomes subject to Section 13(a) or
15(d) of the Exchange Act, the Company shall provide to all Holders and file
with the Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Company were so required, such documents to be mailed to Holders
and filed with the Trustee on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so required. After the Company commences filing
such reports, and so long as any of the Notes are outstanding, the Company, or
if the Company is not required to file,
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Holdings shall file with the Commission the annual reports, quarterly reports
and other documents which the Company is required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor
provisions thereto.
SECTION 1018. Unrestricted Subsidiaries.
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. "Unrestricted
Subsidiary" means (1) any Subsidiary designated as such by the Board of
Directors as set forth below where (a) neither the Company nor any of its other
Subsidiaries (other than another Unrestricted Subsidiary) (i) provides credit
support for, or any Guarantee of, any Debt of such Subsidiary or any Subsidiary
of such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or (ii) is directly or indirectly liable for any Debt of
such Subsidiary or any Subsidiary of such Subsidiary, and (b) no default with
respect to any Debt of such Subsidiary or any Subsidiary of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company and its Subsidiaries (other
than another Unrestricted Subsidiary) to declare a default on such other Debt
or cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary to be so designated has
total assets of $1,000 or less or (y) immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Debt pursuant
to the first paragraph under
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Section 1008 hereof and provided, further, that the Company could make a
Restricted Payment in an amount equal to the greater of the fair market value
and book value of such Subsidiary pursuant to Section 1012 hereof and such
amount is thereafter treated as a Restricted Payment for the purpose of
calculating the aggregate amount available for Restricted Payments thereunder.
SECTION 1019. Statement by Officers as to Default;
Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days
after the end of each fiscal quarter of the Company ending after the date
hereof an Officers' Certificate, stating whether or not to the best knowledge
of the signers thereof the Company or any Guarantor is in default in the
performance and observance of any of the terms, provisions and conditions of
Section 801 or Sections 1004 to 1018, inclusive, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Company becomes aware or
should reasonably become aware of the occurrence of an Event of Default or an
event which, with notice or the lapse of time or both, would constitute an
Event of Default, an Officers' Certificate setting forth the details of such
Event of Default or default, and the action which the Company proposes to take
with respect thereto.
SECTION 1020. Waiver of Certain Covenants.
The Company or any Guarantor may omit in any particular instance
to comply with any covenant or condition set forth in Section 801 and Sections
1004 to 1018, if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Notes shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such
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covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and each of the
Guarantors and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect; provided, however, with
respect to an Offer to Purchase as to which an Offer has been mailed, no such
waiver may be made or shall be effective against any Holder tendering Notes
pursuant to such Offer, and the Company may not omit to comply with the terms
of such Offer as to such Holder.
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption.
The Notes may be redeemed at the option of the Company, in whole
or in part, at any time on or after August 1, 2002 and prior to maturity, upon
not less than 30 nor more than 60 days' notice mailed to each Holder of Notes
to be redeemed at such Holder's address appearing in the Security Register, in
amounts of $1,000 or an integral multiple of $1,000, at the Redemption Prices
specified in the form of Note hereinbefore set forth together with accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
In addition, if on or before August 1, 2000 the Company receives
net proceeds from the sale of its Common Stock or the Common Stock of Holdings
in one or more Public Equity Offerings, the Company may, at its option, use an
amount equal to all or a portion of any such net proceeds to redeem Notes in an
aggregate principal amount of up to 30% of the original aggregate principal
amount of the Notes, provided, however, that Notes having a principal amount
equal to at least 70% of the original aggregate principal amount of the Notes
remain outstanding after such
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redemption. Such redemption must occur on a Redemption Date within 90 days of
such sale and upon not less than 30 nor more than 60 days' notice mailed to
each Holder of Notes to be redeemed at such Holder's address appearing in the
Note Register, in amounts of $1,000 or an integral multiple of $1,000, at a
redemption price of 110.625% of the principal amount of the Notes plus accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the particular
Notes to be redeemed or any portion thereof that is an integral multiple of
$1,000.
The Note will not have the benefit of any sinking fund.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Notes, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Notes to be
redeemed.
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SECTION 1104. Selection by Trustee of Notes to Be
Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Notes of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Note
Registrar in writing of the Notes selected for redemption and, in the case of
any Notes selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion
of the principal amount of such Notes which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed, at his address appearing in the
Note Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Notes are to be redeemed,
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the identification (and, in the case of partial redemption, the
principal amounts) of the particular Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Note to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Notes are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Notes
which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price plus accrued
interest) such Notes shall cease to bear interest.
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Upon surrender of any such Note for redemption in accordance with said notice,
such Note shall be paid by the Company at the Redemption Price together with
accrued interest to the Redemption Date; provided, however, that installments
of interest on Notes whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Notes, or one or more Predecessor
Notes, registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 308.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Note.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Note, without service
charge, a new Note or Notes, having the same form, terms and Stated Maturity,
in any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
ARTICLE TWELVE
Senior Subordinated Guarantee
SECTION 1201. Senior Subordinated Guarantee.
Each of the Guarantors hereby jointly and severally
unconditionally guarantees to each Holder of a Note authenticated and delivered
by the Trustee, and to the
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Trustee on behalf of such Holder, the due and punctual payment of the principal
of (and premium, if any) and interest on such Note when and as the same shall
become due and payable, whether at the Stated Maturity or by acceleration, call
for redemption, purchase or otherwise, in accordance with the terms of such
Note and of this Indenture. In case of the failure of the Company punctually
to make any such payment, each of the Guarantors hereby jointly and severally
agrees to cause such payment to be made punctually when and as the same shall
become due and payable, whether at the Stated Maturity or by acceleration, call
for redemption, purchase or otherwise, and as if such payment were made by the
Company.
Each of the Guarantors hereby jointly and severally agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of any Note or this Indenture, the absence of any
action to enforce the same, any creation, exchange, release or non-perfection
of any Lien on any collateral for, or any release or amendment or waiver of any
term of any other Guarantee of, or any consent to departure from any
requirement of any other Guarantee, of all or any of the Notes, the election by
the Trustee or any of the Holders in any proceeding under Chapter 11 of Title
11 of the United States Code (the "Bankruptcy Code") of the application of
Section 1111(b)(2) of the Bankruptcy Code, any borrowing or grant of a security
interest by the Company, as debtor-in-possession, under Section 364 of the
Bankruptcy Code, the disallowance, under Section 502 of the Bankruptcy Code, of
all or any portion of the claims of the Trustee or any of the Holders for
payment of any of the Notes, any waiver or consent by the Holder of any Note or
by the Trustee with respect to any provisions thereof or of this Indenture, the
obtaining of any judgment against the Company or any action to enforce the same
or any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each of the Guarantors hereby
waives the benefits of diligence, presentment, demand of payment, any
requirement that the Trustee or any of the Holders protect, secure, perfect or
insure any security interest in or other Lien on any property subject thereto
or exhaust any right or take any action against the Company or
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any other Person or any collateral, filing of claims with a court in the event
of insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest or notice with respect to any Note or the
indebtedness evidenced thereby and all demands whatsoever, and covenants, that
this Senior Subordinated Guarantee will not be discharged in respect of any
Note except by complete performance of the obligations contained in such Note
and in this Senior Subordinated Guarantee. Each of the Guarantors hereby
agrees that, in the event of a default in payment of principal (or premium, if
any) or interest on any Note, whether at its Stated Maturity or by
acceleration, call for redemption, purchase or otherwise, legal proceedings may
be instituted by the Trustee on behalf of, or by, the Holder of such Note,
subject to the terms and conditions set forth in this Indenture, directly
against each of the Guarantors to enforce its Senior Subordinated Guarantee
without first proceeding against the Company. Each Guarantor agrees that if,
after the occurrence and during the continuance of an Event of Default, the
Trustee or any of the Holders are prevented by applicable law from exercising
their respective rights to accelerate the maturity of the Notes, to collect
interest on the Notes or to enforce or exercise any other right or remedy with
respect to the Notes, or the Trustee or the Holders are prevented from taking
any action to realize on any collateral, such Guarantor agrees to pay to the
Trustee for the account of the Holders, upon demand therefor, the amount that
would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
No provision of any Senior Subordinated Guarantee or Note or of
the Indenture shall alter or impair the Senior Subordinated Guarantee of any
Guarantor, which is absolute and unconditional, of the due and punctual payment
of the principal (and premium, if any) and interest on the Note upon which such
Senior Subordinated Guarantee is endorsed.
Each Guarantor shall be subrogated to all rights of the Holders
of the Notes upon which its Senior Subordinated Guarantee is endorsed against
the Company in respect of any amounts paid by such Guarantor on account of such
Note pursuant to the provisions of its Senior
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Subordinated Guarantee or this Indenture; provided, however, that no Guarantor
shall be entitled to enforce or to receive any payments arising out of, or
based upon, such right of subrogation until the principal of (and premium, if
any) and interest on all Notes issued hereunder shall have been paid in full.
Each Senior Subordinated Guarantee shall remain in full force and
effect and continue to be effective should any petition be filed by or against
the Company for liquidation or reorganization, should the Company become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the assets
of the Company and shall, to the fullest extent permitted by law, continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Notes are, pursuant to applicable law, rescinded or reduced
in amount, or must otherwise be restored or returned by any obligee on the
Notes, whether as a "voidable preference," "fraudulent transfer" or otherwise,
all as though such payment or performance had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, restored or returned,
the Notes shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
No stockholder, officer, director, employer or incorporator,
past, present or future, of any Guarantor, as such, shall have any personal
liability under any Senior Subordinated Guarantee by reason of his, her or its
status as such stockholder, officer, director, employer or incorporator.
Notwithstanding any provision in this Article to the contrary,
each Guarantor, and by its acceptance hereof each Holder of the Notes, hereby
confirms that it is the intention of all such parties that the Senior
Subordinated Guarantee of such Guarantor not constitute a fraudulent transfer
or conveyance for purposes of any federal or state law. To effectuate the
foregoing intention, the Holders of the Notes and each Guarantor hereby
irrevocably agree that the obligations of each Guarantor under its Senior
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Subordinated Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities (including, but not
limited to, Guarantor Senior Debt) of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Senior
Subordinated Guarantee or pursuant to the next succeeding paragraph hereof,
result in the obligations of such Guarantor under its Senior Subordinated
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. This paragraph is for the benefit of the creditors of
each Guarantor.
To the extent that any Guarantor shall be required to pay any
amounts on account of the Notes pursuant to its Senior Subordinated Guarantee
in excess of the greater of (i) the amount of the economic benefit actually
received by such Guarantor from the issuance of the Notes and (ii) an amount
calculated as the product of (A) the aggregate amount payable by the Guarantors
on account of the Notes pursuant to their Senior Subordinated Guarantees times
(B) the proportion (expressed as a fraction) that such Guarantor's net worth at
the date of enforcement of its Senior Subordinated Guarantee is sought bears to
the aggregate net worth of all Guarantors at such date, then such Guarantor
shall be reimbursed by the other Guarantors for the amount of such excess, pro
rata, based upon the respective net worth of such other Guarantors at the date
enforcement of its Senior Subordinated Guarantees is sought. This paragraph is
intended only to define the relative rights of the Guarantors as among
themselves, and nothing set forth in this paragraph is intended to or shall
impair the joint and several obligations of the Guarantors under their
respective Senior Subordinated Guarantees.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise or such right does not impair the
rights of the Holders under any Senior Subordinated Guarantee.
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SECTION 1202. Execution and Delivery of Senior
Subordinated Guarantees.
The Senior Subordinated Guarantees to be endorsed on the Notes
shall include the terms of the Senior Subordinated Guarantee set forth in
Section 1201 and any other terms that may be set forth in the form established
pursuant to Section 205. Each of the Guarantors hereby agrees to execute its
Senior Subordinated Guarantee, in a form established pursuant to Section 205,
to be endorsed on each Note authenticated and delivered by the Trustee.
The Senior Subordinated Guarantee shall be executed on behalf of
each respective Guarantor by any one of such Guarantor's Chairman of the Board,
Vice Chairman of the Board, President or Vice Presidents, attested by its
Secretary or Assistant Secretary. The signature of any or all of these
officers on the Senior Subordinated Guarantee may be manual or facsimile and
may be pursuant to a duly executed power of attorney.
A Senior Subordinated Guarantee bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of a
Guarantor shall bind such Guarantor, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of the Note on which such Senior Subordinated Guarantee is endorsed or
did not hold such offices at the date of such Senior Subordinated Guarantee.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Senior Subordinated
Guarantee endorsed thereon on behalf of the Guarantors. Each of the Guarantors
hereby jointly and severally agrees that its Senior Subordinated Guarantee set
forth in Section 1201 shall remain in full force and effect notwithstanding any
failure to endorse a Senior Subordinated Guarantee on any Note.
SECTION 1203. Guarantors May Consolidate, Etc.,
on Certain Terms.
(a) Except as may be provided in Section 1204 and in Articles
Eight and Ten, nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into the
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Company or a Guarantor or shall prevent any sale or conveyance of the property
of a Guarantor as an entirety or substantially as an entirety to the Company or
a Guarantor.
(b) Except as set forth in Article 8 hereof, nothing contained
in this Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into a corporation or corporations other than the
Company or a Guarantor (whether or not affiliated with the Guarantor), or
successive consolidations or mergers in which a Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to a corporation other than the Company or another Guarantor (whether or not
affiliated with the Guarantor) authorized to acquire and operate the same;
provided, however, that, subject to Sections 1203(a) and 1204 hereof, (i)
immediately after such transaction, and giving effect thereto, no Default or
Event of Default shall have occurred as a result of such transaction and be
continuing, such transaction shall not violate any of the covenants in Article
10 hereof, and each Guarantor hereby covenants and agrees that, upon any such
consolidation, merger, sale or conveyance, such Guarantor's Guarantee set forth
in this Article 12 and in an endorsement on the Notes, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by such Guarantor, shall be expressly assumed (in the
event that the Guarantor is not the surviving corporation in the merger), by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by such corporation formed by such consolidation, or
into which the Guarantor shall have merged, or by the corporation that shall
have acquired such property (except to the extent the following Section 1204
would result in the release of such Guarantee in which case such surviving
corporation does not have to execute any such supplemental indenture). In the
case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture executed and
delivered to the Trustee and satisfactory in form to the Trustee of the due and
punctual performance of all of the covenants and conditions of this
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Indenture to be performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor.
SECTION 1204. Release of Guarantors.
(a) Concurrently with any consolidation or merger of a Guarantor
or any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, in each case as permitted by Section 1203, and
upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such consolidation, merger, sale or
conveyance was made in accordance with Section 1203, the Trustee shall execute
any documents reasonably required in order to evidence the release of such
Guarantor from its obligations under its Guarantee endorsed on the Notes and
under this Article Twelve. Any Guarantor not released from its obligations
under its Senior Subordinated Guarantees endorsed on the Notes and under this
Article Twelve shall remain liable for the full amount of principal of (and
premium, if any) and interest on the Notes and for the other obligations of a
Guarantor under its Senior Subordinated Guarantees endorsed on the Notes and
under this Article Twelve.
(b) Concurrently with the defeasance of the Notes under Section
1302 or the covenant defeasance of the Notes under Section 1303, the Guarantors
shall be released from all of their obligations under their Senior Subordinated
Guarantees endorsed on the Notes and under this Article Twelve.
(c) Upon the consummation of any transaction (whether involving
a sale or other disposition of securities, a merger, a designation as an
Unrestricted Subsidiary or otherwise) whereby any Guarantor ceases to be a
Restricted Subsidiary and which transaction is otherwise in compliance with the
provisions of this Indenture, such Guarantor shall automatically be released
from all obligations under its Guarantees endorsed on the Notes and under this
Article Twelve.
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SECTION 1205. Additional Guarantors.
The Company shall cause each Person that becomes a Restricted
Subsidiary after the date of this Indenture, upon becoming a Restricted
Subsidiary, to become a Guarantor with respect to the Notes. Any such Person
shall become a Guarantor by executing and delivering to the Trustee (a) a
supplemental indenture, in form and substance satisfactory to the Trustee,
which subjects such Person to the provisions of this Indenture as a Guarantor
and (b) an Opinion of Counsel to the effect that such supplemental indenture
has been duly authorized and executed by such Person and constitutes the legal,
valid, binding and enforceable obligation of such Person (subject to such
customary exceptions concerning creditors' rights and equitable principles as
may be acceptable to the Trustee in its discretion).
ARTICLE THIRTEEN
Subordination of Notes and Senior Subordinated Guarantees
SECTION 1301. Notes Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Note, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to the provisions
of Article Four and Article Fourteen), (i) the payment of the principal of (and
premium, if any) and interest on each and all of the Notes are hereby expressly
made subordinate and subject in right of payment to the prior payment in full
of all Senior Debt of the Company, and (ii) the payment of each Guarantor's
obligations in respect of its Senior Subordinated Guarantee is hereby expressly
made subordinate and subject in right of payment to the prior payment in full
of all the obligations of such Guarantor under all Guarantor Senior Debt of
such Guarantor.
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SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event specified in (a), (b) or (c) above (each
such event, if any, herein sometimes referred to as a "Proceeding") the holders
of Senior Debt shall be entitled to receive or retain payment in full of all
amounts due or to become due on or in respect of all Senior Debt, or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, before the Holders of the
Notes are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities, on account of principal of
(or premium, if any) or interest on or other obligations in respect of the
Notes or on account of any purchase or other acquisition of Notes by the
Company or any Subsidiary of the Company (all such payments, distributions,
purchases and acquisitions herein referred to, individually and collectively,
as a "Company Notes Payment"), and to that end the holders of Senior Debt shall
be entitled to receive, for application to the payment thereof, any Company
Notes Payment which may be payable or deliverable in respect of the Notes in
any such Proceeding.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of any Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of any
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Guarantor, then and in any such event specified in (a), (b) or (c) above (each
such event, if any, herein sometimes referred to as a "Guarantor Proceeding";
the Company Proceeding and the Guarantor Proceeding each may be referred to as
a "Proceeding") the holders of all Guarantor Senior Debt of such Guarantor
shall first be entitled to receive payment in full of all amounts due or to
become due on or in respect of all such Guarantor Senior Debt, or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of such Guarantor Senior Debt, before the
Holders of the Notes are entitled to receive or retain any payment or
distribution of any kind or character from such Guarantor, whether in cash,
property or securities (including any payment or distribution which may be
payable or deliverable by reason of the payment of any other Debt of such
Guarantor subordinated to the payment of its Senior Subordinated Guarantee by
such Guarantor) on account of its Senior Subordinated Guarantee (all such
payments and distributions herein referred to, individually and collectively,
as a "Guarantor Notes Payment"; any of the Company Notes Payment and the
Guarantor Notes Payment each may be referred to as a "Notes Payment"), and to
that end the holders of Guarantor Senior Debt of such Guarantor shall be
entitled to receive, for application to the payment thereof, any Guarantor
Notes Payment which may be payable or deliverable in respect of the Senior
Subordinated Guarantee by such Guarantor in any such Guarantor Proceeding.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Note shall have received any
Notes Payment before all Senior Debt of the Company or Guarantor Senior Debt of
the Guarantor, as applicable, is paid in full or payment thereof provided for
in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of such Debt, and if such fact shall, at or prior to the time of such
Notes Payment, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such Notes Payment shall be paid over or
delivered forthwith to the trustee in bankruptcy or other person making payment
or distribution of assets of the Company for the application to the payment of
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all Senior Debt remaining unpaid, to the extent necessary to pay the Senior
Debt in full.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company or any Guarantor provided for by a plan of reorganization or
readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other corporation provided for by such plan of reorganization or
readjustment which stock or securities are subordinated in right of payment to
all then outstanding Senior Debt or Guarantor Senior Debt to substantially the
same extent as the Notes or Senior Subordinated Guarantors are so subordinated
as provided in this Article. The consolidation of the Company or any Guarantor
with, or the merger of the Company or any Guarantor into, another Person or the
liquidation or dissolution of the Company or any Guarantor following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another Person upon the terms and conditions set forth in
Article Eight shall not be deemed a Proceeding for the purposes of this Section
if the Person formed by such consolidation or into which the Company or any
Guarantor is merged or the Person which acquires by conveyance or transfer such
properties and assets as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
set forth in Article Eight.
SECTION 1303. No Payment When Senior Debt in Default.
In the event that any Company Senior Payment Default (as defined
below) shall have occurred and be continuing, then no Company Notes Payment
shall be made unless and until such Company Senior Payment Default shall have
been cured or waived or shall have ceased to exist or all amounts then due and
payable in respect of Senior Debt shall have been paid in full, or provision
shall have been
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made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt. "Company Senior Payment Default"
means any default in the payment of principal of (or premium, if any) or
interest on Designated Senior Debt when due, whether at the Stated Maturity of
any such payment or by declaration of acceleration, call for redemption or
otherwise.
In the event that any Guarantor Senior Payment Default (as
defined below) shall have occurred and be continuing, then no Guarantor Notes
Payment shall be made unless and until such Guarantor Senior Payment Default
shall have been cured or waived or shall have ceased to exist or all amounts
then due and payable in respect of Guarantor Senior Debt shall have been paid
in full, or provision shall have been made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Debt. "Guarantor Senior Payment Default" means any default in the payment of
principal of (or premium, if any) or interest on Guarantor Designated Senior
Debt when due, whether at the Stated Maturity of any such payment or by
declamation of acceleration, call for redemption or otherwise. Any Company
Senior Payment Default or Guarantor Senior Payment Default may be referred to
herein as a "Senior Payment Default".
Upon the occurrence of a Senior Nonmonetary Default and receipt
of written notice by the Company and the Trustee of the occurrence of such
Senior Nonmonetary Default from any holder of Designated Senior Debt (or a
trustee or other agent on behalf of the holders thereof), which is the subject
of such Senior Nonmonetary Default, no payments on account of principal of,
premium, if any, or interest on, or in respect of the purchase or other
acquisition of, the Notes, and no defeasance of the Notes, may be made for a
period (the "Company Payment Blockage Period") commencing on the date of the
receipt of such notice and ending the earlier of (i) the date on which such
Senior Nonmonetary Default shall have been cured or waived or ceased to exist
or all Senior Debt the subject of such Senior Nonmonetary Default shall have
been discharged and (ii) the 179th day after the date of the receipt of such
notice. In any event, no more than one Company Payment Blockage Period may be
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commenced during any 360-day period and there shall be a period of at least 181
days during each 360-day period when no Company Payment Blockage Period is in
effect. In addition, no Senior Nonmonetary Default that existed or was
continuing on the date of the commencement of a Company Payment Blockage Period
may be made the basis of the commencement of a subsequent Company Payment
Blockage Period whether or not within a period of 360 consecutive days, unless
such Senior Nonmonetary Default shall have been cured for a period of not less
than 90 consecutive days. "Senior Nonmonetary Default" means the occurrence or
existence and continuance of an event of default with respect to Designated
Senior Debt, other than a Senior Payment Default, permitting the holders of the
Designated Senior Debt (or a trustee or other agent on behalf of the holders
thereof) then to declare such Designated Senior Debt due and payable prior to
the date on which it would otherwise become due and payable.
Upon the occurrence of a Guarantor Senior Nonmonetary Default and
receipt of written notice by the Company and the Trustee of the occurrence of
such Guarantor Senior Nonmonetary Default from any holder of Guarantor Senior
Debt (or a trustee or other agent on behalf of the holders thereof), agent,
which is the subject of such Guarantor Senior Nonmonetary Default, no payments
on account of principal of, premium, if any, or interest on, or in respect of
the purchase or other acquisition of, the Notes, and no defeasance of the
Notes, may be made for a period (the "Guarantor Payment Blockage Period")
commencing on the date of the receipt of such notice and ending the earlier of
(i) the date on which such Guarantor Senior Nonmonetary Default shall have been
cured or waived or ceased to exist or all Guarantor Senior Debt the subject of
such Senior Nonmonetary Default shall have been discharged and (ii) the 179th
day after the date of the receipt of such notice. In any event, no more than
one Guarantor Payment Blockage Period may be commenced during any 360-day
period and there shall be a period of at least 181 days during each 360-day
period when no Guarantor Payment Blockage Period is in effect. In addition, no
Guarantor Senior Nonmonetary Default that existed or was continuing on the date
of the commencement of a Guarantor Payment Blockage Period may be
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made the basis of the commencement of a subsequent Guarantor Payment Blockage
Period whether or not within a period of 360 consecutive days, unless such
Guarantor Senior Nonmonetary Default shall have been cured for a period of not
less than 90 consecutive days. "Guarantor Senior Nonmonetary Default" means
the occurrence or existence and continuance of an event of default with respect
to Guarantor Senior Debt, other than a Guarantor Senior Payment Default,
permitting the holders of the Guarantor Senior Debt (or a trustee or other
agent on behalf of the holders thereof) then to declare such Guarantor Senior
Debt due and payable prior to the date on which it would otherwise become due
and payable. Any of the Company Senior Nonmonetary Defaults and the Guarantor
Senior Nonmonetary Defaults may be referred to herein as a "Senior Nonmonetary
Default".
The failure to make any payment on the Notes by reason of the
provisions of the Indenture described under this Article Thirteen will not be
construed as preventing the occurrence of an Event of Default with respect to
the Notes arising from any such failure to make payment. Upon termination of
any period of payment blockage the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments.
In the event that, notwithstanding the foregoing, the Company or
any Guarantor shall make any Company Notes Payment or Guarantor Notes Payment
to the Trustee or any Holder prohibited by the foregoing of this Section, and
if such fact shall, at or prior to the time of such Notes Payment, have been
made known to the Trustee or, as the case may be, such Holder, then and in such
event such Notes Payment shall be paid over and delivered forthwith to the
holders of the Senior Debt of the Company or of the Guarantor Senior Debt of
the Guarantor, as the case may be.
By reason of such subordination, in the event of insolvency,
creditors of the Company who are not holders of Senior Debt or of the Notes may
recover less, ratably, than holders of Senior Debt and more, ratably, than
Holders of the Notes.
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The subordination provisions described above will not be
applicable to payments in respect of the Notes from a defeasance trust
established in connection with any defeasance or covenant defeasance of the
Notes as described under Article Fourteen.
The provisions of this Section shall not apply to any Notes
Payment with respect to which Section 1302 would be applicable.
SECTION 1304. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture
or in any of the Notes shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 1302 or under the
conditions described in Section 1303, from making Notes Payments, or (b) the
application by the Trustee of any money deposited with it hereunder to Notes
Payments or the retention of such Notes Payment by the Holders, if, at the time
of such application by the Trustee, it did not have knowledge that such Notes
Payment would have been prohibited by the provisions of this Article.
SECTION 1305. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become
due on or in respect of Senior Debt of the Company or Guarantor Senior Debt of
a Guarantor, as the case may be, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
Debt, the Holders of the Notes shall be subrogated to the rights of the holders
of such Debt to receive payments and distributions of cash, property and
securities applicable to such Debt until the principal of (and premium, if any)
and interest on the Notes or the obligation under such Guarantor's Senior
Subordinated Guarantee, as the case may be, shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
the Senior Debt of the Company or
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Guarantor Senior Debt of a Guarantor, as the case may be, of any cash, property
or securities to which the Holders of the Notes or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt or
Guarantor Senior Debt by Holders of the Notes or the Trustee, shall, as among
the Company or such Guarantor, as the case may be, its creditors other than
holders of Senior Debt or Guarantor Senior Debt, as the case may be, and the
Holders of the Notes, be deemed to be a payment or distribution by the Company
or such Guarantor, as the case may be, to or on account of the Senior Debt of
the Company or Guarantor Senior Debt of such Guarantor, as the case may be.
SECTION 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders on the one hand and
the holders of Senior Debt and Guarantor Senior Debt on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Notes is intended to or shall (a) impair, as among the Company or any
Guarantor, as applicable, its creditors other than holders of Senior Debt or
Guarantor Senior Debt and the Holders of the Notes as the Guarantees endorsed
thereon, the obligation of the Company or any Guarantor, as applicable, which
is absolute and unconditional (and which, subject to the rights under this
Article of the holders of Senior Debt, is intended to rank equally with all
other general obligations of the Company), to pay to the Holders of the Notes
with the Guarantees endorsed thereon the principal of (and premium, if any) and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company or any Guarantor, as applicable, of the Holders of the Notes with the
Guarantees endorsed thereon and creditors of the Company or any Guarantor, as
applicable, other than the holders of Senior Debt, and Guarantor Senior Debt;
or (c) prevent the Trustee or the Holder of any Note as the Guarantees endorsed
thereon from exercising all remedies otherwise permitted by
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applicable law upon default under this Indenture, subject to the rights, if
any, under this Article of the holders of Senior Debt and Guarantor Senior Debt
and Guarantor Senior Debt to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 1307. Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1308. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt or
Guarantor Senior Debt to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or any Guarantor or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company or any
Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt or Guarantor Senior Debt may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Holders of the Notes, without incurring responsibility to the Holders of the
Notes and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of the Notes to the holders
of Senior Debt and Guarantor Senior Debt, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Senior Debt or Guarantor Senior Debt, or otherwise amend
or supplement in any manner Senior Debt or Guarantor Senior Debt or any
instrument evidencing the same or any agreement
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under which Senior Debt or Guarantor Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt or Guarantor Senior Debt; (iii) release any
Person liable in any manner for the collection of Senior Debt or Guarantor
Senior Debt; and (iv) exercise or refrain from exercising any rights against
the Company, the Guarantors and any other Person.
SECTION 1309. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes or any of the Senior Subordinated
Guarantees. Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Notes or any of the Senior Subordinated
Guarantees, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Debt or Guarantor Senior Debt or
from any trustee therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Section 601, shall be
entitled in all respects to assume that no such facts exist.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt or Guarantor Senior Debt (or
a trustee therefor) to establish that such notice has been given by a holder of
Senior Debt or Guarantor Senior Debt (or a trustee therefor). In the event
that the Trustee determines in good faith that further evidence is required
with respect to the right of any Person as a holder of Senior Debt or Guarantor
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such
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Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt or Guarantor Senior Debt held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of the
Company or any Guarantor referred to in this Article, the Trustee, subject to
the provisions of Section 601, and the Holders of the Notes shall be entitled
to rely upon any order or decree entered by any court of competent jurisdiction
in which such Proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt or Guarantor Senior Debt and other
indebtedness of the Company or any Guarantor, as the case may be, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article.
SECTION 1311. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt or Guarantor Senior Debt and shall not be liable to any
such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Notes or to the Company or any Guarantor or to any other Person
cash, property or securities to which any holders of
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Senior Debt or Guarantor Senior Debt shall be entitled by virtue of this
Article or otherwise.
SECTION 1312. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Debt or
Guarantor Senior Debt which may at any time be held by it, to the same extent
as any other holder of Senior Debt or Guarantor Senior Debt, and nothing in
this Indenture shall deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.
SECTION 1313. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1312 shall not apply to the Company or
any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION 1314. Defeasance of this Article Thirteen.
The subordination of the Notes and the Senior Subordinated
Guarantees provided by this Article Thirteen is expressly made subject to the
provisions for defeasance or covenant defeasance in Article Fourteen hereof
and, anything herein to the contrary notwithstanding, upon the effectiveness of
any such defeasance or covenant defeasance,
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the Notes then outstanding and the Senior Subordinated Guarantees related
thereto shall thereupon cease to be subordinated pursuant to this Article
Thirteen.
ARTICLE FOURTEEN
Defeasance and Covenant Defeasance
SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may at its option by Board Resolution, at any time,
in accordance with the Exchange and Registration Rights Agreement, elect to
have either Section 1402 or Section 1403 applied to the Outstanding Notes upon
compliance with the conditions set forth below in this Article Fourteen.
SECTION 1402. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section
1401 applicable to this Section, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Notes, and the
provisions of Article Twelve and Thirteen hereof shall cease to be effective,
on the date the conditions set forth below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by
the Outstanding Notes and to have satisfied all its other obligations under
such Notes and this Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), and (ii) the Guarantors shall be released from all of
their obligations under their Senior Subordinated Guarantees and under Article
Twelve of this Indenture except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
such Notes to receive, solely from the trust fund described in Section 1404 and
as more fully set forth in such Section, payments in respect of the principal
of (and
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premium, if any) and interest on such Notes when such payments are due, (B) the
Company's obligations with respect to such Notes under Sections 304, 305, 306,
1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Fourteen. Subject to compliance with
this Article Fourteen, the Company may exercise its option under this Section
1402 notwithstanding the prior exercise of its option under Section 1403.
SECTION 1403. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section
1401 applicable to this Section, (i) the Company shall be released from its
obligations under Sections 1005 through 1018, inclusive, and Clauses (3), (4)
and (5) of Section 801, (ii) the occurrence of an event specified in Sections
501(3), 501(4) (with respect to Clauses (1), (3), (4) or (5) of Section 801),
501(5) (with respect to any of Sections 1005 through 1018, inclusive), 501(6)
and 501(7) shall not be deemed to be an Event of Default and (iii) the
provisions of Article Thirteen hereof shall cease to be effective on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"). For this purpose, such covenant defeasance means that the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section, Clause or Article,
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section, Clause or Article or by reason of any reference in any such
Section, Clause or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Notes shall be
unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1402 or Section 1403 to the then Outstanding Notes:
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(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the
provisions of this Article Fourteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide,
not later than one day before the due date of any payment, money in an
amount, or (C) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of (, premium,
if any,) and each instalment of interest on the Notes on the Stated
Maturity of such principal or instalment of interest in accordance with
the terms of this Indenture and of such Notes. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct obligations
of the United States of America for the payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality
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of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with respect to any
such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian
for the account of the holder of such depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt.
(2) In the case of an election under Section 1402, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the
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<PAGE> 174
Outstanding Notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will
be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred.
(3) In the case of an election under Section 1403, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Notes will not recognize gain or
loss for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would have been
the case if such deposit and covenant defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that the Notes, if then listed on
any securities exchange, will not be delisted as a result of such
deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any securities of
the Company.
(6) At the time of such deposit: (A) no default in the payment
of all or a portion of
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<PAGE> 175
principal of (or premium, if any) or interest on or other obligations in
respect of any Senior Debt shall have occurred and be continuing, and no
event of default with respect to any Senior Debt shall have occurred and
be continuing and shall have resulted in such Senior Debt becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable and (B) no other event of default
with respect to any Senior Debt shall have occurred and be continuing
permitting (after notice or the lapse of time, or both) the holders of
such Senior Debt (or a trustee on behalf of the holders thereof) to
declare such Senior Debt due and payable prior to the date on which it
would otherwise have become due and payable, or, in the case of either
Clause (A) or Clause (B) above, each such default or event of default
shall have been cured or waived or shall have ceased to exist.
(7) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and be
continuing.
(8) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(9) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of
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<PAGE> 176
Counsel, each stating that all conditions precedent provided for
relating to either the defeasance under Section 1402 or the covenant
defeasance under Section 1403 (as the case may be) have been complied
with.
(10) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
as defined in the Investment Company Act of 1940, as amended, or such
trust shall be qualified under such act or exempt from regulation
thereunder.
SECTION 1405. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of this Section 1405, the "Trustee") pursuant to Section 1304 in
respect of the Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes, of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law. Money so held in trust shall
not be subject to the provisions of Article Twelve.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
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<PAGE> 177
which by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Fourteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1404 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
SECTION 1406. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money
in accordance with Section 1402 or 1403 by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to this Article Fourteen until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
1402 or 1403; provided, however, that if the Company makes any payment of
principal of (and premium, if any) or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Note to receive such payment from the money held by the
Trustee or the Paying Agent.
--------------------
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-161-
<PAGE> 178
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
HOLLYWOOD THEATERS, INC.
By/s/ Thomas W. Stephenson, Jr.
-----------------------------
Thomas W. Stephenson, Jr.
President
Attest:
/s/ James R. Featherstone
- --------------------------
James R. Featherstone
Secretary
HOLLYWOOD THEATER HOLDINGS, INC.
By/s/ Thomas W. Stephenson, Jr.
-----------------------------
Thomas W. Stephenson, Jr.
President
Attest:
/s/ James R. Featherstone
- --------------------------
James R. Featherstone
Secretary
Crown Theatre Corporation
By/s/ Thomas W. Stephenson, Jr.
-----------------------------
Thomas W. Stephenson, Jr.
President
Attest:
/s/ James R. Featherstone
- --------------------------
James R. Featherstone
Secretary
<PAGE> 179
U.S. TRUST COMPANY OF TEXAS, N.A.
By/s/ Bill Barber
-----------------------------
Name: Bill Barber
Title: Vice President
Attest:
/s/ John Stohlman
- ------------------------
<PAGE> 180
STATE OF TEXAS ) ss.:
COUNTY OF DALLAS )
On the 7th day of August, 1997, before me personally came Thomas
W. Stephenson, Jr., to me known, who, being by me duly sworn, did depose and
say that he is President of Hollywood Theaters, Inc., one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Melissa Benfield
--------------------------
Notary Public
STATE OF TEXAS ) ss.:
COUNTY OF DALLAS )
On the 7th day of August, 1997, before me personally came Thomas
W. Stephenson, Jr., to me known, who, being by me duly sworn, did depose and
say that he is President of Hollywood Theater Holdings, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ Melissa Benfield
--------------------------
Notary Public
<PAGE> 181
STATE OF TEXAS ) ss.:
COUNTY OF DALLAS )
On the 7th day of August, 1997, before me personally came Thomas
W. Stephenson, Jr., to me known, who, being by me duly sworn, did depose and
say that he is President of Crown Theatre Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Melissa Benfield
--------------------------
Notary Public
STATE OF TEXAS) ss.:
COUNTY OF DALLAS)
On the 7th day of August, 1997, before me personally came Bill
Barber, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of U.S. Trust Company of Texas, N.A., one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Kevin D. Nichols
--------------------------
<PAGE> 182
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to Section 306(b)(i) of the Indenture)
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Re: 10 5/8% Senior Subordinated Notes due August 1, 2007 of
Hollywood Theaters, Inc. (the "Securities")
Reference is made to the Indenture, dated as of August 1, 1997
(the "Indenture"), from Hollywood Theaters, Inc. (the "Company"), the
Guarantors named therein, U.S. Trust Company of Texas, N.A., as Trustee. Terms
used herein and defined in the Indenture or in Regulation S or Rule 144 under
the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to U.S. $____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
-------------------------
CERTIFICATE No(s).
-------------------
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Note, they
are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the
A-1
<PAGE> 183
Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form
of a Regulation S Note. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities,
an affiliate of the Company or any such distributor or a person
acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made
to a person in the United States;
(C) either:
(i) at the time the buy order was originated,
the Transferee was outside the United States or the Owner
and any person acting on its behalf reasonably believed
that the Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as
regulated by the Association of International Bond
Dealers, or another designated offshore securities market
and neither the Owner nor any person acting on its behalf
knows that the transaction has been prearranged with a
buyer in the United States;
A-2
<PAGE> 184
(D) no directed selling efforts have been made in the
United States by or on behalf of the Owner or any affiliate
thereof;
(E) if the Owner is a dealer in securities or has
received a selling concession, fee or other renumeration in
respect of the Specified Securities, and the transfer is to occur
during the Restricted Period, then the requirements of Rule
904(c)(1) have been satisfied; and
(F) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of
at least two years (computed in accordance with paragraph (d) of
Rule 144) has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and is being effected in accordance with the
applicable amount, manner of sale and notice requirements of Rule
144; or
(B) the transfer is occurring after a holding period of
at least three years has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the Company.
A-3
<PAGE> 185
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Guarantors and the Initial
Purchasers.
Dated:
--------------------------------------------
(Print the name of the Undersigned, as such
term is defined in the second paragraph of
this certificate.)
By:
-----------------------------------------
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of the
person signing on behalf of the Undersigned
must be stated.)
A-4
<PAGE> 186
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 306(b)(ii) of the Indenture)
U.S. Trust Company of Texas, N.A.,
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Re: 10 5/8% Senior Notes due August 1, 2007 of Hollywood
Theaters, Inc.(the "Securities")
Reference is made to the Indenture, dated as of August 1, 1997
(the "Indenture"), from Hollywood Theaters, Inc. (the "Company"), the
Guarantors named therein and U.S. Trust Company of Texas, N.A., as Trustee.
Terms used herein and defined in the Indenture or in Rule 144A or Rule 144
under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as
so defined.
This certificate relates to U.S. $_____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
----------------------------
ISIN No(s), If any.
---------------------
CERTIFICATE No(s).
----------------------
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by
B-1
<PAGE> 187
a Global Note, they are held through the Depositary or an Agent Member in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Note, they are registered in the
name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form
of a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, (i) the Owner is not a U.S.
Person (as defined in the Indenture) and (ii) such transfer is being effected
in accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as:
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have
taken reasonable steps to ensure that the Transferee is aware
that the Owner may be relying on Rule 144A in connection with the
transfer; and
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of
at least two years (computed in accordance with paragraph (d) of
Rule 144) has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and is being effected in
B-2
<PAGE> 188
accordance with the applicable amount, manner of sale and notice
requirements of Rule 144; or
(B) the transfer is occurring after a holding period of
at least three years has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Guarantors and the Initial
Purchasers.
Dated:
--------------------------------------------------
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this
certificate.)
By:
-----------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
B-3
<PAGE> 189
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 306(c))
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Re: 10 5/8% Senior Subordinated Notes due August 1, 2007 of
Hollywood Theaters, Inc. (the "Securities")
Reference is made to the Indenture, dated as of August 1, 1997
(the "Indenture"), from Hollywood Theaters, Inc. (the "Company"), the
Guarantors named therein and U.S. Trust Company of Texas, N.A., as Trustee.
Terms used herein and defined in the Indenture or in Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
----------------------------
CERTIFICATE No(s).
----------------------
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Note, they
are held through the Depositary or an Agent
C-1
<PAGE> 190
Member in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Note, they are registered
in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to Section
306(c) of the Indenture. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after a holding period of at least two
years (computed in accordance with paragraph (d) of Rule 144) has elapsed since
the Specified Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is not, and during
the preceding three months has not been, an affiliate of the Company. The
Owner also acknowledges that any future transfers of the Specified Securities
must comply with all applicable securities laws of the states of the United
States and other jurisdictions.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Guarantors and the Initial
Purchasers.
Dated:
--------------------------------------------------
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this
certificate.)
By:
-----------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
C-2
<PAGE> 191
ANNEX D -- Form of Certification to
Be Given by Holders of Beneficial
Interest in a Regulation S Temporary
Global Note
OWNER SECURITIES CERTIFICATION
HOLLYWOOD THEATRES, INC.
10 5/8% Senior Subordinated Notes due August 1, 2007
This is to certify that, as of the date hereof, $________ of the
above-captioned Notes are beneficially owned by non-U.S. person(s). As used in
this paragraph, the term "U.S. person" has the meaning given to it by
Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior
to the date on which you intend to submit your certification relating to the
Notes held by you for our account in accordance with your operating procedures
if any applicable statement herein is not correct on such date, and in the
absence of any such notification it may be assumed that this certification
applies as of such date.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
Dated: ,
------------- -------
By:
----------------------------------------------
As, or as agent for, the beneficial owner(s)
of the Notes to which this certificate
relates.
D-1
<PAGE> 192
ANNEX E -- Form of Certification to
Be Given by the Euroclear Operator
or Cedel S.A.
DEPOSITARY SECURITIES CERTIFICATION
HOLLYWOOD THEATRES, INC.
10 5/8% Senior Subordinated Notes due August 1, 2007
This is to certify that, with respect to U.S.$___________
principal amount of the above-captioned Notes, except as set forth below, we
have received in writing, by tested telex or by electronic transmission, from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of Notes set forth above (our "Member
Organizations"), certifications with respect to such portion, substantially to
the effect set forth in the Indenture.(1)
We further certify (i) that we are not making available herewith
for exchange (or, if relevant, exercise of any rights or collection of any
interest) any portion of the Regulation S Temporary Global Note (as defined in
the Indenture) excepted in such certifications and (ii) that as of the date
hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, exercise of any rights or collection of any
interest) are no longer true and cannot be relied upon as of the date hereof.
- --------------------
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is other
wise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this
sentence.
E-1
<PAGE> 193
We understand that this certification is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
Dated: ,
------------- -------
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Brussels office,
as operator of the Euroclear System]
or
[CEDEL S.A.]
By
----------------------------------
E-2
<PAGE> 1
EXHIBIT 4.2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of August 7, 1997,
among Hollywood Theaters Inc., a Delaware corporation (the "Company"),
Hollywood Theater Holdings, Inc., a Delaware corporation and parent to the
Company ("Holdings"), Goldman, Sachs & Co., and BancAmerica Securities Inc., as
purchasers (collectively, the "Purchasers") of the 105/8% Senior Subordinated
Notes due August 1, 2007, of the Company, which are unconditionally guaranteed,
jointly and severally, by Holdings and the Company's subsidiary Crown Theatres
Corporation and will be guaranteed by any future Restricted Subsidiary of the
Company.
The Company proposes to issue and sell to the Purchasers (as defined
herein) upon the terms set forth in the Purchase Agreement (as defined herein)
the Notes (as defined herein). As an inducement to the Purchasers to enter into
the Purchase Agreement and in satisfaction of a condition to the obligations of
the Purchasers thereunder, the Company agrees with the Purchasers for the
benefit of holders (as defined herein) from time to time of the Registrable
Notes (as defined herein) as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Notes under the terms thereof and the Indenture, without giving effect
to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean August 7, 1997.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Date," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Offer Registration Statement effective or as of which the Exchange Offer
Registration Statement otherwise becomes effective and (ii) a Shelf
Registration, shall mean the time and date as of which the Commission
declares the Shelf Registration Statement effective or as of which the
Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Notes that has
returned a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
<PAGE> 2
"Exchange Notes" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Guarantors" shall have the meaning assigned thereto in the Indenture.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Notes from time to time (including any successors
or assigns), in each case for so long as such person owns any Registrable
Notes.
"Indenture" shall mean the Indenture, dated as of August 7, 1997,
between the Company and U.S. Trust Company of Texas, N.A., as Trustee, as
the same shall be amended from time to time.
"Notes" shall mean, collectively, the 105/8% Senior Subordinated Notes
due August 1, 2007 of the Company to be issued and sold to the Purchasers,
and securities issued in exchange therefor or in lieu thereof pursuant to
the Indenture. Each Note is entitled to the benefit of the guarantees
provided for in the Indenture (the "Guarantees") and, unless the context
otherwise requires, any reference herein to a "Note," an "Exchange Note"
or a "Registrable Note" shall include a reference to the related
Guarantees.
"Notice and Questionnaire" shall mean a Notice of Registration
Statement and Selling Securityholder Questionnaire substantially in the
form of Exhibit A hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
July 31, 1997, between the Purchasers and the Company relating to the
Notes.
"Registrable Notes" shall mean the Notes; provided, however, that a
Note shall cease to be a Registrable Note when (i) in the circumstances
contemplated by Section 2(a) hereof, the Note has been exchanged for an
Exchange Note in an Exchange Offer as contemplated in Section 2(a)
(provided that any Exchange Note received by a broker-dealer in an
Exchange Offer in exchange for a Registrable Note that was not acquired by
the broker-dealer directly from the Company will also be a Registrable
Note through and including the earlier of the 90th day after the Exchange
Offer is completed or such time as such broker-dealer no longer owns such
Note); (ii) in the circumstances contemplated by Section 2(b) hereof, a
Shelf Registration Statement registering such Note under the Securities
Act has been declared or becomes effective and such Note has been sold or
otherwise transferred by the holder thereof pursuant to and in a manner
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<PAGE> 3
contemplated by such effective Shelf Registration Statement; (iii) such
Note is sold pursuant to Rule 144 under circumstances in which any legend
borne by such Note relating to restrictions on transferability thereof,
under the Securities Act or otherwise, is removed by the Company or
pursuant to the Indenture; (iv) such Note is eligible to be sold pursuant
to paragraph (k) of Rule 144; or (v) such Note shall cease to be
outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Notes outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes and (iv) a holder that is a broker-dealer, but only with respect to
Exchange Notes received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Notes acquired by the broker-dealer
directly from the Company.
"Restricted Subsidiary" shall have the meaning assigned thereto in the
Indenture.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
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<PAGE> 4
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to use
its reasonable best efforts to file with the Commission under the Securities
Act, within 60 days after the Closing Date, a registration statement relating
to an offer to exchange (such registration statement, the "Exchange Offer
Registration Statement", and such offer, the "Exchange Offer") any and all of
the Notes for a like aggregate principal amount of debt securities issued by
the Company and guaranteed by the Guarantors, which debt securities and
guarantees are substantially identical to the Notes and the related Guarantees,
respectively (and are entitled to the benefits of a trust indenture which is
substantially identical to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the special interest payments contemplated in
Section 2(c) below (such new debt securities hereinafter called "Exchange
Notes"). The Company agrees to use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act as soon as practicable, but no later than 180 days after the Closing Date.
The Exchange Offer will be registered under the Securities Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its
reasonable best efforts to commence and complete the Exchange Offer promptly
after such registration statement has become effective, hold the Exchange Offer
open for at least 30 days and issue Exchange Notes for all Registrable Notes
that have been properly tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have
been "completed" only if the debt securities and related guarantees received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Notes are, upon receipt, transferable by each such holder without need for
further compliance with Section 5 of the Securities Act and the Exchange Act
(except for the requirement to deliver a prospectus included in the Exchange
Offer Registration Statement applicable to resales by broker-dealers of
Exchange Notes received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Notes other than those acquired by the broker-dealer
directly from the Company), and without material restrictions under the blue
sky or securities laws of a substantial majority of the States of the United
States of America. The Exchange Offer shall be deemed to have been completed
upon the earlier to occur of (i) the Company having exchanged the Exchange
Notes for all outstanding Registrable Notes pursuant to the Exchange Offer and
(ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange
Notes for all Registrable Notes that have been properly tendered and not
withdrawn before the expiration of the Exchange Offer, which shall be on a date
that is at least 30 days following the commencement of the Exchange Offer. The
Company agrees (x) to include in the Exchange Offer Registration Statement a
prospectus for use in connection with any resales of Exchange Notes by a
broker-dealer, other than resales of Exchange Notes received by a broker-dealer
pursuant to an Exchange Offer in exchange for Registrable Notes acquired by the
broker-dealer directly from the Company, and (y) to use its reasonable best
efforts to keep such Exchange Offer Registration Statement effective for a
period (the "Resale Period") beginning when Exchange Notes are first issued in
the Exchange Offer and ending upon the earlier of the expiration of the 180th
day after the Exchange Offer has been completed or such time as such
broker-dealers no longer own any Registrable Notes. With respect to such
Exchange Offer Regis tration Statement, each broker-dealer that holds Exchange
Notes received in an Exchange Offer in exchange for Registrable Notes not
acquired by it directly from the Company shall have the benefit of the rights
of indemnification and contribution set forth in Sections 6(a), (c), (d) and
(e) hereof.
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<PAGE> 5
(b) If (i) on or prior to the date of consummation of the Exchange Offer,
existing Commission interpretations are changed such that the debt securities
or any related guarantees received by holders other than Restricted Holders in
the Exchange Offer for Registrable Notes are not or would not be, upon receipt,
freely transferable by each such holder without need for further compliance
with Section 5 of the Securities Act (except for the requirement to deliver a
prospectus included in the Exchange Offer Registration Statement applicable to
resales by broker-dealers of Exchange Notes received by such broker-dealer
pursuant to an Exchange Offer in exchange for Registrable Notes other than
those acquired by the broker-dealer directly from the Company), (ii) the
Exchange Offer has not been consummated within 210 days following the Closing
Date or (iii) the Exchange Offer is not available to any holder of the Notes,
other than a Restricted Holder, in lieu of (or, in the case of clause (iii), in
addition to) conducting the Exchange Offer contemplated by Section 2(a) the
Company shall use its reasonable best efforts to file under the Securities Act
as soon as practicable, but no later than 60 days after the Closing Date, a
"shelf" registration statement providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Notes, or in the case of clause (iii), of Notes held by a holder of Notes for
resale by such holder, pursuant to Rule 415 or any similar rule that may be
adopted by the Commission (such filing, the "Shelf Registration" and such
registration statement, the "Shelf Registration Statement"). The Company agrees
(i) to use its reasonable best efforts to cause such Shelf Registration
Statement be declared effective within 180 days of the Closing Date and to
remain effective for two years following the effective date of the Shelf
Registration Statement or such shorter period that will terminate when all the
securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement, provided, however, that no holder shall be
entitled to be named as a selling securityholder in the Shelf Registration
Statement or to use the prospectus forming a part thereof for resales of
Registrable Notes unless such holder is an Electing Holder, and (ii) after the
Effective Date of the Shelf Registration Statement, promptly upon the request
of any holder of Registrable Notes that is not then an Electing Holder, to take
any action reasonably necessary to enable such holder to use the prospectus
forming a part thereof for resales of Registrable Notes, including, without
limitation, any action necessary to identify such holder as a selling
securityholder in the Shelf Registration Statement, provided, however, that
nothing in this clause (ii) shall relieve any such holder of the obligation to
return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. Notwithstanding clause (i) of the
previous sentence, the Company shall not be obligated to keep the Shelf
Registration Statement effective if (A) the Company determines, in its
reasonable judgment, upon advice of counsel, that the continued effectiveness
and usability of the Shelf Registration Statement would (x) require the
disclosure of confidential information, which the Company has a bona fide
business reason for preserving as confidential, or (y) interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any affiliate, and provided further, that the failure
to keep the Shelf Registration Statement effective and usable for offers and
sales of Registrable Notes for such reasons shall last no longer than 45 days
in any 12-month period. Any such period during which the Company is excused
from keeping the Shelf Registration Statement effective and usable for offers
and sales of Registrable Notes is referred to herein as a "Suspension Period";
a Suspension Period shall commence and include the date that the Company gives
notice to the Electing Holders that the Shelf Registration Statement is no
longer effective or the prospectus included therein is no longer usable for
offers and sales of Registrable Notes as a result of the application of the
proviso of the foregoing sentence and shall end on the earlier to occur of (1)
the date on which each seller of Registrable Notes covered by the Shelf
Registration Statement
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<PAGE> 6
either receives copies of the supplemented or amended prospectus or is advised
in writing by the Company that use of the prospectus may be resumed or (2) the
expiration of 45 days in any 12-month period during which one or more
Suspension Periods has been in effect.
(c) In the event that (i) the Company has not filed the Exchange Offer
Registration Statement (or, if applicable, the Shelf Registration Statement)
within 60 days following the Closing Date, or (ii) such Exchange Offer
Registration Statement or Shelf Registration Statement has not become effective
or been declared effective by the Commission within 180 days following the
Closing, or (iii) the Exchange Offer has not been consummated within 30
business days after the Effective Date or (iv) any Exchange Offer Registration
Statement or Shelf Registration Statement required by Section 2(a) or 2(b)
hereof is filed and declared effective but shall thereafter either be withdrawn
by the Company or shall become subject to an effective stop order issued
pursuant to Section 8(d) of the Securities Act suspending the effectiveness of
such registration statement (except as specifically permitted herein) without
being succeeded immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default" and each period during which a Registration Default has
occurred and is continuing, a "Registration Default Period"), then, the per
annum interest rate on the applicable Notes will increase, for the period from
the occurrence of the Registration Default until such time as no Registration
Default is in effect (at which time the interest rate will be reduced to its
initial rate) by 0.5% during the first 90-day period following the occurrence
of such Registration Default, and by an additional 0.5% thereafter (up to a
maximum of 1.0%).
(d) Each of Holdings and the Company shall take, and shall cause each
Guarantor to take, all action necessary or advisable to be taken by it to
ensure that the transactions contemplated herein are effected as so
contemplated, including all action necessary or desirable to register the
Guarantees under the registration statement contemplated in Section 2(a) or
2(b) hereof, as applicable.
(e) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated therein by reference as of such
time and any reference herein to any post-effective amendment to a registration
statement as of any time shall be deemed to include any document incorporated
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Date of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of
a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
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<PAGE> 7
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) to use its reasonable best efforts to prepare and file with the
Commission, as soon as practicable but no later than 60 days after the
Closing Date, an Exchange Offer Registration Statement on any form which
may be utilized by the Company and which shall permit the Exchange Offer
and resales of Exchange Notes by broker-dealers during the Resale Period
to be effected as contemplated by Section 2(a), and use its best efforts
to cause such Exchange Offer Registration Statement to become effective as
soon as practicable thereafter, but no later than 180 days after the
Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Offer Registration Statement
and the prospectus included therein as may be necessary to use its
reasonable best efforts to effect and maintain the effectiveness of such
Exchange Offer Registration Statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such Exchange Offer Registration Statement, and
promptly provide each broker-dealer holding Exchange Notes with such
number of copies of the prospectus included therein (as then amended or
supplemented), in conformity in all material respects with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, as such broker-dealer
reasonably may request prior to the expiration of the Resale Period, for
use in connection with resales of Exchange Notes;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration statement
for use in consummating resales during the Resale Period (and which has
provided in writing to the Company a telephone or facsimile number and
address for notices), and confirm such advice in writing, (A) when such
Exchange Offer Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Exchange Offer Registration
Statement or any post-effective amendment, when the same has become
effective, (B) of any comments by the Commission or any request by the
Commission for amendments or supplements to such Exchange Offer
Registration Statement or prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of such Exchange Offer Registration Statement or the
initiation or threatening of any proceedings for that purpose, (D) of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Exchange Notes for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (E)
at any time during the Resale Period when a prospectus is required to be
delivered under the Securities Act, that such Exchange Offer Registration
Statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder or contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
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<PAGE> 8
(iv) in the event that the Company would be required, pursuant to
Section 3(e)(iii)(F) above, to notify any broker-dealers holding Exchange
Notes, prepare and furnish as promptly as practicable to each such holder
a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Notes during
the Resale Period, such prospectus shall conform in all material respects
to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(v) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effec tiveness of such Exchange Offer Registration
Statement or any post-effective amendment thereto as promptly as
practicable;
(vi) use its reasonable best efforts to (A) register or qualify the
Exchange Notes under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a) no later than the
commencement of the Exchange Offer, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
until the expiration of the Resale Period and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each
broker-dealer holding Exchange Notes to consummate the disposition thereof
in such jurisdictions; provided, however, that neither the Company nor any
Guarantor shall be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 3(c)(vi), (2)
consent to general service of process in any such jurisdiction or (3) make
any changes to its certificate of incorporation or by-laws or any
agreement between it and its stockholders;
(vii) provide a CUSIP number for all Exchange Notes, not later than
the applicable Effective Date;
(viii) use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission; and make generally available to
its securityholders as soon as practicable but no later than eighteen
months after the effective date of such Exchange Offer Registration
Statement, an earnings statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall, as soon as practicable (or as
otherwise specified):
(i) to use its reasonable best efforts to prepare and file with the
Commission, as soon as practicable but in any case within the time period
specified in Section 2(b), a Shelf Registration Statement on any form
which may be utilized by the Company and which shall register all of the
Registrable Notes for resale by the holders thereof in accordance with
such method or methods of disposition as may be specified by such of the
holders as, from time to time, may be Electing Holders and use its
reasonable best efforts to cause such Shelf Registration
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<PAGE> 9
Statement to become effective as soon as practicable but in any case
within the time period specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Date of the
Shelf Registration Statement, mail the Notice and Questionnaire to the
holders of Registrable Notes; no holder shall be entitled to be named as a
selling securityholder in the Shelf Registration Statement as of the
Effective Date, and no holder shall be entitled to use the prospectus
forming a part thereof for resales of Registrable Notes at any time,
unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein; provided, however, holders of Registrable Notes shall have at
least 21 calendar days from the date on which the Notice and Questionnaire
is first mailed to such holders to return a completed and signed Notice
and Questionnaire to the Company;
(iii) after the Effective Date of the Shelf Registration Statement,
upon the request of any holder of Registrable Notes that is not then an
Electing Holder, promptly send a Notice and Questionnaire to such holder;
provided that the Company shall not be required to take any action to name
such holder as a selling securityholder in the Shelf Registration
Statement or to enable such holder to use the prospectus forming a part
thereof for resales of Registrable Notes until such holder has returned a
completed and signed Notice and Questionnaire to the Company;
(iv) as soon as reasonably practicable prepare and file with the
Commission such amendments and supplements to such Shelf Registration
Statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such Shelf Registration Statement
for the period specified in Section 2(b) hereof and as may be required by
the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Shelf Registration Statement,
and furnish to the Electing Holders copies of any such supplement or
amendment as promptly as practicable after filing with the Commission;
(v) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Notes covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Shelf
Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act), if any, thereof, (C) any sales or
placement agent therefor, (D) counsel for any such underwriter or agent
and (E) not more than one counsel for all the Electing Holders the
opportunity to review and comment on the Shelf Registration Statement,
each prospectus included therein or filed with the Commission and each
amendment or supplement thereto at least ten days prior to its filing;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Registrable Notes pursuant to the
Shelf Registration such financial and other
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<PAGE> 10
information and books and records of the Company, and cause the officers,
employees, counsel and independent certified public accountants of the
Company to respond to such inquiries, as shall be reasonably necessary, in
the reasonable judgment of the respective counsel referred to in such
Section, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that each such party
shall be required to maintain in confidence and not to disclose to any
other person any information or records reasonably designated by the
Company as being confidential, until such time as (A) such information
becomes a matter of public record (whether by virtue of its inclusion in
such registration statement or otherwise), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or order
of any court or other governmental agency or body having jurisdiction over
the matter (subject to the requirements of such order, and only after such
person shall have given the Company prompt prior written notice of such
requirement), or (C) subject to the provisions of Section 2(b) relating to
Suspension Periods, such information is required to be set forth in such
Shelf Registration Statement or the prospectus included therein or in an
amendment to such Shelf Registration Statement or an amendment or
supplement to such prospectus in order that such Shelf Registration
Statement, prospectus, amendment or supplement, as the case may be,
complies with applicable requirements of the federal securities laws and
the rules and regulations of the Commission and does not contain an untrue
statement of a material fact or omit to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which notification
may be made through any managing underwriter that is a representative of
such underwriter for such purpose) and confirm such advice in writing, (A)
when such Shelf Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Shelf Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (E) if at any time when
a prospectus is required to be delivered under the Securities Act, such
Shelf Registration Statement, prospectus, prospectus amendment or
supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(ix) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto as promptly as practicable;
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<PAGE> 11
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or Electing Holder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Registrable Notes, including information with respect to the
principal amount of Registrable Notes being sold by such Electing Holder
or agent or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable Notes
and any discount, commission or other compensation payable in respect
thereof, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the offering of the Registrable Notes
to be sold by such Electing Holder or agent or to such underwriters; and
make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales agent,
if any, therefor, each underwriter, if any, thereof and the respective
counsel referred to in Section 3(d)(vi) an executed copy (or, in the case
of an Electing Holder, a conformed copy) of such Shelf Registration
Statement, each such amendment and supplement thereto (in each case
including all exhibits thereto (in the case of an Electing Holder, upon
request) and documents incorporated by reference therein) and such number
of copies of such Shelf Registration Statement (excluding exhibits thereto
and documents incorporated by reference therein unless specifically so
requested by such Electing Holder, agent or underwriter, as the case may
be) and of the prospectus included in such Shelf Registration Statement
(including each preliminary prospectus and any summary prospectus), and
such other documents, as such Electing Holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Notes owned by such Electing
Holder, offered or sold by such agent or underwritten by such underwriter
and to permit such Electing Holder, agent and underwriter to satisfy the
prospectus delivery requirements of the Securities Act; and the Company
hereby consents to the use of such prospectus (including such preliminary
and summary prospectus) and any amendment or supplement thereto by each
such Electing Holder and by any such agent and underwriter, in each case
in the form most recently provided to such person by the Company, in
connection with the offering and sale of the Registrable Notes covered by
the prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(xii) use its reasonable best efforts to (A) register or qualify the
Registrable Notes to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and for so long as may be
necessary to enable any Electing Holder, agent or underwriter to complete
its distribution of Notes pursuant to such Shelf Registration Statement
and (C) take any and all other actions as may be reasonably necessary or
advisable to enable each such Electing Holder, agent, if any, and
underwriter, if any, to consummate the disposition in such jurisdictions
of such Registrable Notes; provided, however,
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<PAGE> 12
that neither the Company nor any Guarantor shall be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(d)(xii), (2) consent to general service of
process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and
its stockholders;
(xiii) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold, which certificates
shall be printed, lithographed or engraved, or produced by any combination
of such methods, and which shall not bear any restrictive legends; and, in
the case of an underwritten offering, enable such Registrable Notes to be
in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Registrable Notes;
(xiv) provide a CUSIP number for all Registrable Notes, not later than
the applicable Effective Date;
(xv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions
relating to indemnification and contribution, and take such other actions
in connection therewith, as any Electing Holders aggregating at least 30%
in aggregate principal amount of the Registrable Notes at the time
outstanding shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Notes;
(xvi) whether or not an agreement of the type referred to in Section
3(d)(xvi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten
offering or is made through a placement or sales agent or any other
entity, (A) make such representations and warranties to the Electing
Holders covered by such Shelf Registration and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made in connection with an offering
of debt securities pursuant to an appropriate agreement; (B) obtain an
opinion of counsel to the Company in customary form and covering such
matters, of the type customarily covered by such an opinion, as the
managing underwriters, if any, or as any Electing Holders of at least 30%
in aggregate principal amount of the Registrable Notes at the time
outstanding may reasonably request, addressed to such Electing Holder or
Electing Holders and the placement or sales agent, if any, therefor and
the underwriters, if any, thereof and dated the effective date of such
Shelf Registration Statement (and if such Shelf Registration Statement
contemplates an underwritten offering of a part or all of the Regis trable
Notes, dated the date of the closing under the underwriting agreement
relating thereto); (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to the
Electing Holders, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such Shelf
Registration Statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such Shelf Registration Statement
or post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included
-12-
<PAGE> 13
in such prospectus (and, if such Shelf Registration Statement contemplates
an underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters
of the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any Electing Holders of at least 30% in aggregate
principal amount of the Registrable Notes at the time outstanding or the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company or any Guarantor;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are no less favorable than those
provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable Notes of any
proposal by the Company to amend or waive any provision of this Exchange
and Registration Rights Agreement pursuant to Section 9(h) hereof and of
any amendment or waiver effected pursuant thereto, each of which notices
shall contain the text of the amendment or waiver proposed or effected, as
the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Notes or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD")
or any successor thereto, as amended from time to time) thereof, whether
as an Electing Holder or as an underwriter, a placement or sales agent or
a broker or dealer in respect thereof, or otherwise, assist such
broker-dealer in complying with the requirements of such Rules and
By-Laws, including by providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the Rules of Fair Practice of the NASD; and
(xx) use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission; and make generally available to
its securityholders as soon as practicable but in any event not later than
eighteen months after the effective date of such Shelf Registration
Statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder).
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(F) above, to notify the selling Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Company shall prepare and furnish as promptly as practicable to each of the
Electing Holders, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable Notes,
such prospectus shall conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and shall not contain an untrue
statement of a material
-13-
<PAGE> 14
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Each Electing Holder and agent therefor or
underwriter thereof agrees that upon receipt of any notice from the Company
pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder, agent or
underwriter shall forthwith discontinue the disposition of Registrable Notes
pursuant to the Shelf Registration Statement applicable to such Registrable
Notes until such Electing Holder, agent or underwriter shall have received
copies of such amended or supplemented prospectus, and if so directed by the
Company, such Electing Holder, agent or underwriter shall deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies, then in their possession of the prospectus covering such Registrable
Notes at the time of receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice Questionnaire,
the Company may require each Electing Holder as to which any Shelf Registration
pursuant to Section 2(b) is being effected to furnish to the Company such
additional information regarding such Electing Holder and such Electing
Holder's intended method of distribution of such Registrable Notes as may be
required in order to comply with the Securities Act. Each such Electing Holder
agrees to notify the Company as promptly as practicable of any inaccuracy or
change in information previously furnished by such Electing Holder to the
Company or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Notes or
omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Notes
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Electing Holder or the disposition of such
Registrable Notes, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and
any NASD registration, filing and review fees and expenses including reasonable
fees and disbursements of counsel for the placement or sales agent or
underwriters in connection with such registration, filing and review, (b) all
fees and expenses in connection with the qualification of the Notes for
offering and sale under the State securities and blue sky laws referred to in
Section 3(d)(xii) hereof, including reasonable fees and disbursements of
counsel for the Electing Holders (subject to the limitation of clause (i)
below) or underwriters in connection with such qualification and determination,
(c) all expenses relating to the preparation, printing, production,
distribution and reproduction of each registration statement required to be
filed hereunder, each prospectus included therein or prepared for distribution
pursuant hereto, each amendment or supplement to the foregoing, the expenses of
preparing the Notes for delivery and the expenses of printing or producing any
underwriting agreements, agreements among underwriters, selling agreements and
blue sky or legal investment memoranda and all other documents in
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<PAGE> 15
connection with the offering, sale or delivery of Notes to be disposed of
(including certificates representing the Notes), (d) fees and expenses of the
Trustee under the Indenture, any agent of the Trustee and any counsel for the
Trustee and of any collateral agent or custodian, (e) fees, disbursements and
expenses of counsel and independent certified public accountants of the Company
(including the expenses of any opinions or "cold comfort" letters required by
or incident to such performance and compliance), (f) reasonable fees,
disbursements and expenses of one counsel for the Electing Holders retained in
connection with a Shelf Registration, as selected by the Electing Holders of at
least a majority in aggregate principal amount of the Registrable Notes held by
Electing Holders (which counsel shall be reasonably satisfactory to the
Company) and (g) any fees charged by securities rating services for rating the
Notes (collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by any holder of
Registrable Notes or any placement or sales agent therefor or underwriter
thereof, the Company shall reimburse such person for the full amount of the
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the holders of the Registrable
Notes being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Notes and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
the counsel and experts specifically referred to above, and shall bear all
out-of-pocket expenses of such holders incurred in connection with the
registration of the Registrable Notes.
5. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each of the holders of Registrable Notes included in an Exchange Offer
Registration Statement, each of the Electing Holders of Registrable Notes
included in a Shelf Registration Statement, and each person who participates as
a placement or sales agent or as an underwriter in any offering or sale of such
Registrable Notes against any losses, claims, damages or liabilities, joint or
several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Exchange Offer Registration Statement or Shelf Registration Statement, as
the case may be, under which such Registrable Notes were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Company to any such Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse such
holder, such Electing Holder, such agent and such underwriter for any legal or
other expenses reason ably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final or
summary prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein;
-15-
<PAGE> 16
(b) Indemnification by the Electing Holders and any Agents and
Underwriters. The Company may require, as a condition to including any
Registrable Notes in any registration statement filed pursuant to Section 2(b)
hereof and to entering into any underwriting agreement with respect thereto,
that the Company shall have received an undertaking reasonably satisfactory to
it from the Electing Holder of such Registrable Notes and from each underwriter
named in any such underwriting agreement, severally and not jointly, to (i)
indemnify and hold harmless the Company, and all other holders of Registrable
Notes, against any losses, claims, damages or liabilities to which the Company
or such other holders of Registrable Notes may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such Electing Holder,
agent or underwriter, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Electing Holder or underwriter expressly for use
therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such Electing Holder shall be required to undertake liability
to any person under this Section 6(b) for any amounts in excess of the dollar
amount of the proceeds to be received by such Electing Holder from the sale of
such Electing Holder's Registrable Notes pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions
of or contemplated by this Section 6, notify such indemnifying party in writing
of the commencement of such action; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is
an actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
-16-
<PAGE> 17
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 6(d) were determined by pro rata allocation (even if the
holders or any agents or underwriters or all of them were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 6(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no holder shall be required to contribute any amount in excess of
the amount by which the dollar amount of the proceeds received by such holder
from the sale of any Registrable Notes (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any damages which such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, and no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Notes underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The holders' and any underwriters'
obligations in this Section 6(d) to contribute shall be several in proportion
to the principal amount of Registrable Notes registered or underwritten, as the
case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the Securities
Act; and the obliga tions of the holders and any agents or underwriters
contemplated by this Section 6 shall be in addition to any liability which the
respective holder, agent or underwriter may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in any registration
statement as about to become a
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<PAGE> 18
director of the Company) and to each person, if any, who controls the Company
within the meaning of the Securities Act.
6. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Notes covered by
the Shelf Registration are to be sold pursuant to an underwritten offering, the
managing underwriter or underwriters thereof shall be designated by Electing
Holder's holding at least a majority in aggregate principal amount of the
Registrable Notes to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
(b) Participation by Holders. Each holder of Registrable Notes hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
7. Rule 144.
The Company covenants to the holders of Registrable Notes that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or
the Securities Act (including the reports under Section 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and shall take such further action as any holder of
Registrable Notes may reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable Notes without registration
under the Securities Act within the limitations of the exemption provided by
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or any similar or successor rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Notes in connection
with that holder's sale pursuant to Rule 144, the Company shall deliver to such
holder a written statement as to whether it has complied with such
requirements.
8. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Notes or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company fails to perform any of their
respective obligations hereunder and that the Purchasers and the holders from
time to time of the Registrable Notes may be irreparably harmed by any such
failure, and accordingly agree that the Purchasers and such holders, in
addition to any other remedy to which they may be entitled at law or in equity,
shall be entitled to compel specific
-18-
<PAGE> 19
performance of the respective obligations of the Company under this Exchange
and Registration Rights Agreement in accordance with the terms and conditions
of this Exchange and Registration Rights Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 2911 Turtle Creek Boulevard, Suite 1150, Dallas, Texas 75219, Attention:
Chief Financial Officer, with a copy to Baker & Botts, LLP, 2001 Ross Avenue,
Dallas, Texas, 75201-2980, Attention: Carlos A. Fierro, and if to a holder, to
the address of such holder set forth in the security register or other records
of the Company, or to such other address as the Company or any such holder may
have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Registrable Notes and the respective successors and assigns of the
parties hereto and such holders. In the event that any transferee of any holder
of Regis trable Notes shall acquire Registrable Notes, in any manner, whether
by gift, bequest, purchase, operation of law or otherwise, such transferee
shall, without any further writing or action of any kind, be deemed a
beneficiary hereof for all purposes and such Registrable Notes shall be held
subject to all of the terms of this Exchange and Registration Rights Agreement,
and by taking and holding such Registrable Notes such transferee shall be
entitled to receive the benefits of, and be conclusively deemed to have agreed
to be bound by all of the applicable terms and provisions of this Exchange and
Registration Rights Agreement. If the Company shall so request, any such
successor, assign or transferee shall agree in writing to acquire and hold the
Registrable Notes subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made
by or on behalf of any holder of Registrable Notes, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Notes pursuant to the
Purchase Agreement and the transfer and registration of Registrable Notes by
such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpre tation
of this Exchange and Registration Rights Agreement.
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<PAGE> 20
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture
and the form of Notes) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly executed by
the Company and the holders of at least 50 percent in aggregate principal
amount of the Registrable Notes at the time out standing. Each holder of any
Registrable Notes at the time or thereafter outstanding shall be bound by any
amendment or waiver effected pursuant to this Section 9(h), whether or not any
notice, writing or marking indicating such amendment or waiver appears on such
Registrable Notes or is delivered to such holder. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the holders whose
Registrable Notes are being sold and, tendered or registered and that does not
affect the rights of other holders, may be given by at least a majority of such
holders, determined on the basis of Registrable Notes sold, tendered or
registered.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of
Registrable Notes shall be made available for inspection and copying on any
business day by any holder of Registrable Notes for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Notes under the Notes, the Indenture and this Agreement) at the offices of the
Company at the address thereof set forth in Section 9(c) above and at the
office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
Agreed to and accepted as of the date referred to above.
HOLLYWOOD THEATERS, INC.
By: /s/ James R. Featherstone
---------------------------------------
James R. Featherstone
Chief Financial Officer
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
---------------------------------------
James R. Featherstone
Chief Financial Officer
GOLDMAN, SACHS & CO.
BANCAMERICA SECURITIES, INC.
By: /s/ Goldman, Sachs & Co.
---------------------------------------
(Goldman, Sachs & Co.)
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<PAGE> 21
Exhibit A
HOLLYWOOD THEATERS, INC.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]*/
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in Hollywood Theaters, Inc. (the
"Company") 105/8% Senior Subordinated Notes due August 1, 2007 (the
"Securities") are held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire (the "Notice and Questionnaire").
It is important that beneficial owners of the Securities receive a
copy of the enclosed materials as soon as possible as their rights to have the
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Hollywood
Theaters, Inc., 2911 Turtle Creek Boulevard, Suite 1150, Dallas, Texas 75219,
Attention: James R. Featherstone.
- ---------------
*/ Not less than 21 calendar days from date of mailing.
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<PAGE> 22
Hollywood Theaters, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
[Date]
Reference is hereby made to the Exchange and Registration Rights
Agreement (the "Exchange and Registration Rights Agreement") by and between
Hollywood Theaters, Inc. (the "Company"), Hollywood Theater Holdings, Inc. and
the Purchasers named therein. Pursuant to the Exchange and Registration Rights
Agreement, the Company has filed with the United States Securities and Exchange
Commission (the "Commission") a registration statement on Form ___ (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's
105/8% Senior Subordinated Notes due August 1, 2007 (the "Securities"). A copy
of the Exchange and Registration Rights Agreement is attached hereto. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to have
the Registrable Securities beneficially owned by it included in the Shelf
Registration Statement. In order to have Registrable Securities included in the
Shelf Registration Statement, this Notice of Registration Statement and Selling
Securityholder Questionnaire ("Notice and Questionnaire") must be completed,
executed and delivered to the Company's counsel at the address set forth herein
for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial owners of
Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
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<PAGE> 23
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Exchange and Registration
Rights Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder
were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to
the Prospectus and as Exhibit B to the Exchange and Registration Rights
Agreement.
The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate
and complete:
-23-
<PAGE> 24
QUESTIONNAIRE
(a) Full Legal Name of Selling Securityholder:
--------------------------------------------------------------------------
(i) Full Legal Name of Registered Holder (if not the same
as in (a) above) of Registrable Securities Listed in
Item (3) below:
--------------------------------------------------------------------------
(ii) Full Legal Name of DTC Participant (if applicable and
if not the same as (b) above) Through Which
Registrable Securities Listed in Item (3) below are
Held:
--------------------------------------------------------------------------
(b) Address for Notices to Selling Securityholder:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Telephone:
--------------------------
Fax:
--------------------------
Contact Person:
--------------------------
(c) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(i) Principal amount at maturity of Registrable Securities
beneficially owned:
------------------------------------
CUSIP No(s). of such Registrable Securities:
------------------------------
(ii) Principal amount at maturity of Securities other than
Registrable Securities beneficially owned:
-------------
CUSIP No(s). of such other Securities:
(iii) Principal amount at maturity of Registrable Securities
which the undersigned wishes to be included in the
Shelf Registration Statement:
-------------------------
-24-
<PAGE> 25
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
---------------------------------------------------
(d) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Company, other than the Securities listed above in Item (3).
State any exceptions here:
(e) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more)
has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(f) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item (3) only
as follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable Securities may
be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale,
or at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Registered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or services or in the over-the-counter market,
or (iv) through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities short
and deliver Registrable Securities to close out such short positions, or loan
or pledge Registrable Securities to broker-dealers that in turn may sell such
securities.
State any exceptions here:
-25-
<PAGE> 26
(g) Whether you are a corporation or not, the following three
questions should be answered. If you are a corporation
these questions should also be answered with respect to
your officers, directors and holders of 5% or more of your
equity securities; if you are a partnership such questions
should also be answered with respect to your general
partners.
(i) Except as set forth below in this Item (7)(a), neither
the undersigned nor any of its affiliates*/ is a
member**/ of the National Association of Securities
Dealers, Inc. (the "NASD") or a person associated with
a member** of the NASD.
- -----------------
* NASD Rule 2720 defines the term "affiliate" to mean a company which
controls, is controlled by or is under common control with a member. The
term affiliate is presumed to include the following:
(i) a company will be presumed to control a member if the company
beneficially owns 10 percent or more of the outstanding voting securities
of a member which is a corporation, or beneficially owns a partnership
interest in 10 percent or more of the distributable profits or losses of a
member which is a partnership;
(ii) a member will be presumed to control a company if the member and
persons associated with the member beneficially own 10 percent or more of
the outstanding voting securities of a company which is a corporation, or
beneficially own a partnership interest in 10 percent or more of the
distributable profits or losses of a company which is a partnership;
(iii) a company will be presumed to be under common control with a
member if:
(1) the same natural person or company controls both the member
and company by beneficially owning 10 percent or more of the
outstanding voting securities of a member or company which is a
corporation, or by beneficially owning a partnership interest in 10
percent or more of the distributable profits or losses of a member or
company which is a partnership; or
(2) a person having the power to direct or cause the direction of
the management or policies of the member or the company also has the
power to direct or cause the direction of the management or policies
of the other entity in question.
** Article I of the NASD's By-Laws defines the term "member" to mean any
broker or dealer admitted to membership in the NASD and defines the term
"person associated with a member" to mean every sole proprietor, partner,
officer, director or branch manager of any member, or any natural person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by such member (for
example, any employee), whether or not such person is registered or exempt
from registration with the NASD.
-26-
<PAGE> 27
State any exceptions here:
(ii) Except as set forth below in this Item (7)(b), the
undersigned does not own stock or other securities of
any NASD MEMBER not purchased in the open market.
State any exceptions here:
(iii) Except as set forth below in this Item (7)(c), the
undersigned has not made any outstanding subordinated
loans to any NASD MEMBER.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M (which governs manipulation, stabilization and
trading activity during a distribution of securities).
In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on which
such information is provided to the Company, the Selling Securityholder agrees
to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (7) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company, and any underwriters in an
underwritten offering of such Selling Securityholder's Registrable Securities
listed in Item(3) above, in connection with the preparation of the Shelf
Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(d) of the Exchange and Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to promptly notify the Company of
any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect. All notices hereunder and pursuant to the Exchange
-27-
<PAGE> 28
and Registration Rights Agreement shall be made in writing, by hand-delivery,
first-class mail, or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Attention: James R. Featherstone
(214) 528-9500
(ii) With a copy to:
Baker & Botts
2001 Ross Avenue
Suite 700
Dallas, Texas 75201
Attention: Carlos Fierro
(214) 953-6500
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
-28-
<PAGE> 29
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated:
-----------------
---------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
-----------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT
ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Baker & Botts
2001 Ross Avenue
Suite 700
Dallas, Texas 75201
Attention: Carlos Fierro
(214) 953-6500
-29-
<PAGE> 30
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
U.S. Trust Company of Texas, N.A.
Hollywood Theaters, Inc.
c/o U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Suite 2100
Dallas, Texas 75201
Attention: Trust Officer
Re: Hollywood Theaters, Inc. (the "Company")
105/8% Senior Subordinated Notes due August 1, 2007
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount at maturity of the above-referenced
Notes pursuant to an effective Registration Statement on Form ___ (File No.
333-____) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any,
of the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes is named as a "Selling Holder" in the
Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount at maturity of the Notes transferred are the Notes
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
------------------------------
(Name)
By:
-------------------------------
(Authorized Signature)
On behalf of each of the Purchasers
B-1
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
by and between
HOLLYWOOD THEATER HOLDINGS, INC.
and
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
Dated as of October 3, 1996
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of October 3, 1996, by and
between HOLLYWOOD THEATER HOLDINGS, INC., a Delaware corporation (the
"Company") and THE BEACON GROUP III - FOCUS VALUE FUND, L.P., a Delaware
limited partnership ("Beacon").
W I T N E S S E T H :
WHEREAS, the Company and Beacon have entered into a Preferred Stock and
Common Stock Purchase Agreement (the "Purchase Agreement"), pursuant to which
the Company is agreeing to issue, and Beacon is agreeing to purchase, shares of
Series A Convertible Preferred Stock, par value $.01 per share of the Company
(the "Series A Preferred"), Series B Convertible Preferred Stock, $.01 par
value per share of the Company ("Series B Preferred") and Common Stock of the
Company;
WHEREAS, simultaneously herewith, the Company, Beacon and the other
equity holders of the Company are entering into a Shareholders' Agreement (the
"Shareholders' Agreement"); and
WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
2
<PAGE> 3
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) with respect to any
individual, shall also mean the spouse, sibling, child, step-child, grandchild,
niece, nephew or parent of such Person, or the spouse thereof.
"Common Stock" means the Common Stock, $.01 par value per share, of the
Company and any equity securities issued or issuable with respect to the Common
Stock in connection with a reclassification, recapitalization, merger,
consolidation or other reorganization.
"Conversion Shares" means the shares of Common Stock or other equity
securities issued or issuable upon conversion of the Series A Preferred and/or
Series B Preferred.
"Holder" or "Holders" means any party who is a signatory to this
Agreement and any party who shall hereafter acquire and hold Registrable
Securities.
"Investor Conversion Shares" means "Conversion Shares" under and as
defined in the Investor Registration Rights Agreement.
"Investor Registration Rights Agreement" means that certain Registration
Rights Agreement dated October 3, 1996, by and among the Company, Stratford
Capital Partners, L.P., a Texas limited partnership and Precept Investors,
Inc., a Texas corporation.
"Investor Registrable Securities" means "Registrable Securities" under
and as defined in the Investor Registration Rights Agreement.
"Investor Holders" means "Holders" under and as defined in the Investor
Registration Rights Agreement.
3
<PAGE> 4
"IPO" means the initial underwritten offering pursuant to which the
Common Stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
"Major Holder" means with respect to any registration the Holder that,
together with its Affiliates, includes the largest number of Registrable
Securities in such registration.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Registrable Securities" means any (i) shares of Series A Preferred and
Series B Preferred owned by Beacon, whether acquired on the date hereof or
hereafter acquired, (ii) shares of Common Stock owned by Beacon, whether
acquired on the date hereof or hereafter acquired, (iii) Conversion Shares
owned by Beacon, (iv) shares of Series A Preferred and Series B Preferred or
Common Stock acquired by any Person after the date hereof pursuant to rights
granted to Beacon under the Purchase Agreement or the Shareholders' Agreement,
(v) Conversion Shares acquired by any Person after the date hereof pursuant to
rights granted to Beacon under the Purchase Agreement or the Shareholders'
Agreement and (vi) shares of Common Stock issued or issuable, directly or
indirectly, with respect to the Common Stock referenced in clauses (ii), (iii),
(iv) or (v) above by way of stock dividend, stock split or combination of
shares. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have been declared effective under
the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, or (ii) such securities shall have
been sold (other than in a privately negotiated sale) pursuant to Rule 144 (or
any successor provision) under the Securities Act.
4
<PAGE> 5
"Requisite Percentage of Outstanding Holders" means the Holders of
Registrable Securities who, assuming conversion of all of the then outstanding
Series A Preferred and Series B Preferred into Conversion Shares, would hold
15% or more of the total Conversion Shares that would then be outstanding.
"Requisite Percentage of Participating Holders" means Holders of
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Series A Preferred and Series B Preferred
into Conversion Shares, would hold a majority of the total Conversion Shares
that would then be held by all Holders participating in the registration.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration Rights.
2.1. Demand Registrations.
(a) Request for Registration. Subject to Section 2.1(d), at any time
and from time to time after the earlier of (i) the closing of an IPO and (ii)
three years after the date hereof, one or more Holders of Registrable
Securities representing the Requisite Percentage of Outstanding Holders shall
have the right to require the Company to file a registration statement under
the Securities Act covering all or any part of their respective Registrable
Securities, by delivering a written request therefor to the Company specifying
the number of Registrable Securities to be included in such registration by
such Holder(s) and the intended method of distribution thereof. All such
requests pursuant to this Section 2.1(a) are referred to herein as "Demand
Registration Requests," and the registrations so requested are referred to
herein as "Demand Registrations" (with respect to any Demand Registration, the
Holder(s) making such demand for registration being referred to as the
5
<PAGE> 6
"Initiating Holder"). As promptly as practicable, but no later than 5 days
after receipt of a Demand Registration Request, the Company shall give written
notice (the "Demand Exercise Notice") of such Demand Registration Request to
all Holders of record of Registrable Securities.
(b) Registration of Other Securities. The Company shall include in a
Demand Registration (i) the Registrable Securities of the Initiating Holder and
(ii) the Registrable Securities of any other Holder which shall have made a
written request to the Company for inclusion thereof in such registration
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder(s)) within 30 days after the receipt
of the Demand Exercise Notice.
(c) Registration. The Company shall, as expeditiously as possible
following a Demand Registration Request, use its best efforts to (i) effect
such registration under the Securities Act (including, without limitation, by
means of a shelf registration pursuant to Rule 415 under the Securities Act if
so requested and if the Company is then eligible to use such a registration) of
the Registrable Securities which the Company has been so requested to register,
for distribution in accordance with such intended method of distribution, and
(ii) if requested by the Initiating Holder or Major Holder, obtain acceleration
of the effective date of the registration statement relating to such
registration.
(d) Limitations on Requested Registrations. The rights of Holders of
Registrable Securities to request Demand Registrations pursuant to Section
2.1(a) are subject to the following limitations: (i) the Company shall not be
obligated to effect a Demand Registration within six months after the effective
date of any other registration of securities (other than pursuant to a
registration on Form S-8 or any successor or similar form which is then in
effect) and (ii) in no event
6
<PAGE> 7
shall the Company be required to effect, in the aggregate, without regard to
the Holder of Registrable Securities making such request, more than three
Demand Registrations.
(e) Cutbacks. If the managing underwriter of any underwritten offering
shall advise the Holders participating in a Demand Registration that the
Registrable Securities covered by the registration statement cannot be sold in
such offering within a price range acceptable to the Requisite Percentage of
Participating Holders, then the Holders representing the Requisite Percentage
of Participating Holders shall have the right to notify the Company in writing
that they have determined that the registration statement be abandoned or
withdrawn, in which event the Company shall abandon or withdraw such
registration statement. If the managing underwriter of any underwritten
offering shall advise the Company in writing that, in its opinion, the number
of securities requested to be included in a Demand Registration exceeds the
number which can be sold in such offering within a price range acceptable to
the Requisite Percentage of Participating Holders, the Company will include in
such registration, to the extent of the number which the Company is so advised
can be sold in such offering, Registrable Securities requested to be included
in such registration, pro rata among the Holders requesting such registration
in accordance with the number of Conversion Shares held by and issuable upon
conversion of Registrable Securities to each such Holder so requested to be
registered. Any Registrable Securities requested to be included in such
registration by Beacon shall be the last to be reduced.
(f) Selection of Underwriters. The managing underwriter or underwriters
of each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Requisite Percentage of Participating Holders (and
shall be reasonably acceptable to the Company).
2.2. Piggyback Registrations.
7
<PAGE> 8
(a) Piggyback Registrations. If, at any time, the Company proposes or
is required to register any of its equity securities under the Securities Act
(other than pursuant to (i) registrations on such form or similar form(s)
solely for registration of securities in connection with an employee benefit
plan or dividend reinvestment plan or a merger, consolidation or acquisition or
(ii) a Demand Registration under Section 2.1) on a registration statement on
Form S-1, Form S-2 or Form S-3 (or an equivalent general registration form then
in effect), whether or not for its own account, the Company shall give prompt
written notice of its intention to do so to each of the Holders of record of
Registrable Securities. Upon the written request of any Holder, made within 15
days following the receipt of any such written notice (which request shall
specify the maximum number of Registrable Securities intended to be disposed of
by such Holder and the intended method of distribution thereof), the Company
shall use its best efforts to cause all such Registrable Securities, the
Holders of which have so requested the registration thereof, to be registered
under the Securities Act (with the securities which the Company at the time
proposes to register) to permit the sale or other disposition by the Holders
(in accordance with the intended method of distribution thereof) of the
Registrable Securities to be so registered. There is no limitation on the
number of such piggyback registrations pursuant to the preceding sentence which
the Company is obligated to effect. No registration effected under this
Section 2.2(a) shall relieve the Company of its obligations to effect Demand
Registrations.
(b) Abandonment or Delay. If, at any time after giving written notice
of its intention to register any equity securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such equity securities, the Company may, at its election, give
written notice of
8
<PAGE> 9
such determination to all Holders of record of Registrable Securities and (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Section 2.1, and (ii) in the case of a determination to delay such
registration of its equity securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw; provided, however, that (i) such
request must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect
to such registration and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was
made.
(d) Cutbacks. If the managing underwriter of any underwritten offering
shall inform the Company by letter of its belief that the number of Registrable
Securities requested to be included in a registration under this Section 2.2
would materially adversely affect such offering, then the Company will include
in such registration, first, the securities proposed by the Company to be sold
for its own account, second, Investor Registrable Securities to the extent, but
only to the extent that registration is being requested under this Section 2.2
in connection with a registration required because of an exercise of demand
registration rights under Section 2.1 of the Investor Registration Rights
Agreement, third, the Registrable Securities and Investor Registrable
Securities to be included in such registration to the extent of the number and
type which the Company is so advised can be
9
<PAGE> 10
sold in (or during the time of) such offering, pro rata among the Holders and
Investor Holders participating in such offering in accordance with the number
of Conversion Shares and Investor Conversion Shares held by and issuable upon
conversion of Registrable Securities and Investor Registrable Securities to
each such Holder and Investor Holder, and fourth, all other securities of the
Company to be included in such registration to the extent of the number and
type which the Company is so advised can be sold in (or during the time of)
such offering.
2.3. S-3 Registrations. If at any time (i) one or more Holders of
Registrable Securities representing the Registrable Percentage of Outstanding
Holders request that the Company file a registration statement on Form S-3 or
any successor thereto for a public offering of all or any portion of the shares
of Registrable Securities held by such Holder or Holders, the reasonably
anticipated aggregate price to the public of which would exceed $1,000,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such
notice. Whenever the Company is required by this Section 2.3 to use its best
efforts to effect the registration of Registrable Securities, each of the
procedures and requirements of Section 2.1 (including but not limited to the
requirement that the Company notify all Holders of Registrable Securities from
whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 2.3 within six months after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the holders of
10
<PAGE> 11
Registrable Securities shall have been entitled to join pursuant to Sections
2.1 and 2.2 in which there shall have been effectively registered all shares of
Registrable Securities as to which registration shall have been requested.
There is no limitation on the number of registrations pursuant to this Section
2.3 that the Company is obligated to effect.
2.4. Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement on an
appropriate registration form of the SEC for the disposition of such
Registrable Securities in accordance with the intended method of disposition
thereof, which form (i) shall be selected by the Company and (ii) shall, in the
case of a shelf registration, be available for the sale of the Registrable
Securities by the selling Holders thereof and such registration statement shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith, and the Company shall use its best efforts to cause such
registration statement to become effective (provided, however, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, or comparable statements under securities or blue sky laws of any
jurisdiction, the Company will furnish to one counsel for the Holders
participating in the planned offering (selected by the Major Holder) and the
underwriters, if any, copies of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel, and the Company shall
not file any registration statement or amendment thereto or any prospectus or
supplement thereto to which the
11
<PAGE> 12
holders of a majority of the Registrable Securities covered by such
registration statement or the underwriters, if any, shall reasonably object in
writing);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
(which shall not be required to exceed 150 days in the case of a registration
pursuant to Section 2.1 or 120 days in the case of a registration pursuant to
Section 2.2) as any seller of Registrable Securities pursuant to such
registration statement shall request and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Registrable
Securities covered by such registration statement in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits),
and the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with applicable law of each such registration statement (or
amendment or post-effective amendment thereto) and each such prospectus (or
preliminary prospectus or supplement thereto) by each such seller of
Registrable Securities and the underwriters, if any, in connection with
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<PAGE> 13
the offering and sale of the Registrable Securities covered by such
registration statement or prospectus);
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities
or "blue sky" laws of such jurisdictions as any sellers of Registrable
Securities or any managing underwriter, if any, shall reasonably request in
writing, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such sellers or underwriter, if any, to
consummate the disposition of the Registrable Securities in such jurisdictions,
except that in no event shall the Company be required to qualify to do business
as a foreign corporation in any jurisdiction where it would not, but for the
requirements of this paragraph (d), be required to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable Securities covered
by such registration statement and each managing underwriter, if any: (i) when
the registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v) of the
existence of
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<PAGE> 14
any fact of which the Company becomes aware which results in the registration
statement, the prospectus related thereto or any document incorporated therein
by reference containing an untrue statement of a material fact or omitting to
state a material fact required to be stated therein or necessary to make any
statement therein not misleading; and (vi) if at any time the representations
and warranties contemplated by Section 3 below cease to be true and correct in
all material respects; and, if the notification relates to an event described
in clause (v), the Company shall promptly prepare and furnish to each such
seller and each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in the light
of the circumstances under which they were made not misleading;
(f) comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as reasonably
practicable after the effective date of the registration statement (and in any
event within 16 months thereafter), an earnings statement (which need not be
audited) covering the period of at least twelve consecutive months beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) if no similar securities are then so listed, to either
cause all such Registrable
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<PAGE> 15
Securities to be listed on a national securities exchange or to secure
designation of all such Registrable Securities as a National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") "national market
system security" within the meaning of Rule 11Aa2-1 of the SEC or, failing
that, secure NASDAQ authorization for such shares and, without limiting the
generality of the foregoing, take all actions that may be required by the
Company as the issuer of such Registrable Securities in order to facilitate the
managing underwriter's arranging for the registration of at least two market
makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. (the "NASD");
(h) provide and cause to be maintained a transfer agent and registrar
for all such Registrable Securities covered by such registration statement not
later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable, an
underwriting agreement) and take such other actions as the Holders of a
majority of the Registrable Securities or the Major Holder participating in
such offering shall reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities. The Holders of the Registrable
Securities which are to be distributed by such underwriters shall be parties to
such underwriting agreement and may, at their option, require that the Company
make to and for the benefit of such Holders the representations, warranties and
covenants of the Company which are being made to and for the benefit of such
underwriters and which are of the type customarily provided to institutional
investors in secondary offerings;
(j) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants in customary form and
covering such matters as are
15
<PAGE> 16
customarily covered by such opinions and "cold comfort" letters delivered to
underwriters in underwritten public offerings, which opinion and letter shall
be reasonably satisfactory to the underwriters, if any, and to the Major Holder
participating in such offering, and furnish to each Holder participating in the
offering and to each underwriter, if any, a copy of such opinion and letter
addressed to such Holder (in the case of the opinion) and underwriter (in the
case of the opinion and the "cold comfort" letter);
(k) deliver promptly to the Major Holder and counsel for the selling
Holders participating in the offering and each underwriter, if any, copies of
all correspondence between the Commission and the Company, its counsel or
auditors and any memoranda relating to discussions with the Commission or its
staff with respect to the registration statement, other than those portions of
any such memoranda which contain information subject to attorney-client
privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) use its best efforts to obtain promptly the withdrawal of any order
suspending the effectiveness of the registration statement;
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<PAGE> 17
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
(n) make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into account the
needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;
(o) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of
such document to counsel for the selling holders of Registrable Securities and
to each managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such changes in
such document concerning the selling holders prior to the filing thereof as
counsel for such selling holders or underwriters may reasonably request;
(p) furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable Securities and the
managing underwriter, if any, to facilitate the timely preparation and delivery
of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with
the underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an
17
<PAGE> 18
underwritten offering, in accordance with the instructions of the selling
holders of Registrable Securities at least three business days prior to any
sale of Registrable Securities; and
(r) take all such other commercially reasonable actions as are necessary
or advisable in order to expedite or facilitate the disposition of such
Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.4 that each seller of Registrable Securities
as to which any registration is being effected furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request provided that such
information shall be used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Securities that was in effect at the time of receipt
of such notice. In the event the Company shall give any such notice, the
applicable period mentioned in paragraph (b) of this Section 2.4 shall be
extended by the number of days during such period from and including the date
of the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4.
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<PAGE> 19
If any such registration statement or comparable statement under "blue sky"
laws refers to any Holder by name or otherwise as the Holder of any securities
of the Company, then such Holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to such
Holder and the Company, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion
of the reference to such Holder.
2.5. Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses incident to the
Company's performance of or compliance with this Article 2, including, without
limitation: (i) SEC, stock exchange or NASD registration, listing and filing
fees and all listing fees and fees with respect to the inclusion of securities
in NASDAQ, (ii) fees and expenses of compliance with state securities or "blue
sky" laws and in connection with the preparation of a "blue sky" survey,
including without limitation, reasonable fees and expenses of blue sky counsel,
(iii) printing and copying expenses, (iv) messenger and delivery expenses, (v)
expenses incurred in connection with any road show, (vi) fees and disbursements
of counsel for the Company, (vii) with respect to each registration, the
reasonable fees and disbursements of one counsel for the selling Holder(s)
(selected by the Major Holder), (viii) fees and disbursements of all
independent public accountants (including the expenses of any audit and/or
"cold comfort" letter) and fees and expenses of other persons, including
special
19
<PAGE> 20
experts, retained by the Company, (ix) fees and expenses payable to a Qualified
Independent Underwriter and (x) any other fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities
(collectively, "Expenses").
(b) The Company shall pay all Expenses with respect to any Demand
Registration, whether or not it becomes effective or remains effective for the
period contemplated by Section 2.4(b), and with respect to any registration
effected under Sections 2.2 or 2.3.
(c) Notwithstanding the foregoing, (x) the provisions of this Section
2.5 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state in which the offering
is made and (y) in connection with any registration hereunder, each Holder of
Registrable Securities being registered shall pay all underwriting discounts
and commissions and any transfer taxes, if any, attributable to the sale of
such Registrable Securities, pro rata with respect to payments of discounts and
commissions in accordance with the number of shares sold in the offering by
such Holder, and (z) the Company shall, in the case of all registrations under
this Article 2, be responsible for all its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties).
2.6. Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Sections 2.2 or 2.3 if the Company has determined
to enter into an underwriting agreement in connection therewith, all securities
to be included in such registration shall be subject to an underwriting
agreement and no Person may participate in such registration unless such Person
agrees to sell such Person's securities on the basis provided therein and
completes and executes all reasonable questionnaires and other documents
(including custody agreements and powers of attorney) which
20
<PAGE> 21
must be executed in connection therewith, and provides such other information
to the Company or the underwriter as may be necessary to register such Person's
securities.
2.7. Limitations on Sale or Distribution of Other Securities.
(a) To the extent requested in writing by a managing underwriter, if
any, of any registration effected pursuant to Section 2.1, each Holder of
Registrable Securities agrees not to sell, transfer or otherwise dispose of,
including any sale pursuant to Rule 144 under the Securities Act, any Common
Stock, or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering) during the time
period reasonably requested by the managing underwriter, not to exceed 180 days
(and the Company hereby also so agrees (except that the Company may effect any
sale or distribution of any such securities pursuant to a registration on Form
S-4 (if reasonably acceptable to such managing underwriter) or Form S-8, or any
successor or similar form which is then in effect or upon the conversion,
exchange or exercise of any then outstanding Common Stock Equivalent) to use
its reasonable best efforts to cause each holder of any equity security or any
security convertible into or exchangeable or exercisable for any equity
security of the Company purchased from the Company at any time other than in a
public offering so to agree). Each managing underwriter shall be entitled to
rely on the agreements of each Holder of Registrable Securities set forth in
this Section 2.7(a) and shall be a third party beneficiary of the provisions of
this Section 2.7(a).
(b) The Company hereby agrees that, if it shall previously have received
a request for registration pursuant to Section 2.1, 2.2 or 2.3, and if such
previous registration shall not have been withdrawn or abandoned, the Company
shall not sell, transfer, or otherwise dispose of, any Common
21
<PAGE> 22
Stock, or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering, a registration on
Form S-4 or Form S-8 or any successor or similar form which is then in effect
or upon the conversion, exchange or exercise of any then outstanding Common
Stock Equivalent), until a period of 180 days shall have elapsed from the
effective date of such previous registration; and the Company shall so provide
in any registration rights agreements hereafter entered into with respect to
any of its securities.
2.8. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.9. Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to this Article 2, the Company will, and
hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, each Holder of Registrable Securities, its directors, officers,
affiliates, employees, stockholders, members and partners (and the directors,
officers, affiliates, employees, stockholders, members and partners thereof),
each other Person who participates as an underwriter or a Qualified Independent
Underwriter, if any, in the offering or sale of such securities, each officer,
director, employee, stockholder, member or partner of such underwriter or
Qualified Independent Underwriter, and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
actions or proceedings (whether commenced or threatened) in respect thereof
("Claims") and expenses (including reasonable fees of counsel and any amounts
paid in any
22
<PAGE> 23
settlement effected with the Company's consent, which consent shall not be
unreasonably withheld or delayed) to which each such indemnified party may
become subject under the Securities Act or otherwise, insofar as such Claims or
expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such securities were registered under the Securities Act, together
with the documents incorporated by reference therein, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus or any amendment or supplement
thereto, together with the documents incorporated by reference therein, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company shall not be liable to any such indemnified
party in any such case to the extent such Claim or expense arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact made in such registration
statement or amendment thereof or supplement thereto or in any such prospectus
or any preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by as on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
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<PAGE> 24
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1, 2.2 or 2.3 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1, 2.2 or 2.3, any underwriter and Qualified Independent Underwriter,
if any) shall, severally and not jointly, indemnify and hold harmless (in the
same manner and to the same extent as set forth in paragraph (a) of this
Section 2.9) to the extent permitted by law the Company, its officers and
directors, each Person controlling the Company within the meaning of the
Securities Act and all other prospective sellers and their directors, officers,
general and limited partners and respective controlling Persons with respect to
any untrue statement or alleged untrue statement of any material fact in, or
omission or alleged omission of any material fact from, such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such Holder or underwriter or Qualified Independent Underwriter, if
any, specifically for use therein and reimburse such indemnified party for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such Claim as such expenses are incurred; provided, however, that
the aggregate amount which any such Holder shall be required to pay pursuant to
this Section 2.9(b) and Sections 2.9(c) and (e) shall in no case be greater
than the amount of the net proceeds received by such person upon the sale of
the Registrable Securities pursuant to the registration statement giving rise
to such claim. Such indemnity and reimbursement of expenses shall remain in
full force and effect regardless of any investigation made
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<PAGE> 25
by or on behalf of such indemnified party and shall survive the transfer of
such securities by such Holder.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement shall
notify promptly the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 2.9, but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 2.9, except to the extent the
indemnifying party is materially prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than under this Article 2. In case any action or proceeding is
brought against an indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, unless in the reasonable opinion of outside counsel to
the indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof jointly with any other indemnifying party similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party that it so chooses, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided,
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<PAGE> 26
however, that (i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the action or proceeding within 20 days after
receiving notice from such indemnified party that the indemnified party
believes it has failed to do so; or (ii) if such indemnified party who is a
defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there may be one or
more legal defenses available to such indemnified party which are not available
to the indemnifying party; or (iii) if representation of both parties by the
same counsel is otherwise inappropriate under applicable standards of
professional conduct, then, in any such case, the indemnified party shall have
the right to assume or continue its own defense as set forth above (but with no
more than one firm of counsel for all indemnified parties in each jurisdiction
who shall be approved by the Major Holder of the registration in respect of
which such indemnification is sought), and the indemnifying party shall be
liable for any expenses therefor. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (A) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.9(a), (b)
or (c), then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any Claim in such
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<PAGE> 27
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and the indemnified party, on the other hand, with
respect to such offering of securities. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. If, however, the allocation provided in the second preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative faults but also
the relative benefits of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 2.9(e) were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 2.9(e).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything in this
Section 2.9(e) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 2.9(e) to contribute any amount in
excess of the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less
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<PAGE> 28
the amount of any indemnification payment made by such indemnifying party
pursuant to Sections 2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.
(g) The indemnification and contribution required by this Section 2.9
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
3. Underwritten Offerings.
3.1. Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by the Holders pursuant to a registration
requested under Section 2.1 or 2.3, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement
shall be satisfactory in form and substance to the Major Holder and shall
contain such representations and warranties by, and such other agreements on
the part of, the Company and such other terms as are generally included in the
underwriting agreement of such underwriters, including, without limitation,
indemnities and contribution agreements. Any Holder participating in the
offering shall be a party to such underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
28
<PAGE> 29
under such underwriting agreement be conditions precedent to the obligations of
such Holder; provided, however, that the Company shall not be required to make
any representations or warranties with respect to written information
specifically provided by a selling Holder for inclusion in the registration
statement. Such underwriting agreement shall also contain such representations
and warranties by the participating Holders as are customary in agreements of
that type.
3.2. Piggyback Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into an underwriting agreement in connection therewith, all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Holder and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement be conditions precedent
to the obligations of such Holder. Such underwriting agreement shall also
contain such representations and warranties by the participating Holders as are
customary in agreements of that type.
4. General.
4.1. Adjustments Affecting Registrable Securities. The Company agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Holder of any
Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. The Company agrees that it
will take all reasonable steps necessary to effect a subdivision of shares if
in the reasonable judgment of (a) the Holder of Registrable Securities that
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<PAGE> 30
makes a Demand Registration Request or (b) the managing underwriter for the
offering in respect of such Demand Registration Request, such subdivision would
enhance the marketability of the Registrable Securities. Each Holder agrees to
vote all of its shares of capital stock in a manner, and to take all other
actions necessary, to permit the Company to carry out the intent of the
preceding sentence including, without limitation, voting in favor of an
amendment to the Company's Articles of Incorporation in order to increase the
number of authorized shares of capital stock of the Company.
4.2. Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Common Stock or securities of the Company convertible into or
exchangeable or exercisable for Common Stock, the Company covenants that (i) so
long as it remains subject to the reporting provisions of the Exchange Act, it
will timely file the reports required to be filed by it under the Securities
Act or the Exchange Act (including, but not limited to, the reports under
Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of
Rule 144 under the Securities Act), and (ii) will take such further action as
any Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (A) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (B) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
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4.3. Amendments and Waivers. This Agreement may be amended, modified,
supplemented or waived only upon the written agreement of the party against
whom enforcement of such amendment, modification, supplement or waiver is
sought.
4.4. Notices. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first
class registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
Hollywood Theater Holdings, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
(ii) if to Beacon, to:
The Beacon Group III - Focus Value Fund, L.P.
375 Park Avenue
17th Floor
New York, New York 10152
Telecopy: (212) 339-9109
Attention: Eric R. Wilkinson
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: David N. Shine, Esq.
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All such notices, requests, consents and other communications shall be deemed
to have been given when received.
4.5. No Inconsistent Agreements. Without the prior written consent of
Beacon, the Company will not, on or after the date of this Agreement, enter
into any agreement with respect to its securities which is inconsistent with
the rights granted in this Agreement or otherwise conflicts with the provisions
hereof, other than any lock-up agreement with the underwriters in connection
with any registered offering effected hereunder, pursuant to which the Company
shall agree not to register for sale, and the Company shall agree not to sell
or otherwise dispose of, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, for a specified period following
the registered offering.
4.6. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto, whether so expressed or not.
If any Person shall acquire Registrable Securities from any Holder, in any
manner, whether by operation of law or otherwise, such transferee shall
promptly notify the Company and such Registrable Securities acquired from such
Holder shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities such Person shall be entitled to
receive the benefits of and be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provision of this Agreement. If the
Company shall so request, any such successor or assign shall agree in writing
to acquire and hold the Registrable Securities acquired from such Holder
subject to all of the terms hereof. If any Holder shall acquire additional
Registrable Securities, such Registrable Securities shall be subject to all of
the terms, and
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<PAGE> 33
entitled to all the benefits, of this Agreement. No Person other than a Holder
shall be entitled to any benefits under this Agreement, except as otherwise
expressly provided herein.
(b) This Agreement (with the documents referred to herein or delivered
pursuant hereto) embodies the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof.
(c) This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. All section
references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
(f) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no adequate
remedy at law if any party fails to perform any of its obligations hereunder,
and accordingly agree that each party, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to injunctive relief,
including specific performance, to enforce such obligations without the posting
of
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<PAGE> 34
any bond, and, if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date set forth above.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
-----------------------------------------
Name: James R. Featherstone
---------------------------------------
Title: Vice President
--------------------------------------
THE BEACON GROUP III -
FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, L.L.C.
By: Focus Value GP, Inc.
By: Focus Value GP, Inc.
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
34
<PAGE> 35
FIRST AMENDMENT
TO
REGISTRATION RIGHTS AGREEMENT
This First Amendment, dated as of April 25, 1997 (this "First
Amendment"), by and between HOLLYWOOD THEATER HOLDINGS, INC., a Delaware
corporation (the "Company") and THE BEACON GROUP III - FOCUS VALUE FUND, L.P.,
a Delaware limited partnership ("Beacon"), amends that certain Registration
Rights Agreement dated as of October 3, 1996 (the "Registration Rights
Agreement") by and between the Company and Beacon. Capitalized terms used
herein but not defined herein have the meanings assigned to such terms in the
Registration Rights Agreement.
WHEREAS, the Company and Beacon have entered into a Subscription
Agreement, dated as of the date hereof, pursuant to which the Company is
issuing, and Beacon is purchasing, shares of Series C Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Series C Preferred") and
Common Stock of the Company;
WHEREAS, in connection with such issuance and purchase, the Company
and Beacon desire to amend the Registration Rights Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt of which is acknowledged, the parties hereto
agree as follows:
1. AMENDMENT TO RECITALS. The first recital of the Registration Rights
Agreement is hereby amended and restated to read in its entirety as follows:
WHEREAS, the Company and Beacon have entered into a Preferred Stock
and Common Stock Purchase Agreement (the "Purchase Agreement"), pursuant to
which the Company
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<PAGE> 36
is agreeing to issue, and Beacon is agreeing to purchase, shares of Series A
Convertible Preferred Stock, par value $.01 per share of the Company (the
"Series A Preferred"), Series B Convertible Preferred Stock, $.01 par value per
share of the Company and Common Stock of the Company;
2. AMENDMENT TO SECTION 1. Section 1 of the Registration Rights Agreement
is hereby amended to include the following:
"Series B Preferred" means the Series B Convertible Preferred Stock,
$.01 par value per share of the Company, provided, that each share of Series C
Convertible Preferred Stock, $.01 par value per share of the Company ("Series C
Preferred") shall for all purposes hereunder be treated as shares of Series B
Preferred and, as such, shall be Registrable Securities, and all references
herein to Series B Preferred shall be deemed to include both the Series B
Preferred and Series C Preferred.
3. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
4. NO FURTHER AMENDMENT. Except as amended hereby, the Registration Rights
Agreement shall remain in full force and effect.
5. COUNTERPARTS. This First Amendment may be executed in separate
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
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<PAGE> 37
IN WITNESS WHEREOF, the parties have executed this First Amendment
to the Registration Rights Agreement on the day and year first above written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
-----------------------------------------
Name: James R. Featherstone
---------------------------------------
Title: Vice President
--------------------------------------
THE BEACON GROUP III -
FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, L.L.C.
By: Focus Value GP, Inc.
By: /s/ Focus Value GP, Inc.
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
3
<PAGE> 1
EXHIBIT 4.4
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is made as of
October 3, 1996, by and among HOLLYWOOD THEATER HOLDINGS, INC., a Delaware
corporation (the "Company"), STRATFORD CAPITAL PARTNERS, L.P., a Texas limited
partnership ("Stratford"), and PRECEPT INVESTORS, INC., a Texas corporation
("Precept", and together with Stratford, the "Investors").
WITNESSETH
WHEREAS, the Company and the Investors entered into a Registration
Rights Agreement dated as of April 30, 1996 (the "Prior Agreement") pursuant to
which the Company agreed to register under the Securities Act of 1933, as
amended, shares of Series A Convertible Preferred Stock, $.01 par value per
share, of the Company (the "Series A Preferred") owned by the Investors; and
WHEREAS, simultaneously herewith, the Company, the Investors and
Hollywood Theaters, Inc. are entering into a Stock Exchange Agreement and First
Amendment to Stock Purchase Agreement (the "Exchange Agreement") pursuant to
which, upon the occurrence of certain conditions stated therein, the Investors
will exchange their shares of Series A Preferred for shares of Series B
Convertible Preferred Stock, .001 par value per share, of the Company (the
"Series B Preferred"); and
WHEREAS, simultaneously herewith, the Company is entering into a
Preferred Stock and Common Stock Purchase Agreement (the "Beacon Stock Purchase
Agreement"), pursuant to which the Company has agreed to sell shares of Series
A Preferred, Series B Preferred and Common Stock of the Company to the Beacon
Group III - Focus Value Fund, L.P., a Delaware limited partnership ("Beacon");
and
WHEREAS, in connection with the transactions contemplated by the
Exchange Agreement and the Beacon Stock Purchase Agreement, the Company and the
Investors desire to amend and restated the Prior Agreement in its entirety.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
1. Certain Definitions.
1.1 As used in this Agreement, the following terms shall have the
meanings ascribed to them below;
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under the direct or
indirect common control with such specified
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<PAGE> 2
Person or (ii) with respect to any individual, shall also mean the spouse,
sibling, child, step-child, grandchild, niece, nephew or parent of such Person,
or the spouse thereof.
"Beacon Conversion Shares" means "Conversion Share" under and as
defined in the Beacon Registration Rights Agreement.
"Beacon Registration Rights Agreement" means that certain Registration
Rights Agreement dated October 3, 1996, by and between the Company and Beacon.
"Beacon Registrable Securities" means "Registerable Securities" under
and as defined in the Beacon Registration Rights Agreement:
"Beacon Holders" means "Holders" under and as defined in the Beacon
Registration Rights Agreement.
"Common Stock" means the Common Stock, $.01 par value per share, of
the Company and any equity securities issued or issuable with respect to the
Common Stock in connection with a reclassification, recapitalization, merger,
consolidation or other reorganization.
"Conversion Shares" means the shares of Common Stock or other equity
securities issued or issuable upon conversion of the Series A Preferred and/or
Series B Preferred.
"Holder" or "Holders" means any party who is a signatory to this
Agreement and any party who shall hereafter acquire and hold Registrable
Securities.
"IPO" means the initial underwritten offering pursuant to which the
Common stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
"Major Holder" means with respect to any registration the Holder that,
together with its Affiliates, holds the largest number of Registrable
Securities in such registration.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Purchase Agreement" means that certain Stock Purchase Agreement
dated April 30, 1996, by and among the Investors, the Company and Hollywood
Theaters, Inc. as amended by the Exchange Agreement and as the same may
hereafter be amended, modified or restated.
"Registrable Securities" means any (i) shares of Series A Preferred
and Series B Preferred owned by the Investors, whether acquired on the date
hereof or hereafter acquired, (ii) shares of Common Stock owned by the
Investors, whether acquired on the date hereof of hereafter acquired, (iii)
Conversion Shares owned by the Investors, (iv) shares of Series A Preferred and
Series B
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<PAGE> 3
Preferred or Common Stock acquired by any Person after the date hereof pursuant
to rights granted to the Investors under the Purchase Agreement or the
Shareholders" Agreement, (v) Conversion Shares acquired by any Person after the
date hereof pursuant to rights granted to the Investors under the Purchase
Agreement or the Shareholders" Agreement and (vi) shares of Common Stock issued
or issuable, directly or indirectly, with respect to the Common Stock
referenced in clauses (ii), (iii), (iv) or (v) above by way of stock dividend,
stock split or combination of shares. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, or (ii) such
securities shall have been sold (other than in a privately negotiated sale)
pursuant to Rule 144 (or any successor provision) under the Securities Act.
"Requisite Percentage of Outstanding Holders" means the Holders of
Registrable Securities who, assuming conversion of all of the then outstanding
Series A Preferred and Series B Preferred into Conversion Shares, would hold
15% or more of the total Conversion Shares that would, then be outstanding.
"Requisite Percentage of Participating Holders" means Holders of
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Series A Preferred and Series B Preferred
into Conversion Shares, would hold a majority of the total Conversion Shares
that would then be held by all Holders participating in the registration.
"Shareholders Agreement" means the Shareholders and Voting Agreement
dated October 3, 1996 by and among the Company, Beacon, the Investors and
certain other shareholders of the Company.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2.1 Registration Rights
(a) Request of Registration. (a) Subject to Section 2.1
(d), at any time and from time to time after the earlier of (i) the closing of
an IPQ and (ii) three years after the date hereof, one or more Holders of
Registrable Securities representing the Requisite Percentage of Outstanding
Holders shall have the right to require the Company to file a registration
statement under the Securities Act covering all or any part of their respective
Registrable Securities, by delivering a written request therefor to the Company
specifying the number of Registrable Securities to be included in such
registration by such Holder(s) and the intended method of distribution thereof.
All such requests pursuant to this Section 2. l(a) are referred to herein as
"Demand Registration Requests", and the registrations so requested are referred
to herein as "Demand Registrations" (with respect to any Demand Registration,
the Holder(s) making such demand for registration being referred to as the
"Initiating Holder"). As promptly as practicable, but no later than 5 days
after receipt of a Demand Registration Request, the Company shall give written
notice (the "Demand
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<PAGE> 4
Exercise Notice") of such Demand Registration Request to all Holders of record
of Registrable Securities.
(b) Registration of Other Securities. The Company shall
include in a Demand Registration (i) the Registrable Securities of the
Initiating Holder and (ii) the Registrable Securities of any other Holder which
shall have made a written request to the Company for inclusion thereof in such
registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder(s)) within 30 days after
the receipt of the Demand Exercise Notice.
(c) Registration. The Company shall, as expeditiously as
possible following a Demand Registration Request use its best efforts to (i)
effect such registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested and if the Company is then eligible to use such
a registration) of the Registrable Securities which the Company has been so
requested to register, for distribution in accordance with such intended method
of distribution, and (ii) if requested by the Initiating Holder or Major
Holder, obtain acceleration of the effective date of the registration statement
relating to such registration.
(d) Limitations on Requested Registrations. The rights
of Holder of Registrable Securities to request Demand Registrations pursuant to
Section 2.1(a) are subject to the following limitations: (i) the Company shall
not be obligated to effect a Demand Registration within six months after the
effective date of any other registration of securities (other than pursuant to
a registration on Form S-8 or any successor or similar form which is then in
effect) and (ii) in no event shall the Company be required to effect, in the
aggregate, without regard to the Holder of Registrable Securities making such
request, more than three Demand Registrations.
(e) Cutbacks. If the managing underwriter of any
underwritten offering shall advise the Holders participating in a Demand
Registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to
the Requisite Percentage of Participating Holders, then the Holders
representing the Requisite Percentage of Participating Holders shall have the
right to notify the Company in writing that they have determined that the
registration statement be abandoned or withdrawn, in which event the Company
shall abandon or withdraw such registration statement. If the managing
underwriter of any underwritten offering shall advise the Company in writing
that in its opinion, the number of securities requested to be included in a
Demand Registration exceeds the number which can be sold in such offering
within a price range acceptable to the Requisite Percentage of Participating
Holders, the Company will include in such registration, to the extent of the
number which the Company is so advised can be sold in such offering,
Registrable Securities requested to be included in such registration, pro rata
among the Holders requesting such registration in accordance with the numbers
of Conversion Shares held by and issuable upon conversion of Registrable
Securities to each such Holder so requested to be registered. Any Registrable
Securities requested to be included in such registration by the Investors shall
be the last to be reduced.
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<PAGE> 5
(f) Selection of Underwriters. The managing underwriter
or underwriters of each underwritten offering of the Registrable Securities to
be registered shall be selected by the Requisite Percentage of Participating
Holders (and shall be reasonably acceptable to the Company).
2.2 Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the
Company proposes or is required to register any of its equity securities under
the Securities Act (other than pursuant to (i) registrations on such form or
similar form(s) solely for registration of securities in connection with an
employee benefit plan or dividend reinvestment plan or a merger, consolidation
or acquisition or (ii) a Demand Registration under Section 2. 1) on a
registration statement on Form S- 1, Form S-2 or Form S-3 (or an equivalent
general registration form then in -effect), whether or not for its own account,
the Company shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request
of any Holder, made within 15 days following the receipt of any such written
notice (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall use its best efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof, to be registered under the Securities Act (with the securities which
the Company at the time proposes to register) to permit the sale or other
disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. There
is no limitation on the number of such piggyback registrations pursuant to the
preceding sentence which the Company is obligated to effect. No registration
effected under this Section 2.2(a) shall relieve the Company of its obligations
to effect Demand Registrations.
(b) Abandonment or Delay. If, at any time after giving
written notice of its intention to register any equity securities and prior to
the effective date of registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may, at its election,
give written notice of such determination to all Holders of record of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such abandoned registration, without prejudice, however, to the
rights of Holders under Section 2. 1, and (ii) in the case of a determination
to delay such registration of its equity securities, shall be permitted to
delay the registration of such Registrable Securities for the same period as
the delay in registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities
in any registration statement pursuant to this Section 2.2 by giving notice to
the Company of its request to withdraw; however, that (i) such request must be
made in writing prior to the earlier of the execution of the underwriting
agreement or the execution of the custody agreement with respect to such
registration and (ii) such withdrawal shall be irrevocable and, after making
such withdrawal, a Holder shall no longer have any right to include Registrable
Securities in the registration as to which withdrawal was made.
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<PAGE> 6
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief that the
number of Registrable Securities requested to be included in a registration
under this Section 2.2 would materially adversely affect such offering, then
the Company will include in such registration, first. the securities proposed
by the Company to be sold for its own account, second, Beacon Registrable
Securities to the extent, but only to the extent that registration is being
requested under this Section 2.2 in connection with a registration required
because of an exercise of demand registration rights under Section 2.1 of the
Beacon Registration Rights Agreement, third, the Registrable Securities and
Beacon Registrable Securities to be included in such registration to the extent
of the number and type which the Company is so advised can be sold in (or
during the time of) such offering, pro rata among the Holders and Beacon
Holders participating in such offering in accordance with the number of
Conversion Shares and Beacon Conversion Shares held by and issuable upon
conversion of Registrable Securities and Beacon Registerable Securities to each
such Holder and Beacon Holder, and fourth. all other securities of the Company
to be included in such registration to the extent of the number and type which
the Company is so advised can be sold in (or during the time of) such offering.
2.3 S-3 Registration. If at any time (i) one or more Holders of
Registrable Securities representing the Registrable Percentage of Outstanding
Holders request that the Company file a registration statement on Form S-3 or
any successor thereto for a public offering of all or any portion of the shares
of Registrable Securities held by such Holder or Holders, the reasonably
anticipated aggregate price to the public of which would exceed $1,000,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such
notice. Whenever the Company is required by this Section 2.3 to use its best
efforts to effect the registration of Registrable Securities, each of the
procedures and requirements of Section 2.1 (including but not limited to the
requirement that the Company notify all Holders of Registrable Securities from
whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 2.3 within six months after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the holders of Registrable Securities shall have been
entitled to join pursuant to Sections 2.1 and 2.2 in which there shall have
been effectively registered all shares of Registrable Securities as to which
registration shall have been requested. Then is no limitation on the number of
registrations pursuant to this Section 2.3 that the Company is obligated to
effect.
2.4 Registration Proceedings. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities
Act as provided in this Agreement, the Company shall. as expeditiously as
possible:
(a) prepare and file with the SEC a registration
statement on an appropriate registration form of the SEC for the disposition of
such Registrable Securities in accordance with
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<PAGE> 7
the intended method of disposition thereof, which form (i) shall be selected by
the Company and (ii) shall, in the case of a shelf registration, be available
for the sale of the Registrable Securities by the selling Holders thereof and
such registration statement shall comply as to form in all material respects
with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and the Company shall use
its best efforts to cause such registration statement to become effective
(provided, however, that before filing a registration statement or prospectus
or any amendments or supplements thereto, or comparable statements under
securities or "blue sky" laws of any jurisdiction, the Company will furnish to
one counsel for the Holders participating in the planned offering (selected by
the Major Holder) and the underwriters, if any, copies of all such documents
proposed to be filed (including all exhibits thereto), which documents will be
subject to the reasonable review and reasonable comment of such counsel, and
the Company shall not be file any registration statement or amendment thereto
or any prospectus or supplement thereto to which the holders of a majority of
the Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for such period (which shall not be required to exceed 180 days in
the case of a registration pursuant to Section 2.1 or 120 days in the case of a
registration pursuant to Section 2.2) as any seller of Registrable Securities
pursuant to such registration statement shall request and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter, if any, of the securities covered
by such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits), and the prospectus included in such registration statement
(including each preliminary prospectus) in conformity with the requirements of
the Securities Act, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Company hereby
consenting to the use in accordance with applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request in writing, and do any and all other am and things which may be
reasonably necessary or advisable to enable such sellers or underwriters, if
any, to consummate the disposition of the Registrable Securities in such
jurisdictions, except that in no event shall the Company be required to qualify
to
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<PAGE> 8
do business as a foreign corporation in any jurisdiction where it would not,
but for the requirements of this paragraph (d), be required to be so qualified,
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction.
(e) promptly notify each Holder selling Registrable
Securities covered by such registration statement and each managing underwriter,
if any: (i) when the supplement statement, any pre-effective amendment, he
prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed and, with respect to the
registration statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the SEC or state securities authority
for amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such purpose; (v) of
the existence of any fact of which the Company becomes aware which results in
the registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated by Section 3 below cease to be
true and correct in all material respects; and, if the notification relates to
an event described in clause (v), the Company shall promptly prepare and
furnish to each such seller and each underwriter, if any, a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading;
(f) comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first date of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 1.1(a) of the Securities Act and Rule 158
thereunder,
(g)(i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed if any listing
of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule 11 Aa2-1 of the
SEC or, failing that, secure NASDAQ authorization for such shares and, without
limiting the
8
<PAGE> 9
generality of the foregoing, take all actions that may be required by the
Company as the issuer of such Registrable Securities in order to facilitate the
managing underwriter's arranging for the registration of at least two market
makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. ("NASD");
(h) provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if
applicable, an underwriting agreement) and take such other actions as the
Holders of a majority of the Registrable Securities or the Major Holder
participating in such offering shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities. The Holders of the
Registrable Securities which are to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require
that the Company make to and for the benefit of such Holders the
representations, warranties and covenants of the Company which are being made
to and for the benefit of such underwriters and which are of the type
customarily provided to institutional investors in secondary offerings;
(j) obtain an opinion from the Company's counsel and a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the underwriters, if any, and to the Major Holder participating in such
offering, and furnish to each Holder participating in the offering and to each
underwriter, if any, a copy of such opinion and letter addressed to such Holder
(in the case of the opinion) and underwriter (in the case of the opinion and
the "cold comfort" letter);
(k) deliver promptly to the Major Holder and counsel for
the selling Holders participating in the offering and each underwriter, if any,
copies of all correspondence between the Commission and the Company, its
counsel or auditors and any memoranda relating to discussions with the
Commission or its staff with respect to the registration statement, other than
those portions of any such memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of
such confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
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<PAGE> 10
(l) use its best efforts to obtain promptly the
withdrawal of any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable
Securities, not later than the effective date of the region statement;
(n) make reasonably available its employees and personnel
and otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in-any
underwritten offering;
(o) promptly prior to the filing of any document which is
to be incorporated by reference into the registration statement or the
prospectus (after the initial filing of such registration statements provide
copies of such document to counsel for the selling Holders of Registrable
Securities and to each managing underwriter, if any, and make the Company's
representatives reasonably available for discussion of such document and make
such changes in such document concerning the selling Holders prior to the
filing thereof as counsel for such selling Holders or underwriters may
reasonably request;
(p) furnish to each Holder participating in the offering
and the managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities; and
(r) take all such other commercially reasonable actions
as are necessary or advisable in order to expedite or facilitate the
disposition of such Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.4 that each seller of Registrable Securities
as to which any registration is being effected furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request provided that such
information shall be used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue
such Holder's disposition of Registrable Securities
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<PAGE> 11
pursuant to the registration statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (e) of this Section 2.4 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
of the prospectus covering such Registrable Securities that was in effect at
the time of receipt of such notice. In the event the Company shall give any
such notice, the applicable period mentioned in paragraph (b) of this Section
2.4 shall be extended by the number of days during such period from and
including the date of the giving of such notice to and including the dab when
each seller of any Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by paragraph (e) of this Section 2.4.
If any such registration statement or comparable statement under "blue
sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require
("d) the insertion therein of language, in form and substance satisfactory to
such Holder and the Company, to the effect that the holding by such Holder of
such " securities is not to be construed as a recommendation by such Holder of
the investment quality of the Company's securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion
of the reference to such Holder.
2.5 Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 2,
including, without limitation: ("d) SEC, stock exchange or NASD registration
and filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state
securities or "blue sky" laws and in connection with the preparation of a "blue
sky" survey, including without limitation, reasonable fees and expenses of blue
sky counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) expenses incurred in connection with any road show, (vi) fees and
disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Major Holder), (viii) fees and disbursements
of all independent public accountants (including the expenses of any audit
and/or "cold comfort" letter) and fees and expenses of other persons",
including special experts, retained by the Company, (ix) fees and expenses
payable to a Qualified Independent Underwriter and (x) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers
of securities (collectively, "Expenses")
(b) The Company shall pay all Expenses with respect to
any Demand Registration, whether or not it becomes effective or remains
effective for the period contemplated by Section 2.4(b), and with respect to
any registration effected under Sections 2.2 or 2.3.
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<PAGE> 12
(c) Notwithstanding the foregoing, (x) the provisions of
this Section 2.5 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, mo rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties).
2.6 Certain Limitations on Registration Rights. In the case of
any registration under Section 2.1 pursuant to an underwritten offering, or in
the case of a registration under Sections 2.2 or 2.3 if the Company has
determined to enter into an underwriting agreement in connection therewith, all
securities to be included in such registration shall be subject to an
underwriting agreement and no Person may participate in such registration
unless such Person agrees to sell such Person's securities on the basis
provided therein and completes and executes all reasonable questionnaires and
other documents (including custody agreements and powers of attorney) which
must be executed in connection therewith, and provides such other information
to the Company or the underwriter as may be necessary to register such Person's
securities.
2.7 Limitations on Sale or Distribution of Other Securities.
(a) To the extent requested in writing by a managing
underwriter, if any, of any registration effected pursuant to Section 2. 1,
each Holder of Registrable Securities agrees not to sell, transfer or otherwise
dispose of, including any sale pursuant to Rule 144 under the Securities Act,
any Common Stock, or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering) during the
time period reasonably requested by the managing underwriter, not to exceed 180
days (and the Company hereby also agrees) except that the Company may effect
any sale or distribution of any such securities pursuant to a registration on
Form S4 (if reasonably acceptable to such managing underwriter) or Form S-8, or
any successor or similar form which is then in effect or upon conversion,
exchange or exercise of any then outstanding Common Stock Equivalent) to use
its reasonable best efforts to cause each Holder of any equity of security or
any security convertible into or exchangeable or exercisable for any equity
security of the Company purchased from the Company at any time other than in a
public offering so to agree). Each managing underwriter shall be entitled to
rely on the agreements of each Holder of Registrable Securities set forth in
this Section 2.7(a) and shall be a third party beneficiary of the provisions of
this Section 2.7(a).
(b) The Company hereby agrees that, if it shall
previously have received a request for registration pursuant to Section 2.1,
2.2 or 2.3, and if such previous registration shall not have been withdrawn or
abandoned the Company shall not sell, transfer, or otherwise dispose of, any
Common Stock, or any other equity security of the Company or any security
convertible into or
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<PAGE> 13
exchangeable or exercisable for any equity security of the Company (other than
as part of such underwritten public offering, a registration on Form S4 or Form
S-8 or any successor or similar form which is then in effect or upon the
conversion, exchange or exercise of any then outstanding Common Stock
Equivalent), until a period of 180 days shall have elapsed from the effective
date of such previous registration; and the Company shall so provide in any
registration rights agreements hereafter entered into with respect to any of
its securities.
2.8 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.9 Indemnification.
(a) In the event of any registration of any securities of
the Company under the Securities Act pursuant to this Article 2. the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities, its directors,
officers, affiliates, employees, stockholders, members and partners (and the
directors, officers, affiliates, employees, stockholders, members and partners
thereof), each other Person who participates as an underwriter or a Qualified
Independent Underwriter, if any, in the offering or sale of such securities,
each officer, director, employee, stockholder, member or partner of such
underwriter or Qualified Independent Underwriter, and each other Person, if
any, who controls such seller of any such underwriting within the meaning of
the Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof (the "Claims") and expenses (including reasonable fees of
counsel and any amounts paid in any settlement effected with the Company's
consent, which consent shall not be unreasonably withheld or delayed) to which
each such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon
("d) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such securities were
registered under the Securities Act, together with the documents incorporated
by reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or summary
prospectus or any amendment or supplement thereto, together with the documents
incorporated by reference therein, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company shall not be
liable to any such indemnified party in any such case to the extent such Claim
or expense arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact made in such registration statement or amendment thereof or
supplement thereto or in any such prospectus or any preliminary, final or
summary prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such indemnified party specifically
for use therein. Such indemnity and reimbursement of expenses shall remain in
full force and effect
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<PAGE> 14
regardless of any investigation made by as on behalf of such indemnified party
and shall survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are
included in the securities as to which any registration under Section 2.1, 2.2
or 2.3 is being effected (and, if the Company requires as a condition to
including any Registrable Securities in any registration statement filed in
accordance with Section 2.1, 2.2 or 2.3, any underwriter and Qualified
Independent Underwriter, if any) shall, severally and not jointly, indemnify
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.9) to the extent permitted by law the Company,
its officers and directors, each Person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
Persons with respect to any untrue statement or alleged untrue statement of any
material fact in, or omission or alleged omission of any material fact from,
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or underwriter or Qualified
Independent Underwriter, if any, specifically for use therein and reimburse
such indemnified party for any legal or other expenses reasonably incurred in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, however, that the aggregate amount which any such Holder
shall be required to pay pursuant to this Section 2.9(b) and Sections 2.9(c)
and (e) shall in no case be greater than the amount of the net proceeds
received by such person upon the sale of the Registrable Securities pursuant to
the registration statement giving rise to such Claim. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the
preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this
Agreement shall notify promptly the indemnifying party in writing of the
commencement of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this Section 2.9, but the failure of
any indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under the preceding paragraphs of this Section 2.9,
except to the extent the indemnifying party is materially prejudiced thereby
and shall not relieve the indemnifying party from any liability which it may
have to any indemnified party otherwise than under this Article 2. In case any
action or proceedings is brought against an indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, unless in the reasonable
opinion of outside counsel to the indemnified party a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof jointly with any other indemnifying party
similarly notified,
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<PAGE> 15
to the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that (i) if the indemnifying party
fails to take reasonable steps necessary to defend diligently the action or
proceeding within 20 days after receiving notice from such indemnified party
that the indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
them may be one or mom legal defenses available to such indemnified party which
am not available to the indemnifying party; or (iii) if representation of both
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the indemnified
party shall have the right to assume or continue its own defense as set forth
above (but with no mom than one firm of counsel for all indemnified parties in
each jurisdiction who shall be approved by the Major Holder of the registration
in respect of which such indemnification is sought), and the indemnifying party
shall be liable for any expenses therefore No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is
an actual or potential party to such action or claim) unless such settlement,
compromise or judgment (A) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (B) does not
include a statement as to- or an admission of fault, culpability or a failure
to act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Sections 2.9(a), (b) or (c), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any Claim
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, with respect to such offering of securities. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or the indemnified party and the parties" relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. If, however, the allocation provided in the second preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative faults but also
the relative benefits of the indemnifying poly and the indemnified party as
well as any other relative equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 2.9(e) were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 2.9(e).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 1.1(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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<PAGE> 16
Notwithstanding anything in this Section 2.9(e) to the contrary, no
indemnifying party (other than the Company) shall be required pursuant to this
Section 2.9(e) to contribute any amount in excess of the net proceeds received
by such indemnifying party from the sale of Registrable Securities in the
offering to which the losses, claims, damages or liabilities of the indemnified
parties relate, less the amount of any indemnification payment made by such
indemnifying party pursuant to Sections 2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and. shall survive the
transfer of the Registrable Securities by any such party.
(g) The indemnification and contribution required by this
Section 2.9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
3. Underwritten Offerings.
3.1 Requested Underwritten Offering. If requested by the
underwriters for any underwritten offering by the Holders pursuant to a
registration statement requested under Section 2.1 or 2.3, the Company shall
enter into a customary underwriting agreement with the underwriters. Such
underwriting agreement shall be satisfactory in form and substance to the Major
Holder and shall contain such representations and warranties by, and such other
agreements on the part of, the Company and such other terms as are generally
included in the underwriting agreement of such underwriters, including, without
limitation, indemnities and contribution agreements. Any Holder participating
in the offering shall be a party to such underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holder; provided. however, that the Company shall not be required to make
any representations or warranties with respect to written information
specifically provided by a selling Holder for inclusion in the registration
statement. Such underwriting agreement shall also contain such representations
and warranties by the participating Holders as are customary in agreements of
that type.
3.2 Piggyback Underwritten Offerings. In the case of a
registration pursuant to Section 2.2 hereof, if the Company shall have
determined to, enter into an underwriting agreement in connection them with,
all of the Holders" Registrable Securities to be included in such registration
shall be subject to such underwriting agreement. Any Holder participating in
such registration may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder and dud any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the
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<PAGE> 17
obligations of such Holder. Such underwriting agreement shall also contain
such representations and warranties by the participating Holders as are
customary in agreements of that type.
4. General.
4.1 Adjustments Affecting Registrable Securities. The Company
agrees that it shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the Holder of
any Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. The Company agrees that it
will take all reasonable steps necessary to effect a subdivision of shares if
in the reasonable judgment of (a) the Holder of Registrable Securities that
makes a Demand Registration Request or (b) the managing underwriter for the
offering in respect of such Demand Registration Request, such subdivision would
enhance the marketability of the Registrable Securities. Each Holder agrees to
vote all of its shares of capital stock in a manner, and to take all other
actions necessary, to permit the Company to carry out the intent of the
preceding sentence including, without limitation, voting in favor of an
amendment to the Company's Articles of Incorporation in order to increase the
number of authorized shares of capital stock of the Company.
4.2 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Common Stock or securities of the Company convertible into or
exchangeable or exercisable for Common Stock, the Company covenants that (d) so
long as it remains subject to the reporting provisions of the Exchange Act, it
will timely file the reports required to be filed by it under the Securities
Act or the Exchange Act (including, but not limited to, the reports under
Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of
Rule 144 under the Securities Act), and (ii) will take such further action as
any Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (A) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (B) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
4.3 Amendments and Waivers. This Agreement may be amended,
modified, supplemented or waived only upon the written agreement of the party
against whom enforcement of such amendment, modification, supplement or waiver
is sought.
4.4 Notices. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first
class registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other parties:
17
<PAGE> 18
(i) if to the Company, to:
Hollywood Theater Holdings, Inc.
2911 Turtle Creek Blvd., Suite 1150
Dallas, Texas 75219
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
(ii) if to Stratford, to:
Stratford Capital Partners, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Telecopy: (214) 740-7340
Attention: Michael D. Brown
(ii) if to Precept, to:
Precept Investors, Inc.
1909 Woodall Rogers, Suite 500
Dallas, Texas 75201
Telecopy: (214) 220-1081
Attention: Scott Walker
All such notices, requests, consents and other communications shall be deemed
to have been given when received.
4.5 No Inconsistent Agreements. Without the prior written consent
of Investors, the Company will not, on or after the date of this Agreement,
enter into any agreement with respect to its securities which is inconsistent
with the rights granted in this Agreement or otherwise conflicts with the
provisions hereof, other than any lock-up agreement with the underwriters in
connection with any registered offering effected hereunder, pursuant to which
the Company shall agree not to register for sale, and the Company shall agree
not to sell or otherwise dispose of, Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, for a specified period
following the registered offering.
4.6 Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors, personal representatives and assigns of the parties hereto, whether
so expressed or not. If any Person shall acquire Registrable Securities from
any Holder, in any manner, whether by operation of law or otherwise, such
transferee shall promptly notify the Company and such Registrable Securities
acquired from such Holder shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable
18
<PAGE> 19
Securities such Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provision of this Agreement. If the Company shall so request, any
such successor or assign shall agree in writing to acquire and hold the
Registrable Securities acquired from such Holder subject to all of the terms
hereof. If any Holder shall acquire additional Registrable Securities, such
Registrable Securities shall be subject to all of the terms, and entitled to
all the benefits of this Agreement. No Person other than a Holder shall be
entitled to any benefits under this Agreement, except as otherwise expressly
provided herein.
(b) This Agreement (with the documents referred to herein
or delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York without
giving effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
All sections references are to this Agreement unless otherwise expressly
provided.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(f) Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(i) This Agreement amends and restates the Prior
Agreement in its entirety.
19
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.,
President
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates,
L.P., General Partner
By: Stratford Capital Corporation,
its General Partner
By: /s/ Michael D. Brown
--------------------------------
Michael D. Brown,
Managing Director
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
20
<PAGE> 1
EXHIBIT 4.5
================================================================================
REGISTRATION RIGHTS AGREEMENT
by and between
HOLLYWOOD THEATER HOLDINGS, INC.
and
RICHARD M. DURWOOD REVOCABLE TRUST
Dated as of November 1, 1996
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
November 1, 1996, by and between HOLLYWOOD THEATER HOLDINGS, INC., a Delaware
corporation (the "Company") and RICHARD M. DURWOOD REVOCABLE TRUST ("Durwood").
WITNESSETH:
WHEREAS, the Company and Durwood have entered into an Asset and Stock
Purchase Agreement (the "Purchase Agreement"), pursuant to which the Company
will, among other things, purchase all of the outstanding capital stock of
Crown Theatre Corporation from Durwood in exchange for shares of Common Stock
of the Company:
WHEREAS, simultaneously herewith, Durwood will enter into the existing
Shareholders Agreement (the "Shareholders' Agreement") with the Company and the
other equity holders of the Company ; and
WHEREAS, the execution and delivery of this Agreement is a condition
to the closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) with respect to any
individual, the spouse, child, step-child, grandchild, niece, nephew or parent
of such Person, or the spouse thereof or (iii) with respect to Durwood, Richard
M. Durwood.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company and any equity securities issued or issuable with respect to the
Common Stock in connection with a reclassification, recapitalization, merger,
consolidation or other reorganization.
"Holder" or "Holders" means Durwood and any Person who shall hereafter
acquire and hold Registrable Securities.
"Investor Conversion Shares" means "Conversion Shares" under and as
defined in any Investor Registration Rights Agreement.
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<PAGE> 3
"Investor Registration Rights Agreement" means, individually or
collectively, (i) that certain Registration Rights Agreement dated as of
October 3, 1996, by and between the Company and The Beacon Group III-Focus
Value Fund, L.P. and/or (ii) that certain Amended and Restated Registration
Rights Agreement dated October 3, 1996, by and among the Company, Stratford
Capital Partners, L.P., a Texas limited partnership and Precept Investors,
Inc., a Texas corporation.
"Investor Registrable Securities" means "Registrable Securities" under
and as defined in any Investor Registration Rights Agreement.
"Investor Holders" means "Holders" under and as defined in any
Investor Registration Rights Agreement.
"IPO" means the initial underwritten public offering pursuant to which
the Common Stock becomes registered under Section 12 of the Securities Exchange
Act of 1934. as amended (the "Exchange Act").
"Major Holder" means with respect to any registration the Holder that,
together with its Affiliates, includes the largest number of Registrable
Securities in such registration.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Registrable Securities" means any (i) shares of Common Stock owned by
Durwood, whether acquired on the date hereof or hereafter acquired, (ii) shares
of Common Stock acquired from Durwood by any Person after the date hereof
pursuant to rights granted to Durwood under the Shareholders' Agreement, and
(iii) shares of Common Stock issued or issuable, directly or indirectly, with
respect to the Common Stock referenced in clauses (i) or (ii) above by way of
stock dividend, stock split or combination of shares. As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have been declared effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, or (ii) such securities shall have been sold (other than in a
privately negotiated sale) pursuant to Rule 144 (or any successor provision)
under the Securities Act or (iii) such securities are eligible for sale under
Rule 144(k) (or any successor provision) under the Securities Act.
"Requisite Percentage of Holders" means holders of 15% or more of the
total Registrable Securities then outstanding.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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<PAGE> 4
2. Registration Rights.
2.1 Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the
Company first proposes or is required to register its Common Stock under the
Securities Act for purposes of effecting an IPO on a registration statement on
Form S-1 (or an equivalent general registration form then in effect), whether
or not for its own account, the Company shall give prompt written notice of its
intention to do so to each of the Holders of record of Registrable Securities.
Upon the written request of any of the Holders made within 15 days following
the receipt of any such written notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof), the Company shall use its best
efforts to cause all such Registrable Securities, the Holders of which have so
requested the registration thereof, to be registered under the Securities Act
(with the securities which the Company at the time proposes to register) to
permit the sale or other disposition by the Holders (in accordance with the
intended method of distribution thereof) of the Registrable Securities to be so
registered. The number of such piggyback registrations pursuant to the
preceding sentence which the Company is obligated to effect is limited to one.
(b) Abandonment or Delay. If, at any time after giving
written notice of its intention to effect an IPO and register its Common Stock
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of its Common Stock, the Company may,
at its election, give written notice of such determination to all Holders of
record of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such abandoned registration, without prejudice,
however, to the rights of Holders under Section 2.1(a), and (ii) in the case of
a determination to delay such registration of its Common Stock shall be
permitted to delay the registration of such Registrable Securities for the same
period as the delay in registering its Common Stock.
(c) Holder's Right to Withdraw. Any Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities
in any registration statement pursuant to this Section 2.1 by giving written
notice to the Company of its request to withdraw; provided, however, that (i)
such request must be made in writing prior to the earlier of the execution of
the underwriting agreement or the execution of the custody agreement with
respect to such registration and (ii) such withdrawal shall be irrevocable and,
after making such withdrawal, a Holder shall no longer have any right to
include Registrable Securities in the registration as to which such withdrawal
was made or any subsequent registration if any Registrable Securities are
registered pursuant to the initial registration.
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall inform the Company in writing of its belief that
the number of Registrable Securities requested to be included in a registration
under this Section 2.1 would materially adversely affect such offering,
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<PAGE> 5
then the Company will include in such registration, first, Investor Registrable
Securities of any Investor Holder or Investor Holders to the extent, but only
to the extent that registration is being requested under this Section 2.1 in
connection with a registration required because of an exercise by such Investor
Holder or Investor Holders of demand registration rights under an Investor
Registration Rights Agreement, second, the securities proposed by the Company
to be sold for its own account, third, the Registrable Securities and Investor
Registrable Securities to be included in such registration to the extent of the
number and type which the Company is so advised can be sold in (or during the
time of) such offering, pro rata among the Holders and Investor Holders
participating in such offering in accordance with the number of Registrable
Securities held by each such Holder and Investor Conversion Shares held by and
issuable upon conversion of Investor Registrable Securities held by each such
Investor Holder, and fourth, all other securities of the Company to be included
in such registration to the extent of the number and type which the Company is
so advised can be sold in (or during the time of) such offering.
2.2 Demand Registrations.
(a) Request for Registration. If any of the Holders'
Registrable Securities are cutback pursuant to Section 2.1(d), then all
Holders, in the aggregate, shall be entitled to one Demand Registration Request
as defined herein. Subject to Section 2.2(c), at any time after the closing of
an IPO, one or more Holders of Registrable Securities representing the
Requisite Percentage of Holders shall have the right to require the Company to
file a registration statement under the Securities Act covering the Registrable
Securities, by delivering a written request therefor to the Company specifying
the Registrable Securities to be included in such registration by such
Holder(s) and the intended method of distribution thereof. Any such request
pursuant to this Section 2.2(a) is referred to herein as a "Demand Registration
Request," and the registration so requested is referred to herein as a "Demand
Registration."
(b) Registration. The Company shall, as expeditiously as
possible following a Demand Registration Request, use its best efforts to (i)
effect such registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested and if the Company is then eligible to use such
a registration) of the Registrable Securities which the Company has been so
requested to register, for distribution in accordance with such intended method
of distribution, and (ii) if requested by the Major Holder, obtain acceleration
of the effective date of the registration statement relating to such
registration.
(c) Limitations on Requested Registrations. The rights
of Holders of Registrable Securities to request a Demand Registration pursuant
to Section 2.2(a) are subject to the following limitations: (i) in no event
shall a Holder be entitled to a Demand Registration Request unless such Holder
was subject to a cutback pursuant to Section 2.1(d), (ii) the Company shall not
be obligated to effect a Demand Registration within six months after the
effective date of any other registration of securities (other than pursuant to
a registration on Form S-8 or any successor or similar form which is then in
effect), (iii) the Company shall not be required to effect more than one Demand
Registration relating to Registrable Securities and (iv) in no event shall the
Company be required
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<PAGE> 6
to effect a Demand Registration unless the Company, at the time of the filing
of the registration statement to be filed pursuant to the Demand Registration,
will be entitled to register the Registrable Securities on Form S-3.
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall advise the Holders participating in a Demand
Registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to
the Major Holder, then the Major Holder shall have the right to notify the
Company in writing that they have determined that the registration statement be
abandoned or withdrawn, in which event the Company shall abandon or withdraw
such registration statement. If the managing underwriter of any underwritten
offering shall advise the Company in writing that, in its opinion, the number
of securities requested to be included in a Demand Registration exceeds the
number which can be sold in such offering within a price range acceptable to
the Major Holder, the Company will include in such registration, to the extent
of the number which the Company is so advised can be sold in such offering,
Registrable Securities requested to be included in such registration, pro rata
among the Holders in accordance with the number of Registrable Securities each
such Holder so requested to be registered. Any Registrable Securities
requested to be included in such registration by Durwood shall be the last to
be reduced.
(e) Selection of Underwriters. The managing underwriter
or underwriters with respect to a Demand Registration shall be selected by the
Company (and shall be reasonably acceptable to the Major Holder).
2.3 Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities
Act as provided in this Agreement, the Company shall, as expeditiously as
possible:
(a) prepare and file with the SEC a registration
statement on an appropriate registration form of the SEC for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form (i) shall be selected by the Company and (ii)
shall, in the case of a shelf registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and such registration
statement shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and the Company shall use its best
efforts to cause such registration statement to become effective (provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, or comparable statements under securities or
blue sky laws of any jurisdiction, the Company will furnish to one counsel for
the Holders participating in the planned offering (selected by the Major
Holder) and the underwriters, if any, copies of all such documents proposed to
be filed (including all exhibits thereto), which documents will be subject to
the reasonable review and reasonable comment of such counsel, and the Company
shall not file any registration statement or amendment thereto or any
prospectus or supplement thereto to which the holders of a majority of the
aggregate of the Registrable Securities and Investor
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<PAGE> 7
Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for such period (which shall not be required to exceed 120 days in
the case of a registration pursuant to Section 2.1 or 150 days in the case of a
registration pursuant to Section 2.2) as any seller of Registrable Securities
pursuant to such registration statement shall request and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter, if any, of the securities covered
by such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits), and the prospectus included in such registration statement
(including each preliminary prospectus) in conformity with the requirements of
the Securities Act, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Company hereby
consenting to the use in accordance with applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request in writing, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such sellers or underwriter, if
any, to consummate the disposition of the Registrable Securities in such
jurisdictions, except that in no event shall the Company be required to qualify
to do business as a foreign corporation in any jurisdiction where it would not,
but for the requirements of this paragraph (d), be required to be so qualified,
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable
Securities covered by such registration statement and each managing
underwriter, if any: (i) when the registration statement, any pre-effective
amendment, the prospectus or any prospectus supplement related thereto or
post-effective amendment to the registration statement has been filed and, with
respect to the registration statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the SEC or state securities
authority for amendments or supplements to the registration statement or the
prospectus related thereto or for additional information; (iii) of the issuance
by the SEC of any
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<PAGE> 8
stop order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such purpose; (v) of
the existence of any fact of which the Company becomes aware which results in
the registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated by Section 3 below cease to be
true and correct in all material respects, and, if the notification relates to
an event described in clause (v), the Company shall promptly prepare and
furnish to each such seller and each underwriter, if any, a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading;
(f) comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(g) (i) cause all such Registrable Securities covered by
such registration statement to be listed on the principal securities exchange
on which similar securities issued by the Company are then listed (if any), if
the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) if no similar securities are then so listed, to either
cause all such Registrable Securities to be listed on a national securities
exchange or to secure designation of all such Registrable Securities as a
Nasdaq Stock Market ("NASDAQ") "national market system security" within the
meaning of Rule 11 Aa2-1 of the SEC or, failing that, secure NASDAQ
authorization for such shares and, without limiting the generality of the
foregoing, take all actions that may be required by the Company as the issuer
of such Registrable Securities in order to facilitate the managing
underwriter's arranging for the registration of at least two market makers as
such with respect to such shares with the National Association of Securities
Dealers, Inc. (the "NASD");
(h) provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if
applicable, an underwriting agreement) and take such other actions as the
Holders and Investor Holders of a majority of an aggregate of the Registrable
Securities and Investor Registrable Securities
-7-
<PAGE> 9
participating in such offering shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities. The Holders and
Investor Holders of the Registrable Securities which are to be distributed by
such underwriters shall be parties to such underwriting agreement and may, at
their option, require that the Company make to and for the benefit of such
Holders and Investor Holders the representations, warranties and covenants of
the Company which are being made to and for the benefit of such underwriters
and which are of the type customarily provided to institutional investors in
secondary offerings;
(j) obtain an opinion from the Company's counsel and a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the underwriters, if any, and furnish to each Holder participating in the
offering and to each underwriter, if any, a copy of such opinion and letter
addressed to such Holder (in the case of the opinion) and underwriter (in the
case of the opinion and the "cold comfort" letter);
(k) deliver promptly to the Major Holder and counsel for
the selling Holders participating in the offering and each underwriter, if any,
copies of all correspondence between the Commission and the Company, its
counsel or auditors and any memoranda relating to discussions with the
Commission or its staff with respect to the registration statement, other than
those portions of any such memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of
such confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) use its best efforts to obtain promptly the
withdrawal of any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable
Securities, not later than the effective date of the registration statement;
(n) make reasonably available its employees and personnel
and otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering;
(o) promptly prior to the filing with the SEC of any
document which is to be incorporated by reference into the registration
statement or the prospectus (after the initial filing of
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<PAGE> 10
such registration statement) provide copies of such document to counsel for the
selling holders of Registrable Securities and to each managing underwriter, if
any, and make the Company's representatives reasonably available for discussion
of such document and make such changes in such document concerning the selling
holders prior to the filing thereof as counsel for such selling holders or
underwriters may reasonably request;
(p) furnish to each Holder participating in the offering
and the managing underwriter, without charge, at least one copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities; and
(r) take all such other commercially reasonable actions
as are necessary or advisable in order to expedite or facilitate the
disposition of such Registrable Securities.
The Company may require as a condition precedent to the
Company's obligations under this Section 2.3 that each seller of Registrable
Securities as to which any registration is being effected furnish the Company
such information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request provided that such
information shall be used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt
of any notice from the Company of the happening of any event of the kind
described in clause (v) of paragraph (e) of this Section 2.3, such Holder will
discontinue such Holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.3 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Securities that was in effect at the time of receipt
of such notice. In the event the Company shall give any such notice, the
applicable period mentioned in paragraph (b) of this Section 2.3 shall be
extended by the number of days during such period from and including the date
of the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.3.
2.4 Registration Expenses.
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(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 2,
including, without limitation: (i) SEC, stock exchange or NASD registration,
listing and filing fees and all listing fees and fees with respect to the
inclusion of securities in NASDAQ, (ii) fees and expenses of compliance with
state securities or "blue sky" laws and in connection with the preparation of a
"blue sky" survey, including without limitation, reasonable fees and expenses
of blue sky counsel, (iii) printing and copying expenses, (iv) messenger and
delivery expenses, (v) expenses incurred in connection with any road show, (vi)
fees and disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Major Holder) not to exceed $10,000, (viii)
fees and disbursements of all independent public accountants (including the
expenses of any audit and/or "cold comfort" letter) and fees and expenses of'
other persons, including special experts, retained by the Company, (ix) fees
and expenses payable to a "qualified independent underwriter" if required by
the NASD (a "Qualified Independent Underwriter") and (x) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers
of securities (collectively, "Expenses").
(b) The Company shall pay all Expenses with respect to
any Demand Registration, whether or not it becomes effective or remains
effective for the period contemplated by Section 2.3(b), and with respect to
any registration effected under Section 2.1.
(c) Notwithstanding the foregoing, (x) the provisions of
this Section 2.4 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, it any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties).
2.5 Certain Limitations on Registration Rights. In the case of
any registration under Section 2.2 pursuant to an underwritten offering, or in
the case of a registration under Section 2.1, all securities to be included in
such registration shall be subject to an underwriting agreement and no Person
may participate in such registration unless such Person agrees to sell such
Person's securities on the basis provided therein and completes and executes
all reasonable questionnaires and other documents (including custody agreements
and powers of attorney) which must be executed in connection therewith, and
provides such other information to the Company or the underwriter as may be
necessary to register such Person's securities.
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<PAGE> 12
2.6 Limitations on Sale or Distribution of Other Securities. To
the extent requested in writing by a managing underwriter, if any, of any
registration effected pursuant to Section 2.1 or 2.2, each Holder of
Registrable Securities agrees not to sell, transfer or otherwise dispose of,
including any sale pursuant to Rule 144 under the Securities Act, any Common
Stock, or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering) during the time
period reasonably requested by the managing underwriter, not to exceed 180 days
(and the Company hereby also so agrees (except that the Company may effect any
sale or distribution of any such securities pursuant to a registration on Form
S-4 (if reasonably acceptable to such managing underwriter) or Form S-8, or any
successor or similar form which is then in effect or upon the conversion,
exchange or exercise of any then outstanding derivative security relating to
Common Stock) to use its reasonable best efforts to cause each holder of any
equity security or any security convertible into or exchangeable or exercisable
for any equity security of the Company purchased from the Company at any time
other than in a public offering so to agree). Each managing underwriter shall
be entitled to rely on the agreements of each Holder of Registrable Securities
set forth in this Section 2.6 and shall be a third party beneficiary of the
provisions of this Section 2.6.
2.7 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.8 Indemnification.
(a) In the event of any registration of any securities of
the Company under the Securities Act pursuant to this Article 2, the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities, its directors,
officers, affiliates, employees, stockholders, members and partners (and the
directors, officers, affiliates, employees, stockholders, members and partners
thereof), each other Person who participates as an underwriter or a Qualified
Independent Underwriter, if any, in the offering or sale of such securities,
each officer, director, employee, stockholder, member or partner of such
underwriter or Qualified Independent Underwriter, and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof ("Claims") and expenses (including reasonable fees of counsel
and any amounts paid in any settlement effected with the Company's consent,
which consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such Claims or expenses arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered under
the Securities Act, together with the documents incorporated by reference
therein, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with
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<PAGE> 13
the documents incorporated by reference therein, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company shall not be liable to any such indemnified party in any such
case to the extent such Claim or expense arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact made in such registration statement or
amendment thereof or supplement thereto or in any such prospectus or any
preliminary, final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are
included in the securities as to which any registration under Section 2.1 or
2.2 is being effected (and, if the Company requires as a condition to including
any Registrable Securities in any registration statement filed in accordance
with Section 2.1 or 2.2, any underwriter and Qualified Independent Underwriter,
if any) shall, severally and not jointly, indemnify and hold harmless (in the
same manner and to the same extent as set forth in paragraph (a) of this
Section 2.8) to the extent permitted by law the Company, its officers and
directors, each Person controlling the Company within the meaning of the
Securities Act and all other prospective sellers and their directors, officers,
general and limited partners and respective controlling Persons with respect to
any untrue statement or alleged untrue statement of any material fact in, or
omission or alleged omission of any material fact from, such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such Holder or underwriter or Qualified Independent Underwriter, if
any, specifically for use therein and reimburse such indemnified party for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such Claim as such expenses are incurred; provided, however, that
the aggregate amount which any such Holder shall be required to pay pursuant to
this Section 2.8(b) and Sections 2.8(c) and (e) shall in no case be greater
than the amount of the net proceeds received by such person upon the sale of
the Registrable Securities pursuant to the registration statement giving rise
to such claim. Such indemnity and reimbursement of expenses shall remain in
full force and effect regardless of any investigation made by or on behalf of
such indemnified party and shall survive the transfer of such securities by
such Holder.
(c) Indemnification similar to that specified in the
preceding paragraphs (a) and (b) of this Section 2.8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any state securities and "blue sky" laws.
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<PAGE> 14
(d) Any person entitled to indemnification under this
Agreement shall notify promptly the indemnifying party in writing of the
commencement of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this Section 2.8, but the failure of
any indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under the preceding paragraphs of this Section 2.8,
except to the extent the indemnifying party is materially prejudiced thereby
and shall not relieve the indemnifying party from any liability which it may
have to any indemnified party otherwise than under this Article 2. In case any
action or proceeding is brought against an indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, unless in the reasonable
opinion of outside counsel to the indemnified party a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof jointly with any other indemnifying party
similarly notified, to the extent that it chooses, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party that it so chooses, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
(i) if the indemnifying party fails to take reasonable steps necessary to
defend diligently the action or proceeding within 20 days after receiving
notice from such indemnified party that the indemnified party believes it has
failed to do so; or (ii) if such indemnified party who is a defendant in any
action or proceeding which is also brought against the indemnifying party
reasonably shall have concluded that there may be one or more legal defenses
available to such indemnified party which are not available to the indemnifying
party; or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct,
then, in any such case, the indemnified party shall have the right to assume or
continue its own defense as set forth above (but with no more than one firm of
counsel for all indemnified parties in each jurisdiction who shall be approved
by the Major Holder of the registration in respect of which such
indemnification is sought), and the indemnifying party shall be liable for any
expenses therefor. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (A)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (B) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(e) If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Sections 2.8(a), (b) or (c), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any Claim
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, with respect to such offering of securities. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates
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<PAGE> 15
to information supplied by the indemnifying party or the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative faults but also the relative benefits of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 2.8(e) were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
preceding sentences of this Section 2.8(e). The amount paid or payable in
respect of any Claim shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such Claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(t) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this Section 2.8(e) to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 2.8(e) to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate, less the amount of any indemnification
payment made by such indemnifying party pursuant to Sections 2.8(b) and (c).
(f) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
(g) The indemnification and contribution required by this
Section 2.8 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
3. Underwritten Offerings.
3.1 Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Holders pursuant to a
registration requested under Section 2.2, the Company shall enter into a
customary underwriting agreement with the underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Major Holder and
shall contain such representations and warranties by, and such other agreements
on the part of, the Company and such other terms as are generally included in
the underwriting agreement of such underwriters, including, without limitation,
indemnities and contribution agreements. Any Holder participating in the
offering shall be a party to such underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit
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<PAGE> 16
of such Holder and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holder; provided, however, that
the Company shall not be required to make any representations or warranties
with respect to written information specifically by a selling Holder for
inclusion in the registration statement. Such underwriting agreement shall
also contain such representations and warranties by the participating Holders
as are customary in agreements of that type.
3.2 Piggyback Underwritten Offerings. In the case of a
registration pursuant to Section 2.1 hereof, the Company shall enter into an
underwriting agreement in connection therewith and all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Holder and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement be conditions precedent
to the obligations of such Holder. Such underwriting agreement shall also
contain such representations and warranties by the participating Holders as are
customary in agreements of that type.
4. General.
4.1 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Common Stock or securities of the Company convertible into or
exchangeable or exercisable for Common Stock, the Company covenants that (1) so
long as it remains subject to the reporting provisions of the Exchange Act, it
will timely file the reports required to be filed by it under the Securities
Act or the Exchange Act (including, but not limited to, the reports under
Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of
Rule 144 under the Securities Act), and (ii) will take such further action as
any Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (A) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (B) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
4.2 Amendments and Waivers. This Agreement may be amended,
modified, supplemented or waived only upon the written agreement of the party
against whom enforcement of such amendment, modification, supplement or waiver
is sought.
4.3 Notices. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first
class registered or certified mail, return receipt requested, postage prepaid,
addressed
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<PAGE> 17
to such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
Hollywood Theater Holdings, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
(ii) if to Durwood, to:
Richard M. Durwood Revocable Trust
6100 Mission Drive
Shawnee, Mission, KS 66208
with a copy to:
Herbert M. Kohn
Bryan Cave LLP
3500 One Kansas City Place
Kansas City, MO 64105
Telecopy: (816) 374-3300
All such notices, requests, consents and other communications shall be deemed
to have been given when received.
4.4 Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors, personal representatives and assigns of the parties hereto, whether
so expressed or not. If any Person shall acquire Registrable Securities from
any Holder, in any manner, whether by operation of law or otherwise, such
transferee shall promptly notify the Company and such Registrable Securities
acquired from such Holder shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be entitled to receive the benefits of and be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provision of this
Agreement. If the Company shall so request, any such successor or assign shall
agree in writing to acquire and hold the Registrable Securities acquired from
such Holder subject to all of the terms hereof. If any Holder shall acquire
additional Registrable Securities, such Registrable Securities shall be subject
to all of
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<PAGE> 18
the terms, and entitled to all the benefits, of this Agreement. No Person
other than a Holder shall be entitled to any benefits under this Agreement,
except as otherwise expressly provided herein.
(b) This Agreement (with the documents referred to herein
or delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas without giving
effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(f) Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date set forth above.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Name: Thomas W. Stephenson, Jr.
Title: President
RICHARD M. DURWOOD REVOCABLE TRUST
By: /s/ Richard M. Durwood
-------------------------------------
Richard M. Durwood, Trustee
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<PAGE> 1
EXHIBIT 4.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of May 13, 1997 by and
among HOLLYWOOD THEATER HOLDINGS, INC., a Delaware corporation (the "Company"),
HOAK COMMUNICATIONS PARTNERS, L.P., a Delaware limited partnership ("HCP"), HCP
CAPITAL FUND, L.P., a Delaware limited partnership (""HCF") and HCP 1997
AUTHORIZED EMPLOYEE FUND, L.P., a Delaware limited partnership ("HAE") ("HCP"
and "HCF" together with "HAE", the "Investors").
W I T N E S S E T H
WHEREAS, simultaneously herewith, the Company is entering into a
Preferred Stock and Common Stock Purchase Agreement (the "Stock Purchase
Agreement"), pursuant to which the Company has agreed to sell shares of Series
C Convertible Preferred and Common Stock of the Company to the Investors;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
meanings ascribed to them below;
"Affiliate" means (i) with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under the direct
or indirect common control with such specified Person or (ii) with respect to
any individual, shall also mean the spouse, sibling, child, step-child,
grandchild, niece, nephew or parent of such Person, or the spouse thereof.
"Beacon Conversion Shares" means "Conversion Shares" under and
as defined in the Beacon Registration Rights Agreement.
"Beacon Registration Rights Agreement" means that certain
Registration Rights Agreement dated October 3, 1996, by and between the Company
and Beacon Group Fund III-Focus Value Fund, L.P., a Delaware limited
partnership.
"Beacon Registrable Securities" means "Registerable
Securities" under and as defined in the Beacon Registration Rights Agreement:
"Beacon Holders" means "Holders" under and as defined in the
Beacon Registration Rights Agreement.
<PAGE> 2
"Common Stock" means the Common Stock, $.01 par value per
share, of the Company and any equity securities issued or issuable with respect
to the Common Stock in connection with a reclassification, recapitalization,
merger, consolidation or other reorganization.
"Conversion Shares" means the shares of Common Stock or other
equity securities issued or issuable upon conversion of the Series B Preferred
and/or Series C Preferred.
"Holder" or "Holders" means any party who is a signatory to
this Agreement and any party who shall hereafter acquire and hold Registrable
Securities.
"IPO" means the initial underwritten offering pursuant to
which the Common stock becomes registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
"Major Holder" means with respect to any registration the
Holder that, together with its Affiliates, holds the largest number of
Registrable Securities in such registration.
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivisions thereof.
"Purchase Agreement" means that certain Stock Purchase
Agreement dated May 13, 1997, by and among the Investors, the Company and
Hollywood Theaters, Inc. as the same may hereafter be amended, modified or
restated.
"Registrable Securities" means any (i) shares of Series B
Preferred and Series C Preferred owned by the Investors, whether acquired on
the date hereof or hereafter acquired, (ii) shares of Common Stock owned by the
Investors, whether acquired on the date hereof of hereafter acquired, (iii)
Conversion Shares owned by the Investors, (iv) shares of Series B Preferred,
Series C Preferred or Common Stock acquired by any Person after the date hereof
pursuant to rights granted to the Investors under the Purchase Agreement or the
Shareholders' Agreement, (v) Conversion Shares acquired by any Person after the
date hereof pursuant to rights granted to the Investors under the Purchase
Agreement or the Shareholders' Agreement and (vi) shares of Common Stock issued
or issuable, directly or indirectly, with respect to the Common Stock
referenced in clauses (ii), (iii), (iv) or (v) above by way of stock dividend,
stock split or combination of shares. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, or (ii) such
securities shall have been sold (other than in a privately negotiated sale)
pursuant to Rule 144 (or any successor provision) under the Securities Act.
"Requisite Percentage of Outstanding Holders" means the
Holders of Registrable Securities who, assuming conversion of all of the then
outstanding Series B and Series C Preferred
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<PAGE> 3
into Conversion Shares, would hold 10% or more of the total shares of Common
Stock that would then be outstanding.
"Requisite Percentage of Participating Holders" means Holders
of Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Series B Preferred and Series C Preferred
into Conversion Shares, would hold a majority of the total Conversion Shares
that would then be held by all Holders participating in the registration.
"Shareholders Agreement" means the Shareholders and Voting
Agreement dated October 3, 1996 by and among the Company, Beacon, the Investors
and certain other shareholders of the Company, as amended, modified, replaced
or superseded from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred" means the Company's Series Convertible
Preferred Stock, par value $.01 per share.
"Series C. Preferred" means the Company's Series C
convertible Preferred Stock, par value $.01 per share.
"Stratford Conversion Shares" means the "Conversion Shares"
under and as defined in the Stratford Registration Rights Agreement.
"Stratford Registration Rights Agreement" means that certain
Registration Rights Agreement dated as of October 3, 1996 by and between the
Company, Stratford Capital Partners, L.P., a Texas limited partnership and
Precept Investors, Inc., a Texas corporation.
"Stratford Registrable Securities" means "Registrable
Securities" under and as defined in the Stratford Registration Rights
Agreement.
"Stratford Holders" means "Holders" under and as defined in
the Stratford Registration Rights Agreement.
2.1 Registration Rights.
(a) Request of Registration. Subject to Section 2.1(d),
at any time and from time to time after the earlier of (i) the closing of an
IPO and (ii) three years after October 3, 1996, one or more Holders of
Registrable Securities representing the Requisite Percentage of Outstanding
Holders shall have the right to require the Company to file a registration
statement under the Securities Act covering all or any part of their respective
Registrable Securities, by delivering a written request therefor to the Company
specifying the number of Registrable Securities to be included in such
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registration by such Holder(s) and the intended method of distribution thereof.
All such requests pursuant to this Section 2.1(a) are referred to herein as
"Demand Registration Requests", and the registrations so requested are referred
to herein as "Demand Registrations" (with respect to any Demand Registration,
the Holder(s) making such demand for registration being referred to as the
"Initiating Holder"). As promptly as practicable, but no later than 5 days
after receipt of a Demand Registration Request, the Company shall give written
notice (the "Demand Exercise Notice") of such Demand Registration Request to
all Holders of record of Registrable Securities.
(b) Registration of Other Securities. The Company shall
include in a Demand Registration (i) the Registrable Securities of the
Initiating Holder and (ii) the Registrable Securities of any other Holder which
shall have made a written request to the Company for inclusion thereof in such
registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder(s)) within 30 days after
the receipt of the Demand Exercise Notice.
(c) Registration. The Company shall, as expeditiously as
possible following a Demand Registration Request, use its best efforts to (i)
effect such registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested and if the Company is then eligible to use such
a registration) of the Registrable Securities which the Company has been so
requested to register, for distribution in accordance with such intended method
of distribution, and (ii) if requested by the Initiating Holder or Major
Holder, obtain acceleration of the effective date of the registration statement
relating to such registration.
(d) Limitations on Requested Registrations. The rights
of Holders of Registrable Securities to request Demand Registrations pursuant
to Section 2.1(a) are subject to the following limitations: (i) the Company
shall not be obligated to effect a Demand Registration within six months after
the effective date of any other registration of securities (other than pursuant
to a registration on Form S-8 or any successor or similar form which is then in
effect) and (ii) in no event shall the Company be required to effect, in the
aggregate, without regard to the Holder of Registrable Securities making such
request, more than three Demand Registrations.
(e) Cutbacks. If the managing underwriter of any
underwritten offering shall advise the Holders participating in a Demand
Registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to
the Requisite Percentage of Participating Holders, then the Holders
representing the Requisite Percentage of Participating Holders shall have the
right to notify the Company in writing that they have determined that the
registration statement be abandoned or withdrawn, in which event the Company
shall abandon or withdraw such registration statement. If the managing
underwriter of any underwritten offering shall advise the Company in writing
that, in its opinion, the number of securities requested to be included in a
Demand Registration exceeds the number which can be sold in such offering
within a price range acceptable to the Requisite Percentage of Participating
Holders, the Company will include in such registration, to the extent of the
number which the Company is
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so advised can be sold in such offering, Registrable Securities requested to be
included in such registration, pro rata among the Holders requesting such
registration in accordance with the numbers of Conversion Shares held by and
issuable upon conversion of Registrable Securities to each such Holder so
requested to be registered. Any Registrable Securities requested to be
included in such registration by the Investors shall be the last to be reduced.
(f) Selection of Underwriters. The managing underwriter
or underwriters of each underwritten offering of the Registrable Securities to
be registered shall be selected by the Requisite Percentage of Participating
Holders (and shall be reasonably acceptable to the Company).
2.2 Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the
Company proposes or is required to register any of its equity securities under
the Securities Act (other than pursuant to (i) registrations on such form or
similar form(s) solely for registration of securities in connection with an
employee benefit plan or dividend reinvestment plan or a merger, consolidation
or acquisition or (ii) a Demand Registration under Section 2.1) on a
registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent
general registration form then in effect), whether or not for its own account,
the Company shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request
of any Holder, made within 15 days following the receipt of any such written
notice (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall use its best efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof, to be registered under the Securities Act (with the securities which
the Company at the time proposes to register) to permit the sale or other
disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. There
is no limitation on the number of such piggyback registrations pursuant to the
preceding sentence which the Company is obligated to effect. No registration
effected under this Section 2.2(a) shall relieve the Company of its obligations
to effect Demand Registrations.
(b) Abandonment or Delay. If, at any time after giving
written notice of its intention to register any equity securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may, at its
election, give written notice of such determination to all Holders of record of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such abandoned registration, without prejudice, however, to the
rights of Holders under Section 2.1, and (ii) in the case of a determination to
delay such registration of its equity securities, shall be permitted to delay
the registration of such Registrable Securities for the same period as the
delay in registering such other equity securities.
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(c) Holder's Right to Withdraw. Any Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities
in any registration statement pursuant to this Section 2.2 by giving notice to
the Company of its request to withdraw; provided, however, that (i) such
request must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect
to such registration and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which withdrawal was made.
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief that the
number of Registrable Securities requested to be included in a registration
under this Section 2.2 would materially adversely affect such offering, then
the Company will include in such registration, first, the securities proposed
by the Company to be sold for its own account, second, Beacon Registrable
Securities or Stratford Registrable Securities, as the case may be, to the
extent, but only to the extent that registration is being requested under this
Section 2.2 in connection with a registration required because of an exercise
of demand registration rights under Section 2.1 of the Beacon Registration
Rights Agreement or the Stratford Registration Rights Agreement, respectively,
third, the Registrable Securities, Beacon Registrable Securities and Stratford
Registrable Securities to be included in such registration to the extent of the
number and type which the Company is so advised can be sold in (or during the
time of) such offering, pro rata among the Holders, Beacon Holders and
Stratford Holders participating in such offering in accordance with the number
of Conversion Shares, Beacon Conversion Shares and Stratford Shares held by and
issuable upon conversion of Registrable Securities, Beacon Registerable
Securities and Stratford Registrable Securities to each such Holder, Beacon
Holder and Stratford Holder, and fourth, all other securities of the Company to
be included in such registration to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such offering.
2.3 S-3 Registration. If at any time (i) one or more Holders of
Registrable Securities representing the Registrable Percentage of Outstanding
Holders request that the Company file a registration statement on Form S-3 or
any successor thereto for a public offering of all or any portion of the shares
of Registrable Securities held by such Holder or Holders, the reasonably
anticipated aggregate price to the public of which would exceed $1,000,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such
notice. Whenever the Company is required by this Section 2.3 to use its best
efforts to effect the registration of Registrable Securities, each of the
procedures and requirements of Section 2.1 (including but not limited to the
requirement that the Company notify all Holders of Registrable Securities from
whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 2.3 within six months after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the holders of
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Registrable Securities shall have been entitled to join pursuant to Sections
2.1 and 2.2 in which there shall have been effectively registered all shares of
Registrable Securities as to which registration shall have been requested.
There is no limitation on the number of registrations pursuant to this Section
2.3 that the Company is obligated to effect.
2.4 Registration Proceedings. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities
Act as provided in this Agreement, the Company shall, as expeditiously as
possible:
(a) prepare and file with the SEC a registration
statement on an appropriate registration form of the SEC for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form (i) shall be selected by the Company and (ii)
shall, in the case of a shelf registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and such registration
statement shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and the Company shall use its best
efforts to cause such registration statement to become effective (provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, or comparable statements under securities or
blue sky laws of any jurisdiction, the Company will furnish to one counsel for
the Holders participating in the planned offering (selected by the Major
Holder) and the underwriters, if any, copies of all such documents proposed to
be filed (including all exhibits thereto), which documents will be subject to
the reasonable review and reasonable comment of such counsel, and the Company
shall not file any registration statement or amendment thereto or any
prospectus or supplement thereto to which the holders of a majority of the
Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for such period (which shall not be required to exceed 150 days in
the case of a registration pursuant to Section 2.1 or 120 days in the case of a
registration pursuant to Section 2.2) as any seller of Registrable Securities
pursuant to such registration statement shall request and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter, if any, of the securities covered
by such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits), and the prospectus included in such registration statement
(including each preliminary prospectus) in conformity with the requirements of
the Securities Act, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other
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<PAGE> 8
disposition of the Registrable Securities owned by such seller (the Company
hereby consenting to the use in accordance with applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request in writing, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such sellers or underwriters, if
any, to consummate the disposition of the Registrable Securities in such
jurisdictions, except that in no event shall the Company be required to qualify
to do business as a foreign corporation in any jurisdiction where it would not,
but for the requirements of this paragraph (d), be required to be so qualified,
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction.
(e) promptly notify each Holder selling Registrable
Securities covered by such registration statement and each managing
underwriter, if any: (i) when the supplement statement, any pre-effective
amendment, the prospectus or any prospectus supplement related thereto or
post-effective amendment to the registration statement has been filed and, with
respect to the registration statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the SEC or state securities
authority for amendments or supplements to the registration statement or the
prospectus related thereto or for additional information; (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of
the qualification of any Registrable Securities for sale under the securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose; (v) of the existence of any fact of which the Company becomes
aware which results in the registration statement, the prospectus related
thereto or any document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact required to
be stated therein or necessary to make any statement therein not misleading;
and (vi) if at any time the representations and warranties contemplated by
Section 3 below cease to be true and correct in all material respects; and, if
the notification relates to an event described in clause (v), the Company shall
promptly prepare and furnish to each such seller and each underwriter, if any,
a reasonable number of copies of a prospectus supplemented or amended so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading;
(f) comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement
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<PAGE> 9
(which need not be audited) covering the period of at least twelve consecutive
months beginning with the first date of the Company's first calendar quarter
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by
such registration statement to be listed on the principal securities exchange
on which similar securities issued by the Company are then listed (if any), if
the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) if no similar securities are then so listed, to either
cause all such Registrable Securities to be listed on a national securities
exchange or to secure designation of all such Registrable Securities as a
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") "national market system security" within the meaning of Rule 11Aa2-1
of the SEC or, failing that, secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, take all actions that may be
required by the Company as the issuer of such Registrable Securities in order
to facilitate the managing underwriter's arranging for the registration of at
least two market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. ("NASD");
(h) provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if
applicable, an underwriting agreement) and take such other actions as the
Holders of a majority of the Registrable Securities or the Major Holder
participating in such offering shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities. The Holders of the
Registrable Securities which are to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require
that the Company make to and for the benefit of such Holders the
representations, warranties and covenants of the Company which are being made
to and for the benefit of such underwriters and which are of the type
customarily provided to institutional investors in secondary offerings;
(j) obtain an opinion from the Company's counsel and a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the underwriters, if any, and to the Major Holder participating in such
offering, and furnish to each Holder participating in the offering and to each
underwriter, if any, a copy of such opinion and letter addressed to such Holder
(in the case of the opinion) and underwriter (in the case of the opinion and
the "cold comfort" letter);
(k) deliver promptly to the Major Holder and counsel for
the selling Holders participating in the offering and each underwriter, if any,
copies of all correspondence between the
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Commission and the Company, its counsel or auditors and any memoranda relating
to discussions with the Commission or its staff with respect to the
registration statement, other than those portions of any such memoranda which
contain information subject to attorney-client privilege with respect to the
Company, and, upon receipt of such confidentiality agreements as the Company
may reasonably request, make reasonably available for inspection by any seller
of such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties of the Company,
and cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(l) use its best efforts to obtain promptly the
withdrawal of any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable
Securities, not later than the effective date of the registration statement;
(n) make reasonably available its employees and personnel
and otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering;
(o) promptly prior to the filing of any document which is
to be incorporated by reference into the registration statement or the
prospectus (after the initial filing of such registration statement) provide
copies of such document to counsel for the selling Holders of Registrable
Securities and to each managing underwriter, if any, and make the Company's
representatives reasonably available for discussion of such document and make
such changes in such document concerning the selling Holders prior to the
filing thereof as counsel for such selling Holders or underwriters may
reasonably request;
(p) furnish to each Holder participating in the offering
and the managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities; and
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(r) take all such other commercially reasonable actions
as are necessary or advisable in order to expedite or facilitate the
disposition of such Registrable Securities.
The Company may require as a condition precedent to the
Company's obligations under this Section 2.4 that each seller of Registrable
Securities as to which any registration is being effected furnish the Company
such information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request provided that such
information shall be used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt
of any notice from the Company of the happening of any event of the kind
described in clause (v) of paragraph (e) of this Section 2.4, such Holder will
discontinue such Holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Securities that was in effect at the time of receipt
of such notice. In the event the Company shall give any such notice, the
applicable period mentioned in paragraph (b) of this Section 2.4 shall be
extended by the number of days during such period from and including the date
of the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4.
If any such registration statement or comparable statement
under "blue sky" laws refers to any Holder by name or otherwise as the Holder
of any securities of the Company, then such Holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and the Company, to the effect that the holding by
such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not in the judgment
of the Company, as advised by counsel, required by the Securities Act or any
similar federal statute or any state "blue sky" or securities law then in
force, the deletion of the reference to such Holder.
2.5 Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 2,
including, without limitation: (i) SEC, stock exchange or NASD registration and
filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state
securities or "blue sky" laws and in connection with the preparation of a "blue
sky" survey, including without limitation, reasonable fees and expenses of blue
sky counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) expenses incurred in connection with any road show, (vi) fees
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<PAGE> 12
and disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Major Holder), (viii) fees and disbursements
of all independent public accountants (including the expenses of any audit
and/or "cold comfort" letter) and fees and expenses of other persons',
including special experts, retained by the Company, (ix) fees and expenses
payable to a Qualified Independent Underwriter and (x) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers
of securities (collectively, "Expenses")
(b) The Company shall pay all Expenses with respect to
any Demand Registration, whether or not it becomes effective or remains
effective for the period contemplated by Section 2.4(b), and with respect to
any registration effected under Sections 2.2 or 2.3.
(c) Notwithstanding the foregoing, (x) the provisions of
this Section 2.5 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties).
2.6 Certain Limitations on Registration Rights. In the case of
any registration under Section 2.1 pursuant to an underwritten offering, or in
the case of a registration under Sections 2.2 or 2.3 if the Company has
determined to enter into an underwriting agreement in connection therewith, all
securities to be included in such registration shall be subject to an
underwriting agreement and no Person may participate in such registration
unless such Person agrees to sell such Person's securities on the basis
provided therein and completes and executes all reasonable questionnaires and
other documents (including custody agreements and powers of attorney) which
must be executed in connection therewith, and provides such other information
to the Company or the underwriter as may be necessary to register such Person's
securities.
2.7 Limitations on Sale or Distribution of Other Securities.
(a) To the extent requested in writing by a managing
underwriter, if any, of any registration effected pursuant to Section 2.1, each
Holder of Registrable Securities agrees not to sell, transfer or otherwise
dispose of, including any sale pursuant to Rule 144 under the Securities Act,
any Common Stock, or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering) during the
time period reasonably requested by the managing underwriter, not to exceed 180
days (and the Company hereby also agrees (except that the Company may effect
any sale or distribution of any such securities pursuant to a registration on
Form S-4 (if
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<PAGE> 13
reasonably acceptable to such managing underwriter) or Form S-8, or any
successor or similar form which is then in effect or upon conversion, exchange
or exercise of any then outstanding Common Stock Equivalent) to use its
reasonable best efforts to cause each Holder of any equity security or any
security convertible into or exchangeable or exercisable for any equity
security of the Company purchased from the Company at any time other than in a
public offering so to agree). Each managing underwriter shall be entitled to
rely on the agreements of each Holder of Registrable Securities set forth in
this Section 2.7(a) and shall be a third party beneficiary of the provisions of
this Section 2.7(a).
(b) The Company hereby agrees that, if it shall
previously have received a request for registration pursuant to Section 2.1,
2.2 or 2.3, and if such previous registration shall not have been withdrawn or
abandoned, the Company shall not sell, transfer, or otherwise dispose of, any
Common Stock, or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering, a
registration on Form S-4 or Form S-8 or any successor or similar form which is
then in effect or upon the conversion, exchange or exercise of any then
outstanding Common Stock Equivalent), until a period of 180 days shall have
elapsed from the effective date of such previous registration; and the Company
shall so provide in any registration rights agreements hereafter entered into
with respect to any of its securities.
2.8 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.9 Indemnification.
(a) In the event of any registration of any securities of
the Company under the Securities Act pursuant to this Article 2, the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities, its directors,
officers, affiliates, employees, stockholders, members and partners (and the
directors, officers, affiliates, employees, stockholders, members and partners
thereof), each other Person who participates as an underwriter or a Qualified
Independent Underwriter, if any, in the offering or sale of such securities,
each officer, director, employee, stockholder, member or partner of such
underwriter or Qualified Independent Underwriter, and each other Person, if
any, who controls such seller or any such underwriting within the meaning of
the Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof (the "Claims") and expenses (including reasonable fees of
counsel and any amounts paid in any settlement effected with the Company's
consent, which consent shall not be unreasonably withheld or delayed) to which
each such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such securities were
registered under the Securities Act, together with the documents incorporated
by reference therein, or the omission or alleged omission to state
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<PAGE> 14
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary, final or
summary prospectus or any amendment or supplement thereto, together with the
documents incorporated by reference therein, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company shall not be liable to any such indemnified party in any such
case to the extent such Claim or expense arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact made in such registration statement or
amendment thereof or supplement thereto or in any such prospectus or any
preliminary, final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by as on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are
included in the securities as to which any registration under Section 2.1, 2.2
or 2.3 is being effected (and, if the Company requires as a condition to
including any Registrable Securities in any registration statement filed in
accordance with Section 2.1, 2.2 or 2.3, any underwriter and Qualified
Independent Underwriter, if any) shall, severally and not jointly, indemnify
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.9) to the extent permitted by law the Company,
its officers and directors, each Person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
Persons with respect to any untrue statement or alleged untrue statement of any
material fact in, or omission or alleged omission of any material fact from,
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or underwriter or Qualified
Independent Underwriter, if any, specifically for use therein and reimburse
such indemnified party for any legal or other expenses reasonably incurred in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, however, that the aggregate amount which any such Holder
shall be required to pay pursuant to this Section 2.9(b) and Sections 2.9(c)
and (e) shall in no case be greater than the amount of the net proceeds
received by such person upon the sale of the Registrable Securities pursuant to
the registration statement giving rise to such Claim. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the
preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate
modifications) shall be given by the Company and each
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<PAGE> 15
seller of Registrable Securities with respect to any required registration or
other qualification of securities under any state securities and "blue sky"
laws.
(d) Any person entitled to indemnification under this
Agreement shall notify promptly the indemnifying party in writing of the
commencement of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this Section 2.9, but the failure of
any indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under the preceding paragraphs of this Section 2.9,
except to the extent the indemnifying party is materially prejudiced thereby
and shall not relieve the indemnifying party from any liability which it may
have to any indemnified party otherwise than under this Article 2. In case any
action or proceedings is brought against an indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, unless in the reasonable
opinion of outside counsel to the indemnified party a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof jointly with any other indemnifying party
similarly notified, to the extent that it chooses, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that (i) if the
indemnifying party fails to take reasonable steps necessary to defend
diligently the action or proceeding within 20 days after receiving notice from
such indemnified party that the indemnified party believes it has failed to do
so; or (ii) if such indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying party reasonably
shall have concluded that there may be one or more legal defenses available to
such indemnified party which are not available to the indemnifying party; or
(iii) if representation of both parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct, then, in any
such case, the indemnified party shall have the right to assume or continue its
own defense as set forth above (but with no more than one firm of counsel for
all indemnified parties in each jurisdiction who shall be approved by the Major
Holder of the registration in respect of which such indemnification is sought),
and the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Sections 2.9(a), (b) or (c), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any Claim
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, with respect to such offering of securities. The
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<PAGE> 16
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. If, however, the allocation provided in the
second preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and
the indemnified party as well as any other relative equitable considerations.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 2.9(e) were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentences of this
Section 2.9(e). The amount paid or payable in respect of any Claim shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding
anything in this Section 2.9(e) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 2.9(e) to
contribute any amount in excess of the net proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, claims, damages or liabilities of the indemnified parties
relate, less the amount of any indemnification payment made by such
indemnifying party pursuant to Sections 2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
(g) The indemnification and contribution required by this
Section 2.9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
3. Underwritten Offerings.
3.1 Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offering by the Holders pursuant to a
registration statement requested under Section 2.1 or 2.3, the Company shall
enter into a customary underwriting agreement with the underwriters. Such
underwriting agreement shall be satisfactory in form and substance to the Major
Holder and shall contain such representations and warranties by, and such other
agreements on the part of, the Company and such other terms as are generally
included in the underwriting agreement of such underwriters, including, without
limitation, indemnities and contribution agreements. Any Holder participating
in the offering shall be a party to such underwriting agreement and may, at its
option,
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<PAGE> 17
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holder; provided, however, that the Company shall not be required to make
any representations or warranties with respect to written information
specifically provided by a selling Holder for inclusion in the registration
statement. Such underwriting agreement shall also contain such representations
and warranties by the participating Holders as are customary in agreements of
that type.
3.2 Piggyback Underwritten Offerings. In the case of a
registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into an underwriting agreement in connection therewith, all
of the Holders' Registrable Securities to be included in such registration
shall be subject to such underwriting agreement. Any Holder participating in
such registration may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holder. Such underwriting
agreement shall also contain such representations and warranties by the
participating Holders as are customary in agreements of that type.
4. General.
4.1 Adjustments Affecting Registrable Securities. The
Company agrees that it shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the Holder of
any Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. The Company agrees that it
will take all reasonable steps necessary to effect a subdivision of shares if
in the reasonable judgment of (a) the Holder of Registrable Securities that
makes a Demand Registration Request or (b) the managing underwriter for the
offering in respect of such Demand Registration Request, such subdivision would
enhance the marketability of the Registrable Securities. Each Holder agrees to
vote all of its shares of capital stock in a manner, and to take all other
actions necessary, to permit the Company to carry out the intent of the
preceding sentence including, without limitation, voting in favor of an
amendment to the Company's Articles of Incorporation in order to increase the
number of authorized shares of capital stock of the Company.
4.2 Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act in respect of the Common Stock or securities of the Company
convertible into or exchangeable or exercisable for Common Stock, the Company
covenants that (i) so long as it remains subject to the reporting provisions of
the Exchange Act, it will timely file the reports required to be filed by it
under the Securities Act or the Exchange Act (including, but not limited to,
the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph
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<PAGE> 18
(c)(1) of Rule 144 under the Securities Act), and (ii) will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (A) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (B) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
4.3 Amendments and Waivers. This Agreement may be
amended, modified, supplemented or waived only upon the written agreement of
the party against whom enforcement of such amendment, modification, supplement
or waiver is sought.
4.4 Notices. Except as otherwise provided in this
Agreement, all notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or by telecopy, nationally recognized overnight
courier or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at the address set forth below or such
other address as may hereafter be designated in writing by such party to the
other parties:
(i) if to the Company, to:
Hollywood Theater Holdings, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Telephone: (214) 528-9500
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
(ii) if to Hoak Communications Partners, L.P., to:
Hoak Capital Corporation
One Galleria Tower
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Telephone: (972) 960-4848
Telecopy: (972) 960-4899
Attention: Thomas L. Harrison
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<PAGE> 19
(iii) if to HCP Capital Fund, L.P., to:
Hoak Capital Corporation
One Galleria Tower
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Telephone: (972) 960-4848
Telecopy: (972) 960-4899
Attention: Thomas L. Harrison
(iv) if to HCP 1997 Authorized Employee Fund,
L.P., to:
Hoak Capital Corporation
One Galleria Tower
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Telephone: (972) 960-4848
Telecopy: (972) 960-4899
Attention: Thomas L. Harrison
All such notices, requests, consents and other communications shall be deemed
to have been given when received.
4.5 No Inconsistent Agreements. Without the prior
written consent of Investors, the Company will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities which
is inconsistent with the rights granted in this Agreement or otherwise
conflicts with the provisions hereof, other than any lock-up agreement with the
underwriters in connection with any registered offering effected hereunder,
pursuant to which the Company shall agree not to register for sale, and the
Company shall agree not to sell or otherwise dispose of, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
for a specified period following the registered offering.
4.6 Miscellaneous.
(a) This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and the
respective successors, personal representatives and assigns of the parties
hereto, whether so expressed or not. If any Person shall acquire Registrable
Securities from any Holder, in any manner, whether by operation of law or
otherwise, such transferee shall promptly notify the Company and such
Registrable Securities acquired from such Holder shall be held subject to all
of the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provision of this Agreement. If the Company shall so request, any
such successor or assign shall agree in writing to acquire and hold
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<PAGE> 20
the Registrable Securities acquired from such Holder subject to all of the
terms hereof. If any Holder shall acquire additional Registrable Securities,
such Registrable Securities shall be subject to all of the terms, and entitled
to all the benefits of this Agreement. No Person other than a Holder shall be
entitled to any benefits under this Agreement, except as otherwise expressly
provided herein.
(b) This Agreement (with the documents referred
to herein or delivered pursuant hereto) embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Texas
without giving effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All sections references are to this Agreement unless otherwise
expressly provided.
(e) This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(f) Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to injunctive relief, including specific performance, to enforce such
obligations without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
(h) Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
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<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
-------------------------------------
James R. Featherstone
Vice President and Chief Financial
Officer
HOAK COMMUNICATIONS PARTNERS, L.P.
By: HCP INVESTMENT, L.P.
By: HOAK PARTNERS, L.L.C.
By: /s/ Thomas L. Harrison
---------------------------
Thomas L. Harrison
Manager
HCP CAPITAL FUND, L.P.
By: JAMES M. HOAK & CO.
By: /s/ Thomas L. Harrison
--------------------------------
Thomas L. Harrison
Executive Vice President
HCP 1997 AUTHORIZED EMPLOYEE FUND, L.P.
By: AUTHORIZED FUND MANAGEMENT, INC.
By: /s/ Robert Sussman
--------------------------------
Robert Sussman
President
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<PAGE> 1
EXHIBIT 4.7
AMENDED AND RESTATED
AGREEMENT WITH RESPECT TO REGISTRATION RIGHTS
THIS AGREEMENT is entered into as of May 13, 1997 by and among
Hollywood Theater Holdings, Inc., a Delaware corporation (the "Company"),
Stratford Capital Partners, L.P., a Texas limited partnership ("Stratford"),
Precept Investors, Inc., a Texas corporation ("Precept"), The Beacon Group III
- - Focus Value Fund, L.P. ("Beacon"), Hoak Communications Partners, L.P., a
Delaware limited partnership ("HCP"), HCP Capital Fund, L.P., a Delaware
limited partnership ("HCF") and HCP 1997 Authorized Employee Fund, L.P., a
Delaware limited partnership ("HAE") ("HCP" and "HCF" together with "HAE", the
"Hoak Entities").
WITNESSETH:
WHEREAS, the Company, Stratford and Precept have entered into that
certain Amended and Restated Registration Rights Agreement, dated as of October
3, 1996 (the "Stratford Agreement") whereby the holders of "Registrable
Securities" (as defined in the Stratford Agreement) (the "Stratford
Registrable Securities") are entitled to certain registration rights (the
"Stratford Registration Rights");
WHEREAS, the Company, Hollywood and Beacon have entered into that
certain Registration Rights Agreement, dated as of October 3, 1996 (the "Beacon
Agreement") whereby the holders of "Registrable Securities" (as defined in the
Beacon Agreement) (the "Beacon Registrable Securities") are entitled to certain
registration rights (the "Beacon Registration Rights");
WHEREAS, the Company and the Richard M. Durwood Revocable Trust
("Durwood") have entered into that certain Registration Rights Agreement, dated
as of November 1, 1996 (the "Durwood Agreement") and attached hereto as Exhibit
A, whereby the holders of "Registrable Securities" (as defined in the Durwood
Agreement) (the "Durwood Registrable Securities") are entitled to certain
registration rights (the "Durwood Registration Rights");
WHEREAS, the Company and the Hoak Entities have entered into that
certain Registration Rights Agreement, dated as of May 8, 1997 (the "Hoak
Agreement") whereby the holders of "Registrable Securities" (as defined in the
Hoak Agreement) (the "Hoak Registrable Securities") are entitled to certain
registration rights (the "Hoak Registration Rights");
WHEREAS, Durwood's Registration Rights under the Durwood Agreement
conflict in certain respects with the Stratford Registration Rights, the Beacon
Registration Rights and the Hoak Registration Rights;
WHEREAS, certain provisions of the Stratford Agreement, the Beacon
Agreement and the Hoak Agreement are internally inconsistent;
WHEREAS, the Company, Stratford, Precept, Beacon and the Hoak Entities
desire to resolve such conflicts and inconsistencies and, accordingly, desire
to enter into this Agreement;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
1. Notwithstanding anything to the contrary contained in either
the Stratford Agreement, the Beacon Agreement or the Hoak Agreement, in the
case of an IPO (as defined in each of the above referenced agreements), to the
extent that "Piggyback Rights" under the Durwood Agreement are exercised by
Durwood or another holder of Durwood Registrable Securities in connection with
an IPO and the cutback provisions of Section 2.1(d) of the Durwood Agreement
conflict with Section 2.2(d) of the Stratford Agreement, Section 2.2(d) of the
Beacon Agreement and/or Section 2.2(d) of the Hoak Agreement, the cutback
provisions of Section 2.1(d) of the Durwood Agreement will govern the piggyback
rights of all holders of the Durwood Registrable Securities, Stratford
Registrable Securities, Beacon Registrable Securities and Hoak Registrable
Securities in connection with such IPO. For purposes of this paragraph 1, the
Hoak Registrable Securities shall be deemed "Investor Registrable Securities"
and the Hoak Entities shall be deemed "Investor Holders" for purposes of
Section 2.1(d) of the Durwood Agreement.
2. Notwithstanding anything to the contrary contained in either
the Stratford Agreement, the Beacon Agreement or the Hoak Agreement, to the
extent that (i) Durwood exercises the "Demand Registration" rights provided for
in Section 2.2 of the Durwood Agreement in the context of an underwritten
offering, (ii) a holder or holders of Stratford Registrable Securities, Beacon
Registrable Securities or Hoak Registrable Securities exercises the piggyback
rights provided for in such agreement(s) and (iii) the managing underwriter
advises the Company that, in its opinion, the number of securities requested to
be included in the registration exceeds the number which can be sold in such
offering at a price reasonable to Durwood, then the Company will include in
such registration, first, the Durwood Registrable Securities to the extent, but
only to the extent that registration is being requested under Section 2.2 of
the Durwood Agreement, second, the Stratford Registrable Securities, the Beacon
Registrable Securities and the Hoak Registrable Securities, to be included in
such registration to the extent of the number and type which the Company is so
advised can be sold in (or during the time of such offering), pro rata among
the holders of the Stratford Registrable Securities, the Beacon Registrable
Securities and the Hoak Registrable Securities participating in such offering
in accordance with the number of "Conversion Shares" (as defined in the
Stratford Agreement, the Beacon Agreement and the Hoak Agreement) held by each
of Stratford, Beacon, Precept and the Hoak Entities, and third, all other
securities of the Company to be extent of the number and type which the Company
is so advised can be sold in (or during the time of) such offering.
3. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement or the Hoak Agreement, to the extent that (i) a
holder or holders of Stratford Registrable Securities exercises the "Demand
Registration" rights provided for in Section 2.1 of the Stratford Agreement in
the context of an underwritten offering, (ii) a holder or holders of Beacon
Registrable Securities or Hoak Registrable Securities exercises the piggyback
rights provided for in the Beacon Agreement or the Hoak Agreement, as the case
may be, and (iii) the managing underwriter advises the Company by letter of its
belief that the number of securities requested to be included in the
registration would
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<PAGE> 3
materially affect such offering, then the Company will include in such
registration, first, Stratford Registrable Securities to the extent, but only
to the extent that registration is being requested under Section 2.1 of the
Stratford Agreement, second, the securities proposed by the Company to be sold
for its own account, third, the Beacon Registrable Securities and Hoak
Registrable Shares to be included in such registration to the extent of the
number and type which the Company is advised can be sold in (and during the
time of) such offering, pro rata among the holders of the Beacon Registrable
Shares and Hoak Registrable Shares participating in such offering in accordance
with the number of "Conversion Shares" (as defined in the Beacon Agreement and
the Hoak Agreement) held by each of Beacon and the Hoak Entities, and fourth,
all other securities of the Company to be included in such registration to the
extent of the number and type which the Company is so advised can be sold in
(or during the time of) such offering.
4. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement and Hoak Agreement, to the extent that (i) a
holder or holders of Stratford Registrable Securities exercises the "Piggyback
Registration" rights provided for in Section 2.2 of the Stratford Agreement in
the context of an underwritten offering, (ii) a holder or holders of Beacon
Registrable Securities or Hoak Registrable Shares exercise the piggyback rights
provided for in the Beacon Agreement or the Hoak Agreement, as the case may be,
and (iii) the managing underwriter advises the Company by letter of its belief
that the number of securities requested to be included in the registration
would materially affect such offering, then the Company will include in such
registration, first, the securities proposed by the Company to be sold for its
own account, second, Beacon Registrable Securities or Hoak Registrable
Securities to the extent, but only to the extent that registration is being
requested under Section 2.1 of the Beacon Agreement or Section 2.1 of the Hoak
Agreement, as the case may be, third, the Beacon Registrable Securities, the
Stratford Registrable Securities and the Hoak Registrable Securities to be
included in such registration to the extent of the number and type which the
Company is advised can be sold in (and during the time of) such offering, pro
rata among the holders of the Beacon Registrable Securities, the Stratford
Registrable Securities and the Hoak Registrable Securities participating in
such offering in accordance with the number of "Conversion Shares" (as defined
in the Beacon Agreement, Stratford Agreement and Hoak Agreement) held by each
of Beacon, Stratford, Precept and the Hoak Entities, and fourth, all other
securities of the Company to be included in such registration to the extent of
the number and type which the Company is so advised can be sold in (or during
the time of) such offering.
5. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement and Hoak Agreement, to the extent that (i) a
holder or holders of Beacon Registrable Securities exercises the "Demand
Registration" rights provided for in Section 2.1 of the Beacon Agreement in the
context of an underwritten offering, (ii) a holder or holders of Stratford
Registrable Securities or Hoak Registrable Shares exercise the piggyback rights
provided for in the Stratford Agreement or the Hoak Agreement, as the case may
be, and (iii) the managing underwriter advises the Company by letter of its
belief that the number of securities requested to be included in the
registration would materially affect such offering, then the Company will
include in such registration, first, Beacon Registrable Securities to the
extent, but only to the extent that registration is being requested under
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<PAGE> 4
Section 2.1 of the Beacon Agreement, second, the securities proposed by the
Company to be sold for its own account, third, the Stratford Registrable
Securities and the Hoak Registrable Securities to be included in such
registration to the extent of the number and type which the Company is advised
can be sold in (and during the time of) such offering, pro rata among the
holders of the Stratford Registrable Securities and the Hoak Registrable
Securities participating in such offering in accordance with the number of
"Conversion Shares" (as defined in the Stratford Agreement and Hoak Agreement)
held by each of Stratford, Precept and the Hoak Entities, and fourth, all other
securities of the Company to be included in such registration to the extent of
the number and type which the Company is so advised can be sold in (or during
the time of) such offering.
6. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement and Hoak Agreement, to the extent that (i) a
holder or holders of Beacon Registrable Securities exercises the "Piggyback
Registration" rights provided for in Section 2.2 of the Beacon Agreement in the
context of an underwritten offering, (ii) a holder or holders of Stratford
Registrable Securities or Hoak Registrable Shares exercise the piggyback rights
provided for in the Stratford Agreement or the Hoak Agreement, as the case may
be, and (iii) the managing underwriter advises the Company by letter of its
belief that the number of securities requested to be included in the
registration would materially affect such offering, then the Company will
include in such registration, first, the securities proposed by the Company to
be sold for its own account, second, Stratford Registrable Securities or Hoak
Registrable Securities to the extent, but only to the extent that registration
is being requested under Section 2.1 of the Stratford Agreement or Section 2.1
of the Hoak Agreement, as the case may be, third, the Beacon Registrable
Securities, the Stratford Registrable Securities and the Hoak Registrable
Securities to be included in such registration to the extent of the number and
type which the Company is advised can be sold in (and during the time of) such
offering, pro rata among the holders of the Beacon Registrable Securities, the
Stratford Registrable Securities and the Hoak Registrable Securities
participating in such offering in accordance with the number of "Conversion
Shares" (as defined in the Beacon Agreement, Stratford Agreement and Hoak
Agreement) held by each of Beacon, Stratford, Precept and the Hoak Entities,
and fourth, all other securities of the Company to be included in such
registration to the extent of the number and type which the Company is so
advised can be sold in (or during the time of) such offering.
7. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement and Hoak Agreement, to the extent that (i) a
holder or holders of Hoak Registrable Securities exercises the "Demand
Registration" rights provided for in Section 2.1 of the Hoak Agreement or in
the context of an underwritten offering, (ii) a holder or holders of Stratford
Registrable Securities or Beacon Registrable Shares exercise the piggyback
rights provided for in the Stratford Agreement or the Beacon Agreement, as the
case may be, and (iii) the managing underwriter advises the Company by letter
of its belief that the number of securities requested to be included in the
registration would materially affect such offering, then the Company will
include in such registration, first, Hoak Registrable Securities to the extent,
but only to the extent that registration is being requested under Section 2.1
of the Hoak Agreement, second, the securities proposed by the Company to be
sold for its own account, third, the Stratford Registrable Securities and the
Beacon Registrable Securities to
-4-
<PAGE> 5
be included in such registration to the extent of the number and type which the
Company is advised can be sold in (and during the time of) such offering, pro
rata among the holders of the Stratford Registrable Securities and the Beacon
Registrable Securities participating in such offering in accordance with the
number of "Conversion Shares" (as defined in the Stratford Agreement and
Beacon Agreement) held by each of Stratford, Precept and Beacon, and fourth,
all other securities of the Company to be included in such registration to the
extent of the number and type which the Company is so advised can be sold in
(or during the time of) such offering.
8. Subject to the provisions of paragraph 1 above and
notwithstanding anything to the contrary contained in either the Stratford
Agreement, the Beacon Agreement and Hoak Agreement, to the extent that (i) a
holder or holders of Hoak Registrable Securities exercises the "Piggyback
Registration" rights provided for in Section 2.2 of the Hoak Agreement in the
context of an underwritten offering, (ii) a holder or holders of Stratford
Registrable Securities or Beacon Registrable Shares exercise the piggyback
rights provided for in the Stratford Agreement or the Beacon Agreement, as the
case may be, and (iii) the managing underwriter advises the Company by letter
of its belief that the number of securities requested to be included in the
registration would materially affect such offering, then the Company will
include in such registration, first, the securities proposed by the Company to
be sold for its own account, second, Stratford Registrable Securities or Beacon
Registrable Securities to the extent, but only to the extent that registration
is being requested under Section 2.1 of the Stratford Agreement or Section 2.1
of the Beacon Agreement, as the case may be, third, the Beacon Registrable
Securities, the Stratford Registrable Securities and the Hoak Registrable
Securities to be included in such registration to the extent of the number and
type which the Company is advised can be sold in (and during the time of) such
offering, pro rata among the holders of the Beacon Registrable Securities, the
Stratford Registrable Securities and the Hoak Registrable Securities
participating in such offering in accordance with the number of "Conversion
Shares" (as defined in the Beacon Agreement, Stratford Agreement and Hoak
Agreement) held by each of Beacon, Stratford, Precept and the Hoak Entities,
and fourth, all other securities of the Company to be included in such
registration to the extent of the number and type which the Company is so
advised can be sold in (or during the time of) such offering.
9. Except as provided in paragraphs 1 through 8 above, this
Agreement does not change, modify or affect the Stratford Agreement, the Beacon
Agreement or the Hoak Agreement, and such agreements continue in full force and
effect.
10. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto, whether expressed
or not.
11. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
12. The Holders (as defined in the Durwood Agreement) are third
party beneficiaries of this Agreement and are therefore entitled to enforce
this Agreement and to enforce the terms hereof.
-5-
<PAGE> 6
13. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Texas without giving effect to
the conflicts of law principles thereof.
HOLLYWOOD THEATER HOLDINGS, INC.
HOLLYWOOD THEATERS, INC.
By: /s/ James R. Featherstone
-----------------------------------------
James R. Featherstone
Vice President and Chief
Financial Officer
STRATFORD CAPITAL PARTNERS, L.P.
By: /s/ Stratford Capital Partners, L.P.
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
THE BEACON GROUP III-FOCUS VALUE FUND, L.P.
BY: BEACON FOCUS VALUE INVESTORS, LLC
BY: FOCUS VALUE GP, INC.
By: /s/ Focus Value GP, Inc.
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-6-
<PAGE> 7
HOAK COMMUNICATIONS PARTNERS, L.P.
By: HCP INVESTMENT, L.P.
By: HOAK PARTNERS, L.L.C.
By: /s/ Thomas L. Harrison
------------------------------------
Thomas L. Harrison
Manager
HCP CAPITAL FUND, L.P.
By: JAMES M. HOAK & CO.
By: /s/ Thomas L. Harrison
------------------------------------
Thomas L. Harrison
Executive Vice President
HCP 1997 AUTHORIZED EMPLOYEE FUND, L.P.
By: AUTHORIZED FUND MANAGEMENT, INC.
By: /s/ Robert Sussman
------------------------------------
Robert Sussman
President
-7-
<PAGE> 1
EXHIBIT 10.1
HOLLYWOOD THEATERS, INC.
10 5/8% SENIOR SUBORDINATED NOTES
DUE AUGUST 1, 2007
----------------------------------------
unconditionally guaranteed as to
the payment of principal,
premium, if any, and interest by
Hollywood Theater Holdings, Inc.
and Crown Theater Corp.
----------------------------------------
PURCHASE AGREEMENT
July 31, 1997
Goldman, Sachs & Co.,
BancAmerica Securities, Inc.
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Hollywood Theaters, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$110,000,000 principal amount of the Notes specified above. The Securities
will be unconditionally guaranteed as to the payment of principal, premium, if
any, and interest (the "Guarantees") by Hollywood Theater Holdings, Inc.
("Holdings"), Crown Theater Corp. ("Crown") and any future Restricted
Subsidiary (as defined in the Indenture referred to in Section 1(f) below) of
the Company (collectively, the "Guarantors"). Holdings and Crown are
corporations incorporated under the laws of Delaware and Missouri,
respectively. The Company is the wholly owned subsidiary of Holdings and Crown
is the wholly owned subsidiary of the Company ; Crown is the only subsidiary of
the Company. The Notes and the Guarantees are hereinafter collectively called
the "Securities".
1. The Company, Holdings and Crown represent and warrant to, and
agree with, each of the Purchasers that:
(a) A preliminary offering circular, dated July 15, 1997
(the "Preliminary Offering Circular") and an offering circular, dated
July 31, 1997 (the "Offering Circular"), in each case including the
international supplement thereto, have been prepared in
<PAGE> 2
connection with the offering of the Securities. The Preliminary
Offering Circular or the Offering Circular and any amendments or
supplements thereto did not and will not, as of their respective
dates, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by a Purchaser through Goldman, Sachs & Co. expressly for use
therein;
(b) Neither the Company, nor any Guarantor has sustained
since the date of the latest audited financial statements included in
the Offering Circular any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular and other than such loss or
interference which would not, individually or in the aggregate, have a
material adverse effect on the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries considered as a consolidated entity (a "Material
Adverse Effect"); and, since the respective dates as of which
information is given in the Offering Circular, there has not been any
change in the capital stock or long-term debt of the Company, or any
Guarantor or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries considered
as a consolidated entity, otherwise than as set forth or contemplated
in the Offering Circular;
(c) The Company and the Guarantors have good and
marketable title in fee simple to all real property and good title to
all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Offering Circular or such as would not, individually or in the
aggregate, have a Material Adverse Effect; and any real property and
buildings held under lease by the Company and the Guarantors are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and would not, individually or in the
aggregate, have a Material Adverse Effect;
(d) Each of the Company and the Guarantors has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular, and has been duly
qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so
qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect;
(e) The Company has an authorized capitalization as set
forth in the Offering Circular, and all of the issued shares of
capital stock of the Company have been duly and
-2-
<PAGE> 3
validly authorized and issued and are fully paid and non-assessable;
and all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(f) The Notes have been duly authorized and, when issued
and delivered to the Purchasers against payment therefor as provided
by this Agreement, will have been duly executed, authenticated, issued
and delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
indenture to be dated as of August 7, 1997 (the "Indenture") between
the Company and U.S. Trust Company of Texas, N.A., as Trustee (the
"Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Guarantees
have been duly authorized and, when the Notes have been issued and
delivered pursuant to this Agreement with the Guarantees endorsed
thereon, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Guarantors
entitled to the benefits provided by the Indenture, subject, as to
enforcement, to fraudulent conveyance laws; the Indenture has been
duly authorized and, when executed and delivered by the Company, the
Guarantors and the Trustee, the Indenture will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Indenture
will conform in all material respects to the descriptions thereof in
the Offering Circular;
(g) None of the transactions contemplated by this
Agreement (including, without limitation, the use of the proceeds from
the sale of the Securities) will violate or result in a violation of
Regulations G, T, U, and X of the Board of Governors of the Federal
Reserve System;
(h) The issue and sale of the Securities and the
compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Indenture, this Agreement and the
Exchange and Registration Rights Agreement between the Company and the
Purchasers to be entered into as of August 7, 1997 (the "Registration
Rights Agreement") and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any Guarantor
is a party or by which the Company or any Guarantor is bound or to
which any of the property or assets of the Company or any Guarantor is
subject, except for such conflicts, breaches, violations or defaults
that would not, individually or in the aggregate, have a Material
Adverse Effect, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any Guarantor or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company, or any of the Guarantors or any of
their properties, except, with respect to such statutes, orders, rules
or regulations, for such violations that would not, individually or in
the aggregate, have a Material Adverse Effect; and assuming that
-3-
<PAGE> 4
the representations and warranties of the Purchasers in Section 3
hereof are true and correct, no consent, approval, authorization,
order, registration or qualification of or with any court or
governmental agency or body of the United States or any State or
territory thereof is required for the issue and sale of the Securities
or the consummation by the Company or the Guarantors of the
transactions contemplated by this Agreement, the Registration Rights
Agreement or the Indenture, except for the filing and effectiveness
of a registration statement by the Company and the Guarantors with the
Commission pursuant to the United States Securities Act of 1933, as
amended (the "Act") and qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(i) Neither the Company nor any Guarantor is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound , except for such
obligations, covenants or conditions that would not, individually or
in the aggregate, have a Material Adverse Effect;
(j) The statements set forth in the Offering Circular
under the caption "Description of Notes", insofar as they purport to
constitute a summary of the terms of the Securities, and under the
captions "Description of New Senior Bank Facility", "Offer and Resale"
and "Certain U.S. Federal Tax Consequences to Non-U.S. Holders",
insofar as they purport to describe the provisions of the laws and
documents referred to therein fairly and accurately summarize, in all
material respects, the matters referred to therein with respect to
such legal matters and documents;
(k) Other than as set forth in the Offering Circular,
there are no legal or governmental proceedings pending to which the
Company, or any Guarantor is a party or of which any property of the
Company, or any Guarantor is the subject which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(l) When the Securities are issued and delivered pursuant
to this Agreement, the Securities will not be of the same class
(within the meaning of Rule 144A under the United States Securities
Act of 1933, as amended (the "Act")) as securities which are listed on
a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation
system;
(m) Each of the Company and the Guarantors is not, and
after giving effect to the offering and sale of the Securities, will
not be an "investment company", or an entity "controlled" by an
"investment company", as such terms are defined in the United States
Investment Company Act of 1940, as amended (the "Investment Company
Act");
-4-
<PAGE> 5
(n) Neither the Company, the Guarantors nor any person
acting on its or their behalf has offered or sold the Securities by
means of any general solicitation or general advertising within the
meaning of Rule 502(c) under the Act or, with respect to Securities
sold outside the United States to non-U.S. persons (as defined in Rule
902 under the Act), by means of any directed selling efforts within
the meaning of Rule 902 under the Securities Act and each of the
Company, the Guarantors, any of its or their affiliates and any person
acting on its or their behalf has complied with and will implement the
"offering restriction" within the meaning of such Rule 902;
(o) Within the preceding six months, neither the Company,
the Guarantors nor any other person acting on behalf of the Company or
the Guarantors has offered or sold to any person any Securities, or
any securities of the same or a similar class as the Securities, other
than Securities offered or sold to the Purchasers hereunder;
(p) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(q) Arthur Andersen LLP, who have certified certain
financial statements of Holdings and its subsidiaries and of Theaters
Acquired from GC Companies, Inc., Escape Theaters, Inc., Theaters
Acquired from United Artists Theatre Circuit, Inc. and, Theaters
Acquired from Crown Cinema Corporation and Crown Theater Corporation
are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder; and
(r) The Registration Rights Agreement, which shall be
substantially in the form previously delivered to you, has been duly
authorized, and, when executed and delivered by the Company (assuming
due authorization, execution and delivery by the Purchasers), will
constitute a valid and legally binding agreement of the Company
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
2. Subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Company, at
a purchase price of 97% of the principal amount thereof, plus accrued interest,
if any, from August 7, 1997 to the Time of Delivery hereunder, the principal
amount of Securities set forth opposite the name of such Purchaser in Schedule
I hereto, each of which will have duly endorsed thereon the Guarantee of each
Guarantor, and the Guarantors agree to issue their Guarantees accordingly.
3. Upon the authorization by you of the release of the
Securities, the several Purchasers propose to offer the Securities for sale
upon the terms and conditions set forth in this Agreement and the Offering
Circular and each Purchaser hereby represents and warrants to, and agrees with
the Company that:
-5-
<PAGE> 6
(a) It will offer and sell the Securities only to: (i)
persons who it reasonably believes are "qualified institutional
buyers" ("QIBs") within the meaning of Rule 144A under the Act in
transactions meeting the requirements of Rule 144A or, (ii) upon the
terms and conditions set forth in Annex I to this Agreement;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities by any form
of general solicitation or general advertising, including but not
limited to the methods described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser
hereunder will be represented by one or more global Securities in book-entry
form which will be deposited by or on behalf of the Company with The Depository
Trust Company ("DTC") or its designated custodian. The Company will deliver
the Securities to Goldman, Sachs & Co., for the account of each Purchaser,
against payment by or on behalf of such Purchaser of the purchase price
therefor by wire transfer, payable to the order of the Company in Federal (same
day) funds, by causing DTC to credit the Securities to the account of Goldman,
Sachs & Co. at DTC. The Company will cause the certificates representing the
Securities to be made available to Goldman, Sachs & Co. for checking at least
twenty-four hours prior to the Time of Delivery (as defined below) at the
office of DTC or its designated custodian (the "Designated Office"). The time
and date of such delivery and payment shall be 9:30 a.m., New York City time,
on August 7, 1997 or such other time and date as Goldman, Sachs & Co. and the
Company may agree upon in writing. Such time and date are herein called the
"Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Purchasers pursuant to Section 7(k) hereof, will be delivered at such time and
date at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York 10004 (the "Closing Location") (or such other location as the Company and
the Purchasers mutually agree), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location on the Business Day next preceding the Time of Delivery (at
such time as the Company and the Purchasers mutually agree), at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the purposes
of this Section 4, "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the
Closing Location are generally authorized or obligated by law or executive
order to close.
5. Each of the Company and the Guarantors, jointly and severally,
agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form reasonably
approved by you; during the time period set forth in Section 5(c), to
make no amendment or any supplement to the Offering Circular which
shall be reasonably disapproved by you promptly after reasonable
notice thereof; and to furnish you with copies thereof;
-6-
<PAGE> 7
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Securities, provided that in
connection therewith neither the Company nor the Guarantors shall be
required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of this Agreement or as
promptly as practicable thereafter and from time to time, to furnish
the Purchasers with a copy of the Offering Circular in New York City
and each amendment or supplement thereto signed by an authorized
officer of the Company with the independent accountants' report(s) in
the Offering Circular, and any amendment or supplement containing
amendments to the financial statements covered by such report(s),
signed by the accountants, and additional copies thereof in such
quantities as you may reasonably request, and if, at any time prior to
the expiration of nine months after the date of the Offering Circular
or such earlier date on which the offering and initial resale of the
Securities shall have been completed, any event shall have occurred as
a result of which the Offering Circular as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during
such same period to amend or supplement the Offering Circular, to
notify you and upon your request to prepare and furnish without charge
to each Purchaser and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct
such statement or omission;
(d) During the period beginning from the date hereof and
continuing until the date six months after the Time of Delivery, not
to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any securities of the Company that are
substantially similar to the Notes, without your prior written
consent;
(e) Not to be or become, at any time prior to the
expiration of three years after the Time of Delivery, an open-end
investment company, unit investment trust, closed-end investment
company or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act;
(f) At any time when the Company or Holdings is not
subject to Section 13 or 15(d) of the Exchange Act, for the benefit of
holders from time to time of Securities, to furnish at its expense,
upon request, to holders of Securities and prospective purchasers of
securities information (the "Additional Issuer Information")
satisfying the requirements of subsection (d)(4)(i) of Rule 144A under
the Act;
-7-
<PAGE> 8
(g) If requested by you, to use its best efforts to cause
the Securities to be eligible for the PORTAL trading system of the
National Association of Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon
as practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date
of the Offering Circular), consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable
detail;
(i) During a period of two years from the date of the
Offering Circular, to furnish to you copies of all reports or other
communications (financial or other) furnished to the Trustee, and to
deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the United
States Securities and Exchange Commission (the "Commission") or any
securities exchange on which the Securities or any class of securities
of the Company or any Guarantor is listed; and (ii) such additional
public information concerning the business and financial condition of
the Company and the Guarantors as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to
the extent the accounts of the Company, its subsidiaries or relevant
Guarantor are consolidated in reports furnished to its stockholders
generally or to the Commission);
(j) During the period of two years after the Time of
Delivery, the Company and the Guarantors will not, and will not permit
any of their "affiliates" (as defined in Rule 144 under the Securities
Act) to, resell any of the Securities which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them,
except pursuant to an effective registration statement under the Act;
(k) To execute and deliver the Registration Rights
Agreement prior to the Time of Delivery;
(l) To use the net proceeds received by it from the sale
of the Securities pursuant to this Agreement in the manner specified
in the Offering Circular under the caption "Use of Proceeds"; and
(m) To take reasonable precautions designed to insure
that any offer or sale, direct or indirect, in the United States or to
any U.S. person (as defined in Rule 902 under the Act) of any
Securities or any substantially similar security issued by the Company
or the Guarantors, within six months subsequent to the date on which
the distribution of the Securities has been completed (as notified to
the Company by Goldman, Sachs & Co.), is made under restrictions and
other circumstances reasonably designed not to affect the status of
the offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the
registration provisions of the Act.
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<PAGE> 9
6. Each of the Company and the Guarantors, jointly and severally,
covenants and agrees with the several Purchasers that the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the issue of the
Securities and all other expenses in connection with the preparation and
printing of the Preliminary Offering Circular and the Offering Circular and any
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Purchasers and dealers; (ii) the cost of printing or producing
any Agreement among Purchasers, this Agreement, the Indenture, the Registration
Rights Agreement, any Blue Sky and Legal Investment Memoranda, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Purchasers in
connection with such qualification and in connection with the Blue Sky and
legal investment surveys; (iv) any fees charged by securities rating services
for rating the Securities; (v) the cost of preparing the Securities; (vi) the
fees and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; (vii) any cost incurred in connection with the designation of
the Securities for trading in PORTAL; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11
hereof, the Purchasers will pay all of their own costs and expenses, including
the fees of their counsel, transfer taxes on resale of any of the Securities by
them, and any advertising expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject,
in their discretion, to the condition that all representations and warranties
and other statements of the Company and the Guarantors herein are, at and as of
the Time of Delivery, true and correct, the condition that each of the Company
and the Guarantors shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) Sullivan & Cromwell, counsel for the Purchasers shall
have furnished to you such opinion or opinions (a draft of each such
opinion is attached as Annex II(c) hereto), dated the Time of Delivery
for such Securities, with respect to the incorporation of the Company,
the validity of the Indenture, the Securities and the Registration
Rights Agreement, the Offering Circular and other related matters as
you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them
to pass upon such matters;
(b) Baker & Botts, L.L.P., counsel for the Company and
the Guarantors, shall have furnished to you their written opinion (a
draft of such opinion is attached as Annex II(d) hereto), dated the
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) Each of the Company and the Guarantors has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation with the corporate power and
authority to own its properties and conduct its business as
described in the Offering Circular
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<PAGE> 10
(such counsel being entitled to rely in respect of their
opinion in this clause as to Crown upon an opinion of local
counsel, provided that such counsel state that they believe
that both you and they are justified in relying upon such
opinion);
(ii) The Company has an authorized capitalization
as set forth in the Offering Circular, and all of the issued
shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and
non-assessable;
(iii) All of the issued shares of capital stock of
Crown have been duly and validly authorized and issued, are
fully paid and non-assessable, and are owned by the Company
free and clear of all liens, encumbrances, equities or claims
other than the lien created pursuant to the New Bank Facility
(as defined in the Indenture) (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon
certificates of officers of the Company or the Guarantors,
provided that such counsel shall state that they believe that
both you and they are justified in relying upon such opinions
and certificates);
(iv) To such counsel's knowledge and other than as
set forth in the Offering Circular, there are no legal or
governmental proceedings pending to which the Company or any
Guarantor is a party or of which any property of the Company
or any Guarantor is the subject which, individually or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect; and, to such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(v) This Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered by
the Company and the Guarantors (such counsel being entitled to
rely in respect of their opinion in this clause as to Crown
upon an opinion of local counsel, provided that such counsel
state that they believe that both you and they are justified
in relying upon such opinion);
(vi) The Notes and the Guarantees have been duly
authorized by the Company and the Guarantors respectively; the
global Note representing Notes sold pursuant to Rule 144A
under the Act and the temporary global Note representing Notes
sold pursuant to Regulation S under the Act have been duly
executed, authenticated, issued and delivered; the Guarantees
have been duly executed, issued and endorsed onto the global
Note and temporary global Note and the Guarantees constitute
valid and legally binding joint and several obligations of
each of the Guarantors entitled to the benefits provided by
the Indenture, subject, as to enforcement, to fraudulent
conveyance laws; the global Note and temporary global Note
constitute valid and legally binding obligations of the
Company and the Notes in definitive form, when executed,
authenticated, issued and delivered with the Guarantees
endorsed thereon in exchange for the temporary global Note in
accordance with the terms of the Indenture, will have been
duly executed, authenticated, issued and delivered and will
constitute valid
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<PAGE> 11
and legally binding obligations of the Company, in each case
entitled to the benefits provided by the Indenture, and the
Guarantees to be endorsed on the definitive Notes, when
executed, issued and endorsed onto such definitive Notes, will
have been duly executed, issued and endorsed onto the
definitive Notes and will constitute valid and legally binding
joint and several obligations of each of the Guarantors
entitled to the benefits provided by the Indenture, subject,
as to enforcement, to fraudulent conveyance laws; and the
global Note, the temporary global Note, the Guarantees and the
Indenture conform, and the Notes and the Guarantees endorsed
thereon will conform, in all material respects to the
descriptions thereof in the Offering Circular (such counsel
being entitled to rely in respect of their opinion in this
clause as to Crown upon an opinion of local counsel, provided
that such counsel state that they believe that both you and
they are justified in relying upon such opinion);
(vii) The Indenture has been duly authorized,
executed and delivered by the Company and the Guarantors and
constitutes a valid and legally binding instrument of the
Company and the Guarantors, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles (such counsel being entitled to rely in
respect of their opinion in this clause as to Crown upon an
opinion of local counsel, provided that such counsel state
that they believe that both you and they are justified in
relying upon such opinion);
(viii) The issue and sale of the Securities and the
compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Indenture, this Agreement
and the Registration Rights Agreement and the consummation of
the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any Guarantor
is a party or by which the Company or any Guarantor is bound
or to which any of the property or assets of the Company or
any Guarantor is subject and which has been identified to such
counsel by the Company or the Guarantors as material (based on
the standards found in Section 601 of Regulation S-K under the
Act) as reflected on the exhibit attached to such opinion, nor
will such actions result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company or
any Guarantor or any statute or any order (which order is
known to such counsel), rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any Guarantor or any of their properties (provided
that such counsel may express no opinion with respect to
compliance with any federal or state securities or anti-fraud
rule or regulation except as otherwise specifically stated in
this opinion), except, with respect to such statutes, orders,
rules or regulations, for such conflicts, breaches, violations
or defaults that would not, individually or in the aggregate,
have a Material Adverse Effect (such counsel being entitled to
rely in respect of their opinion in this clause as to Crown
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<PAGE> 12
upon an opinion of local counsel, provided that such counsel
state that they believe that both you and they are justified
in relying upon such opinion);
(ix) Assuming that the representations and
warranties of the Purchasers in Section 3 hereof are true and
correct, no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of the United States or any State
or territory thereof is required for the issue and sale of the
Securities or the consummation by the Company or the
Guarantors of the transactions contemplated by this Agreement,
the Registration Rights Agreement or the Indenture, except for
the filing and effectiveness of a registration statement by
the Company and the Guarantors with the Commission pursuant to
the Act and qualification of the Indenture under the Trust
Indenture Act and except that such counsel need express no
opinion as to state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the
Purchasers;
(x) The statements set forth in the Offering
Circular under the caption "Description of Notes", insofar as
they purport to constitute a summary of the terms of the
Securities, and under the captions "Description of New Senior
Bank Facility" and "Certain U.S. Federal Tax Consequences to
Non-U.S. Holders", insofar as they purport to describe the
provisions of the laws and documents referred to therein,
fairly and accurately summarize, in all material respects, the
matters referred to therein with respect to such legal matters
and documents;
(xi) No registration of the Securities under the
Act, and no qualification of an indenture under the Trust
Indenture Act with respect thereto, is required for the offer,
sale and initial resale of the Securities by the Purchasers in
the manner contemplated by this Agreement assuming that the
representations and warranties of the Purchasers in Section 3
hereof are true and correct; and
(xii) Neither the Company nor any of the Guarantors
is an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the
Investment Company Act.
In rendering such opinion Baker & Botts, L.L.P. may state
that they express no opinion as to the laws of any jurisdiction other
than the Federal laws of the United States, the laws of the State of
Texas, the State of New York and the General Corporation Law of the
State of Delaware. With respect to the opinions relating to Crown in
clauses (i), (iii), (v), (vi), (vii), (viii) and (ix) above, Baker &
Botts need not render such opinions if the Purchasers are provided an
opinion of counsel for Crown (which counsel shall be satisfactory to
you), dated the Time of Delivery, in form and substance satisfactory
to you, to the effect of the opinions in such clauses.
Baker & Botts, L.L.P. shall have also stated that, while they
themselves have not checked the accuracy and completeness of, or
otherwise verified, and are not passing upon and assume no
responsibility for the accuracy or completeness of, the statements
contained in the Offering Circular, except to the limited extent
stated in paragraphs (ii),
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<PAGE> 13
(vi), and (x) above, in the course of their review and discussion of
the contents of the Offering Circular with certain officers and other
representatives of the Company and the Company's independent
accountants, but without independent check or verification, no facts
have come to their attention which cause them to believe that the
Offering Circular (other than the financial statements, schedules and
notes thereto and the other financial information contained therein,
as to which such counsel need express no belief) contained as of its
date, or contains as of the Time of Delivery, an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) On the date of the Offering Circular prior to the
execution of this Agreement and also at the Time of Delivery, Arthur
Andersen LLP shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex II hereto (the
executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex II(a) hereto and a draft of the form of
letter to be delivered as of the Time of Delivery is attached as Annex
II(b) hereto);
(d) (i) Neither the Company nor any Guarantor shall have
sustained since the date of the latest audited financial statements
included in the Offering Circular any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular, and (ii) since the respective
dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt
of the Company or any Guarantor or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company or the Guarantors, otherwise than as set
forth or contemplated in the Offering Circular, the effect of which,
in any such case described in Clause (i) or (ii), is in the judgment
of the Purchasers so material and adverse as to make it impracticable
or inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in this
Agreement and in the Offering Circular;
(e) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's or any Guarantor's
debt securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's or
any Guarantor's debt securities;
(f) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange;
(ii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities; or (iii) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States
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<PAGE> 14
of a national emergency or war, if the effect of any such event
specified in this clause (iii) in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the offering or
the delivery of the Securities on the terms and in the manner
contemplated in the Offering Circular; or (iv) the occurrence of any
material adverse change in the existing financial, political or
economic conditions in the United States or elsewhere which, in the
judgment of the Representatives, would materially and adversely affect
the financial markets or the markets for the Securities and other debt
securities;
(g) The Securities have been designated for trading on
PORTAL;
(h) The Company shall have used its best efforts to
comply with the provisions of Section 5(c) hereof with respect to the
furnishing of offering circulars on the New York Business Day next
succeeding the date of this Agreement;
(i) The Company shall have entered into the New Bank
Facility with the lenders named therein;
(j) The Company shall have agreed to close on August 14,
1997 the purchase of assets of, and assignment of leases from, General
Cinema Corp. of Oklahoma, Inc. ("General") pursuant to the Purchase
and Assignment Agreement, dated July 25, 1997 and amended July 30,
1997, between the Company and General, and all documents and funds
necessary to effect such closing, in form and substance satisfactory
to you, shall have been deposited in escrow in a manner satisfactory
to you for release on August 14, 1997; and
(k) The Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates of officers of
the Company satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Guarantors
herein at and as of such Time of Delivery, as to the performance by
the Company and the Guarantors of all of their obligations hereunder
to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsection (d) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company, and the Guarantors, jointly and severally,
will indemnify and hold harmless each Purchaser against any losses, claims,
damages or liabilities, joint or several, to which such Purchaser may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or
other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that neither the Company nor the Guarantors shall
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
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<PAGE> 15
reliance upon and in conformity with written information furnished to the
Company by any Purchaser through Goldman, Sachs & Co. expressly for use
therein.
(b) Each Purchaser will indemnify and hold harmless the Company
and the Guarantors against any losses, claims, damages or liabilities to which
the Company and the Guarantors may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular or
the Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Offering Circular or the Offering Circular or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company by such Purchaser through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company and the Guarantors for any legal or
other expenses reasonably incurred by the Company and the Guarantors in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as
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<PAGE> 16
a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Guarantors on the one hand and the Purchasers
on the other from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and the Purchasers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Purchasers, in
each case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Guarantors on the one hand or the Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Guarantors and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities and
Holdings underwritten by it and distributed to investors were offered to
investors exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Purchasers' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 8 shall be in addition to any liability which the Company and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Act; and the obligations of the Purchasers under this Section 8
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or the Guarantors and to each person, if
any, who controls the Company or the Guarantors within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder, you may in
your discretion arrange for you or another party or other parties to purchase
such Securities on the terms contained herein. If
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<PAGE> 17
within thirty-six hours after such default by any Purchaser you do not arrange
for the purchase of such Securities, then the Company shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Securities on such terms.
In the event that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such Securities, or the
Company notifies you that it has so arranged for the purchase of such
Securities, you or the Company shall have the right to postpone the Time of
Delivery for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Offering Circular, or in any other
documents or arrangements, and the Company agrees to prepare promptly any
amendments to the Offering Circular which in your opinion may thereby be made
necessary. The term "Purchaser" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase
of the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal amount of
such Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal amount of
Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities, or if the Company shall not exercise
the right described in subsection (b) above to require non-defaulting
Purchasers to purchase Securities of a defaulting Purchaser or Purchasers, then
this Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Purchaser or the Company, except for the expenses to be borne by
the Company and the Purchasers as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Guarantors and the several
Purchasers, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Purchaser or any controlling person of any
Purchaser, or the Company, the Guarantors, or any officer or director or
controlling person of the Company or the Guarantors, and shall survive delivery
of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Guarantors shall then be under any
liability to any Purchaser except as provided in Sections 6 and 8 hereof; but,
if for any other reason, the Securities are not delivered
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<PAGE> 18
by or on behalf of the Company and the Guarantors as provided herein, the
Company and the Guarantors, jointly and severally, will reimburse the
Purchasers through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Purchasers in making preparations for the purchase, sale and delivery of the
Securities, but neither the Company nor the Guarantors shall then be under
further liability to any Purchaser except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Purchasers, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Purchaser made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Offering Circular, Attention:
Secretary; provided, however, that any notice to a Purchaser pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Purchaser at its address set forth in its Purchasers'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company, the Guarantors and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
or any Guarantor and each person who controls the Company, any Guarantor or any
Purchaser, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Purchaser shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such respective counterparts shall together constitute
one and the same instrument.
-18-
<PAGE> 19
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Purchasers, the
Company and the Guarantors. It is understood that your acceptance of this
letter on behalf of each of the Purchasers is pursuant to the authority set
forth in a form of Agreement among Purchasers, the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Hollywood Theaters, Inc.
By: /s/ James R. Featherstone
---------------------------------
Name:
Title:
Hollywood Theater Holdings, Inc.
By: /s/ James R. Featherstone
---------------------------------
Name:
Title:
Crown Theater Corp.
By: /s/ James R. Featherstone
---------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
BancAmerica Securities, Inc.
By: /s/ Goldman, Sachs & Co.
--------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
-19-
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount of
Securities
to be
Purchaser Purchased
--------- ------------
<S> <C>
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,000,000
BancAmerica Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000,000
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,000,000
=============
</TABLE>
-20-
<PAGE> 21
ANNEX I
(1) The Securities have not been and will not be registered under
the Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Regulation S
under the Act or pursuant to an exemption from the registration requirements of
the Act. Each Purchaser represents that it has offered and sold the
Securities, and will offer and sell the Securities (i) as part of their
distribution at any time and (ii) otherwise until 40 days after the later of
the commencement of the offering and the Time of Delivery, only in accordance
with Rule 903 of Regulation S or Rule 144A under the Act. Accordingly, each
Purchaser agrees that neither it, its affiliates nor any persons acting on its
or their behalf has engaged or will engage in any directed selling efforts with
respect to the Securities, and it and they have complied and will comply with
the offering restrictions requirement of Regulation S. Each Purchaser agrees
that, at or prior to confirmation of sale of Securities (other than a sale
pursuant to Rule 144A), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meaning given to them by Regulation
S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with its affiliates or with the prior
written consent of the Company.
(2) Notwithstanding the foregoing, Securities in registered form
may be offered, sold and delivered by the Purchasers in the United States and
to U.S. persons pursuant to Section 3 of this Agreement without delivery of the
written statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has
not offered or sold and prior to the date six months after the date of issue of
the Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements)
A-1
<PAGE> 22
(Exemptions) Order 1996 of Great Britain or is a person to whom the document
may otherwise lawfully be issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver
any of the Securities in any jurisdiction outside the United States except
under circumstances that will result in compliance with the applicable laws
thereof, and that it will take at its own expense whatever action is required
to permit its purchase and resale of the Securities in such jurisdictions.
Each Purchaser understands that no action has been taken to permit a public
offering in any jurisdiction outside the United States where action would be
required for such purpose. Each Purchaser agrees not to cause any
advertisement of the Securities to be published in any newspaper or periodical
or posted in any public place and not to issue any circular relating to the
Securities, except in any such case with Goldman, Sachs & Co.'s express written
consent and then only at its own risk and expense.
A-2
<PAGE> 23
ANNEX II
Pursuant to Section 7(d) of the Purchase Agreement, the accountants
shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries under rule 101 of the
American Institute of Certified Public Accountants' Code of
Professional Conduct, and its interpretations and rulings;
(ii) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the most recent fiscal year and for the
period from the Company's inception through December 31, 1995 included
in the Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such periods;
(iii) On the basis of limited procedures not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Offering Circular are
not in conformity with generally accepted accounting
principles applied on the basis substantially consistent with
the basis for the audited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and
balance sheet items included in the Offering Circular do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were
not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
consolidated financial statements included in the Offering
Circular;
(C) the unaudited financial statements which were
not included in the Offering Circular but from which were
derived any unaudited condensed financial statements referred
to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Offering Circular and
referred to in Clause (B) were not determined on a basis
substantially consistent with the basis for the audited
consolidated financial statements included in the Offering
Circular;
<PAGE> 24
(D) any unaudited pro forma consolidated
condensed financial statements included in the Offering
Circular do not comply as to form in all material respects
with the applicable accounting requirements or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five
days prior to the date of such letter, there have been any
changes in the consolidated capital stock or any increase in
the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Purchasers, or any increases in any items specified by the
Purchasers, in each case as compared with amounts shown in the
latest balance sheet included in the Offering Circular except
in each case for changes, increases or decreases which the
Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(F) for the period from the date of the latest
financial statements included in the Offering Circular to the
specified date referred to in Clause (E) there were any
decreases in consolidated revenues or any increases in
operating loss or the total or per share amounts of
consolidated net loss, or any increases or decreases in any
items specified by the Purchasers, in each case as compared
with the comparable period of the preceding year and with any
other period of corresponding length specified by the
Purchasers, except in each case for decreases or increases
which the Offering Circular discloses have occurred or may
occur or which are described in such letter; and
(iv) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (ii) and (iii) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Offering
Circular, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
2
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
August 7, 1997, among HOLLYWOOD THEATER HOLDINGS, INC., a Delaware corporation
(the "Parent"), HOLLYWOOD THEATERS, INC., a Delaware corporation (the
"Company"), the several financial institutions from time to time party to this
Agreement (collectively, the "Banks"; individually, a "Bank"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent for the
Banks.
WHEREAS, the Parent, the Company, Administrative Agent and Bank of
America Illinois ("Original Bank") are parties to that Credit Agreement dated
as of November 1, 1996 (as amended, supplemented or otherwise modified prior to
the date hereof, the "Existing Credit Agreement") pursuant to which Original
Bank made the Existing Term Loans and the Existing Revolving Loans to the
Company and such Existing Term Loans and Existing Revolving Loans remain
outstanding; and
WHEREAS, BofA is the successor by merger to the Original Bank; and
WHEREAS, the parties hereto wish to amend and restate the Existing
Credit Agreement to (a) effect and permit the Recapitalization and (b)
otherwise amend and restate the Existing Credit Agreement in its entirety as
more fully set forth herein; and
WHEREAS, as part of the Recapitalization, the Existing Term Loans and
the Existing Revolving Loans shall be converted to Revolving Loans as provided
herein and the Banks shall make available to the Company a revolving credit
facility in an initial amount not to exceed $50,000,000 in the aggregate, which
amount may be increased at the option of any Bank to an amount not to exceed
$75,000,000 in the aggregate pursuant to Section 2.16 hereof, all as provided
herein; and
WHEREAS, as part of the Recapitalization, the Issuing Bank shall,
upon request of the Company from time to time, issue Letters of Credit in an
aggregate amount outstanding from time to time not to exceed $3,000,000, all as
provided more particularly herein; and
WHEREAS, as part of the Recapitalization, the Banks shall purchase
and assume, as of the Effective Date, all of the Banks' rights and obligations
under the Existing Credit Agreement as amended and restated herein and, after
giving effect to such purchase as of the Effective Date, the Commitment of and
the amount of Loans owing to each of the Banks will be as set forth on Schedule
2.1; and
WHEREAS, on or before the Effective Date, the Company shall
consummate the Recapitalization;
1
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following meanings:
"Acceleration": as defined in subsection 8.2(b).
"Acquisition": any transaction or series of related transactions by
a Hollywood Entity for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of one or more Theaters, (b) the acquisition of all or a
material portion of the assets of a Person, or of any business or division of a
Person, (c) the acquisition of greater than 50% of the Capital Stock of any
Person, (d) a merger or consolidation or any other combination with another
Person (other than the Parent, the Company or a Subsidiary) provided that the
Parent, the Company or a Hollywood Entity, as applicable, is the surviving
entity or (e) a Land Acquisition.
"Acquisition Costs": with respect to any Acquisition, the sum, as
calculated at the time of such Acquisition (without duplication), of (a) the
net purchase price of such Acquisition after accounting for customary closing
adjustments, (b) the outstanding amount of any Indebtedness assumed by any
Hollywood Entity in connection with such Acquisition, (c) the outstanding
amount of any Indebtedness secured by Liens encumbering the property acquired
pursuant to such Acquisition and (d) the outstanding amount of any other
Indebtedness incurred by any Hollywood Entity in connection with such
Acquisition.
"Adjustment Date": the second Business Day following receipt by the
Administrative Agent of a Compliance Certificate in respect of the then most
recently ended fiscal quarter pursuant to subsection 6.3(b).
"Administrative Agent": BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9.
"Administrative Agent-Related Persons": BofA and any successor agent
arising under Section 9.9, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Administrative Agent's Payment Office": the address for payments
set forth on Schedule 11.2 or such other address as the Administrative Agent
may from time to time specify.
2
<PAGE> 3
"Affected Bank": as defined in Section 3.7.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Aggregate Specified Swap Amount": at any time, the sum of all
Specified Swap Amounts then owing to all Swap Providers.
"Agreement": this Credit Agreement, as amended, supplemented,
restated or otherwise modified from time to time.
"Applicable Margin": for the periods (a) commencing on the Effective
Date and ending on the day immediately preceding the first Adjustment Date and
(b) commencing on the first Adjustment Date and ending on the day immediately
preceding the next succeeding Adjustment Date, the rate per annum for the
relevant type of Loan set forth below opposite the Consolidated Total Leverage
Ratio determined in accordance with this Agreement as at the end of the fiscal
quarter most recently ended prior to the first day of such period:
<TABLE>
<CAPTION>
Eurodollar Base Rate
Period Rate Loans Loans
------ ---------- -----
<S> <C> <C>
Consolidated Total Leverage
Ratio is equal to or greater
than 5.0 to 1.0 2.500% 1.500%
Consolidated Total Leverage
Ratio is equal to or greater
than 4.5 to 1.0 but less
than 5.0 to 1.0 2.250% 1.250%
Consolidated Total Leverage
Ratio is equal to or greater
than 4.0 to 1.0 but less
than 4.5 to 1.0 1.750% 0.750%
Consolidated Total Leverage
Ratio is equal to or greater
than 3.5 to 1.0 but less
than 4.0 to 1.0 1.375% 0.375%
Consolidated Total Leverage
Ratio is less than 3.5 to 1.0 1.000% 0.00%
</TABLE>
3
<PAGE> 4
The Applicable Margin in effect from the Effective Date until the first
Adjustment Date shall be determined on the basis of the Consolidated Total
Leverage Ratio set forth in the Compliance Certificate delivered on the
Effective Date. In the event that the Company fails to deliver a Compliance
Certificate for any fiscal quarter when due, then, commencing on the date on
which such Compliance Certificate is due and ending on the date the Company so
delivers such Compliance Certificate, the Applicable Margin shall be an amount
equal to the sum of (i) the Applicable Margin in effect hereunder on the date
immediately preceding the subject Adjustment Date (the "Prior Applicable
Margin") and (ii) the amount set forth below:
(A) in the event that the Prior Applicable Margin was equal to or
less than 2.00% in the case of Eurodollar Rate Loans, or 1.00% in the case of
Base Rate Loans, .50%; and
(B) in the event that the Prior Applicable Margin was greater
than 2.00% in the case of Eurodollar Rate Loans, or 1.00% in the case of Base
Rate Loans, .25%.
"Arranger": BancAmerica Securities, Inc., a Delaware corporation.
"Assignee": as defined in Section 11.8.
"Assignment and Acceptance": an agreement in the form of Exhibit E.
"Attorney Costs": includes all reasonable fees and disbursements of
any law firm or other external counsel, the reasonable allocated cost of
internal legal services and all reasonable disbursements of internal counsel.
"Bank": the institutions specified in the introductory clause
hereto. Unless the context otherwise clearly requires, "Bank" includes any such
institution in its capacity as a Swap Provider. Unless the context otherwise
clearly requires, references to any such institution as a "Bank" shall also
include any of such institution's Affiliates that may at any time of
determination be Swap Providers.
"Bankruptcy Code": the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Base Rate": for any day, the higher of: (a) 0.50% per annum above
the latest Federal Funds Rate in effect on such day; and (b) the rate of
interest in effect on such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." The "reference rate" is
a rate set by BofA based upon various factors, including BofA's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing
4
<PAGE> 5
some loans, which may be priced at, above, or below such announced rate. Any
change in the reference rate announced by BofA shall take effect at the opening
of business on the day specified in the public announcement of such change.
"Base Rate Loan": a Loan that bears interest based on the Base Rate.
"Beacon": The Beacon Group III - Focus Value Fund, L.P., a Delaware
limited partnership.
"BofA": Bank of America National Trust and Savings Association, a
national banking association.
"Borrowing": a borrowing hereunder consisting of Loans of the same
Type made to the Company on the same day by the Banks under Article II, and,
other than in the case of Base Rate Loans, having the same Interest Period.
"Borrowing Date": any date on which a Borrowing occurs under Section
2.3.
"Business Day": any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or San Francisco or Dallas, Texas
are authorized or required by law to close and, if the applicable Business Day
relates to any Eurodollar Rate Loan, such a day on which dealings are carried
on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation": any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any commercial bank or of any corporation controlling a
commercial bank.
"Capital Expenditures": for any period, with respect to any Person,
the aggregate of all expenditures by such person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) which should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries. Notwithstanding
the foregoing, there shall be excluded from Capital Expenditures the proceeds
arising out of any Event of Loss and expenditures incurred in connection with
Acquisitions and Construction Projects.
"Capital Expenditures Cap": as defined in Section 7.16.
"Capital Stock": (a) in the case of a corporation, any equity
security issued by that corporation; and (b) in the case of any other entity,
any share, membership, partnership or other percentage interest, unit of
participation or other equivalent (however designated) of a corporate equity
security; and (c) any and all warrants, rights or options to purchase any of
the foregoing.
5
<PAGE> 6
"Capitalized Lease": any lease the obligations under which have
been, or in accordance with GAAP are required to be, recorded on the books of
the Parent, the Company or any Subsidiary as a capital lease liability.
"Cash Collateralize": to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Administrative Agent, the Issuing
Bank and the Banks, as additional collateral for the L/C Obligations, cash or
deposit account balances pursuant to documentation in form and substance
satisfactory to the Administrative Agent and the Issuing Bank (which documents
are hereby consented to by the Banks). Derivatives of such term shall have
corresponding meaning.
"CERCLA": as defined in the definition of "Environmental Laws."
"Code": the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral": all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Parent, the Company or any
Subsidiary in or upon which a Lien now or hereafter exists in favor of the
Banks, or the Administrative Agent on behalf of the Banks, whether under this
Agreement or under any other documents executed by any such Person and
delivered to the Administrative Agent or the Banks.
"Collateral Documents": collectively, (a) the Security Agreement,
the Mortgages, the Pledge Agreement, the Subsidiaries Guaranty and all other
security agreements, mortgages, deeds of trust, patent and trademark
assignments, lease assignments, guaranties and other similar agreements between
the Parent, the Company or any Subsidiary and the Banks, or the Administrative
Agent for the benefit of the Banks, now or hereafter delivered to the Banks or
the Administrative Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with the Uniform Commercial Code or comparable
law) against the Parent, the Company or any Subsidiary as debtor in favor of
the Banks, or the Administrative Agent for the benefit of the Banks, as secured
party, and (b) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.
"Commitment": as to each Bank, its Revolving Loan Commitment.
6
<PAGE> 7
"Compliance Certificate": a certificate duly executed by a
Responsible Officer of the Parent and the Company, substantially in the form of
Exhibit C (with such changes thereto as may be agreed upon from time to time by
the Administrative Agent and the Parent and the Company), and including
therein, among other things, calculations supporting compliance with Article
VII.
"Consolidated Cash Interest": for any period with respect to the
Parent, the Company and the Subsidiaries, without duplication of amounts, the
amounts classified as interest expense in determining Consolidated Net Income,
other than such interest expense that is not payable in cash during such period
(e.g., interest or dividends on securities paid in additional securities,
imputed interest and amortization of original issue discount). Notwithstanding
the foregoing, Consolidated Cash Interest for any period ending prior to the
first anniversary of the Effective Date shall be determined by multiplying (a)
Consolidated Cash Interest for the period beginning on the Effective Date and
ending on the last day of the applicable period, by (b) the quotient of (i)
365, divided by (ii) the number of days in the applicable period.
"Consolidated Current Assets": at a particular date, all amounts
which would, in conformity with GAAP, be classified as "current assets" on a
consolidated balance sheet of the Parent and its Subsidiaries at such date.
"Consolidated Current Liabilities": at a particular date, all
amounts which would, in conformity with GAAP, be classified as "current
liabilities" on a consolidated balance sheet of the Parent and its Subsidiaries
at such date.
"Consolidated Fixed Charge Coverage Ratio": as of the end of any
fiscal quarter, the ratio of (a) the sum of Consolidated Operating Cash Flow
plus aggregate rental expense for the Hollywood Entities for the prior twelve
month period ending on such date to (b) Consolidated Fixed Charges for the
prior twelve month period ending on such date.
"Consolidated Fixed Charges": for any period with respect to the
Parent, the Company and the Subsidiaries, the sum of the aggregate amount
(without duplication) of (a) rental expense (including rental payments under
real property operating leases) of such Persons during such period, (b)
Consolidated Cash Interest for such period, (c) Capital Expenditures of such
Persons during such period, (d) required principal repayments of all
Indebtedness of such Persons during such period (excluding the repayment of the
outstanding Loans on the Maturity Date), (e) Permitted Restricted Payments made
by such Person in respect of its Capital Stock during such period pursuant to
subsection 7.12(a)(iii), and (f) income tax expenses for the Hollywood
Entities. Notwithstanding the foregoing, Consolidated Fixed Charges for any
period ending prior to the first anniversary of the Effective Date shall be
determined by multiplying (a) Consolidated Fixed Charges for the period
beginning on the Effective Date and ending on the last day of the applicable
period, by (b) the quotient of (i) 365, divided by (ii) the number of days in
the applicable period.
7
<PAGE> 8
"Consolidated Interest Coverage Ratio": as of the end of any fiscal
quarter, the ratio of: (a) Consolidated Operating Cash Flow for the prior
twelve month period ending on such date to (b) Consolidated Cash Interest for
the prior twelve month period ending on such date.
"Consolidated Net Income": for any period with respect to the
Parent, the Company and the Subsidiaries, the net income (or loss) of such
Persons for that period, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Operating Cash Flow": for any period, with respect to
the Parent, the Company and the Subsidiaries, Consolidated Net Income for such
period plus, without duplication and to the extent deducted in determining
Consolidated Net Income for such period, the sum of (a) total income tax
expense, (b) interest expense, amortization or writeoff of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary expenses or
losses (including, whether or not otherwise includable as a separate item in
the statement of such Consolidated Net Income for such period, losses on sales
of assets outside of the ordinary course of business) and (f) any other noncash
charges (excluding inventory writedowns), and minus, without duplication and to
the extent included in determining Consolidated Net Income for such period, the
sum of (a) non-cash interest income, (b) any extraordinary income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales
of assets outside of the ordinary course of business) and (c) any other noncash
income, all as determined on a consolidated basis.
Notwithstanding the foregoing, Consolidated Operating Cash Flow shall
be adjusted as set forth below to account for (a) Theaters which are newly
constructed by a Hollywood Entity, (b) Theaters which are substantially
renovated by a Hollywood Entity and/or (c) Theaters which were newly
constructed prior to acquisition by a Hollywood Entity and, in each such case,
have been open and operating for less than one year:
(i) with respect to the recently constructed Theaters in
Beaumont, Texas, Tyler, Texas and Lawrence, Kansas, (A) Consolidated Operating
Cash Flow for the Effective Date shall be determined by adding $2,987,000 to
Consolidated Operating Cash Flow as otherwise applicable for such date and (B)
Consolidated Operating Cash Flow for the Test Period ending September 30, 1997
shall be determined by adding $2,390,000 to Consolidated Operating Cash Flow as
otherwise applicable to such Test Period; and
(ii) with respect to (A) any new Theater constructed by any
Hollywood Entity from and after the Effective Date, (B) any existing Theater
substantially renovated by any Hollywood Entity from and after the Effective
Date (such that none of the screens in such Theater were in operation during
such renovation) and/or (C) any Theater acquired from and after the Effective
Date which had been newly constructed by a third party prior to the acquisition
of such Theater by a Hollywood Entity and not operated by such third party,
Consolidated Operating Cash
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Flow for any Test Period during which, in each such case, such Theater shall
have been open and operating (in the case of Theaters referenced in clause (B),
re-opened and operating) for at least six consecutive months but not more than
twelve consecutive months (in the case of Theaters referenced in clause (C),
such six month period shall include any period of operation by any predecessor
owner(s) to a Hollywood Entity) shall be calculated by annualizing the actual
applicable revenues and expenses for such New Theater as if such New Theater
had been in operation for the full twelve months prior to such Test Period.
For the purposes of this clause (ii), whenever income and expenses in respect
of Theaters of a type referenced in the foregoing clauses (A), (B) or (C) are
to be annualized in connection with the determination of Consolidated Operating
Cash Flow, such calculations shall be determined in good faith by the chief
financial officer of the Company and shall be reasonably satisfactory in all
respects to the Administrative Agent.
"Consolidated Senior Leverage Ratio": as of the end of any fiscal
quarter, the ratio of (a) Senior Debt on such day (after giving effect to all
prepayments made on such day) to (b) Consolidated Operating Cash Flow for the
prior twelve month period ending on such date.
"Consolidated Total Debt": at any date, the sum (without
duplication) of all Indebtedness of the Parent, the Company and the
Subsidiaries outstanding on such date.
"Consolidated Total Cash": at any date, the sum of all cash and cash
equivalents of the Parent, the Company and the Subsidiaries as of such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Leverage Ratio": as of the end of any fiscal
quarter, the ratio of (a) the difference between (i) Consolidated Total Debt on
such day minus (ii) (Consolidated Total Cash on such day less $1,000,000) (in
each case, after giving effect to all prepayments made on such day) to (b)
Consolidated Operating Cash Flow for the prior twelve month period ending on
such date.
"Consolidated Working Capital": the excess of Consolidated Current
Assets over Consolidated Current Liabilities.
"Construction Advance Compliance Certificate": a certificate duly
executed by a Responsible Officer of the Parent and the Company, substantially
in the form of Exhibit N (with such changes thereto as may be agreed upon from
time to time by the Administrative Agent and the Parent and the Company), and
including therein, among other things, calculations supporting compliance with
Article VII after taking into consideration the applicable Construction
Advance(s).
"Construction Advances": any Revolving Loan made hereunder the
proceeds of which are to be used in whole or in part in connection with (a)
costs and expenses related to any Land Acquisition and/or (b) the "hard" and
"soft" costs of construction incurred or to be incurred by any Hollywood Entity
in connection with a Construction Project (collectively, "Land
Acquisition/Construction Costs").
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"Construction Project": any construction related to a Theater,
including construction of a New Theater or the material renovation or
modification (excluding normal maintenance) of any Theater or any screen
addition at any Theater.
"Contingent Obligation": as to any Person, without duplication, any
direct or indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise acquire such
primary obligations or any security therefor, (ii) to advance or provide funds
for the payment or discharge of any such primary obligation, or to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation, or (iv) otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies
or other property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the case of
other Contingent Obligations other than in respect of Swap Contracts, shall be
equal to the maximum reasonably anticipated liability in respect thereof and,
in the case of Contingent Obligations in respect of Swap Contracts, shall be
equal to the Swap Termination Value. Notwithstanding the foregoing,
obligations in respect of indemnities and surety bonds, appeal bonds and
similar instruments which (a) are granted or which arise in the ordinary course
of business, including in connection with Acquisitions and Dispositions,
Construction Projects, lease agreements and other Contractual Obligations and
litigation, and (b) are not assurances with respect to Indebtedness of the
types described in clauses (a) through (f) of the definition of Indebtedness
shall not constitute "Contingent Obligations" for purposes of this Agreement.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement
to which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date": any date on which, under Section
2.4, the Company (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
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"Credit Extension": the collective reference to (a) the making of any
Revolving Loans hereunder, and (b) the Issuance of any Letters of Credit
hereunder, including the Existing BofA Letter of Credit.
"Credit Obligations": as defined in Section 7.17.
"Crown": Crown Theatre Corporation, a Missouri corporation.
"Crown Agreement": that certain Asset and Stock Purchase Agreement
dated as of August 26, 1996, by and between Richard M. Durwood, individually
and as trustee pursuant to Trust Agreement dated May 7, 1980, Crown Cinema
Corporation, Crown, and the Company and the Parent, as amended by letter
agreement dated November 1, 1996.
"Crown Assets": the stock of Crown acquired by the Parent and the
assets acquired by the Company, in each case, pursuant to the Crown Agreement.
"Default": any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Default Rate": the rate of interest applicable from time to time
under subsection 2.9(c).
"Delayed Construction Project": as defined in Section 7.20.
"Disposition": the sale, lease, conveyance or other disposition of
assets by any Hollywood Entity to any Person (other than to a Hollywood Entity
other than the Parent), including Sale and Leaseback Transactions, and the sale
or transfer by any Hollywood Entity of any Capital Stock issued by any
Subsidiary held by such transferor Person to any Person (other than to a
Hollywood Entity).
"Dollars", "dollars" and "$": lawful money of the United States.
"Effective Date": the date on which all conditions precedent set
forth in Section 4.1 are satisfied or waived by all Banks (or, in the case of
subsection 4.1(e), waived by the Person entitled to receive such payment).
"Eligible Assignee": (a) any bank, insurance company, mutual fund
or other financial institution or (b)any other Person which is an "accredited
investor" as defined in Regulation D of the Securities Act of 1933, as amended,
excluding those Persons described in clauses (4), (5) and (6) of such
definition.
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"Environmental Claims": all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility of the Parent, the Company or any Subsidiary for violation of
any Environmental Law, or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal, remedial
or response costs, restitution, civil or criminal penalties, injunctive relief,
or other type of relief, resulting from or based upon the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental, placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Material at, in, or from property, whether or not owned by the
Parent, the Company or any Subsidiary.
"Environmental Laws": all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
Environmental Permits and all administrative orders and directed duties of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and natural resource preservation matters;
including the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation
and Recovery Act, the Toxic Substances Control Act and the Emergency Planning
and Community Right-to-Know Act.
"Environmental Permits": as defined in Section 5.12.
"ERISA": the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate": any trade or business (whether or not
incorporated) under common control with the Parent or the Company within the
meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event": (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Parent or the Company or any ERISA Affiliate from
a Pension Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Parent or the
Company or any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent
to terminate, the treatment of a Plan amendment as a termination under Section
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which
could reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the
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imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, on the Parent or the
Company or any ERISA Affiliate.
"Eurodollar Rate": for any day in any Interest Period, with respect
to Eurodollar Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/100th of 1%) determined by the
Administrative Agent as follows:
IBOR
------------------------------------
Eurodollar Rate = 1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentages": for any day in any Interest Period
the maximum reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day under regulations issued from time to
time by the FRB for determining the maximum reserve requirement applicable to
the Administrative Agent (including any emergency, supplemental or other
marginal reserve requirement) with respect to "Eurocurrency liabilities" having
a term equal to such Interest Period (as such term is currently defined in
Regulation D of the FRB, or under any similar or successor regulation with
respect to Eurocurrency liabilities or Eurocurrency funding); and
"IBOR" means the rate of interest per annum determined by the
Administrative Agent as the rate at which dollar deposits in the approximate
amount of BofA's Eurodollar Rate Loan for such Interest Period offered by
BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be
designated for such purpose by BofA), to major banks in the offshore dollar
interbank market at their request at approximately 11:00 a.m. (New York City
time) two Business Days prior to the commencement of such Interest Period.
The Eurodollar Rate shall be adjusted automatically as to all
Eurodollar Rate Loans then outstanding as of the effective date of any change
in the Eurodollar Reserve Percentage.
"Eurodollar Rate Loan": a Loan that bears interest based on the
Eurodollar Rate.
"Eurodollar Reserve Percentage": as defined in the definition of
"Eurodollar Rate".
"Event of Default": any of the events or circumstances specified in
Section 8.1.
"Event of Loss": with respect to any fee or leasehold interest in
real property of any Hollywood Entity or any other material property of any
Hollywood Entity, any of the following: (a) any loss, destruction or damage of
such property; (b) any sale, transfer, conveyance or other Disposition of such
property in lieu of or in settlement of any pending or threatened institution
of any proceedings for the condemnation or seizure of such property or for the
exercise of any right of eminent domain; or (c) any actual condemnation,
seizure or taking, by exercise of the power of
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<PAGE> 14
eminent domain or otherwise, of such property, or confiscation of such property
or the requisition of the use of such property.
"Excess Cash Flow": for any twelve month period, the excess of (a)
the sum, without duplication, of (i) Consolidated Net Income for such twelve
month period, (ii) an amount equal to the amount of all non-cash charges
deducted in arriving at such Consolidated Net Income, (iii) decreases in
Consolidated Working Capital (other than cash) for such twelve month period and
(iv) an amount equal to the aggregate net non-cash loss on the sale, lease,
transfer or other disposition of assets by the Parent, the Company and their
Subsidiaries during such twelve month period (other than sales of inventory in
the ordinary course of business), to the extent deducted in arriving at such
Consolidated Net Income over (b) the sum, without duplication, of (i) an amount
equal to the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by the Parent,
the Company and their Subsidiaries in cash during such twelve month period on
account of Capital Expenditures and Construction Projects (excluding the
principal amount of Indebtedness incurred in connection with such expenditures,
but including amounts repaid during such period in respect of such
Indebtedness), (iii) the aggregate amount of all payments and prepayments of
Revolving Loans to the extent accompanying permanent reductions of the
Revolving Commitments (other than pursuant to subsection 2.7(b), but not
including any payments or prepayments made in respect of the Existing Term
Loans and/or the Existing Revolving Loan), (iv) the aggregate amount of all
regularly scheduled principal payments of Indebtedness of the Parent and the
Company permitted hereunder and its Subsidiaries made during such twelve month
period (other than under this Agreement), (v) increases in Consolidated Working
Capital (other than cash) for such twelve month period, and (vi) an amount
equal to the aggregate net non-cash gain on the sale, lease, transfer or other
disposition of assets by the Parent, the Company and their Subsidiaries during
such twelve month period (other than sales of inventory in the ordinary course
of business), to the extent included in arriving at such Consolidated Net
Income.
"Excess Cash Flow Application Date": as defined in subsection
2.7(b).
"Exchange Act": the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
"Excluded Taxes": as defined in the definition of "Taxes".
"Existing BofA Letter of Credit": the collective reference to the
Letters of Credit issued by BofA prior to the Effective Date for the account of
the Company and listed on Schedule 2.17 attached hereto.
"Existing Credit Agreement": as defined in the recitals to this
Agreement.
"Existing Revolving Loans": the revolving loans made by the Banks
parties to the Existing Credit Agreement pursuant to subsection 2.1(b) of the
Existing Credit Agreement.
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"Existing Term Loans": the term loans made by the Banks parties to
the Existing Credit Agreement pursuant to subsection 2.1(a) of the Existing
Credit Agreement.
"FDIC": the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate": for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"Fee Letter": as defined in subsection 2.10(a).
"Fee Mortgaged Properties": all of the Fee Properties, as to which
the Administrative Agent for the benefit of the Banks has been or shall be
granted a Lien pursuant to the Fee Mortgages, and all real properties and the
improvements thereon hereafter acquired in fee by any Hollywood Entity which
are to be mortgaged to secure the obligations of the Obligations.
"Fee Mortgages": each of the mortgages or deeds of trust made by any
Loan Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Banks and encumbering any of the Fee Mortgaged Properties,
substantially in the form of Exhibit G (with such changes thereto as shall be
advisable under the law of the jurisdiction in which such mortgage or deed of
trust is to be recorded), as the same may be amended, supplemented or otherwise
modified from time to time.
"Fee Properties": the real properties listed on Schedule 5.9(a) and
the improvements thereon.
"FRB": the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Funded Debt": as defined in the definition of "Indebtedness".
"Further Taxes": as defined in subsection 3.1(b).
"GAAP": generally accepted accounting principles and practices in
the United States set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature
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and authority within the U.S. accounting profession), which are applicable to
the circumstances as of the date of determination.
"GC Agreement": Purchase and Assignment Agreement dated as of July
25, 1997 by and between General Cinema Corp. of Oklahoma, Inc., as seller, and
the Company, as purchaser, as amended by Amendment No. 1 to Purchase and
Assignment Agreement dated as of July 31, 1997.
"GC Assets": the assets to be acquired by the Company pursuant to
the GC Agreement.
"Governmental Authority": Any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation": as defined in the definition of "Contingent
Obligation."
"Hazardous Materials": all those substances that are regulated by,
or which may form the basis of liability under, any Environmental Law,
including any substance identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Hollywood Entities": the collective reference to the Parent, the
Company and all Subsidiaries from time to time; individually, each a "Hollywood
Entity".
"Honor Date": as defined in subsection 2.17(c).
"Indebtedness": as to any Person, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables arising in the ordinary course of business on customary terms
and accrued expenses and deferred compensation and other pension, benefit and
welfare expenses arising in the ordinary course of business); (c) all
noncontingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by that Person (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all obligations as a lessee
under synthetic or leveraged leases, (h) all indebtedness referred to in
clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property
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(including accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, but only to the extent of the value of such property; and (i) all
Guaranty Obligations in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (h) above. For all purposes of this
Agreement, the Indebtedness of any Person shall include all Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer and with respect to which the holder of such Indebtedness has
recourse to such Person, but only to the extent of such recourse. "Funded
Debt" shall mean the collective reference (without duplication) to the
Indebtedness referred to in clauses (a) and (d) above.
"Indemnified Environmental Liabilities": as defined in Section 11.5.
"Indemnified Liabilities": as defined in Section 11.5.
"Indemnified Person": as defined in Section 11.5.
"Independent Auditor": as defined in subsection 6.1(a).
"Ineligible Securities": as defined in Section 7.8.
"Information": written information, including, without limitation,
certificates, reports, statements (excluding financial statements of the
Parent, the Company and the Subsidiaries) and documents.
"Insolvency Proceeding": with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling
of assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors; undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.
"Intercompany Indebtedness": as defined in subsection 7.6(f).
"Interest Payment Date": as to any Loan other than a Base Rate Loan,
the last day of each Interest Period applicable to such Loan and, as to any
Base Rate Loan, the last Business Day of each calendar quarter and each date
such Loan is converted into another Type of Loan, provided, however, that if
any Interest Period for a Eurodollar Rate Loan exceeds three months, the date
that falls three months after the beginning of such Interest Period and after
each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period": as to any Eurodollar Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is
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converted into or continued as an Eurodollar Rate Loan, and, except as provided
in clause (e) below, ending on the date one, two, three or six months
thereafter as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that is not
a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall
end on the last Business Day of the calendar month at the end of such Interest
Period;
(c) no Interest Period shall extend beyond the Maturity Date;
(d) no Interest Period applicable to a Revolving Loan shall extend
beyond any date upon which is due any scheduled principal payment in respect of
the Revolving Loans except, unless the aggregate principal amount of Revolving
Loans represented by Base Rate Loans or Eurodollar Rate Loans having Interest
Periods that will expire on or before such date, equals or exceeds the amount
of such principal payment; and
(e) until the earlier of (i) the date the Administrative Agent
notifies the Company that the primary syndication of the Loans is completed and
(ii) 60 days after the Effective Date, and subject to the provisions of
subsection 3.4(d) hereof, without prior consent of the Administrative Agent, no
Interest Period shall exceed one month with respect to outstanding Revolving
Loans.
"Investment": as defined in Section 7.5.
"IRS": the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issuance Date": as defined in subsection 2.17(a).
"Issue": with respect to any Letter of Credit, to incorporate the
Existing BofA Letter of Credit into this Agreement, or to issue or to extend
the expiry of, or to renew or increase the amount of, such Letter of Credit;
and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
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"Issuing Bank": BofA in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement letter of credit
issuer arising under subsection 9.1(b) or Section 9.9.
"Joint Venture": a single-purpose corporation, partnership, limited
liability company, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now or
hereafter formed by the Company or any of the Subsidiaries with another Person
in order to conduct a common venture or enterprise with such Person.
"Land Acquisition": any acquisition of a fee or leasehold interest
(or a combination thereof) in real property which, at the time of such
acquisition, is not used for operating a Theater.
"Land Acquisition/Construction Costs": as defined in the definition
of Construction Advances.
"Lawrence Property": that certain parcel of real property owned by
the Company and located at 3400 Iowa Street, Lawrence, Kansas.
"L/C Advance": with respect to each Bank, such Bank's participation
in any L/C Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application": an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application": an application form for issuances of standby or
commercial documentary letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing": an extension of credit under subsection 2.17(c)(v)
resulting from a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing of Revolving
Loans under subsection 2.17(c)(iii).
"L/C Commitment": the commitment of the Issuing Bank to Issue, and
the commitment of the Banks severally to participate in, Letters of Credit
(including the Existing BofA Letter of Credit) from time to time Issued or
outstanding under Section 2.17, in an aggregate amount not to exceed on any
date the amount equal to the lesser of (a) $3,000,000 and (b) the aggregate
amount of the Commitments (as the same shall be reduced from time to time in
accordance with the provisions of Sections 2.5 and 2.7); provided that the L/C
Commitment is a part of the combined Commitments, rather than a separate,
independent commitment.
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"L/C Obligations": at any time the sum of (a) the aggregate undrawn
amount of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding
L/C Borrowings.
"L/C-Related Documents": the collective reference to the Letters of
Credit, the L/C Applications, the L/C Amendment Applications and any other
document relating to any Letter of Credit (other than any underlying
transactional document), including any of the Issuing Bank's standard form
documents for letter of credit issuances.
"Leasehold Mortgaged Properties": all of the Leasehold Properties,
as to which the Administrative Agent for the benefit of the Banks has been or
shall be granted a Lien pursuant to the Leasehold Mortgages, and all leasehold
interests in real property and the improvements thereon hereafter acquired by
any Hollywood Entity which are to be mortgaged to secure the Obligations.
"Leasehold Mortgages": each of the leasehold mortgages or deeds of
trust made by any Loan Party in favor of, or for the benefit of, the
Administrative Agent for the benefit of the Banks and encumbering any of the
Leasehold Mortgaged Properties, substantially in the form of Exhibit H (with
such changes thereto as shall be advisable under the law of the jurisdiction in
which such mortgage or deed of trust is to be recorded), as the same may be
amended, supplemented or otherwise modified from time to time.
"Leasehold Properties": the leasehold interest of any Hollywood
Entity now or hereafter acquired in each of the real properties listed on
Schedule 5.9(b) and the improvements thereon.
"Lending Office": as to any Bank, the office or offices of such Bank
specified as its "Lending Office" Lending Office" or "Eurodollar Lending
Office", as the case may be, on Schedule 11.2, or such other office or offices
as the Bank may from time to time notify the Company and the Administrative
Agent.
"Letters of Credit": the Existing BofA Letter of Credit and any
letters of credit (whether standby letters of credit or commercial documentary
letters of credit) Issued by the Issuing Bank pursuant to Section 2.17.
"Lien": any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention agreement,
the interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing
of any financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable law) and
any contingent or other agreement to provide any of the foregoing, but not
including the interest of a lessor under an operating lease.
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"Lien Restriction": as defined in Section 7.17.
"Loan": an extension of credit by a Bank to the Company under
Sections 2.1 through 2.16 which may be a Base Rate Loan or an Eurodollar Rate
Loan (each, a "Type" of Loan), and includes any Revolving Loan.
"Loan Documents": this Agreement, any Notes, the L/C Related
Documents, the Collateral Documents, the Fee Letter, any documents evidencing
Specified Swap Contracts, and all other documents delivered to the
Administrative Agent or any Bank in connection with this Agreement evidencing
or securing the Obligations, and all amendments, restatements, supplements,
replacements, extensions or other modifications to any of the foregoing.
"Loan Parties": the Parent, the Company and each of the Subsidiaries
that is or becomes a party to a Loan Document.
"Margin Stock": "margin stock" as such term is defined in Regulation
G, T, U or X of the FRB.
"Material Adverse Effect": (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or condition
(financial or otherwise) of the Parent, the Company and the Subsidiaries taken
as a whole; (b) a material impairment of the ability of the Parent, the Company
or any Subsidiary to perform in any material respect under any Loan Document to
which it is a party and to avoid any Event of Default; or (c) a material
adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Parent, the Company or any Subsidiary of any Loan
Document to which it is a party, or (ii) the perfection or priority of any Lien
on material Collateral granted under any of the Collateral Documents.
"Maturity Date": August 7, 2002.
"Maximum Lawful Rate": for any Bank, the maximum rate of interest
which, at the time in question, would not cause the interest charged hereunder
or any other Loan Document to exceed the maximum amount which such Bank would
be allowed to contract for, charge, take, reserve or receive under applicable
law, after taking into account, to the extent required by applicable law, any
and all relevant payments, fees and charges under the Loan Documents.
"Minimum Required Ownership": (a) with respect to Stephenson, the
collective reference to all Capital Stock of the Parent owned by Stephenson on
November 1, 1996, (b) with respect to Beacon for the period beginning on
November 1, 1996 and ending on November 1, 1997, the collective reference to
all Capital Stock of the Parent owned by Beacon on November 1, 1996, and (c)
with respect to Beacon from and after November 1, 1997, beneficial ownership by
Beacon of not less than 51% of the Capital Stock of the Parent; provided,
however, that any sale, transfer or other disposition of Capital Stock of the
Parent by Beacon permitted under the foregoing clause (c) shall not be so sold,
transferred or disposed of for a purchase price of less than its par value; and
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<PAGE> 22
provided, further, that each of the foregoing Minimum Required Ownerships shall
not be applicable from and after the consummation of a public equity offering
of the Capital Stock of the Parent.
"Monetary Event of Default": any Event of Default occurring pursuant
to subsection (a), (e) or (i) of Section 8.1.
"Mortgage Amendments": the collective reference to the mortgage
amendments referred to in subsection 4.1(g)(iii).
"Mortgaged Property": the Fee Mortgaged Properties and the Leasehold
Mortgaged Properties, collectively.
"Mortgages": the Fee Mortgages and the Leasehold Mortgages,
collectively.
"Multiemployer Plan": a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"Net Issuance Proceeds": as to any issuance of debt or equity by any
Person, cash proceeds received or receivable by such Person in connection
therewith, net of reasonable out-of-pocket costs and expenses (including
underwriting fees and commissions) paid or incurred in connection therewith in
favor of any Person not an Affiliate of such Person.
"Net Proceeds": as to any Disposition by a Person other than
pursuant to subsection (a) through (f) of Section 7.3 hereof, proceeds in cash,
checks or other cash equivalent financial instruments as and when received by
such Person, net of: (a) the direct costs relating to such Disposition
excluding amounts payable to such Person or any Affiliate of such Person to the
extent in excess of arms' length costs, (b) sale, use or other transaction
taxes paid or payable by such Person as a direct result thereof, (c) a
reasonable reserve for taxes payable incident to such Disposition (without
duplication of taxes included in clause (b)) and (d) amounts required to be
applied to repay principal, interest and prepayment premiums and penalties on
Indebtedness secured by a Lien on the asset which is the subject of such
Disposition. "Net Proceeds" shall also include proceeds in cash, checks or
other cash equivalent financial instruments paid on account of any Event of
Loss, net of (i) so long as no Event of Default has occurred and is continuing,
all money actually applied to repair, replace or reconstruct the damaged
property or property affected by the condemnation or taking, (ii) so long as no
Event of Default has occurred and is continuing, all of the costs and expenses
reasonably incurred in connection with the collection of such proceeds, award
or other payments, and (iii) any amounts retained by or paid to parties having
superior rights to such proceeds, awards or other payments.
"New Theater": any Theater to be acquired or leased by or
constructed by any Hollywood Entity from and after the Effective Date.
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"Non-monetary Event of Default": any Event of Default other than a
Monetary Event of Default.
"Note": any Revolving Note.
"Notice of Borrowing": a notice in substantially the form of Exhibit
A.
"Notice of Conversion/Continuation": a notice in substantially the
form of Exhibit B.
"Obligations": all advances, debts, liabilities, obligations and
covenants arising under any Loan Document owing by the Parent and the Company
to any Bank, the Administrative Agent, or any Indemnified Person, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising.
"Organization Documents": with respect to any Person, (a) the
articles or certificate of formation, incorporation or organization (or
equivalent organizational documents) of such Person, (b) the bylaws, limited
liability company agreement or regulations (or the equivalent governing
documents) of such Person, (c) all applicable resolutions of the board of
directors (or any committee thereof), or applicable consents of partners or
members and (d) each document setting forth the designation, amount and
relative rights, limitations and preferences of any class or series of such
Person's Capital Stock or of any rights in respect of such Person's Capital
Stock.
"Other Taxes": any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents other than Taxes, Further Taxes and
Excluded Taxes.
"Participant": as defined in subsection 11.8(d).
"PBGC": the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan": a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Parent or the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Liens": as defined in Section 7.2.
"Permitted Restricted Payments": as defined in Section 7.12.
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"Permitted Swap Obligations": all obligations (contingent or
otherwise) of the Parent, the Company or any Subsidiary existing or arising
under Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such Person in
the ordinary course of business for the purpose of directly mitigating risks
associated with liabilities, commitments or assets held by such Person, or
changes in the value of securities issued by such Person in conjunction with a
securities repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view;" (b) such Swap Contracts do
not contain any provision ("walk-away" provision) exonerating the
non-defaulting party from its obligation to make payments on outstanding
transactions to the defaulting party; and (c) a perfected security interest in
such Person's rights and interests to and in such Swap Contracts has been
granted, and exists, in favor of the Administrative Agent, for the benefit of
the Banks, as collateral for the Obligations.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan": an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Parent or the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and includes
any Pension Plan.
"Pledge Agreement": the collective reference to (i) that Amended and
Restated Pledge and Security Agreement to be executed and delivered by the
Parent, substantially in the form of Exhibit I-1 and (ii) that Pledge and
Security Agreement to be executed and delivered by the Company, substantially
in the form of Exhibit I-2, as each of the same may be amended, supplemented or
otherwise modified from time to time.
"Pledged Collateral": as defined in the Pledge Agreement.
"Principal Payment": as defined in Section 2.8.
"Principal Payment Date": as defined in Section 2.8.
"Pro Rata Share": as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all
Banks.
"Recapitalization": the collective reference to (a) the purchase by
the Banks of the Existing Term Loans, the Existing Revolving Credit Loans and
the Revolving Loan Commitments (as defined in the Existing Credit Agreement)
under the Existing Credit Agreement, (b) the conversion and extension of the
Existing Term Loans to Revolving Credit Loans as provided herein and the
amendment, restatement and extension of the Existing Revolving Loans as
provided herein,
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(c) the amendment and restatement of the Existing Credit Agreement as provided
herein, and (d) the issuance by the Company of the Senior Subordinated Notes.
"Replacement Banks": as defined in Section 3.7.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Required Banks": at any time Banks then holding in excess of 50% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having in excess of 50% of the
Commitments, or, if the Commitments have been terminated and no Loans are then
outstanding, Banks then owed in excess of 50% of the Aggregate Specified Swap
Amount.
"Requirement of Law": as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon that Person
or any of its property or to which that Person or any of its property is
subject.
"Responsible Officer": as to either the Parent or the Company, the
chief executive officer or the president of such Person or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of such Person, or any other officer having substantially the same
authority and responsibility.
"Restricted Payments": as defined in subsection 7.12(a).
"Revolving Loan": as defined in Section 2.1.
"Revolving Loan Commitment": for each Bank, initially, the amount
set forth on Schedule 2.1 as the "Revolving Loan Commitment" of such Bank, as
the same is reduced, increased or otherwise adjusted from time to time pursuant
to Section 2.5, 2.7, 2.16 or subsection 11.8(a)).
"Revolving Loan Commitment Increase": as defined in Section 2.16.
"Revolving Loan Commitment Increase Amount": as defined in Section
2.16.
"Revolving Loan Commitment Reduction Amount": as defined in Section
2.5.
"Revolving Loan Commitment Reduction Date": as defined in Section
2.5.
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"Revolving Note": a promissory note executed by the Company in favor
of a Bank pursuant to subsection 2.2(b), in substantially the form of Exhibit F.
"Revolving Termination Date": the earlier to occur of:
(a) the Maturity Date; and
(b) the date on which all of the Commitments terminate in accordance
with the provisions of this Agreement.
"Sale and Leaseback Transaction": any arrangement, directly or
indirectly, with any Person whereby a seller or transferor shall sell or
otherwise transfer any real or personal property and then or thereafter lease,
or repurchase under an extended purchase contract, conditional sales or other
title retention agreement, the same or similar property.
"SEC": the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Security Agreement": the Amended and Restated Security Agreement to
be executed and delivered by the Company, substantially in the form of Exhibit
J, as the same may be amended, supplemented or otherwise modified from time to
time.
"Senior Debt": at any date, all Indebtedness of the Hollywood
Entities outstanding on such date other than in respect of the Senior
Subordinated Notes and the Senior Subordinated Indenture.
"Senior Subordinated Indenture": the Indenture dated August 7, 1997
between the Company, the Parent and Crown as guarantors, and U.S. Trust Company
of Texas. N.A., as the same may be amended, supplemented or otherwise modified
from time to time in accordance with Section 7.20 and any other indenture which
governs the Senior Subordinated Notes which is substantially identical to such
original Indenture which replaces such Indenture in connection with the
exchange of the Senior Subordinated Notes.
"Senior Subordinated Notes": the Company's $110,000,000 of 10 5/8%
Senior Subordinated Notes due August 1, 2007 issued pursuant to the Senior
Subordinated Indenture, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with Section 7.20 and all senior
subordinated notes issued in exchange for such Senior Subordinated Notes on
terms substantially identical thereto.
"Solvent": as to any Person at any time, that (a) the fair value of
the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
applicable state law; (b)
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the present fair saleable value of the property of such Person is not less than
the amount that will be required to pay the probable liability of such Person
on its debts as they become absolute and matured; (c) such Person is able to
realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital. For purposes of this definition, unliquidated, contingent,
disputed and unmatured claims shall be valued at the amount that can, in light
of all the facts and circumstances existing at such time, be reasonably
expected to be an actual or matured liability.
"Specified Swap Amount": at any time, in respect of any Specified
Swap Contract, the Swap Termination Value relating thereto; provided that for
purposes of this definition, any Swap Termination Value that is negative as to
(i.e., owing by) any Swap Provider shall be deemed equal to zero (0).
"Specified Swap Contract": any Swap Contract made or entered into at
any time, or in effect at any time (whether heretofore or hereafter), whether
directly or indirectly, and whether as a result of assignment or transfer or
otherwise, between the Parent or the Company and any Swap Provider, which Swap
Contract is or was intended by the Parent or the Company, as applicable, to
have been entered into, in part or entirely, for purposes of mitigating
interest rate or currency exchange risk relating to any Loan (which intent
shall conclusively be deemed to exist if the Parent or the Company, as
applicable, so represents to the Swap Provider in writing), and as to which the
final scheduled payment by the Parent or the Company, as applicable, is not
later than the Revolving Termination Date.
"Stephenson": Thomas W. Stephenson, Jr., an individual resident of
the State of Texas.
"Subsidiaries Guaranty": that Amended and Restated Subsidiaries
Guaranty, dated as of the Effective Date, made by each Subsidiary Guarantor in
favor of the Administrative Agent for the ratable benefit of the Banks in
substantially the form of Exhibit K and any other guaranty or amendment to
supplement to guaranty executed and delivered by a Subsidiary pursuant to
Section 6.16, as each of the same may be amended, restated or otherwise
modified from time to time.
"Subsidiary": with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture or other
business entity of which more than 50% of the Capital Stock is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refers to a
Subsidiary of the Parent or the Company.
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"Subsidiary Guarantor": the collective reference to Crown and each
other Subsidiary that executes and delivers a Subsidiaries Guaranty pursuant to
Section 6.16.
"Substantial Delay": in respect of any Construction Project, a delay
of more than 90 days beyond the scheduled completion time for such Construction
Project.
"Surety Instruments": all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds and similar
instruments.
"Swap Contract": any agreement, whether or not in writing, relating
to any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange
transaction, cap, collar or floor transaction, currency swap, cross-currency
rate swap, swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Provider": any Bank, or any Affiliate of any Bank, that is at
the time of determination party to a Swap Contract with the Parent or the
Company and which Swap Contract is related to or entered into in connection
with any Loan.
"Swap Termination Value": in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include any Bank.)
"Taxes": any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Administrative Agent, respectively, taxes imposed on or measured by its net
income, franchise taxes imposed in lieu of income taxes, doing business taxes
and bank share taxes by the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Administrative Agent, as the case may
be, is organized or maintains a lending office (such exclusions, "Excluded
Taxes").
"Test Period": as defined in Section 1.3.
"Theater": any building and related improvements or complex of
buildings and related improvements containing one or more movie screens and
operated as a movie theater, including any New Theater.
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"Theater Exchange Letter of Intent": the nonbinding letter of intent
for the exchange by the Company of certain Theaters operated in Kansas and
Missouri for certain Theaters in Kansas and Missouri, all as referenced on p.4
of the Offering Circular for the Senior Subordinated Notes dated July 15, 1997.
"Type": as defined in the definition of "Loan."
"UA Agreement": that certain Agreement of Purchase and Sale dated as
of July 22, 1996, by and between United Artists Theater Circuit, Inc., United
Artists Properties I Corp. and Resort Amusement Corporation, and the Company,
and all amendments thereto.
"UA Assets": the assets acquired by the Company pursuant to the UA
Agreement.
"UA Guaranty": the collective reference to all guaranties made by
the Company or the Parent for the benefit of United Artists Theatre Circuit,
Inc. given in connection with the acquisition of the UA Assets by the Company,
and as each of the same may be amended, restated or otherwise modified from
time to time.
"UCC": the Uniform Commercial Code as in effect in the State of New
York.
"Undistributed Restricted Payments": as defined in Section 7.12.
"Unfunded Pension Liability": the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S.": the United States of America.
"United States Person": as defined in Section 9.10(a).
"Wholly-Owned Subsidiary": any entity in which (other than
directors' qualifying shares required by law) 100% of the issued and
outstanding Capital Stock of each such entity at the time as of which any
determination is being made, is owned, beneficially and of record, by the
Parent, Company, or by one or more of the other Wholly-Owned Subsidiaries, or
any combination thereof.
1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof, "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
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(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means: "including
without limitation. "
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(iv) The term "property" includes any kind of property or asset,
real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Parent, the Company and the other parties, and are the products of
all parties. Accordingly, they shall not be construed against the Banks or the
Administrative Agent merely because of the Administrative Agent's or Banks'
involvement in their preparation.
(g) Reference in this Agreement or any other Loan Document to
knowledge of events or circumstances shall be deemed to refer to events or
circumstances of which any individual holding the title of regional manager of
the Company or any Subsidiary (or its functional equivalent) or any title or
position senior to a regional manager of the Company or any Subsidiary, has
knowledge.
1.3 Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall
be made, in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the independent certified public accountants reporting
on the financial statements required by subsection 6.l(a)) with the most recent
audited financial statements delivered to the Administrative Agent pursuant to
subsection 6.1(a).
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(b) For the purposes of calculating Consolidated Operating Cash Flow
and Consolidated Interest Expense for any fiscal quarter (a "Test Period"), (i)
if at any time from the period commencing on the first day of such Test Period
and ending on the last date of such Test Period, the Parent, the Company or any
Subsidiary shall have made any Disposition involving one or more Theaters, the
Consolidated Operating Cash Flow for such Test Period shall be reduced by an
amount equal to the Consolidated Operating Cash Flow (if positive) attributable
to the property which is the subject of such Disposition for such Test Period
or increased by an amount equal to the Consolidated Operating Cash Flow (if
negative) attributable thereto for such Test Period, and Consolidated Interest
Expense for such Test Period shall be reduced by an amount equal to the
Consolidated Interest Expense for such Test Period attributable to any
Indebtedness of the Parent, the Company or any Subsidiary repaid, repurchased,
defeased or otherwise discharged in connection with such Disposition (or, if
the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense
for such Test Period directly attributable to the Indebtedness of such
Subsidiary to the extent the Parent, the Company and their continuing
Subsidiaries are no longer liable for such Indebtedness after such
Disposition); and (ii) if during such Test Period the Parent, the Company or
any Subsidiary shall have made any acquisition involving one or more Theaters,
Consolidated Operating Cash Flow and Consolidated Interest Expense for such
Test Period shall be calculated after giving pro forma effect thereto
(including the incurrence or assumption of any Indebtedness in connection
therewith) as if such acquisition (and the incurrence or assumption of any such
Indebtedness) occurred on the first day of such Test Period. For the purposes
of this subsection, whenever pro forma effect is to be given to an applicable
Disposition or acquisition, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any
Indebtedness discharged or incurred in connection therewith, the pro forma
calculations shall be determined in good faith by the chief financial officer
of the Company and shall be reasonably satisfactory in all respects to the
Administrative Agent. If any Indebtedness bears a floating rate of interest
and the incurrence or assumption thereof is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the last day of the relevant Test Period had been the applicable rate
for the entire relevant Test Period.
(c) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Parent.
ARTICLE II
THE CREDITS; THE LETTERS OF CREDIT
2.1 The Revolving Credit. Each Bank severally agrees, on the terms
and conditions set forth herein, to make loans to the Company (each such loan,
a "Revolving Loan") from time to time on any Business Day during the period
from the Effective Date to the Business Day immediately preceding the Revolving
Termination Date, in an aggregate amount not to exceed at any time outstanding
the Revolving Loan Commitment of such Bank; provided, however, that, after
giving effect to any Borrowing, (i) the aggregate amount of Revolving Loans
outstanding in respect of each Bank, together with the aggregate principal
amount of all L/C Obligations outstanding at
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such time in respect of such Bank, shall not exceed such Bank's Pro Rata Share
of the Revolving Loan Commitments and (ii) the aggregate principal amount of
all outstanding Loans, together with the aggregate principal amount of all L/C
Obligations outstanding at such time, shall not at any time exceed the combined
Commitments of the Banks. Within the limits of each Bank's Commitment, and
subject to the other terms and conditions hereof, the Company may borrow under
this Section 2.1, prepay under Section 2.6 and reborrow under this Section 2.1.
2.2 Loan Accounts. (a) The Loans made by each Bank and the Letters
of Credit Issued by the Issuing Bank shall be evidenced by one or more loan
accounts or records maintained by such Bank in the ordinary course of business.
The loan accounts or records maintained by the Administrative Agent and each
Bank shall be conclusive absent manifest error of the Loans made by the Banks
to the Company and the Letters of Credit Issued by the Issuing Bank and the
interest and payments thereon. Any failure so to record or any error in doing
so shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Loans or any Letter of
Credit.
(b) Upon the request of any Bank made through the Administrative
Agent, the Revolving Loans made by such Bank may be evidenced by one or more
Revolving Notes, in each case instead of or in addition to loan accounts. Each
such Bank shall endorse on the schedules annexed to its Note(s) the date,
amount and maturity of each Loan made by it and the amount of each payment of
principal made by the Company with respect thereto. Each such Bank is
irrevocably authorized by the Company to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Company hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon
the Company's irrevocable written notice delivered to the Administrative Agent
in the form of a Notice of Borrowing (which notice must be received by the
Administrative Agent prior to 11:00 a.m. (New York City time) (i) three
Business Days prior to the requested Borrowing Date, in the case of Eurodollar
Rate Loans; and (ii) on the requested Borrowing Date, in the case of Base Rate
Loans, specifying:
(i) the amount of the Borrowing, which shall be in an aggregate
minimum amount of $1,000,000 or any multiple of $100,000 in excess thereof;
(ii) the requested Borrowing Date, which shall be a Business Day;
(iii) the Type of Loans comprising the Borrowing; and
(iv) subject to clause (e) of the definition of Interest Period,
if the Borrowing consists of Eurodollar Rate Loans, the duration of the
Interest Period applicable to such Loans, provided that if the Notice of
Borrowing fails to specify the duration of any such Interest
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<PAGE> 33
Period, subject to clause (e) of the definition of Interest Period, such
Interest Period shall be three months;
provided, however, that with respect to any Borrowing to be made on the
Effective Date, the Notice of Borrowing shall be delivered to the
Administrative Agent not later than 11:00 a.m. (New York City time) (A) one
Business Day before the Effective Date in the event, at the Company's election,
such Borrowing will consist of Base Rate Loans only and (B) three Business Days
before the Effective Date in the event, at the Company's election, such
Borrowing will consist of any Eurodollar Rate Loans.
(b) The Administrative Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata
Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Administrative Agent for the account of the Company
at the Administrative Agent's Payment Office by 12:00 p.m. (New York City time)
on the Borrowing Date requested by the Company in funds immediately available
to the Administrative Agent. The proceeds of all such Loans will then be made
available to the Company by the Administrative Agent by wire transfer in
accordance with written instructions provided to the Administrative Agent by
the Company of like funds as received by the Administrative Agent.
(d) After giving effect to any Borrowing, unless the Administrative
Agent shall otherwise consent, there may not be more than six different
Interest Periods in effect with respect to outstanding Eurodollar Rate Loans.
2.4 Conversion and Continuation Elections. (a) The Company may,
upon irrevocable written notice to the Administrative Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case of
Eurodollar Rate Loans, to convert any such Loans (or any part thereof in an
amount not less than $1,000,000, or that is in an integral multiple of $100,000
in excess thereof) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods expiring on such day (or
any part thereof in an amount not less than $1,000,000, or that is in an
integral multiple of $100,000 in excess thereof);
provided, that if at any time the aggregate amount of Eurodollar Rate Loans
having the same Interest Period is reduced, by payment, prepayment, or
conversion of part thereof to be less than $1,000,000, such Eurodollar Rate
Loans shall automatically convert into Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Administrative Agent not later than 11:00 a.m. (New York
City time) (i) at least three
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<PAGE> 34
Business Days in advance of the Conversion/Continuation Date, if the Loans are
to be converted into or continued as Eurodollar Rate Loans; (ii) on the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from any proposed conversion or
continuation; and
(D) other than in the case of conversions into Base Rate Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Eurodollar Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Eurodollar Rate Loans or, subject to subsection
(e) of this Section 2.4, if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Eurodollar Rate Loans
into Base Rate Loans effective as of the expiration date of such Interest
Period.
(d) The Administrative Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each
Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans held by the Banks with respect to which the
notice was given.
(e) Unless the Required Banks otherwise consent, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Eurodollar Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
unless the Administrative Agent shall otherwise consent, there may not be more
than six different Interest Periods in effect with respect to outstanding
Eurodollar Rate Loans.
2.5 Termination or Reduction of Commitments. (a) The Company may,
upon not fewer than three Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Commitments by an
aggregate minimum amount of $1,000,000 or any multiple of $100,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of Loans
made on the effective date thereof, (i) the then-outstanding principal amount
of the Loans and the L/C Obligations together would exceed the amount of the
combined Commitments then in effect or (ii) the amount of all L/C Obligations
then outstanding would exceed the L/C Commitment.
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<PAGE> 35
(b) The Revolving Loan Commitments shall automatically be reduced on
each date as follows (each a "Revolving Loan Commitment Reduction Date") in the
amount set forth below corresponding to each such date (each a "Revolving Loan
Commitment Reduction Amount"):
<TABLE>
<CAPTION>
Revolving Loan Commitment Revolving Loan Commitment
Reduction Date Reduction Amount
----------------------- ----------------------------------
<S> <C>
March 31, 1999 $1,250,000
June 30, 1999 $1,250,000
September 30, 1999 $1,250,000
December 31, 1999 $1,250,000
March 31, 2000 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
June 30, 2000 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
September 30, 2000 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
December 31, 2000 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
March 31, 2001 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
June 30, 2001 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
September 30, 2001 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
December 31, 2001 $2,500,000 plus 6.25% of the
Revolving Loan Commitment Increase
Amount (if any)
</TABLE>
(c) The Company shall repay on each Revolving Loan Commitment
Reduction Date in respect of the outstanding Revolving Loans a principal amount
equal to the difference, if negative, between (i) the amount of the Revolving
Loan Commitments (after giving effect to the reduction of the Revolving Loan
Commitments occurring on such date), minus (ii) the sum of the aggregate
principal amount of all outstanding Revolving Loans and the aggregate amount of
all L/C Obligations then outstanding.
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<PAGE> 36
(d) Subject to the provisions of Section 2.16, once reduced in
accordance with this Section or subsection 2.7(g), the Commitments may not be
increased. Any reduction of the Commitments shall be applied to each Bank
according to its Pro Rata Share. All accrued commitment fees to, but not
including the effective date of any reduction or termination of the
Commitments, shall be paid on the effective date of such reduction or
termination.
2.6 Optional Prepayments. Subject to Section 3.4, the Company may,
at any time or from time to time, upon not less than three Business Days'
irrevocable written notice to the Administrative Agent in the case of
Eurodollar Loans and one Business Day irrevocable notice to the Administrative
Agent in the case of Base Rate Loans, ratably prepay Loans in whole or in part,
in minimum amounts of $1,000,000 or any multiple of $100,000 in excess thereof.
Such notice of prepayment shall specify the date and amount of such prepayment
and the Type(s) of Loans to be prepaid. The Administrative Agent will promptly
notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata
Share of such prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to each such date on the amount prepaid. All repayments of the Loans
under this Section 2.6 shall be applied in the reverse order of maturity.
2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.
(a) Asset Dispositions. If the Parent, the Company or any Subsidiary shall at
any time or from time to time make or agree to make a Disposition other than as
permitted under subsections (a) through (f) of Section 7.3, or shall suffer an
Event of Loss, then (i) the Company shall promptly notify the Administrative
Agent of such proposed Disposition or Event of Loss (including the amount of
the estimated Net Proceeds to be received by the Parent, the Company or such
Subsidiary in respect thereof) if the aggregate Net Proceeds of such proposed
Disposition or Event of Loss exceeds $1,000,000 and (ii) to the extent such
Hollywood Entity does not reinvest all or any portion of such Net Proceeds in
one or more Acquisitions otherwise permitted hereunder within 180 days of
receipt of such Net Proceeds and the amount of such Net Proceeds (or remaining
portion thereof) exceeds $1,000,000 (the "Excess Proceeds"), the Company shall
promptly, and in no event later than five days after such 180 day period, apply
toward prepayment of the Loans and reduction of the Revolving Loan Commitments
an amount equal to the amount of such unused Excess Proceeds. Notwithstanding
the foregoing, the provisions of this subsection (a) shall not be applicable
with respect to (A) the Net Proceeds of any Sale and Leaseback Transactions
including, without limitation, the proposed Sale and Leaseback Transaction in
respect of the Lawrence Property and (B) the Net Proceeds resulting from the
consummation of the transactions contemplated in the Theater Exchange Letter of
Intent.
(b) Excess Cash Flow. If for any fiscal year, beginning with the
fiscal year ending December 31, 1998, there shall be Excess Cash Flow, the
Company shall, on the relevant Excess Cash Flow Application Date, apply toward
prepayment of the Loans and reduction of the Revolving Loan Commitments an
amount equal to (i) if the Consolidated Total Leverage Ratio as set forth in
the Compliance Certificate for the fourth fiscal quarter of such fiscal year is
equal to or greater than
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<PAGE> 37
4.0 to 1, 50% of Excess Cash Flow for such fiscal year, or (ii) if the
Consolidated Total Leverage Ratio as set forth in the Compliance Certificate
for the fourth fiscal quarter of such fiscal year is less than 4.0 to 1, 25% of
Excess Cash Flow for such fiscal year. Each such prepayment and commitment
reduction shall be made on a date (an "Excess Cash Flow Application Date") no
later than five days after the earlier of (A) the date on which the audited
financial statements referred to in subsection 6.1(a) for the fiscal year with
respect to which such prepayment and/or commitment reduction is made, are
required to be delivered to the Banks and (B) the date such financial
statements are actually delivered.
(c) Loans in Excess of Commitments; L/C Obligations in Excess of L/C
Commitment. If at any time the sum of the aggregate unpaid principal amount of
Revolving Credit Loans and the aggregate Amount of all L/C Obligations then
outstanding exceed the Revolving Loan Commitments, the Company shall
immediately repay the amount of such excess. If on any date the L/C
Obligations exceed the L/C Commitment, the Company shall Cash Collateralize on
such date the outstanding Letters of Credit in an amount equal to the excess of
the amount of the aggregate L/C Obligations over the aggregate L/C Commitment.
(d) Equity Issuance. If, after the Effective Date any Hollywood
Entity shall issue and sell any of its Capital Stock to any Person other than
another Hollywood Entity, the Company shall promptly notify the Administrative
Agent of the estimated Net Issuance Proceeds of such issuance and sale to be
received by the issuer of such Capital Stock in respect thereof. Promptly
upon, and in no event later than five (5) days after, receipt by the applicable
issuer of Net Issuance Proceeds in respect of such issuance, the Company shall
apply toward prepayment of the Loans and reduction of the Revolving Loan
Commitments an amount equal to 75% of such Net Issuance Proceeds.
Notwithstanding the foregoing, (i) no such notice to the Administrative Agent
and no such prepayment of the Loans or reduction of the Revolving Loan
Commitments shall be required in connection with the issuance of Capital Stock
of the Parent to fund Land Acquisition/Construction Costs in connection with
permitted Acquisitions, any issuance of Capital Stock constituting a Permitted
Restricted Payment, any issuance of Capital stock in connection with a
permitted Acquisition, any issuance of Capital stock of the Parent to
directors, officers and employees of any Hollywood Entity in connection with
employee compensation and incentive arrangements (subject to the applicable
limits set forth in the Parent's Organization Documents) or any issuance of
Capital Stock constituting director qualifying shares and (ii) with respect to
Net Issuance Proceeds received in connection with a public equity offering of
the Capital Stock of the Parent, such notice and prepayment of the Loans shall
be made in accordance with the foregoing provisions but no corresponding
reduction of the Revolving Loan Commitments shall occur.
(e) Debt Issuance. If the Parent, the Company or any Subsidiary
shall incur or permit the incurrence of any Indebtedness (other than
Indebtedness permitted under Section 7.6), the Company shall promptly notify
the Administrative Agent of the estimated Net Issuance Proceeds of such
Indebtedness to be received by the applicable borrower in respect thereof.
Promptly upon, and in no event later than five days after, receipt by the
applicable borrower of Net Issuance Proceeds in respect of such Indebtedness,
the Company shall apply toward prepayment of the Loans
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<PAGE> 38
and reduction of the Revolving Loan Commitments an amount equal to the amount
of such Net Issuance Proceeds.
(f) General. All prepayments of principal under this Section 2.7
shall be applied to repay the Revolving Loans and, except with respect to
subsection 2.7(c), in connection with such prepayments, and subject to and in
accordance with subsection (g) of this Section 2.7, the Revolving Loan
Commitments shall be permanently reduced by an amount equal to the Revolving
Loans so repaid. Any prepayments pursuant to this Section 2.7 shall be applied
first to any Base Rate Loans then outstanding and then to Eurodollar Rate Loans
with the shortest Interest Periods remaining; provided, however, that if the
amount of Base Rate Loans then outstanding is not sufficient to satisfy the
entire prepayment requirement, the Company may, at its option, place any
amounts which it would otherwise be required to use to prepay Eurodollar Rate
Loans on a day other than the last day of the Interest Period therefor in an
interest-bearing account pledged to the Administrative Agent for the benefit of
the Banks until the end of such Interest Period at which time such pledged
amounts will be applied to prepay such Eurodollar Rate Loans. The Company
shall pay, together with each prepayment under this Section 2.7, accrued
interest on the amount prepaid and any amounts required pursuant to Section
3.4.
(g) Reduction of Commitment. Upon the making of any mandatory
prepayment of any Revolving Credit Loans pursuant to subsection (a), (b), (d)
or (e) of this Section 2.7, the Revolving Loan Commitment of each Bank shall
automatically be reduced by an amount equal to such Bank's ratable share of the
aggregate of principal of such Loans repaid, effective as of the earlier of the
date that such prepayment is made or the date by which such prepayment is due
and payable hereunder. All accrued commitment fees to, but not including the
effective date of any such reduction, shall be paid on the effective date of
such reduction. If the Revolving Loan Commitments are reduced on any date
pursuant to subsection 2.5(a) or Section 2.7, the amount of each such reduction
shall be applied to the Revolving Loan Commitments in the reverse order of the
respective reduction dates.
2.8 Repayment. (a) The Company shall repay to the Banks on the
Revolving Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date. The Company shall also repay to the Banks in respect
of the Revolving Loans on each Revolving Loan Commitment Reduction Date such
amounts as may be required under subsection 2.5(b).
(b) All repayments of the Loans under this Section 2.8 shall be
applied in the reverse order of maturity.
2.9 Interest. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date until such Loan is
paid in full at a rate per annum selected by the Company or otherwise
applicable from time to time in accordance with this Agreement equal to the
Eurodollar Rate or the Base Rate, as the case may be, plus the Applicable
Margin.
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<PAGE> 39
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Loans under Sections 2.6, 2.7 or 2.8 for the principal portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Administrative Agent at the request or with the consent of the Required Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect
for such Obligations; provided, however, that, on and after the expiration of
any Interest Period applicable to any Eurodollar Rate Loan outstanding on the
date of occurrence of such Event of Default or acceleration, the principal
amount of such Loan shall, during the continuation of such Event of Default or
after acceleration, bear interest at a rate per annum equal to the Base Rate
plus 2%.
(d) Notwithstanding the foregoing provisions of this Section 2.9,
the amount of interest payable by the Company to any Bank in respect of the
Obligations shall not exceed the Maximum Lawful Rate, and if at any time the
interest payable to any Bank hereunder or under any Loan Document would exceed
the Maximum Lawful Rate, but for this subsection 2.9(d), the interest payable
by the Company to such Bank shall be limited to the Maximum Lawful Rate.
2.10 Fees. (a) Arrangement, Agency Fee. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay
an Agency Fee to the Administrative Agent for the Administrative Agent's
account, as required by the letter agreement (the "Fee Letter") between the
Company, the Arranger and the Administrative Agent dated July 15, 1997.
(b) Commitment Fees. The Company shall pay to the Administrative
Agent for the account of each Bank (i) if the Consolidated Total Leverage Ratio
as set forth in the Compliance Certificate for the most recently completed
fiscal quarter is equal to or greater than 4.0 to 1, a commitment fee on the
average daily unused portion of such Bank's Pro Rata Share of the Commitments
equal to .50 percent per annum and (ii) if the Consolidated Total Leverage
Ratio as set forth in the Compliance Certificate for the most recently
completed fiscal quarter is less than 4.0 to 1, a commitment fee on the average
daily amount of such Bank's Pro Rata Share of the Commitments equal to .375
percent per annum, in each such case computed on a quarterly basis in arrears
on the last Business Day of each calendar quarter based upon the daily
utilization for that quarter as calculated by the Administrative Agent. For
purposes of calculating utilization under this subsection, the Commitments
shall be deemed used to the extent of the amount of the Loans outstanding, plus
the L/C Obligations then outstanding. Such commitment fees shall accrue from
the Effective Date to the earlier of (i) the Revolving Termination Date and
(ii) the date the Commitments are terminated pursuant to the terms of this
Agreement, and such fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar year quarter commencing on
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<PAGE> 40
September 30, 1997 to the Revolving Termination Date, or such earlier date as
the case may be, with the final payment to be made on the Revolving Termination
Date, or such earlier date as the case may be; provided that, in connection
with any reduction of Commitments under Section 2.5 or 2.7, the accrued
commitment fee calculated for the period ending on the date of such reduction
shall also be paid on the date of such reduction, with the following quarterly
payment being calculated on the basis of the period from such reduction date to
such quarterly payment date. The commitment fees provided in this subsection
shall accrue at all times during the above described period, including at any
time during which one or more conditions in Article IV are not met.
2.11 Computation of Fees and Interest. (a) All computations of
fees and interest for Base Rate Loans when the Base Rate is determined by
BofA's "reference rate" shall be made on the basis of a year of 365 or 366
days, as the case may be, for the actual days elapsed. All other computations
of interest shall be made on the basis of a 360-day year for the actual days
elapsed (which results in more interest being paid than if computed on the
basis of a 365-day year). Interest and fees shall accrue during each period
during which interest or such fees are computed from the first day thereof to
the last day thereof.
(b) Each determination of an interest rate by the Administrative
Agent shall be conclusive and binding on the Company and the Banks in the
absence of manifest error.
2.12 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Administrative Agent for the account of the Banks at the Administrative
Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than 11:00 a.m. (New York City time) on the date
specified herein. The Administrative Agent will promptly distribute to each
Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Administrative Agent later than 11:00 a.m. (New York City time) shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue to such following Business Day.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that the Company
will not make such payment in full as and when required, the Administrative
Agent may assume that the Company has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Bank shall
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<PAGE> 41
repay to the Administrative Agent on demand such amount distributed to such
Bank, together with interest thereon at the Federal Funds Rate for each day
from the date such amount is distributed to such Bank until the date repaid.
2.13 Payments by the Banks to the Administrative Agent. (a) Unless
the Administrative Agent receives notice from a Bank on or prior to the
Effective Date or, with respect to any Borrowing after the Effective Date, on
the applicable Borrowing Date, that such Bank will not make available as and
when required hereunder to the Administrative Agent for the account of the
Company the amount of that Bank's Pro Rata Share of the Borrowing, the
Administrative Agent may assume that each Bank has made such amount available
to the Administrative Agent in immediately available funds on the Borrowing
Date and the Administrative Agent may (but shall not be so required), in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Administrative Agent in immediately available
funds and the Administrative Agent in such circumstances has made available to
the Company such amount, that Bank shall on the Business Day following such
Borrowing Date make such amount available to the Administrative Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Administrative Agent submitted to any Bank with respect to
amounts owing under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Company of such failure to fund and, upon
demand by the Administrative Agent, the Company shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing
Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment pro rata with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank)
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of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 11.10) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in the amount of
such participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
2.15 Security. (a) All obligations of the Parent and the Company
under this Agreement, the Notes and all other Loan Documents shall be secured
in accordance with the Collateral Documents.
(b) All obligations of the Company under this Agreement, each of the
Notes and all other Loan Documents shall be unconditionally guaranteed by the
Parent pursuant to Article X of this Agreement.
2.16 Increases to Revolving Loan Commitments. (a) Notwithstanding
the foregoing, the Company may from time to time prior to June 30, 1999, at the
Company's sole cost and expense, request that the Banks increase the amount of
their Revolving Loan Commitments, which increases (collectively, the "Revolving
Loan Commitment Increases"; the aggregate amount, if any, of the Revolving Loan
Commitment Increases, the "Revolving Loan Commitment Increase Amount") shall be
made in the sole discretion of the Bank so agreeing to such increase, subject
to the following conditions:
(i) after giving effect to such Revolving Loan Commitment
Increases, the aggregate amount of all Revolving Loan Commitments hereunder
shall not exceed $75,000,000;
(ii) each request by the Company for a Revolving Loan
Commitment Increase shall be in a minimum amount of $5,000,000 or any multiple
of $1,000,000 in excess thereof;
(iii) at the time of such request by the Company and at the
time such Revolving Loan Commitment Increase is made effective, no Default or
Event of Default shall have occurred and be continuing;
(iv) no such Revolving Loan Commitment Increase shall be
effective until (A) the Company, the Parent, the Administrative Agent and the
Banks enter into one or more written agreements in form and substance
reasonably satisfactory to the Administrative Agent setting forth the terms and
amount of such Revolving Loan Commitment Increase, (B) Administrative Agent
shall have received such certificates, legal opinions and other documents as it
shall reasonably
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request in connection with such increase and (C) any fees and expenses payable
by the Hollywood Entities in respect of such increase shall be paid; and
(v) all such Revolving Loan Commitment Increases shall be
made effective prior to June 30, 1999.
(b) In the event that the Company desires to request a Revolving
Loan Commitment Increase, the Company shall give notice thereof to
Administrative Agent, which notice shall set forth the requested amount of such
Revolving Loan Commitment Increase. Within 10 days of receipt of such notice
by Administrative Agent, Administrative Agent shall notify the Banks of such
request. Any Bank that desires to participate in such increase to the
Revolving Loan Commitments shall notify Administrative Agent thereof within 30
days of receipt of such notice from Administrative Agent, which notice shall
also set forth the maximum amount and terms by which such Bank desires to
participate in such Revolving Loan Commitment Increase. If more than one Bank
desires to participate in any requested Revolving Loan Commitment Increase such
that the aggregate amount by which all Banks agree to participate therein
exceeds the amount of such increase so requested by the Company, such Banks
shall participate in such Revolving Loan Commitment Increase on an equitable
basis (as determined by Administrative Agent in its sole discretion and
considering the pro rata share of each such Bank's Commitment compared to the
Commitments of all such participating Banks). In the event the aggregate
maximum amount by which the Banks agree to participate in any requested
Revolving Loan Commitment Increase is less than the amount of such increase as
requested by the Company, such Revolving Loan Commitment Increase shall be
capped at such lesser amount.
2.17 The Letters of Credit
(a) The Letter of Credit Subfacility.
(i) On the terms and conditions set forth herein (A) the
Issuing Bank agrees, (I) from time to time on any Business Day during the
period from the Effective Date to the Maturity Date to Issue Letters of Credit
for the account of the Company, and to amend or renew Letters of Credit
previously issued by it, in accordance with subsections 2.17(b)(iii) and
2.17(b)(iv), and (II) to honor drafts under the Letters of Credit; and (B) the
Banks severally agree to participate in Letters of Credit Issued for the
account of the Company; provided, that the Issuing Bank shall not be obligated
to Issue, and no Bank shall be obligated to participate in, any Letter of
Credit if as of the date of Issuance of such Letter of Credit (the "Issuance
Date") (1) the aggregate amount of all L/C Obligations plus the aggregate
amount of outstanding Loans exceeds the aggregate amount of the Commitments as
of such date, (2) the participation of any Bank in the aggregate amount of all
L/C Obligations plus the aggregate amount of the Loans of such Bank exceeds
such Bank's Commitment as of such date, or (3) the aggregate amount of L/C
Obligations exceeds the L/C Commitment as of such date. Within the foregoing
limits, and subject to the other terms and conditions hereof, the Company's
ability to obtain Letters of Credit shall be fully revolving, and, accordingly,
the Company
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may, during the foregoing period, obtain Letters of Credit to replace Letters
of Credit which have expired or which have been drawn upon and reimbursed.
(ii) The Issuing Bank is under no obligation to Issue any Letter
of Credit if:
(A) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank
from Issuing such Letter of Credit, or any Requirement of Law applicable to the
Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit, or request that the Issuing Bank refrain from, the Issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the Issuing Bank is not
otherwise compensated hereunder) not in effect on the Effective Date, or shall
impose upon the Issuing Bank any unreimbursed loss, cost or expense which was
not applicable on the Closing Date and which the Issuing Bank in good faith
deems material to it;
(B) the Issuing Bank has received written notice from any Bank,
the Administrative Agent or the Company, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article IV is not then satisfied;
(C) the expiry date of any requested Letter of Credit is more
than one calendar year after the date of Issuance, unless the Required Banks
have approved such expiry date in writing;
(D) the expiry date of any requested Letter of Credit is later
than the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(E) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuing Bank, or
the Issuance of a Letter of Credit shall violate any applicable policies of the
Issuing Bank;
(F) any standby Letter of Credit is for the purpose of supporting
the issuance of any letter of credit by any other Person; or
(G) such Letter of Credit is in a face amount of less than
$25,000 or denominated in a currency other than Dollars.
(b) Issuance, Amendment and Renewal of Letters of Credit.
(i) Each Letter of Credit shall be issued upon the irrevocable
written request of the Company received by the Issuing Bank (with a copy sent
by the Company to the Administrative Agent) at least four Business Days (or
such shorter time as the Issuing Bank may
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agree in a particular instance in its sole discretion) prior to the proposed
date of issuance. Each such request for issuance of a Letter of Credit shall
be by facsimile, confirmed immediately in an original writing, in the form of
an L/C Application or L/C Amendment Application, and shall specify in form and
detail satisfactory to the Issuing Bank: (A) the proposed date of issuance of
the Letter of Credit (which shall be a Business Day); (B) the face amount of
the Letter of Credit; (C) the expiry date of the Letter of Credit; (D) the name
and address of the beneficiary thereof; (E) the documents to be presented by
the beneficiary of the Letter of Credit in case of any drawing thereunder; (F)
the full text of any certificate to be presented by the beneficiary in case of
any drawing thereunder; and (G) such other matters as the Issuing Bank may
require.
(ii) At least two Business Days prior to the Issuance of any
Letter of Credit, the Issuing Bank will confirm with the Administrative Agent
(by telephone or in writing) that the Administrative Agent has received a copy
of the L/C Application or L/C Amendment Application from the Company and, if
not, the Issuing Bank will provide the Administrative Agent with a copy
thereof. Unless the Issuing Bank has received notice on or before the Business
Day immediately preceding the date the Issuing Bank is to issue a requested
Letter of Credit from the Administrative Agent (A) directing the Issuing Bank
not to issue such Letter of Credit because such issuance is not then permitted
under subsection 2.17(a)(i) as a result of the limitations set forth in clauses
(1) through (3) thereof or subsection 2.17(a)(ii)(B); or (B) that one or more
conditions specified in Article IV are not then satisfied; then, subject to the
terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(iii) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Issuing Bank will,
upon the written request of the Company received by the Issuing Bank (with a
copy sent by the Company to the Administrative Agent) at least four Business
Days (or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of amendment, amend
any Letter of Credit issued by it. Each such request for amendment of a Letter
of Credit shall be made by facsimile, confirmed immediately in an original
writing, made in the form of an L/C Amendment Application and shall specify in
form and detail satisfactory to the Issuing Bank: (A) the Letter of Credit to
be amended; (B) the proposed date of amendment of the Letter of Credit (which
shall be a Business Day); (C) the nature of the proposed amendment; and (D)
such other matters as the Issuing Bank may require. The Issuing Bank shall be
under no obligation to amend any Letter of Credit if: (I) the Issuing Bank
would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (II) the beneficiary of any
such Letter of Credit does not accept the proposed amendment to the Letter of
Credit. The Administrative Agent will promptly notify the Banks of the receipt
by it of any L/C Application or L/C Amendment Application.
(iv) The Issuing Bank and the Banks agree that, while a
Letter of Credit is outstanding and prior to the Revolving Termination Date, at
the option of the Company and upon the written request of the Company received
by the Issuing Bank (with a copy sent by the Company to the Administrative
Agent) at least four Business Days (or such shorter time as the Issuing Bank
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may agree in a particular instance in its sole discretion) prior to the
proposed date of notification of renewal, the Issuing Bank shall be entitled to
authorize the renewal of any Letter of Credit issued by it. Each such request
for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment
Application, and shall specify in form and detail satisfactory to the Issuing
Bank: (A) the Letter of Credit to be renewed; (B) the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business
Day); (C) the revised expiry date of the Letter of Credit; and (D) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation so to renew any Letter of Credit if: (I) the Issuing Bank would have
no obligation at such time to issue or amend such Letter of Credit in its
renewed form under the terms of this Agreement; or (II) the beneficiary of any
such Letter of Credit does not accept the proposed renewal of the Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
Issuing Bank that such Letter of Credit shall not be renewed, and if at the
time of renewal the Issuing Bank would be entitled to authorize the automatic
renewal of such Letter of Credit in accordance with this paragraph (iv) upon
the request of the Company but the Issuing Bank shall not have received any L/C
Amendment Application from the Company with respect to such renewal or other
written direction by the Company with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and the
Company and the Banks hereby authorize such renewal, and, accordingly, the
Issuing Bank shall be deemed to have received an L/C Amendment Application from
the Company requesting such renewal.
(v) The Issuing Bank may, at its election (or as required by
the Administrative Agent at the direction of the Required Banks), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Revolving
Termination Date.
(vi) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of Credit).
(vii) The Issuing Bank will also deliver to the
Administrative Agent, concurrently or promptly following its delivery of a
Letter of Credit, or amendment to or renewal of a Letter of Credit, to an
advising bank or a beneficiary, a true and complete copy of each such Letter of
Credit or amendment to or renewal of a Letter of Credit.
(c) Existing BofA Letter of Credit; Risk Participations, Drawings
and Reimbursements.
(i) On and after the Effective Date, the Existing BofA Letter
of Credit shall be deemed for all purposes, including for purposes of the fees
to be collected pursuant to subsections 2.17(h)(i) and 2.17(h)(iii), and
reimbursement of costs and expenses to the extent provided herein, Letters of
Credit outstanding under this Agreement and entitled to the benefits of this
Agreement and the other Loan Documents, and shall be governed by the
applications and
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agreements pertaining thereto and by this Agreement. Each Bank shall be deemed
to, and hereby irrevocably and unconditionally agrees to, purchase from the
Issuing Bank on the Closing Date a participation in each such Letter of Credit
and each drawing thereunder in an amount equal to the product of (A) such
Bank's Pro Rata Share times (B) the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing, respectively. For
purposes of Section 2.1, the Existing BofA Letter of Credit shall be deemed to
utilize pro rata the Commitment of each Bank.
(ii) Immediately upon the Issuance of each Letter of Credit
in addition to those described in subsection 2.17((c)(i), each Bank shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
the Issuing Bank a participation in such Letter of Credit and each drawing
thereunder in an amount equal to the product of (A) the Pro Rata Share of such
Bank, times (B) the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively. For purposes of Section
2.1, each Issuance of a Letter of Credit shall be deemed to utilize the
Commitment of each Bank by an amount equal to the amount of such participation.
(iii) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Company. The Company shall reimburse the Issuing Bank on
the same date that any amount is paid by the Issuing Bank under any Letter of
Credit (each such date, an "Honor Date"), in an amount equal to the amount so
paid by the Issuing Bank. In the event the Company fails to reimburse the
Issuing Bank for the full amount of any drawing under any Letter of Credit by
2:00 p.m. (New York City time) on the Honor Date, the Issuing Bank will
promptly notify the Administrative Agent and the Administrative Agent will
promptly notify each Bank thereof, and the Company shall be deemed to have
requested that Base Rate Loans be made by the Banks to be disbursed on the
Honor Date under such Letter of Credit, subject to the amount of the unutilized
portion of the Revolving Loan Commitment and subject to the conditions set
forth in Section 4.2. Any notice given by the Issuing Bank or the
Administrative Agent pursuant to this paragraph (iii) may be oral if
immediately confirmed in writing (including by facsimile); provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(iv) Each Bank shall upon any notice from the Administrative
Agent pursuant to subsection 2.17(c)(iii) make available to the Administrative
Agent for the account of the relevant Issuing Bank an amount in Dollars and in
immediately available funds equal to its Pro Rata Share of the amount of the
drawing, whereupon the participating Banks shall (subject to subsection
2.17(c)(v)) each be deemed to have made a Loan consisting of a Base Rate Loan
to the Company in that amount. If any Bank so notified fails to make available
to the Administrative Agent for the account of the Issuing Bank the amount of
such Bank's Pro Rata Share of the amount of the drawing by no later than 4:00
p.m. (New York City time) on the Honor Date, then interest shall accrue on such
Bank's obligation to make such payment, from the Honor Date to the date such
Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in
effect from time to time during such period. The Administrative Agent will
promptly give notice of the occurrence of the Honor
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Date, but failure of the Administrative Agent to give any such notice on the
Honor Date or in sufficient time to enable any Bank to effect such payment on
such date shall not relieve such Bank from its obligations under this
subsection 2.17(c).
(v) With respect to any unreimbursed drawing that is not
converted into Loans consisting of Base Rate Loans to the Company in whole or
in part, because of the Company's failure to satisfy the conditions set forth
in Section 4.2 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of such drawing,
which L/C Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at a rate per annum equal to the Base Rate plus 2% per
annum, and each Bank's payment to the Issuing Bank pursuant to subsection
2.17(c)(iv) shall be deemed payment in respect of its participation in such L/C
Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of
its participation obligation under this subsection 2.17(c).
(vi) Each Bank's obligation in accordance with this
Agreement to make the Loans or L/C Advances, as contemplated by this subsection
2.17(c), as a result of a drawing under a Letter of Credit, shall be absolute
and unconditional and without recourse to the Issuing Bank and shall not be
affected by any circumstance, including (A) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Issuing
Bank, the Company or any other Person for any reason whatsoever; (B) the
occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (C) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided, however, that each
Bank's obligation to make Revolving Loans under this subsection 2.17(c) is
subject to the conditions set forth in Section 4.2.
(d) Repayment of Participations.
(i) Upon (and only upon) receipt by the Administrative Agent
for the account of the Issuing Bank of immediately available funds from the
Company (A) in reimbursement of any payment made by the Issuing Bank under the
Letter of Credit with respect to which any Bank has paid the Administrative
Agent for the account of the Issuing Bank for such Bank's participation in the
Letter of Credit pursuant to subsection 2.17(c) or (B) in payment of interest
thereon, the Administrative Agent will pay to each Bank, in the same funds as
those received by the Administrative Agent for the account of the Issuing Bank,
the amount of such Bank's Pro Rata Share of such funds, and the Issuing Bank
shall receive the amount of the Pro Rata Share of such funds of any Bank that
did not so pay the Administrative Agent for the account of the Issuing Bank.
(ii) If the Administrative Agent or the Issuing Bank is
required at any time to return to the Company, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any
portion of the payments made by the Company to the Administrative Agent for the
account of the Issuing Bank pursuant to subsection 2.17(d)(i) in reimbursement
of a payment made under the Letter of Credit or interest or fee thereon, each
Bank shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or the Issuing Bank the
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amount of its Pro Rata Share of any amounts so returned by the Administrative
Agent or the Issuing Bank plus interest thereon from the date such demand is
made to the date such amounts are returned by such Bank to the Administrative
Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate
in effect from time to time.
(e) Role of the Issuing Bank.
(i) Each Bank and the Company agree that, in paying any drawing
under a Letter of Credit, the Issuing Bank shall not have any responsibility to
obtain any document (other than any sight draft and certificates expressly
required by the Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(ii) No Administrative Agent-Related Person nor any of the
respective correspondents, participants or assignees of the Issuing Bank shall
be liable to any Bank for: (A) any action taken or omitted in connection
herewith at the request or with the approval of the Banks (including the
Required Banks, as applicable); (B) any action taken or omitted in the absence
of gross negligence or willful misconduct; or (C) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(iii) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Company's pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. No Administrative Agent-Related Person, nor any of the respective
correspondents, participants or assignees of the Issuing Bank, shall be liable
or responsible for any of the matters described in paragraphs (i) through (vii)
of subsection 2.17(f); provided, however, anything in such clauses to the
contrary notwithstanding, that the Company may have a claim against the Issuing
Bank, and the Issuing Bank may be liable to the Company, to the extent, but
only to the extent, of any direct, as opposed to consequential or exemplary,
damages suffered by the Company which the Company proves were caused by the
Issuing Bank's willful misconduct or gross negligence or the Issuing Bank's
willful failure to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. In furtherance and not in
limitation of the foregoing: (A) the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; and (B)
the Issuing Bank shall not be responsible for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason.
(f) Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any
drawing under a Letter of Credit converted into Revolving
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Loans, shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other L/C-Related
Document under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or
any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Company in respect
of any Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such beneficiary
or any such transferee may be acting), the Issuing Bank or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by the L/C-Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any Letter
of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of any Letter of Credit; or any payment made by the Issuing Bank
under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit, including any arising in connection
with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any other guarantee, for all or any of the obligations of the Company in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Company or a guarantor.
(g) Cash Collateral Pledge. Upon the request of the Administrative
Agent, (i) if the Issuing Bank has honored any full or partial drawing request
on any Letter of Credit and such drawing has resulted in an L/C Borrowing
hereunder, or (ii) if, as of the Maturity Date, any Letters of Credit may for
any reason remain outstanding and partially or wholly undrawn, the Company
shall immediately Cash Collateralize the L/C Obligations in an amount equal to
the L/C Obligations. The Company hereby grants the Administrative Agent, for
the benefit of the Administrative Agent,
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the Issuing Bank and the Banks, a security interest in all such cash and
deposit account balances deposited with BofA from time to time pursuant to the
Company's obligations hereunder to Cash Collateralize L/C Obligations. All
such cash collateral shall be maintained in blocked, non-interest bearing
deposit accounts at BofA.
(h) Letter of Credit Fees.
(i) The Company shall pay to the Administrative Agent for the
account of each of the Banks a letter of credit fee with respect to the Letters
of Credit computed on the average daily maximum amount available to be drawn on
the outstanding Letters of Credit, on each Interest Payment Date for Base Rate
Loans based upon Letters of Credit outstanding for the previous calendar
quarter and such letter of credit fees shall be due and payable in arrears on
each such Interest Payment Date for Base Rate Loans. The letter of credit fee
shall be equal to the Applicable Margin for Eurodollar Loans as in effect from
time to time during the periods of calculation thereof.
(ii) The Company shall pay to the Issuing Bank a letter of
credit fronting fee for each Letter of Credit Issued by the Issuing Bank equal
to .0125% of the face amount (or increased face amount, as the case may be) of
such Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable in arrears on each Interest Payment Date for Base Rate Loans.
(iii) The Company shall pay to the Issuing Bank from time to
time on demand the normal presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters
of credit as from time to time in effect.
(i) Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce ("UCP") most recently at the time of issuance of any Letter of Credit
shall (unless otherwise expressly provided in the Letters of Credit) apply to
the Letters of Credit.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by the Company to each Bank or
the Administrative Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for, any Taxes,
except to the extent required by applicable law. In addition, the Company
shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Administrative Agent, then:
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(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section
(collectively, "Further Taxes")), such Bank or the Administrative Agent, as the
case may be, receives and retains an amount equal to the sum it would have
received and retained had no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings; and
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance with
applicable law.
(c) To the extent not duplicative of amounts paid pursuant to
subsections (a) and (b) of this Section 3.1 or pursuant to Section 3.3, the
Company agrees to indemnify and hold harmless each Bank and the Administrative
Agent for the full amount (without duplication) of (i) Taxes, (ii) Other Taxes,
and (iii) Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes, Other Taxes or
Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Bank or the
Administrative Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment satisfactory to such
Bank or the Administrative Agent.
(e) Subject to Section 3.7, if the Company is required to pay any
amount to any Bank or the Administrative Agent pursuant to subsection (b) or
(c) of this Section, then such Bank shall use reasonable efforts (consistent
with legal and regulatory restrictions) to change the jurisdiction of its
Lending Office so as to eliminate any such additional payment by the Company
which may thereafter accrue, if such change in the sole judgment of such Bank
is not otherwise disadvantageous to such Bank.
(f) Notwithstanding the foregoing provisions of this Section 3.1,
the Company shall have no obligation to any Bank under subsection (b) or (c) of
this Section 3.1 if such Bank fails to comply with the requirements of Section
9.10 unless such failure is as a result of a change in law (including a change
in treaty or regulation) occurring after the date of this Agreement or, in the
case of an Eligible Assignee, after the date such Eligible Assignee becomes a
Bank under this Agreement.
3.2 Illegality. (a) If any Bank determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, in each case after
the date of this Agreement, has made it unlawful, or that any central bank or
other Governmental Authority has asserted after the date of this Agreement that
it
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is unlawful, for any Bank or its applicable Lending Office to make Eurodollar
Rate Loans, then, on notice thereof by the Bank to the Company through the
Administrative Agent, any obligation of that Bank to make Eurodollar Rate Loans
shall be suspended until the Bank notifies the Administrative Agent and the
Company that the circumstances giving rise to such determination no longer
exist.
(b) If a Bank determines that it is unlawful to maintain any
Eurodollar Rate Loan, the Company shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Administrative Agent),
convert in full such Eurodollar Rate Loans of that Bank then outstanding to
Base Rate Loans, and pay to such Bank interest accrued thereon and amounts
required under Section 3.4, either on the last day of the Interest Period
thereof, if the Bank may lawfully continue to maintain such Eurodollar Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Eurodollar Rate Loan.
(c) If the obligation of any Bank to make or maintain Eurodollar
Rate Loans has been so terminated or suspended, the Company may elect, by
giving notice to the Bank through the Administrative Agent that all Loans which
would otherwise be made by the Bank as Eurodollar Rate Loans shall be instead
Base Rate Loans.
(d) Before giving any notice to the Administrative Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its Eurodollar Rate Loans if such designation will avoid the need
for giving such notice or making such demand and will not, in the judgment of
the Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return. To the extent not
duplicative of amounts payable pursuant to Section 3.1,
(a) if any Bank determines that, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation after the
date of this Agreement or (ii) the compliance by that Bank with any guideline
or request from any central bank or other Governmental Authority issued or made
after the date of this Agreement (whether or not having the force of law),
there shall be any increase in the cost to such Bank (other than pursuant to
Excluded Taxes) of agreeing to make or making, funding or maintaining any
Eurodollar Rate Loans or participating in any Letters of Credit, or, in the
case of the Issuing Bank, any increase in the cost to the Issuing Bank of
agreeing to issue, issuing or maintaining any unpaid drawing under any Letter
of Credit, then the Company shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Administrative
Agent), pay to the Administrative Agent for the account of such Bank,
additional amounts as are sufficient to compensate such Bank for such increased
costs.
(b) If any Bank shall have determined that (i) the introduction
after the date of this Agreement of any Capital Adequacy Regulation, (ii) any
change after the date of this Agreement in any Capital Adequacy Regulation,
(iii) any change after the date of this Agreement in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance
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by the Bank (or its Lending Office) or any corporation controlling the Bank
required after the date of this Agreement with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration such Bank's or such corporation's policies with respect to
capital adequacy and such Bank's desired return on capital) determines that the
amount of such capital is increased as a consequence of its Commitment, loans,
credits or obligations under this Agreement, then, upon demand of such Bank to
the Company through the Administrative Agent, the Company shall pay to the
Bank, from time to time as specified by the Bank, additional amounts sufficient
to compensate the Bank for such increase.
3.4 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation, other than pursuant to Section 3.5;
(b) the prepayment (including pursuant to Section 2.5 or 2.7) or
other payment (including after acceleration thereof) of an Eurodollar Rate Loan
on a day that is not the last day of the relevant Interest Period;
(c) the automatic conversion under Section 2.4 of any Eurodollar
Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period; or
(d) the prepayment of a Eurodollar Rate Loan having an Interest
Period in excess of 7 days in connection with an assignment of all or any part
of the Revolving Loans and the Revolving Loan Commitments pursuant to
subsection 11.8(a) occurring during the period described in clause (e) of the
definition of "Interest Period";
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Eurodollar Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Company to the Banks under this
Section and under subsection 3.3(a), each Eurodollar Rate Loan made by a Bank
(and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the IBOR used in determining the
Eurodollar Rate for such Eurodollar Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Eurodollar Rate Loan is in fact so
funded.
3.5 Inability to Determine Rates. If the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Loan, or that the Eurodollar Rate applicable
pursuant to subsection 2.9(a) for any requested Interest Period with respect to
a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost
to the Banks of
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funding such Loan, the Administrative Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make or maintain
Eurodollar Rate Loans, as the case may be, hereunder shall be suspended until
the Administrative Agent revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Eurodollar Rate Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy
to the Administrative Agent) a certificate setting forth in reasonable detail
the amount payable to the Bank hereunder and such certificate shall be
conclusive and binding on the Company in the absence of manifest error.
3.7 Substitution of Banks. Upon the receipt by the Company from any
Bank (an "Affected Bank") of a claim for compensation under Section 3.1 or 3.3
or it becomes unlawful for any Bank to make or maintain Eurodollar Rate Loans
as contemplated by Section 3.2 or a Bank is no longer exempt from U.S. federal
withholding tax and back-up withholding, the Company may: (i) request the
Affected Bank to use its best efforts to obtain a replacement bank or financial
institution satisfactory to the Company and to the Administrative Agent (a
"Replacement Bank") to acquire and assume all or a ratable part of all of such
Affected Bank's Loans and Commitment, and if such Affected Bank or any
Affiliate thereof is a Swap Provider, all Specified Swap Contracts of such
Affected Bank and Affiliate; (ii) request one more of the other Banks to
acquire and assume all or part of such Affected Bank's Loans and Commitment; or
(iii) designate a Replacement Bank. Any such designation of a Replacement Bank
under clause (i) or (iii) shall be subject to the prior written consent of the
Administrative Agent (which consent shall not be unreasonably withheld).
3.8 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations, provided
however, that except after the occurrence and continuance of an Event of
Default described in subsection 8.1(f) or (g), any Bank making a request or
demand for compensation or indemnity under this Article III shall make such
demand within 180 days after the occurrence of the event or circumstances
giving rise to such claim.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions of Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the condition that the
Administrative Agent shall have received on or before the Effective Date all of
the following, in form and substance satisfactory to the Administrative Agent
and each Bank, and in sufficient copies for each Bank:
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(a) Credit Agreement. This Agreement executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of the
Parent, the Company and each Subsidiary that is a party to a Loan Document
authorizing the transactions contemplated hereby or thereby, certified as of
the Effective Date by the Secretary or an Assistant Secretary of such Person;
and
(ii) A certificate of the Secretary or Assistant Secretary
of the Parent, the Company and each Subsidiary that is a party to a Loan
Document certifying the names and true signatures of the officers of the
Parent, the Company or such Subsidiary, as applicable, authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder or thereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of each of the Parent, the Company and each Subsidiary that is a party
to any Loan Document as in effect on the Effective Date, certified by the
Secretary or Assistant Secretary of the Parent, the Company or such Subsidiary,
as applicable, as of the Effective Date; and
(ii) a good standing certificate for each of the Parent,
the Company and each Subsidiary that is a party to any Loan Document from the
Secretary of State (or similar, applicable Governmental Authority) of its state
of incorporation and each state where such Person is qualified to do business
as a foreign corporation as of a recent date, together with a bring-down
certificate by facsimile, dated the Effective Date (except as otherwise
provided on Schedule 5.1(c));
(d) Legal Opinions. A legal opinion of Baker & Botts, L.L.P., counsel
to the Parent, and the Company and addressed to the Administrative Agent and
the Banks, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the Company of
(i) all accrued and unpaid fees, costs and expenses to the extent then
due and payable on the Effective Date to the Administrative Agent, Arranger or
any Bank, together with Attorney Costs of BofA to the extent invoiced prior to
or on the Effective Date, plus such additional amounts of Attorney Costs as
shall constitute BofA's reasonable estimate of Attorney Costs incurred or to be
incurred by it through the closing proceedings (provided that such estimate
shall not thereafter preclude final settling of accounts between the Company
and BofA); including any such costs, fees and expenses arising under or
referenced in Sections 2.10 and 11.4; and
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(ii) all commitment fees, costs and expenses of the Administrative
Agent or any Bank, all Attorney Fees of BofA and all such other fees and
expenses accrued but unpaid under the Existing Credit Agreement through the
Effective Date;
(f) Financial Statements.
(i) Copies of the consolidated audited balance sheet and
related consolidated statements of income and cash flow, including the
footnotes thereto, of the Parent and its Subsidiaries as at December 31, 1996
and for the fiscal years then ended duly reported on by Arthur Andersen LLP;
and
(ii) Copies of the consolidated unaudited balance sheet and
related consolidated statements of income and cash flow of the Parent and its
Subsidiaries as at June 30, 1996 and for the period then ended duly certified
by a Responsible Officer of the Parent;
(g) Collateral Documents. The Collateral Documents, executed by the
Parent, the Company and each Subsidiary, as applicable, in appropriate form for
recording, where necessary, together with:
(i) all certificates and instruments representing the Pledged
Collateral, stock transfer powers executed in blank;
(ii) funds sufficient to pay any filing or recording tax or
fee in connection with any and all Mortgage Amendments;
(iii) with respect to each of the Fee Mortgaged Properties
pursuant to which a Fee Mortgage (as defined in the Existing Credit Agreement)
was previously recorded, an amendment to mortgage in the form attached hereto
as Exhibit L (with such changes thereto as shall be advisable under the law of
the jurisdiction where such Fee Mortgage was recorded) reflecting the amendment
and restatement of the Existing Credit Agreement pursuant to this Agreement;
(iv) with respect to each of the Fee Mortgaged Properties
pursuant to which a mortgagee policy of title insurance was previously
delivered to Administrative Agent pursuant to the Existing Credit Agreement, an
endorsement to such title policy satisfactory to the Administrative Agent and
the Banks insuring that the applicable Mortgage encumbering such parcel of
Mortgaged Property, as amended by the Mortgage Amendment referred to in clause
(iii) above, continues to constitute a valid first Lien against the applicable
portion of the Mortgaged Property in favor of the Administrative Agent
notwithstanding such Mortgage Amendment and the amendment and restatement of
the Existing Credit Agreement, subject only to exceptions acceptable to the
Administrative Agent and the Banks, with such endorsements and affirmative
insurance as the Administrative Agent may reasonably request;
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(v) to the extent required by law, flood insurance and
earthquake insurance on terms satisfactory to the Administrative Agent;
(vi) proof of payment of all title insurance premiums,
documentary stamp or intangible taxes, recording fees and mortgage taxes
payable in connection with the recording of any Mortgage Amendment or the
issuance of the title insurance endorsements in connection therewith; and
(vii) evidence that all other actions necessary or, in the
opinion of the Administrative Agent or the Banks, desirable to perfect and
protect the first priority Lien created by the Collateral Documents, and to
enhance the Administrative Agent's ability to preserve and protect its
interests in and access to the Collateral, have been taken;
(h) Insurance Policies. Standard lenders' payable endorsements with
respect to the insurance policies or other instruments or documents evidencing
insurance coverage on the properties of the Company in accordance with Section
6.6 and in accordance with the terms of the Mortgages (including without
limitation, the Mortgaged Properties);
(i) Certificate. A certificate of the Parent and the Company executed
by a Responsible Officer of each such Person, dated as of the Effective Date,
stating that:
(i) the representations and warranties contained in Article V
are true and correct in all material respects on and as of such date, as though
made on and as of such date except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true
and correct in all material respects as of such earlier date;
(ii) no Default or Event of Default exists; and
(iii) no event or circumstance has occurred since December
31, 1996 that has resulted or could reasonably be expected to result in a
Material Adverse Effect;
(j) Issuance of Senior Subordinated Notes.
(i) The Company shall have received aggregate net proceeds of
not less than $75,000,000 (including amounts escrowed for the Acquisition of
the GC Assets) in connection with the issuance by the Company of the Senior
Subordinated Notes;
(ii) After giving effect to the transactions described in
clause (i) above, the capital structure of the Parent and the Company shall be
satisfactory in all respects to the Administrative Agent;
(k) Repayment of Existing Loans. The outstanding balance of the
Existing Term Loans and the Existing Revolving Loans shall not exceed
$50,000,000 in the aggregate.
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(l) Other Documents. Such other approvals, opinions, documents or
materials as the Administrative Agent may reasonably request.
4.2 Conditions to All Credit Extensions. The obligation of each Bank
to make any Loan to be made by it (including its initial Loan) or to continue
or convert any Loan under Section 2.4 and the obligation of the Issuing Bank to
issue any Letter of Credit is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date:
(a) Notice of Borrowing or Conversion/Continuation. The Administrative
Agent shall have received a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable or in the case of any Issuance of any
Letter of Credit, the Issuing Bank and the Administrative Agent shall have
received an L/C Application or L/C Amendment Application, as required under
subsection 2.17(b);
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct in all
material respects on and as of such Borrowing Date or Conversion/Continuation
Date or date of issuance with the same effect as if made on and as of such
Borrowing Date or Conversion/ Continuation Date or date of issuance (except to
the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all material respects as
of such earlier date);
(c) No Existing Default. No Default or Event of Default shall exist or
shall result from such Borrowing or continuation or conversion or issuance; and
(d) No Material Adverse Effect. Since the most recent Borrowing Date
or Conversion/Continuation Date or date of issuance, no event or circumstance
shall have occurred that has resulted or could reasonably be expected to result
in a Material Adverse Effect. Each Notice of Borrowing and Notice of
Conversion/Continuation and L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice or
application and as of each Borrowing Date or Conversion/Continuation Date or
date of issuance, as applicable, that the conditions in this Section 4.2 are
satisfied.
4.3 Conditions to all Construction Advances. The obligation of each
Bank to make any Construction Advance is subject to the satisfaction of the
following conditions:
(a) Land Acquisition Diligence; Permits; Construction Project.
(i) if the Construction Advance is to be used to fund a Land
Acquisition,
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(A) the Hollywood Entity making such Land Acquisition shall have
entered into a binding agreement to consummate a Land Acquisition for the
purpose of constructing (or causing to be constructed) a New Theater;
(B) the Hollywood Entity making such Land Acquisition shall have
prepared (or cause to have been prepared) schematic plans for the construction
of a New Theater on the real property to be acquired (which plans shall include
the number of screens to be contained therein) and shall, upon request of the
Administrative Agent, provide Administrative Agent with reasonable information
regarding such plans; and
(C) the Hollywood Entity making such Land Acquisition shall have
performed or caused to be performed such reasonable and prudent diligence as
may be necessary or desirable under the circumstances for such Hollywood Entity
to conclude, in its reasonable business judgment, that the proposed New Theater
may be constructed on the real property to be so acquired; and/or
(ii) if such Construction Advance is to be used for any
costs of construction in connection with a Construction Project, all permits
and/or other approvals of Governmental Authorities as may be necessary to
undertake the portion of the Construction Project to be funded by such
Construction Advance have been obtained.
(b) Delivery of Mortgage. If a Land Acquisition is to be consummated,
and subject to the provisions of subsection 6.16(b), the Hollywood Entity
acquiring such real property or leasehold interest shall have executed and
delivered to the Administrative Agent for the benefit of the Banks a Fee
Mortgage or a Leasehold Mortgage, as applicable, in accordance with all of the
terms and conditions of this Agreement relating to the delivery of Mortgages
and the granting of a Lien on real property;
(c) Limitation on New Screens. On the date such Construction Advance
is to be made, the sum of
(i) the aggregate number of Theater screens under construction
on such date by all Hollywood Entities (including the screens to be contained
in the applicable New Theater) and
(ii) the aggregate number of Theater screens in operation by
all Hollywood Entities on such date for less than six calendar months (other
than Theater screens constituting part of the GC Assets and any Theater screens
acquired or leased by any Hollywood Entity prior to the date of such
Construction Advance which, in each such case, were in operation by any Person
for at least six months prior to the date of such Construction Advance),
shall (A) for the period beginning on the Effective Date and ending on June 30,
1998, be less than 30% of the aggregate number of all Theater screens operated
or under construction by all Hollywood
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Entities (including all screens to be contained in the applicable New Theater)
on the date of such Construction Advance, and (B) at any time thereafter, be
less than 20% of the aggregate number of all movie screens operated or under
construction by all Hollywood Entities (including all screens to be contained
in the applicable New Theater) on the date of such Construction Advance;
(d) The purpose of the requested Construction Advance is to fund Land
Acquisition/Construction Costs actually incurred in connection with such Land
Acquisition and/or Construction Project.
(e) Construction Advance Compliance Certificate. The Parent and the
Company shall deliver to the Administrative Agent, with sufficient copies for
each Bank, a Construction Advance Compliance Certificate in the form attached
hereto as Exhibit N regarding such Construction Project.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Banks to enter into this
Agreement and to make the Loans, the Parent and the Company hereby jointly and
severally represent and warrant to the Administrative Agent and each Bank that:
5.1 Corporate Existence and Power. Each Hollywood Entity:
(a) is duly organized, validly existing and, where applicable, in good
standing under the laws of the jurisdiction of its formation or organization;
(b) has the requisite power and authority under the statute under
which it is formed or organized and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business as presently
conducted and to execute, deliver and perform its obligations under the Loan
Documents, except where the failure to possess such governmental licenses,
authorizations, consents and approvals either individually or collectively
could not reasonably be expected to have a Material Adverse Effect;
(c) except as otherwise set forth on Schedule 5.1(c), is duly
qualified as a foreign corporation and is licensed and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification or license,
except where the failure to be so qualified or licensed could not reasonably be
expected to have a Material Adverse Effect; and
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(d) is in compliance with all Requirements of Law, except where the
failure to so comply (either individually or collectively) could not reasonably
be expected to have a Material Adverse Effect.
5.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by each Loan Party of this Agreement and each other
Loan Document to which such Person is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which such Person is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for recordings or filings in connection with the
Liens granted to the Administrative Agent under the Collateral Documents) is
necessary or required in connection with the execution, delivery or performance
by any Loan Party of this Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan Document to
which any Loan Party is a party constitute the legal, valid and binding
obligations of such Loan Party to the extent it is a party thereto, enforceable
against such Person in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.
5.5 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Parent or the Company,
threatened at law, in equity, in arbitration or before any Governmental
Authority, against any Loan Party or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to any Loan Party, would reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
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5.6 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Parent or the Company or from the
grant or perfection of the Liens of the Administrative Agent and the Banks on
the Collateral. As of the Effective Date, no Loan Party is in default under or
with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Effective Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. Other than exceptions to any of the following
that could not (either individually or collectively) reasonably be expected to
have a Material Adverse Effect:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Parent and the Company, nothing has occurred which would cause the loss of such
qualification. Each Loan Party and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Parent and
the Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been
no prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) none of the
Company or any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) none of
the Loan Parties or any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
none of the Loan Parties or any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans
and Letters of Credit are to be used solely for the purposes set forth in and
permitted by Section 6.14 and 7.8. None of the Loan Parties is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
5.9 Title to Properties. (a) Each of the Loan Parties has good title
in fee simple to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of their respective businesses, except for (i)
failure of the seller under the Crown Agreement to have obtained
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any required consent to the assignment to the Company of the leasehold interest
in the Theaters known as Cinema East 6 located in Wichita, Kansas and Joplin 6
located in Joplin, Missouri and (ii) such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Effective Date, the property of the Parent, the Company and the Subsidiaries is
subject to no Liens, other than Permitted Liens.
(b) As of the Effective Date, all real properties owned in fee by any
Hollywood Entity are listed on Schedule 5.9(a) and all real properties leased
by any Hollywood Entity for the purpose of operating or constructing a Theater
are listed on part B of Schedule 5.9(b).
5.10 Taxes. Each of the Loan Parties has filed all Federal and other
material tax returns and reports required to be filed by it, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided
in accordance with GAAP. There is no proposed tax assessment against the
Parent, the Company or any Subsidiary that would, if made, have a Material
Adverse Effect.
5.11 Financial Condition. (a) The audited consolidated financial
statements of the Hollywood Entities for the fiscal year ended December 31,
1996, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein;
(ii) fairly present in all material respects the financial
condition of the Hollywood Entities on a consolidated basis as of the date
thereof and results of operations for the period covered thereby; and
(iii) reflect as required by GAAP all material indebtedness
and other liabilities, direct or contingent, of the Hollywood Entities on a
consolidated basis as of the date thereof, including liabilities for taxes,
material commitments and Contingent Obligations.
(b) Since December 31, 1996, there has been no development or event
which has had or could reasonably be expected to have a Material Adverse
Effect.
5.12 Environmental Matters. Other than exceptions to any of the
following that could not (either individually or collectively) reasonably be
expected to have a Material Adverse Effect:
(a) The on-going operations of each of the Parent, the Company and
each of their Subsidiaries comply in all respects with all Environmental Laws;
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(b) Each of the Parent, the Company and their Subsidiaries has
obtained all licenses, permits, authorizations and registrations required under
any Environmental Law ("Environmental Permits") and necessary for its
respective ordinary course operations, all such Environmental Permits are in
good standing, and the Parent, the Company and each of its Subsidiaries are in
compliance with all terms and conditions of such Environmental Permits;
(c) None of the Parent, the Company, any Subsidiary or, to the
knowledge of any such Person, any of their respective present property or
operations, is subject to (i) any outstanding written order from or agreement
with any Governmental Authority, or (ii) any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental
Claim or Hazardous Material;
(d) To the knowledge of the Parent, the Company or any Subsidiary,
there are no Hazardous Materials or other conditions or circumstances existing
with respect to any property of the Parent, the Company or any of their
Subsidiaries, or arising from operations prior to the Effective Date, of any of
the Parent, the Company or any of the Subsidiaries that would reasonably be
expected to give rise to Environmental Claims. In addition, to the knowledge
of the Parent, the Company or any Subsidiary, (i) none of the Parent, the
Company or any of the Subsidiaries has any underground storage tanks (x) that
are not properly registered or permitted under applicable Environmental Laws,
or (y) that are leaking or disposing of Hazardous Materials off-site.
(e) References in subsections (c) and (d) above to knowledge of the
Parent, the Company or any Subsidiary of conditions or circumstances shall be
deemed to refer to events or circumstances of which a Responsible Officer has
knowledge.
5.13 Collateral Documents. (a) The provisions of each of the
Collateral Documents are effective to create in favor of the Administrative
Agent for the benefit of the Banks, a legal, valid and enforceable first
priority security interest in all right, title and interest of the Loan Parties
who are parties thereto in the collateral described therein, subject only to
Permitted Liens.
(b) Each Mortgage when delivered will be effective to grant to the
Administrative Agent for the benefit of the Banks a legal, valid and
enforceable deed of trust or mortgage lien (as applicable) on all the right,
title and interest of the mortgagor under such Mortgage in the mortgaged
property described therein. When each such Mortgage is duly recorded in the
offices of real property register applicable to the Mortgaged Property
encumbered by such Mortgage and the mortgage recording fees and taxes in
respect thereof are paid and compliance is otherwise had with the formal
requirements of state law applicable to the recording of real estate mortgages
generally, each such mortgaged property, subject to the Permitted Liens and
encumbrances and exceptions to title set forth therein, is subject to a legal,
valid, enforceable and perfected first priority mortgage or deed of trust, as
applicable; and when financing statements have been filed in the offices
specified in such Mortgage, such Mortgage also creates a legal, valid,
enforceable and perfected first lien on, and security interest in, all right,
title and interest of the mortgagor under such Mortgage in all personal
property and fixtures covered by such Mortgage, subject to no other Liens,
except the Permitted
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Liens and encumbrances and exceptions to title set forth therein. The
foregoing representation is also applicable with respect to each Mortgage as
amended by the Mortgage Amendments to be delivered pursuant to subsection
4.1(g) hereof.
(c) All representations and warranties of the Loan Parties contained
in the Collateral Documents are true and correct in all material respects.
5.14 Regulated Entities. None of the Parent, the Company, any Person
controlling the Parent or the Company or any Subsidiary, is an "Investment
Company" within the meaning of the Investment Company Act of 1940. The Company
is not subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting
its ability to incur Indebtedness under this Agreement.
5.15 No Burdensome Restrictions. None of the Loan Parties is a party
to or bound by any Contractual Obligation, or subject to any restriction in any
Organization Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
5.16 Copyrights, Patents, Trademarks and Licenses, etc. Each of the
Loan Parties owns or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without known conflict with the
rights of any other Person except where failure to have such item (either
individually or collectively) and except for such claims (either individually
or collectively), in each case, could not reasonably be expected to have a
Material Adverse Effect. To the best knowledge of the Parent and the Company,
no slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by any
Loan Party infringes upon any rights held by any other Person, except for such
infringements (either individually or collectively) that could not be
reasonably be expected to have a Material Adverse Effect. No claim or
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending which in any such case could reasonably
be expected to have a Material Adverse Effect.
5.17 Subsidiaries. As of the Effective Date after giving effect to
the transactions contemplated hereby on such date, (a) the Parent has no direct
Subsidiaries other than the Company, (b) the Company has no Subsidiaries other
than Crown and (c) neither the Parent nor the Company has any equity
investments in any other corporation or entity.
5.18 Insurance. The properties of each Loan Party are insured with
financially sound and reputable insurance companies not Affiliates of any
Hollywood Entity, in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where such Loan Party operates.
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5.19 Solvency. The Hollywood Entities, on a consolidated basis, are
Solvent.
5.20 Swap Obligations. None of the Loan Parties has incurred any
outstanding obligations under any Swap Contracts, other than Permitted Swap
Obligations.
5.21 Full Disclosure. (a) As of the Effective Date, all Information
that has been made available to the Administrative Agent or any Bank by or on
behalf of the Company prior to the date of this Agreement in connection with
the transactions contemplated by this Agreement is, taken together, true and
correct in all material respects (other than financial budgets and projections)
and does not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements maintained therein not
materially misleading in light of the circumstances under which such statements
were made.
(b) All information that is made available after the date of this
Agreement from time to time to the Administrative Agent or any Bank by or on
behalf of the Company in connection with or pursuant to this Agreement, any
other Loan Document or the transactions contemplated hereby or thereby will be,
when made available and taken together, true and correct in all material
respects (other than financial budgets and projections) and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made.
(c) All financial budgets and projections that have been or are
hereafter from time to time prepared by or on behalf of the Company and made
available to the Administrative Agent or any Bank pursuant to or in connection
with this Agreement, any other Loan Document or the transactions contemplated
hereby or thereby have been and will be prepared and furnished to the
Administrative Agent and the Bank in good faith and were and will be based on
facts and assumptions that are believed by the management of the Company to be
reasonable in light of the then current and foreseeable business conditions of
the Hollywood Entities and represented and will represent the Company's
management's good faith estimate of the consolidated projected financial
performance of the Hollywood Entities based on the information available to the
Responsible Officers at the time so furnished.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Parent and the Company hereby jointly and severally agree that, so
long as any Bank shall have any Commitment hereunder, or any Loan or other
Obligation which has become due and payable shall remain unpaid or unsatisfied,
unless the Required Banks waive compliance in writing:
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6.1 Financial Statements. The Parent shall furnish to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent and the Required Banks, with sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year (commencing with the fiscal year ending December 31, 1997), a
copy of the audited consolidated balance sheets of the Hollywood Entities as at
the end of such year and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year,
accompanied by the report of Arthur Andersen LLP or another
nationally-recognized independent public accounting firm ("Independent
Auditor") which report shall state that such consolidated financial statements
present fairly in all material respects the financial position of the Hollywood
Entities on a consolidated basis for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years except as disclosed in the
footnotes thereto. Such report shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of any Hollywood Entity's records;
(b) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with
the fiscal quarter ending June 30, 1997), either (i) a copy of the unaudited
consolidated balance sheets of the Hollywood Entities as of the end of such
quarter and the related consolidated statements of income, shareholders' equity
and cash flows for the period commencing on the first day and ending on the
last day of such quarter, certified by a Responsible Officer of the Parent as
fairly presenting in all material respects, in accordance with GAAP (subject to
good faith year-end audit adjustments and the absence of complete footnotes),
the financial position and the results of operations of the Hollywood Entities
on a consolidated basis for the period then ended or (ii) (available) the Form
10Q that the Parent or the Company filed with the SEC for such fiscal quarter;
(c) as soon as available, but not later than 30 days after the end of
each month, a report in a form satisfactory to the Administrative Agent
containing monthly revenues and cash flow information for the previous month,
reported by each Theater owned or operated by any of the Hollywood Entities;
and
(d) as soon as available, but not later than 30 days after the end of
each month, an attendance report in a form satisfactory to the Administrative
Agent for the previous month, reported by each Theater owned or operated by any
of the Hollywood Entities.
6.2 Construction Reports. The Company shall furnish to the
Administrative Agent at the end of each fiscal quarter, or more frequently (but
not more than once per month) upon request of Administrative Agent, with
sufficient copies for each Bank, progress reports in a form satisfactory to the
Administrative Agent with respect to each Construction Project under
construction during such fiscal quarter by any of the Hollywood Entities
(including any projects undertaken to repair, restore or replace any Theater or
any material part thereof after the occurrence of a casualty at such
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Theater), which report shall include, among other things, the status of
Construction Projects planned in connection with consummated Land Acquisitions
where construction has not yet commenced (such as the status of permits and
other approvals of Governmental Authorities required to be obtained in
connection therewith).
6.3 Certificates; Other Information. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the Independent Auditor
stating that in making the examination necessary for such audit no knowledge
was obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer of the Company;
(c) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a report of the Company in a form
satisfactory to Administrative Agent regarding the number of new screens under
construction by any Hollywood Entity during the applicable fiscal quarter and
verifying compliance with Section 7.18 hereof;
(d) promptly, copies of all financial statements and reports that the
Parent sends to its shareholders generally, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Parent, the Company or any Subsidiary may make to, or file
with, the SEC (to the extent not previously delivered pursuant to subsection
6.1(b)); and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Parent, the Company or any Subsidiary as
the Administrative Agent, at the request of any Bank, may from time to time
reasonably request.
6.4 Notices. After obtaining knowledge thereof, the Company shall
promptly notify the Administrative Agent and each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of (i) any breach or non-performance of, or any default under, any
Contractual Obligation of the Parent, the Company or any Subsidiary which could
reasonably be expected to result in a Material Adverse Effect; and (ii) any
material dispute, litigation, investigation, proceeding or suspension which may
exist at any time between any of the Parent, the Company or any Subsidiary and
any Governmental Authority;
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(c) of the commencement of, or any material adverse development in,
any litigation or proceeding affecting the Parent, the Company or any
Subsidiary (i) in which the amount of damages claimed is $2,000,000 (or its
equivalent in another currency or currencies) or more, (ii) in which injunctive
or similar relief is sought and which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect, or (iii) in which the
relief sought is an injunction or other stay of the performance of this
Agreement or any Loan Document;
(d) upon (i) any enforcement, cleanup, removal or other actions
instituted, or threatened by any Governmental Authority against the Parent, the
Company or any Subsidiary or any of their respective properties pursuant to any
applicable Environmental Laws and (ii) the occurrence of any environmental or
similar condition on any real property adjoining or in the vicinity of any
property of the Parent, the Company or any Subsidiary that could reasonably be
expected to cause such property of such Hollywood Entity or any part thereof to
be subject to any material restrictions on the ownership, occupancy,
transferability or use of such property under any applicable Environmental
Laws;
(e) of any other litigation or proceeding affecting the Parent, the
Company or any Subsidiary which such Person would be required to report to the
SEC pursuant to the Exchange Act, within four days after reporting the same to
the SEC;
(f) of the occurrence of any of the following events affecting the
Parent, the Company or any Subsidiary or any ERISA Affiliate, and deliver to
the Administrative Agent and each Bank a copy of any notice with respect to
such event that is filed with a Governmental Authority and any notice delivered
by a Governmental Authority to the Company or any ERISA Affiliate with respect
to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Parent or the Company or
any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability.
(g) of any material change in accounting policies or financial
reporting practices by the Parent, the Company or any Subsidiary;
(h) of the entry by the Parent, the Company or any Subsidiary into any
Specified Swap Contract, together with the details thereof;
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(i) upon the request from time to time of the Administrative Agent,
the Swap Termination Values, together with a description of the method by which
such amounts were determined, relating to any then-outstanding Swap Contracts
to which any Hollywood Entity is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer of the Parent or the Company setting forth
details of the occurrence referred to therein, and stating what action the
Parent, the Company or any affected Subsidiary, as applicable, proposes to take
with respect thereto and when. Each notice under subsection 6.4(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been breached or violated, if any.
6.5 Preservation of Corporate Existence, Etc. Each of the Parent and
the Company shall, and shall cause each Subsidiary to:
(a) except as permitted by Sections 7.3 and 7.4, preserve and maintain
in full force and effect its existence and, where applicable, good standing
under the laws of its state or jurisdiction of formation or organization;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 7.4 and sales of assets permitted by Section
7.3 and except where the failure to so preserve or maintain could not
reasonably be expected to have a Material Adverse Effect; and
(c) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
6.6 Conduct of Business and Maintenance of Existence, etc. Each of
the Parent and the Company shall, and shall cause each Subsidiary to (a)
continue to engage in business of the same general type as now conducted by it,
(b) comply with all Contractual Obligations except to the extent that failure
to comply therewith could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
6.7 Maintenance of Property. Except as permitted by Sections 6.5, 7.3
and 7.4, each of the Parent and the Company shall maintain, and shall cause
each Subsidiary to maintain, and preserve all its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof. Each of the Parent, the Company and any Subsidiary shall
use the standard of care typical in the industry in the operation and
maintenance of its facilities.
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6.8 Insurance. In addition to insurance requirements set forth in the
Collateral Documents, each of the Parent and the Company shall maintain, and
shall cause each Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons;
including workers' compensation insurance, public liability and property and
casualty insurance. All casualty insurance maintained by the Parent, the
Company or any Subsidiary shall name the Administrative Agent as loss payee and
all liability insurance shall name the Administrative Agent as additional
insured for the benefit of the Banks, as their interests may appear. Upon
request of the Administrative Agent or any Bank, each of the Parent and the
Company shall furnish the Administrative Agent, with sufficient copies for each
Bank, at reasonable intervals (but not more than once per calendar year) a
certificate of a Responsible Officer thereof (and, if requested by the
Administrative Agent, any insurance broker of the Company) setting forth the
nature and extent of all insurance maintained by such Person and its
Subsidiaries in accordance with this Section or any Collateral Documents (and
which, in the case of a certificate of a broker, were placed through such
broker).
6.9 Payment of Obligations. Each of the Parent and the Company shall,
and shall cause each Subsidiary to, pay and discharge as the same shall become
due and payable:
(a) all Federal taxes and all other material tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets, and all other lawful claims which, if unpaid, would by law become a
Lien upon its property, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Parent, the Company or such Subsidiary, as applicable;
(b) all Indebtedness, as and when due and payable or within any
applicable grace period and the failure of which to pay would constitute an
Event of Default pursuant to subsection 8.1(a), but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness; and
(c) all other obligations and liabilities of the Hollywood Entities,
the failure to pay which could reasonably be expected to have a Material
Adverse Effect.
6.10 Compliance with Laws. Each of the Parent and the Company shall
comply, and shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority having jurisdiction
over it or its business (including the Federal Fair Labor Standards Act),
except such as may be contested in good faith or as to which a bona fide
dispute may exist except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
6.11 Compliance with ERISA. Each of the Parent and the Company shall,
and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects
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with the applicable provisions of ERISA, the Code and other federal or state
law; (b) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required contributions to any
Plan subject to Section 412 of the Code.
6.12 Inspection of Property and Books and Records. Each of the Parent
and the Company shall maintain and shall cause each Subsidiary to keep and
maintain a system of accounting established and administered in accordance with
sound business practices and keep and maintain proper books of record and
accounts. Each of the Parent and the Company shall permit, and shall cause
each Subsidiary to permit, representatives and independent contractors of the
Administrative Agent or any Bank to visit and inspect any of their respective
properties, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at the expense of the
Administrative Agent and/or the Banks and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company; provided, however that, (a) the
Administrative Agent may make one such visit, inspection and examination of the
Hollywood Entities in any calendar year at the expense of the Company, and (b)
when an Event of Default exists and is continuing the Administrative Agent may
do any of the foregoing at the expense of the Company at any time during normal
business hours.
6.13 Environmental Laws. (a) Each of the Parent and the Company
shall, and shall cause each Subsidiary to comply with, and require compliance
by all tenants and subtenants, if any, with, all applicable Environmental Laws,
and obtain and comply with and maintain, and require that all tenants and
subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required
by applicable Environmental Laws, except, in each case with respect to the
foregoing, where the failure to so comply or to require such compliance or the
failure to so obtain or to so require the obtaining thereof could not
reasonably be expected to have a Material Adverse Effect;
(b) Each of the Parent and the Company shall, and shall cause each
Subsidiary to conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws, except, in each case with respect to the foregoing, such as may be
contested in good faith by appropriate proceedings; and
(c) The Parent and the Company shall not, and shall not permit any
Subsidiary to, install or permit to be installed in any real property owned in
fee or leased by any Hollywood Entity any asbestos containing material, or any
other building material, prohibited under applicable Environmental Laws. With
respect to any such material currently present in any real property owned in
fee or leased by any Hollywood Entity, the Parent and the Company shall, and
shall promptly cause each Subsidiary to (subject, however, in the case of
leased real property to the terms of the underlying lease) promptly either (a)
remove or abate any such material which applicable
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Environmental Laws require to be removed or abated or (b) otherwise comply in
all material respects with applicable Environmental Laws regulating the
presence of such materials in such real property, at such Hollywood Entity's
expense. In the event any Hollywood Entity shall fail to comply with this
subsection (c), then, upon ten days' prior written notice, the Parent and the
Company shall give, or shall cause the applicable Hollywood Entity to give, the
Administrative Agent and its agents and employees access to the applicable real
property to remove or abate such material.
6.14 Use of Proceeds. Subject in each case to the applicable terms
and conditions of this Agreement, the Company may use the proceeds of the
Revolving Loans and Letters of Credit for general corporate purposes, including
Capital Expenditures, Construction Projects and Acquisitions and for no other
purpose.
6.15 Interest Rate Protection. At all times, not less than 50% of
the principal amount of the Funded Debt outstanding from time to time shall
either carry fixed interest rates and/or the Hollywood Entities shall maintain
Swap Contracts for fixed interest rates in respect of such Funded Debt. Any
such Swap Contracts shall have terms and provisions as shall be reasonably
satisfactory to the Administrative Agent.
6.16 Additional Collateral, etc. (a) With respect to any assets
acquired after the Effective Date by the Parent, the Company or any Subsidiary
(other than (x) any assets described in subsection (b) or (c) below, (y)
immaterial assets a security interest with respect to which cannot be perfected
by filing UCC-1 financing statements and (z) any assets subject to a Lien
permitted by Section 7.2) as to which the Administrative Agent, for the benefit
of the Banks, does not have a perfected Lien (including, without limitation,
the interests of the Company and/or any Subsidiary in any Indebtedness
permitted under subsection 7.6(f) and all notes or other instruments evidencing
such Indebtedness), promptly (i) execute and deliver to the Administrative
Agent such amendments to this Agreement or the Security Agreement or such other
documents as the Administrative Agent or the Required Banks deem necessary or
advisable in order to grant to the Administrative Agent, for the benefit of the
Banks, a security interest in such assets, (ii) take all actions necessary or
advisable to grant to the Administrative Agent, for the benefit of the Banks, a
perfected first priority security interest in such assets, subject only to
Permitted Liens, including without limitation, the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
appropriate Security Agreement or by law or as may be requested by the
Administrative Agent and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in the preceding clauses (i) and (ii), which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(b) With respect to (i) any fee interest in any real estate and (ii)
at the election of Administrative Agent, in Administrative Agent's sole
discretion, any leasehold interest in any real estate, in each case acquired
before or after the Effective Date by the Parent, the Company or any
Subsidiary, promptly (A) execute and deliver a first priority Fee Mortgage or
Leasehold Mortgage (as applicable) subject only to exceptions acceptable to the
Administrative Agent and the Banks and to Permitted Liens, as the case may be,
in favor of the Administrative Agent, for the benefit of the
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Banks, covering such real estate or, in the case of a leasehold interest, such
Person's leasehold interest in such real estate, (B) if requested by the
Administrative Agent, provide the Banks with (x) with respect to fee interests
in real estate only, an ALTA Form B (or other form acceptable to the
Administrative Agent and the Banks) mortgagee policy of title insurance or a
binder issued by a title insurance company satisfactory to the Administrative
Agent and the Banks in an amount at least equal to the purchase price of such
real estate (or such lesser amount as shall be reasonably specified by the
Administrative Agent) insuring (or undertaking to insure, in the case of a
binder) that the Fee Mortgage encumbering such real estate creates and
constitutes a valid first Lien against the applicable real estate in favor of
the Administrative Agent, subject only to exceptions acceptable to the
Administrative Agent and the Banks, with such endorsements and affirmative
insurance as the Administrative Agent may reasonably request, as well as a
current ALTA survey thereof, together with a surveyor's certificate; and (y)
any consents or estoppels deemed necessary or advisable by the Administrative
Agent in connection with such any mortgage or deed of trust, each of the
foregoing in form and substance reasonably satisfactory to the Administrative
Agent; (C) proof of payment of all title insurance premiums (to the extent
required in clause (B) above), documentary stamp or intangible taxes, recording
fees and mortgage taxes payable in connection with the recording of any
Mortgage in respect of such real estate or the issuance of the required title
policies, including sums necessary to insure the Lien of any Mortgage in
respect of future advances; (D) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in the preceding clause (A), which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent, (E) with respect to fee interests in real estate and, upon reasonable
request of Administrative Agent, with respect to leasehold interests in real
estate, deliver to the Administrative Agent an environmental site assessment
with respect to such property, dated as of a recent date prior to acquisition
of such property, prepared by a qualified firm acceptable to the Administrative
Agent in form and substance reasonably satisfactory to the Administrative
Agent; and (F) to the extent such insurance is required by law, obtain flood
insurance and earthquake insurance on terms satisfactory to the Administrative
Agent. The foregoing covenant regarding delivery of a mortgage or deed of
trust and other related documents shall also be applicable in connection with
any amendment, extension, replacement, renewal or other modification of a lease
encumbered by a Leasehold Mortgage (any of the foregoing, a "Replacement
Lease") if, in the reasonable judgment of Administrative Agent, such Leasehold
Mortgage does not adequately encumber such Replacement Lease for the benefit of
the Administrative Agent and the Banks. Except as otherwise provided in
subsection 4.3(b), all requirements of this subsection (b) shall be satisfied
promptly upon acquisition of the applicable real estate by a Hollywood Entity,
or within such other time frame as Administrative Agent shall reasonably
request. Notwithstanding the foregoing, (x) the obligation of any Hollywood
Entity to satisfy the requirements of clauses (A) and (B) above in respect of
leasehold interests in real property or requirements relating to Replacement
Leases shall be subject to the best efforts of the Hollywood Entities to obtain
the requisite consents and/or estoppels necessary to satisfy such requirements,
but in no event shall any Hollywood Entity be required to pay any fees or
expenses to a third party landlord or mortgagee in order to obtain such
consents or estoppels other than, if required, to compensate such third party
for its out of pocket costs (including legal fees and disbursements) in
connection with the review, execution and delivery of such consents and/or
estoppels by such third party landlord or mortgagee and (y) with respect to
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the GC Assets and such fee and/or leasehold interests in real property acquired
by any Hollywood Entity prior to the Effective Date for which the requirements
of this subsection (b) have not been fully satisfied or waived by the
Administrative Agent, the Company shall cause all such requirements to be
satisfied within (I) in the case of the GC Assets, 60 days of the Effective
Date and (II) in the case of all other fee or leasehold interests in real
property, within 30 days of the Effective Date.
(c) With respect to any new Subsidiary, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Pledge Agreement as
the Administrative Agent or the Required Banks deem necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the Banks, a
perfected first priority security interest in the Capital Stock of such new
Subsidiary which is owned by the Parent, the Company or any Subsidiary, (ii)
deliver to the Administrative Agent the certificates representing such Capital
Stock, together with undated stock powers, in blank, executed and delivered by
a duly authorized officer of the Parent, the Company or such other Subsidiary,
as the case may be, (iii) cause such new Subsidiary (A) to execute and deliver
to Administrative Agent, for the benefit of the Banks, a guaranty of the
obligations of the Company hereunder and under the other Loan Documents in the
form attached hereto as Exhibit K and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Banks a
perfected first priority security interest in the Collateral described in the
Security Agreement with respect to such new Subsidiary, including, without
limitation, the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Security Agreement or by law or as may
be requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in the preceding clauses (i), (ii) and (iii),
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
6.17 Further Assurances. (a) After obtaining knowledge thereof, the
Parent and the Company shall promptly disclose to the Administrative Agent and
correct (i) any material factual error that may be discovered in any Loan
Document or in the execution, acknowledgment or recordation thereof and (ii)
any material factual error that may be discovered in any Information delivered
to the Administrative Agent or the Banks from and after the Effective Date
(unless the material factual error in such Information has been reported or
corrected in updated Information subsequently delivered to the Administrative
Agent and the Banks).
(b) Promptly upon request by the Administrative Agent or the Required
Banks, the Parent and the Company shall (and shall cause any Subsidiary to) do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages (subject to the provisions of subsection 6.16(b)),
assignments, estoppel certificates, financing statements and continuations
thereof, termination statements, notices of assignment, transfers,
certificates, assurances and other instruments the Administrative Agent or such
Banks, as the case may be, may reasonably require from time to time in order
(i) to carry out more effectively the purposes of this Agreement or any other
Loan Document, (ii) to subject to the Liens created by any of the Collateral
Documents any of the
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properties, rights or interests covered by any of the Collateral Documents,
(iii) to perfect and maintain the validity, effectiveness and priority of any
of the Collateral Documents and the Liens intended to be created thereby, and
(iv) to better assure, convey, grant, assign, transfer, preserve, protect and
confirm to the Administrative Agent and Banks the rights granted or now or
hereafter intended to be granted to the Banks under any Loan Document or under
any other document executed in connection therewith.
ARTICLE VII
NEGATIVE COVENANTS
The Parent and the Company hereby jointly and severally agree that, so
long as any Bank shall have any Commitment hereunder, or any Loan or other
Obligation which has become due and payable shall remain unpaid or unsatisfied,
unless the Required Banks waive compliance in writing:
7.1 Financial Condition Covenants. The Parent and the Company shall
not, and shall not permit any other Subsidiary to directly or indirectly:
(a) Consolidated Total Leverage Ratio. Permit the Consolidated Total
Leverage Ratio at the end of any fiscal quarter ending during any period listed
below to exceed the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Consolidated Leverage
---------------------
Period Ratio
------ -----
<S> <C>
Effective Date to December 30, 1998 5.50 to 1
December 31, 1998 to June 29, 1999 5.25 to 1
June 30, 1999 to December 30, 1999 5.00 to 1
December 31, 1999 to December 30, 2000 4.75 to 1
December 31, 2000 to December 30, 2001 4.50 to 1
December 31, 2001 and thereafter 4.25 to 1
</TABLE>
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(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio at the end of any fiscal quarter ending during any
period listed below to be less than the ratio set forth below opposite such
period:
<TABLE>
<CAPTION>
Consolidated Interest
---------------------
Period Coverage Ratio
------ --------------
<S> <C>
Effective Date to December 31, 1997 1.50 to 1
January 1, 1998 to December 30, 1998 1.75 to 1
December 31, 1998 to June 29, 1999 2.00 to 1
June 30, 1999 to December 30, 1999 2.25 to 1
December 31, 1999 to December 30, 2000 2.50 to 1
December 31, 2000 and thereafter 2.75 to 1
</TABLE>
(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio at the end of any fiscal quarter to be less than
1.10 to 1.
(d) Consolidated Senior Leverage Ratio. Permit the Consolidated
Senior Leverage Ratio at the end of any fiscal quarter ending during any period
listed below to exceed the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Period Consolidated Total Leverage Ratio
------ ---------------------------------
<S> <C>
Effective Date to 2.50 to 1
December 30, 1998
December 31, 1998 to 2.25 to 1
June 29, 1999
June 30, 1999 2.00 to 1
and thereafter
</TABLE>
7.2 Limitation on Liens. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, directly or indirectly, make,
create, incur, assume or suffer to exist any
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Lien upon or with respect to any part of its property, whether now owned or
hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Parent, the Company or any
other Hollywood Entity on the Effective Date and set forth in Schedule 7.1
securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 6.9, provided that no notice
of lien has been filed or recorded under the Code or, if filed or recorded,
foreclosure, distraint, sale or other similar proceedings have not been
commenced or, if commenced have been stayed;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
securing amounts which are not delinquent or remain payable without penalty or
which are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation or consisting of escrow arrangements or deposits in connection with
Acquisitions;
(f) Liens on the property of the Parent, the Company or any other
Subsidiary securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course of
business, provided all such Liens in the aggregate would not (even if enforced)
cause a Material Adverse Effect;
(g) Liens consisting of prejudgment, judgment or judicial attachment
liens, not giving rise to an Event of Default so long as any appropriate legal
proceeding that may have been initiated for the review of such judgment or
attachment shall not have been fully terminated or the period within such
proceeding may be initiated shall not have expired and the enforcement of such
Liens is effectively stayed.
(h) Liens constituting permitted encumbrances pursuant to the terms of
the respective Mortgages and Liens constituting survey exceptions,
encumbrances, easements and reservations of, or right of others for, rights of
way, zoning and other restrictions as to the use of real properties and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are
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not substantial in amount, and which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the businesses of the Parent, the Company and the
Subsidiaries;
(i) to the extent the Indebtedness is permitted by subsection 7.6(c),
purchase money security interests on any property acquired or held by the
Parent, the Company or any Subsidiary in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such
Lien attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction and (iii) the principal amount of the debt secured thereby
does not exceed 110% of the cost of such property;
(j) Liens securing obligations in respect of Capital Leases permitted
by subsection 7.11(b) on assets subject to such leases;
(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Hollywood Entity owning such deposit account in excess of those
set forth by regulations promulgated by the FRB, and (ii) such deposit account
is not intended by the Parent, the Company or any Subsidiary to provide
collateral to the depository institution;
(l) any obligations or duties affecting the property of any Hollywood
Entity to any municipally or governmental, statutory or public authority with
respect to any franchise, grant, license or permit or similar authorization
obtained in the ordinary course of business, and any rights reserved to or
vested in any municipality or governmental, statutory or public authority by
the terms of any right, power, franchise, grant, license or permit or similar
authorization (i) to terminate or restrict the transfer of such right, power,
franchise, grant, license or permit or similar authorization, (ii) to control
or regulate any property of any Hollywood Entity, (iii) to use such property in
a manner which does not materially impair the use of such property for the
purposes for which it is held by any Hollywood Entity or (iv) to purchase,
condemn, expropriate or recapture any of the property of any Hollywood Entity;
(m) legal and equitable encumbrances deemed to exist by reason of
negative pledges such as those contained in this Section 7.2 and 7.17;
(n) Liens in favor of Mark Twain Bank encumbering the Lawrence
Property and the Theater to be built thereon and securing Indebtedness
permitted by subsection 7.6(e); and
(o) Liens, if any, arising as a result of certain proceeds of the
issuance of the Senior Subordinated Notes being escrowed pending the closing of
the Acquisition of the GC Assets, but only during such escrow period.
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7.3 Disposition of Assets. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus equipment,
all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of assets by the Parent, the Company or any
Subsidiary to another Hollywood Entity pursuant to reasonable business
purposes, including dispositions permitted by Section 7.4;
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof;
(e) as permitted by Section 7.5 or 7.12;
(f) provided no Default or Event of Default exists, (i) Sale and
Leaseback Transactions in connection with the real property associated with any
Theater and in connection with which a Hollywood Entity will own or lease and
operate (and be entitled to the revenues therefrom) the improvements thereon or
to be constructed thereon, the aggregate proceeds of which do not exceed
$10,000,000 in any fiscal year, (ii) other leases and subleases on market terms
of property or space associated with any Theater other than leases or subleases
of all or substantially all of the space and property in which any Hollywood
Entity has an interest associated with any Theater except as otherwise
permitted under clause (i), and (iii) the Dispositions of Theaters described in
and made substantially in accordance with the Theater Exchange Letter of
Intent; and
(g) other Dispositions (other than those described in subsection
7.3(a) through (f) hereof and other than receivables, except to the extent
disposed of incidentally in connection with a Disposition otherwise permitted
hereby or permitted by subsection (d) of this Section 7.3), the aggregate
proceeds of which do not exceed $10,000,000 in any fiscal year, provided that
(i) the Company complies with subsection 2.7(a) and (ii) both before and after
giving effect to such Disposition, (A) the Hollywood Entities are in compliance
with all of the financial conditions set forth in Section 7.1 on a pro forma
basis after giving effect to the subject Disposition and (B) no Default or
Event of Default exists.
7.4 Consolidations and Mergers. The Parent and the Company shall not,
and shall not suffer or permit any Subsidiary to, merge, consolidate with or
into, or convey, transfer, lease or
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otherwise dispose of (whether in one transaction or in a series of transactions
all or substantially all of its assets (whether now owned or hereafter
acquired) to or in favor of any Person, except as permitted by Section 7.3 or
7.5 and;
(a) any Subsidiary may merge or consolidate with the Parent or the
Company, provided that the Parent or the Company shall be the continuing or
surviving corporation, or with any one or more Subsidiaries, provided that if
any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary,
the Wholly-Owned Subsidiary shall be the continuing or surviving entity; and
(b) any Subsidiary may transfer all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the Company or another
Wholly-Owned Subsidiary.
7.5 Loans and Investments. Neither the Parent, the Company, nor any
other Hollywood Entity shall purchase or acquire, or suffer or permit any
Hollywood Entity to purchase or acquire, or make any commitment therefor any
capital stock, equity interest, or any obligations or other securities of, or
any interest in, any Person, or make or commit to make any Acquisitions, or
make or commit to make any advance, loan, extension of credit or capital
contribution to or any other investment in, any Person including any Affiliate
of the Parent or the Company (together, "Investments"), except for:
(a) Investments in the form of cash equivalents having maturities of
one year or less and mutual funds investing solely in cash equivalents having
maturities of one year or less;
(b) extensions of trade credit in the ordinary course of business and
adjustments to account debtors with respect thereto in the ordinary course of
business;
(c) Investments by any Hollywood Entity in any other Hollywood Entity
and Investments incurred in order to consummate the Acquisition of the GC
Assets and other Acquisitions, subject to the foregoing provisions:
(i) in the case of any Acquisition of the type described in
clause (b), (c) or (d) of the definition of such term,
(A) the Person and/or division to be acquired is engaged
primarily in the business of owning and/or operating Theaters, the assets to be
acquired are used in the business of owning and/or operating Theaters and/or
the business to be acquired is one primarily involving the ownership and/or
operation of Theaters; and
(B) in the case of any Acquisition which is a merger or
consolidation with one or more other Persons, the surviving Person is a
Hollywood Entity;
(ii) in the case of any Land Acquisition,
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(A) such Land Acquisition is for the purpose of constructing a
New Theater; and
(B) the Hollywood Entity making such Land Acquisition shall have
complied with the provisions of subsection 4.3(a) whether or not the Company
requests a Construction Advance in connection with such Land Acquisition;
(iii) immediately prior to and after giving effect to such
Acquisition, no Default or Event of Default shall exist;
(iv) any such Acquisition does not involve Margin Stock;
(v) the prior, effective written consent or approval to such
Acquisition of the board of directors or equivalent governing body of the
acquirer is obtained if required by the Organization Documents of such Person;
(vi) in the case of Acquisitions other than (A) the
Acquisitions described in and made substantially in accordance with the Theater
Exchange Letter of Intent and (B) any Acquisitions made pursuant to Sale and
Leaseback Transactions, the Acquisition Costs in respect of such Acquisition,
together with the Acquisition Costs of all Acquisitions (other than those
Acquisitions described in the foregoing clauses (A) and (b)) consummated in the
twelve (12) month period immediately preceding the closing date of the subject
Acquisition, does not exceed $40,000,000 in the aggregate;
(vii) with respect to any single Acquisition or related
series of Acquisitions having Acquisition Costs exceeding $5,000,000 in the
aggregate, the Company shall deliver to the Administrative Agent on or prior to
the date of the consummation of such Acquisition, with sufficient copies for
each of the Banks,
(A) a copy of the pro forma projections for such Acquisition in a
form satisfactory to the Administrative Agent and certified by a Responsible
Officer of the Company;
(B) a certificate of the Company, certified by a Responsible
Officer of the Company, providing that, the Hollywood Entities are in
compliance with all of the financial conditions set forth in Section 7.1 on a
pro forma basis after giving effect to the subject Acquisition (including,
without limitation, accounting for any additional Indebtedness incurred in
connection with such Acquisition); and
(C) a certificate of the Company, certified by a Responsible
Officer of the Company, stating that, both before and after giving effect to
the subject Acquisition, (I) the representations and warranties in Article V
shall be true and correct in all material respects as of such date with the
same effect as if made on and as of such date (except to the extent such
representations
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and warranties expressly refer to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date) and (II) no
Default or Event of Default shall exist; and
(viii) during the 30 day period following the date on which
Administrative Agent shall have notified the Company that the primary
syndication of the Loans has commenced, no Hollywood Entity shall consummate or
enter into any agreements relating to any single Acquisition or related series
of Acquisitions having Acquisition Costs in excess of $2,000,0000 other than
the transactions contemplated in the Theater Exchange Letter of Intent;
(d) loans and advances to employees of any Hollywood Entity for
travel, entertainment and relocation expenses in the ordinary course of
business or to finance the acquisition of Capital Stock of the Parent in
connection with equity incentive plans, in an aggregate principal amount not to
exceed $500,000 at any time outstanding; and
(e) provided that no Default or Event of Default shall exist
immediately prior to and upon the consummation of any such Investment, one or
more Investments other than Acquisitions, provided that (i) such Investment
does not involve Margin Stock and (ii) the aggregate amount expanded for all
such Investments permitted under this subsection (e) does not exceed $3,000,000
at any time outstanding, which amount may be replenished and reinvested by any
cash return of principal or return of capital of any such Investment.
7.6 Limitation on Indebtedness. The Parent and the Company shall not,
and shall not suffer or permit any Subsidiary to, create, incur, assume, suffer
to exist, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 7.9;
(c) purchase money Indebtedness, whether unsecured or secured by Liens
permitted by subsection 7.2(i), in an aggregate amount not to exceed $5,000,000
at any time outstanding;
(d) Indebtedness incurred in connection with leases permitted pursuant
to Section 7.11;
(e) Indebtedness owing to Mark Twain Bank in a principal amount not to
exceed $3,800,000 at any time outstanding for the purpose of financing
construction of a Theater on the Lawrence Property;
(f) Indebtedness owing by any Subsidiary to the Company or any other
Subsidiary ("Intercompany Indebtedness"); provided however that the aggregate
amount of all Intercompany
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Indebtedness owing by all Subsidiaries to the Company or to other Subsidiaries
shall not exceed $5,000,000 at any time outstanding;
(g) Indebtedness in an aggregate amount outstanding at any time not to
exceed $5,000,000 provided that
(i) such Indebtedness has a stated maturity date occurring not
earlier than twelve (12) months after the Maturity Date;
(ii) there are no scheduled principal repayments to be made
in respect of such Indebtedness prior to the Maturity Date and no voluntary
principal repayments are made in respect of such Indebtedness except in
accordance with Section 7.12;
(iii) the terms governing such Indebtedness are not more
restrictive on the borrower thereunder than the Loan Documents and are
otherwise acceptable to the Required Banks; and
(iv) the Hollywood Entities are in compliance with all of
the financial conditions set forth in Section 7.1 on a pro forma basis after
giving effect to the subject Indebtedness;
(h) Indebtedness of the Parent owing to The Provident Bank in an
aggregate principal amount not to exceed $136,850 at any time outstanding; and
(i) Indebtedness incurred pursuant to the Senior Subordinated Notes
and the Senior Subordinated Indenture.
7.7 Transactions with Affiliates. The Parent and the Company shall
not, and shall not suffer or permit any Subsidiary to, enter into any
transaction with any Affiliate of the Parent unless such transaction is
otherwise permitted under this Agreement or such transaction is upon fair and
reasonable terms no less favorable to the Parent, the Company or such
Subsidiary, as applicable, than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate of the Parent, the Company or such
Subsidiary or on terms fair from a financial point of view to such Hollywood
Entity in the event no comparable with an unaffiliated Person is available;
provided that the foregoing restrictions shall not prohibit (a) transactions
permitted by Section 7.12, (b) the payment in accordance with sound business
practice to officers and directors of any Hollywood Entity of compensation,
including salaries, bonuses, awards, participation in any retirement, health,
welfare or other executive or employee plan, policy, practice or program, for
the performance of their services, (c) any indemnification or similar payment
or advancement of expenses by any Hollywood Entity to any director, officer or
employee of any Hollywood Entity in accordance with its Organization Documents
or under applicable law and (d) payment of reasonable director's fees to
directors of any Hollywood Entity who is not an employee of such Hollywood
Entity. For
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purposes of this Section 7.7, no Hollywood Entity shall be deemed an Affiliate
of any other Hollywood Entity.
7.8 Use of Proceeds. (a) The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, use any portion of the Loan
proceeds or any Letter of Credit, directly or indirectly, (i) to purchase or
carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the
Company or others incurred to purchase or carry Margin Stock, (iii) to extend
credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act.
(b) The Parent and the Company shall not, directly or indirectly, use
any portion of the Loan proceeds or any Letter of Credit (i) knowingly to
purchase Ineligible Securities from the Arranger during any period in which the
Arranger makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting or placement period Ineligible Securities
being underwritten or privately placed by the Arranger, or (iii) to make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by the Arranger and issued by or for the benefit of the
Parent, the Company or any Affiliate thereof. The Arranger is a registered
broker-dealer and permitted to underwrite and deal in certain Ineligible
Securities; and "Ineligible Securities" means securities which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
7.9 Contingent Obligations. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, create, incur, assume or suffer
to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Hollywood Entities (i) in respect of
Indebtedness or (ii) incurred in connection with the acquisition of the Crown
Assets, the UA Assets or the GC Assets (notwithstanding that such obligations
may be excluded from the definition of "Contingent Obligations" pursuant to the
last sentence of such definition) and, in each case, existing as of the
Effective Date and listed in Schedule 7.8;
(d) Contingent Obligations with respect to Surety Instruments (other
than pursuant to Letters of Credit issued under Section 2.17 hereof) incurred
in the ordinary course of business and not exceeding at any time $5,000,000 in
the aggregate in respect of the Parent, the Company and any Subsidiary; and
(e) (i) Contingent Obligations of the Parent evidenced by any Loan
Document, (ii) Contingent Obligations evidenced by any guaranty agreement of
any Subsidiary, guaranteeing the
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Obligations and (iii) Contingent Obligations of any Hollywood Entity in respect
of obligations of any Hollywood Entity not prohibited by this Agreement.
7.10 Joint Ventures. The Parent and the Company shall not, and shall
not suffer or permit any Subsidiary to enter into any Joint Venture.
7.11 Lease Obligations. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, create or suffer to exist any
obligations for the payment of rent for any property under lease or agreement
to lease, except for:
(a) leases of the Parent, the Company and of Subsidiaries in existence
on the Effective Date and any renewal, extension or refinancing thereof;
(b) Capital Leases other than those permitted under subsections (a)
and (c) of this Section, entered into by the Parent, the Company or any
Subsidiary after the Effective Date to finance the acquisition of equipment;
provided that the aggregate amounts to be paid under all such capital leases
shall not exceed $5,000,000 at any time outstanding;
(c) leases in connection with permitted Acquisitions otherwise in
compliance with Section 7.5 and any renewal or extension thereof; and
(d) leases in connection with Sale and Leaseback Transactions by any
Hollywood Entity, provided that any such Sale and Leaseback Transaction is
otherwise permitted hereunder and complies with the provisions of Section 7.3.
7.12 Restricted Payments. (a) The Parent and the Company shall not,
and shall not suffer or permit any Subsidiary to, declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding (collectively "Restricted Payments") other than the following
(collectively, "Permitted Restricted Payments"):
(i) any Subsidiary may declare and pay dividends to and make
other distributions to the Company;
(ii) the Parent may declare and distribute dividends on their
respective Capital Stock in kind by the issuance of additional shares of
Capital Stock;
(iii) the Parent may purchase or redeem shares of its Capital
Stock held by present or former officers or employees of any Hollywood Entity
upon such person's death, disability, retirement or termination of employment;
and
(iv) provided
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(A) no Default or Event of Default shall have occurred and be
continuing prior to or after giving effect to any Permitted Restricted Payment;
and
(B) prior to and after giving effect to any Permitted Restricted
Payment permitted under this subsection (iv), the Consolidated Total Leverage
Ratio is less than 4.0 to 1, and the Company shall have delivered a compliance
certificate in the form attached hereto as Exhibit M demonstrating the same;
the Parent, the Company and any Subsidiary may make other Restricted
Payments from time to time in an aggregate amount not exceeding 25% of Excess
Cash Flow for any fiscal year beginning after December 31, 1998.
(b) In the event that at any time Permitted Restricted Payments are
not made in the maximum permitted amount under subsection (a) above, the
difference, at any time, between (i) the aggregate maximum amount of Permitted
Restricted Payments which the Parent, the Company and any Subsidiary were
entitled to make under subsection (a) and (ii) an amount equal to the aggregate
amount of Permitted Restricted Payments so made (such difference,
"Undistributed Restricted Payments") may be applied from time to time, in whole
or in part (but without duplication) toward Capital Expenditures incurred by
the Parent, the Company or any Subsidiary in excess of the Capital Expenditures
Cap for any fiscal year.
7.13 ERISA. The Parent and the Company shall not, and shall not
suffer or permit any of its ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan that could reasonably be expected to have a Material Adverse Effect;
or (b) engage in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
7.14 Change in Business. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, engage in any material line of
business substantially different from those lines of business carried on by the
Parent, the Company and its Subsidiaries on the date hereof.
7.15 Accounting Changes. The Parent and the Company shall not, and
shall not suffer or permit any Subsidiary to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of the Parent, the Company or of any Subsidiary.
7.16 Capital Expenditures Cap. Except as otherwise permitted under
subsection 7.12(b), aggregate amount of Capital Expenditures incurred by the
Parent, the Company or any Subsidiary in any fiscal year shall not exceed the
amount set forth below for the applicable fiscal year (the "Capital
Expenditures Cap"):
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<TABLE>
<CAPTION>
Fiscal Year Ending Capital Expenditures Cap
------------------ ------------------------
<S> <C>
December 31, 1997 $3,000,000
December 31, 1998 $3,250,000
December 31, 1999 $3,500,000
December 31, 2000 $3,750,000
December 31, 2001 $4,000,000
December 31, 2002 $4,250,000
</TABLE>
; provided, however, if any amounts so permitted to be expended for Capital
Expenditures during any fiscal year are not expended during such fiscal year
(the "CapEx Shortfall"), the Hollywood Entities may make additional Capital
Expenditures in excess of the foregoing limitation in the next succeeding
fiscal year in an aggregate amount not to exceed the lesser of (a) the CapEx
Shortfall and (b) $500,000; and, provided further, that no CapEx Shortfall for
any fiscal year may be carried over beyond the next succeeding fiscal year.
7.17 Limitation on Negative Pledge Clauses. The Parent and the
Company will not, and will not permit any Subsidiary to, enter into any
contractual obligation (a "Lien Restriction") in connection with the incurrence
of Indebtedness which, with respect to any material asset of such Person, would
prohibit the Parent, the Company or any Subsidiary from granting a Lien on such
asset as collateral security for the obligations of the Parent and the Company
hereunder or, as applicable, a guaranty of such obligations by the Parent, the
Company or any Subsidiary (collectively, "Credit Obligations"), except Lien
Restrictions with respect to any asset encumbered by a Lien permitted by
Section 7.2). It is understood that an "equal and ratable" clause shall not be
deemed to constitute a Lien Restriction so long as such clause would permit the
obligations entitled to the benefit of such clause and the applicable Credit
Obligations to be secured by Liens on the relevant assets on a pari passu
basis.
7.18 Limitation on Construction of New Screens. At no time shall the
sum of (a) the aggregate number of movie theater screens under construction by
all Hollywood Entities on any date and (b) the aggregate number of movie
theater screens in operation by all Hollywood Entities for less than six
calendar months as of such date (other than movie theater screens acquired or
leased by any Hollywood Entity from time to time which has been in operation by
any Person for at least six months prior to such date), be greater than (i) for
the period beginning on the Effective Date and ending on June 30, 1998, 30% of
the aggregate number of all movie screens operated or under construction by all
Hollywood Entities (including all screens to be contained in the applicable New
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Theater) on such date and (ii) at any time thereafter, 20% of the aggregate
number of all movie screens operated or under construction by all Hollywood
Entities (including all screens to be contained in the applicable New Theater)
on such date.
7.19 Subsidiaries. The Parent shall not, directly or indirectly (a)
own or acquire any Subsidiary which is not a Wholly-Owned Subsidiary or (b)
sell, transfer or otherwise dispose of less than all its Capital Stock in any
Subsidiary or (c) permit any Wholly-Owned Subsidiary to issue any Capital Stock
to any Person other than to the Parent or another Wholly-Owned Subsidiary,
except that, with the prior consent of the Administrative Agent (which consent
shall not be unreasonably withheld) the Parent may, directly or indirectly, (i)
own and acquire a Subsidiary which is not a Wholly-Owned Subsidiary and (ii)
sell, transfer or otherwise dispose of less than all of its Capital Stock in
any Subsidiary and (iii) permit any Wholly-Owned Subsidiary to issue Capital
Stock to any other Person, provided, that in each such case, after giving
effect to any such acquisition, disposition or issuance, the Parent shall own,
directly or indirectly, beneficially and of record, not less than 80% of all
Capital Stock in such Subsidiary.
7.20 Senior Subordinated Indenture; Senior Subordinated Notes. Except
as otherwise provided for in the Senior Subordinated Notes and the Senior
Subordinated Indenture, the Company shall not amend or modify, nor permit the
amendment or modification of, the Senior Subordinated Notes or the Senior
Subordinated Indenture in any manner which would be materially adverse to the
interests of the Administrative Agent and the Banks without the prior written
consent of the Administrative Agent, which consent shall not be unreasonably
withheld or delayed.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to make, (i) when and as required
to be made herein, payments of any amount of principal of any Loan or any L/C
Obligation, or (ii) when and as required to be paid under any Specified Swap
Contract (including within any applicable grace period), any payment or
transfer under such Specified Swap Contract, or (iii) within 3 days after the
same becomes due, payment of any interest, fee or any other amount payable
hereunder or under any other Loan Document (other than a Specified Swap
Contract); or
(b) Representation or Warranty. Any representation or warranty by the
Parent or the Company or any Subsidiary made or deemed made herein, in any
other Loan Document (other than a Specified Swap Contract) or which is
contained in any certificate or in any other Information furnished by the
Parent, the Company, any Subsidiary or any Responsible Officer thereof at any
time under this Agreement, or in or under any other Loan Document (other than a
Specified Swap Contract) is incorrect in any material respect on or as of the
date made or deemed made except to
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the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all material respects as
of such earlier date; provided however, that notwithstanding the fact that
certain representations and warranties contained in Section 5.12 are limited to
the knowledge of the Parent or the Company regarding the statements made
therein, for purposes of this subsection 8.1(b), such knowledge limitation
shall be disregarded and such representations and warranties contained in
Section 5.12 shall be applied under this subsection (b) as if such knowledge
limitation did not exist; or
(c) Specific Defaults. The Parent or the Company fails to perform or
observe any term, covenant or agreement contained in Article VII; or
(d) Other Defaults. Except as otherwise provided in the Mortgages,
the Parent or the Company or any Subsidiary party thereto fails to perform or
observe any other term or covenant contained in this Agreement or any other
Loan Document other than a Specified Swap Contract, and such default shall
continue unremedied for a period of 30 days after the date upon which written
notice thereof is given to the Company by the Administrative Agent or any Bank;
or
(e) Cross-Default. (i) The Parent, the Company or any Subsidiary (A)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation (other than in respect of Swap Contracts), when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) or
(B) fails to perform or observe any other condition or covenant, or any other
event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, and, with respect
to clauses (A) and (B) if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary
or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness
to be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof
to be demanded and the outstanding principal amount of such Indebtedness is
greater than $2,000,000, or (ii) there occurs under any Swap Contract an early
termination thereof resulting from (1) any event of default under such Swap
Contract as to which the Parent, the Company or any Subsidiary is the
defaulting party or (2) any termination event as to which the Parent, the
Company or any Subsidiary is an affected party, and, in either event, the Swap
Termination Value owed by the Company or such Subsidiary as a result thereof is
greater than $2,000,000, or (iii) there occurs any default or event of default
under the UA Guaranty by any Hollywood Entity which continues beyond any
applicable notice and/or cure period.
(f) Insolvency; Voluntary Proceedings. The Parent, the Company or any
Subsidiary (i) generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business and operations; (iii) commences any Insolvency Proceeding with respect
to itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
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(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Parent, the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Parent's or the
Company's or any Subsidiary's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within 60 days after commencement, filing or levy; (ii) the Parent, the Company
or any Subsidiary admits the material allegations of a petition against it in
any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Parent, the
Company or any Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected
to result in liability of the Parent or the Company under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC; or (ii) an Unfunded Pension
Liability exists; or (iii) the Parent or the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan; in each case in clauses (i)
through (iii) above, such event or condition, together with all other such
events and conditions, if any, could reasonably be expected to have a Material
Adverse Effect; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Parent or the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $2,000,000 or more, and the same
shall remain unvacated and unstayed pending appeal for a period of 10
consecutive days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Parent or the Company or any Subsidiary which
does or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(k) Change of Control. (i) Either of Beacon or Stephenson fails to
own its respective Minimum Required Ownership in the Parent of the Capital
Stock of the Parent, provided, however, the foregoing shall not prohibit the
pledge or other hypothecation of any Capital Stock of the Parent by Stephenson
or Beacon, and no Event of Default pursuant to this subsection (k) shall be
deemed to occur as a result of such pledge or other hypothecation until such
time as such Capital Stock has been foreclosed upon or the beneficiary of such
pledge or other hypothecation undertakes to exercise
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the voting rights attributable to such Capital Stock; or (ii) the Parent shall
cease to own and control, beneficially and of record, 100% of each class of
outstanding Capital Stock of the Company free and clear of all Liens (except
Permitted Liens); or (iii) Stephenson fails to be the chief executive officer
of the Company; or
(l) Guarantor Defaults. The Parent fails in any material respect to
perform or observe any term, covenant or agreement in the guaranty contained in
Article X hereof; or such guaranty is for any reason partially (including with
respect to future advances) or wholly revoked or invalidated, or otherwise
ceases to be in full force and effect, or the Parent or any other Person
contests in any manner the validity or enforceability thereof or denies that it
has any further liability or obligation thereunder; or
(m) Collateral.
(i) any provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable against the Company or
any Subsidiary party thereto or the Parent, the Company or any Subsidiary shall
so state in writing or bring an action to limit its obligations or liabilities
thereunder; or
(ii) any Collateral Document shall for any reason (other
than pursuant to the terms thereof) cease to create a valid security interest
in the Collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority security
interest subject only to Permitted Liens.
8.2 Remedies. If any Event of Default occurs, the Administrative
Agent shall, at the request of, or may, with the consent of, the Required
Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to issue Letters of Credit to be terminated,
whereupon such commitments shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is or
at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or
shall be entitled at such time to present, the drafts or other documents
required to draw under such Letters of Credit) to be immediately due and
payable, and declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company ("Acceleration"); and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
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provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 8.1 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans and any obligation of the Issuing Bank to issue
Letters of Credit shall automatically terminate and the unpaid principal amount
of all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent, the Issuing Bank or any Bank.
8.3 Specified Swap Contract Remedies. Notwithstanding any other
provision of this Article VIII, each Swap Provider shall have the right, with
prior notice to the Administrative Agent, but without the approval or consent
of the Administrative Agent or the other Banks, with respect to any Specified
Swap Contract of such Swap Provider, (a) to declare an event of default,
termination event or other similar event thereunder and to create an Early
Termination Date, (b) to determine net termination amounts in accordance with
the terms of such Specified Swap Contracts and to set-off amounts between
Specified Swap Contracts, and (c) to prosecute any legal action against the
Company to enforce net amounts owing to such Swap Provider.
8.4 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1 Appointment and Authorization; "Administrative Agent". (a) Each
Bank hereby irrevocably (subject to Section 9.9) appoints, designates and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
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(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Administrative Agent may agree at the
request of the Required Banks to act for such Issuing Bank with respect
thereto; provided, however, that the Issuing Bank shall have all of the
benefits and immunities (i) provided to the Administrative Agent in this
Article IX with respect to any acts taken or omissions suffered by the Issuing
Bank in connection with Letters of Credit Issued by it or proposed to be Issued
by it and the application and agreements for letters of credit pertaining to
the Letters of Credit as fully as if the term "Agent", as used in this Article
IX, included the Issuing Bank with respect to such acts or omissions, and (ii)
as additionally provided in this Agreement with respect to the Issuing Bank.
9.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible to any Bank for the negligence or misconduct of
any agent or attorney-in-fact that it selects with reasonable care.
9.3 Liability of Administrative Agent. None of the Administrative
Agent-Related Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Banks for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or for the value of or title to any
Collateral, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
the Company or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Administrative Agent-Related Person shall be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company or any of the Company's Subsidiaries or Affiliates.
9.4 Reliance by Administrative Agent. (a) The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Banks as it deems appropriate and, if it so requests, it
shall first be indemnified
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to its satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Banks and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Banks, unless the Administrative Agent shall have received written notice from
a Bank or the Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Banks in accordance with
Article VIII; provided, however, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in
the best interest of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by the Administrative Agent hereinafter taken, including
any review of the affairs of the Company and its Subsidiaries, shall be deemed
to constitute any representation or warranty by any Administrative
Agent-Related Person to any Bank. Each Bank represents to the Administrative
Agent that it has, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, the value of and title to
any Collateral, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Administrative Agent, the
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Administrative Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of any of the Administrative
Agent-Related Persons.
9.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Banks shall indemnify
upon demand the Administrative Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation
of the Company to do so), pro rata, from and against any and all Indemnified
Liabilities; provided, however, that no Bank shall be liable for the payment to
the Administrative Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Administrative
Agent.
9.8 Administrative Agent in Individual Capacity. BofA and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Company and its Subsidiaries and Affiliates as though BofA were not the
Administrative Agent or the Issuing Bank hereunder and without notice to or
consent of the Banks. The Banks acknowledge that, pursuant to such activities,
BofA or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that
the Administrative Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not the Administrative Agent or the Issuing Bank, and
the terms "Bank" and "Banks" include BofA in its individual capacity.
Notwithstanding the foregoing, however, BofA may not be removed as the
Administrative Agent at the request of the Required Banks unless BofA shall
also simultaneously be replaced as "Issuing Bank" hereunder pursuant to
documentation in form and substance reasonably satisfactory to BofA.
9.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Banks. If the
Administrative Agent resigns under this Agreement, the Required Banks shall
appoint from among the Banks a successor agent for the Banks. If no successor
agent is appointed prior to the effective date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Banks and
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with the approval of the Company (which approval will not be unreasonably
withheld), a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article IX and
Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor agent has accepted appointment as Administrative
Agent by the date which is 30 days following a retiring Administrative Agent's
notice of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above.
9.10 Withholding Tax. (a) Each Bank that is not a United States
person, within the meaning of Section 7701(a)(30) of the Code (a "United States
Person"), shall:
(i) prior to the Effective Date deliver to the Administrative
Agent and to the Company (A) a duly completed copy of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as the case
may be, and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, and
(ii) thereafter deliver to the Administrative Agent and to
the Company a future copy of any such form on or before the date that any such
prior form expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Administrative Agent and the Company, unless, as a result of a change in law
(including a change in treaty or regulation) occurring after the date of this
Agreement (or, with respect to an Eligible Assignee, after such Eligible
Assignee becomes a Bank under this Agreement), such Bank is legally precluded
from duly completing and delivering any such form with respect to it and such
Bank so advises the Administrative Agent and the Company.
Such Bank shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. In addition, each such Bank shall, at any time, deliver to
the Administrative Agent and the Company such additional forms or other
documents as the Administrative Agent or the Company shall reasonably request,
in order to confirm the exemptions described in the immediately preceding
sentence. Each Person, other than a United States Person, that intends to
become a Bank or a Participant pursuant to Section 11.8 shall on or prior to
the effectiveness of the related transfer be required to provide, and shall
provide, the forms and certificates required above as though the "Effective
Date" were the effective date of such transfer and, thereafter, shall comply
with all the other requirements of this Section 9.10; provided in the case of a
Participant, such
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Participant shall furnish all such required forms and certificates to the Bank
from which the related participation shall have been purchased.
(b) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 1001 or 4224 with the Administrative Agent and the Company
sells, assigns, grants a participation in, or otherwise transfers to a
Participant all or part of the Obligations of the Company to such Bank, such
Bank agrees to undertake sole responsibility for complying with the withholding
tax requirements imposed by Sections 1441 and 1442 of the Code.
(c) If any Bank is entitled to a reduction in the applicable
withholding tax, the Administrative Agent or the Company may withhold from any
interest payment to such Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. However, if the
forms or other documentation required by subsection (a) of this Section are not
delivered to the Administrative Agent and the Company, then the Administrative
Agent or the Company may withhold from any interest payment to such Bank not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.
(d) Each Bank that is a United States Person shall, upon request,
provide the Company and the Administrative Agent such forms or other documents
as are necessary to establish that such Bank is a United States Person and is
entitled to an exemption from United States backup withholding tax.
(e) If the Internal Revenue Service or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that the
Administrative Agent or the Company did not properly withhold tax from amounts
paid to or for the account of any Bank (because the appropriate form was not
delivered or was not properly executed, or because such Bank failed to notify
the Administrative Agent or the Company of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Administrative Agent and
the Company fully for all amounts paid, directly or indirectly, by the
Administrative Agent or the Company as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Administrative Agent or the Company under this Section,
together with all costs and expenses (including Attorney Costs). The
obligation of the Banks under this subsection shall survive the payment of all
Obligations and the resignation or replacement of the Administrative Agent.
9.11 Collateral Matters. (a) The Administrative Agent is authorized
on behalf of all the Banks, without the necessity of any notice to or further
consent from the Banks, from time to time to take any action with respect to
any Collateral or the Collateral Documents which may be necessary to perfect
and maintain perfected the security interest in and Liens upon the Collateral
granted pursuant to the Collateral Documents.
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(b) The Banks irrevocably authorize the Administrative Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other Obligations known to
the Administrative Agent and payable under this Agreement or any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (iii)
constituting property in which the Company or any Subsidiary owned no interest
at the time the Lien was granted or at any time thereafter; (iv) constituting
property leased to the Company or any Subsidiary under a lease which has
expired or been terminated in a transaction permitted under this Agreement or
is about to expire and which has not been, and is not intended by the Company
or such Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full; or (vi) if approved, authorized or ratified in
writing by the Required Banks or all the Banks, as the case may be, as provided
in subsection 11.1(f). Upon request by the Administrative Agent at any time,
the Banks will confirm in writing the Administrative Agent's authority to
release particular types or items of Collateral pursuant to this subsection
9.11(b), provided that the absence of any such confirmation for whatever reason
shall not affect the Administrative Agent's rights under this Section 9.11.
(c) Each Bank agrees with and in favor of each other (which agreement
shall not be for the benefit of the Company or any Subsidiary) that the
Company's obligation to such Bank under this Agreement and the other Loan
Documents is not and shall not be secured by any real property collateral now
or hereafter acquired by such Bank other than the real property described in
the Mortgages.
ARTICLE X
GUARANTY
10.1 Guaranty. In order to induce the Administrative Agent and the
Banks to execute and deliver this Agreement and to make or maintain the Loans
hereunder, and in consideration thereof, the Parent hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Banks, the prompt and complete payment and performance by the Company when
due (whether at stated maturity, by acceleration or otherwise) of the
Obligations, and the Parent further agrees to pay any and all expenses
(including, without limitation, all reasonable fees, charges and disbursements
of counsel) which may be paid or incurred by the Administrative Agent or by the
Banks in enforcing, or obtaining advice of counsel in respect of, any of their
rights under the guaranty contained in this Article X. The guaranty contained
in this Article X, subject to Section 10.5, shall remain in full force and
effect until the Loans are paid in full, the Commitments are terminated and the
other Obligations which have become due and payable are paid in full,
notwithstanding that from time to time prior thereto the Company may be free
from any Obligations.
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The Parent agrees that whenever, at any time, or from time to time, it
shall make any payment to the Administrative Agent or any Bank on account of
its liability under this Article X, it will notify the Administrative Agent and
such Bank in writing that such payment is made under the guaranty contained in
this Article X for such purpose. No payment or payments made by the Company or
any other Person or received or collected by the Administrative Agent or any
Bank from the Company or any other Person by virtue of any action or proceeding
or any setoff or appropriation or application, at any time or from time to
time, in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Parent under
this Article X which, notwithstanding any such payment or payments, shall
remain liable for the Obligations until, subject to Section 10.5, the Loans are
paid in full, the Commitments are terminated and the other Obligations which
have become due and payable are paid in full.
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Article X, the Parent hereby
irrevocably waives all rights which may have arisen in connection with the
guaranty contained in this Article X to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code (or similar
action under any successor law or under any comparable law), including Section
509 thereof, under common law or otherwise) of the Administrative Agent or any
Bank against the Company or against the Administrative Agent or any Bank for
the payment of the Obligations. The Parent hereby further irrevocably waives
all contractual, common law, statutory and other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
the Company or any other Person which may have arisen in connection with the
guaranty contained in this Article X. So long as the Obligations remain
outstanding, if any amount shall be paid by or on behalf of the Company to the
Parent on account of any of the rights waived in this Section 10.2, such amount
shall be held by the Parent in trust, segregated from other funds of the
Parent, and shall, forthwith upon receipt by the Parent, be turned over to the
Administrative Agent in the exact form received by the Parent (duly indorsed by
the Parent to the Administrative Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
10.3 Amendments, etc. with respect to the Obligations. To the maximum
extent permitted by applicable law:
(a) the Parent shall remain obligated under this Article X
notwithstanding that, without any reservation of rights against the Parent, and
without notice to or further assent by the Parent, any demand for payment of or
reduction in the principal amount of any of the Obligations made by the
Administrative Agent or any Bank may be rescinded by the Administrative Agent
or such Bank, and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guaranty therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Bank, any such requirement being hereby waived by
the Parent; and
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(b) this Agreement, any other Loan Document, and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Banks (or the Required
Banks, as the case may be) may deem advisable from time to time, and any
collateral security, guaranty or right of offset at any time held by the
Administrative Agent or any Bank for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Bank shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
the guaranty contained in this Article X or any property subject thereto, any
such requirement being hereby waived by the Parent.
10.4 Guaranty Absolute and Unconditional. The Parent waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Bank upon the guaranty contained in this Article X or acceptance of the
guaranty contained in this Article X; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guaranty contained
in this Article X; and all dealings between the Company or the Parent, on the
one hand, and the Administrative Agent and the Banks, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon the guaranty contained in this Article X. The Parent waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or the Parent with respect to the Obligations. To the
maximum extent permitted by applicable law, the guaranty contained in this
Article X shall be construed as a continuing, absolute and unconditional
guaranty of payment without regard to (a) the validity or enforceability of
this Agreement or any other Loan Document, any of the Obligations or any
collateral security therefor or guaranty or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or
any Bank, (b) any defense, setoff or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company against the Administrative Agent or any Bank, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Company
or the Parent) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company for the Obligations, or of the
Parent under the guaranty contained in this Article X, in bankruptcy or in any
other instance. When the Administrative Agent or any Bank is pursuing its
rights and remedies under this Article X against the Parent, the Administrative
Agent or any Bank may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Company or any other Person or against
any collateral security or guaranty for the Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or any Bank
to pursue such other rights or remedies or to collect any payments from the
Company or any such other Person or to realize upon any such collateral
security or guaranty or to exercise any such right of offset, or any release of
the Company or any such other Person or of any such collateral security,
guaranty or right of offset, shall not relieve the Parent of any liability
under this Article X, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Administrative
Agent and the Banks against the Parent all rights of the Parent to require
otherwise being hereby waived by the Parent.
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10.5 Reinstatement. The guaranty contained in this Article X shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Bank upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Company or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
10.6 Payments. The Parent hereby agrees that any payments in respect
of the Obligations pursuant to this Article X will be paid to the
Administrative Agent without setoff or counterclaim in Dollars at the office of
the Administrative Agent specified in Section 11.2.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required Banks
(or by the Administrative Agent at the written request of the Required Banks)
and the Company and acknowledged by the Administrative Agent, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all the Banks and
the Company and acknowledged by the Administrative Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 8.2);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
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(e) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks; or
(f) discharge the guaranty contained in Article X hereof, or release
all or substantially all of the Collateral except as otherwise may be provided
in the Collateral Document or except where the consent of the Required Banks
only is specifically provided for;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Issuing Bank in addition to the Required Banks or
all the Banks, as the case may be, affect the rights or duties of the Issuing
Bank under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Required Banks or all the Banks, as the case may be, affect the rights or
duties of the Administrative Agent under this Agreement or any other Loan
Document, and (ii) the Fee Letter and documents evidencing Specified Swap
Contracts may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto.
11.2 Notices. (a) All notices, requests, consents, approvals,
waivers and other communications shall be in writing (including, unless the
context expressly otherwise provides, by facsimile transmission, provided that
any matter transmitted by the Company by facsimile shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.2), and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 11.2; or, as directed to the Company
or the Administrative Agent, to such other address as shall be designated by
such party in a written notice to the other parties, and as directed to any
other party, at such other address as shall be designated by such party in a
written notice to the Company and the Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX to the Administrative Agent shall not be
effective until actually received by the Administrative Agent and notices
pursuant to Section 2.17 to the Issuing Bank shall not be effective until
actually received by the Issuing Bank at the address specified for "Issuing
Bank" on Schedule 11.2 hereof.
(c) Any agreement of the Administrative Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Administrative Agent and the Banks
shall be entitled to rely on the authority of any Person purporting to be a
Person authorized by the Company to give such notice and the Administrative
Agent and the Banks shall not have any liability to the Company or other Person
on account of any action taken or not taken by the Administrative Agent or the
Banks in reliance upon such telephonic or facsimile notice. The obligation of
the Company to repay the Loans shall not be
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affected in any way or to any extent by any failure by the Administrative Agent
and the Banks to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Administrative Agent and the Banks of a
confirmation which is at variance with the terms understood by the
Administrative Agent and the Banks to be contained in the telephonic or
facsimile notice.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
11.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Administrative
Agent and Issuing Bank) within five Business Days after demand (subject to
subsection 4.1(e)) for all costs and expenses incurred by BofA (including in
its capacity as Administrative Agent) in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Administrative Agent and
Issuing Bank) with respect thereto; and
(b) pay or reimburse the Administrative Agent and each Bank within
five Business Days after demand (subject to subsection 4.1(e)) for all costs
and expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding); and
(c) pay or reimburse BofA (including in its capacity as Administrative
Agent) within five Business Days after demand (subject to subsection 4.1(e))
for all appraisal (including the allocated cost of internal appraisal
services), audit, environmental inspection and review (including the allocated
cost of such internal services), search and filing costs, fees and expenses,
incurred or sustained by BofA (including in its capacity as Administrative
Agent) in connection with the matters referred to under subsections (a) and (b)
of this Section.
11.5 Company Indemnification. (a) Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Administrative Agent-Related Persons, and each Bank and each of its
respective officers, employees, directors, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against any
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and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans, termination of the
Letters of Credit and the termination, resignation or replacement of the
Administrative Agent or replacement of any Bank) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the Letters of Credit or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Company shall
have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
(b) (i) The Company shall indemnify, defend and hold harmless each
Indemnified Person, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges, expenses
or disbursements (including Attorney Costs and the allocated cost of internal
environmental audit or review services), which may be incurred by or asserted
against such Indemnified Person in connection with or arising out of any
pending or threatened investigation, litigation or proceeding, or any action
taken by any Person, with respect to any Environmental Claim arising out of or
related to any property subject to a Mortgage in favor of the Administrative
Agent or any Bank ("Indemnified Environmental Liabilities"). No action taken
by legal counsel chosen by the Administrative Agent or any Bank in defending
against any such investigation, litigation or proceeding or requested remedial,
removal or response action shall vitiate or any way impair the Company's
obligation and duty hereunder to indemnify and hold harmless the Administrative
Agent and each Bank. Notwithstanding the foregoing, the Company shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Environmental Liabilities to the extent resulting from the gross negligence or
willful misconduct of the Indemnified Person.
(ii) In no event shall any site visit, observation, or testing by the
Administrative Agent or any Bank (or any contractee of the Administrative Agent
or any Bank) be deemed a representation or warranty that Hazardous Materials
are or are not present in, on, or under, the site, or that there has been or
shall be compliance with any Environmental Law. Neither the Company nor any
other Person is entitled to rely on any site visit, observation, or testing by
the Administrative Agent or any Bank. Neither the Administrative Agent nor any
Bank owes any duty of care to protect the Company or any other Person against,
or to inform the Company or any other party of, any Hazardous Materials or any
other adverse condition affecting any site or property.
(c) Survival; Defense. The obligations in this Section shall survive
payment of all other Obligations. At the election of any Indemnified Person,
the Company shall defend such
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Indemnified Person using legal counsel satisfactory to such Indemnified Person
in such Person's sole discretion, at the sole cost and expense of the Company.
All amounts owing under this Section shall be paid within 30 days after demand.
11.6 Marshalling; Payments Set Aside. Neither the Administrative
Agent nor the Banks shall be under any obligation to Marshall any assets in
favor of the Company or any other Person or against or in payment of any or all
of the Obligations. To the extent that the Company makes a payment to the
Administrative Agent or the Banks, or the Administrative Agent or the Banks
exercise their right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.
11.7 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent and each Bank.
11.8 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Administrative Agent, and subject to clause (iv) below,
the Company, which consents shall not be unreasonably withheld, at any time
assign and delegate to one or more Eligible Assignees (provided that no written
consent of the Administrative Agent or the Company shall be required in
connection with any assignment and delegation by a Bank to an Eligible Assignee
that is an Affiliate of such Bank or that is already a Bank) (each an
"Assignee") all, or any part of all, of the Revolving Loans and the Revolving
Loan Commitments; and the other rights and obligations of such Bank hereunder
in respect thereof, in (A) a minimum amount of $5,000,000 with respect to any
Assignee which is not a current Bank immediately prior to such assignment and
(B) any amount with respect to an Assignee which is a Bank immediately prior to
such assignment; provided, however, that
(i) no Bank may make any such assignment if, after giving
effect thereto, the sum of such Bank's remaining amount of the outstanding
Revolving Loans and available Revolving Loan Commitment shall be less than
$5,000,000;
(ii) the Company and the Administrative Agent may continue
to deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (A) written notice of such assignment, together
with payment instructions, addresses and related information with respect to
the Assignee, shall have been given to the Company and the Administrative Agent
by such Bank and the Assignee; (B) such Bank and its Assignee shall have
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delivered to the Company and the Administrative Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") together with
any Note or Notes subject to such assignment, and (C) the assignor Bank or
Assignee has paid to the Administrative Agent a processing fee in the amount of
(I) $3,000 with respect to an assignment to an Assignee which is not a current
Bank immediately prior to such assignment or (II) $1,500 with respect to an
assignment to an Assignee which is a Bank immediately prior to such assignment;
(iii) if the assignor Bank or any of its Affiliates is a Swap
Provider with respect to any Specified Swap Contract, such Bank shall not
assign all of its interest in the Loans and the Commitments to an Assignee
unless such Assignee, or an Affiliate of such Assignee, shall also assume all
obligations of such assignor Bank or Affiliate with respect to such Specified
Swap Contracts; and
(iv) notwithstanding the foregoing, no consent of the
Company shall be required in connection with any assignment by a Bank of any
part of its interests in the Loans or the Commitments until the earlier of (A)
the first anniversary of the Effective Date and (B) the date on which the
Administrative Agent notifies the Company that the primary syndication of the
Loans has been completed.
(b) From and after the date that the Administrative Agent notifies the
assignor Bank that it and, if required, the Company, have received (and
provided their respective consents with respect to) an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Bank under the Loan
Documents, and (ii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, the Company shall execute and deliver to the
Administrative Agent new Notes evidencing such Assignee's assigned Loans and
Commitment and, if the assignor Bank has retained a portion of its Loans and
its Commitment, replacement Notes in the principal amount of the Loans retained
by the assignor Bank (such Notes to be in exchange for, but not in payment of,
the Notes held by such Bank). Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment
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of that Bank and the other interests of that Bank (the "originating Bank")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Bank's obligations under this Agreement shall remain unchanged,
(ii) the originating Bank shall remain solely responsible for the performance
of such obligations, (iii) the Company, the Administrative Agent and the
Issuing Bank shall continue to deal solely and directly with the originating
Bank in connection with the originating Bank's rights and obligations under
this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Banks as described in
the first proviso to Section 11.1. In the case of any such participation, the
Participant shall not have any rights under this Agreement, or any of the other
Loan Documents, and all amounts payable by the Company hereunder shall be
determined as if such Bank had not sold such participation.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Note held by it in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information provided to it by or on behalf
of the Parent, the Company or any Subsidiary, or by the Administrative Agent on
the Parent's, the Company's or such Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary;
except to the extent such information (a) was or becomes generally available to
the public other than as a result of disclosure by the Bank, or (b) was or
becomes available on a non-confidential basis from a source other than the
Parent, the Company or any Subsidiary, provided that such source is not bound
by a confidentiality agreement known to the Bank; provided, however, that any
Bank may disclose such information (i) pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (ii) pursuant to subpoena or
other court process; (iii) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (iv) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Bank or their respective Affiliates may be party; (x)
to the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (vi) to such Bank's independent
auditors and other professional advisors; (vii) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Banks hereunder;
(viii) as to any Bank or its Affiliate, as expressly permitted under the terms
of any other document or agreement
109
<PAGE> 110
regarding confidentiality to which the Company or any Subsidiary is party with
such Bank or such Affiliate; and (ix) to its Affiliates.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, to the extent permitted by applicable law, each Bank is authorized
at any time and from time to time, with prior notice to the Company, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by,
such Bank to or for the credit or the account of the Company against any and
all Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Administrative Agent or such Bank shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Company and
the Administrative Agent after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Administrative Agent in writing of any changes in the address
to which notices to the Bank should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.13 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
11.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Hollywood Entities, the
Banks, the Administrative Agent and the Administrative Agent-Related Persons,
and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any of the other Loan
Documents.
11.15 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT CONSIDERATION OF ITS CONFLICT OF LAWS PRINCIPLES,
AND APPLICABLE FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
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OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY,
THE ADMINISTRATIVE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
COMPANY, THE ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
(c) NOTHING CONTAINED IN THIS SECTION SHALL OVERRIDE ANY CONTRARY
PROVISION CONTAINED IN ANY SPECIFIED SWAP CONTRACT.
11.16 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE
ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY Administrative Agent-RELATED
PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE ADMINISTRATIVE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FUROR AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.17 Release of Collateral. If any of the Collateral shall be sold,
transferred or otherwise disposed of in a transaction permitted by this
Agreement, then the Administrative Agent, at the request (with reasonable prior
notice) and sole expense of the Company, shall execute and deliver to the
Company all releases or other documents reasonably necessary or desirable for
the release of the Liens granted to Administrative Agent in respect of such
Collateral.
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11.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Administrative Agent relating to the subject matter hereof
and thereof, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
-----------------------------------------------
James R. Featherstone, Vice President
HOLLYWOOD THEATERS, INC.
By: /s/ James R. Featherstone
-----------------------------------------------
James R. Featherstone, Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: /s/ Carl F. Salas
-----------------------------------------------
Carl F. Salas, Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Bank
By: /s/ Carl F. Salas
-----------------------------------------------
Carl F. Salas, Vice President
112
<PAGE> 113
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Bank
By: /s/ Carl F. Salas
-----------------------------------------------
Carl F. Salas, Vice President
113
<PAGE> 114
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Revolving Pro Rata
Loan Share of
Bank Commitment Revolving Loan
---- ---------- --------------
<S> <C> <C>
Bank of America $50,000,000 100%
National Trust and
Savings Association
TOTAL $50,000,000 100%
</TABLE>
114
<PAGE> 115
SCHEDULE 2.17
THE EXISTING BofA LETTER OF CREDIT
115
<PAGE> 116
SCHEDULE 5.1(c)
Corporate Existence
As of the Effective Date, the Company is not qualified to do business as a
foreign corporation in the State of Missouri. The Company hereby represents
to the Administrative Agent and the Banks that it is diligently pursuing such
qualification. The Company hereby covenants that it shall obtain the
appropriate qualification to do business as a foreign corporation in the State
of Missouri no later than 60 days after the Effective Date and shall deliver to
Administrative Agent within such 60 day period a current good standing
certificate from the Secretary of State of Missouri (or similar applicable
Governmental Authority) evidencing such qualification.
116
<PAGE> 117
SCHEDULE 5.9(a)
FEE PROPERTIES OF THE HOLLYWOOD ENTITIES
Fee Theater Properties (includes land on which Theaters are to be constructed)
Tall City 10
4915 West Loop 250 N.
Midland, Texas
Hollywood Rose 10
1250 Loop 323 South S.W.
Tyler, Texas
South of West Shaw Street and East of WSW Loop 323 in the Tyler Industrial Park
in Tyler, Smith County, Texas.
Texas I & II
114 East Broadway
Sweetwater, Nolan County, Texas
North Park 6
1930 42nd Street
Odessa, Ector County, Texas
Ben Bolt Theater
828 Washington
Chillicothe, Missouri
Uptown Theater
110 Pine Street
Rolla, Missouri
Varsity Theater
1015 Massachusetts
Lawrence, Kansas
Westridge 8 Theater
1727 SW Wanamaker Road
Topeka, Kansas
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<PAGE> 118
Campus Theater
1102 East Broadway
Columbia, Missouri
State Theater
418 North Main
Garden City, Kansas
Sequoyah Theater
1118 Fleming
Garden City, Kansas
Forum Theater
1101 East 18th Street
Rolla, Missouri
Northside 10
901 North 38th Street
Killeen, Texas
Parcel located at
Stadium Blvd. & Hwy 63
Columbia, Missouri (under construction)
Parcel located at
Rambling Oaks Drive & Northwest Blvd.
Norman, Oklahoma
Southwind 12
3433 Iowa Street
Lawrence, Kansas
118
<PAGE> 119
SCHEDULE 5.9(b)
LEASED PROPERTIES OF THE HOLLYWOOD ENTITIES
A. Leasehold Theater Properties
The real estate located at:
Overland Park Triplex
7051 Overland Park Road
Boise, ID 83705
Agreement and Lease dated December 8, 1976, by and between Gary L. Drown, Duane
Stucckle and The Oppenheimer Companies, Inc. (collectively, "Original
Landlord") and Cooper-Hyland, Inc. ("Original Tenant"), as amended by Lease
Amendment dated February 22, 1977, by Original Landlord and Original Tenant, as
amended by letter dated July 28, 1977, from Original Landlord to Original
Tenant, as amended by Modification to Agreement and Lease dated November 22,
1978, between Original Landlord and Commonwealth Theatres, Inc.
(successor-in-interest to Original Tenant).
Landlord: Gary L. Drown and N. Jeanne Drown, Duane Stueckle and Lorraine
Stueckle and The Oppenheimer Companies, Inc. (successor-in-interest to
Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to United Artists
Theatre Circuit, Inc., successor-in-interest to United Artists Realty Company,
successor-in-interest to Commonwealth Theatres Realty, Inc.,
successor-in-interest to Commonwealth Highland Theatres, Inc.,
successor-in-interest to Commonwealth Theatres, Inc., successor-in-interest to
Original Tenant)
The real estate located at:
Plaza Twin
5220 Overland Road
Boise, ID 83705-2636
Shop Lease dated as of January 1, 1994, by and between Hillcrest Plaza
Partnership ("Original Landlord") and United Artists Theatre Circuit, Inc.
("Original Tenant"), as amended by letter dated September 16, 1996, from
Original Tenant to Carr-Gottstein Properties (successor-in-interest to Original
Landlord)
Landlord: Carr-Gottstein Properties (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
119
<PAGE> 120
The real estate located at:
Cinema 4
Country Club Shopping Center
1546 Northgate Mile
Idaho Falls, ID 83401
Lease dated June 22, 1970, between Daum Industries, Inc. ("Original Landlord")
and Carrols Equities Corp. ("Original Tenant"), as amended by Modification of
Lease dated September 27, 1971, by Makad, Inc. (successor-in-interest to
Original Landlord) and Original Tenant, as amended by Amendment to Lease dated
January 7, 1977, by Consolidated Capital Realty Investors ("CCRI",
successor-in-interest to Daum Industries, Inc. and Double "D" Land, Inc.,
successors-in-interest to Makad, Inc.) and United Artists Theatre Circuit, Inc.
("UATC", successor-in-interest to Carrols Idaho Falls Cinema, Inc.,
successor-in-interest to Original Tenant), as amended by letter dated November
29, 1994, from UATC to Country Club Mall Associates Limited Partnership
("CCMALP", successor-in-interest to Intermountain Associates,
successor-in-interest to CCRI), as amended by letter dated February 7, 1995,
from CCMALP
Landlord: CCMALP (successor-in-interest to Intermountain Associates,
successor-in-interest to CCRI, successor-in-interest to Daum Industries, Inc.
and Double "D" Land, Inc., successors-in-interest to Makad, Inc.,
successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to UATC,
successor-in-interest to Carrols Idaho Falls Cinema, Inc.,
successor-in-interest to Original Tenant)
The real estate located at:
The North One Hundred Feet (N 100') of Lot One (1) of Palace Addition No. 2
Garden City, Finney County, Kansas
Lease dated June 9, 1994 between David T. Robinson and Bernice Robinson
(collectively, the "Landlord") and Crown Cinema Corporation ("Tenant")
Landlord: David T. Robinson and Bernice Robinson
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation)
The real estate located at:
Village 3 Theatres
4805 10th Street
Great Bend, KS 67530
120
<PAGE> 121
Lease dated April 15, 1976, between Mall Development, Inc. ("Original
Landlord") and Commonwealth Theatres of Kansas, Inc. ("Original Tenant"), as
amended by letter dated May 19, 1976, from Original Tenant to Original
Landlord, as amended by letter dated June 24, 1985, from Commonwealth Theatres
Realty, Inc. ("CTRI", successor-in-interest to Original Tenant) to Village Mall
(successor-in-interest to Original Landlord), as amended by letter dated July
31, 1985, from CTRI to Village Mall, as amended by Lease Modification Agreement
dated September 19, 1985, between Village Mall and CTRI, as amended by letter
dated November 6, 1990, from Crown Cinema Corporation ("CCC",
successor-in-interest to United Artists Theatre Circuit, Inc.,
successor-in-interest to CTRI) to CPI86-2 General Partnership,
successor-in-interest to Cohen Properties, Inc., successor-in-interest to
Village Mall
Landlord: CPI86-2 General Partnership (successor-in-interest to Cohen
Properties, Inc., successor-in-interest to Village Mall, successor-in-interest
to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to United Artists Theatre Circuit, Inc.,
successor-in-interest to CTRI, successor-in-interest to Original Tenant)
The real estate located at:
Cinema Twin Theatre
3110 Iowa Street
Lawrence, KS 66045
Lease dated August 25, 1976, between Malan Construction Company ("Original
Landlord") and The Commonwealth Lawrence Theatre Corporation ("Original
Tenant"), as amended by letter dated October 6, 1977, between Original Landlord
and Commonwealth Theatres, Inc. ("CTI", successor by merger to the Original
Tenant), as amended by letter dated December 31, 1986, between the Original
Landlord and CTI advising CTI that the property had been sold to Kangross
Partners and Company, Limited, a Quebec Limited Partnership ("Kangross"), as
amended by an Agreement of Assignment and Assumption of Lease dated December
21, 1988 between CTI and United Artists Realty Company ("UARC"), as amended by
an Assignment of Lease dated November 5, 1990 between UARC and Crown Cinema
Corporation
Landlord: Kangross (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to UARC, successor-in-interest to CTI,
successor-in-interest to Original Tenant)
The real estate located at:
Hillcrest 5 Theatres
925 Iowa Street
Lawrence, KS 66049
121
<PAGE> 122
Lease dated August 17, 1967, between Richard M. Raney and Mildred H. Raney, his
wife (collectively, "Original Landlord") and The Commonwealth Lawrence Theatre
Corporation ("Original Tenant"), as amended by Modification of Lease dated
November 14, 1967, between Original Landlord and Original Tenant, as amended by
Modification of Lease dated September 24, 1968, between Original Landlord and
Original Tenant, as amended by letter dated November 19, 1968, from Original
Landlord to Original Tenant, as amended by letter dated September 23, 1982,
from Commonwealth Theatres, Inc. ("CTI", successor-in-interest to Original
Tenant) to Original Landlord, as amended by Lease Modification and Extension
Agreement dated January 31, 1983, from CTI to Raney Enterprises
(successor-in-interest to Original Landlord), as amended by Lease Modification
Agreement dated January 22, 1986, between Raney Enterprises and Commonwealth
Theatres Realty, Inc. ("CTRI", successor-in-interest to CTI), as amended by
Agreement of Modification of Lease dated November 7, 1990, between Mildred H.
Raney (successor-in-interest to Raney Enterprises) and United Artists Theatre
Circuit, Inc. ("UATC", successor-in-interest to CTRI)
Landlord: Mildred H. Raney (successor-in-interest to Raney Enterprises,
successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to UATC, successor-in-interest to CTRI,
successor-in-interest to CTI, successor-in-interest to Original Tenant)
The real estate located at:
Westside 4 Theatres
1016 West 6th Street
Junction City, KS 66441
Lease dated August 23, 1993, between Ron Bramlage ("Original Landlord") and
Crown Cinema Corporation ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Mall 4 Theatres
1500 East 11th Street
Hutchinson, KS 67501
Hutchinson Mall Lease dated May 18, 1995, between Simon Property Group, L.P.
("Original Landlord") and Crown Cinema Corporation ("Original Tenant")
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<PAGE> 123
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Mall 8 Theatres
1500 East 11th Street
Hutchinson, KS 67501
Hutchinson Mall Lease dated September 19, 1994, between Simon Property Group,
L.P. ("Original Landlord") and Crown Cinema Corporation ("Original Tenant").
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Cinema East Theatres
320 North Rock Road
Wichita, KS 67206
Lease dated October 8, 1973, between Lindy Andeel and Frank Carney
(collectively, "Original Landlord") and American Entertainment, Inc. ("Original
Tenant"), as amended by Addendum to Lease dated November 30, 1973, between
Original Landlord and Original Tenant, as amended by Lease Agreement dated
November 19, 1974, between Original Landlord and Original Tenant, as amended by
Amendment to Lease dated December 19, 1975, between Original Landlord and
Original Tenant, as amended by Lease Modification Agreement dated December 3,
1986, between Frank L. Carney ("Carney", successor-in-interest to Original
Landlord) and Commonwealth Theatres Realty, Inc. ("CTRI", successor-in-interest
to Commonwealth Theatres of Kansas, Inc., successor-in-interest to Original
Landlord), as amended by Amendment to Lease Modification Agreement dated
December 2, 1986, between Carney and CTRI, as amended by Second Amendment to
Lease Modification Agreement dated July 31, 1987, between Carney and CTRI, as
amended by letter dated June 21, 1988, from CTRI to Carney, as Unended by
letter dated July 8, 1988, from Carney to CTRI
Landlord: Jeff C. Lyle and Barbara A. Lyle (successor-in-interest to Carney,
successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to United Artists Realty Company,
successor-in-interest to CTRI,
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<PAGE> 124
successor-in-interest to Commonwealth Theatres of Kansas, Inc.,
successor-in-interest to Original Landlord)
The real estate located at:
Cinema West 4 Theatres
9035 West Central
Wichita, KS 67212
Lease dated March 26, 1976, between J. Ernest Talley ("Original Landlord") and
American Entertainment, Inc. ("Original Tenant").
Landlord: W.A. Michaelis, Jr. (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to United Artists Realty Company,
successor-in-interest to Commonwealth Theatres of Kansas, Inc.,
successor-in-interest to Original Tenant)
The real estate located at:
Towne East 2 Theatres
Towne East Square Mall
7700 East Kellogg
Wichita, KS 67207
Indenture of Lease dated March 8, 1976, between Kellogg Mall Associates
("Original Landlord") and General Cinema Corp. of Kansas ("Original Tenant"),
as amended by Lease Amendment dated February 23, 1994, between Simon Property
Group, L.P. (successor-in-interest to Original Landlord) and Crown Cinema
Corporation ("CCC", successor-in-interest to Original Tenant)
Landlord: Simon Property Group, L.P. (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to Original Tenant)
The real estate located at:
Towne East 4 Theatres
7700 East Kellogg
Wichita, KS 67207
Indenture of Lease dated May 22, 1981, between Kellogg Mall Associates
("Original Landlord") and General Cinema Corp. of Kansas ("Original Tenant"),
as amended by Amendment to Lease dated
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May 22, 1981, between Original Landlord and Original Tenant, as amended by
Lease Amendment dated February 23, 1994, between Simon Property Group, L.P.
(successor-in-interest to Original Landlord) and Crown Cinema Corporation
("CCC", successor-in-interest to Original Tenant)
Landlord: Simon Property Group, L.P. (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to Original Tenant)
The real estate located at:
Towne West 5 Theatres
Towne West Square Mall
4600 West Kellogg
Wichita, KS 67207
Indenture of Lease dated September 17, 1980, between Towne West Mall Company
("Original Landlord") and General Cinema Corp. of Kansas ("Original Tenant"),
as amended by letter dated as of September 17, 1980, between Original Landlord
and Original Tenant
Landlord: Simon Property Group, L.P. (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation successor-in-interest to Original Tenant)
The real estate located at:
Southgate 4 Theatres
1104 S. Kansas Avenue
Liberal, KS 67901
Lease dated May 24, 1977, between Liberal Management, Inc. ("Original
Landlord") and Commonwealth Theatres of Kansas, Inc. ("Original Tenant"), as
amended by Lease Modification Agreement dated March 13, 1986, between Original
Landlord and Commonwealth Theatres Realty, Inc. ("CTRI", successor-in-interest
to Original Tenant)
Landlord: Daniels-McCray Lumber Co. (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to CTRI, successor-in-interest to Original
Tenant)
The real estate located at:
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Gage 4 Theatres
4121 Huntoon Street
Topeka, KS 66604
Lease dated December 14, 1967, between Gage Shopping Center, Inc. ("Original
Landlord") and Topeka Theatres, Inc. ("Original Tenant"), as amended by letter
dated January 30, 1968, from Original Landlord to Original Tenant, as amended
by Amendment to Lease dated April 30, 1968, between Original Landlord and
Original Tenant, as amended by Consolidating Amendment to Lease dated April 28,
1970, between Original Landlord and Original Tenant, as amended by letter dated
July 28, 1989, from Crown Cinema Corporation ("CCC", successor-in-interest to
American-Multi Cinema, Inc., successor-in-interest to Original Tenant) to
Original Landlord
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to American-Multi Cinema, Inc., successor-in-interest to
Original Tenant)
The real estate located at:
Westridge 6 Theatres
Westridge Mall
1801 SW Wanamaker Road
Box 347, Suite B-19
Topeka, KS 66604
Lease dated September 24, 1987, between Topeka Mall Company, L.P. ("Original
Landlord") and Crown Cinema Corporation ("Original Tenant"), as amended by
Lease Amendment dated November 6, 1992, between Original Landlord and Original
Tenant
Landlord: Simon Property Group, L.P. (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Cinema Theatre
1729 West Broadway
Columbia, MO 65203
Lease dated April 8, 1975, between M.F.A. Security Service Company ("Original
Landlord") and Commonwealth Barrett Theatre Corporation ("Original Tenant"), as
amended by Modification of Lease dated January 30, 1981, between Original
Landlord and Commonwealth Theatres of Missouri, Inc. ("CTMI",
successor-in-interest to Original Tenant), as amended by letter dated February
13,
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1981, from CTMI to Original Landlord, as amended by Modification of Lease dated
April 12, 1982, between Shelter Financial Services, Inc. ("SFSI",
successor-in-interest to Original Landlord) and CTMI, as amended by letter
dated January 28, 1986, from Commonwealth Theatres Realty, Inc. ("CTRI",
successor-in-interest to CTMI) to SFSI, as amended by Lease Extension Agreement
dated July 5, 1990, between Shelter Enterprises, Inc. ("SEI",
successor-in-interest to SFSI), and United Artists Realty Company ("UARC",
successor-in-interest to CTRI)
Landlord: SEI (successor-in-interest to SFSI, successor-in-interest to
Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to UARC, successor-in-interest to CTRI,
successor-in-interest to CTMI, successor-in-interest to Original Tenant)
The real estate located at:
Mall 4 Theatres
#15 Columbia Mall
2300 Bernadette Drive
Columbia, MO 65203
Agreement of Lease dated February 16, 1985, between Columbia Mall Limited
Partnership ("Original Landlord") and Commonwealth Theatres Realty, Inc.
("Original Tenant"), as amended by First Lease Amendment dated May 20, 1985,
between Original Landlord and Original Tenant, as amended by agreement dated
November 2, 1989, between Spring Valley Community Church and United Artists
Theatre Circuit, Inc. ("UATC", successor-in-interest to Original Tenant)
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Crown Cinema
Corporation, successor-in-interest to UATC, successor-in-interest to Original
Tenant)
The real estate located at:
Plaza 8 Theatres
2219 N. Belt Highway
St. Joseph, MO 64506
Lease dated September 9, 1996, between M&R Investment Properties, L.L.C.
("Original Landlord") and Crown Cinema Corporation ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
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The real estate located at:
Capital 4 Theatres
3600 Country Club Drive
Jefferson City, MO 65109
Lease dated February 17, 1977, between General Growth Properties ("Original
Landlord") and Crown Cinema Corporation ("Original Tenant"), as amended by
First Amendment to Lease dated April 13, 1979, between Original Landlord and
Original Tenant, as amended by Second Amendment to Lease dated March 26, 1984,
between Original Landlord and Original Tenant, as amended by Third Amendment to
Lease dated November 26, 1984, between The Equitable Life Assurance Society of
the United States ("Equitable", successor-in-interest to Original Landlord) and
Original Tenant, as amended by Lease Extension and Amendment Agreement dated
January 17, 1995, between GGP Limited Partnership ("GGP", successor-in-interest
to Equitable) and Original Tenant
Landlord: GGP (successor-in-interest to Equitable, successor-in-interest to
Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Hillcrest 4 Theatres
603 N. Belt Highway
St. Joseph, MO 64506
Lease dated April 2, 1968, between Donald Golden ("Original Landlord") and
Hillcrest Shopping Center Theatres, Inc. ("Original Tenant"), as amended by
Addendum to Lease dated April 2, 1968, between Original Landlord and Original
Tenant, as amended by Second Lease Modification Agreement dated July 19, 1968,
between Original Landlord and Original Tenant, as amended by Agreement dated
April 10, 1969, between Original Landlord and Original Tenant, as amended by
letter dated June 2, 1989, from Crown Cinema Corporation ("CCC",
successor-in-interest to Original Tenant) to Original Landlord
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to Original Tenant)
The real estate located at:
Capital 8 Theatres
3550 Country Club Drive
Jefferson City, MO 65109
128
<PAGE> 129
Lease dated January 13, 1995, between GGP Limited Partnership ("Original
Landlord") and Crown Cinema Corporation ("Original Tenant"), as amended by
First Amendment to Lease dated August 30, 1995, between Original Landlord and
Original Tenant
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Ramada 4 Theatres
1614 Jefferson
Jefferson City, MO 65109
Lease dated February 28, 1968, between Donald E. Breckenridge and Diane
Breckenridge (collectively, "Original Landlord") and Ramada Theatres of
Jefferson City, Missouri, Incorporated ("Original Tenant"), as amended by First
Amendment of Lease dated May 20, 1969, between Breckenridge Hotels Corp.
("BHC", successor-in-interest to Original Landlord) and Original Tenant, as
amended by Second Amendment of Lease dated November 6, 1985, between Hotel
Investors Trust ("HIT", successor-in-interest to The Hotel Investors,
successor-in-interest to BHC) and Crown Cinema Corporation ("CCC",
successor-in-interest to American Multi-Cinema, Inc., successor-in-interest to
Durwood American, Inc., successor-in-interest to Original Tenant)
Landlord: HIT (successor-in-interest to The Hotel Investors,
successor-in-interest to BHC, successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to CCC,
successor-in-interest to American Multi-Cinema, Inc., successor-in-interest to
Durwood American, Inc., successor-in-interest to Original Tenant)
The real estate located at:
Joplin 6 Theatres
1110 East 7th Street
Joplin, MO 64801
Lease dated September 30, 1986, between Missouri Centers Limited ("Original
Landlord") and Mid-America Cinema Corporation ("Original Tenant")
Landlord: Original Landlord
Tenant: Crown Theatre Corporation (successor-in-interest to Original Tenant)
129
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The real estate located at:
Indian Mound 6 Theatres
771 South 30th Street
Heath, OH 43056
Lease dated April 27, 1987, between Indian Mound Associates Limited Partnership
("Original Landlord") and Mid-America Cinema Corp. ("Original Tenant"), as
amended by Addendum to Lease dated April 27, 1987, between Original Landlord
and Original Tenant, as amended by Addendum No. 2 to Lease dated October, 1987,
between Original Landlord and Original Tenant, as amended by Addendum No. 3 to
Lease dated May 3, 1988, between Original Landlord and Original Tenant, as
amended by Settlement Agreement and Mutual Release dated July 11, 1989, between
Original Landlord and Original Tenant, as amended by Addendum No. 4 to Lease
dated July 12, 1989, between Original Landlord and Original Tenant
Landlord: Original Landlord
Tenant: Crown Theatre Corporation (successor-in-interest to Original Tenant)
The real estate located at:
Newark 4 Theatres
1065 Mt. Vernon Road
Newark, OH 43055
Lease dated June 25, 1984, between William J. Kraus ("Original Landlord") and
Mid-America Cinema Partnership ("Original Tenant"), as amended by letter dated
August 3, 1995, from Original Landlord to Crown Theatre Corporation
(successor-in-interest to Original Tenant)
Landlord: Original Landlord
Tenant: Crown Theatre Corporation (successor-in-interest to Original Tenant)
The real estate located at:
Cinema 6, West Side Plaza
5050 W. Broadway, Suite 10
Pearland, TX 77581
Retail Lease dated July 26, 1993 between West Side Plaza Partners ("Original
Landlord") and Pearland Cinema Operating Company, Inc. ("Original Tenant"), as
amended by First Addendum to Lease Agreement dated November 6, 1995 between
Original Landlord and Original Tenant
130
<PAGE> 131
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 4
Heartland Mall
300 Early Blvd.
Early, TX 76801
Lease dated February 14, 1980 between Brownwood Associates ("Original
Landlord") and Plitt Theatre Investments, Inc. ("Original Tenant"), as amended
by Lease Modification Agreement No. 1 dated November 7, 1980 between Original
Tenant and Original Landlord, Supplemental Agreement dated November 8, 1980
between Original Tenant and Original Landlord, Letter Agreement dated September
17, 1985 between Original Tenant and Original Landlord, and Lease Modification
Agreement dated December 19, 1991 between Original Landlord and Trans-Texas
Amusements, Inc. ("TTAI", successor-in-interest to Original Tenant)
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to TTAI,
successor-in-interest to Original Tenant)
The real estate located at:
Medallion 5 Theatre
125 Medallion Center
Dallas, TX 75214
Agreement of Lease dated September 30, 1995 between NCNB Texas National Bank,
Trustee of the W. W. Caruth, Jr. Foundation ("Original Landlord") and Trans
Texas Theatres, Inc., a Texas Corporation ("Original Tenant"), as amended by
Addendum to Lease Agreement dated August 7, 1990 between Original Landlord and
Original Tenant and Lease Modification Agreement dated November 8, 1991 between
Original Tenant and Original Landlord
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 7
131
<PAGE> 132
Blue Grove Shopping Center
1450 W. Pleasant Run Road
Suite 110
Lancaster, TX 75146
Lease Agreement dated February 19, 1990 between Integon Life Insurance
Corporation ("Original Landlord") and Trans Texas Theatres, Inc. ("Original
Tenant"), as amended by First Modification and Ratification of Lease dated
September 20, 1994 between Original Landlord and Original Tenant
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Cinema 7
North Permian Mall
4325 John Ben Shepperd Pkwy.
Odessa, TX 79762
Lease Agreement dated March 23, 1993 between BDC Properties/Construction, Inc.
("Original Landlord") and Cinemore Odessa, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Permian 4
4101 East 42nd Street
Odessa, Texas 79762
Lease dated March 26, 1978 between Permian Mall, Inc., as Agent ("Original
Landlord") and United Artists Theatre Circuit, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 9
132
<PAGE> 133
University Shopping Center
US 120 Highway 31
Longview, TX 75603
Lease Agreement dated September 19, 1989 between Cargill Interests, Ltd.
("Original Landlord") and Trans-Texas Amusements, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 3
University Shopping Center
2210 Live Oak
Commerce, TX 75428
Lease dated November 11, 1988 between Barnett & Sweet ("Original Landlord") and
TransTexas Amusements, Inc. ("Original Tenant"), as amended by undated Lease
Extension between Original Landlord and Original Tenant, Lease Extension #2
dated January 1, 1993 between Original Landlord and Original Tenant, and Lease
Extension #3 dated June 26, 1995 between Original Landlord and Original Tenant
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Hollywood Two
3684 College Street
Beaumont, TX 77701
Retail/Industrial Lease Agreement dated February 6, 1995 between Federal
Deposit Insurance Corporation, as Manager of the FSLIC Resolution Fund
("Original Landlord") and Beaumont Cinema Ventures, L.P. ("Original Tenant"),
as amended by Letter Agreement dated July 26, 1995 between Original Landlord
and Beaumont Gateway Partners, Ltd. ("BGP", successor-in-interest to Original
Landlord)
Landlord: BGP (successor-in-interest to Original Landlord)
133
<PAGE> 134
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Hollywood Star
4455 Dowlen Rd.
Beaumont, TX 77706
Indenture of Lease dated February 23, 1976 between Ben J. Rogers, Trustee
("Original Landlord") and General Cinema Corp. of Texas ("Original Tenant"),
as amended by Amendment #1 to Lease dated May 12, 1977 between Original
Landlord and Original Tenant, Second Amendment to Lease dated October 31, 1994
between Parkdale Mall Associates ("PMA", successor-in-interest to Original
Landlord) and Original Tenant, and Third Amendment to Lease dated December 31,
1994 between PMA and Original Tenant
Landlord: PMA (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Lacy-Lakeview Cinema 6
4051 N. I-35
Waco, TX 76705
Sublease dated as of October 31, 1996, between Sunwest N.O.P., Inc. ("Original
Landlord") and Cinema Operating Company of Lacy-Lakeview, Inc. ("Original
Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Cine Four
3207 Cuthbert Avenue
Midland, TX 79701
Lease Agreement dated July 15, 1977 between Jimmie E. Nix ("Original Landlord")
and United Artists Theatre Circuit, Inc. ("Original Tenant"), as amended by
Lease Amendment dated July 15, 1977 between Original Landlord and Original
Tenant
134
<PAGE> 135
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Mineral Wells Cinema 3
2801 Highway 180E, #18
Mineral Wells, TX 76057
Shopping Center Lease dated July 15, 1977 between Brazos Shopping Center
("Original Landlord") and Resort Amusement Company ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 6
2747 E. Fifth Street
Tyler, TX 75701
Amended and Restated Lease Agreement dated May 15, 1992 between Sunwest N.O.P.,
Inc. ("Original Landlord") and Trans-Texas Amusements, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 10
301 West Rendon-Crowley
Burleson, TX 76028
Lease Agreement dated December 30, 1992 between J.C. Mitchell ("Original
Landlord") and Trans-Texas Amusements, Inc. ("Original Tenant"), as amended by
Amendment to Lease Agreement dated July 10, 1995 between Original Landlord and
Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
Landlord: Original Landlord
135
<PAGE> 136
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 8 (Grapevine)
1301 William D. Tate
Grapevine, TX 76501
Lease Agreement dated June 39, 1995 between J.C. Mitchell ("Original Landlord")
and Trans-Texas Amusements, Inc. ("Original Tenant"), as amended by Amendment
to Lease Agreement dated July 10, 1995 between Original Landlord and Hollywood
Theaters, Inc. (successor-in-interest to Original Tenant)
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Town Center 8
Fort Worth Town Center
4200 South Freeway, Ste. C-53
Ft. Worth, TX 76115
Lease Agreement dated January 24, 1992 between Texas Centers Associates
("Original Landlord") and Trans Texas Theatres, Inc. ("Original Tenant"), as
amended by First Amendment of Lease dated August 27, 1993 between Fort Worth
Mall, Inc. (successor-in-interest to Original Landlord) and Original Tenant
Landlord: Fort Worth Mall, Inc. (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Southwest 7
3598 Knickerbocker
San Angelo, TX 76904
Shopping Center Lease Agreement dated April 20, 1987 between McNeil Real Estate
Fund IX, Limited ("Original Landlord") and United Artists Communications, Inc.
("Original Tenant")
136
<PAGE> 137
Landlord: Midland Red Oak Realty, Inc. (successor-in-interest to MRO
Properties, Inc., successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Sunset 4
1066 Sunset Mall
San Angelo, TX 76904
Lease Agreement dated June 5, 1978 between Sunset Mall Company ("Original
Landlord") and United Artists Theatre Circuit, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 4
Sunset Plaza Shopping Center
4106 Sunset Drive
San Angelo, TX 76904
Lease dated April 15, 1991 between OTR ("Original Landlord") and Cinemore of
San Angelo, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Village 6 - Plex
3750 West Robinson, Suite 100
Norman, OK 73072
Lease dated June 21, 1983 between Thirty-Sixth and Robinson, Inc. ("Original
Landlord") and Commonwealth Frontier Theatres, Inc. ("Original Tenant"), as
amended by First Modification of Lease dated June 21, 1983 between Original
Landlord and Original Tenant and Second Modification of Lease dated August 27,
1984 between The Village L.T.D. (successor-in-interest to Original Landlord)
and Commonwealth Theatres Realty, Inc. (successor-in-interest to Original
Tenant)
137
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Landlord: The Village L.T.D. (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Commonwealth
Theatres Realty, Inc., successor-in-interest to Original Tenant)
The real estate located at:
Cache 8
4908 N.W. Cache Road
Lawton, OK 73505
Triple Net Bond Sublease Agreement Lease dated November 27, 1996 between United
Artists Theatre Circuit, Inc. ("Original Landlord") and Hollywood Theaters,
Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Original Tenant
The real estate located at:
Almonte 6 - Plex
2956 South West 59th Street
Oklahoma City, OK 73119
Lease dated May 15, 1980 between Goldco Operating Company ("Original Landlord")
and Oklahoma Cinema Theatres, Inc. ("Original Tenant"), as amended by Letter
Amendment to Lease dated June 6, 1980 between Original Landlord and Original
Tenant, Letter Amendment to Lease dated August 26, 1980 between Original
Landlord and Original Tenant, Letter Amendment to Lease dated October 9, 1980
between Original Landlord and Original Tenant, and Letter Agreement dated June
24, 1981 between Original Landlord and Commonwealth Frontier Theatres, Inc.
(successor-in-interest to Original Tenant)
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to United Artists
Theatre Circuit, Inc., successor-in-interest to Commonwealth Theatres Realty,
Inc., successor-in-interest to Commonwealth Theatres, Inc.,
successor-in-interest to Commonwealth Frontier Theatres, Inc.,
successor-in-interest to Original Tenant)
The real estate located at:
138
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Heritage Park Triplex
6745 East Reno
Midwest City, OK 73110
Lease dated March 21, 1980 between Heritage Mall Company ("Original Landlord")
and Oklahoma Cinema Theatres, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Commonwealth
Theatres Realty, Inc., successor-in-interest to Commonwealth Frontier Theatres,
Inc., successor-in-interest to Commonwealth Theatres, Inc.,
successor-in-interest to Original Tenant)
The real estate located at:
Heritage Plaza 5
351 North Air Depot, Suite CC
Midwest City, OK 73110
Lease dated December 31, 1984 between Gary D. Magness and Gary B. Homesey
(collectively, "Original Landlord") and Commonwealth Theatres Realty, Inc.
("Original Tenant"), as amended by Lease Modification Agreement dated April 1,
1985 between Original Tenant and Original Landlord
Landlord: Heritage Plaza Shopping Center (successor-in-interest to
Homesey-Magness Joint Venture, successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to United Artists
Theatre Circuit, Inc., successor-in-interest to United Artists Realty Company,
successor-in-interest to Original Tenant)
The real estate located at:
Movies 6
Shawnee Mall
4901 N. Kickapoo
Shawnee, OK 74801
Lease dated October 17, 1988 between Shawnee Mall Associates Limited
Partnership ("Original Landlord") and Trans-Texas Amusements, Inc. ("Original
Tenant"), as amended by Amendment to Lease Agreement dated December 22, 1988
between Original Tenant and Original Landlord
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
139
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The real estate located at:
Annex 7
5345 East 41st Street
Tulsa, OK 74135
Lease dated October 25, 1983 between Annex Mall Ltd. ("Original Landlord") and
United Artists Communications, Inc. ("Original Tenant").
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Fontana 6
7810 East 49th Street
Tulsa, OK 74145
Lease dated June 20, 1984 between Boothe Financial Corporation ("Original
Landlord") and United Artists Communications, Inc. ("Original Tenant")
Landlord: National Life Insurance Company (successor-in-interest to Original
Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to United Artists
Theatre Circuit, Inc., successor-in-interest to Original Tenant)
The real estate located at:
Parklane Twin
4905 South Sheridan
Tulsa, OK 74135
Indenture of Lease dated May 1, 1979 between Park Lane Shopping Center, Inc.
("Original Landlord") and General Theatres, Inc. ("Original Tenant"), as
amended by Amendment to Indenture of Lease dated April 22, 1980 between
Original Landlord and Snyder-Ashley Enterprises, Inc. (successor-in-interest to
Original Tenant)
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to United Artists
Theatre Circuit, Inc., successor-in-interest to Snyder-Ashley Enterprises,
Inc., successor-in-interest to Original Tenant)
140
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The real estate located at:
Promenade 4
4107 South Yale #LC337
Tulsa, OK 74135
Lease Agreement dated August 22, 1985 between Southland Associates ("Original
Landlord") and United Artists Communications, Inc. ("Original Tenant")
Landlord: Tulsa Promenade (successor-in-interest to Original Landlord)
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
The real estate located at:
Movies 6
Washington Park Mall
2350 SE Washington Blvd.
Bartlesville, OK 74006
Lease dated August 23, 1994 between HO Retail Properties II Limited Partnership
("Original Landlord") and Trans-Texas Amusements, Inc. ("Original Tenant")
Landlord: Original Landlord
Tenant: Hollywood Theaters, Inc. (successor-in-interest to Original Tenant)
North Park 4 Theater
One North Park Shopping Center
Midland, Texas
Midland Cinema
Midland Park Mall
4511 N. Midkiff Road
Midland, TX
Cinema Four
2100 Southwest Young Drive
Killeen, Texas
Phelan Six
4155 Laurel Street
Beaumont, Texas
141
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Port Arthur Theater
4600 Highway 73
Port Arthur, Texas
B. Other Leasehold Properties
(a) Office Lease for Parent and Company:
2911 Turtle Creek Blvd.
Suite 1150
Dallas, TX 75219
(b) Warehouse Lease
9530 Skillman Avenue
Unit #D041
Dallas, TX 75244
142
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SCHEDULE 7.1
EXISTING LIENS
(Other than Permitted Liens)
Liens in favor of United Artists Theatre Circuit, Inc. and its affiliates
securing the obligations of the Company under the Assignment and Assumption
Agreement executed in connection with the UA Agreement
Liens in favor of General Cinema Corp. of Oklahoma, Inc. and its affiliates
securing the obligations of the Company under assignment and assumption
executed in connection with the GC Agreement
143
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SCHEDULE 7.8
CONTINGENT OBLIGATIONS
UA Guaranty
Indemnity obligations under the Crown Agreement, the UA Agreement and the GC
Agreement
144
<PAGE> 1
EXHIBIT 10.3
SHAREHOLDERS' AND VOTING AGREEMENT
THIS SHAREHOLDERS' AND VOTING AGREEMENT (the "Agreement") is
made as of October 3, 1996 by and among HOLLYWOOD THEATER HOLDINGS, INC., a
Delaware corporation (the "Company"), THE BEACON GROUP III - FOCUS VALUE FUND,
L.P., a Delaware limited partnership ("Beacon") and each of the shareholders of
the Company executing one of the signature pages attached hereto.
W I T N E S S E T H :
WHEREAS, as of the date hereof, Beacon is purchasing shares of
Series A Convertible Preferred Stock of the Company, par value $.01 per share
("Series A Preferred"), pursuant to a Preferred Stock and Common Stock Purchase
Agreement (the "Purchase Agreement");
WHEREAS, the Purchase Agreement contemplates that, subject to
the terms and conditions thereof, Beacon will purchase, at a subsequent
closing, shares of Series B Convertible Preferred Stock of the Company, par
value $.01 per share (the "Series B Preferred") and shares of Common Stock of
the Company;
WHEREAS, the Company and certain other shareholders of the
Company are party to a Stockholders Agreement dated as of April 30, 1996 (the
"Prior Shareholders' Agreement"); and
WHEREAS, the parties hereto deem it to be in their best
interests to amend and restate the Prior Shareholders' Agreement in its
entirety.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and obligations hereinafter set forth, the parties hereto
hereby agree as follows:
Section 1. Definitions. As used herein, the following terms shall have the
following meanings:
"Accepted Shares" has the meaning assigned to it in Section
8(a).
1
<PAGE> 2
"Adjusted Base EBITDA" means, for any period, the Base EBITDA
for such period adjusted to include the Base EBITDA attributable to (a)
theaters acquired by the Company or any of its Subsidiaries during such period
(including theaters acquired as a result of the acquisition by the Company or
any of its Subsidiaries of a Subsidiary or Subsidiaries during such period),
and (b) theaters constructed by the Company during such period to the extent
certificates of occupancy have been issued and such theaters are open for
business as of the last day of such period, in each case as if such theaters
were owned and open for business throughout the entire period. For purposes of
computing Adjusted Base EBITDA, the Base EBITDA attributable to any theater
constructed (and opened) during such period for the portion of such period
prior to the opening of such theater shall be the Base EBITDA set forth in the
projections (for the first full year of the operation) of Base EBITDA for such
theater presented to the Board of Directors of the Company in connection with
its approval of the construction of such theater.
"Agreement" has the meaning set forth in the Preamble.
"Affiliate" means (i) with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and (ii) with respect to any
individual, shall also mean the spouse, parent, sibling, child, step-child,
grandchild, niece or nephew of such Person, or the spouse thereof.
"All or Nothing Sale" has the meaning assigned to it in
Section 5(a).
"Appraisal Procedure" shall mean the following procedure for
determining the Market Value of Common Stock: (a) upon receipt by the Company
of a Put Notice, the Company and the Put Holder which delivered such Put Notice
shall attempt to agree on a mutually acceptable Qualified Appraiser to value
the Common Stock, and if such parties agree on a Qualified Appraiser
2
<PAGE> 3
within ten (10) days following the receipt of the Put Notice, such Qualified
Appraiser shall, on or before twenty (20) days following the date it is
appointed, determine the Market Value of the Common Stock, and such
determination shall be binding upon the Company and such Put Holder; (b) in the
event the Company and such Put Holder are unable to agree upon a mutually
acceptable Qualified Appraiser within ten (10) days following receipt of the
Put Notice, on the expiration of such ten (10) day period, the Company and such
Put Holder shall each appoint a Qualified Appraiser to value the Common Stock.
Within twenty (20) days following the date they are appointed, the Qualified
Appraisers appointed by the Company and such Put Holder shall determine the
Market Value of the Common Stock. In the event the values determined by the
Company's Qualified Appraiser and the Put Holder's Qualified Appraiser are
within ten percent (10%) of each other, the Market Value for purposes of such
exercise of the Put shall be the average of the values determined by such
appraisers and such determination shall be binding upon the Company and such
Put Holder. In the event such values differ by ten percent (10%) or more, such
appraisers shall in turn promptly appoint a third Qualified Appraiser who
shall, within twenty (20) days following the date it is appointed, determine
the Market Value of the Common Stock. The value which is neither the lowest
nor the highest of the values determined by the three Qualified Appraisers
shall be the Market Value of the Common Stock for purposes of such exercise of
the Put and shall be binding upon the Company and such Put Holder. In the
event either the Company or the such Put Holder fails to timely appoint a
Qualified Appraiser, such failing party will be deemed to have waived its
rights to appoint a Qualified Appraiser, and the Qualified Appraiser appointed
by the other party shall determine the Market Value for purposes of such
exercise of the Put which determination shall be binding upon such Put Holder
and the Company. The costs of any mutually agreeable Qualified
3
<PAGE> 4
Appraiser referred to in (a) above and of the third Qualified Appraiser
referred to in (b) above shall be paid equally by the Company and such Put
Holder. Such Put Holder shall pay all costs of the Qualified Appraiser
appointed by it pursuant to (b) above and the Company shall pay all costs of
the Qualified Appraiser so appointed by it. For purposes of the time periods
in this definition, the Company shall be deemed to have received the Put Notice
on such date as the Company and the Put Holder determine that they are unable
to agree on the Market Value of a share of Common Stock.
"Base EBITDA" means, for any period, the remainder of (a) all
revenue of the Company and its Subsidiaries during such period derived from
theaters owned, leased or operated by the Company and its Subsidiaries,
including, without limitation, ticket revenue, advertising revenue and revenue
from concession sales, minus (b) the direct "theater level" cash operating
expenses incurred by the Company and its Subsidiaries during such period in
connection with the ownership, leasing and operation of movie theaters owned,
leased or operated by the Company and its Subsidiaries during such period. As
used herein, "theater level" cash operating expenses shall expressly exclude,
without limitation, corporation overhead charges, executive officer
compensation, general and administrative expenses and other expenses not
directly related to the ownership, leasing or operation of individual movie
theaters.
"Beacon" has the meaning assigned to it in the Preamble.
"Beacon Designee" has the meaning assigned to it in Section
3.1.
"Beacon Directors" has the meaning assigned to it in Section
3.1.
"Beacon Non-Voting Observer" has the meaning assigned to it in
Section 3.4.
"Board" has the meaning assigned to it in Section 3.1.
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"Book Value" means the book value per share of Common Stock,
as determined bdividing Total Equity as of the date of the most recent
quarterly or year-end financial statements of the Company available on the
Determination Date by the total number of shares of Common Stock issued and
outstanding as of the date of the financial statements.
"Business Day" means any day other than a Saturday, Sunday or
other day on whicnational banks are authorized or required by law to be closed
in Dallas, Texas.
"By-laws" means the By-laws of the Company as in effect on the
date hereof, as they may be amended from time to time hereafter.
"Certificate" means the Restated Certificate of Incorporation
of the Company as in effect on the date hereof, as it may be amended from time
to time hereafter.
"Closing" has the meaning specified in Section 16.
"Common Stock" means the Common Stock, par value $.01 per
share of the Company and any equity securities issued or issuable with respect
to the Common Stock in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Common Stock Equivalents" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock, including, without
limitation, the Series A Preferred and the Series B Preferred.
"Company" has the meaning assigned to it in the Preamble.
"Company Acceptance Period" has the meaning assigned to it in
Section 5(a).
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"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Conversion Shares" has the meaning assigned to it in the
Purchase Agreement.
"Credit Agreement" means that certain Credit Agreement dated
as of June 30, 1995 among the Company, The Provident Bank and the other lenders
party thereto, as the same may hereafter be amended or otherwise modified from
time to time, and any refinancings thereof.
"Deceased Shareholder" has the meaning assigned to it in
Section 11(a).
"Deceased Spouse" has the meaning assigned to it in Section
12(a).
"Determination Date" means (i) in the case of a Transfer
proposed to be effected pursuant to Section 14 hereof, the date of the first
Offer Notice given in connection with such Transfer, (ii) in the case of a
Transfer upon the death of a Shareholder or the spouse of a Shareholder, the
date of death, and (iii) in the case of a Transfer upon the divorce of a
Shareholder, the date of the entry of the divorce decree.
"Divorced Shareholder" has the meaning specified in Section
13(a).
"Divorced Spouse" has the meaning specified in Section 13(a).
"Drag-Along Initiator" has the meaning assigned to it in
Section 7.1.
"Excluded Securities" means (a) options issued by the Company
to employees or consultants pursuant to any stock option or similar plan (and
any shares of Common Stock issuable thereunder) approved by the Board, and (b)
shares of Common Stock issuable upon conversion, exchange or exercise of any
Common Stock Equivalent (including, without limitation, upon
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<PAGE> 7
conversion of the Series A Preferred and the Series B Preferred) the issuance
of which is approved by the Board.
"First Offer Percentage" means, as to each Offered
Shareholder, the quotient obtained (expressed as a percentage) by dividing (i)
the number of shares of Common Stock owned by such Offered Shareholder on the
first day of the Shareholder Acceptance Period by (ii) the aggregate number of
shares of Common Stock owned on the first day of the Shareholder Acceptance
Period by all Offered Shareholders who exercise their option to purchase
Refused Stock.
"First Offer Shares" has the meaning assigned to it in Section
5(b).
"Formula Value" means the value per share of Common Stock
determined by the following formula: (a)(i) 5.0 x Base EBITDA for the trailing
four fiscal quarters of the Company as determined by reference to the most
recently available unaudited income statement of the Company (or the audited
financial statement in the case of quarters constituting a full fiscal year),
prepared in accordance with GAAP, for the period ended as of the last day of
the quarter ended immediately prior to the Determination Date less (ii) the sum
of (A) the aggregate principal and accrued but unpaid interest outstanding in
respect of debt for borrowed money of the Company (including (x) borrowed money
under the Credit Agreement, (y) an amount equal to the original principal
amount under that certain Subordinated Promissory Note dated as of July 10,
1995 from the Company to J.C. Mitchell and (z) the present value (discounted at
10%) as of such date of determination of the difference between the rents
payable under Schedule 1 over the rents payable under Schedule 2 of each of
that certain Amendment to Lease Agreement dated as of July 10, 1995 between
J.C. Mitchell and Hollywood Theaters, Inc. with respect to the Grapevine lease
and that certain Amendment to Lease Agreement dated as of July 10, 1995 between
J.C. Mitchell and
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<PAGE> 8
Hollywood Theaters, Inc. with respect to the Burleson lease) and (B) the
aggregate liquidation value of any redeemable preferred stock of the Company
outstanding as of such date plus (iii) cash held by the Company as of such date
of determination divided by (b) the Total Shares as of such date of
determination.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended.
"IPO" means the initial underwritten offering pursuant to
which the Common Stock becomes registered under Section 12 of the Securities
Exchange Act.
"Issuance" has the meaning assigned to it in Section 8.
"Issuance Period" has the meaning assigned to it in Section
8(b).
"Issuance Stock" has the meaning assigned to it in Section
8(a).
"Issue" has the meaning assigned to it in Section 8.
"Litigation" has the meaning assigned to it in Section 32.
"LKCM Theater Partners" means LKCM Theater Partners, L.P.
"Major Shareholder" has the meaning assigned to it in Section
8(a).
"Market Value" means, with respect to a share of Common Stock
on any date herein specified, the fair market value of such share of Common
Stock determined as of the last day of the month most recently ended prior to
such date without giving effect to any discount for (a) a minority interest,
(b) a lack of liquidity of such Common Stock or (c) the fact that such Common
Stock is
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<PAGE> 9
subject to this Agreement. In the event the Company and the Put Holder are
unable to agree on the Market Value, the Market Value shall be determined
pursuant to the Appraisal Procedure.
"Non-Voting Observers" has the meaning assigned to it in
Section 3.4.
"Offer" has the meaning assigned to it in Section 5(a).
"Offer Notice" means a written notice of offer to sell shares
of Stock.
"Offered Shareholder" has the meaning assigned to it in
Section 5(a).
"Offered Stock" means the shares of Stock offered for sale
pursuant to an Offer Notice, which shall consist of (i) in the case of a
Transfer proposed to be made pursuant to Section 14 hereof, all shares of Stock
that are involved in such Transfer, (ii) in the case of a Transfer upon the
death of a Shareholder, all shares of Stock owned or held by the Deceased
Stockholder, (iii) in the case of a Transfer upon the death of the spouse of a
Shareholder, a number of shares of Stock equal to (x) the number of shares of
Stock in which the estate of the Deceased Spouse claims an interest which have
not passed to the Surviving Shareholder free of any trust, multiplied by (y)
the proportionate interest so claimed, and (iv) in the case of a Transfer upon
the divorce of a Shareholder, the number of shares of Stock owned by the
Divorced Spouse, as determined by the divorce decree.
"Offering Price" means the proposed sale price of Stock
offered for sale pursuant to an Offer Notice given under Sections 11, 12 or 13
hereof.
"Oversubscribed Pre-emptive Shareholder" has the meaning
assigned to it in Section 8(a).
"Oversubscribed Shareholder" has the meaning assigned to it
in Section 5(b).
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"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-
stock company, trust, unincorporated organization or government or any agency
or political subdivisions thereof.
"Pre-emptive Acceptance Period" has the meaning assigned to
it in Section 8(a).
"Pre-emptive Notice" has the meaning assigned to it in
Section 8(a).
"Pre-emptive Offer" has the meaning assigned to it in Section
8(a).
"Pre-emptive Percentage" means, at any time, as to each Major
Shareholder, the quotient obtained (expressed as a percentage) by dividing (i)
the number of shares of Common Stock owned by such Major Shareholder as of the
time of determination by (ii) the aggregate number of shares of Common Stock
owned by all Major Shareholders as of the time of determination.
"Prior Shareholders' Agreement" means the Stockholder
Agreement dated as of April 30, 1996 by and among the Company, Stratford, and
the other shareholders that are party thereto.
"Public Sale" means a Transfer pursuant to a bona fide
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act or pursuant to Rule 144 under the Securities
Act.
"Purchase Agreement" has the meaning assigned to it in the
Recitals.
"Purchase Price" has the meaning assigned in Section 15.
"Purchaser" has the meaning specified in Section 16.
"Purchasing Shareholders" means any Offered Shareholder
electing to purchase shares of Stock offered for sale pursuant to an Offer
Notice.
"Put" means the right of each holder of Series A Preferred or
Conversion Shares to require the Company to repurchase such stock pursuant to
this Agreement.
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"Put Closing Date" has the meaning set forth in Section 22.
"Put Formula Value" means, with respect to a share of Common
Stock on any date herein specified, the value determined by dividing (a) (i)
6.5 multiplied by the Adjusted Base EBITDA of the Company for the period of
twelve consecutive months ending with (and including) the month most recently
ended as of such date, less (ii) the aggregate principal and accrued but unpaid
interest outstanding in respect of debt for borrowed money of the Company
(including borrowed money under the Credit Agreement, but excluding debt
incurred to finance the construction of any movie theater owned by the Company
or any of its Subsidiaries to the extent a certificate of occupancy has not
been issued for such theater as of the last day of such period or to the extent
such theater is not open for business as of the last day of such period) plus
(ii) an amount equal to the cash balance of the Company and its Subsidiaries on
a consolidated basis as of the last day of the month most recently ended as of
such date, plus (iii) the market value of all marketable securities held by the
Company and its Subsidiaries on a consolidated basis as of the last day of the
month most recently ended as of such date (determined based on the fair market
value of such securities on the last day of such month), plus (iv) the
consideration which would be received by the Company upon an exercise of all
options, warrants and other rights to acquire Common Stock which are
outstanding on such date (only to the extent such rights are then exercisable
and only to the extent Market Value exceeds the per share exercise price
thereof) and the conversion of all securities of the Company outstanding on
such date which are convertible into Common Stock (only to the extent such
securities are then convertible and only to the extent Market Value exceeds the
per share exercise price thereof) by (b) the Total Shares (excluding all
options, warrants and other rights to
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<PAGE> 12
acquire Common Stock which are outstanding on such date that are not then
exercisable and for which the Market Value is less than the per share exercise
price thereof) on such date.
"Put Holder" has the meaning set forth in Section 22.
"Put Notice" has the meaning set forth in Section 22.
"Put Price" means (a) a price mutually acceptable to the Put
Holder and the Company, or (b) if the Put Holder and the Company are not able
to agree on the Put Price (i) in the case of a Put Share consisting of Series A
Preferred , the greater of (A) the Stated Value of such share of Series A
Preferred, (B) the Market Value multiplied by the number of shares of Common
Stock into which such share of Series A Preferred is then convertible, or (C)
the Put Formula Value multiplied by the number of shares of Common Stock into
which such shares of Series A Preferred is then convertible, and (ii) in the
case of a Put Share consisting of Conversion Shares, the greater of (A) the
Market Value, or (B) the Put Formula Value.
"Put Shares" has the meaning set forth in Section 22.
"Qualified Appraiser" shall mean an investment banking firm or
appraisal firm (including any national accounting firm) of recognized national
or regional standing.
"Qualified IPO" means any underwritten public offering of
Common Stock (pursuant to an effective registration statement filed under the
Securities Act), (a) resulting in at least $25 million of net proceeds to the
Company and (b) reflecting a per share offering price for each share of Common
Stock sold in such offering of no less than $300 (subject to stock splits,
combinations and recapitalizations).
"Refused Stock" has the meaning assigned to it in Section
5(b).
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"Registration Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company, Beacon and certain
other shareholders as it may be amended, modified, replaced or superseded from
time to time.
"Remaining Pre-emptive Shares" has the meaning assigned to it
in Section 8(a).
"Remaining Shares" has the meaning assigned to it in Section
5(b).
"Response Notice" means a written notice of election to
purchase any shares of Stock.
"Sale Period" has the meaning assigned to it in Section 5(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Senior Management Shareholder" means Thomas W. Stephenson,
Jr.
"Series A Conversion Shares" means shares of Common Stock
issuable upon conversion of Series A Preferred.
"Series A Preferred" has the meaning assigned to it in the
Recitals.
"Series A Repurchase Offer" has the meaning assigned to it in
Section 3.1(a).
"Series B Preferred" has the meaning assigned to it in the
Recitals
"Shareholder Acceptance Period" has the meaning assigned to it
in Section 5(b).
"Shareholders" means the parties to this Agreement (other than
the Company) and any other subsequent holder of Stock who agrees to be bound by
the terms of this Agreement.
"Stated Value" means $100 plus accrued and unpaid dividends in
the case of the Series A Preferred and $175 plus accrued and unpaid dividends
in the case of the Series B Preferred.
"Stock" means (i) any shares of Common Stock and (ii) any
Common Stock Equivalents (including, without limitation, the Series A Preferred
and the Series B Preferred and the
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Common Stock issuable upon conversion thereof), in each case, whether owned on
the date hereof or acquired hereafter.
"Stratford" means Stratford Capital Partner, L.P., a Texas
limited partnership and licensee under the Small Business Investment Act of
1958, as amended, and its successors and assigns.
"Stratford Director" has the meaning assigned to it in Section
3.1.
"Stratford Non-Voting Observer" has the meaning assigned to it
in Section 3.4.
"Subject Stock" has the meaning assigned to it in Section
5(a).
"Subsequent Purchase" has the meaning assigned to it in the
Purchase Agreement.
"Subsidiary" means with respect to any Person, (i) any
corporation, partnership or other entity of which shares of capital stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other similar managing body of such corporation,
partnership or other entity are at the time owned by such Person, or (ii) the
management of which is otherwise controlled, directly or indirectly, through
one or more intermediaries by such Person.
"Surviving Shareholder" has the meaning assigned to it in
Section 12(a).
"Surviving Spouse" has the meaning assigned to it in Section
11(a).
"Tag-Along Initiator" has the meaning assigned to it in
Section 6.2.
"Tag-Along Notice" has the meaning assigned to it in Section
6.2.
"Tag-Along Offeree" has the meaning assigned to it in Section
6.2.
"Tag-Along Shares" has the meaning assigned to it in Section
6.2.
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"Total Equity" means the sum of the par value, capital surplus
and retained earnings attributable to the Common Stock (other than any shares
of Common Stock held in treasury of the Company), as determined in accordance
with GAAP.
"Total Shares" means the total number of shares of Common
Stock issued and outstanding, assuming the exercise or conversion of all
outstanding options, rights, warrants and convertible securities.
"Transfer" as to any Stock, means to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily.
"Transferee" means a Person that acquires any shares of stock,
or any interest therein, as a result of a Transfer.
"Voting Shares" means any securities of the Company the
holders of which are generally entitled to vote for members of the Board
(including, without limitation, all outstanding shares of Common Stock and
Series B Preferred).
Section 2. Methodology for Calculations. For purposes
of this Agreement, the Transfer of a Common Stock Equivalent shall be treated
as the Transfer of the shares of Common Stock into which such Common Stock
Equivalent can be converted, exchanged or exercised. Except as otherwise
provided in this Agreement, for purposes of calculating (i) the amount of
outstanding Common Stock as of any date, (ii) the amount of Common Stock owned
by a Person hereunder, and (iii) related percentages, all shares of Series A
Preferred and Series B Preferred as of the date hereof (but no other Common
Stock Equivalents) shall be treated as having been converted, exchanged or
exercised.
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Section 3. Corporate Governance.
3.1. Composition of the Board.
(a) Pre-Qualified IPO. Prior to a Qualified IPO,
the Board of Directors of the Company (the "Board") shall be composed of no
more than five members. Prior to a Qualified IPO, (i) so long as Beacon holds
(x) 50% or more of the outstanding Common Stock or any shares of Series A
Preferred, Beacon shall have the right to designate three persons to serve as
members of the Board, (y) 25% or more of the outstanding Common Stock but less
than 50% of the outstanding Common Stock, Beacon shall have the right to
designate two persons to serve as members of the Board and (z) 5% or more of
the outstanding Common Stock but less than 25% of the outstanding Common Stock,
Beacon shall have the right to designate one person to serve as a member of the
Board (such members being referred to herein as the "Beacon Directors"), (ii)
so long as Stratford holds more than 5% or more of the outstanding Common
Stock, Stratford shall have the right to designate one person to serve as a
member of the Board (the "Stratford Director") and (iii) the chief executive
officer of the Company shall serve as a member of the Board. Notwithstanding
the foregoing, if the Purchase Agreement terminates without the Subsequent
Purchase (as defined in the Purchase Agreement) having been consummated, the
number of Beacon Directors shall be reduced to two as long as Beacon holds 5%
or more of the outstanding Common Stock and the number of Stratford Directors
shall be two as long as Stratford holds 5% or more of the outstanding Common
Stock, provided that the number of Beacon Directors shall be reduced to one if
(A) within six months following such termination the Company delivers to Beacon
a written offer to purchase all of Beacon's shares of Series A Preferred for a
cash purchase price equal to the sum of (x) the Initial Purchase Price (as
defined in the Purchase Agreement) and (y) the amount of all accrued but unpaid
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dividends on such shares of Series A Preferred through and including the
proposed purchase date and (z) the amount of Beacon's documented out-of-pocket
costs and expenses (including, without limitation, the fees and expenses of
Beacon's attorneys and accountants) incurred by Beacon in connection with its
due diligence review of the Company and the negotiation, execution and delivery
of this Agreement, the Purchase Agreement and related documents (a "Series A
Repurchase Offer"), and, (B) Beacon has not delivered to the Company a written
acceptance of such offer within 30 days after Beacon has received such offer.
A majority of each of (1) the Beacon Directors and (2) the non-Beacon Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board. Except as otherwise expressly required by law, the Certificate or By-
laws, the act of a majority of the directors present at any meeting of which a
quorum is present shall be the act of the Board, provided that the Beacon
Directors shall be recused with respect to any vote regarding whether the
Company shall make a Series A Repurchase Offer to Beacon.
(b) Post Qualified IPO. From and after a
Qualified IPO, the Board shall be composed of no more than five members. From
and after a Qualified IPO, in connection with any election for members of the
Board, the Company shall, at the request of Beacon include in the slate of
directors recommended by the Board to stockholders for election as directors
(i) two representatives designated by Beacon so long as Beacon holds 25% or
more of the outstanding Common Stock and (ii) one representative designated by
Beacon so long as Beacon holds 5% or more of the outstanding Common Stock but
less then 25% of the outstanding Common Stock(such representatives designated
by Beacon being referred to herein as the "Beacon Designees"). The Company and
the Shareholders shall each use their best efforts to cause the Beacon
Designees to be elected to, and to be maintained as members of, the Board
(including, (i) in the case of the Company,
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recommending to the stockholders of the Company the election of the Beacon
Designees to the Board and opposing any proposal to remove any Beacon Designee
at each meeting of the stockholders of the Company at which the election or
removal of members of the Board is on the agenda and (ii) in the case of the
Shareholders, voting all of their Voting Shares in favor of the Beacon
Designees, and voting such shares against any person opposing any Beacon
Designee), and shall take no action which would diminish the prospects of the
Beacon Designees being elected to the Board or increase the prospects of any
Beacon Designee being removed from the Board.
3.2. Committees; Subsidiaries.
(a) The Company will take all actions necessary
to cause at least one Beacon Director or Beacon Designee (and, prior to a
Qualified IPO, at least one Stratford Director) to be appointed to each
committee of the Board and to each of the boards of directors or other similar
managing bodies (and any committee thereof) of each of the Subsidiaries of the
Company (in each case, subject to eligibility requirements under applicable law
or stock exchange rules following a Qualified IPO).
(b) The Company shall elect as the Board of
Directors of each Subsidiary those persons who are at the time directors of the
Company as provided in Section 3.1. If any Beacon Director, Beacon Designee or
Stratford Director serving on any committee of the Board or on any board of
directors or other similar managing body (and any committee thereof) of any
Subsidiary of the Company shall cease to serve as a member of the Board for any
reason or otherwise is unable to fulfill his or her duties on any such
committee, board of directors, or other similar managing body, as the case may
be, he or she shall be succeeded by another Person designated by Beacon, in the
case of a Beacon Director or Beacon Designee, and by Stratford in the case of a
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Stratford Director (in each case, subject to eligibility requirements under
applicable law or stock exchange rules following a Qualified IPO).
3.3. Vacancies; Removal.
(a) If any Beacon Director, Beacon Designee or
Stratford Director shall cease to serve as a director of the Company for any
reason, the vacancy resulting thereby shall be filled by another person
designated by Beacon, in the case of a Beacon Director or Beacon Designee, and
by Stratford in the case of a Stratford Director.
(b) None of the Beacon Directors, any Beacon
Designee nor any Stratford Director shall be removed from office without the
consent of Beacon, in the case of a Beacon Director or Beacon Designee, and by
Stratford in the case of a Stratford Director. Each Beacon Director, Beacon
Designee and Stratford Director may be removed from office at any time, with or
without cause, at the request of Beacon, in the case of a Beacon Director or
Beacon Designee, and by Stratford in the case of a Stratford Director.
3.4. Non-Voting Observers. The Company agrees that if at
any meeting for the election of directors any Beacon Director, Beacon Designee
or Stratford Director is not elected to the Board, or if for any other reason,
at any time, neither a Beacon Director or Beacon Designee (in the case of
Beacon) nor a Stratford Director (in the case of Stratford) is a member of the
Board, Beacon (in the case of a Beacon Director or Beacon Designee), so long as
Beacon holds 5% or more of the outstanding Common Stock, will be entitled to
have one observer (a "Beacon Non-Voting Observer") selected by Beacon present
at all meetings of the Board, and Stratford (in the case of a Stratford
Director), so long as Stratford holds 5% or more of the outstanding Common
Stock, will be entitled to have one observer (a "Stratford Non-Voting
Observer") selected by Stratford present
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at all meetings of the Board (the Beacon Non-Voting Observer, if any, and
Stratford Non-Voting observer, if any, are referred to together as (the "Non-
Voting Observers"), provided that following a Qualified IPO the Company shall
be entitled to require such Non-Voting Observers to enter into confidentiality
arrangements no more burdensome to the Non-Voting Observers than any
confidentiality arrangement to which the members of the Board are subject.
Such observers shall have the same access to information concerning the
business and operations of the Company and at the same time as directors of the
Company and shall be entitled to participate in discussions and consult with,
and make proposals and furnish advice to, the Board, without voting; provided,
however, that the Board shall be under no obligation to take any action with
respect to any proposals made or advice furnished by any Non-Voting Observers,
other than to give due consideration thereto. In addition to any requirements
specified in the By-laws, the Company shall notify the Non-Voting Observers, by
telecopy, of every meeting (or action by written consent) of the Board at least
two days in advance of such meeting (or distribution of written consents), or,
if such notice under the circumstances is not practicable, as soon before the
meeting (or distribution) as is practicable, provided that nothing in this
Section 3.4 shall be construed in any way to authorize or allow a party hereto
not to comply with its obligations hereunder.
3.5. Representative. In the event that, after receiving
proper notice of a meeting of the Board or a meeting of any board of directors
or similar managing body of any of the Company's Subsidiaries in accordance
with such entity's by-laws, any Beacon Director, Beacon Designee, Stratford
Director or Non-Voting Observer determines that he or she is unable to attend
such meeting, Beacon (in the case of a Beacon Director, Deacon Designee or
Beacon Non-Voting Observer) and Stratford (in the case of a Stratford Director
or Stratford Non-Voting Observer) shall
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<PAGE> 21
have the right to designate a representative to attend and observe such meeting
on behalf of such Beacon Director, Beacon Designee, Stratford Director or Non-
Voting Observer, as the case may be, who shall be entitled to fully participate
(other than the right to vote) in such meeting as if he were a member of the
Board, or a member of the board of directors or similar managing body of the
relevant Subsidiary of the Company or a Non-Voting Observer, as the case may
be.
3.6. Board and Committee Meetings. The Company shall hold
regular meetings of its Board on at least a quarterly basis. The Company
agrees, and shall cause the By-laws to be amended to the extent necessary to
provide, that any two members of the Board (including, without limitation, the
Beacon Designees, each Beacon Director and each Stratford Director) shall have
the right, upon reasonable notice, to call meetings of the Board and of each
committee of the Board on which he or she is a member. The Company agrees that
prior to a Qualified IPO any Non-Voting Observer shall have the right to
request that the Chairman of the Board or the Chief Executive Officer of the
Company call a meeting of the Board and that, upon such request, the Chairman
of the Board shall promptly call a meeting of the Board to be held at such time
(but not earlier than three days from the date such request is made by the Non-
Voting Observer) as shall be requested by the Non-Voting Observer.
3.7. Telephonic Board Meetings. The Company shall take
all necessary actions, including, without limitation, causing its By-laws to be
duly amended, to allow all directors (including any Beacon Director, Beacon
Designee and Stratford Director) and Non-Voting Observer to telephonically
attend (a) any meeting of the Board or (b) any meeting of any board of
directors or any similar managing body (and any committee thereof) of any
Subsidiary of the Company of which he or she is a member.
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3.8. Directors' Indemnification.
(a) The Company shall obtain and cause to be
maintained in effect, with financially sound insurers, a policy of directors'
and officers' liability insurance covering each of the members of the Board
(including, without limitation, each Beacon Director, each Beacon Designee and
each Stratford Director) in an amount of at least $3,000,000 per occurrence.
(b) The Certificate, By-laws and other
organizational documents of the Company and each of its Subsidiaries shall at
all times, to the fullest extent permitted by law, provide for indemnification
of, advancement of expenses to, and limitation of the personal liability of,
the members of the Board and the members of the boards of directors or other
similar managing bodies of each of the Company's Subsidiaries and such other
persons, if any, who, pursuant to a provision of such Certificates, By-laws or
other organizational documents, exercise or perform any of the powers or duties
otherwise conferred or imposed upon members of the Board or the boards of
directors or other similar managing bodies of each of the Company's
Subsidiaries. Any Non-Voting Observer shall be entitled to indemnification
from the Company to the maximum extent permitted by law as though he or she
were a director of the Company and any of its Subsidiaries. Such provisions
may not be amended, repealed or otherwise modified in any manner adverse to any
member of the Board or any member of the boards of directors or other similar
managing bodies of any of the Company's Subsidiaries, until at least six years
following the date that Beacon is no longer entitled to designate or nominate
any Beacon Director or Beacon Designee.
(c) Each of the members of the Board (including,
without limitation, the Beacon Directors, Beacon Designees and Stratford
Director) and each Non-Voting Observer is intended to be a third-party
beneficiary of the obligations of the Company pursuant to this Section
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3.8, and the obligations of the Company pursuant to this Section 3.8 shall be
enforceable by each such individual.
3.9. Irrevocable Proxy. In order to secure each
Shareholder's obligation to vote his Voting Shares in accordance with the
provisions of this Section 3 pursuant to which Beacon has rights hereunder,
each Shareholder hereby appoints Beacon as his, her or its true and lawful
proxy and attorney-in-fact, with full power of substitution, to vote all of his
Voting Shares of the Company for the election of each Beacon Director and each
Beacon Designee as a member of the Board and to take all such other actions as
are necessary to enforce the rights of Beacon under this Section 3. Beacon may
exercise the irrevocable proxy granted to it hereunder at any time any
Shareholder fails to comply with any provision of this Agreement granting
Beacon rights under this Section 3. The proxies and powers granted by each
Shareholder pursuant to this Section 3.9 are coupled with an interest and are
given to secure the performance of the Shareholders' obligations to Beacon
under this Section 3. Such proxies and powers will be effective until a
Qualified IPO, at which time such proxies and powers shall terminate, and shall
survive the death, incompetency and disability of each Shareholder.
3.10. Contractual Management Rights. The Company and each
of the Shareholders acknowledge that the provisions of this Agreement,
including this Section 3, are intended to provide Beacon with "contractual
management rights" within the meaning of the Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated thereunder.
3.11. Expenses. Subject to proper documentation being
provided to the Company, the Company shall pay the reasonable out-of-pocket
expenses incurred by each of the Beacon Directors, Beacon Designees, Stratford
Director and any Non-Voting Observer in connection with
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performing his or her duties, including without limitation the reasonable out-
of-pocket expenses incurred by such person attending meetings of the Board or
any committee thereof or meetings of any board of directors or other similar
managing body (and any committee thereof) of any Subsidiary of the Company.
3.12. Cooperation. Each Shareholder shall vote all of its
Voting Shares and shall take all other necessary actions within its control
(including, without limitation, attending all meetings in person or by proxy
for purposes of obtaining a quorum, executing all written consents in lieu of
meetings and voting to remove members of the Board, as applicable), and the
Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special Board and shareholder meetings
and voting to remove members of the Board, as applicable), to effectuate the
provisions of this Section 3.
Section 4. Restrictions on Transfers of Stock.
(a) No Shareholder shall Transfer any Stock,
whether owned on the date hereof or acquired hereafter, without first complying
with the provisions of Section 5 hereof and then, in each case as applicable,
complying with the provisions of Section 6 hereof, provided that the foregoing
shall not be deemed to prohibit pledges of Stock effected by Shareholders prior
to the date in accordance with the terms of the Prior Shareholder Agreement as
long as such terms continue to be applicable to such transfers.
Notwithstanding any other provision hereof, no Senior Management Shareholder
may Transfer any Stock if, after giving effect to such Transfer, such Senior
Management Shareholder shall have Transferred in the aggregate an amount of
Common Stock in excess of 5% of the outstanding Common Stock held by such
Senior Management Shareholder as of the date hereof, except that from and after
a Qualified IPO, any Senior Management Shareholder
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may Transfer Stock. Each Senior Management Shareholder shall, prior to any
Transfer of Stock pursuant to this Section 4, comply with the provisions of
Sections 5 and 6 hereof, in each case as applicable.
(b) Except in connection with a Public Sale, any
transferee of Stock (including any transferee that is an Affiliate of a
transferor) who is not a Shareholder shall upon consummation of, and as a
condition to, such Transfer execute and deliver to the Company (which the
Company shall then deliver to all other Shareholders) an agreement in form and
substance satisfactory to Beacon and the Company pursuant to which it agrees to
be bound by the terms of this Agreement for the benefit of the parties hereto
and such transferee shall thereafter be deemed to be a Shareholder for all
purposes of this Agreement.
(c) Any Transfer or attempted Transfer of Stock
in violation of any provision of this Agreement shall be void, and the Company
shall not record such Transfer on its books or treat any purported transferee
of such Stock as the owner of such Stock for any purpose.
Section 5. Rights of First Offer. In addition to and
not in limitation of any other restrictions on Transfers of Stock contained in
this Agreement, any Transfers of Stock by a Shareholder shall be consummated
only in accordance with the following procedures:
(a) The transferring Shareholder shall first
deliver to the Company and each other Shareholder (the "Offered Shareholders")
a written notice (an "Offer Notice"), which shall (i) state the transferring
Shareholder's intention to Transfer Stock to one or more Persons in a bona fide
arms' length transaction, the amount and type of Stock to be Transferred (the
"Subject Stock"), the purchase price therefor (which shall be payable in cash)
and a summary of the other material terms of the proposed Transfer and (ii)
offer the Company and the Offered Shareholders the option
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to acquire all or a portion of such Subject Stock upon the terms and subject to
the conditions of the proposed Transfer as set forth in the Offer Notice (the
"Offer"), provided that such Offer may provide that it must be accepted by the
Company and the Offered Shareholders (in the aggregate) on an all or nothing
basis (an "All or Nothing Sale"). The Offer shall remain open and irrevocable
for the periods set forth below (and, to the extent the Offer is accepted
during such periods, until the consummation of the sale contemplated by the
Offer). The Company shall have the right and option, for a period of 30 days
after delivery of the Offer Notice (the "Company Acceptance Period"), to accept
all or any part of the Subject Stock at the cash purchase price and on the
terms stated in the Offer Notice. Such acceptance shall be made by delivering
a written notice to the transferring Shareholder and each of the Offered
Shareholders within the Company Acceptance Period.
(b) If the Company shall fail to accept all of
the Subject Stock offered pursuant to, or shall reject in writing, the Offer
(the Company being required to notify in writing the transferring Shareholder
and each of the Offered Shareholders of its rejection or failure to accept in
the event of the same), then, upon the earlier of the expiration of the Company
Acceptance Period or the giving of such written notice of rejection or failure
to accept such offer by the Company, each Offered Shareholder shall have the
right and option, for a period of 30 days thereafter (the "Shareholder
Acceptance Period"), to accept all or any part of the Subject Stock so offered
and not accepted by the Company (the "Refused Stock") at the cash purchase
price and on the terms stated in the Offer Notice; provided, however, that, if
the Offer contemplated an All or Nothing Sale, the Offered Shareholders, in the
aggregate, may accept, during the Shareholder Acceptance Period, all, but not
less than all, of the Refused Stock, at the cash purchase price and on the
terms stated in the Offer Notice. Such acceptance shall be made by delivering
a written notice to the Company and the
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transferring Shareholder within the Shareholder Acceptance Period specifying
the maximum number of shares such Offered Shareholder will purchase (the "First
Offer Shares"). If, upon the expiration of the Shareholder Acceptance Period,
the aggregate amount of First Offer Shares exceeds the amount of Refused Stock,
the Refused Stock shall be allocated among the Offered Shareholders as follows:
(i) first, each Offered Shareholder shall be entitled to purchase no more than
its First Offer Percentage of Refused Stock; (ii) second, if any shares of
Refused Stock have not been allocated for purchase pursuant to (i) above (the
"Remaining Shares"), each Offered Shareholder (an "Oversubscribed Shareholder")
which had offered to purchase a number of shares of Refused Stock in excess of
the amount of stock allocated for purchase to it in accordance with previous
allocations of such shares of Refused Stock, shall be entitled to purchase an
amount of Remaining Shares equal to no more than its First Offer Percentage
(treating only Oversubscribed Shareholders as Offered Shareholders for these
purposes) of the Remaining Shares; and (iii) third, the process set forth in
(ii) above shall be repeated with respect to any shares of Refused Stock not
allocated for purchase until all shares of Refused Stock are allocated for
purchase.
(c) If effective acceptance shall not be received
pursuant to Sections 5(a) and/or 5(b) above with respect to all of the Subject
Stock offered for sale pursuant to the Offer Notice, then the transferring
Shareholder may Transfer all or any portion of the Stock so offered for sale
and not so accepted (or, in the case of an All or Nothing Sale, all, but not
less than all, of the Subject Stock offered for sale pursuant to the Offer
Notice), at a cash price not less than the price, and on terms not more
favorable to the purchaser thereof than the terms, stated in the Offer Notice
at any time within 90 days after the expiration of the Shareholder Acceptance
Period (the "Sale Period"). In the event that all of the Stock is not sold by
the transferring Shareholder during the Sale
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Period, the right of the transferring Shareholder to Transfer such Stock shall
expire and the obligations of this Section 5 shall be reinstated.
(d) All Transfers of Subject Stock to the Company
and/or the Offered Shareholders pursuant to this Section 5 shall be made free
and clear of all liens and shall be consummated contemporaneously at the
offices of the Company on the later of (i) a mutually satisfactory business day
within 30 days after the expiration of the later of the Company Acceptance
Period or the Shareholder Acceptance Period, as applicable, and (ii) the fifth
business day following the expiration or termination of all waiting periods
under the HSR Act applicable to such Transfers, or at such other time and/or
place as the parties may agree. The delivery of certificates or other
instruments evidencing such Subject Stock duly endorsed for transfer shall be
made on such date against payment of the purchase price for such Subject Stock.
(e) The requirements of this Section 5 shall not
apply to (i) any Transfer of Stock by a Shareholder to an Affiliate of such
Shareholder, (ii) any Transfer of Stock pursuant to Section 7, 9 or 10 of this
Agreement or (iii) any Transfer pursuant to a Public Sale.
Section 6. Tag-Along Rights.
6.1. Tag-Along. No Shareholder shall Transfer any Stock
owned by such Shareholder without complying with the terms and conditions set
forth in this Section 6 (after having complied with the provisions of Section
5 with the result that no Subject Stock was purchased by the Company or any
Offered Shareholder).
6.2. Tag-Along Obligations. Any Shareholder (the "Tag-
Along Initiator") desiring to Transfer any shares of Stock in one transaction
or a series of related transactions which in the aggregate represent at least
5% of the then outstanding Common Stock shall, after expiration of all
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required notice periods under Section 5, give not less than 20 days' prior
written notice of such intended Transfer to each other Shareholder ("Tag-Along
Offeree") and to the Company. Such notice (the "Tag-Along Notice") shall set
forth the terms and conditions of such proposed Transfer, including the name of
the proposed transferee, the number of shares proposed to be transferred by the
Tag-Along Initiator (the "Tag-Along Shares"), the purchase price per share
proposed to be paid therefor and the payment terms and type of transfer to be
effectuated. Within 10 days after delivery of the Tag-Along Notice by the Tag-
Along Initiator to each Tag-Along Offeree and to the Company, each Tag-Along
Offeree shall, by written notice to the Tag-Along Initiator and the Company,
have the opportunity and right to sell to the transferee in such proposed
Transfer (upon the same terms and conditions as the Tag-Along Initiator) up to
that number of shares of such Stock owned by the Tag-Along Offeree as shall
equal the product of (x) a fraction, the numerator of which is the number of
shares of such Stock owned by the Tag-Along Offeree as of the date of the
proposed Transfer and the denominator of which is the aggregate number of
shares of such Stock owned as of the date of the Tag-Along Notice by each Tag-
Along Initiator and by all other Tag-Along Offerees, times (y) the number of
Tag-Along Shares. The amount of Tag-Along Shares to be sold by any Tag-Along
Initiator shall be reduced to the extent necessary to provide for such sales of
shares by Tag-Along Offerees. No Person may Transfer shares in any transaction
that is subject to this Section 6 unless the transferee agrees to be bound by
and complies with the terms of this Agreement.
6.3. Closing. At the closing of any proposed Transfer in
respect of which a Tag-Along Notice has been delivered, the Tag-Along Initiator
together with all Tag-Along Offerees electing to sell shares, shall deliver,
free and clear of all liens, to the proposed transferee certificates evidencing
the shares to be sold thereto duly endorsed with transfer powers and shall
receive in
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exchange therefore the consideration to be paid or delivered by the proposed
transferee in respect of such shares as described in the Tag-Along Notice.
6.4. Limitations. The provisions of this Section 6 shall
not apply to (x) any Public Sale, (y) any Transfer by a Shareholder to
Affiliates of such Shareholder, or (z) any Transfers pursuant to Section 5, 7,
9 or 10 of this Agreement.
Section 7. Drag-Along Rights.
7.1. Drag-Along. If Beacon (the "Drag-Along Initiator")
determines to Transfer or exchange (in a business combination or otherwise) in
one or a series of bona fide arms-length transactions to an unrelated and
unaffiliated third party all of the shares of Stock held by the Drag-Along
Initiator at a price of at least $200 per share of Common Stock, then, upon 30
days written notice from the Drag-Along Initiator to the other Shareholders,
which notice shall include reasonable details of the proposed transaction,
including the proposed time and place of closing and the consideration to be
received by the Shareholders, each other Shareholder shall be obligated to, and
shall, sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such third party, all of his shares of Stock in the same
transaction at the closing thereof (and will deliver certificates for all of
his shares at the closing, free and clear of all liens, claims, or
encumbrances), and each Shareholder shall receive the same consideration per
share upon such transaction as is received by the Drag-Along Initiator.
7.2. Limitations. The provisions of this Section 7 shall
not apply to (x) any Public Sale, (y) any Transfer by a Shareholder to an
Affiliate of such Shareholder or (z) any Transfer or exchange consummated prior
to the third anniversary of the date hereof.
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Section 8. Pre-emptive Rights. At any time before the
completion of a Qualified IPO, and excluding any Issuance (as defined below) in
a Qualified IPO or in connection with a merger or other business combination of
the Company approved by the Board, the Company shall not issue, sell or
exchange, or agree to issue, sell or exchange (collectively, "Issue," and any
issuance, sale or exchange resulting therefrom, an "Issuance") any shares of
Stock (other than Excluded Securities), except as authorized by the Board and
in accordance with the following procedures:
(a) The Company shall deliver to each Shareholder
that at the time owns more than 5% of the Common Stock (each, a "Major
Shareholder") a written notice (a "Pre-emptive Notice"), which shall (i) state
the Company's intention to Issue Stock to one or more Persons, the amount and
type of Stock to be Issued (the "Issuance Stock"), the purchase price therefor
and a summary of the other material terms of the proposed Issuance and (ii)
offer each of the Major Shareholders the option to acquire all or any part of
the Issuance Stock (the "Pre-emptive Offer"). The Pre-emptive Offer shall
remain open and irrevocable for the periods set forth below (and, to the extent
the Pre-emptive Offer is accepted during such periods, until the consummation
of the Issuance contemplated by the Pre-emptive Offer). Each Major Shareholder
shall have the right and option, for a period of 30 days after delivery of the
Pre-emptive Notice (the "Pre-emptive Acceptance Period"), to accept all or any
part of the Issuance Stock at the purchase price and on the terms stated in the
Pre-emptive Notice. Such acceptance shall be made by delivering a written
notice to the Company by each Major Shareholder within the Pre-emptive
Acceptance Period specifying the maximum number of shares of the Issuance Stock
such Major Shareholder will purchase (the "Accepted Shares"). If, upon the
expiration of the Pre-emptive Acceptance Period, the aggregate amount of
Accepted Shares exceeds the amount of Issuance Stock, the amount of Issuance
Stock,
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shall be allocated among the Major Shareholders as follows: (i) first, each
Major Shareholder shall be entitled to purchase no more than its Pre-emptive
Percentage of Issuance Stock; (ii) second, if any shares of Issuance Stock have
not been allocated for purchase pursuant to (i) above (the "Remaining Pre-
emptive Shares"), each Major Shareholder (an "Oversubscribed Pre-emptive
Shareholder") which had offered to purchase a number of shares of Issuance
Stock in excess of the amount of stock allocated for purchase to it in
accordance with previous allocations of such shares of Issuance Stock, shall be
entitled to purchase an amount of Remaining Pre-emptive Shares equal to no more
than its Pre-emptive Percentage (treating only Oversubscribed Pre-emptive
Shareholders as Major Shareholders for these purposes) of the Remaining Pre-
emptive Shares; and (iii) third, the process set forth in (ii) above shall be
repeated with respect to any shares of Issuance Stock not allocated for
purchase until all shares of Issuance Stock are allocated for purchase.
(b) If effective acceptance shall not be received
pursuant to Section 8(a) above with respect to all of the Issuance Stock
offered for sale pursuant to the Pre-emptive Notice, then the Company may Issue
all or any portion of such Stock so offered for sale and not so accepted, at a
price not less than the price, and on terms not more favorable to the purchaser
thereof than the terms, stated in the Pre-emptive Notice at any time within 90
days after the expiration of the Pre-emptive Acceptance Period (the "Issuance
Period"). In the event that all of the Issuance Stock is not Issued by the
Company during the Issuance Period, the right of the Company to Issue such
unsold Issuance Stock shall expire and the obligations of this Section 8 shall
be reinstated.
(c) All Sales of Issuance Stock to the Major
Shareholders subject to any Pre-emptive Notice shall be consummated
contemporaneously at the offices of the Company on the later of (i) a mutually
satisfactory business day within 30 days after the expiration of the Pre-
emptive
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Acceptance Period or (ii) the fifth business day following the expiration or
termination of all waiting periods under the HSR Act, applicable to such
Issuance, or at such other time and/or place as the Company and the Major
Shareholders may agree. The delivery of certificates or other instruments
evidencing such Issuance Stock shall be made by the Company on such date
against payment of the purchase price for such Issuance Stock.
Section 9. Pledge of Shares. A Shareholder shall have
the right to pledge any Stock owned or held by such Shareholder to the Company,
a commercial bank, savings and loan association or other lending or financial
institution as security for any indebtedness of such Shareholder; provided,
however, that no such pledge shall be made unless (i) the Person to which such
pledge is made shall have executed an appropriate document in which such Person
agrees that, in the event of realization upon such Stock, such Stock shall
continue to be subject to the terms and conditions of this Agreement and that
such Person will not effect any Transfer of such Stock except in compliance
with the provisions hereof, and (ii) such document shall have been promptly
delivered to, and shall have been approved by, the Company and Beacon prior to
the pledge of such Stock. Neither the Company nor Beacon shall unreasonably
withhold or delay its approval of any such document.
Section 10. Transfer to Specified Persons. A Shareholder
shall have the right to effect a Transfer of any Stock owned or held by such
Shareholder to:
(a) any spouse, child (natural or adopted),
spouse of any such child, grandchild, sister, brother or parent of such
Shareholder;
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(b) any trust in which there are and continue to
be during the term of this Agreement no beneficiaries other than such
Shareholder and one or more Persons specified in clause (a) above;
(c) if such Shareholder is a corporation or
partnership, any Person who is a beneficial owner of an equity interest in such
corporation or partnership as of the date hereof, provided that such
Shareholder may only transfer to such Persons the number of shares of Stock
owned or held by such Shareholder which constitutes the same percentage of the
total number of shares of Stock held by such Shareholder as the percentage of
the total equity interests in such corporation or partnership held by such
Person;
(d) in the case of LKCM Theater Partners, and
notwithstanding anything to the contrary in this Section 10, any Person who is
an employee of such partnership at the time of Transfer and who receives such
Stock as compensation for services rendered to the partnership; and
(e) in the case of Stratford, and notwithstanding
anything to the contrary in this Section 10, any of the following:
(i) any Person who is a beneficial owner
of an equity interest in Stratford as of the date of the proposed Transfer;
(ii) any Person (A) owned or Controlled
by Stratford, (B) which Controls Stratford, (C) which is under common Control
with Stratford, or (D) who is a beneficial owner of an equity interest in
Stratford, or in any Person which Controls Stratford or which is under common
Control with Stratford; and
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(iii) any other Person which is an
"accredited investor" as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act, provided, however, that Stratford may not Transfer
more than 10,000 shares of preferred stock pursuant to this clause (iii).
Section 11. Transfer Upon Death of a Shareholder.
(a) In the event of the death of a Shareholder (a
"Deceased Shareholder"), the personal representative of the estate of the
Deceased Shareholder shall, within 30 days after qualification, submit an Offer
Notice to the Company and the Offered Shareholders. The Offer Notice shall be
given concurrently to the Company and the Offered Shareholders and shall state
that the personal representative offers to sell the shares of Stock in the
Company ("Offered Stock"). The Offer Notice shall also specify (i) the date of
death of the Deceased Shareholder, (ii) the number of shares of Offered Stock,
(iii) the Transferee or Transferees, if such Transferee or Transferees can then
be determined with certainty, to whom the shares of Offered Stock would be
distributed by will or by the laws of descent should the Company and the
Offered Shareholders fail to purchase any such Stock (provided, however, that
if such Transferee or Transferees cannot then be determined with certainty,
there shall be provided a list of potential Transferees to whom the Offered
Stock may be so distributed), (iv) if the personal representative proposes to
effect a Transfer of the Offered Stock otherwise than by distribution to the
Transferee or Transferees named in the Offer Notice pursuant to the preceding
clause (iii), the Offering Price, the name and address of the proposed
Transferee or Transferees and the other terms of such proposed Transfer, if
any, and (v) the address of the personal representative that is to serve as its
location for notices and other communications hereunder. If the Deceased
Shareholder is survived by a spouse (a "Surviving Spouse") with a community
property or other interest in any shares of Offered Stock, the personal
representative shall also include in the
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Offer Notice a statement specifying the proposed ratio in which the Purchase
Price to be paid by the Company or the Purchasing Shareholders for the shares
of Offered Stock should be divided between the estate of the Deceased
Shareholder and the Surviving Spouse. A copy of the Offer Notice shall be sent
by the personal representative to the Surviving Spouse and, unless the
Surviving Spouse objects to the ratio for division of the Purchase Price
specified therein within 30 days after receipt thereof, the Company shall be
entitled to rely upon such ratio in dividing the Purchase Price for the shares
of Offered Stock between the estate of the Deceased Shareholder and the
Surviving Spouse. If the Surviving Spouse gives timely written notice of an
objection to the ratio specified in the Offer Notice, and if the dispute has
not been resolved as of the date set for the Closing, each of the Company and
the Purchasing Shareholders shall be entitled to hold its portion of the
Purchase Price in escrow until the dispute is resolved, and in such event, each
of the Company and the Purchasing Shareholders may continue to hold the
Purchase Price in escrow until (a) the rights of the estate of the Deceased
Shareholder and the Surviving Spouse shall have been fully and finally
adjudicated by a court of competent jurisdiction or (b) the dispute shall have
been resolved by agreement between the personal representative and the
Surviving Spouse, and the Company and the Purchasing Shareholders shall have
been notified thereof in a writing signed by the personal representative and
the Surviving Spouse.
(b) Within 30 days after receipt of the Offer
Notice, the Company shall give a Response Notice to the personal representative
of the Deceased Shareholder and the Offered Shareholders stating whether it
elects to purchase the shares of Offered Stock. If the Company does not elect
to purchase all of the shares of Offered Stock, each of the Offered
Shareholders shall, within 15 days after receipt of the Response Notice of the
Company, give a Response Notice to the
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personal representative, the Company and the other Offered Shareholders stating
whether such Offered Shareholder elects to purchase any of the shares of
Offered Stock not to be purchased by the Company. If there is more than one
Purchasing Shareholder, the Offered Stock to be purchased by such Purchasing
Shareholder shall be allocated among the Purchasing Shareholders in such
proportions as they may mutually agree, or in the absence of such agreement,
pro rata according to the relative holdings of shares of Stock of the
Purchasing Shareholders on the applicable Determination Date.
(c) If no ratio for the division of the Purchase
Price between the estate of the Deceased Shareholder and the Surviving Spouse
is specified in the Offer Notice, at the Closing each of the Company and the
Purchasing Shareholders shall pay the entire Purchase Price to the personal
representative of the Deceased Shareholder.
(d) During the time the personal representative
of any Deceased Shareholder is holding any shares of Offered Stock, he shall be
subject to the restrictions on the Transfer of Stock contained in this
Agreement. If all of the shares of Offered Stock are not purchased by the
Company or the Offered Shareholders, or any of them, the personal
representative may effect a Transfer to the Transferee or Transferees named in
the Offer Notice of the balance of the shares of Offered Stock not purchased by
the Company or the Offered Shareholders, but only in strict compliance with the
terms therein stated.
Section 12. Transfer Upon Death of the Spouse of a
Shareholder.
(a) If the marital relationship of a Shareholder
(a "Surviving Shareholder") is terminated by the death of his spouse (a
"Deceased Spouse") and if the Deceased Spouse had any interest in the Stock
owned or held by the Surviving Shareholder at the time of the death of the
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Deceased Spouse which has not passed to the Surviving Shareholder free of any
trust, then the personal representative of the estate of the Deceased Spouse
shall, within 30 days after qualification, submit an Offer Notice to the
Surviving Shareholder, the Company and Offered Shareholders. The Offer Notice
shall be given concurrently to the Surviving Shareholder, the Company and the
Offered Shareholders and shall state that the personal representative offers to
sell the shares of Offered Stock. The Offer Notice shall also specify (i) the
date of death of the Deceased Spouse, (ii) the number of shares of Offered
Stock, (iii) the Transferee or Transferees, if such Transferee or Transferees
can then be determined with certainty, to whom the shares of Offered Stock
would be distributed by will or by the laws of descent should the Surviving
Shareholder, the Company and the Offered Shareholders fail to purchase such
Stock (provided, however, that if such Transferee or Transferees cannot then be
determined with certainty, there shall be provided a list of potential
Transferees to whom such shares of Offered Stock may be distributed), (iv) if
the personal representative proposes to effect a Transfer of any shares of
Offered Stock otherwise than by distribution to the Transferee or Transferees
named pursuant to the preceding clause (iii), the Offering Price, the name and
address of the proposed Transferee or Transferees and the other terms of such
proposed Transfer, if any, and (v) the address of the personal representative
that is to serve as its location for notices and other communications
hereunder. Unless the Surviving Shareholder notifies the Company and the
Purchasing Shareholders that he objects to the specification of the number of
shares of Offered Stock in the Offer Notice within 30 days after receipt
thereof, the Company and the Purchasing Shareholders shall be entitled to rely
upon such specification in determining the Purchase Price for the shares of
Offered Stock to be paid to the personal representative. If the Surviving
Shareholder gives timely written notice of an objection to such specification
of the shares of Offered Stock, and
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if the dispute has not been resolved as of the date set for the Closing, each
of the Company and the Purchasing Shareholders shall be entitled to hold its
portion of the Purchase Price in escrow until the dispute is resolved, and in
such event, each of the Company and the Purchasing Shareholders may continue to
hold its portion of the Purchase Price in escrow until (a) the rights of the
estate of the Deceased Spouse and the Surviving Shareholder shall have been
fully and finally adjudicated by a court of competent jurisdiction or (b) the
dispute shall have been resolved by agreement between such personal
representative and the Surviving Shareholder, and the Company and the
Purchasing Shareholders shall have been notified thereof in a writing signed by
such personal representative and the Surviving Shareholder.
(b) Within 30 days after receipt of the Offer
Notice, the Surviving Shareholder shall give a Response Notice to the personal
representative, the Company and the Offered Shareholders stating whether he
elects to purchase the shares of Offered Stock. If the Surviving Shareholder
does not elect to purchase all of the shares of Offered Stock, the Company
shall, within 15 days after receipt of the Response Notice of the Surviving
Shareholder, give a Response Notice to such personal representative and the
Offered Shareholders stating whether it elects to purchase the shares of
Offered Stock not to be purchased by the Surviving Shareholder. If the
Surviving Shareholder and the Company, or either of them, do not elect to
purchase all of the shares of Offered Stock, each of the Offered Shareholders
shall, within 15 days after the giving of the Response Notice of the Company,
give a Response Notice to such personal representative, the Company and the
other Offered Shareholders stating whether such Offered Shareholder elects to
purchase any of the shares of Offered Stock not to be purchased by the
Surviving Shareholder or the Company. If there is more than one Purchasing
Shareholder, the shares of Offered Stock to be
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purchased by such Purchasing Shareholders shall be allocated among the
Purchasing Shareholders in such proportions as they may mutually agree, or in
the absence of such agreement, pro rata according to the relative holdings of
shares of Stock of the Purchasing Shareholders on the applicable Determination
Date.
(c) During the time the personal representative
of the Deceased Spouse is holding any shares of Offered Stock, the personal
representative shall be subject to the restrictions on the Transfer of such
Stock contained in this Agreement. If all of the shares of Offered Stock are
not purchased by the Surviving Shareholder, the Company and the Offered
Shareholders, or any of them, the personal representative may effect a Transfer
to the Transferee or Transferees named in the Offer Notice of the balance of
the shares of Offered Stock not purchased by the Surviving Shareholder, the
Company or the Offered Shareholders, but only in strict compliance with the
terms therein stated. If any transfer of shares of Offered Stock described in
clause (iv) of Section 12(a) hereof that is to be effected pursuant to the
immediately preceding sentence has not been completed within 30 days following
the expiration of the time provided in Section 12(b) for the election by the
Offered Shareholders to purchase the same, the personal representative shall be
required to submit another Offer Notice in order to effect a Transfer of such
Offered Stock pursuant to this Section 12.
Section 13. Transfer Upon Divorce of a Shareholder.
(a) If the marital relationship of a Shareholder
( a "Divorced Shareholder") is terminated by divorce and if the Divorced
Shareholder does not succeed directly to the interest, if any, of his former
spouse (the "Divorced Spouse") in any Stock owned or held by the Divorced
Shareholder at the time of the divorce, then the divorce decree shall specify
the Stock owned by the Divorced Spouse and shall require compliance with this
Section 13 prior to any Transfer of such
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Stock, including a Transfer thereof into the name of the Divorced Spouse. The
Divorced Spouse shall, within 30 days after the divorce becomes final, submit
an Offer Notice to the Divorced Shareholder, the Company and the Offered
Shareholders. The Offer Notice shall be given concurrently to the Divorced
Shareholder, the Company and the Offered Shareholders and shall state that the
Divorced Spouse offers to sell the Offered Stock. The Offer Notice shall also
specify (i) the date the divorce became final, (ii) the number of shares of
Offered Stock, (iii) whether the Divorced Spouse proposes to effect a Transfer
of Offered Stock not purchased by the Divorced Shareholder, the Company or the
Offered Shareholders, and if so the Offering Price, the name and address of the
prospective Transferee or Transferees and the other terms of such proposed
Transfer, if any, and (iv) the address of the Divorced Spouse that is to be its
location for notices and other communications hereunder.
(b) Within 30 days after receipt of the Offer
Notice, the Divorced Shareholder shall give a Response Notice to the Divorced
Spouse, the Company and the Offered Shareholders stating whether such Divorced
Shareholder elects to purchase the shares of Offered Stock. If the Divorced
Shareholder does not elect to purchase all of the shares of Offered Stock, the
Company shall, within 15 days after receipt of the Response Notice of the
Divorced Shareholder, give a Response Notice to the Divorced Spouse and the
Offered Shareholders stating whether it elects to purchase any of the shares of
Offered Stock not to be purchased by the Divorced Shareholder. If all of the
Offered Stock is not purchased by the Divorced Shareholder and the Company, or
either of them, each of the Offered Shareholders shall, within 15 days after
the giving of the Response Notice of the Company, give a Response Notice to the
Divorced Spouse, the Company and the other Offered Shareholders as to whether
such Offered Shareholder elects to
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purchase any of the shares of Offered Stock not to be purchased by the Divorced
Shareholder or the Company. If there is more than one Purchasing Shareholder,
the shares of Offered Stock to be purchased by such Purchasing Shareholders
shall be allocated among the Purchasing Shareholders in such proportions as
they may mutually agree, or in the absence of such agreement, pro rata
according to the relative holdings of shares of Stock of the Purchasing
Shareholders on the applicable Determination Date.
(c) If all of the Offered Stock is not purchased
by the Divorced Shareholder, the Company and the Offered Shareholders, or any
of them, (i) the Divorced Spouse may, within 30 days following the expiration
of the time provided in Section 13(b) hereof for election by the Offered
Shareholders to purchase the same, effect a Transfer to the Transferee or
Transferees named in the Offer Notice of the balance of the shares of Offered
Stock not purchased by the Divorced Shareholder, the Company or the Offered
Shareholders, but only in strict compliance with the terms therein stated, and
(ii) the shares of Offered Stock that are not purchased by the Divorced
Shareholder, the Company or the Offered Shareholders or as to which the
Divorced Spouse fails to complete a Transfer pursuant to the preceding clause
(i) shall be transferred into the name of the Divorced Spouse and shall
continue to be subject to the provisions of this Agreement.
(d) If a Transfer of Stock is ever made to a
Person whose spouse is already a Shareholder, so that following such Transfer
both husband and wife will be Shareholders, then unless otherwise expressly
agreed in a written instrument executed by both husband and wife and delivered
to the Company, in the event of the divorce of such Persons, the Person who
acquired Stock as of the earliest date shall be the Divorced Shareholder and
the spouse who acquired Stock thereafter shall be the Divorced Spouse for
purposes of this Section 13.
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Section 14. Involuntary Transfer. Any Transfer of Stock
in connection with any bankruptcy, insolvency or similar proceedings involving
a Shareholder or a spouse of a Shareholder or pursuant to any judicial order,
legal process, execution or attachment and any other involuntary Transfer not
otherwise expressly provided for in this Agreement shall be subject to the
restrictions set forth in this Agreement.
Section 15. Purchase Price. The purchase price per share
of Stock (the "Purchase Price") to be paid by the Company, a Purchasing
Shareholder or any other Person for the purchase of Stock pursuant to an Offer
Notice shall be as follows:
(a) for purposes of Section 14 hereof, the
Purchase Price shall be the Book Value of the shares of Common Stock and the
Stated Value of the shares of Preferred Stock;
(b) for purposes of Sections 11 and 12 hereof,
the Purchase Price shall be the lesser of (i) the Formula Value of the shares
of Common Stock, (ii) the Stated Value of the shares of Preferred Stock or
(iii) the Offering Price, if any, specified in the Offer Notice; and
(c) for purposes of Section 13 hereof, the
Purchase Price shall be the lesser of (i) the Book Value of the shares of
Common Stock, (ii) the Stated Value of the shares of Preferred Stock, (iii) the
Offering Price, if any, specified in the Offer Notice or (iv) the value per
share of Stock, if any, specified in the divorce decree.
Section 16. Closing. The closing (the "Closing") of the
purchase and sale of any shares of Offered Stock shall be held on such date and
at such time as is specified in the Response Notice given by the Person or
Persons electing to purchase the same (each, a "Purchaser"); provided, however,
that (i) the date so specified shall be not less than 45 nor more than 60 days
after the date of such Response Notice and (ii) if there is more than one
Purchaser, the Closing shall be held on
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the date specified in the earliest affirmative Response Notice. The Closing
shall take place at the principal office of the Company or at such other
location as may be mutually agreed upon by the Purchasers and the Person or
Persons from which the shares of Offered Stock are to be purchased. At the
Closing, each seller of Offered Stock shall deliver a certificate or
certificates representing the shares of Offered Stock to be sold by such seller
to the Purchasers, duly endorsed in blank or accompanied by stock powers duly
executed in blank or otherwise in form acceptable for transfer on the books of
the Company, and the Purchasers shall pay to each seller of Offered Stock an
amount in cash equal to the Purchase Price for such Stock. Each seller of
Offered Stock shall cooperate in good faith with the Purchasers in connection
with the Closing. In addition, at the Closing, the personal representative of
the estate of a Deceased Shareholder or of a Deceased Spouse, if any, shall
deliver to the Purchasers (i) copies of the letters testamentary or letters of
administration evidencing his appointment and qualification, (ii) a certificate
issued by the Internal Revenue Service pursuant to Section 6325 of the Internal
Revenue Code discharging the Stock to be sold from liens imposed by the
Internal Revenue Code, and (iii) an estate tax waiver issued by the state of
domicile of the Deceased Shareholder or Deceased Spouse.
Section 17. Holdback Agreement; Adjustments.
(a) Each Shareholder agrees that, (i) to the
extent requested in writing by a managing underwriter of an IPO or any
underwritten public offering effected pursuant to a demand registration request
under the Registration Agreement, it will not Transfer any Stock or any other
equity security of the Company or any security convertible into or exchangeable
or exercisable for any equity security of the Company (other than as part of
such underwritten public offering) during the time period reasonably requested
by the managing underwriter, not to exceed 180 days, and (ii)
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to the extent requested in writing by a managing underwriter of any
underwritten public offering effected by the Company for its own account within
three years after an IPO, it will not Transfer after such offering any of the
Stock or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering) during the time
period reasonably requested by the managing underwriter, which period shall (x)
not exceed 180 days, in the event that it participates in such public offering
pursuant to "piggyback" registration rights granted under the Registration
Agreement, and (y) not exceed 90 days, in the event that it does not so
participate in such public offering.
(b) The Company agrees that it will take all
reasonable steps necessary to effect a subdivision of shares if, with respect
to any demand registration request under the Registration Agreement, in the
reasonable judgment of the managing underwriter for the offering in respect of
such demand registration, such subdivision would enhance the marketability of
the securities proposed to be registered thereunder. Each Shareholder agrees
to vote all of its shares of capital stock in a manner, and to take all other
actions necessary, to permit the Company to carry out the intent of the
preceding sentence including, without limitation, voting in favor of an
amendment to the Certificate in order to increase the number of authorized
shares of capital stock of the Company.
Section 18. Certain Covenants.
18.1. Financial Statements and Other Information.
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(a) From the date hereof until completion of an
IPO, the Company shall deliver to each Shareholder (so long as such Shareholder
holds at least 1% of the Common Stock) and to each other subsequent holder of
at least 1% of the Common Stock:
(i) within 45 days after the end of each
of the first three quarterly accounting periods in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company for such fiscal quarter, and unaudited consolidating and consolidated
balance sheets of the Company as of the end of such fiscal quarter, setting
forth in each case comparisons to the same quarter of the preceding fiscal
year, all prepared in accordance with GAAP, consistently applied, subject to
the absence of footnote disclosures and to normal year-end adjustments;
(ii) within 90 days after the end of each
fiscal year, audited consolidating and consolidated statements of income and
cash flows of the Company for such fiscal year, and consolidating and
consolidated balance sheets of the Company as of the end of such fiscal year,
setting forth in each case comparisons to the preceding fiscal year, all
prepared in accordance with GAAP, consistently applied, and accompanied by,
with respect to the consolidated portions of such statements, an opinion of a
"Big Six" independent accounting firm that is unqualified with respect to the
scope of such firm's examination and the Company's status as a going concern;
(iii) promptly (but in any event within
five business days) after the discovery or receipt of notice of any default
under any material agreement to which the Company and/or any of its
Subsidiaries is a party, which default could have a material adverse effect on
the Company or any Subsidiary, an Officer's Certificate specifying the nature
and period of existence thereof and what actions the Company has taken and
proposes to take with respect thereto;
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(iv) promptly (but in any event within
three business days) after transmission thereof, copies of all financial
statements, proxy statements, reports and any other general written
communications which the Company sends to its shareholders generally; and
(v) with reasonable promptness, such
other information and financial data concerning the Company as any Person
entitled to receive information under this Section 18.1 may reasonably request.
(b) Each of the financial statements referred to
in this Section 18.1 shall be true and correct in all material respects, and
shall fairly and accurately reflect the financial condition and operating
results of the Company as of the dates and for the periods stated therein,
subject in the case of the unaudited financial statements to changes resulting
from normal year-end adjustments (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets or operations of the Company and its Subsidiaries taken as a whole).
18.2. Reservation of Common Stock. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of issuance upon the conversion of the
Series A Preferred and Series B Preferred, such number of shares of Common
Stock issuable upon the conversion of all outstanding shares of Series A
Preferred and Series B Preferred. All shares of Common Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Company shall
take all such actions as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common
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Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
18.3. Public Disclosures. Unless approved by the Board,
the Company shall not, nor shall it permit any of its Subsidiaries to, disclose
any Shareholder's name or identity as an investor in the Company or any
material information related to this Agreement in any press release or other
public announcement or in any document or material filed with any governmental
entity, without the prior written consent of such Shareholder, unless such
disclosure is required by applicable law or governmental regulations or by
order of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to such Shareholder describing
in reasonable detail the proposed content of such disclosure and shall permit
such Shareholder to review and comment upon the form and substance of such
disclosure.
18.4. Certain Events. In the event (i) the Purchase
Agreement terminates without the Subsequent Purchase (as defined therein)
having been consummated and (ii) the Company purchases from Beacon all shares
of Series A Preferred owned by Beacon, then immediately following such
purchase, the terms of this Agreement shall automatically and without any
further required action of the Shareholders be amended and restated in its
entirety to reflect the terms of the Prior Shareholders' Agreement.
Section 19. Conflicting Agreements. Each Shareholder
represents and warrants that such Shareholder has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with any provision of this Agreement, and no holder of Stock shall
grant any proxy or become party to any voting trust or other agreement which is
inconsistent with or conflicts with any provision of this Agreement.
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Section 20. Legend.
(a) Each Shareholder and the Company shall take
all such action necessary (including exchanging with the Company certificates
representing shares of Stock issued prior to the date hereof) to cause each
certificate representing outstanding shares of Stock to bear a legend
containing the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, EXCHANGED, TRANSFERRED OR
OTHERWISE DISPOSED OF (i) UNLESS (A) REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES AND "BLUE SKY" LAWS OR (B) AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND ANY SUCH LAWS IS AVAILABLE AND, IN SUCH CASE, AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO HOLLYWOOD
THEATER HOLDINGS, INC. (THE "COMPANY"), SHALL HAVE BEEN DELIVERED TO THE
COMPANY TO THE EFFECT THAT THE OFFER, SALE, TRANSFER, DISPOSITION, PLEDGE,
HYPOTHECATION OR EXCHANGE THEREOF IS EXEMPT FROM REGISTRATION UNDER THE ACT AND
ANY SUCH LAWS) OR (ii) UNLESS SOLD PURSUANT TO AND IN COMPLIANCE WITH RULE 144
OF THE ACT AND APPLICABLE SECURITIES OR "BLUE SKY" LAWS."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER AND TO THE VOTING AGREEMENTS SET
FORTH IN THE SHAREHOLDERS' AND VOTING AGREEMENT DATED AS OF OCTOBER 3, 1996 BY
THE COMPANY AND THE PARTIES THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE
OF THE COMPANY."
(b) The requirement that the above securities
legend be placed upon certificates evidencing shares of Stock shall cease and
terminate upon the earliest of the following events: (i) when such shares are
transferred in an underwritten public offering, (ii) when such shares are
transferred pursuant to Rule 144 under the Securities Act or (iii) when such
shares are transferred in any other transaction if the seller delivers to the
Company an opinion of its counsel, which counsel and opinion shall be
reasonably satisfactory to the Company to the effect that such legend is no
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longer necessary in order to protect the Company against a violation by it of
the Securities Act upon any sale or other disposition of such shares without
registration thereunder. The requirement that the above legend regarding this
Agreement be placed upon certificates evidencing shares of Stock shall cease
and terminate upon the sale of such shares of Stock pursuant to a Public Sale.
Upon the consummation of any event requiring the removal of a legend hereunder,
the Company, upon the surrender of certificates containing such legend, shall,
at its own expense, deliver to the holder of any such shares as to which the
requirement for such legend shall have terminated, one or more new certificates
evidencing such shares not bearing such legend.
Section 21 Representations and Warranties.
(a) Each party hereto represents and warrants to
the other parties hereto as follows:
(i) It has full power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) This Agreement has been duly and
validly authorized, executed and delivered by it, and constitutes a valid and
binding obligation of it, enforceable against it in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally.
(iii) The execution, delivery and
performance of this Agreement by it does not (x) violate, conflict with, or
constitute a breach of or default under its organizational documents, if any,
or any material agreement to which it is a party or by which it is bound or (y)
violate any law, regulation, order, writ, judgment, injunction or decree
applicable to it.
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(iv) No consent or approval of, or filing
with, any governmental or regulatory body is required to be obtained or made by
it in connection with the transactions contemplated hereby.
(v) It is not a party to any agreement
which is inconsistent with the rights of any party hereunder or otherwise
conflicts with the provisions hereof.
(b) Each Shareholder represents and warrants to
Beacon as follows:
(i) Schedule 13(b) hereto sets forth a
list of all securities of the Company (including, without limitation, shares of
capital stock, convertible securities, debentures, etc.) held of record or
beneficially owned by it immediately after the date hereof.
(ii) Except as set forth on Schedule
13(b) hereto and other than this Agreement, it is not a party to any contract
or agreement, written or oral, (i) with respect to the securities of the
Company (including, without limitation, any voting agreement, voting trust,
stockholder's agreement, registration rights agreement, etc.) or (ii) otherwise
with or relating to the Company.
(c) Beacon represents and warrants to the other
parties hereto that prior to the date hereof it was not a party to any contract
or agreement, written or oral, with respect to any securities of the Company.
Section 22. Put. At any time on or after April 29, 2001, and
provided that a Qualified IPO has not then occurred, any holder of Series A
Preferred or Series A Conversion Shares may, by written notice of such intent
to the Company (the "Put Notice"), require the Company to purchase all but not
less than all shares of Series A Preferred or Series A Conversion Shares then
held by such holder (any such holder exercising such right is referred to
herein as the "Put Holder") at the Put
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Price determined as of the date of the Put Notice. The Put Notice shall set
forth a date (which shall be not less than sixty 60 days, nor more than ninety
90 days after the date of the Put Notice and which shall be a Business Day)
(the "Put Closing Date") for the purchase and sale of the shares of Series A
Preferred or Series A Conversion Shares with respect to which such Put Holder
is exercising the Put (the "Put Shares"). On the Put Closing Date, the Put
Holder shall deliver the certificates evidencing the Put Shares by such Put
Holder to the Company duly endorsed, free and clear of all liens, claims and
encumbrances of any kind (other than any liens, claims and encumbrances arising
under this Agreement or under applicable federal and state securities laws),
and the Company shall pay to such Put Holder, in cash, an amount equal (i) the
Put Price multiplied by (ii) the number of Put Shares. The amount payable by
the Company to any Put Holder upon exercise of the Put shall be paid by
certified or cashier's check, by wire transfer or other immediately available
funds. The failure of any Put Holder to deliver the certificates evidencing
the Put Shares held by such Put Holder to the Company shall not limit or impair
the right of such Put Holder to receive the consideration to be paid to such
Put Holder upon exercise of the Put. However, the Company may withhold payment
of such consideration pending receipt from such Put Holder of such certificates
or of evidence that such certificates have been mutilated, lost, stolen or
destroyed and satisfactory indemnities with respect thereto. Pending delivery
of such certificate(s) (or other evidence and indemnities), the consideration
to be paid to such Put Holder shall be held in trust by the Company for such
Put Holder and shall be set aside in a separate account for the benefit of such
Put Holder, segregated from the other assets of the Company. If the Company is
unable to purchase all Put Shares on a Put Closing Date due to state law
restrictions or restrictions in the Company's Certificate or its agreements
relating to indebtedness for borrowed money, the Company shall
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purchase all Put Shares which it is then permitted to purchase without
violating such restrictions (on a pro rata basis from each Put Holder then
exercising the Put), and the Company shall purchase the remaining Put Shares as
soon thereafter as possible without violating such restrictions; provided, that
in the event the purchase of such remaining securities is postponed for more
than ninety (90) days following the original Put Closing Date, the Put
Holder(s) shall have the right to have the Put Price redetermined as of such
date and may elect to have the Put Price be the higher of the original Put
Price or the Put Price determined at such later date. Notwithstanding any
other provision of this Agreement, the provisions of this Section 22 shall,
with respect to all Shareholders other than Richard M. Durwood, automatically,
and without any further required action on the part of the Company or any
Shareholder, terminate and cease to be of any force or effect upon the
consummation of the Subsequent Purchase (as defined in the Purchase Agreement),
provided that the terms of this Section 22 as applicable to Mr. Durwood shall
apply to Common Stock owned by Mr. Durwood and shall, upon the consummation of
the Subsequent Purchase, be automatically, and without any further required
action on the part of the Company or any Shareholder, be modified to provide
(i) that the Put Price shall at all times equal the Market Value multiplied by
the number of shares of Common Stock into which the Put Shares are then
convertible and (ii) that the Put is exercisable any time on or after the fifth
anniversary of the Subsequent Closing (as defined in the Purchase Agreement)
(rather than on or after April 29, 2001).
Section 23. Duration of Agreement. The rights and
obligations of a Shareholder under this Agreement shall terminate at such time
as such Shareholder no longer is the beneficial owner of any shares of Stock.
This Agreement shall terminate upon the consummation of an IPO,
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except that the terms of Sections 3.1(b) to 3.12 (only to the extent binding on
the Company), 17, 18.2, 18.3, 25 and 32 shall survive until, by their
respective terms, they are no longer operative.
Section 24. Further Assurances. At any time or from time
to time after the date hereof, the parties agree to cooperate with each other,
and at the request of any other party, to execute and deliver any further
instruments or documents and to take all such further action as the other party
may reasonably request in order to evidence or effectuate the consummation of
the transactions contemplated hereby and to otherwise carry out the intent of
the parties hereunder.
Section 25. Amendment and Waiver. Except as otherwise
provided herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against the Company or any Shareholder unless such
modification, amendment or waiver is approved in writing by (i) the Company,
(ii) Shareholders holding at least 75% of the Common Stock (which may include
Beacon and/or Stratford), (iii) Beacon (as long as it holds at least 5% of the
outstanding Common Stock) and (iv) Stratford (as long as it holds at least 5%
of the outstanding Common Stock). The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its
terms.
Section 26. Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed
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and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
Section 27. Entire Agreement. Except as otherwise
expressly set forth herein, this document and the other documents dated the
date hereof embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts
any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof
in any way, including, without limitation, the Prior Shareholders' Agreement
which is amended and restated in its entirety hereby.
Section 28. Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and each Shareholder
and their respective successors, assigns, heirs and personal representatives,
so long as they hold Stock. Except pursuant to a Transfer of Stock in
compliance which Section 4, no Shareholder shall have the right to assign its
rights and obligations under this Agreement, without the consent of each of the
other Shareholders. As long as its Transfer is in compliance with Section 4,
Beacon may assign its rights under Section 3.1 to designate Beacon Directors as
follows: At such time as Beacon has the right to designate three Beacon
Directors, any transferee of 33-1/3% or more of Beacon's shares shall have the
right to designate one Beacon Director. At such time as Beacon has the right
to designate one or two Beacon Directors, any transferee of 50% or more of
Beacon's shares shall have the right to designate one Beacon Director.
Section 29. Counterparts. This Agreement may be executed
in separate counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
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Section 30. Remedies. Each Shareholder shall be entitled to
enforce its rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that each party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
Section 31. Notices. Any notice provided for in this
Agreement shall be in writing and shall be either personally delivered, or
mailed first class mail (postage prepaid) or sent by reputable overnight
courier service (charges prepaid) to the Company at the address set forth below
and to any other recipient at the address indicated on Schedule 31 hereto and
to any subsequent holder of Stock subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's
address is:
Hollywood Theater Holdings, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
Section 32. Governing Law; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without giving
56
<PAGE> 57
effect to the principles of conflicts of law. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America, in each case located in the County of New Castle, for any action,
proceeding or investigation in any court or before any governmental authority
("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement shall be effective service of process for
any Litigation brought against it in any such court. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of Delaware or the
United States of America, in each case located in the County of New Castle, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum. Each of the parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out
of or relating to this Agreement or the transactions contemplated hereby.
Section 33. Miscellaneous. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement. This Agreement is intended to be a voting agreement among
stockholders as permitted by Section 218(c) of the Delaware General Corporation
Law.
57
<PAGE> 58
Section 34. Construction. Where specific language is used to
clarify by example a general statement contained herein, such specific language
shall not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be
applied against any party.
IN WITNESS WHEREOF, the parties hereto have executed this
Shareholders' and Voting Agreement on the day and year first above written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------------------------
Name: Thomas W. Stephenson, Jr.
-----------------------------------------------------
Title: President
----------------------------------------------------
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: Focus Value Investors, L.L.C., its general partner
By: Focus Value GP, Inc., its managing member
By: /s/ Focus Value GP, Inc.
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates, L.P.
By: Stratford Capital Corporation
By: /s/ Stratford Capital Corporation
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
58
<PAGE> 59
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
59
<PAGE> 60
FIRST AMENDMENT
TO
SHAREHOLDERS' AND VOTING AGREEMENT
This First Amendment, dated as of November 1, 1996 (this
"First Amendment"), by and among HOLLYWOOD THEATER HOLDINGS, INC., a Delaware
Corporation (the "Company"), THE BEACON GROUP III - FOCUS VALUE FUND, L.P., a
Delaware Limited Partnership ("Beacon") and each of the other shareholders of
the Company executing one of the signature pages attached hereto or otherwise
subject to this First Amendment, amends that certain Shareholders and Voting
Agreement dated as of October 3, 1996 (the "Shareholders' Agreement") by and
among the Company, Beacon and each of the shareholders of the Company executing
one of the signature pages attached thereto or otherwise subject thereto.
Capitalized terms used herein but not defined herein have the meanings assigned
to such terms in the Shareholders' Agreement.
WHEREAS, the holders of in excess of 80% of the combined
voting power of the capital stock of the Company outstanding immediately prior
to the initial investment by Beacon in the Company executed the Shareholders'
Agreement to serve as an amendment and restatement of the Prior Shareholders'
Agreement and as a result thereof all shareholders signatory to the Prior
Shareholders' Agreement became subject to and bound by the Shareholders'
Agreement; and
WHEREAS, the (i) the Company, (ii) Shareholders holding at
least 75% of the Common Stock (including Beacon and Stratford), such percentage
being calculated as provided in the Shareholders Agreement, (iii) Beacon and
(iv) Stratford desire to amend the Shareholders' Agreement to clarify certain
ambiguities and in certain other respects, and as a result of such amendments
all shareholders subject the Shareholders' Agreement will continue to be
subject to the Shareholders' Agreement as amended by this First Amendment;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt of which is acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO PREAMBLE. The first paragraph of the
Shareholders' Agreement is hereby amended to include the following words to the
end thereof:
"or otherwise subject hereto"
2. AMENDMENT TO SECTION 2. Section 2 of the
Shareholders' Agreement is hereby amended and restated to read in its entirety
as follows:
"Section 2. Methodology for Calculations. For purposes
of this Agreement, the Transfer of a Common Stock Equivalent
shall be
<PAGE> 61
treated as the Transfer of the shares of Common Stock into
which such Common Stock Equivalent can be converted, exchanged
or exercised. Except as otherwise provided in this Agreement,
for purposes of calculating (i) the amount of outstanding
Common Stock as of any date, (ii) the amount of Common Stock
owned by a Person hereunder, and (iii) related percentages,
(x) between the date hereof and the Subsequent Closing all
shares of Series A Preferred outstanding as of the date hereof
(but no other Common Stock Equivalents) shall be treated as
having been converted, exchanged or exercised and (y) from and
after the Subsequent Closing, all shares of Series B Preferred
outstanding immediately after the Subsequent Closing (but no
other Common Stock Equivalents) shall be treated as having
been converted, exchanged or exercised."
3. AMENDMENT TO SECTION 22. Section 22 of the
Shareholders' Agreement is hereby amended by deleting the final sentence
thereof and replacing such sentence with the following:
"Notwithstanding any other provision of this Agreement, the
provisions of this Section 22 shall, with respect to all
Shareholders other than Richard M. Durwood and/or the Richard
M. Durwood Revocable Trust (collectively, "Durwood"),
automatically, and without any further required action on the
part of the Company or any Shareholder, terminate and cease to
be of any force or effect upon the consummation of the
Subsequent Purchase (as defined in the Purchase Agreement).
Upon consummation of the Subsequent Purchase, notwithstanding
the limitation in the first sentence of this Section 22 to the
holders Series A Preferred or Series A Conversion Shares, the
terms of this Section 22 shall become applicable to Durwood
as a holder of Common Stock automatically, and without any
further required action on the part of the Company or any
Shareholder, and shall apply to any and all shares of Common
Stock owned by Durwood; provided that as this Section 22
applies to Durwood, the terms of this Section 22 shall, upon
the consummation of the Subsequent Purchase, be automatically,
and without any further required action on the part of the
Company or any Shareholder, be modified to provide that (i) as
used in this Section 22, the term "Put Holder" shall mean
Durwood, (ii) as used in this Section 22, the term "Put
Shares" shall mean the shares of Common Stock owned by
Durwood, (iii) as used in this Section 22, the term "Put
Price" shall mean a price equal to the Market Value multiplied
by the number of shares of Common Stock constituting the Put
Shares and (iv) the Put
2
<PAGE> 62
Notice may not be delivered by Durwood prior to October
31, 2001 (rather than April 29, 2001)."
4. AMENDMENT TO SECTION 23. Section 23 of the
Shareholders' Agreement is hereby amended by deleting the parenthetical phrase
"(only to the extent binding on the Company)" from the final sentence thereof.
5. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
6. COUNTERPARTS. This First Amendment may be executed
in separate counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Shareholders' and Voting Agreement on the day and year first above
written.
[SIGNATURE PAGES FOLLOW]
3
<PAGE> 63
HOLLYWOOD THEATER HOLDINGS, INC.
/s/ Thomas W. Stephenson, Jr.
--------------------------------------------------
By: Thomas W. Stephenson, Jr.
President
THE BEACON GROUP III - FOCUS
VALUE FUND, L.P.
By: Focus Value Investors, L.L.C.,
Its General Partner
By: Focus Value GP, Inc.,
a Member
By: /s/ Focus Value GP, Inc.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates, L.P.
General Partner
By: Stratford Capital Corporation,
its General Partner
By: /s/ Stratford Capital Corporation
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
4
<PAGE> 64
/s/ Thomas W. Stephenson, Jr.
--------------------------------------------------
Thomas W. Stephenson, Jr.
/s/ Jeffery L. Lightfoot
--------------------------------------------------
Jeffery L. Lightfoot
/s/ James R. McNab, Jr.
--------------------------------------------------
James R. McNab, Jr.
/s/ Mary W. McNab
--------------------------------------------------
Mary W. McNab
/s/ Esther J. McNab
--------------------------------------------------
Esther J. McNab
/s/ Elizabeth Scott McNab
--------------------------------------------------
Elizabeth Scott McNab
/s/ James R. McNab, Jr.
--------------------------------------------------
James R. McNab III UGMA,
c/o James R. McNab, Jr., Custodian
LKCM Theater Partners, L.P.
By: /s/ LKCM Theater Partners, L.P.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Mistral Entertainment LLC
By: Mistral Entertainment LLC
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
5
<PAGE> 65
/s/ Sidney L. Tassin
--------------------------------------------------
Sidney L. Tassin
/s/ Christopher Bancroft
--------------------------------------------------
Christopher Bancroft
/s/ Thomas G. Mendell
--------------------------------------------------
Thomas G. Mendell
/s/ Stephen P. Wilkes
--------------------------------------------------
Stephen P. Wilkes
/s/ Edward L. Thomas
--------------------------------------------------
Edward L. Thomas
/s/ Robert Feldman
--------------------------------------------------
H.V.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Robert Feldman
--------------------------------------------------
K.S.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Robert Feldman
--------------------------------------------------
A.M.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Susan Hodges
--------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o Holston H. Hodges
/s/ Susan Hodges
--------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o David F. Hodges
6
<PAGE> 66
SECOND AMENDMENT
TO
SHAREHOLDERS' AND VOTING AGREEMENT
This Second Amendment, dated as of April 25, 1997 the "Second
Amendment"), by and among HOLLYWOOD THEATER HOLDINGS, INC., a Delaware
corporation (the "Company"), THE BEACON GROUP III - FOCUS VALUE FUND, L.P., a
Delaware limited partnership ("Beacon") and each of the other shareholders of
the Company executing one of the signature pages attached hereto or otherwise
subject to this Second Amendment, amends that certain Shareholders' and Voting
Agreement dated as of October 3, 1996 (the "Shareholders' Agreement") by and
among the Company, Beacon and each of the shareholders of the Company executing
one of the signature pages attached thereto or otherwise subject thereto, as
amended by the First Amendment thereto, dated as of November 1, 1996.
Capitalized terms used herein but not defined herein have the meanings assigned
to such terms in the Shareholders' Agreement.
WHEREAS, the Company and Beacon have entered into a
Subscription Agreement, dated as of the date hereof, pursuant to which the
Company is issuing, and Beacon is purchasing, shares of Series C Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Series C
Preferred") and Common Stock of the Company;
WHEREAS, the (i) the Company, (ii) Shareholders holding at
least 75% of the Common Stock (including Beacon and Stratford), such percentage
being calculated as provided in the Shareholders' Agreement, (iii) Beacon and
(iv) Stratford desire to amend the Shareholders' Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt of which is acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO RECITALS. The second recital of the
Shareholders' Agreement is hereby amended and restated in its entirety as
follows:
WHEREAS, the Purchase Agreement contemplates that, subject to
the terms and conditions thereof, Beacon will purchase, at a subsequent
closing, shares of Series B Convertible Preferred Stock of the Company, par
value $.01 per share and shares of Common Stock of the Company;
2. AMENDMENT TO SECTION 1. The definition of the term
"Common Stock Equivalents" set forth in Section 1 of the Shareholders'
Agreement is hereby amended and restated to read in its entirety as follows:
"Common Stock Equivalents" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock, including without
limitation, the Series A Preferred, the Series B Preferred and the Series C
Preferred.
1
<PAGE> 67
3. AMENDMENT TO SECTION 1. The definition of the term
"Conversion Shares" set forth in Section 1 of the Shareholders' Agreement is
hereby amended and restated in its entirety as follows:
"Conversion Shares" means shares of Common Stock (i) issuable
upon the conversion of the Series A Preferred and the Series B Preferred issued
or issuable to Beacon under the Purchase Agreement or (ii) issuable upon the
conversion of the Series C Preferred issued to Beacon under the Subscription
Agreement.
4. AMENDMENT TO SECTION 1. The definition of the term
"Series B Preferred" set forth in Section 1 of the Shareholders' Agreement is
hereby amended and restated in its entirety as follows:
"Series B Preferred" means the Series B Convertible Preferred
Stock, $.01 par value per share of the Company, provided, that each share of
Series C Convertible Preferred Stock, $.01 par value per share of the Company
("Series C Preferred") shall for all purposes hereunder other than for purposes
of the definition of "Stated Value", be treated as shares of Series B
Preferred, and all references herein to Series B Preferred (other than
references in the definition of "Stated Value") shall be deemed to include both
the Series B Preferred and Series C Preferred.
5. AMENDMENT TO SECTION 1. The definition of the term
"Stated Value" set forth in Section 1 of the Shareholders' Agreement is hereby
amended and restated in its entirety as follows:
"Stated Value" means (i) $100 plus accrued and unpaid
dividends in the case of the Series A Preferred, (ii) $175 plus accrued and
unpaid dividends in the case of the Series B Preferred and (iii) $195 plus
accrued and unpaid dividends in the case of Series C Preferred.
6. AMENDMENT TO SECTION 1. Section 1 of the
Shareholders' Agreement is hereby amended to include the following:
"Subscription Agreement" means the Subscription Agreement,
dated as of April 25,1997, between the Company and Beacon, as it may be
amended, modified, replaced or superseded from time to time.
7. AMENDMENT TO SECTION 2. Section 2 of the
Shareholders' Agreement is hereby amended and restated in its entirety as
follows:
"Section 2. Methodology for Calculations. For purposes of
this Agreement, the Transfer of a Common Stock Equivalent shall be treated as
the Transfer of the shares of Common Stock into which such Common Stock
Equivalent can be converted, exchanged or exercised. Except as otherwise
provided in this Agreement, for purposes of calculating (i) the amount of
outstanding Common Stock as of any date, (ii) the amount of Common Stock owned
by a Person hereunder, and (iii) related percentages, (x) between the date
hereof and the Subsequent Closing all shares of Series
2
<PAGE> 68
A Preferred outstanding as of the date hereof (but no other Common Stock
Equivalents) shall be treated as having been converted, exchanged or exercised
and (y) from and after the Subsequent Closing, all shares of Series B Preferred
outstanding immediately after the Subsequent Closing and all shares of Series C
Preferred (but no other Common Stock Equivalents) shall be treated as having
been converted, exchanged or exercised."
8. APPROVAL. The signatures of each of the parties
below shall constitute the approval of each such party for all purposes to the
form, terms and provisions of this Second Amendment to the Shareholders'
Agreement.
9. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
10. NO FURTHER AMENDMENT. Except as amended hereby, the
Shareholders' Agreement shall remain in full force and effect.
11. COUNTERPARTS. This Second Amendment may be executed
in separate counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to the Shareholders' Agreement on the day and year first above
written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-----------------------------------------
Name: Thomas W. Stephenson, Jr.
---------------------------------------
Title: President
--------------------------------------
3
<PAGE> 69
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: /s/ Focus Value Investors, L.L.C.
-------------------------------------------
Focus Value Investors, L.L.C.,
Its General Partner
By: /s/ Focus Value GP, Inc.
-------------------------------------------
Focus Value GP, Inc.,
a Member
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
4
<PAGE> 70
STRATFORD CAPITAL PARTNERS, L.P.
By: /s/ Stratford Capital GP Associates, L.P.
----------------------------------------------
Stratford Capital GP Associates, L.P.
its General Partner
By: /s/ Stratford Capital Corporation
------------------------------------------------
Stratford Capital Corporation,
its General Partner
/s/ Thomas W. Stephenson, Jr.
-----------------------------------------------
Thomas W. Stephenson, Jr.
/s/ Jeffrey L. Lightfoot
---------------------------------------------------
Jeffrey L. Lightfoot
/s/ James R. McNab, Jr.
-----------------------------------------------
James R. McNab, Jr.
/s/ Mary W. McNab
----------------------------------------------
Mary W. McNab
/s/ Esther J. McNab
--------------------------------------------------
Esther J. McNab
/s/ Elizabeth Scott McNab
------------------------------------------------
Elizabeth Scott McNab
/s/ James R. McNab III UGMA
--------------------------------------------
James R. McNab III UGMA,
c/o James R. McNab, Jr., Custodian
5
<PAGE> 71
LKCM Theater Partners, L.P.
By: /s/ LKCM Theater Partners, L.P.
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Mistral Entertainment LLC
By: /s/ Mistral Entertainment LLC
-------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
/s/ Sidney L. Tassin
----------------------------------------
Sidney L. Tassin
/s/ Christopher Bancroft
----------------------------------------
Christopher Bancroft
/s/ Thomas G. Mendell
----------------------------------------
Thomas G. Mendell
/s/ Stephen P. Wilkes
----------------------------------------
Stephen P. Wilkes
/s/ Edward L. Thomas
----------------------------------------
Edward L. Thomas
H.V.H. 1995 Trust
6
<PAGE> 72
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
K.S.H. 1995 Trust
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
A.M.H. 1995 Trust
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
/s/ Susan Hodges
----------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o Holston H. Hodges
/s/ Susan Hodges
----------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o David F. Hodges
RICHARD M. DURWOOD REVOCABLE TRUST
By: /s/ Richard M. Durwood
-------------------------------------------------
Richard M. Durwood,
Trustee
The undersigned hereby consents to the
foregoing agreement.
/s/ Maureen W. Durwood
----------------------------------------------------
Maureen W. Durwood
7
<PAGE> 1
EXHIBIT 10.4
[EXECUTION COPY]
PURCHASE AND ASSIGNMENT AGREEMENT
AGREEMENT made this 25th day of July, 1997, between GENERAL CINEMA
CORP. OF OKLAHOMA, INC., an Oklahoma corporation ("Seller"), and HOLLYWOOD
THEATERS, INC., a Delaware corporation ("Purchaser").
R E C I T A L S
This Agreement relates to (i) the assignment by Seller to Purchaser of
seven leases referred to in Schedule of Leases to be attached hereto no later
than 10 days following the date hereof (such leases, together with their
respective amendments, modifications and supplements, hereinafter referred to
individually as a "Lease," and collectively referred to as "Leases") as well as
(ii) the sale by Seller to Purchaser of the fixtures and equipment (the
"Assets") located in the respective theatres (hereinafter referred to
individually as a "Theatre," and collectively referred to as "Theatres")
demised by said Leases. The landlords referred to in Schedule of Leases are
individually and collectively hereinafter referred to as "Landlord" and/or
"Landlords," as the context requires.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto agree
as follows:
ARTICLE 1
LEASE ASSIGNMENTS AND SALE OF ASSETS
At the Closing, as hereinafter defined, and subject to the applicable
provisions of this Agreement, Purchaser will buy and assume from Seller, and
Seller will sell the Assets and assign Seller's rights, title and interest to
and obligations under the Leases to Purchaser, for a purchase price of Fifteen
Million Five Hundred Thousand Dollars ($15,500,000), subject to adjustment as
provided herein. With respect to each Theatre, the Assets shall include (i)
all right, title and interest in and to all tangible personal property,
equipment and fixtures of any kind owned or leased by Seller and attached to or
located within or on or customarily used in connection with the operation of
the Theatres, including, but not limited to, seats, merchandise, inventory,
merchantable food and drink, cleaning equipment, office equipment, projection
and sound equipment, screens, carpets, draperies, soundfold, wall coverings,
cash registers, ticket machines, signs (including marquees), projection
supplies, concessions equipment and prepaid utility and rent deposits; (ii) the
rights and interests in the consents, approvals, licenses, permits, franchises
and other authorizations possessed by Seller identified in Schedule of Licenses
to be attached hereto no later than 10 days following the date hereof relating
to the Theatres; (iii) the rights and interests in, to and under the contracts
relating to the Theatres to be listed on Schedule of Contracts to be attached
hereto no later than 10 days following the date hereof; (iv) all right, title
and interest in the names of each of the Theatres (other than the words
"General Cinema" or derivatives thereof and the related logos, trade fixtures
and
<PAGE> 2
supplies or inventory bearing any logo or mark of General Cinema) and any
derivatives or designs of any thereof, either in word form or as a design, and
any other names, trademarks, service marks, trade names, brand names, logos or
slogans incidental thereto or associated therewith; (v) all records of Seller
that are necessary to the continuing operation of the Theatres; (vi) all other
properties and assets of any kind, character and description whatsoever
(whether or not reflected on the books of Seller and whether real, personal or
mixed, tangible or intangible, contingent or otherwise) used, or available for
use, in the business or operations of Seller at the Theatres or necessary for
the continuation of such business or operations consistent with past practice;
and (vii) the items on the mutually approved inventory lists to be attached as
schedules to the Bills of Sale for the Assets substantially in the form
attached as Exhibit A hereto. Specifically excluded from the Assets shall be
(i) accounts receivable attributable to the Theatres, (ii) cash attributable to
the Theatres, (iii) Seller's headquarters, (iv) the Point of Sale System at the
Penn Square Theater (which will be replaced with the system previously in place
and currently on site, which system shall be in good operating condition at
Closing), (v) the concession stand referred to in Section 14.37 hereof, (vi)
the sound systems referred to in Section 14.38 hereof, (vii) the contract
between General Cinema Corp. of Oklahoma, Inc. and Tulsa, Oklahoma, Local No.
513 of the International Alliance of Theatrical Stage Employees, Moving Picture
Machine Technicians, Artists and Allied Crafts of the United States and Canada,
Effective May 31, 1996 to March 26, 1998 (the "Local 513 Agreement") and (viii)
the contract between General Cinema Corp. of Oklahoma, Inc. and Oklahoma City,
Oklahoma, Local No. 380 of the International Alliance of Theatrical Stage
Employees and Moving Picture Machine Operators of the United States and Canada,
Effective May 5, 1995 to May 4, 1998 (the "Local 380 Agreement"). With respect
to each Theatre, the Lease shall be assigned by an Agreement Assigning Lease
substantially in the form attached hereto as Exhibit B.
ARTICLE 2
PAYMENT OF PURCHASE PRICE; SECURITY
The purchase price for the assignment of the Leases and the sale of
Assets hereunder (the "Purchase Price") is Fifteen Million Five Hundred
Thousand Dollars ($15,500,000), plus or minus net prorations and adjustments as
hereinafter provided. On June 17, 1997, Purchaser delivered to Seller the sum
of $100,000 in cash (the "Initial Escrow Funds"), which Seller is holding in
escrow in a segregated interest bearing account with a commercial bank (the
"Purchase Price Escrow Account") as a deposit to be applied toward the Purchase
Price at the Closing. Concurrent with the execution of this Agreement,
Purchaser is delivering to Seller the additional sum of $1,450,000 in cash (the
"Additional Escrow Funds" and, together with the Initial Escrow Funds, the
"Escrow Funds"), which shall be held by Seller in the Purchase Price Escrow
Account as a deposit to be applied toward the Purchase Price at the Closing.
At the Closing, the Escrow Funds and the interest thereon shall be paid to
Seller in partial satisfaction of the Purchase Price, the balance of which
shall be paid by Purchaser to Seller by wire transfer to an account specified
by Seller. If the Closing does not occur under circumstances in which all of
the Purchaser's closing conditions have been satisfied but Purchaser fails to
close for any reason other than a reason within Seller's exclusive control,
then Seller shall be entitled to retain the Escrow Funds. If the Closing does
not occur under circumstances in which (i) all of the Sellers closing
conditions have been satisfied but Seller fails
2
<PAGE> 3
to close for any reason other than a reason within Purchaser's exclusive
control, or (ii) all of Purchaser's closing conditions have not been satisfied,
then Seller shall promptly upon request return the Escrow Funds, together with
the interest earned thereon, to Purchaser.
As security for Purchaser's performance under said Lease assignments
through the end of the respective Lease terms, Purchaser shall enter into a
security agreement (each a "Security Agreement") substantially in the form
attached hereto as Exhibit C giving Seller a security interest in the Assets of
the Theatres and shall grant to Seller leasehold mortgages (each a "Leasehold
Mortgage") substantially in the form attached hereto as Exhibit D of its
interests in the Leases. Both the security interest and the Leasehold Mortgage
are to be junior only to a security interest in the Assets of the Theatres to
be held by Purchaser's bank lenders ("Purchaser's Lenders") securing a loan of
not more than $75,000,000 subject to an intercreditor agreement (the
"Intercreditor Agreement") with Purchaser's bank lenders, substantially in the
form attached hereto as Exhibit E.
Purchaser shall establish with a bank acceptable to Purchaser and
Seller an escrow (the "Escrow Account") in the amount of $595,478 (3 months
rent with respect to each of the Theaters) for a period of one year which will
reduce to $297,739 (one and one-half month's rent with respect to each of the
Theaters) for a second year and to zero at the end of the second year (and upon
such reductions in the required escrow amounts, the Escrow Agent shall promptly
release funds attributable to such Lease(s) from the Escrow Account and deliver
such funds to Purchaser); provided that no reduction in the escrow account will
be allowed so long as Purchaser is in default under the Leases or Purchaser's
Net Worth, as defined below, falls below $10,000,000. As used herein
"Purchaser's Net Worth" shall mean Total Shareholder's Equity and Preferred
Stock as established by Purchaser's unaudited quarterly financial statements or
Purchaser's audited year end financial statements. Notwithstanding the
foregoing, in the event that, at or prior to the Closing, Seller shall have
received from one or more Landlords under one or more Leases a release in form
and substance reasonably satisfactory to Seller, releasing Seller (and any
affiliates of Seller that are guarantors thereof), from any and all obligations
and potential liability arising under such Lease or Leases on or after the
"Effective Date" as hereinafter defined (each, a "Release") (i) Purchaser shall
not give Seller a security interest in the Assets located in the related
Theatre or Theaters, (ii) Purchaser shall not grant to Seller a Leasehold
Mortgage of its interest in such Lease or Leases and (iii) the Escrow Account
shall be proportionately reduced to reflect that no rents must be escrowed with
respect to such Theater or Theaters, provided that no reduction will be allowed
so long as Purchaser is in default under any of the other Leases or Purchaser's
Net Worth falls below $10,000,000. To the extent one or more Releases are
obtained after the Closing, (i) Seller shall release its mortgage and security
interests in the related Lease(s) and Assets pursuant to appropriate
documentation and (ii) the Escrow Agent shall promptly release funds
attributable to such Lease(s) from the Escrow Account and deliver such funds to
Purchaser; provided that no reduction will be allowed so long as Purchaser is
in default under any of the other Leases or Purchaser's Net Worth falls below
$10,000,000.
In the event that Purchaser's Net Worth falls below $10,000,000, or
Purchaser (or its successor as tenant under the Leases) is in default under a
Lease remaining uncured for a period
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continuing beyond the period ending five days prior to the expiration of any
applicable grace period (or, if there be no applicable grace period, then upon
the occurrence of such default), there shall be no further reduction in the
Escrow Account, Seller may draw down the funds in the Escrow Account for the
purpose of curing any default under the applicable Lease and may exercise any
or all rights available to Seller under the Security Agreement or any Leasehold
Mortgage as Seller, in Seller's sole discretion, may elect.
ARTICLE 3
CLOSING
The closing of the transactions provided for in this Agreement (the
"Closing") shall take place at the office of Seller, 1280 Boylston Street,
Chestnut Hill, Massachusetts, on the 5th day of August, 1997 (the "Effective
Date") or at such other location or date as the parties hereto may agree upon
and shall be effective as of 11:59 p.m. on the Effective Date.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
4.01 The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at and as of the
Effective Date with the same effect as though such representations and
warranties had been made on and as of the Effective Date; Seller shall have
performed and complied with all agreements required by this Agreement to be
performed or complied with by Seller at or prior to the Effective Date; and
Purchaser shall have received certificates, dated as of the Effective Date,
signed by Seller to the foregoing effect.
4.02 No action or proceeding shall have been instituted or threatened for
the purpose or with the possible effect of enjoining or preventing the
consummation of this Agreement or seeking damages on account thereof.
4.03 From the date hereof until Closing, there shall not have occurred any
material casualty or damage (whether or not insured) to any Theatre or Asset
and the business of Seller at the Theatres shall have been conducted only in
the ordinary course consistent with past practices.
4.04 All necessary action (corporate or otherwise) shall have been taken by
Seller to authorize, approve, and adopt this Agreement and the consummation and
performance of the transactions contemplated hereby, and Purchaser shall have
received a certificate, dated as of the Effective Date, signed by Seller to the
foregoing effect.
4.05 Seller shall have terminated all Contracts relating to the Theatres
and the Assets, other than the Contracts to be assumed by Purchaser as
determined by Purchaser after review of the Contracts, but in no case later
than 10 days following the Closing.
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4.06 At the Closing, Seller shall deliver, or cause to be delivered, to
Purchaser each of the documents and items referred to in Article 8.
4.07 At the Closing, Seller shall deliver, or cause to be delivered, to
Purchaser evidence reasonably satisfactory to Purchaser regarding the
termination by Seller prior to Closing of all Persons employed at each Theatre.
4.08 The waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1974 shall have expired.
4.09 The Landlord for the Penn Square Theater shall have waived the 60 day
notice period under the related Lease to the assignment of such Lease to
Purchaser, or such 60 day period shall have expired; provided, however, that
Seller shall endeavor in good faith to obtain such waiver from the Landlord as
promptly as practicable.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
5.01 Purchaser's representations and warranties contained in this Agreement
shall be true and correct in all material respects at and as of the Effective
Date with the same effect as though such representations and warranties had
been made as of the Effective Date; Purchaser shall have performed and complied
with all agreements required by this Agreement to be performed or complied with
by Purchaser at or prior to the Closing; and Seller shall have received a
certificate, dated as of the Effective Date, signed by Purchaser to the
foregoing effect.
5.02 No action or proceeding shall have been instituted or threatened for
the purpose or with the possible effect of enjoining or preventing the
consummation of this Agreement or seeking damages on account thereof.
5.03 All necessary action (corporate or otherwise) shall have been taken by
Purchaser to authorize, approve and adopt this Agreement and the consummation
and performance of the transactions contemplated hereby, and Seller shall have
received a certificate, dated as of the Effective Date, signed by Purchaser to
the foregoing effect.
5.04 At the Closing, Purchaser shall deliver, or cause to be delivered, to
Seller each of the documents and items required to be delivered by Article 7.
5.05 The waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1974 shall have expired.
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ARTICLE 6
TERMINATION
This Agreement may be terminated prior to the Closing by (a) the
mutual consent of Purchaser and Seller, (b) Seller upon the failure of
Purchaser to perform or comply with any of its covenants or agreements
contained herein prior to or at the Closing or if any representation or
warranty of Purchaser hereunder shall not have been true and correct in all
material respects as of the time at which such was made, (c) Purchaser upon the
failure of Seller to perform or comply with any of its covenants or agreements
contained herein prior to or at the Closing or if any representation or
warranty of Seller hereunder shall not have been true and correct in all
material respects as of the time at which such was made, (d) Seller pursuant to
Article 14.05 of this Agreement, or (e) either Seller or Purchaser if the
Closing does not occur by August 29, 1997, provided, that no party may
terminate this Agreement pursuant to (b) or (c) above if such party is, at the
time of any such attempted termination, in breach of any term hereof.
ARTICLE 7
DELIVERIES BY PURCHASER AT CLOSING
Purchaser shall deliver to Seller at the Closing:
(A) The Purchase Price as set forth in Articles 1 and 2 hereof,
subject to the adjustments set forth in Article 9 hereof.
(B) For each Theatre, respectively, a fully executed Agreement
Assigning Lease substantially in the form attached as Exhibit
B.
(C) For each Theatre, respectively, a fully executed Security
Agreement substantially in the form attached as Exhibit C.
(D) For each Theatre, a fully executed Leasehold Mortgage
substantially in the form attached as Exhibit D.
(E) Executed financing statements to perfect Seller's security
interest under the Security Agreements.
(F) An Intercreditor Agreement, in substantially the form attached
as Exhibit E, providing Seller the right to exercise its
rights under the Security Agreements and/or Leasehold
Mortgages as security in the event of a default under any of
the Leases.
(G) An Escrow Agreement with respect to the Escrow Account (the
Escrow Agreement may be delivered within ten (10) days
following Closing, provided that the Escrow Account is funded
at Closing).
(H) A list of all persons employed by Seller within the thirty
(30) day period prior to the Effective Date to which Purchaser
has made or, to the best of its then current knowledge,
expects to make an offer of employment.
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(I) With respect to each Theatre, a certificate of insurance
evidencing Purchaser's having complied with all insurance
requirements set forth in each Lease, and naming Seller as a
mortgagee and as an additional insured, as appropriate, with
respect to all such insurance policies (provided that this
requirement 7(I) may be satisfied within two (2) business days
following the Effective Date).
(J) Such further executed instruments and documents as may be
requested by Seller and reasonably necessary to fully
consummate the transactions contemplated by this Agreement,
all in form reasonably satisfactory to Purchaser and Seller.
Provided, however, that in the event that, at or prior to the Closing,
Seller shall have received one or more Releases, Purchaser shall not deliver
(i) a Security Agreement for the related Theatre or Theaters, (ii) a Leasehold
Mortgage for the related Lease or Leases, (iii) a financing statement with
respect to any security interest in the assets of such Theatre or Theaters, or
(iv) a certificate of insurance with respect to any insurance policies relating
to such Theatre or Theaters.
ARTICLE 8
DELIVERIES BY SELLER AT CLOSING
At the Closing, Seller shall deliver to Purchaser the following:
(A) The Theatres and Assets free and clear of all Liens or claims
other than the those arising under the Leases.
(B) For each Theatre, respectively, an executed Bill of Sale for
the Assets substantially in the form attached hereto as
Exhibit A, the schedules to be attached thereto being the
inventory approved by Purchaser and Seller's Director of
Operations at or subsequent to the Initial Inspection (defined
below) of each Theatre.
(C) For each Theatre, respectively, a fully executed Agreement
Assigning Lease substantially in the form attached hereto as
Exhibit B.
(D) Fully executed counterparts of the instruments delivered by
Purchaser in accordance with clauses (C) through (G) of
Article 7.
(E) Subject to Article 13, for each Theatre, a fully executed
Landlord's Consent, Estoppel and Release substantially in the
form attached as Exhibit F or such other form as is acceptable
to Landlord, Seller, Purchaser and Purchaser's Lender.
(F) Such further executed instruments and documents as may be
requested by Purchaser and are reasonably necessary to fully
consummate the transactions contemplated by this Agreement,
all in form reasonably satisfactory to Purchaser and Seller.
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ARTICLE 9
PRORATIONS OF FEES AND EXPENSES
Fees and expenses relating to the Assets, Theatres and Leases,
including, but not limited to, those listed below, shall be prorated between
the parties hereto as of the Effective Date, with Seller bearing the burden of
the fees and expenses existing or arising prior to and on, and relating to
periods ending prior to and on, the Effective Date; and Purchaser bearing the
burden of the fees and expenses existing or arising after and relating to
periods after the Effective Date:
(A) Prepaid fees with respect to Seller's interest in any licenses
and permits transferred by Seller to Purchaser;
(B) Cash on hand at each of the Theatres, or, alternatively,
Purchaser will increase the Purchase Price by the amount of
cash on hand at each Theatre on the Effective Date;
(C) Personal property taxes with respect to the Assets;
(D) Utility charges, including, without limitation, for gas,
electric, telephone, water and sewer with respect to the
Theatres;
(E) All lease charges including without limitation rent, taxes,
common area maintenance fees, merchant's association fees and
similar fees with respect to the Theatres;
(F) Film rental expenses;
(G) Minimum rent payable under the Leases of each and all Theatres
for the month in which the Effective Date occurs; and
(H) Percentage rent, if any, payable under the Leases of each and
all Theatres, which shall be prorated based on the applicable
gross box office and/or concession receipts (as may be
relevant and to the extent so defined in each such Lease)
prior to the Effective Date in the period for which such
percentage rent is payable, as compared to said applicable
gross box office and/or concession receipts in such period
after the Effective Date, and after deducting all credits
(including payment of base rent and, if applicable, payments
of excess film rental) against percentage rent attributable to
such payment period prior to the Effective Date as compared to
all such credits attributable to such period after the
Effective Date.
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To the extent that any of the amounts required to be prorated or paid
for the purchase of property pursuant to this Article 9 are readily
ascertainable as of the Closing (such as minimum rent for the month in which
the Effective Date occurs), such amounts shall be paid at the Closing. With
respect to such amounts as are not readily ascertainable as of the Closing,
interim prorations and payments shall be made after the Closing at regular
intervals promptly after such amounts have been reasonably estimated or
ascertained, and a final proration and payment shall be made as soon as the
amounts required to be prorated have been established, but in no event, with
the exception of expenses and payments to be prorated pursuant to paragraph (H)
of this Article 9, later than September 30, 1997. The parties shall have until
December 31, 1997 to resolve all expenses and payments to be prorated pursuant
to paragraph (H) of this Article 9.
Each of Seller and Purchaser may dispute in good faith any amounts the
other claims to be payable pursuant to this Article 9 by delivering a written
notice to the other party setting forth in reasonable detail the amount and
nature of each disputed matter (each such notice being hereinafter referred to
as a "Dispute Notice") within ten (10) days after receiving a notice that any
such amount is due. Such disputing party shall provide the other party with
such additional information as it may reasonably request as to the basis of
such dispute. The parties shall attempt in good faith to resolve any dispute
as to any matter set forth in a Dispute Notice. If within one (1) month
following the date of the receipt of the Dispute Notice (the "Expiration
Date"), the dispute cannot be resolved through negotiation, mediation or some
other form of alternative dispute resolution ("ADR"), and the amount in dispute
(individually or in the aggregate with other disputes) exceeds Five Thousand
Dollars ($5,000), the dispute shall be submitted for resolution by binding
arbitration in accordance with the rules of the American Arbitration
Association. Within fifteen (15) days of the Expiration Date, the parties
hereto shall jointly select an independent arbitrator who is experienced in the
resolution of disputes of a similar nature. If the parties fail to select an
arbitrator within the period referred to above, the parties shall select an
independent arbitrator, within thirty (30) days from the Expiration Date, from
a panel proposed by the American Arbitration Association. In any such action,
the use of any ADR procedures shall not be construed under the doctrine of
laches, waiver or estoppel to affect adversely the rights of any party.
To the extent they relate specifically to the Theatres, Purchaser
agrees to honor for a period of one (1) year after the Closing valid gift
certificates, VIP tickets and other discount tickets, vouchers or passes issued
by Seller. Seller agrees to promptly reimburse Purchaser the face amount of
such certificates, tickets, vouchers and passes upon receipt of stubs or other
satisfactory evidence that the same were honored.
Seller may be entitled to payments from landlords pursuant to the
Leases resulting from common area maintenance audits, tax abatement proceedings
and other contractual agreements affecting the Leases for periods ending on or
prior to the Effective Date; in the event that such payments are delivered to
Purchaser, Purchaser shall promptly deliver same to Seller.
Notwithstanding anything to the contrary contained in this Agreement,
except with respect to the Leases and the Contracts assumed by Purchaser
pursuant to this Agreement, Purchaser shall
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<PAGE> 10
not assume, pay, perform or discharge any debts, liabilities, expenses or
obligations of Seller of any kind, character or description whatsoever (whether
absolute or contingent, known or unknown, asserted or asserted, whether or not
the same are disclosed to Purchaser in or pursuant to this Agreement).
ARTICLE 10
BROKER
Each of the parties to this Agreement, respectively, warrants and
represents to the other that it dealt with no broker in connection with any of
the transactions referred to herein and agrees to indemnify the other against
any claim arising from its actual or alleged representation by any broker in
connection herewith.
ARTICLE 11
SALES, USE AND TRANSFER TAX
Should any sales or use tax be payable in connection with the sale of
Assets to be sold by Seller to Purchaser pursuant to this Agreement or should
any transfer or similar tax be applicable to any lease assignment herein
contemplated, such sales, use or transfer tax shall be paid by Purchaser,
unless Seller is required by law to pay such tax, in which case the amount
thereof will be paid by Seller. The parties shall cooperate in the reporting
and settlement of any such taxes.
ARTICLE 12
FINANCIAL REPORTS
For the balance of the remaining term of the Leases, Purchaser shall
provide Seller with the following financial information:
1. Monthly reports of revenues generated from each Theatre;
2. Quarterly unaudited financial statements of Purchaser; and
3. Annual audited financial statements of Purchaser.
Provided, however, that in the event that Seller receives a Release
with respect to one or more Leases, Purchaser shall not be required to provide
Seller with monthly reports of revenues generated from the related Theatre(s).
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ARTICLE 13
CONSENTS AND RELEASES
The obligations of Seller and Purchaser hereunder are conditioned upon
the execution and delivery by each of the Landlords, at or prior to the
Closing, of a Landlord's Consent, Estoppel and Release in substantially the
form attached hereto as Exhibit F, or such other form as is acceptable to each
Landlord, respectively, and Seller, Purchaser and Purchaser's Lender; provided,
however, if any Lease may be assigned without the Landlord's consent, or if any
Lease generally requires Landlord's consent to assignment but permits
assignment without such consent to qualified assignees, and Purchaser can
provide evidence, satisfactory to Seller and the Landlord of such Lease, that
Purchaser meets such qualifications for assignment of such Lease without the
Landlord's consent, then, with respect to each such Lease, respectively, the
foregoing condition to the Closing shall be waived. From and after the date of
this Agreement, Seller shall endeavor in good faith to obtain Releases, in form
and substance satisfactory to Purchaser and Seller, through commercially
reasonable efforts from the Landlords under each of the Leases.
ARTICLE 14
MISCELLANEOUS
14.01 This Agreement sets forth the entire understanding of the parties and
supersedes any and all prior agreements, arrangements or understandings
relating to the subject matter hereof. No representations, promises,
inducements or statements of intention have been made by any of the parties
hereto which are not embodied in this Agreement, and neither of the parties
shall be bound by or be liable for any alleged misrepresentation, promise,
inducement or statement of intention not embodied herein, and the parties
acknowledge that they have not relied on any representation or promise, except
as in this Agreement contained.
14.02 From time to time after the date hereof, and at the request of the
other, each of the parties hereto will execute and deliver such further
statements and documents, and take such action as may be reasonably required in
order to implement the transactions contemplated by this Agreement. Seller
agrees to use reasonable efforts to assist with the smooth transition to
Purchaser of the Assets and the operations of the Theatres, provided that such
efforts shall be at no cost to Seller.
14.03 Neither this Agreement nor any provision hereof may be modified,
changed, discharged or terminated, except by an instrument in writing, signed
by the party against whom the enforcement of any modification, change,
discharge or termination is sought.
14.04 Nothing contained in this Agreement or any documents executed at the
Closing shall be construed so as to require a commission of any act contrary to
law; and wherever there is any conflict between any provisions of this
Agreement or any such document and any statute, law, ordinance or regulation,
the latter shall prevail, and the provisions of this Agreement or any such
document affected shall be curtailed and limited only to the extent necessary
to bring it within the requirements of such statute, law, ordinance or
regulation.
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14.05 Purchaser acknowledges that it has inspected each of the Theatres in
the company of Seller's Director of Operations or his designee (the "Initial
Inspection") and that it is familiar with the condition of each of the premises
demised under the Leases as well as with the condition of the Assets to be
purchased and agrees that all of the same are to be conveyed "as is" and
without any warranty, express or implied, as to their physical condition or
fitness for any particular purpose; provided that Seller represents and
warrants that the Assets are sufficient in all material respects to carry on
the business and operations as presently conducted by Seller at the Theatres.
Purchaser specifically agrees that the statements, if any, as to the condition
of Assets set forth in any inventory attached to a Bill of Sale are for
purposes of identification only and are not intended as representations or
warranties and may not be relied upon by Purchaser. After the date hereof but
prior to Closing, Purchaser shall have the right to inspect the Theatres (the
"Subsequent Inspection") after notice to Seller's Director of Operations and in
the company of such Director of Operations or his designee. It shall be a
condition to Purchaser's obligation to close that the Theatres and the Assets
shall be in substantially the same condition (i.e., no change which
individually or in the aggregate for all the Theatres together would require an
expenditure in excess of $100,000.00 to return to the prior condition) at the
Effective Date as at the Initial Inspection. Notwithstanding the foregoing, if
upon Purchaser's Subsequent Inspection of the Assets, Purchaser reasonably
determines that the Assets are not (i) sufficient in all material respects to
carry on the business and operations as presently conducted by Seller at the
Theatres and (ii) fit for the purposes for which they are presently being used
and in good operating condition and repair, ordinary wear and tear excepted, no
later than 5 days prior to the Closing, Purchaser shall deliver a written
notice to Seller setting forth in reasonable detail the nature and extent of
any repair(s) necessary to restore the Assets to good operating condition.
Upon Seller's receipt of said notice, Purchaser and Seller shall attempt in
good faith to reach agreement as to the nature, extent and estimated cost of
any repair(s) necessary to restore the Assets to good operating condition.
Within 2 days of receipt of said Notice but in no event later than 1 day prior
to the Closing, Seller shall elect in a writing delivered to Purchaser either
to (i) restore the Assets to good operating condition at Seller's expense, (ii)
adjust the Purchase Price by an amount equal to the estimated cost of any
repair(s) necessary to restore the Assets to good operating condition as
determined in good faith by Seller and Purchaser, or (iii) if the amount in
question exceeds $100,000, terminate this Agreement unless Purchaser waives
this condition within two days of receiving such notice of election from
Seller.
14.06 Seller represents and warrants that Seller has not received any notice
that Seller is not in compliance with any applicable governmental requirements
in connection with the ownership or lease of the Assets or the conduct of the
business and operations of Seller at the Theatres.
14.07 Seller hereby represents and warrants to Purchaser that the corporate
officers executing this Agreement and the other documents contemplated by this
Agreement have full corporate authority to do so and that the actions
undertaken by such party in this Agreement and said other documents are fully
binding on Seller.
14.08 Seller hereby agrees to indemnify Purchaser for all direct out of
pocket costs Purchaser may reasonably incur arising out of or in connection
with (i) any and all claims for injury or damage to
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persons or property resulting from any default of or under a Lease or other
matters arising out of or in connection with the conduct of the business and
operation of the Theatres and occurring on or prior to the Effective Date, (ii)
the breach of any representation or warranty of Seller contained in this
Agreement that will survive the Closing as specified in Article 16 and (iii)
any breach of any agreement or covenant of Seller contained in this Agreement
or in any Seller's Ancillary Documents (as hereinafter defined).
14.09 Purchaser hereby agrees to indemnify Seller for all direct out of
pocket costs Seller may reasonably incur arising out of or in connection with
(i) any and all claims for injury or damage to persons or property and
resulting from any default of or under any Lease or other matters arising out
of or in connection with the conduct of the business and operation of the
Theatres and occurring after the Effective Date and (ii) any breach of any
agreement or covenant of Purchaser contained in this Agreement or in any
Purchaser's Ancillary Documents (as hereinafter defined).
14.10 Indemnification for Third Party Claims. The following procedures
shall be applicable with respect to indemnification under Sections 14.08 and
14.09 for third party claims arising in connection with any provision of this
Agreement.
i. Promptly after receipt by the party seeking indemnification
hereunder (an "Indemnitee") of written notice of the assertion
or the commencement of any claim, liability or obligation by a
third party, whether by legal process or otherwise (a
"Claim"), with respect to any matter within the scope of
Section 14.08 or 14.09, the Indemnitee shall give written
notice thereof (the "Notice") to the Person from whom
indemnification is sought pursuant hereto (the "Indemnitor")
and shall thereafter keep the Indemnitor reasonably informed
with respect thereto, provided that the failure of the
Indemnitee to give the Indemnitor prompt notice as provided
herein shall not relieve the Indemnitor of its obligations
hereunder unless such failure results in (i) a default
judgement, (ii) the expiration of the time to answer a
complaint or (iii) material prejudice to Indemnitor's defense
of such Claim. In case any such Claim is brought against any
Indemnitee, the Indemnitor shall be entitled to assume the
defense thereof by written notice of its intention to the
Indemnitee within 30 days after receipt of the Notice, with
counsel reasonably satisfactory to the Indemnitee at the
Indemnitor's own expense. If the Indemnitor shall assume the
defense of such Claim, it shall not settle such Claim without
the prior written consent of the Indemnitee, which consent
shall not be unreasonably withheld. Notwithstanding the
assumption by the Indemnitor of the defense of any Claim as
provided in this Paragraph 14.10, the Indemnitee shall be
permitted to join in the defense of such Claim and to employ
counsel at its own expense.
ii. If the Indemnitor shall fail to notify the Indemnitee of its
desire to assume the defense of any such Claim within the
prescribed period of time, or shall notify the Indemnitee that
it will not assume the defense of any such Claim, then the
Indemnitee shall assume the defense of any such Claim, in
which event it may do so
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in such manner as it may deem appropriate, provided that it
shall not settle any Claim which would give rise to the
Indemnitor's liability under Paragraph 14.08 or 14.09, as the
case may be, without the Indemnitor's prior written consent,
such consent not to be unreasonably withheld. The Indemnitor
shall be permitted to join in the defense of such Claim and to
employ counsel at its own expense.
14.11 Except as expressly provided to the contrary in this Agreement, each
party to this Agreement shall pay its own fees, costs and expenses including,
without limitation, attorneys' fees, costs and expenses incident to the
negotiation, preparation, execution and closing of this Agreement.
14.12 Seller covenants and agrees that it will satisfy, as and when due, any
and all obligations which may have accrued on or prior to the Effective Date to
or with respect to any of its employees employed at or in connection with the
Theatres, including, without limitation, obligations as to or arising out of
any applicable federal or state laws or pension, retirement or benefit plan or
programs. Seller shall (i) on or prior to the Effective Date, provide its
employees presently employed at or in connection with the Theatres with notice
of the proposed transfer of the Theatres, (ii) effective as of the Effective
Date, either terminate the employment of such employees or transfer the
employment of such employees elsewhere within Seller's company or related
companies, and (iii) Seller shall offer benefits pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, to those employees of
Seller eligible to receive such benefits as of the Effective Date.
14.13 Seller represents and warrants as follows:
14.13.1 Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Oklahoma. The
Seller is qualified to do business in each jurisdiction where
the failure to be so qualified would have a material adverse
effect on Seller's ability to consummate the transactions
contemplated by this Agreement or the other agreements and
instruments to be executed and delivered by Seller pursuant to
the terms and provisions of this Agreement (the "Seller's
Ancillary Documents") and to perform its obligations hereunder
and thereunder.
14.13.2 The Seller has all requisite corporate power and authority to
enter into this Agreement and Seller's Ancillary Documents and
to perform its respective obligations hereunder and
thereunder. The execution and delivery by Seller of this
Agreement and Seller's Ancillary Documents and the performance
of Seller's respective obligations hereunder have been duly
authorized by all necessary corporate action on the part of
Seller. This Agreement and Seller's Ancillary Documents have
been duly executed and delivered by Seller, and each document
constitutes a valid and binding obligation of Seller,
enforceable against it in accordance with its terms, except as
enforceability may be limited by the terms of this Agreement
or bankruptcy, insolvency,
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<PAGE> 15
moratorium, fraudulent conveyance or other similar laws
affecting creditors' rights generally or by general principles
of equity.
14.13.3 With such exceptions thereto as do not have a material adverse
effect on the ability of Seller to consummate the transactions
contemplated by this Agreement or Seller's Ancillary Documents
or to perform its obligations hereunder or thereunder, the
execution, delivery and performance by Seller of this
Agreement and each of the Seller's Ancillary Documents, to the
best of Seller's knowledge, does not, and the consummation by
Seller of the transactions contemplated hereby or thereby will
not, with or without the giving of notice or the lapse of time
or both:
i. violate any law to which Seller is subject;
ii. conflict with or result in a breach of or constitute
or result in a default under any of the terms,
conditions or provisions of the certificate of
incorporation or bylaws of Seller or any order to
which Seller is subject or by which it or any Asset
is bound;
iii. except for the respective Landlord's Consent, Estoppel
and Release, require any consent of or filing with or
giving of notice to any Governmental Authority or any
other Person not a party to this Agreement;
iv. violate, or be in conflict with, or constitute a
default under, or permit the termination of any term
or provision of, or result in the acceleration of (or
give the right to accelerate) the maturity or
performance of any obligation of Seller (including
under any note, bond, mortgage, indenture, lease,
license, contract or other instrument to which Seller
is a party or by which its assets, properties or
businesses are bound) or any permit held by Seller or
by which any of its assets are bound; or
v. result in the creation of, or impose on Seller the
obligation to create, any Lien upon the Leases,
Theatres or Assets.
14.13.4 Except as set forth on Schedule of Litigation to be attached
hereto no later than 10 days following the date hereof, there
is no claim, action, suit, proceeding, litigation or order
pending, or to the knowledge of Seller threatened, by or
before any court or governmental authority or private
arbitration tribunal against Seller that relates to this
Agreement, the Theatres or the Assets or any of the
transactions contemplated hereby (i) which would adversely
affect or prevent or delay the consummation of such
transactions
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<PAGE> 16
or the performance of Seller's obligations hereunder, (ii) in
which an adverse decision could, either in any case or in the
aggregate, have a material adverse effect on the business,
operations, affairs, condition (financial or otherwise)
results of operation, properties, assets, liabilities or
prospects of the Theatres, individually or in the aggregate or
(iii) which in any manner draws into question the validity of
or otherwise affects this Agreement, the transactions
contemplated hereby or the ability of Seller to perform its
obligations hereunder.
14.13.5 Seller has delivered to Purchaser true and complete and
correct copies of the Leases.
14.13.6 Seller has delivered to Purchaser true and complete and
correct copies of the financial information with respect to
attendance for 1996, as well as box office revenues,
concession revenues and occupancy costs for the period from
November 1, 1993 through April 30, 1997. There has not been
any material change with respect to attendance, box office
revenues, concession revenues or fixed expenses in the interim
period from the date of such information through the date
hereof, nor has Seller engaged in any material transaction
other than in the ordinary course of business which would
affect attendance, box office revenues, concession revenues or
the fixed items during such interim period. Purchaser
acknowledges that, with respect to Seller's Theatre level
profit and loss statements for the twelve months ended April
30, 1997, Seller makes no warranty regarding such Theatre
level profit and loss statements, Purchaser's bank lenders may
not confirm such statements, and verification of such
statements is not a condition to closing. Except as otherwise
set forth in this paragraph, Seller warrants that all such
facts and information are true, complete and correct, and
Purchaser may rely and has relied thereon in entering into
this Agreement and the transactions contemplated hereby.
14.13.7 Seller has good and marketable title to all of the Assets and
valid leasehold interests in all Leases sold and transferred
by this Agreement and, except for Landlord's liens, the same
are free of all Liens and claims. All Leases are valid,
subsisting and effective in accordance with their terms, and
Seller enjoys peaceful possession of all such properties and
assets. To the knowledge of Seller, there are no leases,
surface or subsurface use agreements, tenancies, arrangements,
service contracts, management contracts, or other agreements,
instruments or encumbrances that will be in force or effect as
of the Closing that grant to any Person any right, title,
interest or benefit in or to all or any part of the Leases,
Theatres or Assets or any right relating to the ownership,
use, operation, management, maintenance or repair of all or
any part of the Leases, Theatres or Assets, and no Person
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<PAGE> 17
has any rights to acquire any of the Leases, Theatres or
Assets. To the knowledge of Seller, there are no third
parties in possession of any portion of the Theatres as
lessees, tenants at sufferance, trespassers or otherwise.
Upon the sale, conveyance, transfer and delivery of the
Leases, Theatres and Assets in accordance with the terms of
this Agreement, Purchaser will (i) acquire good and marketable
title to the Assets, free and clear of all Liens and (ii)
continue to enjoy peaceful possession of the Theatres.
Notwithstanding the foregoing, Purchaser, at its sole cost and
expense, has the right to examine real estate title records
with respect to the real estate demised pursuant to the Leases
until the date that is 60 days after the Effective Date (the
"Title Inspection Period"). Purchaser shall provide Seller
with a copy of any written title report or commitment for
title insurance concerning such title examination within three
(3) days after Purchaser's receipt of such report or
commitment. Title shall be deemed satisfactory unless (i)
Purchaser's title examination reveals the existence of Liens
encumbering the real estate demised pursuant to the Leases
which Liens secure indebtedness in excess of $5,000 per Lease
("Material Liens") and (ii) Purchaser delivers to Seller prior
to 5:00 p.m. Eastern Standard Time on the last day of the
Title Inspection Period, time being of the essence therefor, a
statement of any such Material Liens (the "Material Lien
Statement"). Within ten (10) days after Seller's receipt of
the Material Lien Statement ("Seller's Election Period"),
Seller may elect to (i) remove from the public record such
Material Liens, or (ii) cause the same to be affirmatively
insured against by the title insurer at Seller's expense. In
either event, Seller shall reimburse Purchaser for all direct
out of pocket costs reasonably incurred by Purchaser as a
result of claims of creditors asserted pursuant to such
Material Liens to protect Purchaser's title to the respective
Lease.
In the event that Purchaser timely delivers to Seller the
Material Lien Statement, and Seller does not, within Seller's
Election Period, remove from the public record such Material
Liens or cause the same to be affirmatively insured against by
the title insurer at Seller's expense, Purchaser may, in its
sole discretion, cancel this Agreement and rescind the
transactions contemplated hereby as provided below by written
notice to Seller within ten (10) days after the expiration of
Seller's Election Period, or, alternatively, Purchaser may
waive title objections.
In the event that Purchaser elects to cancel this Agreement as
set forth in the preceding paragraph, within ten (10) days of
the expiration of Seller's Election Period, (i) Purchaser
shall reconvey to Seller the Leases, the Theatres, and the
Assets in substantially the same condition all of the same
were in immediately prior to the Effective Date and free and
clear of all Liens
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<PAGE> 18
and claims excepting only those Liens and claims to which all
of the same were subject immediately prior to the Effective
date and (ii) Seller shall reconvey to Purchaser the Purchase
Price and the Escrow Account. In the event Purchaser is
unable to reconvey to Seller the Leases, the Theatres, and the
Assets as herein provided, Purchaser shall be obligated to
waive title objections.
14.13.8 There are no contracts binding upon the Theatres or the Assets
which are not terminable without penalty upon not more than
thirty (30) days' notice, except for the Leases and the
contracts specifically identified in Schedule of Contracts to
be attached hereto. A true and correct copy of each such
contract listed on Schedule of Contracts shall be delivered to
Purchaser no later than the Effective Date. With respect to
any contracts not canceled as of the Effective Date (unless
assumed by Purchaser), Seller covenants to be responsible for
and to pay all obligations under such contracts until the same
are terminated. No later than the Effective Date, Seller
shall pay any monies earned and owed to any employees of the
Theatres covered by either the Local 513 Agreement or the
Local 380 Agreement, or to any fund related to either such
agreement to which Seller is obligated to contribute, in each
case as of the Effective Date.
14.13.9 Since October 31, 1996, there has not been any damage,
destruction or loss (whether or not insured against) with
respect to the Theatres.
14.13.10 Except for the Local 513 Agreement and the Local 380
Agreement, Seller is not a party to any collective bargaining
agreement with respect to employees of the Theaters, no such
agreement determines the terms and conditions of the
employment of any employee of the Theaters, and no collective
bargaining agent has been certified as a representative of
any of the employees of the Theaters.
14.13.11 Except as set forth on Schedule of Material Events to be
attached hereto no later than 10 days following the date
hereof, and except as contemplated in this Agreement, since
October 31, 1996, there has not been:
i. any material adverse change in Seller's business,
operations, affairs, conditions (financial or
otherwise), results of operations, properties, assets,
liabilities or prospects as they relate to the
Theatres;
ii. any sale, assignment or disposition of any substantial
properties or assets of any kind or character relating
to the operations of the Theatres, except for personal
property sold, assigned or disposed of
18
<PAGE> 19
in the ordinary course of business and consistent with
past practice and custom;
iii. any damage, destruction or loss (whether or not
insured against) affecting the Theatres or Assets;
iv. any revocation or termination, or any notice of any
threatened revocation or termination, of any consents
or permits relating to the operations of the Theatres;
v. any material change or any anticipated change in the
present relationships between Seller and any of its
significant suppliers, insurers, lessors, licensors,
licensees and distributors and with respect to the
Theatres or Assets; or
vi. any other material transaction other than in the
ordinary course of business and consistent with past
practice and custom with respect to the Theatres or
Assets.
14.13.12 Seller has not received notice of any claims for Taxes pending
against Seller nor any threatened claims for Tax deficiencies
against Seller for which the Theatres or Assets could be
liable, and Seller does not know of any basis for such claims.
To the knowledge of Seller there exist no actual or proposed
additional assessments or adjustments of Taxes by any taxing
authority for which the Theatres or Assets could be liable.
To Seller's knowledge, there are no pending audits, actions,
proceedings, disputes, claims, or investigations with respect
to any Taxes payable by or asserted against Seller and, to the
knowledge of Seller, there is no basis on which any claim for
material Taxes can be asserted against Seller for which claims
against the Theatres or Assets could be made. All Taxes
required to be withheld or collected by Seller (including, but
not limited to, Taxes required to be withheld with respect to
amounts paid or owing to any officer, employee, creditor,
shareholder, independent contractor or other Person) as they
relate to the Theatres or the Assets have been timely withheld
or collected and, to the extent required, have been timely
paid, remitted or deposited to or with the relevant
Governmental Authority. To the knowledge of Seller, there are
no proposed reassessments of the taxable value of any of the
Theatres or Assets or similar matters pending with respect to
any taxing authority. Seller is not a party to any
outstanding agreements or waivers that would extend the
statutory period in which a taxing authority may assess or
collect a Tax against Seller for which the Theatres or Assets
could be liable. To the knowledge of Seller, there are no
Liens for Taxes (other than for current Taxes not yet due and
payable) imposed upon the Theatres or Assets.
19
<PAGE> 20
14.13.13 Seller has not received any notice, and Seller shall give
Purchaser prompt written notice of each and every notice
Seller shall have received, with respect to any Hazardous
Substance (as hereinafter defined) on, from or affecting the
Theatres. Seller is not subject to any existing, pending or
threatened action, suit, investigation, inquiry or proceeding
by any Governmental Authority under, and is not currently in
violation of, or subject to, any remedial obligation under,
any Environmental Law in respect of the Theatres. To the
knowledge of Seller, all environmental notices, permits,
licenses or similar authorizations, if any, required to be
obtained or filed in connection with the operation of the
Theatres have been obtained or filed. To the knowledge of
Seller, Hazardous Substances have not been disposed of on, to
or from any of the Theatres during the time of Seller's
ownership or possession of the Theatres, or prior thereto,
except in compliance with Environmental Laws in effect at the
time such activity was undertaken. To the knowledge of
Seller, no Hazardous Substances have been generated, managed,
treated or transported to or from the Theatres. To the
knowledge of Seller, there is not now at, on or in the
Theatres any asbestos, polychlorinated biphenyl ("PCBs") or,
to the extent only it exists at levels which are considered
hazardous to human health, radon gas. To the knowledge of
Seller, no underground storage tanks currently exist or have
existed on the land occupied by the Theatres. To the
knowledge of Seller, there has not been a Discharge of
Hazardous Substances into, onto or out of the land occupied by
the Theatres. Seller has not released any Person from any
claim under any Environmental Law or waived any rights
concerning any Discharges of Hazardous Substances into, onto
or out of or with respect to the land occupied by the
Theatres. For the purposes of this Subsection, "Hazardous
Substance" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form, PCBs and, to the
extent only it exists at levels which are considered hazardous
to human health, radon gas; and (b) any chemicals, materials
or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous substances," "toxic
substance," "toxic pollutants," "contaminants," or
"pollutants" or words of similar import, under any applicable
Environmental Laws.
14.13.14 The Theatres are connected to and are served by water, solid
waste and sewage disposal, drainage, telephone, gas,
electricity and other utility equipment facilities and
services required by law or necessary for the operation or use
of the Theatres; and such facilities and services are adequate
for the present use and operation of the Theatres on a fully
occupied basis. Seller has not received notice from any
supplier of water, solid waste and sewage disposal, drainage,
telephone, gas, electricity or other utility services
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<PAGE> 21
to the Theatres that such service is being or will be
terminated or curtailed and Seller has no knowledge that such
termination or curtailment may occur.
14.13.15 To the knowledge of Seller, there are no pending or threatened
condemnation or similar proceedings or assessments affecting
the Theatres or Assets or any part thereof, nor, to the
knowledge of Seller, are any such proceedings or assessments
contemplated by any Governmental Authority.
14.13.16 The books and records of Seller relating to the Theatres
fairly reflect the transactions to which the Theatres or
Assets are or were bound, and such books and records are and
have been properly kept and maintained, with the revenues,
expenses, assets and liabilities of Seller relating to the
Theatres and Assets accurately recorded in all material
respects therein. True, complete and correct copies of such
books and records have been made available for review by
Purchaser and shall be transferred to Purchaser as part of
the Assets.
14.14 Purchaser represents and warrants:
14.14.1 Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
Purchaser is qualified to do business in each jurisdiction
where the failure to be so qualified would have a material
adverse effect on Purchaser's ability to consummate the
transactions contemplated by this Agreement or the other
agreements and instruments, including without limitation the
Leasehold Mortgages and Security Agreements, to be executed
and delivered by Purchaser pursuant to the terms and
provisions of this Agreement ("Purchaser's Ancillary
Documents") and to perform its obligations hereunder and
thereunder.
14.14.2 Purchaser has all requisite corporate power and authority to
enter into this Agreement and Purchaser's Ancillary Documents
and to perform its obligations hereunder and thereunder. The
execution and delivery by Purchaser of this Agreement and
Purchaser's Ancillary Documents and the performance of
Purchaser's obligations hereunder have been duly authorized by
all necessary corporate action on the part of Purchaser. This
Agreement and Purchaser's Ancillary Documents have been duly
executed and delivered by Purchaser, and each document
constitutes a valid and binding obligation of Purchaser,
enforceable against it in accordance with its terms, except as
enforceability may be limited by the terms of this Agreement
or bankruptcy, insolvency, moratorium, fraudulent conveyance
or other similar laws affecting creditors' rights generally or
by general principles of equity.
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<PAGE> 22
14.14.3 With such exceptions thereto as do not have a material adverse
effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement or Purchaser's
Ancillary Documents or to perform its obligations hereunder or
thereunder, the execution, delivery and performance by
Purchaser of this Agreement and Purchaser's Ancillary
Documents, to the best of Purchaser's knowledge, does not, and
the consummation by Purchaser of the transactions contemplated
hereby or thereby will not, with or without the giving of
notice or the lapse of time or both:
i. violate any law to which Purchaser is subject;
ii. conflict with or result in a breach of or constitute
or result in a default under any of the terms,
conditions or provisions of the certificate of
incorporation or bylaws of Purchaser or any order to
which Purchaser is subject or by which it or any
Asset is bound;
iii. except for the respective Landlord's Consent, Estoppel
and Release and such other consents as shall be
obtained prior to the Closing, require any consent of
or filing with or giving of notice to any Governmental
Authority or any other Person not a party to this
Agreement; or
iv. violate, or be in conflict with, or constitute a
default under, or permit the termination of any term
or provision of, or result in the acceleration of (or
give the right to accelerate) the maturity or
performance of any obligation of Purchaser (including
under any note, bond, mortgage, indenture, lease,
license, contract or other instrument to which a
Purchaser is a party or by which its assets,
properties or businesses are bound) or any permit held
by Purchaser or by which any of its assets are bound.
14.14.4 Except as has been disclosed to Seller, there is no claim,
action, suit, proceeding, litigation or order pending, or to
the knowledge of Purchaser threatened, by or before any court
or governmental authority or private arbitration tribunal
against Purchaser that relates to this Agreement, the Theatres
or the Assets or any of the transactions contemplated hereby
which would adversely affect or prevent or delay the
consummation of such transactions or the performance of
Purchaser's obligations hereunder.
14.14.5 Purchaser operates a chain of motion picture theaters and has
a book net worth (as used in Article VII of each Lease) of not
less than $14,000,000 as of April 30, 1997.
22
<PAGE> 23
14.15 Seller declares under penalty of perjury that it is not a Foreign
Person (as defined by the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and that its federal Employer Number is: 04-2462658.
The foregoing shall constitute an affidavit as permitted by Section 1445(b) of
the Internal Revenue Code.
14.16 Purchaser acknowledges that Seller shall not fully comply with
applicable Bulk Sales laws in connection with the transactions contemplated by
this Agreement, but Seller agrees with Purchaser that Seller shall pay and
discharge when due or contest and litigate at its sole expense any and all
claims of creditors which may be asserted against Purchaser with respect to the
Assets sold and transferred by this Agreement by reason of such noncompliance
and further agrees to indemnify and to hold Purchaser harmless from and against
any and all such demands, claims and/or against any action, suit or other
proceeding and/or judgment which may hereafter arise and against any and all
damages, liabilities, costs, fees (including attorneys' fees) and expenses
Purchaser may incur as a result thereof and to promptly remove any lien or
encumbrance which may be placed upon the Assets as a result thereof.
14.17 From and after the date of this Agreement through and including the
Effective Date, Seller shall operate the Theatres in the ordinary course of
business, consistent with past practice, and shall not (i) sell, transfer,
assign, dispose of, mortgage, pledge or encumber, or permit to be sold,
transferred, assigned, disposed of, mortgaged, pledged or encumbered any or all
of the Assets, Leases or Theatres sold and transferred hereunder or remove or
permit to be removed all or any part of said Assets, Leases or Theatres from
any Theatre premises, provided, however, that Seller shall be permitted to sell
its concessions inventory and otherwise operate the Theatres in the ordinary
course of its business consistent with its past practices, or (ii) enter into
any lease, contract or commitment or incur any liabilities or obligations in
connection with said Assets except in the ordinary course of its business
consistent with its past practices.
14.18 Seller hereby agrees that from time to time after Closing it shall (i)
execute, deliver, acknowledge, file and record, or cause to be executed,
delivered, acknowledged, filed and recorded, such further bills of sale, deeds,
general conveyances, endorsements, assignments and other good and sufficient
instruments of sale, conveyance, transfer and delivery and such further
consents, certifications, affidavits and assurances as are required in order to
vest in Purchaser all of Seller's rights, title and interests in and to the
Theatres, the Leases and the Assets or otherwise to consummate and make
effective the transactions contemplated by this Agreement and (ii) take, or
cause to be taken, all actions and do, or cause to be done, all things as are
required in order to put Purchaser in actual possession and operating control
of the Theatres and the Assets or otherwise to accomplish the purposes of this
Agreement.
14.19 Seller covenants and agrees that from and after the date hereof until
Closing, or the earlier termination of this Agreement, Purchaser and its
contractors, agents and employees, at the sole expense of Purchaser, may enter
upon any portion of the Theatres from time to time during reasonable business
hours, without any disruption of the normal conduct of Seller's business at the
Theatres, and with reasonable prior notice to Seller, for the purposes of
inspection (mechanical,
23
<PAGE> 24
structural and otherwise), tests, including environmental testing and
examination of the operating condition of the Theatres and Assets. If the
Closing does not occur, Purchaser will compensate Seller for any loss, cost,
damage, liability or expense caused by any action or failure to take any action
on the part of Purchaser during its inspection activities.
In addition, from the date hereof to the Closing, Seller shall give to
Purchaser and its officers, attorneys, accountants, and representatives free,
full, and complete access during reasonable business to the Theatres and Assets
as Purchaser may deem necessary or appropriate; provided, that such due
diligence review will not unreasonably interfere with the operations by Seller
of the Theatres. Seller will provide Purchaser and its officers, attorneys,
accountants and representatives with any information reasonably requested by
them pertaining to income derived from or expenses associated with the Theatres
and Assets.
14.20 From the date hereof to the Closing, Seller shall not take or fail to
take any action which action or failure to take such action shall cause the
representations and warranties made by Seller herein to be untrue or incorrect
as of the Closing. From the date hereof to the Closing, Seller shall use its
reasonable efforts to cause all conditions precedent in Article 4 to be
satisfied by the Closing.
14.21 From the date hereof to the Closing, Seller shall keep in full force
and effect insurance coverage for the Theatres and the Assets in the same
amount and scope to the coverage now maintained covering the Theatres and the
Assets.
14.22 Seller covenants and agrees that, from and after the date hereof,
Seller will in good faith cooperate, and cause its auditors to cooperate, with
Purchaser and its auditors to prepare, as promptly as practicable, audited
financial statements, including balance sheets, income statements and cash flow
statements, for each of Seller's two most recent fiscal years, and unaudited
financial statements for the comparative interim periods following the end of
Seller's most recent fiscal year, with the intent to finalize such financial
statements as promptly as practicable.
14.23 From the date hereof to the Closing, Seller will use its reasonable
efforts to maintain the Theatres and the Assets in their present operating
condition and repair, ordinary wear and tear excepted.
14.24 As used herein, the following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person.
As used herein, the term "control" shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether
by the ownership of voting securities, by contract or
otherwise.
"Contract" means any contract, agreement, arrangement,
understanding or other instrument or obligation (whether oral
or written, pending or executory).
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<PAGE> 25
"Discharge" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment,
or into, onto, or out of the Theatres, including the movement
of any Hazardous Substance or other substance through or in
the air, soil, surface water, groundwater or other property.
"Environmental Laws" means any federal, state, local and
foreign laws (including common law), statutes, codes,
ordinances, guides, written policy rules and regulations that
are applicable to the Theatres or Assets, and in each case as
amended, and any judicial or administrative interpretation
thereof, relating to pollution or protection of human health,
the environment or natural resources (including, without
limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation,
laws, statutes, codes ordinances, rules, regulations, consent
decrees and judgements relating to emissions, discharges,
releases or threatened releases of Hazardous Substances, or
otherwise relating to the manufacture processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state
court and any other agency, body, authority or entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means, with respect to any properties or assets, any
mortgage, pledge, hypothecation, assignment, security
interest, lien or encumbrance or any preference, priority or
other security agreement or preferential arrangement of any
kind or character whatsoever (including, but not limited to,
any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect
as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction) in respect of such
properties or assets.
"Person" means any individual, corporation, limited liability
company, partnership, association, trust or any other entity
or organization of any kind or character, including any
Governmental Authority.
"Taxes" means all taxes, charges, fees, levies or other
assessments (including, but not limited to, income, gross
receipts, excise, property, sales, occupation, use, service
use, license, payroll, franchise, transfer and recording
taxes, fees and charges) imposed by any Governmental
Authority, whether computed on a separate, consolidated,
unitary or combined basis or in any other manner, and includes
any interest, penalties and additions to any tax.
25
<PAGE> 26
14.25 All of the representations and warranties of Seller which are limited
to "the knowledge of Seller" are based on, and are limited to, the actual
knowledge of Seller's Director of Operations for the Theatres after reasonable
inquiry relating to the substance of the representation or warranty. "Actual
knowledge" means only that information which is in fact known to one or more of
the aforesaid and excludes information which is not so known by any of them
even if it would or might be obtained from an investigation to determine the
existence of such facts and is known to Persons other than the aforesaid,
whether or not they may be employees of Seller or any Affiliate thereof.
14.26 Notices. All notices and other communications hereunder shall be
given by delivery in person, by registered or certified mail (return receipt
requested with postage prepaid thereon) or by facsimile transmission to the
respective parties at the following addresses (or at such other address as
either party shall have furnished to the other in accordance with the terms of
this Section):
If to Seller:
General Cinema Corp. of Oklahoma, Inc.
c/o General Cinema Theatres
Box 9100
1280 Boylston Street
Chestnut Hill, Massachusetts 02167
Attention: William B. Doeren, Executive Vice President
Facsimile: (617) 264-8361
With a copy to:
General Cinema Corp. of Oklahoma, Inc.
1300 Boylston Street
Chestnut Hill, Massachusetts 02167
Philip Szabla, General Counsel
Facsimile: (617) 264-8206
If to Purchaser:
Hollywood Theatres, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Attention: Thomas W. Stephenson, Jr.
Facsimile: (214) 520-2323
26
<PAGE> 27
With a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Carlos A. Fierro
Facsimile: (214) 953-6503
All notices and other communications hereunder that are addressed as provided
in or pursuant to this Section shall be deemed duly and validly given (i) if
delivered in person, upon delivery, (ii) if delivered by registered or
certified mail, 72 hours after being placed in a depository of the United
States Mails or (iii) if delivered by facsimile transmission, upon transmission
thereof and receipt of the appropriate answer back.
14.27 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, constitutes the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior oral
or written agreements and understandings with respect thereto. All Exhibits
and Schedules hereto are expressly made a part of this Agreement and are
incorporated herein by reference.
14.28 Parties in Interest; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns (it being understood and agreed that, except as expressly
provided herein, nothing contained in this Agreement is intended to confer upon
any other Person any rights, benefits or remedies of any kind or character
whatsoever under or by reason of this Agreement). Neither party may assign
this Agreement without the prior written consent of each of the other parties
hereto.
14.29 Amendment; Waivers. This Agreement may be amended only by a written
instrument duly executed and delivered on behalf of each of the parties hereto,
and compliance with any term or provision hereof may be waived only by a
written instrument executed by each party entitled to the benefits thereof. No
failure to exercise any right, power or privilege granted hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege granted hereunder.
14.30 Severability. In the event that any term or provision contained in
this Agreement is held to be invalid, illegal or unenforceable for any reason,
the invalidity, illegality or unenforceability thereof shall not affect any
other term or provision hereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14.31 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with the terms hereof. Accordingly, the
parties agree that each of them shall be entitled to injunctive relief to
27
<PAGE> 28
prevent breaches of the terms of this Agreement and to obtain specific
performance of the terms hereof, in addition to any other remedy now or
hereafter available at law or in equity, or otherwise.
14.32 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Oklahoma, without regard to
principles of conflicts of law, except to the extent that mandatory principles
of conflicts of law require the application of laws of another jurisdiction
wherein any of the Assets are located to determine the validity or effect of
the sale, conveyance, transfer or delivery thereof in accordance with the
provisions of this Agreement.
14.33 Headings. The Article and Paragraph headings contained in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and shall not limit, extend or otherwise affect the meaning or
interpretation of the provisions hereof.
14.34 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
14.35 Press Releases. None of the parties hereto shall issue press releases
or other public communications of any sort relating to this Agreement prior to
Closing; provided, however, that the parties shall be entitled to make such
disclosures as may be required pursuant to applicable law or the lawful
requirement of any Governmental Authority or by order of a court of competent
jurisdiction.
14.36 Purchaser will have secured, as of the Effective Date, financing
sufficient to fund the closing of the transactions contemplated by this
Agreement.
14.37 Purchaser understands that Seller is building a new concession stand
at the Penn Square Theater in Oklahoma City at a cost of $147,000, including
equipment and construction related to the renovation of the concession stand.
Purchaser will reimburse Seller for such costs if such costs are paid prior to
the Closing or will assume responsibility for payment of such costs if they are
not due until after the Closing, in each case subject to a maximum
reimbursement or payment of $147,000. Such reimbursement or assumption
obligation shall be in addition to the obligation to pay the Purchase Price
pursuant to Articles 1 and 2 hereof.
14.38 Purchaser understands that, prior to the date hereof, Seller has been
leasing the sound system currently installed in each of the Theaters. In
consideration of the purchase and sale of such sound systems in each Theater,
Purchaser agrees to make a one-time payment to Seller at the Closing of
$179,040, or such amount as may subsequently be agreed to by the parties
following execution of this Agreement. Such one-time payment shall be in
addition to the obligation to pay the Purchase Price pursuant to Articles 1 and
2 hereof, and shall constitute Purchaser's entire obligation with respect to
the sound system in each of the Theaters. After making such payment to Seller,
Seller agrees that Purchaser shall own all right, title and interest in and to
such sound systems, and that Purchaser shall have no obligations with respect
to the leases entered into between Seller and the lessor of such sound systems.
28
<PAGE> 29
ARTICLE 15
NON-COMPETITION AGREEMENT
Except as otherwise consented to or approved in writing by Purchaser,
Seller agrees that neither Seller nor any of Seller's Affiliates will at any
time for a period of three (3) years following the Closing, directly or
indirectly, acting alone or in conjunction with any Person, or as a holder,
beneficially or of record, of in excess of 5% of any security of any class, or
as a consultant to or representative of, any Person:
(A) engage in the business of Purchaser as it is being conducted
immediately following the Closing in competition with
Purchaser at any location with a 3 1/2 mile radius of any
Theatre location; or
(B) request any present or future supplier of, distributor to or
provider of services to Purchaser to curtail or cancel its
business with Purchaser in respect of the operations at any
Theatre and the use and operation of the Assets; or
(C) unless otherwise required by law, disclose to any Person any
details of the organization or affairs of the business of
Purchaser or any other nonpublic information concerning the
Theatres or Assets or the conduct of the operations at the
Theatres.
Seller and Seller's Affiliates acknowledge that in the event the scope
of the covenants set forth in this Article 15 is deemed to be too broad in any
court proceeding, the court may reduce such scope to that which it deems
reasonable under the circumstances. The parties hereto agree and acknowledge
that Purchaser does not have any adequate remedy at law for the breach or
threatened breach by Seller or Seller's Affiliates of the agreements set forth
in this Article 15 and, accordingly, Purchaser may in lieu of or in addition to
the other remedies that may be available to it hereunder (including its rights
to indemnification hereunder) or under applicable law, file a suite in equity
to enjoin Seller or Seller's Affiliates from such breach or threatened breach
and consent to the issuance of injunctive relief hereunder.
ARTICLE 16
SURVIVAL OF REPRESENTATIONS AND AGREEMENTS
16.01 Except as otherwise expressly provided herein, none of the
representations and warranties contained in this Agreement or in any Seller's
Ancillary Documents or Purchaser's Ancillary Documents shall survive the
Closing. The representations and warranties contained in Sections 14.13.12 and
14.13.13, the last sentence of the first paragraph of Section 14.13.7 and the
last two sentences of Section 14.13.8 of this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby and
thereby and shall continue in full force and effect for one (1) year after the
Effective Date.
29
<PAGE> 30
16.02 Each covenant and agreement set forth in this Agreement or in any
Seller's Ancillary Document or in any Purchaser's Ancillary Documents to be
performed after the Closing will survive the Closing in accordance with its
terms.
ARTICLE 17
PURCHASER'S SUBSEQUENT TRANSFER
Purchaser hereby represents and warrants that it is purchasing the
Theatres with the intent of owning and operating them indefinitely, such
representation and warranty constituting a material part of the consideration
to Seller hereunder and being relied upon by Seller in connection with its
willingness to enter into this Agreement. Accordingly, Purchaser agrees that
if, during the period of three (3) years from the Effective Date, any interest
in any of the Theatres or Assets shall be sold, leased, assigned or otherwise
conveyed in any manner (other than with respect to the Assets in the ordinary
course of business) to any party that is not a subsidiary or Affiliate of
Purchaser or if a binding agreement be entered into to do any of the foregoing
(any such event hereinafter a "Transfer"), then Purchaser or any subsequent
holder of such interest shall (i) notify Seller of such Transfer, and (ii) pay
to Seller at the time of such Transfer a one-time fee of $25,000. This Article
17 shall apply only to the Transfer of the Theaters, either individually or
together, or in connection with the sale by Purchaser of all of its theaters in
Oklahoma as a unit, but not in connection with the sale, lease, assignment or
other conveyance of any other assets, properties or theaters of Purchaser or
the merger or consolidation of Purchaser with any other Person.
30
<PAGE> 31
Executed as a sealed instrument on the day and year above first
written in several counterparts each of which shall be an original.
PURCHASER: SELLER:
HOLLYWOOD THEATERS, INC. GENERAL CINEMA CORP.
OF OKLAHOMA, INC.
By /s/ James Featherstone By /s/ Paul R. Del Rossi
---------------------------- ----------------------------
James Featherstone, Paul R. Del Rossi
Vice President and Chief President
Financial Officer
<PAGE> 32
[EXECUTION COPY]
AMENDMENT NO. 1 TO PURCHASE AND ASSIGNMENT AGREEMENT
AMENDMENT NO. 1 TO PURCHASE AND ASSIGNMENT AGREEMENT made this 30th day
of July 1997, between GENERAL CINEMA CORP. OF OKLAHOMA, INC., an Oklahoma
corporation ("Seller"), and HOLLYWOOD THEATERS, INC., a Delaware corporation
("Purchaser"). Capitalized terms used herein without definition shall have the
respective meanings set forth in the Purchase Agreement (as defined herein).
RECITALS
WHEREAS, on July 25, 1997, Seller and Purchaser entered into that certain
Purchase and Assignment Agreement (the "Purchase Agreement") pursuant to which
Purchaser agreed to buy from Seller, and Seller agreed to sell to Purchaser,
all of Seller's right, title and interest in and to certain theater leases
relating to seven motion picture theaters located in the cities of Tulsa and
Oklahoma City, in the State of Oklahoma (the "Theaters"), along with the assets
related to such theaters (the "Acquisition");
WHEREAS, Article 3 of the Purchase Agreement provides that the closing of
the transactions contemplated by the Purchase Agreement shall take place on
August 5, 1997; and
WHEREAS, Seller and Purchaser desire to enter into this Amendment No. 1
to the Purchase Agreement to establish certain changes in the procedures to be
followed in consummating the Acquisition and turning over control of the
Theaters from Seller to Purchaser.
WITNESSETH
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto agree
as follows:
18 The Signing Date.
18.01 On August 7, 1997, Seller and Purchaser will consummate the
Acquisition by signing all such documents as are necessary to effect the
closing of the transactions contemplated by the Purchase Agreement, including
those documents referred to in Articles 7 and 8 thereof. All such documents
shall be dated to be effective as of the Effective Date as specified below, and
shall be held in escrow by Baker & Botts, L.L.P. pending the Effective Date and
the payment of the Purchase Price in consideration of the assignment of the
Leases and Assets as specified in the Purchase Agreement and herein.
-1-
<PAGE> 33
18.02 Simultaneously with the signing of the documents described in the
preceding paragraph, Purchaser will deposit the following in escrow in a
segregated interest bearing account with a commercial bank (the "Purchase Price
Account"): (i) the Purchase Price, less the Escrow Funds, (ii) all amounts
required to be deposited in the Escrow Account pursuant to Article 2 of the
Purchase Agreement, and (iii) the amounts required to be reimbursed or paid
pursuant to Sections 14.37 and 14.38 of the Purchase Agreement (collectively,
with the amounts set forth in clauses (i) and (ii) of this paragraph, the "Cash
Deposit").
19 The Effective Date.
19.01 The Purchase Agreement is hereby amended to provide that the
"Effective Date" shall be the 14th day of August, 1997.
19.02 On the Effective date, Purchaser shall deliver to Seller the Cash
Deposit from the Purchase Price Account for application by the Seller to the
Purchase Price (subject to the adjustments set forth in Article 9 of the
Purchase Agreement), the funding of the Escrow Account and the reimbursements
and payments required by Sections 14.37 and 14.38. Purchaser shall be entitled
to interest earned on the funds in the Purchase Price Account. Upon such
delivery of the Cash Deposit, the transactions contemplated by the Purchase
Agreement shall be deemed to have "Closed" and all documents referred to in
Section 1 above shall become effective without any further act of any party.
19.03 At midnight on the Effective Date, Seller shall turn over control
and all operations of the Theaters to Purchaser.
20 Miscellaneous.
20.01 This Amendment No. 1 may be amended only by a written instrument
duly executed and delivered on behalf of each of the parties hereto, and
compliance with any term or provision hereof may be waived only by a written
instrument executed by each party entitled to the benefits thereof.
20.02 This Amendment No. 1 shall be governed by, and construed in
accordance with, the laws of the State of Oklahoma, without regard to
principles of conflicts of law.
20.03 The headings contained in this Amendment No. 1 are for convenience
of reference only, do not constitute a part of this Amendment No. 1 and shall
not limit, extend or otherwise affect the meaning or interpretation of the
provisions hereof.
20.04 This Amendment No. 1 may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
-2-
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first above written.
GENERAL CINEMA CORP. OF OKLAHOMA, INC.
By: /s/ Paul Del Rossi
--------------------------------------
Name: Paul Del Rossi
------------------------------------
Title: President
-----------------------------------
HOLLYWOOD THEATERS, INC.
By: /s/ James Featherstone
--------------------------------------
Name: James Featherstone
------------------------------------
Title: Vice President
-----------------------------------
<PAGE> 1
EXHIBIT 10.5
AGREEMENT OF PURCHASE AND SALE
This AGREEMENT OF PURCHASE AND SALE (this "Agreement") is entered into
as of the 22nd day of July, 1996, by and among UNITED ARTISTS THEATRE CIRCUIT,
INC., a Maryland corporation ("UATC") and UNITED ARTISTS PROPERTIES I CORP., a
Colorado corporation ("UAPIC"), and RESORT AMUSEMENT CORPORATION, a Texas
corporation ("RAC") (UATC, UAPIC and RAC will be referred herein collectively
as the "Sellers" and each individually as a "Seller"), at the address of 9110
E. Nichols Avenue, Suite 200, Englewood, Colorado 80112, and HOLLYWOOD
THEATERS, INC., a Delaware corporation (the "Purchaser"), at the address of
2911 Turtle Creek Boulevard, Suite 1150, Dallas, Texas 75219, Attn: Thomas W.
Stephenson, Jr.
RECITALS
A. UAPIC owns two parcels of real property located in Texas, being
operated as motion pictures theatres, which property UAPIC desires to sell to
Purchaser. UATC owns a leasehold interest in 17 motion picture theatres and
RAC owns a leasehold interest in one motion picture theatre located in the
states of Idaho, Oklahoma and Texas, all of which the Sellers desire to assign
to Purchaser. In addition, the Sellers own certain personal property used in
the operation of or in connection with the above-mentioned motion picture
theatres, which property the Sellers desire to sell to Purchaser.
B. Purchaser and the Sellers desire to enter into this Agreement
pursuant to which Purchaser will assume and the Sellers will assign such
leaseholds, and Purchaser will buy and the Sellers will sell the Sellers' real
property and the other assets hereinafter described with an anticipated closing
date of September 26, 1996.
AGREEMENTS
In consideration of the premises, the Purchase Price and the covenants,
contained herein, the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the terms set forth
below shall have the following respective meanings:
A. Acceptance Date. "Acceptance Date" means the date upon which
this Agreement is signed by the Sellers and Purchaser.
B. Affiliate. "Affiliate" means, with respect to any Person, any
other Person who, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. As used herein, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether by the ownership of voting securities, by contract or otherwise.
<PAGE> 2
C. Closing. "Closing" means the consummation of the purchase of the
Purchased Assets as contemplated by Section 13 of this Agreement.
D. Contract. "Contract" means any contract, agreement, understanding
or other instrument or obligation (whether oral or written, pending or
executory).
E. Earnest Money Deposit. "Earnest Money Deposit" means the amount
to be paid by Purchaser pursuant to Section 4 below, which amount is to be held
by Title Company in an interest bearing account in accordance with the terms
and conditions of this Agreement.
F. Environmental Laws. "Environmental Laws" means any federal,
state or local statute, law, rule, regulation, ordinance, code, guide, written
policy, directive and rule of common law in effect that is applicable to the
Purchased Assets and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment or natural resources, or any
Hazardous Substance, including without limitation, Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq.; Solid Waste Disposal Act, 42 U.S.C. Section 6901 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U. S. C. Section 7401 et seq.; the Clean Air Act, 42
U. S. C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.;
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et
seq., and the regulations promulgated pursuant thereto and any state and local
counterparts or substantial
equivalents thereof.
G. Fee Theatres. "Fee Theatres" means the Real Property and
Improvements located thereon as more particularly described in Section 3 below.
H. Governmental Authority. "Governmental Authority" means any
nation or government, any state or political subdivision thereof, any federal
or state court and any other agency, body or authority exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
I. Hazardous Substance. "Hazardous Substance" means (a) any
petroleum or petroleum products, radioactive materials, asbestos in any form,
polychlorinated biphenyls ("PCBs") and, to the extent only it exists at levels
which are considered hazardous to human health, radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "toxic substances," "toxic pollutants," "contaminants,"
or "pollutants" or words of similar import, under any applicable Environmental
Laws.
J. Inspection Period. "Inspection Period" means the period
beginning on the Acceptance Date and ending at the close of business 90 days
following the Acceptance Date.
<PAGE> 3
K. Leasehold Theatres. "Leasehold Theatres" means those certain
leasehold rights under the Leases as more particularly described in Section 3
below.
L. Leases. "Lease or "Leases" means those written leases, together
with all amendments and modifications thereto, relating to the Leasehold
Theatres, described in Section 3 below.
M. Lien. "Lien" means, with respect to any properties or assets,
any mortgage, pledge, hypothecation, assignment, security interest, lien or
encumbrance or any preference, priority or other security agreement or
preferential arrangement of any kind or character whatsoever (including, but
not limited to, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction) in
respect of such properties or assets.
N. Material Adverse Effect. "Material Adverse Effect" means a
material adverse effect on the business, operations, affairs, condition
(financial or otherwise), properties, assets, or liabilities of the Theatres,
individually or in the aggregate.
0. Person. "Person" means any individual, corporation, limited
liability company, partnership, association, trust or any other entity or
organization of any kind or character, including any Governmental Authority.
P. Proprietary Rights. "Proprietary Rights" means any United States
and foreign letters patent, patents, patent applications, trademarks, trade
names, service marks, brand names, logos and other trade registrations
(including unregistered names and marks), trademark and service mark
registrations and applications, copyrights and copyright registrations and
applications, inventions, invention disclosures, trade secrets, processes,
designs, technology, know-how and other similar rights.
Q. Purchase Price. "Purchase Price" means the price payable for the
purchase of the Purchased Assets as more particularly set forth in Section 5A
below.
R. Purchased Assets. "Purchased Assets" means the Fee Theatres,
Leasehold Theatres, Personal Property, Contract Rights and Names as more
particularly described in Section 3 below.
S. Taxes. "Taxes" means all taxes, charges, fees, levies or other
assessments (including, but not limited to, income, gross receipts, excise,
property, sales, occupation, use, service use, license, payroll, franchise,
transfer and recording taxes, fees and charges) imposed by any Governmental
Authority, whether computed on a separate, consolidated, unitary or combined
basis or in any other manner, and includes any interest, penalties and
additions to any tax.
<PAGE> 4
T. Theatres. The Fee Theatres and the Leasehold Theatres, as
described in Section 3 below, are collectively referred to herein as the
"Theatres."
U. Title Company. "Title Company" means Republic Title Company, as
agent to Chicago Title at the address of ____________________________________.
2. AGREEMENT. Subject to the terms and conditions set forth in this
Agreement, the Sellers will sell and convey the Purchased Assets to Purchaser
and Purchaser will purchase the Purchased Assets from the Sellers for the
Purchase Price and upon the terms and conditions set forth in this Agreement.
3. PROPERTY TO BE SOLD. The Purchased Assets consist of:
A. Real Property and Improvements. Fee simple title in and to that
certain tract of real property known as the Odessa NorthPark located in Odessa,
Texas, and that certain tract of real property known as the Texas I and II
located in Sweetwater, Texas, both of which are more particularly described in
Exhibit A attached hereto and by this reference incorporated herein (together,
the "Real Property"), and all buildings or other improvements situated on the
Real Property (collectively, the "Improvements"), together with all of Seller's
right, title and interest in and to adjacent streets, roads, alleys,
rights-of-way, easements, rail usage and any strips or gores of real estate
abutting or bounding said property, and all rights, titles and interest of
Seller appurtenant to the Real Property and the Improvements (collectively, the
"Fee Theatres").
B. Leasehold Theatres. All of the Sellers' right, title and interest
as tenants in, to and under the Leases covering the 18 Leasehold Theatres which
are described on Exhibit B attached hereto and incorporated herein; provided,
however, that the Sellers' right, title and interest as tenants in, to and
under the Law covering the Cache Cinemas, located in Lawton, Oklahoma (the
"Cache Lease") shall not be assigned to the Purchaser. Sellers shall sublease
their interest in, to and under the Cache Lease to Purchaser, and Seller and
Purchaser shall execute a sublease agreement reasonably acceptable to the
parties covering the Cache Lease.
C. Personal Property. All tangible personal property, equipment
and fixtures of any kind owned by the Sellers and attached to or located
within or on and customarily used in connection with the operation of the
Theatres, including but not limited to, seats, cleaning equipment, concessions
equipment, typewriters or similar office equipment, projection and sound
equipment, screens, carpets, draperies, soundfold, wall coverings, cash
registers, non-Pacer ticketing machines and personal computers, signs
(including marquees), cleaning supplies, projection supplies and concession
supplies not held for sale to the public; provided, however, that the items
described on Exhibit C attached hereto and by this reference incorporated
herein shall be excluded from the sale to Purchaser under this Agreement (the
"Personal Property").
D. Contract Rights. Subject to the provisions of Section 8C hereof,
all of Sellers' right, title, and interest in and to any and all (i) Contracts,
such as maintenance, service or utility agreements relating to the ownership,
maintenance and operation of the Theatres, (ii) warranties and
<PAGE> 5
guaranties currently in force and effect with respect to and running in favor
of the Theatres, (iii) all licenses, permits or similar documents relating to
the Theatres, and (iv) the obligation to honor for one year after the Closing
Date any and all prepaid tickets or passes issued by Seller prior to Closing,
allowing admittance to the Theatres, as described below in this paragraph
(collectively, the "Contract Rights"). A flyer describing the tickets and
passes which may be accepted will be given to Purchaser prior to Closing.
Sellers agree to reimburse Purchaser for the face value of any and all prepaid
tickets and passes honored by Purchaser hereunder. A request for reimbursement
may be made by Purchaser once in each calendar quarter and shall be reimbursed
by Sellers no later than 30 days after receipt of an invoice therefor,
accompanied by reasonable documentation of the applicable amounts owed.
Sellers' obligations under this Paragraph shall survive the Closing.
E. Names. All of the Sellers' right, title and interest in and to
the names of the Theatres (the "Names") and any symbol or logo related to such
Names, and any Proprietary Rights in and to the Names and any other intangible
rights and goodwill associated with the Names. Purchaser acknowledges that it
shall have no rights to use the name "United Artists" nor any logo trademark or
similar mark for such name. Sellers agree that they shall be responsible, at
their respective cost, for the removal of any signs on, outside or within the
Theatres with the name "United Artists" on them as soon as reasonably
practicable after Closing, not to exceed 90 days after the Closing Date.
The Fee Theatres, Leasehold Theatres, Personal Property, Contract
Rights and Names will be collectively referred to in this Agreement as the
"Purchased Assets."
4. EARNEST MONEY DEPOSIT
A. The Earnest Money Deposit under this Agreement shall be as
follows: within three days of the Acceptance Date, Purchaser shall deliver to
Title Company the sum of Two Hundred Seventy-Five Thousand and no/ 100 dollars
($275,000.00) in immediately available funds, which is to be held by the Title
Company for the benefit of Purchaser and Sellers in accordance with the terms,
and conditions of this Agreement (the "Earnest Money Deposit"). The Title
Company shall deposit the Earnest Money Deposit in an interest-bearing account
at a federally insured national bank. From time to time as directed by
Purchaser, the Title Company shall pay any interest earned on the Earnest Money
Deposit to Purchaser. The Earnest Money Deposit shall be refunded to Purchaser,
together with any interest thereon, if Purchaser terminates this Agreement
during the Inspection Period in accordance with the terms of Section 9 hereof.
If Purchaser does not terminate this Agreement during the Inspection Period
pursuant to Section 9, the Earnest Money Deposit will become non-refundable and
the parties will proceed to Closing. If this Agreement is not earlier
terminated in accordance with the terms and conditions of this Agreement, the
Earnest Money Deposit shall be credited against the Purchase Price at Closing.
Notwithstanding the foregoing, if this Agreement terminates in accordance with
Sections 14, 15 or 16B, the Earnest Money Deposit shall be refunded to
Purchaser, together with any interest thereon.
B. In addition, within three days of the Acceptance Date, the
Purchaser shall pay to Sellers the sum of One Hundred and no/100 dollars
($100.00) (the "Non-Refundable Earnest
<PAGE> 6
Money Deposit") in consideration for this Agreement and the Inspection Period.
Notwithstanding anything in this Agreement to the contrary, the Non-Refundable
Earnest Money Deposit shall be non-refundable to Purchaser in any event.
5. PURCHASE PRICE.
A. Purchase Price. The total Purchase Price for the Purchased Assets
is Eleven Million Nine Hundred Sixty-Five Thousand Two Hundred Sixty-One and
no/100 Dollars ($11,965,261.00). The Purchase Price is based upon the "Cash
Flow Multiple" multiplied by the "1995 Cash Flow" amounts for the Theatres as
specified on Exhibit F attached hereto and incorporated herein, reduced by a
credit to Purchaser of $125,000 for Pacer hardware and software ticketing
systems which are not included as part of the Purchased Assets.
The parties hereby agree that in the event, during the Inspection
Period, that either Seller or Purchaser discovers an error in Seller's profit
and loss statements for 1995 as to the Theatres such that the "1995 Cash Flow"
amounts shown on Exhibit F are incorrect, then the Purchaser and Seller shall
promptly adjust the Purchase Price based upon the actual 1995 Cash Flow amounts
for the Theatres multiplied by the Cash Flow Multiple shown for each Theatre on
Exhibit F. The "1995 Cash Flow" amounts shall not be adjusted after the
expiration of the Inspection Period.
B. Allocation of Purchase Price. On or prior to expiration of the
Inspection Period, the Purchase Price shall be allocated among the Purchased
Assets and the Covenant not to Compete. Such allocation shall be mutually
agreeable to Purchaser and Sellers. Purchaser and Sellers hereby agree that
neither party will take a position on any income tax return or before any
Governmental Authority charged with the collection of any income tax or in any
judicial proceeding that is in any way inconsistent with the allocation agreed
upon pursuant to this Section 5B, and that it will prepare and file, promptly
as and when due, all forms of returns required to be filed by the Internal
Revenue Service and any other Governmental Authority. The provisions of this
Section 5B shall survive Closing.
C. Payment of Purchase Price. The Purchase Price, adjusted for
apportionments and closing costs as provided in Sections 13C and 13D below and
reduced by the amount of the Earnest Money Deposit and the Nonrefundable
Earnest Money Deposit, shall be payable in full by Purchaser to the Sellers in
cash or by certified check, cashier's check or federal wire transfer on the
date of Closing.
D. Liabilities. Purchaser shall not assume, pay, perform or
discharge any debts, liabilities, expenses or obligations of the Sellers of any
kind, character or description whatsoever (whether contingent, known or
unknown, asserted or unasserted, whether or not the same are disclosed to
Purchaser in of pursuant to this Agreement) that arise or are incurred prior to
or on the date of Closing in connection with the operation and business of the
Theatres or related to the Purchased Assets; provided, however, that Purchaser
shall assume all obligations of Sellers related
<PAGE> 7
to repair, maintenance, upkeep and condition of the Theatres, regardless of the
date such obligation may have arisen, subject to the representations of Sellers
in Sections 6J, 6K, 6L and 60 hereof.
6. SELLERS' REPRESENTATIONS AND WARRANTIES. Each Seller jointly and
severally represents and warrants to the Purchaser as of the Acceptance Date
and as of the date of the Closing as follows:
A. Corporate Organization. UATC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and has all requisite corporate power and authority to own, lease and operate
its assets and properties. UAPIC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and has
all requisite corporate power and authority to own, lease and operate its
assets and properties. RAC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has all requisite
corporate power and authority to own, lease and operate its assets and
properties.
B. Authority: Binding Effect. All resolutions, stockholder actions
and other proceedings required to be taken by or on behalf of Sellers to
authorize Sellers to execute and deliver this Agreement and to consummate the
transactions contemplated hereby have been or will be, on or prior to Closing,
duly and validly taken. Each Seller has all requisite power and authority to
enter into this Agreement and each of the other agreements and instruments to
be executed and delivered by the Sellers pursuant to the terms of this
Agreement (the "Sellers' Ancillary Documents") and to perform its respective
obligations hereunder and thereunder. This Agreement and the Sellers'
Ancillary Documents have been or will be duly executed and delivered by the
Sellers and when duly executed and delivered, will constitute legal, valid and
binding agreements of the Sellers, enforceable against. the Sellers in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights generally or by general
principles of equity.
C. Cash Flow Statements. The unaudited statements of operations for
the years ended December 31, 1993, 1994 and 1995 which are summarized on Exhibit
F, fairly present in all materials respects the results of operations and cash
flows of the Theatres for such twelve-month period. Such statements were
prepared using the same principles and procedures as used for audited
financials, which audited financials are prepared in conformity with generally
accepted accounting principles. The numbers shown as "Cash Flow" on Exhibit F
were calculated as follows: (a) all revenue of the Sellers during such periods
derived from the respective Theatres, including, without limitation, ticket
revenue, advertising revenue and revenue from concession sales less (b) all
expenses incurred by the Sellers during such period in connection with the
ownership, leasing and operation of the respective Theatres during such
periods.
D. Title. At Closing, Sellers will be the sole owners of all the
Purchased Assets and will not have assigned, pledged, transferred, leased or
otherwise encumbered Sellers' interest in the Purchased Assets. UAPIC has good
and indefeasible title to the Fee Theatres and UATC and
<PAGE> 8
RAC have valid leasehold interests in the Leasehold Theatres, as the case may
be, free and clear of all Liens granted by Sellers, except the Permitted
Exceptions.
Sellers have delivered true and complete copies of the Leases in
Sellers' files relating to the Leasehold Theatres, and Sellers have made no
changes to the Leases since the date of delivery, except as disclosed to
Purchaser. Each such Lease is a valid and binding obligation of Seller and, to
Seller's knowledge, the landlord, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and by equitable
principles of general applicability. The rent due under the Leases and the
terms of the Leases are as set forth in Schedule 6D hereto (to be delivered
within 15 days of the Acceptance Date). Sellers have received no written
notice of any defaults under any lease which have not been cured and, to the
best knowledge of Sellers, there are no existing defaults by any Seller or
landlord under any such Lease and no event has occurred which (with or without
notice, lapse of time or both) would constitute a default under a Lease by any
party.
Sellers have not leased any part of the Fee Theatres or the Leasehold
Theatres to any Person, and Seller has not granted to any other person any
estate in or right to possession of such properties (other than the interest
and rights of any landlord with respect to any Leasehold Theatres and other
than rights of way, easements or similar encumbrances shown on the Surveys or
disclosed to Purchaser on Schedule 6D to be delivered on or before two weeks
prior to the end of the Inspection Period (excluding, in any case, liens or
security interests of any nature securing indebtedness for borrowed money).
The representations of this Section 6D shall survive the Closing for a
period of one year from the Closing Date.
E. Absence of Conflicts. Except as set forth on Schedule 6E hereto
(to be delivered within 10 days of the Acceptance Date), the execution and
delivery by the Sellers of this Agreement and the Sellers' Ancillary Documents,
the performance by the Sellers of their respective obligations hereunder and
thereunder and the consummation by the Sellers of the transactions contemplated
hereby or thereby will not require the Sellers to obtain any consent, approval,
permit, notice, action, authorization or waiver (each, a "Consent") of or
filing with or giving notice to any Governmental Authority or any other Person
not a party to this Agreement, except for the Consents listed on Schedule 6E
hereto and except any consents of mortgagees of the landlords under the Leases
which may be required under any mortgages which encumber the Leasehold
Theatres.
F. Taxes. Subject to Section 13C(i) and (ii), Sellers have paid,
or will pay out of Closing proceeds, in full all Taxes on the Purchased Assets
that have accrued for the period prior to Closing and the Purchased Assets will
not be subject to any lien for payment of taxes, other than general property
taxes constituting a lien not yet payable. There are no pending audits with
respect to any Taxes related to the Purchased Assets payable by or asserted
against any Seller. There are no proposed reassessments of the taxable value
of any of the Purchased Assets or similar matters pending with respect to any
taxing authority. There are no Liens for taxes (other than for current taxes
not yet due and payable) imposed upon the Purchased Assets.
<PAGE> 9
G. Contracts and Other Agreements. Each Contract described in
Schedule 6G - Assumed Contracts (to be supplied pursuant to Section 8C) is
valid, in full force and effect, and binding upon the Seller that is a party
thereto, in accordance with its terms. To the best knowledge of Sellers, no
Seller is in default under any of the Contracts described in Schedule
6G-Assumed Contracts. No Seller has received any written notice from any other
party to any Contract listed on Schedule 6G of the termination or threatened
termination thereof.
H. No Violation. To the best of Sellers' knowledge, no approval,
authorization or other action by, or filing with, any governmental authority,
is required in connection with the execution and delivery by the Sellers of
this Agreement or the consummation by the Sellers of the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not conflict
with, or result in a violation of, or constitute a default under any provision
of the Sellers' Articles of Incorporation or Bylaws, or to the best of Sellers'
knowledge, of any agreement, order, writ, judgment or decree, ordinance,
regulation or any other restriction to which the Purchased Assets are subject
or by which any Seller is bound, nor under any indenture, mortgage, deed of
trust, indebtedness to which any Seller is a party, in accordance with its
terms.
I. Litigation. No Seller has received any written notice of any
action, suit, investigation, inquiry or other proceeding pending against,
threatened against or affecting the Sellers and any of the Purchased Assets in
any court or before any arbitrator or any foreign or United States federal,
state or local Governmental Authority (i) in which an adverse decision could,
either in any case or in the aggregate, have a Material Adverse Effect on the
Purchased Assets or (ii) which in any manner draws into question the validity
of or otherwise affects this Agreement, the transactions contemplated hereby or
the ability of Sellers to perform their obligations hereunder, except as may be
disclosed to Purchaser in Schedule 6I (to be delivered to Purchaser on or
before two weeks prior to the end of the Inspection Period).
J. Environmental Compliance. No Seller is subject to any existing,
pending or, to Sellers' knowledge, threatened, action, suit, investigation,
written inquiry or proceeding by any Governmental Authority or to any remedial
obligation related to the Theatres under any Environmental Law. Seller has not
disposed, generated or released any Hazardous Substances on, to or from any of
the Theatres during the time of Sellers' ownership or possession of the
Purchased Assets and their operation of the Theatres.
K. Condemnation. There are no existing, pending or, to Sellers'
knowledge, threatened, condemnation proceedings or assessments affecting the
Purchased Assets or any part thereof.
L. Utilities. Sellers have not received any written notice from any
supplier of water, solid waste and sewage disposal, drainage, telephone, gas,
electricity or other utility services to the Theatres that such service is
being or will be terminated.
<PAGE> 10
M. Foreign Status. Seller is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as amended.
N. Brokers and Finders. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
intervention of any Person acting on behalf of the Sellers in such manner as to
give rise to a valid claim against any of the parties hereto for any broker's
or finder's commission. Sellers have not retained any broker or finder in
connection with the transactions contemplated hereby. In the event that any
claim for a broker's fee, real estate commission or finder's fee is asserted,
the party through whose actions the claim is asserted shall indemnify and hold
harmless the other party from any and all claims, losses, damages, or expenses
of any nature whatsoever arising out of said claim, including, but not limited
to, reasonable attorneys' fees and costs.
O. Insurance. The Sellers have, in full force and effect, adequate
policies of fire casualty and commercial general liability insurance relating
to the Purchased Assets and the operation of the Theatres. The Sellers shall
continue all such insurance in full force and effect up to and including the
Closing, and are the beneficiaries of all such policies.
7. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser represents and
warrants to the Sellers as of the Acceptance Date and as of the Closing Date
as follows:
A. Corporate Organization and Authority. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lean and operate its assets and properties.
B. Authority: Binding Effect. All resolutions, stockholder actions
and other proceedings required to be taken by or on behalf of Purchaser to
authorize Purchaser to execute and deliver this Agreement and to consummate the
transactions contemplated hereby have been duly and validly taken. Purchaser
has all requisite power and authority to enter into this Agreement and each of
the other agreements and instruments to be executed and delivered by the
Purchaser pursuant to the terms of this Agreement (the "Purchaser's Ancillary
Documents") and to perform its obligations hereunder and thereunder. This
Agreement and the Purchaser's Ancillary Documents will, when executed and
delivered by Purchaser, constitute legal, valid and binding agreements of
Purchaser, enforceable against Purchaser in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights generally or by general principles of equity.
C. Regulatory Approval: No Violation. To the best of Purchaser's
knowledge, no approval, authorization or other action by, or filing with, any
governmental authority, is required in connection with the execution and
delivery by the Purchaser of this Agreement or the consummation by the
Purchaser of the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with, or result in a violation of, or
constitute a default under any provision of the Purchaser's Articles of
Incorporation or Bylaws, or to the best of Purchaser's knowledge, of any
<PAGE> 11
agreement, order, writ, judgment or decree, ordinance, regulation or any other
restriction to which the Purchaser is subject or by which the Purchaser is
bound, nor under any indenture, mortgage, deed of trust, indebtedness to which
Purchaser is a party, in accordance with its terms.
D. Brokers and Finders. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
intervention of any Person acting on behalf of Purchaser, in such manner as to
give rise to a valid claim against any of the parties hereto for any broker's
or finder's commission, other than Hoak Securities Corp., to whom Purchaser has
agreed to pay a fee under a separate agreement. Purchaser has not retained any
broker or finder in connection with the transactions contemplated hereby. In
the event that any claim for a broker's fee, real estate commission or finder's
fee is asserted, the party through whose actions the claim is asserted shall
indemnify and hold harmless the other party from any and all claims, losses,
damages, or expenses of any nature whatsoever arising out of said claim,
including, but not limited to, reasonable attorneys' fees and costs.
E. Acknowledgment. Purchaser acknowledges that Purchaser is
purchasing the Purchased Assets solely in reliance on Purchaser's own
investigation, and that no representations or warranties of any kind, either
express or implied have been made by Sellers or Sellers' agents, other than any
expressly contained in writing herein and in the Sellers' Ancillary Documents.
Purchaser acknowledges that the Purchased Assets are being sold "AS IS, WHERE
IS, without any warranty of quality, condition or usefulness, including,
without limitation, any WARRANTY OF MERCHANTABILITY or any WARRANTY OF FITNESS
FOR THE PARTICULAR PURPOSE OF PURCHASER," including, without limitation, any
warranty as to compliance or non-compliance of the Purchased Assets under the
Americans With Disabilities Act of 1990, or similar state laws. In addition,
Purchaser acknowledges that Sellers have made no representation regarding
zoning regulations, other governmental requirements, site and physical
conditions and other matters affecting the use and condition of the Purchased
Assets other than the representations made in Section 6 hereof, and Purchaser
agrees to purchase the Purchased Assets in the condition that they are in at
Closing, subject to the terms of this Agreement. Purchaser further
acknowledges that Sellers have made no investigation as to whether the
Purchased Assets contain hazardous materials and substances, including asbestos
containing materials, and that Purchaser will be responsible for its own
environmental investigation of the Purchased Assets and will rely solely on
such investigation. Purchaser agrees to waive any claim or cause of action of
any nature whatsoever which it may now have or have in the future against
Sellers resulting from hazardous materials or substances located within the
Purchased Assets; provided that such waiver shall not include the right of
Purchaser to bring a claim against Sellers for contribution arising from
Sellers' statutory liability under any Environmental Law in the event an action
against Purchaser is instituted by a Governmental Authority under any such
Environmental Law. Notwithstanding the foregoing to the contrary, Purchaser
waives any claim or cause of action against Sellers with respect to asbestos
within the Theatres or with respect to any hazardous or environmental condition
identified in any Phase I or II environmental audit disclosed to Purchaser by
Sellers or performed by Purchaser on the Theatres. The provisions of this
paragraph shall survive Closing and delivery of the deed.
<PAGE> 12
8. PURCHASER'S INSPECTION OF THE PURCHASED ASSETS.
A. Deliveries. The Sellers shall provide to Purchaser in Dallas,
Texas, on or before 5:00 p.m. Dallas time on the date ten business days after
the Acceptance Date ("Delivery Date") the following items and documents relating
to the Purchased Assets, as applicable, to the extent the same are in the
Sellers' possession or are readily obtainable by the Sellers (all of the
following are herein called the "Delivered Documents"):
(i) copies of all engineering, structural, elevator, curtain
wall, mechanical, roof, environmental and seismographic reports, a current site
plan, the most recent survey for the Theatres and the land on which they are
situated, elevator specifications, if any, and as-built architectural,
structural, mechanical, and electrical plans and specifications of the
Theatres;
(ii) copies of all monthly operating statements for each
Theatre for each month during 1994, 1995 and 1996;
(iii) copies of all certificates of occupancy, licenses,
permits, authorizations and approvals as required by law for the construction,
occupancy and operation of the Theatres, and the land on which they are
situated;
(iv) copies of all real estate tax bills for 1994, 1995 and
1996, including evidence of payment thereof,
(v) a schedule of all guarantees and warranties in the
Sellers' possession and still in effect issued or made in connection with the
construction, improvement, alteration or repair of the Fee Theatres, including
without limitation, guaranties and warranties pertaining to roofs, elevators,
masonry, landscaping and heating and air conditioning systems;
(vi) Uniform Commercial Code ("UCC") search certificates from
the Secretaries of State of Idaho, Oklahoma and Texas reflecting any effective
UCC financing statements then of record that name any Seller as debtor, and
(vii) copies of any notices from any Governmental Authority of
violations of laws which relate to the Purchased Assets which are currently
outstanding and have not been cured.
In addition to the Delivered Documents, Sellers shall deliver the Schedules
referenced in this Agreement within the time periods provided for the delivery
of such Schedules. As used herein, "readily obtainable" means that the
material either is in a Seller's files or in the files of a third party agent,
contractor or consultant of a Seller and can be obtained by contacting such
third party. The Sellers shall not be required to contact any governmental
agencies or authorities nor spend sums of money in excess of photocopying
charges to obtain any of the Delivered Documents. One complete set of the
Delivered Documents shall be delivered to Purchaser at its offices in Dallas,
Texas, and if Purchaser requests, a second set of the as-built plans and
specifications specified in clause (a) only shall also be delivered but such
second set shall be copied and delivered at the expense of Purchaser.
<PAGE> 13
B. Purchaser's Access to the Purchased Assets. The Sellers covenant
and agree that from and after the Acceptance Date until Closing or earlier
termination of this Agreement, Purchaser and its contractors, agents and
employees, at the sole expense of Purchaser, may enter upon any portion of the
Real Property and the Theatres from time to time during reasonable business
hours (Purchaser acknowledges that its access to the Leasehold Theatres may be
subject to consent of the landlords under the Leases, and Sellers agree to use
reasonable efforts to obtain any such consents), without any disruption of the
normal conduct of the Sellers' business in the Theatres, and with reasonable
prior notice to the Sellers for the purposes of inspection (mechanical,
structural and otherwise), tests, including environmental testing and
examination of the operating condition of the Purchased Assets. In addition,
Purchaser hereby agrees to indemnify and hold Sellers harmless from (i) any
damage to any of the Purchased Assets caused by Purchaser or its authorized
agents, or (ii) claims, expenses, costs, damages, losses, liabilities and
mechanics' liens or other liens which may be brought or which may be filed
against the Purchased Assets or any portion thereof arising by, through or
under Purchaser or its authorized agents or from the failure to pay for
services rendered in connection with such inspections and tests. Purchaser
further agrees to defend any action to be brought by reason of such acts and to
reimburse Sellers for reasonable attorneys' fees and costs incurred by Sellers
by reason of any such action. The provisions of this paragraph shall
survive Closing and delivery of the Closing documents.
C. Contracts to be Assumed by Purchaser. Within 15 days of the
Acceptance Date, Sellers shall deliver to Purchaser Schedule 6G - Contracts
setting forth a fist of all of the Contracts, whether written or oral, to
which any Seller is a party relating to the operation of the Theatres together
with true and complete copies of each written Contract listed on Schedule 6G-
Contracts and, in the case of Contracts not reduced to writing, a written
summary of the material terms thereof. Purchaser will deliver to Seller on or
before the end of the Inspection Period Schedule 6G - Assumed Contracts,
listing those Contracts the Purchaser elects, at its discretion, to take an
assignment of and assume, failing which Purchaser shall be deemed to have
elected not to take an assignment of the same. Sellers will terminate all
other Contracts on or prior to Closing. At Closing, Purchaser shall take an
assignment of those Contracts to be assumed by Purchaser to the extent
assignable, and Purchaser also shall assume all obligations under the same
which are to be performed after the Closing.
9. TERMINATION BY PURCHASER. The Purchaser may terminate this Agreement
during the Inspection Period for any reason or no reason, by notifying Sellers
in writing of its election to terminate this Agreement on or before 90 days
after the Acceptance Date. If Purchaser terminates this Agreement within such
time period, then Purchaser shall promptly deliver to the Sellers a copy of any
and all tests, studies and examinations conducted by Purchaser related to the
Purchased Assets, Purchaser shall receive a prompt refund of the Earnest Money
Deposit, and both parties shall be released from all further obligations under
this Agreement. Any failure by Purchaser to deliver its written notice of
termination to Sellers within the time period specified above shall be deemed
to be acceptance by Purchaser of all such matters and its desire to proceed to
Closing, subject to the terms of this Agreement.
<PAGE> 14
10. SURVEY AND TITLE.
A. Survey. As soon as reasonably possible after the Acceptance Date
and no later than 45 days after the Acceptance Date, Sellers shall provide
Purchaser and its attorney with a current on-the-ground staked "as-built"
survey of the Fee Theatres made in accordance with the requirements of the
Texas Surveyors Association for a Category 1A Condition II Survey (the
"Survey") prepared by a registered land surveyor licensed in the State of Texas
reasonably approved by Purchaser (the "Surveyor"). Purchaser and Sellers shall
each pay one-half of the cost of such surveys. The Survey (including
specifically the certificate of the Surveyor forming a part thereof) shall be
in form and substance reasonably acceptable to the Title Company and Purchaser
and shall locate all existing improvements, easements, rights-of-way, setback
lines (which shall show recording data, if applicable), encroachments,
conflicts, overlaps and protrusions affecting the Fee Theatres (to the extent
visible on the ground or listed in the Title Commitment) and other matters
noted on the Title Commitment, shall set forth the outside perimeter of the
Real Property, shall contain a metes and bounds description of the Real
Property and shall set forth the acres included within the Real Property. The
Survey shall contain a statement on the face thereof certifying that no part of
the Real Property lies within a flood plain or flood prone area or a flood way
of any body of water as determined by reference to the current Flood Insurance
Rate Map published by the Federal Emergency Management Agency for the community
in which the Real Property is located except as shown or described on the
Survey. The Survey shall reflect that there is access to and from the Real
Property from a publicly dedicated street or road and shall be sufficient to
cause the Title Company to delete (except for "shortages in area") the printed
exception for "discrepancies, conflicts, or shortages in area or boundary
lines, or encroachments, or any overlapping of improvements" in the Title
Policy to be delivered pursuant to Section 10D. The Survey also shall show all
underground parking spaces (as striped). The Survey shall be certified to
Purchaser, the Title Company and any financing source of Purchaser in a manner
reasonably satisfactory to Purchaser and Title Company. In the event the metes
and bounds legal description contained on the Survey varies from the metes and
bounds legal description set forth on Exhibit A attached hereto, the deeds for
the Fee Theatres shall contain the legal description set forth in the Survey.
B. Title Commitment. As soon as reasonably possible after the date
hereof and no later than 45 days after the Acceptance Date, Seller, at its
cost and expense, shall cause to be issued and delivered to Purchaser and its
attorney (i) an Owner's Title Policy Commitment (the "Title Commitment") from
the Title Company setting forth the status of the title to the Fee Theatres,
pursuant to which the Title Company agrees to insure title to the Fee Theatres
under a standard form Texas Owner's Policy of Title Insurance in the full
amount set forth in Section 10D subject only to the standard printed exceptions
included in a standard form Texas Owner's Policy of Title Insurance; provided,
however, that the standard printed exception pertaining to discrepancies,
conflicts, or shortages in area shall be deleted as to the Fee Theatres (except
for "shortages in area"), the standard printed exception pertaining to
restrictions shall, include only those restrictions that are Permitted
Exceptions, the standard printed exception pertaining to taxes shall, be
limited to the year in which Closing occurs, marked "not yet due and payable,"
and subsequent years and subsequent assessments for prior years due to change
in land usage or ownership, there shall be no exception for lack of access, all
arbitration provisions shall be deleted, and the title exception for parties in
possession shall be deleted, (ii) copies of all documents referred to in the
Title Commitment, including but not limited to, deeds, lien instruments, plats,
reservations, restrictions and easements, and (iii)
<PAGE> 15
certificates of taxes due covering the Theatres and prepared by the appropriate
tax authorities. Sellers and Purchaser shall each pay one-half of the cost of
any endorsements requested by Purchaser to remove any standard printed
exceptions including one-half of the cost of the surveys for the Fee Theatres.
Sellers shall not be obligated to pay for any mortgagee policies or
endorsements for Purchaser's financing source, if any.
C. In the event any exceptions appear in the Tide Commitment (or any
new exceptions appear in any date down endorsement or revised commitment,
referred to herein collectively as a "Revised Commitment"), other than the
standard printed exceptions (which shall be modified in the Title Policy as
described in Section 10B above), that are unacceptable to Purchaser, then
Purchaser shall, within 15 days after the receipt of the Title Commitment or
the Survey, whichever shall be last received (or within five days after receipt
of a Revised Commitment and copies of any new documents as applicable), notify
Seller in writing of such fact. If Seller fails to cure any such objection
(without having any obligation to do so, except as otherwise provided herein)
on or prior to the end of the Inspection Period (or within five days after
Purchaser's objection if such objection pertains to any new exception first
appearing in a Revised Commitment received after five days prior to the end of
the Inspection Period), then Purchaser may either (i) terminate this Agreement,
and upon such termination Purchaser shall be entitled to a prompt return of the
Earnest Money Deposit, or (ii) waive the objection for any Theatre, which
election shall be made by delivering written notice to Seller on or before two
business days after the end of the Inspection Period (or within two business
days after the five day cure period as to a Revised Commitment, as applicable).
For the purposes of this section, unless Purchaser exercises option (i), the
modification of the standard exceptions, as described above, and all easements,
restrictions or other conditions which are shown on the Title Commitment (or
any Revised Commitment) and/or the Survey (to the extent only such Survey items
are ultimately contained in the Title Policy) and which are not cured by Seller
as described above are hereinafter collectively referred to as the "Permitted
Exceptions".
Notwithstanding the foregoing, Sellers shall be obligated to remove at
Closing any Liens which may burden the Theatres and arise by, through or under
Sellers, except the Permitted Exceptions.
D. Title. As soon as reasonably possible after Closing, Sellers, at
their cost and expense, shall furnish to Purchaser a standard form Texas
Owner's Policy of Title Insurance for the Fee Theatres located in the State of
Texas, issued by the Title Company in Purchaser's favor, in the amount of the
Appraised Land and Building Value allocated to each of the Fee Theatres on
Exhibit F hereto, insuring Purchaser's title to the Fee Theatres in the form
contemplated by the Title Commitments (collectively, the "Title Policies").
E. Condition of Title. Seller shall convey to Purchaser good,
indefeasible and insurable fee simple title to the Fee Theatres free and clear
of all Liens arising by, through or under Sellers and free and clear of all
other matters except the Permitted Exceptions.
<PAGE> 16
11. COVENANTS. Each Seller hereby covenants and agrees with Purchaser as
follows:
A. Insurance. At all times from the date hereof to the Closing, the
Sellers shall cause to be maintained in full force and effect policies of fire
and casualty insurance and comprehensive general liability insurance covering
the Purchased Assets and the operation of the Theatres in the same amounts as
the insurance coverage on the Purchased Assets as of the date hereof.
B. Film Booking. The Sellers shall cause all film booking for the
Theatres prior to Closing to be substantially in accordance with the Sellers'
current booking practices for each such Theatre.
C. Conduct of Business. At all times from the Acceptance Date until
the Closing, the Sellers shall operate and maintain the Purchased Assets in
substantially the same manner as they are now operated and maintained, and the
Sellers shall maintain the physical condition of the Purchased Assets in their
current condition, reasonable and ordinary wear and tear excepted.
D. No Transfer of Purchased Assets. From the Acceptance Date until
the Closing, the Sellers shall neither transfer nor remove any Purchased Assets
from the Theatres subsequent to the date hereof, unless the same are no longer
needed for the maintenance and operation of the Theatres or except for purposes
of replacement thereof, in which case such replacements shall be promptly
installed prior to Closing and shall be comparable in quality to the items
being replaced and consistent with the current operation of the Theatres.
E. Modification of Leases. The Sellers shall not enter into any
lease, lease extension, or lease modification subsequent to the Acceptance
Date without the prior written consent of Purchaser.
F. Liens. From the Acceptance Date until the Closing, the Sellers
shall not further encumber the Purchased Assets without the written consent of
Purchaser and in any event Seller shall not place any Liens for borrowed money
on the Purchased Assets.
G. Monthly Reports. The Sellers shall provide Purchaser with copies
of all monthly profit and loss summary reports prepared by the Sellers from the
date hereof to the Closing Date.
H. Use of Corporate Names. The Sellers acknowledge that, from and
after the Closing, they will have no right, title or interest in or to the
names of the Theatres (other than the Sellers' use of the name "United
Artists"). Neither the Sellers nor any of their Affiliates shall use any such
names in any business or venture in which such Persons are engaged within a
3-mile radius of any of the Theatres for a period of 5 years following the
Closing.
I. Notice of Defaults. From the Acceptance Date until the Closing,
the Sellers shall notify Purchaser promptly of (and give Purchaser all
information known by the Sellers, including copies of any written notices
received, relating to): (i) any material defaults or alleged
<PAGE> 17
material defaults by the landlord or the tenant under any of the Leases or by
any party under any of the Contracts listed on Schedule 6G - Assumed Contracts
hereof, or (H) any alleged violations of or compliance requirements under
applicable laws or from insurance carriers relating to the Purchased Assets and
received by the Sellers after the date hereof.
J. Contracts. From the Acceptance Date until the Closing, the
Sellers shall not enter into any new Contracts in connection with the Purchased
Assets unless the same are approved by Purchaser or are cancelable after
Closing on no more than 30 days notice without payment of a cancellation
penalty or premium.
K. Covenant Not to Compete. Except as otherwise consented to or
approved in writing by Purchaser, neither the Sellers nor any Affiliate of the
Sellers will at any time for a period of three years following the Closing,
directly or indirectly, acting alone or as a member of a partnership or as a
managing entity (whether by ownership of stock, participation by contract or
otherwise) of, any corporation, other business entity or Person:
(i) construct and operate a new motion picture theatre
following the Closing in competition with the Purchaser at any location within
a 5-mile radius of any Theatre location;
(ii) request any present supplier of, distributor to or
provider of services to the Purchaser to curtail or cancel its business with
the Purchaser in respect of the operations at any Theatre and the use and
operation of the Purchased Assets; or
(iii) unless otherwise required by law, disclose to any Person
any details of the organization or affairs of the business of the Purchaser or
any other nonpublic information concerning the Purchased Assets or the conduct
of the operations at the Theatres.
The parties hereto agree and acknowledge that if the scope of the covenants set
forth in this Section 11K is deemed to be too broad in any court proceeding,
the court may reduce such scope to that which it deems reasonable under the
circumstances. The parties hereto further agree and acknowledge that Purchaser
does not have any adequate remedy at law for the breach or threatened breach by
either of the Sellers or their Affiliates of the agreements set forth in this
Section 11K and, accordingly, each of the Sellers further agrees that Purchaser
may, in lieu of or in addition to the other remedies that may be available to
it hereunder or under applicable law, file a suit in equity to enjoin any of
the Sellers and each of their Affiliates from such breach or threatened breach.
12. CONDITIONS PRECEDENT TO CLOSING. The obligations of the respective
parties to close the purchase of the Purchased Assets will be subject to the
following conditions:
A. Sellers' Conditions. The Sellers will not be obligated to close
the purchase of the Purchased Assets unless:
<PAGE> 18
(i) the representation and warranties of Purchaser contained
in this Agreement shall be true and correct at and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the Closing, Purchaser shall have performed and complied with all
agreements required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing, including, without limitation, delivering
to the Sellers all funds, instruments and documents required to be delivered by
Purchaser in connection with the Closing pursuant to the terms of this
Agreement, and the Sellers shall have received a certificate, dated as of the
date of the Closing, signed by the President of Purchaser to the foregoing
effect;
(ii) Sellers have obtained approval of this Agreement and the
transaction contemplated herein from the Boards of Directors of Sellers within
45 days of the Acceptance Date;
(iii) no action or proceeding shall have been instituted or
threatened by a third party for the purpose or with the possible effect of
enjoining or preventing the consummation of the transactions contemplated by
this Agreement or seeking damages on account thereof; and
(iv) the Sellers shall have received consent to the assignment
of, and releases of the Sellers' obligations under, the Leases, duly executed
by the landlords of the Leasehold Theatres, which consents and releases shall
be in a form satisfactory to the Sellers.
Notwithstanding the foregoing, if the consents to assignment have been obtained
from the landlords of the Leasehold Theatres, but any release of a Seller has
not been obtained at the time of Closing as provided in clause (iv) above, then
such requirement shall be deemed waived by the Sellers, and the parties shall
proceed to Closing; provided, however, that the conditions set forth below in
this paragraph are satisfied. Sellers shall use commercially reasonable efforts
and Purchaser shall cooperate with Sellers, to obtain consents and releases
prior to Closing, and Purchaser shall deliver such other documents, guaranties
or security deposits reasonably required by the landlords of the Theatres. If
the release of the Sellers' liability under the Leases for the Leasehold
Theatres cannot be obtained from the landlords of the Leasehold Theatres prior
to Closing, then Purchaser agrees to (a) not assign or sublet such Leases
without the prior written consent of UATC, not to be unreasonably withheld (for
purposes of this section, a change in the control or ownership of Purchaser or
of its stock of fifty percent (50%) or more, or a change in the control of the
management of Purchaser by virtue of a management agreement, contract or other
similar arrangement intended to circumvent these assignment provisions shall be
deemed an assignment); provided that Sellers shall consent to an assignment or
subletting by Purchaser to a Person with a net worth equal or greater than that
of Purchaser on the Closing Date (as set forth on Schedule 12A to be delivered
to Sellers by Purchaser at Closing), and further provided that (1) an
underwritten public offering of the common stock of Purchaser or (2) a change
in the identity of individual managers or of senior management personnel, shall
not be deemed to be an assignment hereunder, (b) observe all of the covenants
under the Leases and perform all of Purchaser's obligations thereunder in
accordance with the terms of the Leases, (c) indemnify and hold the Sellers,
harmless from and against any and all claims, losses, damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees and
expenses) incurred by the Sellers arising from and after the date of Closing in
connection with
<PAGE> 19
the Purchaser's breach of any Lease for which any Seller remains liable or
under the Purchaser's Ancillary Documents (excluding damages not related to
repair, maintenance or condition of the Theatres arising from an event which
occurred prior to Closing which was not caused by Purchaser) and (d) deliver a
copy of the Memorandum (defined below) to any assignee, subtenant, licensee or
other person or entity in possession of the Leasehold Theatres as notice of the
obligations contained therein. In the event that Purchaser fails to observe
any of the covenants contained in this paragraph or is in default (after any
applicable cure periods have expired under the Leases) under the terms of any
of the Leases than Sellers may, but without any obligation, perform Purchaser's
obligations and covenants, under such Lease(s), and Sellers shall be entitled
to repossess any or all of the Leasehold Theatres, together with the personal
property and fixtures located at such Theatres, and dispossess Purchaser and
any other assignees, subtenants, licensees or parties in possession, and
Purchaser will be liable for any damages suffered by Sellers as to the
Leasehold Theatres, including reasonable attorneys' fees (and legal assistants'
fees) and the cost of any premium for any bond required in connection with an
injunction brought to enforce any Seller's remedies under this paragraph, and
for such purpose, Purchaser shall grant to Sellers a collateral assignment in
Purchaser's leasehold interests in the Leasehold Theatres, which s hall be
subordinate to Purchaser's third party institutional financing encumbering the
Leasehold Theatres, if any. Purchaser agrees to execute a Memorandum of
Agreement at Closing summarizing the covenants of operation and the obligations
and indemnity contained in this paragraph, a copy of which is attached hereto
as Exhibit D (the "Memorandum"), which Memorandum will be recorded by Sellers
in the real estate records of the applicable counties where such Leasehold
Theatres are located. To further secure the obligations specified in such
Memorandum and the full performance of all terms, covenants, conditions,
provisions and agreements under the Leases, Purchaser agrees to execute a
corporate guaranty in form satisfactory to Sellers, at Closing for the benefit
of Sellers. At Closing, Purchaser shall also deliver to Sellers an opinion
letter of Purchaser's legal counsel in the State of Texas in form reasonably
satisfactory to Sellers, which opinion will be subject to the standard
limitations and qualifications commonly included in opinions for similar
transactions relating to enforceability, bankruptcy and similar laws affecting
rights of creditors, general principles of equity and other similar provisions,
and stating that Purchaser is a corporation duly organized, authorized,
qualified and in good standing to perform the obligations and execute the
documents contemplated by this Agreement, and that, with respect to Texas laws,
the Memorandum, Guaranty and the collateral assignment agreements (collectively
the "Security Documents") are legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their terms.
Further, notwithstanding the foregoing, if the consents to assignment
have been obtained from the landlords of the Leasehold Theatres, but any
release of the Sellers has not been obtained at the time of Closing as provided
in clause (iv) above, and in the event that Purchaser encumbers the Purchaser's
leasehold interest in the Leases and the Leasehold Theatres with a mortgage,
stock pledge or any other security interest, then Sellers shall obtain an
agreement from Purchaser's financing source agreeing to enter into a management
agreement with UATC substantially on the terms to be attached as Exhibit E and
satisfactory to UATC in its sole discretion (the "Lender Agreements"). UATC
agrees to negotiate with Purchaser's lender in good faith in accordance with
the terms attached in Exhibit E; provided, that Sellers shall not be obligated
to assume or pay Purchaser's financing or to increase its liabilities as
contemplated under this Agreement. Sellers and
<PAGE> 20
Purchaser agree to use diligent efforts to reach an agreement to the terms of
such agreements with Purchaser's lender on or prior to the end of the
Inspection Period. If such agreements have not been reached by the end of the
Inspection Period, the Sellers may elect to terminate this Agreement and
Purchaser shall receive a refund of the Earnest Money Deposit and the parties
hereto shall have no further obligations hereunder.
B. Purchaser's Conditions. Purchaser will not be obligated to close
the purchase of the Purchased Assets unless:
(i) the representation and warranties of the Sellers contained
in this Agreement shall be true and correct at and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the Closing, the Sellers shall have performed and complied with all
agreements required by this Agreement to be performed or complied with by the
Sellers at or prior to the Closing, including without limitation, delivering to
Purchaser all instruments and documents required to be delivered by the Sellers
in connection with the Closing pursuant to the terms of this Agreement;
(ii) no action or proceeding shall have been instituted or
threatened by a third party for the purpose or with the possible effect of
enjoining or preventing the consummation of the transactions contemplated by
this Agreement or seeking damages on account thereof;
(iii) all of the landlords of the Leasehold Theatres have
consented the assignment to Purchaser and to Purchaser's assumption of the
Leases and the Leasehold Theatres, if required under such Leases, and any other
required consents of third parties to the assignment and assumption of the
Leases;
(iv) On or before the expiration of the Inspection Period,
Purchaser shall be satisfied with its inspections of the roof and HVAC systems
in the Theatres, and any other physical inspections, and with the environmental
condition of the Theatres;
(v) On or before the expiration of the Inspection Period,
Purchaser shall have approved the Leases in effect with respect to the
Theatres; and
(vi) the Sellers shall have obtained the release of the Fee
Theatres under the UAPIC Mortgage.
(vii) the Purchaser shall have obtained non-disturbance
agreements from all mortgagees of the landlords under the Leases with mortgages
encumbering the Leasehold Theatres or evidence satisfactory to Purchaser that
an existing non-disturbance agreement runs to Purchaser's benefit; provided
that if Purchaser is unable to obtain non-disturbance agreements from certain
mortgages, but the Leasehold Theatres encumbered by such mortgages do not
represent more than ten percent (10%) of the purchase price, as allocated for
such Leasehold Theatres in Exhibit F, then this condition shall be deemed to be
satisfied.
<PAGE> 21
13. CLOSING.
A. Date, Time, and Place.
The Closing will take place at the offices of Baker & Botts, L.L.P.,
2001 Ross Avenue, Dallas Texas 75201, or at such other location as agreed to by
the parties, at a mutually agreeable time, on the later of (i) the first
Thursday two weeks following receipt of approval by the landlords of the Leases
to the assignment and assumption of the Leasehold Theatres to Purchaser or (ii)
the first Thursday following expiration of the Inspection Period. If, for any
reason, the Closing has not occurred on or before 30 days following the
expiration of the Inspection Period, this Agreement shall be terminated and be
of no further effect.
The transactions consummated at Closing, when effected, will be deemed
to be effective as of 11:59 p.m., Dallas time, on the date of Closing, except
as otherwise specifically provided in this Agreement. All action to be taken at
Closing will be considered as taken simultaneously and no paper, document, or
instrument will be considered to be delivered until all items to be delivered
have been delivered. At Closing, the net proceeds due and all closing
documents contemplated herein required for Closing will be delivered to the
Title Company and Title Company will be instructed in writing by Purchaser and
the Sellers to deliver such documents and proceeds to the appropriate party
only after the Title Company has given written notice to Purchaser that it is
in a position to issue its title insurance policies for the Fee Theatres in
conformance with Section 10 of this Agreement.
B. Deliveries.
At Closing, the Sellers will deliver to Purchaser the following:
(i) a special warranty deed (the "Deed") from UAPIC conveying
the Fee Theatres, free and clear of all Liens and mortgages created by, through
or under Sellers and subject to the Permitted Exceptions;
(ii) an assignment from UATC and RAC, as the case may be, of the
leasehold interests under the Leases relating to the Leasehold Theatres,
together with the Landlord's consent to such assignment if required under
the Leases, and any other required consents of third parties to the assignment
and assumption of the Leases together with a duly executed and acknowledged
sublease under the Cache Lease;
(iii) the original copies of all Leases (if in Seller's
possession) or copies thereof, and all other currently relevant non-proprietary
documents in the possession of the Sellers pertaining to the Leases;
(iv) the Title Policies required by Section 10;
<PAGE> 22
(v) evidence acceptable to the Title Company authorizing
consummation by the Sellers of the purchase and sale transaction contemplated
hereby and the execution and delivery of the closing documents on behalf of
Sellers and all additional documents and instruments as in the opinion of the
Title Company are reasonably necessary to the proper consummation of the
conveyance of the Fee Theatres;
(vi) a bill of sale from Sellers conveying the Purchased Assets
in form reasonably satisfactory to the Sellers and Purchaser duly executed and
acknowledged by Sellers;
(vii) an assignment and assumption of Contract Rights, assigning
the Sellers' interests in the Contracts, in form reasonably satisfactory to the
Sellers and Purchaser, duly executed and acknowledged by Sellers;
(viii) such other bills of sale, deeds, general conveyances,
assignments, endorsements and other good and sufficient instruments of sale,
conveyance, transfer and delivery as the Purchaser may reasonably request in
order more effectively to vest in the Purchaser all of the Sellers' right,
title and interest in and to the Purchased Assets conveyed by them pursuant
hereto, in each case duly executed and acknowledged by the sellers;
(ix) an executed certification of non-foreign status in a form
satisfies Section 1445 of the Internal Revenue Code; and
(x) an opinion from the general counsel of UATC, in form
reasonably satisfactory to Purchaser, opining on the Sellers' organization,
authority to enter into this transaction, and the enforceability of the
Agreement and Sellers' Ancillary Documents; and
(xi) any other documents reasonably requested by Purchaser.
At Closing, Purchaser will deliver to Sellers the following:
(i) the portion of the Purchase Price payable at Closing as
provided in Section 5 above for the Purchased Assets in cash, by cashier's
check, by certified check, or by federal wire transfer (as adjusted for
apportionments and closing costs under Sections 13C and 13D above);
(ii) evidence acceptable to the Title Company and the Sellers
authorizing consummation by Purchaser of the purchase and sale transaction
contemplated hereby and the execution and delivery of the closing documents on
behalf of Purchaser,
(iii) all additional documents and instruments as in the opinion
of the Title Company are reasonably necessary to the proper consummation of
this transaction;
<PAGE> 23
(iv) an assignment and assumption of Contract Rights, assuming
the Sellers' obligation under the Contracts, in form reasonably satisfactory
to the Sellers and Purchaser, duly executed and acknowledged by Purchaser,
(v) a duly executed and acknowledged sublease under the Cache
Lease; and
(vi) the duly executed, and where appropriate, acknowledged,
Memorandum, Guaranty, and opinion letter of Purchaser's counsel.
C. Apportionments. The following items will be prorated between the
Sellers and Purchaser effective as of 11:59 P.M., Dallas, Texas, time on the
day of the Closing (the "Proration Data"):
(i) general real estate, special assessments, and personal
property taxes applicable to the Purchased Assets for the year of the Closing,
based upon the then latest available levy and assessment;
(ii) any other governmental or special district fees and
assessments as are customarily adjusted in similar real estate transactions;
(iii) with respect to any percentage rent payable under the
Leases for the lease year during which the Closing occurs, the percentage rent
shall be prorated between the Sellers and Purchaser by calculating annualized
gross receipts amounts for the Leasehold Theatres based on actual gross
receipts (or in any other manner specified in the Leases from January to
Closing, minus the breakpoints specified in the Leases; and
(iv) such other items as are customarily adjusted in similar
sales of business and real estate transactions, including without limitation,
rents, additional rents, common expenses, utilities, taxes, security deposits,
if any, under the Leases and operating expenses for the Theatres, film rentals
and concession rentals.
It is agreed that all such prorations regarding taxes and assessments shall be
based upon the current year's tax bill for the Theatres. If the current year's
tax bill is not available, then such taxes and assessments shall be prorated
based on the latest available tax bill or bills. Prorations for expenses under
the Leases shall be based upon the most recent billing therefor by the landlord
under the Leases. All prepaid and unearned film rental amounts, if any, will
be credited to Sellers at Closing, and the Purchase Price will be accordingly
adjusted at Closing. If any of the prorations are based upon estimates at the
time of Closing, it is mutually agreed as a covenant to survive the Closing
that an accurate adjustment shall be made by cash settlement between the
Sellers and Purchaser within 60 days after the estimated item is known.
D. Closing Costs. Each party shall pay one-half of any escrow fees
charged by the Title Company and each party shall pay all of the fees and
expenses of its own counsel
<PAGE> 24
in entering into and consummating the transactions described in this Agreement
(except as provided in Section 16C below). Documentary transfer taxes, deed
taxes, recording costs and taxes on the sale and assignment of the Theatres
shall be paid by Purchaser. All other closing costs shall be shared equally by
Purchaser and Seller.
E. Possession. Possession of the Purchased Assets shall be
delivered to Purchaser at the Closing.
14. RISK OF LOSS. If, prior to Closing, any of the Purchased Assets are
damaged by fire, vandalism, acts of God or other casualty or cause, the Sellers
shall give Purchaser prompt notice of any such damage. In any such event,
Purchaser shall have the option to (a) take such damaged Purchased Assets "as
is" together with the insurance proceeds covering such damaged Purchased
Assets, if any, or the right to receive the same as provided in the Leases as
to the Leasehold Theatres, or (b) terminate this Agreement with the effect that
both parties shall be released from all further obligations under this
Agreement and receive a prompt refund of the Earnest Money Deposit. If
Purchaser elects to proceed to Closing under clause (a) above, the Sellers
agree to assign to Purchaser, at the Closing, the Sellers' rights to such
insurance proceeds.
15. CONDEMNATION. If prior to Closing, any Governmental Authority having
condemnation authority institutes an eminent domain proceeding or takes any
steps preliminary thereto to condemn any portion of the Theatres such that
there will be an adverse effect on the operation of any of the Theatres,
Purchaser will have the option to (a) proceed to Closing, provided that the
Sellers shall assign their rights to any compensation for such condemnation to
Purchase, or (b) terminate this Agreement upon notice to Sellers, and Purchaser
shall receive a prompt refund of the Earnest Money Deposit and the parties
shall be released from all further obligations under this Agreement. If
Purchaser chooses to proceed to Closing pursuant to clause (a) above, Sellers
agree to assign to Purchaser, at Closing, Sellers' rights to any compensation
or damages relating to such condemnation.
16. FAILURE TO CLOSE.
A. Purchaser's Default. If Purchaser, in default of its obligations
under this Agreement, fails to perform any of the obligations contemplated by
this Agreement, the Sellers will have the right to (i) obtain specific
performance by Purchaser of Purchaser's obligations under this Agreement; or
(ii) terminate this Agreement and obtain immediate payment of the Earnest Money
Payment, as liquidated damages, which shall constitute payment in full for all
damages Sellers may hereby have suffered. The parties acknowledge that such
damages are not, as of the date of this Agreement, capable of accurate
estimation.
B. Sellers' Default. If any Seller, in default of its obligations
hereunder, fails to perform any of the obligations contemplated by this
Agreement, Purchaser will have the right to: (i) obtain specific performance by
the Sellers of the Sellers' obligations under this Agreement; or (ii) terminate
this Agreement and receive a prompt return of the Earnest Money Deposit paid by
<PAGE> 25
Purchaser under this Agreement, and both parties shall be released from all
further obligations under this Agreement.
C. Attorneys' Fees. In the event of litigation arising out of any
alleged default or breach of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred in the prosecution or
defense of such litigation, including reasonable attorneys' fees and costs (and
legal assistant fees). For purposes of this Section, "prevailing party" shall
include a party who withdraws or moves to dismiss a claim in consideration for
payment due, performance owed, or other consideration in substantial
satisfaction of the claim withdrawn or dismissed.
D. Failure of Conditions. The failure to occur of any of the
conditions set forth in Section 12 shall not be a default under this Agreement
giving rise to the remedies in this Section.
17. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. Survival of Representations and Warranties. Except as
specifically provided otherwise in this Agreement, all representations and
warranties contained in this Agreement, or in any certificate, document,
affidavit or instrument delivered pursuant to this Agreement shall not survive
the Closing and the consummation of the transactions contemplated hereby. The
representations in Sections 6A, 6B, 6E and 6H shall survive Closing for a
period of six months after the Closing Date. In the event of a breach within
the survival period set forth therein of the representation in the second
paragraph of Section 6D, stating that the amount of rent and the expiration
dates of the term of the Leases are as disclosed to Purchaser by Sellers and
that to the best knowledge of Sellers them are no defaults under the Leases,
then Purchaser's sole remedy shall be an adjustment of the multiple of 1995
Cash Flow for such Theatre, as set forth in Exhibit F, and a corresponding
adjustment to the Purchase Price to equitably reflect the change in rent
liability or low term or the effect of the default as mutually agreed upon by
the parties acting in good faith. In the event that a default by any Seller
under a Lease shall result in the termination of the Lease, the purchase price
shall be adjusted by the Cash Flow Value for such Theatre, as set forth in
Exhibit F.
B. Survival of Covenants and Agreements. Each covenant and agreement
set forth in any Sellers' Ancillary Document to be performed after the Closing
will survive the Closing in accordance with its terms.
18. INDEMNIFICATION.
A. Indemnification of Purchaser. From and after the Closing, each
of the Sellers shall jointly and severally indemnify, defend and hold Purchaser
and its directors, officers, employees and agents harmless against any and all
damages, losses, deficiencies, liabilities, obligations, commitments, costs or
expenses (including legal and other expenses reasonably incurred)
(collectively, "Liabilities" and each a "Liability") incurred by Purchaser
resulting from (i) the breach of any representation or warranty of any Seller
contained in Section 6 of this Agreement or in any Sellers' Ancillary Document,
(ii) any breach of any agreement or covenant of any Seller
<PAGE> 26
contained in this Agreement or in the Sellers' Ancillary Documents, (iii) the
conduct of the operations or possession of the Theatres prior to the Closing,
other than with respect to the repair, maintenance or condition of the Theatres
(subject to the representations in Sections 6J, 6K, 6L, and 60 hereof, and
other than Liabilities relating to or arising from a breach of a representation,
warranty, covenant or agreement by Purchaser.
B. Indemnification of Sellers. From and after the Closing,
Purchaser shall indemnify, defend and hold the Sellers and their directors,
officers, employees and agents harmless against any and all Liabilities
incurred by the Sellers resulting from (i) the breach by Purchase of any
representation or warranty made by Purchaser and contained in Section 7 or in
any Purchaser's Ancillary Document, (ii) any breach of any agreement or
covenant of Purchaser contained in this Agreement or in any Purchaser's
Ancillary Docu[Bment, and (iii) the conduct of the operations or possession of
the Theatres by Purchaser after the Closing, other than with respect to
Liabilities relating to or arising from a breach of a representation, warranty,
covenant or agreement by Sellers.
C. Indemnification for Third Party Claims. The following procedures
shall be applicable with respect to indemnification for third party claims
arising in connection with any provision of this Agreement.
(i) Promptly after receipt by the party seeking indemnification
hereunder (an "Indemnitee") of written notice of the assertion or the
commencement of any claim, liability or obligation by a third party, whether by
legal process or otherwise (a "Claim"), with respect to any matter within the
scope of Sections 18A or 18B hereof, the Indemnitee shall give written notice
thereof (the "Notice") to the Person from whom indemnification is sought
pursuant hereto (the "Indemnitor") and shall thereafter keep the Indemnitor
reasonably informed with respect thereto, provided that the failure of the
Indemnitee to give the Indemnitor prompt notice as provided herein shall not
relieve the Indemnitor of its obligations hereunder unless such failure results
in (i) a default judgment, (ii) the expiration of the time to answer a complaint
or (iii) material prejudice to Indemnitor's defense of such Claim. In case any
such Claim is brought against any Indemnitee, the Indemnitor shall be entitled
to assume the defense thereof, by written notice of its intention to the
Indemnitee within 30 days after receipt of the Notice, with counsel reasonably
satisfactory to the Indemnitee at the Indemnitor's own expense. If the
Indemnitor shall assume the defense of such Claim, it shall not settle such
Claim without the prior consent of the Indemnitee, which consent shall not be
unreasonably withheld. Notwithstanding the assumption by the Indemnitor of the
defense of any Claim as provided in this 18C, the Indemnitee shall be permitted
to join in the defense of such Claim and to employ counsel at its own expense.
(ii) If the Indemnitor shall fail to notify the Indemnitee of
its desire to assume the defense of any such Claim within the prescribed period
of time, or shall notify the Indemnitee that it will not assume the defense of
any such Claim, then the Indemnitee shall assume the defense of any such Claim,
in which event it may do so in such manner as it may deem appropriate, provided
that it shall not settle any Claim which would give rise to the indemnitor's
liability under Sections 18A or 18B hereof, as the case may be, without
<PAGE> 27
the Indemnitor's prior written consent, such consent, which shall not be
unreasonably withheld. The Indemnitor shall be permitted to join in the
defense of such Claim and to employ counsel at its own expense.
19. BULK SALES LAW. Purchaser and the Sellers hereby waive compliance
with the provisions of any bulk sales law which may apply to the sale of the
Purchased Assets under this Agreement, provided, however, that the Sellers
shall pay and discharge when due or contest or litigate all claims of creditors
which may be asserted against Purchaser of the Purchased Assets by reason of
such non-compliance and to indemnify and hold Purchaser harmless from and
against any and all such claims from obligations arising prior to the Closing
Date; and further, the Sellers shall take all necessary action to remove any
Liens or other encumbrances which are placed on the Purchased Assets as a
result of such non-compliance with applicable bulk sales laws.
20. CONFIDENTIALITY. Prior to Closing, no party shall issue any press
release or disclose any information to any third party whatsoever (except
Purchaser's lenders, potential equity investors, attorneys, accountants or
other professional consultants and as may be required by laws or regulations)
pertaining to the transaction contemplated by this Agreement without the prior
written approval of the other parties. After the Closing, no party shall
disclose any information related to the financial terms of this transaction,
such as purchase price and financials delivered to the other party (except
Purchaser's lenders, potential equity investors, attorneys, accountants or
other professional consultants and as may be required by laws or regulations)
The results of any inspections conducted by Purchaser prior to the Closing and
any other information delivered to Purchaser by the Sellers related to this
transaction shall be treated as strictly confidential.
21. EMPLOYEES OF THE SELLERS. Purchaser acknowledges that the Sellers
intend to give its employees at least two weeks' notice prior to the Closing
Date. Sellers acknowledge and agree that COBRA extension insurance coverage
will be offered to all employees who are terminated upon the Closing.
22. CONCESSION STAND INVENTORY. Provided that Purchaser notifies Sellers
in writing during the Inspection Period that it desires to purchase the
concession stand inventory in the Theaters, then at Closing, the Sellers shall,
in addition to the Purchased Assets hereunder, sell to Purchaser and Purchaser
shall purchase from the Sellers all of the stock in trade and inventory of the
concession stands (excluding bulk candy displays) located in the Theatres as of
the Closing Date, specifically excluding therefrom all inventory containing the
"United Artists" name, such as imprinted cups and similar items (such stock in
trade and inventory, the "Concession Stand Inventory"). Immediately after
Closing, the Sellers shall notify Purchaser of the actual amount of the
Concession Stand Inventory and its valuation thereof located within the
Theatres as of the Closing Date. Payment for the agreed upon value of the
Concession Stand Inventory as of the Closing Date shall be made by Purchaser to
the Sellers within five days after such notice, in immediately available funds,
and such payment shall be in addition to the Purchase Price set forth in
Section 5A above.
<PAGE> 28
23. MISCELLANEOUS.
A. Notices. All notices hereunder to the respective parties will be
in writing and will be served by personal delivery, via telecopy, or by prepaid,
express mail via a reputable courier service, or by prepaid, registered or
certified mail, addressed to the respective parties at their addresses set
forth above. Any such notice to Seller or Purchaser will be deemed to be given
and effective: (i) if personally delivered or sent via telecopy, then on the
date of such delivery, (ii) if sent via express mail or overnight courier, then
24 hours after the date such notice is sent, or (iii) if sent by registered or
certified mail, then three days following the date on which such notice is
deposited in the United States mad addressed as aforesaid. Copies of all
notices will be sent to the following:
If to Purchaser. Hollywood Theatres, Inc.
2911 Turtle Creek Boulevard, Suite 1150
Dallas, Texas 75219
Attn: Thomas W. Stephenson, Jr.
Fax No.: (214) 520-2332
with a copy to: Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attn: Carlos A. Fierro
Fax No.: (214) 953-6503
If to Sellers: United Artists Theatre Circuit, Inc.
9110 E. Nichols Avenue, Suite 200
Englewood, Colorado 80112
Attn: Kurt Hall, Executive Vice President and Rebecca.
Wilcox Dow, Esq., Senior Vice President
Fax No.: (303) 792-8647
with a copy to: Sherman & Howard L.L.C.
633 17th Street
Suite 3000
Denver, Colorado 80202
Attn: Rebecca A. Fischer, Esq.
Fax No.: (303) 298-0940
All such addresses may be changed by notice given in accordance with this
Section.
B. Parties in Interest. All of the terms and provisions of this
Agreement will be binding upon and inure to the benefit of and be enforceable
by the successors and permitted assigns of the Sellers and Purchaser.
<PAGE> 29
C. Entire Agreement. There are and were no verbal or written
representations, warranties, understandings, stipulations, agreements, or
promises pertaining to the subject matter of this Agreement made by either
party or any agent, employee, or other representative of either party or by any
broker or any other person representing or purporting to represent either
party, not incorporated in writing in this Agreement, and neither this
Agreement nor any of the terms, provisions, conditions, representations, or
covenants contained in this Agreement can be modified, changed, terminated,
amended, superseded waived, or extended except by an appropriate written
instrument duly executed by the parties.
D. Originals. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
E. Time. Time is of the essence under this Agreement. In the event
the last day permitted for the performance of any act required or permitted
under this Agreement falls on a Saturday, Sunday, or holiday, the time for such
performance will be extended to the next succeeding business day. Time periods
under this Agreement will exclude the first day and include the last day of
such time period.
F. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and will not in any
way affect the meaning or interpretation of the text of this Agreement.
G. Governing Law. This Agreement and the Guaranty will be construed
and enforced in accordance with the laws of the State of Texas, except that
matters relating to real property, leasehold interest or fixtures will be
governed by the laws of the State in which the real property, leasehold
interest or fixtures is situated.
H. Assignment of Agreement. No Person may assign any interest in
this Agreement, not any of the benefits or obligations of this Agreement,
without the prior written consent of each of the other parties, which consent
shall not be unreasonably withheld. Any assignment in violation hereof will be
void.
I. Recording. This Agreement may not be recorded in whole or in
part, and any recordation in violation hereof shall be deemed to be a default
under this Agreement by the recording party.
J. Binding Effect. This Agreement will not be binding or effective
until properly executed and delivered by the Sellers and Purchaser.
K. Gender. As used in this Agreement, the masculine will include the
feminine and neuter, the singular will include the plural, and the plural will
include the singular, as the context may require.
<PAGE> 30
L. No Joint Venture, Partnership, Agency, Etc. This Agreement shall
not be construed as in any way establishing a partnership, joint venture,
express or implied agency, or employer-employee relationship between Purchaser
and the Sellers.
M. No Third Party Beneficiaries. This Agreement is for the sole
benefit of Purchaser and the Sellers and their respective successors and
permitted assigns, and no other person or entity shall be entitled to rely upon
or receive any benefit from this Agreement.
N. No Waiver. No consent or waiver, express or implied, by Purchaser
to or of any breach of any representation, covenant or warranty of the Sellers
shall be construed as a consent or waiver to or of any other breach of the same
or any other representation, covenant or warranty.
O. Antitrust Matters. To the extent permitted by applicable laws,
Purchaser shall release Sellers from any and all claims, losses, damages, costs
and expenses, including reasonable attorneys' fees, arising out of any claim
that this Agreement, or the transaction contemplated herein, violate state or
federal antitrust laws, rules or regulations to the extent such claim is based
upon the relative competitive position of Purchaser from and after consummation
of the transactions contemplated hereunder. Sellers agree to cooperate with
Purchaser to comply with any reporting or other requirements of the
Hart-Scott-Rodino Act, if necessary, and Purchaser agrees to reimburse Sellers
for Sellers' costs to comply with such Act, including without limitation,
reasonable attorneys' fees.
P. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when taken together will be deemed one original.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first set forth above.
SELLERS:
UNITED ARTISTS THEATRE CIRCUIT, INC.
a Maryland corporation
By: /s/ Kurt Hall
--------------------------------------------
Kurt Hall, CFO and EVP
July 17, 1996
UNITED ARTISTS PROPERTIES I CORP.,
a Colorado corporation
By: /s/ Kurt Hall
--------------------------------------------
Kurt Hall, CFO and EVP
July 17, 1996
<PAGE> 31
RESORT AMUSEMENT CORPORATION,
a Texas corporation
By: /s/ Kurt Hall
-------------------------------------------
Kurt Hall, CFO and EVP
July 17, 1996
PURCHASER:
HOLLYWOOD THEATRES,
a Delaware corporation
By: /s/ Thomas W. Stephenson, Jr.
--------------------------------------------
Thomas W. Stephenson, Jr., President
<PAGE> 32
FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
This FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the
"Amendment") is dated this 16th day of September, 1996, by and among HOLLYWOOD
THEATERS, INC., a Delaware corporation ("Purchaser"), and UNITED ARTISTS
THEATRE CIRCUIT, INC., a Maryland corporation, UNITED ARTISTS PROPERTIES I
CORP., a Colorado corporation, and RESORT AMUSEMENT CORPORATION, a Texas
corporation (collectively and individually, "Seller").
Recitals
A. Seller and Purchaser are parties to a certain Agreement of
Purchase and Sale dated as of July 22, 1996 (the "Agreement").
B. Seller and Purchaser desire to amend the Agreement to evidence
the agreement of the parties to change the purchase price payable at Closing
and to provide for adjustment and further payment of the purchase price in the
event of the exercise of options to extend the terms of certain leases, upon
the terms and conditions set forth below.
C. Unless otherwise specifically defined herein, all capitalized
terms shall have the same meaning as those terms are defined in the Agreement,
as amended.
Agreement
In consideration of the recitals, covenants, and conditions in this
Amendment, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The full paragraph of Section 5A is deleted and restated in its
entirety as follows:
The total Purchase Price for the Purchased Assets is Eleven
Million Nine Hundred Forty Four Thousand Seven Hundred Fifty
Seven and no/100 Dollars ($11,944,757). The Purchase Price is
based upon the "Cash Flow Multiple" multiplied by the "1995 Cash
Flow" amounts for the Theatres as specified on Exhibit F attached
hereto and incorporated herein, for a total of $12,090,261, which
amount shall be reduced by a credit to Purchaser of $125,000 for
Pacer hardware and software ticketing systems which are not
included as part of the Purchased Assets, and further reduced by
$20,506 as a result of the removal of the Odessa Winwood theatre
from the transaction.
2. Section 5B is amended to add the following sentence to the end
of the paragraph:
<PAGE> 33
The Purchase Price shall be allocated among the Purchased Assets
when and if paid, and therefore, the portion of the Purchase
Price allocated on or prior to the expiration of the inspection
Period shall be $11,285,064, the amount of the "First
Installment", as defined below, of the Purchase Price as set
forth in Section 5C below.
3. Section 5C is deleted and restated in its entirety as follows:
Payment of Purchase Price. The Purchase Price shall be paid in
two or more, installments. The "First Installment" shall mean
the amount of $11,285,064, (as adjusted for apportionments and
closing costs as provided in Sections 13C and 13D of the
Agreement, and as credited for the amount of any Earnest Money
Deposit and Nonrefundable Earnest Money Deposit), shall be
payable in full by Purchaser to the Sellers in cash or by
certified check, cashier's check or federal wire transfer on the
date of Closing.
Any subsequent installments after the First Installment shall be
paid, if at all, upon the exercise of any options to extend the
terms of the Overland Park 3 and the Plaza Twin leases beyond the
Lease Termination Dates set forth below. If Purchaser renews or
extends the terms of one or both of such leases, Purchaser agrees
to pay to Sellers within 10 days after the date any such
extension is exercised, an additional installment payment equal
to the number of years in the extension(s), multiplied by the
1995 Cash Flow shown below, up to a maximum amount equal, to the
Total Adjustment set forth below. Any additional installment
after the First Installment of the Purchase Price due for each
extension is defined as the Additional Purchase Price.
<TABLE>
<CAPTION>
Lease 1995 Total
Termination Cash Adjust-
Date Flow ment
<S> <C> <C> <C>
Overland Park 3 6/20/97 $19,436 $110,144
Plaza Twin 12/31/99 $173,359 $549,549
</TABLE>
For example, if the Overland Park lease is extended for five
additional years, the Additional Purchase Price due upon extension is as
follows:
5 years x $19,436/year = $97,180
If at the end of that term the lease is extended for an additional
5-year period, the Additional Purchase Price would be the balance of the Total
Adjustment, or
$110,144 - $97,180 = $12,964
If the Plaza Twin lease is extended for an additional 3-year period,
the Additional
<PAGE> 34
Purchase Price would be as follows:
3 years x $173,359/year = $520,077
If at the end of that term the lease is extended for an additional
3-year period, the Additional Purchase Price would be the balance of the Total
Adjustment, or
$549,549 - $520,077 = $29,472.00
The terms of this Section shall survive the Closing of the transaction
contemplated by the Agreement and shall be evidenced by a Memorandum of this
First Amendment recorded the real estate records where the Overland Park 3 and
Plaza Twin properties are located.
4. Payment of any Additional Purchase Price shall be due and payable
within 10 days after the exercise of any option to extend the term of either
of the Overland Park or Plaza Twin Leases. Failure to make such payment shall
be a default under the terms of the Assignment and Assumption Agreement. In
addition, Purchaser and Sellers shall use good faith efforts to amend Overland
Park and Plaza Twin leases to provide that payment of the Additional Purchase
Price Sellers shall be a condition to the valid exercise of any options to
extend such leases. This covenant shall survive the Closing of the transaction
contemplated by the Agreement.
5. In the event Purchaser does not elect to extend either the Overland
Park or Plaza Twin lease prior to the expiration of the then current term,
Sellers shall have the option to require Purchaser to assign such lease to UATC
and UATC shall have the right to exercise the option to extend the term of the
lease and assume operations of the theatre. This covenant shall survive the
Closing of the transaction contemplated by the Agreement.
6. Except as expressly amended by this Amendment, the terms, covenants,
conditions, provisions and agreements of the Agreement are hereby ratified and
confirmed by and remain in full force and effect. If there is any conflict
between the terms and provisions of this Amendment and the terms and provisions
contained in the Agreement, as amended, this Amendment shall control.
-3-
<PAGE> 35
The parties have executed this First Amendment to Agreement of Purchase
and Sale to be effective on the date first written above.
SELLER:
UNITED ARTISTS THEATRE CIRCUIT, INC.,
a Maryland corporation
By: /s/ Kurt Hall
--------------------------------------
Kurt Hall, EVP & CFO
UNITED ARTISTS PROPERTIES I CORP.
a Colorado corporation
By: /s/ Kurt Hall
--------------------------------------
Kurt Hall, EVP & CFO
RESORT AMUSEMENT CORPORATION,
a Texas corporation
By: /s/ Kurt Hall
--------------------------------------
Kurt Hall, EVP & CFO
PURCHASER:
HOLLYWOOD THEATERS, INC.,
a Delaware corporation
By: /s/ Thomas W. Stephenson, Jr.
--------------------------------------
Thomas W. Stephenson, Jr., President
<PAGE> 36
SECOND AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE
This Second Amendment to Agreement of Purchase and Sale ("Second
Amendment") is made effective as of the 8th day of November, 1996, by and
between United Artists Theatre Circuit a Maryland corporation ("UATC"), United
Artists Properties I Corp., a Colorado corporation ("UAPIC"), and Resort
Amusement Corporation ("RAC") (UATC, UAPIC, and RAC being collectively and
individually referred to as "Seller") and Hollywood Theaters, Inc.
("Purchaser").
Recitals
A. Seller and Purchaser have entered into a certain Agreement
for Purchase and Sale dated July 22, 1996, as amended by a First Amendment to
Agreement of Purchase and Sale dated September ___, 1996 (collectively, the
"Purchase Agreement").
B. Seller and Purchaser desire to amend the Purchase Agreement
to permit closings occur thereunder on a staggered basis, under
certain circumstances, as consents to transfer the Leases and Leasehold
Theatres are obtained from landlords, and to make other amendments, as
described below.
C. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller and Purchaser agree
as follows:
1. Rolling Closings. Subject to the restrictions contained in
this paragraph 1, the Purchase Agreement is amended to permit Purchaser to
acquire the Theatres and related Personal Property, Contract Rights and Names
through a series of closings as conditions precedent for the acquisition of a
particular Theatre are satisfied or waived. However, the first closing under
the Purchase Agreement ("First Closing") shall not occur until satisfaction or
waiver by the appropriate party of the conditions precedent (other than payment
of the Purchase Price) pertaining to at least ten Theatres having an aggregate
1995 Cash Flow (as set forth on Schedule 1 attached hereto) equal to or greater
than 50% of the total 1995 cash flow in respect of all Theatres. The
definition of "Closing" which appears in Section 1C of the Purchase Agreement
is amended to mean, as to each Theatre, the consummation of the purchase of
such Theatre as contemplated by Section 13 of the Purchase Agreement. The last
sentence of the first paragraph of Section 13A of the Purchase Agreement is
deleted and replaced with the following language:
"If for any reason other than failure by a party to perform
its obligations under this Agreement, the Closing for the
acquisition of any Theatre has not occurred on or before
December 6, 1996, this Agreement shall terminate and be of no
further effect as to such Theatre."
<PAGE> 37
All Closings shall occur on Thursday unless another day of the week is
mutually agreed to. Subject to the limitations pertaining to the First Closing
described above, Purchaser shall be required to close on its acquisition of
each Theatre on the first Thursday following the date the conditions precedent
for such Theatre are satisfied and/or waived. Deliveries under Section 13B and
apportionments under Section 13C of the Purchase Agreement will be made as to
each Theatre as the Closing for such Theatre occurs. The Purchase Price for
each Theatre shall be as set forth on the attached Schedule 1.
2. Earnest Money. The Earnest Money Deposit shall be held by
the Title Company and applied to the Purchase Price of the Cache Cinema, Annex
7 and Promenade 4 Theatres as follows:
Cache Cinema $91,666
Annex 7 $91,666
Promenade 4 $91,667
Any of the Earnest Money Deposit remaining after the completion of the last
such Closing or December 6, 1996, whichever first occurs, shall be returned to
Purchaser. Nothing contained herein shall constitute a waiver of any rights
Seller may have to the Earnest Money Deposit in the event Purchaser defaults
under the Purchase Agreement.
3. UA Annex 7. The landlord for the Theatre known as UA Annex 7
located in Tulsa, Oklahoma, is conditioning its consent to assignment
of such Leasehold Theatre to Purchaser upon Purchaser's agreement to enter into
a new lease with such landlord for a period of one year only, on the lease form
attached as Exhibit A hereto, with such modifications as may be necessary to
conform Exhibit A to the economic terms of the existing Lease between Seller
and the landlord for the Annex 7 Theatre (other than the term of the Lease).
Purchaser agrees that the Purchase Price for the UA Annex 7 Theatre shall be
the amount stated in Schedule 1, notwithstanding the fact that Purchaser will
not be able to operate that Leasehold Theatre for the entire period of time
permitted under Seller's Lease for the Theatre. Purchaser also agrees it will
sign a new lease with the UA Annex 7 landlord on the form attached as Exhibit A
with the modifications described in this paragraph 3, if such is required in
order to obtain the landlord's consent to the transfer of the UA Annex 7
Leasehold Theatre to Purchaser.
4. Waiver of Condition. Purchaser hereby irrevocably waives the
condition to Closing set forth in Section 12B(vii) of the Purchase Agreement
(regarding non disturbance agreements) as to all Leasehold Theatres.
5. Seller's Reservation of Rights. Notwithstanding any provision
to the contrary contained in the Purchase Agreement, (i) the Purchased Assets
shall not include, and Seller shall not assign to Purchaser, Seller's right to
seek recovery from any landlord of disputed amounts paid by Seller to such
landlord in order to obtain written consent to transfer any Lease to Purchaser
or any other claims or amounts accruing prior to Closing, (ii) Seller expressly
reserves its right to pursue
<PAGE> 38
such claims against such landlords following the Closing, and (iii) any amounts
recovered by Seller pursuant to such claims shall be the sole property
of Seller.
6. Petty Cash. Seller shall sell to Purchaser the petty cash
estimated to be located at each Theatre as of the date of Closing for each
Theatre. Immediately after Closing, Seller shall notify Purchaser of the
actual amount of petty cash at the Theatre as of the Closing date and Purchaser
shall pay Seller the amount of the petty cash within five days after such
notice, in immediately available funds, and such payment shall be in addition
to the Purchase Price.
7. Credit for Repairs. Purchaser shall be allowed the following
amounts as credits against the Purchase Price for the following Theatres:
Theatre Credit
Heritage Plaza 5 $2,000
Cache Cinema $6,000
Village 6-Plex $2,000
Such credits will be given at the time that the Closing on the applicable
Theatre occurs and shall be a full and final settlement and accord and
satisfaction of the repairs described in the October 27, 1996 letter from
Robert E. Painter to Kurt Hall.
8. No Rescission. Once the Closing of the conveyance of any Theatre
occurs under the Purchase Agreement, Seller shall have no right of rescission
with respect to such Theatre.
9. Leasehold Deeds of Trust. Purchaser agrees that if, on or before
December 6, 1996, Seller obtains consent of either or both of the landlords for
the Sunset Mall and Mineral Wells Cinema 3 Leasehold Theatres to encumber those
Theatres with leasehold deeds of trust, Purchaser shall execute the leasehold
deeds of trust notwithstanding the fact that the Closings for those Theatres
have occurred previously.
<PAGE> 39
10. Scope of Amendment. Except as expressly amended by this Second
Amendment, all terms, covenants, conditions and other provisions of the
Purchase Agreement shall remain in full force and effect. If a conflict arises
between the provisions of the Purchase Agreement and those of this Second
Amendment, the provisions of this Second Amendment shall control.
UNITED ARTISTS THEATRE CIRCUIT, INC.
By: /s/ R. E. Hardy
-----------------------------------------
R.E. Hardy, EVP
UNITED ARTISTS PROPERTIES I CORP.
By: /s/ R. E. Hardy
------------------------------------------
R.E. Hardy, EVP
RESORT AMUSEMENT CORPORATION
By: /s/ R. E. Hardy
-----------------------------------------
R.E. Hardy, EVP
HOLLYWOOD THEATERS, INC.
By: /s/ James R. Featherstone
-----------------------------------------
James R. Featherstone, Vice President
<PAGE> 1
EXHIBIT 10.6
ASSET AND STOCK PURCHASE AGREEMENT
BETWEEN
CROWN CINEMA CORPORATION
CROWN THEATRE CORPORATION
HOLLYWOOD THEATERS, INC.,
AND
HOLLYWOOD THEATER HOLDINGS, INC.
DATED AS OF AUGUST 26, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SALE AND TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1 Sale and Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2 Acquisition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.3 Expenses; Prorations of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.4 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.5 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.6 Escrow Agreement; Purchase Price Adjustments;
Post-Closing Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.7 Earnest Money Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.8 Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.10 Non-Assignable Assumed Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III
THE CLOSING; TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.2 Conditions Precedent to Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.3 Conditions Precedent to Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.5 Buyer's Inspection of the Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.6 Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.7 Survey and Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.5 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.6 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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SECTION 4.7 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.8 Contracts and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.9 Theater Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.11 Assets Necessary to Business; Effect of Transfer . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.14 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.15 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.16 Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.17 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.18 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.19 Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.20 ERISA Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.21 Holdings Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.22 CTC Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.23 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.24 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.1 Corporate Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.4 Governmental Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.5 Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.6 Holdings Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.1 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.2 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.3 Satisfaction of All Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.5 Material Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.6 Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.7 Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.8 Continuation of Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.9 Interim Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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SECTION 6.11 Preservation of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.12 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.13 Use of Corporate Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.14 Termination of CTC Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.15 Tax Treatment of Sale of CTC Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.16 Corporate Office Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . 41
SECTION 7.1 Survival of Representations and Agreements . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.2 Indemnification of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.3 Indemnification of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.4 Indemnification for Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.5 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.4 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.5 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.7 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.9 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.13 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
Exhibit A - Assignment and Assumption Agreement
Exhibit B - Bill of Sale and Assignment
Exhibit C - Form of Landlord Consent and Subordination
Exhibit D - Escrow Agreement
Exhibit E - Consulting Agreement
Exhibit F - Form of Sellers' Legal Opinion
Exhibit G - Form of Buyer's Legal Opinion
Schedule 1 - Calculation of TLCF
Schedule 2.1(a) - Real Property
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Schedule 2.1(b) - Theater Leases
Schedule 2.1(d) - Assignable Consents and Approvals
Schedule 2.1(e) - Assumed Contracts
Schedule 2.1(h) - Excluded Assets
Schedule 2.2(a) - Development Theaters Cost
Schedule 2.5 - Existing Debt
Schedule 3.2(c) - Important Theaters
Schedule 3.3 - Rent Amounts and Term of Theater in St. Joseph, Missouri
Schedule 3.7(b) - Title Commitment Amounts
Schedule 4.3 - Sellers Conflicts; Required Consents
Schedule 4.4 - Liens; Agreements Granting Rights to Third Parties
Schedule 4.5 - Proprietary Rights
Schedule 4.6 - Financial Statements; TLCF Sample Calculation
Schedule 4.7 - Conduct of Business
Schedule 4.8 - Contracts and Other Agreements
Schedule 4.9 - Theater Locations
Schedule 4.12 - Litigation
Schedule 4.14 - Environmental Law Undertakings
Schedule 4.17 - Defects
Schedule 4.19 - Brokers
Schedule 4.20 - Employee Benefit Plans
Schedule 4.21 - ERISA
Schedule 4.23 - Labor Matters
Schedule 5.3 - Buyers or Holdings Conflicts
Schedule 5.7 - Holdings Financial Statements
Schedule 6.9 - Interim Operations
Schedule 6.12 - Theaters Owned By Cinema Venture Partners
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ASSET AND STOCK PURCHASE AGREEMENT
This ASSET AND STOCK PURCHASE AGREEMENT (this "Agreement"), is
entered into effective as of August 26, 1996 (the "Effective Date") by and
between Richard M. Durwood, acting in his individual capacity ("Durwood"),
Richard M. Durwood, acting in his capacity as trustee ("Trustee") pursuant to
Trust Agreement dated May 7, 1980 (the "Trust"), Crown Cinema Corporation, a
Missouri corporation ("CCC"), Crown Theatre Corporation, a Missouri corporation
("CTC") (each of Durwood, CCC and CTC being a "Seller" and any two or more of
them being collectively referred to as "Sellers"), Hollywood Theaters, Inc., a
Delaware corporation ("Buyer"), and Hollywood Theater Holdings, Inc., a
Delaware corporation ("Holdings"). Richard M. Durwood executes this Agreement
in his individual capacity, in his capacity as President of CCC and CTC, and in
his capacity as Trustee.
W I T N E S S E T H:
WHEREAS, on July 1, 1996, Buyer and Sellers entered into a
Letter of Intent, as supplemented by letter dated July 9, 1996 (as
supplemented, the "Letter of Intent") whereby Buyer proposed to buy and Sellers
agreed to sell the Acquired Assets (as hereinafter defined) subject to the
execution of a definitive agreement; and
WHEREAS, Buyer and Sellers now desire to enter into a
definitive agreement whereby Sellers will sell, convey, transfer and deliver
the Acquired Assets to Buyer free and clear of all Liens (as hereinafter
defined), title imperfections, claims, charges, levies or assessments, and
Buyer will acquire the Acquired Assets from Sellers, all upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. For purposes of this
Agreement, the terms set forth below shall have the following respective
meanings:
"Accrued Vacation Obligations" has the meaning set forth in
Section 6.9(d) hereof.
"Acquired Assets" means the CCC Assets, the CTC Stock and the
CTC Assets.
"ADA" has the meaning specified in Section 4.11.
<PAGE> 7
"Additional Deposit" has the meaning set forth in Section
2.7(c) hereof.
"Affiliate" shall mean, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. As used herein, the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether by the
ownership of voting securities, by contract or otherwise. In the case of
Sellers, the term Affiliate does not include any employee of Sellers, other
than Durwood.
"Arbitration Panel" has the meaning specified in Section
8.6(b) hereof.
"Assignment and Assumption Agreement" means an assignment and
assumption document to be executed as of the Closing Date, in the form attached
as Exhibit A hereto.
"Assumed Contracts" has the meaning specified in Section
2.1(e) hereof.
"Bill of Sale and Assignment" means a sale and assignment
document to be executed as of the Closing Date by Sellers, in the form attached
as Exhibit B hereto.
"Cash Purchase Price" has the meaning specified in Section
2.2(a).
"CCC Assets" has the meaning specified in Section 2.1 hereof.
"Closing" has the meaning specified in Section 3.1 hereof.
"Closing Date" has the meaning specified in Section 3.1
hereof.
"Consent" has the meaning specified in Section 4.3 hereof.
"Consulting Agreement" has the meaning specified in Section
2.8.
"Contract" means any contract, agreement, arrangement,
understanding or other instrument or obligation (whether oral or written,
pending or executory).
"CTC Assets" means all of the assets, properties and rights of
any kind owned or leased by CTC, including, without limitation, those of the
nature described with respect to CCC in Section 2.1 hereof.
"CTC Stock" means all of the issued and outstanding shares of
common stock, par value $1.00 per share, of CTC.
"Delivered Documents" has the meaning specified in Section
3.5(a).
"Delivery Date" has the meaning specified in Section 3.5(a).
2
<PAGE> 8
"Development Theaters" means the Indian Mound 6 Theater in
Heath, Ohio, the new theater under development in Lawrence, Kansas, the Forum
Twin 2 Theater in Rolla, Missouri, and the Capital 8 Theaters in Jefferson
City, Missouri.
"Dispute Notice" has the meaning specified in Section 2.3(b)
hereof.
"Earnest Money Deposit" means the amount to be advanced by
Buyer pursuant to Section 2.7 hereof, which amount is to be held by the Title
Company in an interest bearing account and distributed in accordance with the
terms and conditions of this Agreement.
"Environmental Laws" means any federal, state, local and
foreign laws (including common law), statutes, codes, ordinances, guides,
written policy rules and regulations that are applicable to the Acquired
Assets, and in each case as amended, and any judicial or administrative
interpretation thereof, relating to pollution or protection of human health,
the environment or natural resources (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws, statutes, codes, ordinances, rules, regulations,
consent decrees and judgments relating to emissions, discharges, releases or
threatened releases of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"Escrow Agreement" has the meaning specified in Section 2.6(a)
hereof.
"Escrowed Funds" has the meaning specified in Section 2.6(a)
hereof.
"Excluded Assets" has the meaning specified in Section 2.1(h)
hereof.
"Existing Debt" means the indebtedness identified on Schedule
2.5 hereto (i) relating to or secured by liens on any Theaters, or (ii) whether
or not relating to or secured by liens on any Theaters, for which CTC or any of
the CTC Assets are obligated or bound, all of which indebtedness is to be
repaid by Durwood and/or CCC on the Closing Date with proceeds of the Cash
Purchase Price.
"Expenses" means any and all fees or expenses or capital
expenditures relating to the replacement of equipment arising out of or
relating to the operation of the Theaters and the Acquired Assets in the
ordinary course of business, including, but not limited to, prepaid fees,
Taxes, utility charges, lease charges, film rental expenses, minimum rent and
percentage rent under the Leases, concession expenses and wages and salaries.
"Expiration Date" has the meaning specified in Section 2.3(b)
hereof.
"Fee Theaters" means the Real Property and Improvements.
"GAAP" means generally accepted accounting principles and
practices as in effect in the United States at the time of the application
thereof, consistently applied for all periods so as
3
<PAGE> 9
to fairly reflect the financial condition, the results of operations and the
cash flows of the relevant Person or Persons.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and any
other agency, body, authority or entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Hazardous Substance" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form, polychlorinated biphenyl
("PCBs") and, to the extent only it exists at levels which are considered
hazardous to human health, radon gas; and (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous waste," "hazardous materials," "extremely hazardous substances,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants" or
words of similar import, under any applicable Environmental Laws.
"Holdings Common Stock" has the meaning specified in Section
2.2(b).
"Holdings Equity Purchaser" means the Person(s) purchasing
common and/or preferred equity of Holdings in connection with the financing by
Buyer of the acquisition of the Acquired Assets.
"Improvements" means all buildings and other improvements
situated on the Real Property.
"Inspection Period" means the period beginning on the date of
this Agreement and ending on the close of business on September 8, 1996.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended and as the same may be amended from time to time, and any
successor statute thereto.
"Knowledge" means the actual knowledge of Durwood and/or Brent
Hudson after reasonable inquiry of all district managers and corporate staff of
CCC and CTC.
"Landlord Consent to Assignment and Subordination" means a
written consent to, among other things, the assignment of each Lease by the
respective landlord of such Lease, substantially in the form attached as
Exhibit C hereto.
"Leased Theaters" means (i) all of CCC's right, title and
interest as tenant in, to and under the Leases covering the 22 Theaters which
are identified as "CCC Leased Theaters" on Schedule 4.9 hereto and all of CTC's
right, title and interest as tenant in, to and under the Leases covering the 3
Theaters identified as "CTC Leased Theaters" on Schedule 4.9 hereto.
4
<PAGE> 10
"Leases" means those written leases, together with all
amendments, supplements and modifications thereto, relating to the Leased
Theaters as of the date hereof, which Leases are identified on Schedule 2.1(b)
hereto under the captions CCC Leased Theaters and CTC Leased Theaters (being
the "CCC Leases" and the "CTC Leases," respectively).
"Letter of Intent" has the meaning specified in the recitals
hereto.
"Liability" has the meaning specified in Section 7.2 hereof.
"Lien" means, with respect to any properties or assets, any
mortgage, pledge, hypothecation, assignment, security interest, lien or
encumbrance or any preference, priority or other security agreement or
preferential arrangement of any kind or character whatsoever (including, but
not limited to, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction) in
respect of such properties or assets.
"Material Adverse Effect" means a material adverse effect on
the business, operations, affairs, condition (financial or otherwise), results
of operation, properties, assets or liabilities of the Theaters, individually
or in the aggregate.
"Permitted Exceptions" has the meaning specified in Section
3.7(c).
"Person" means any individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization of
any kind or character, including any Governmental Authority.
"Proprietary Rights" means any United States and foreign
letters patent, patents, patent applications, trademarks, trade names, service
marks, brand names, logos and other trade registrations (including unregistered
names and marks), trademark and service mark registrations and applications,
copyrights and copyright registrations and applications, inventions, invention
disclosures, trade secrets, processes, designs, technology, know-how and other
similar rights, including proprietary theater ticketing systems and the related
software.
"Purchase Price" has the meaning specified in Section 2.2
hereof.
"Real Property" means fee simple title in and to those certain
tracts of real property on which are located an aggregate of eight Theaters
identified as "CCC Fee Theaters" and "CTC FeeTheaters" on Schedule 4.9 hereto,
which property is more particularly described on Schedule 2.1(a) hereto under
the captions CCC Fee Theaters and CTC Fee Theaters, respectively, together with
all of Sellers' right, title and interest in and to adjacent streets, roads,
alleys, rights of way, easements, rail usage and any strips or gores of real
estate abutting or bounding such property, and all rights, titles and interests
of Sellers appurtenant to such real property and the Improvements.
5
<PAGE> 11
"Registration Rights Agreement" means a registration rights
agreement relating to the Holdings Common Stock which has substantially the
same terms as the registration rights agreement to be entered into by Holdings
and the Holdings Equity Purchaser, provided that, unless Durwood otherwise
agrees, such registration rights agreement will (i) grant Durwood "piggy back"
registration rights with respect to the Holdings Common Stock that will be
exercisable in connection with the first underwritten public offering of common
stock of Holdings, subject to standard underwriters' carve backs; and (ii)
grant Durwood one "demand" registration right in the event that the
underwriters for Holdings' initial public offering of common stock carve back
Durwood's sale of Holdings Common Stock therein.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the outdoor environment, or into, onto, or out of the Theaters,
including the movement of any Hazardous Substance or other substance through or
in the air, soil, surface water, groundwater or other property.
"Retained Liabilities" has the meaning specified in Section
2.5 hereof.
"Revised Commitment" has the meaning specified in Section
3.7(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" and "Sellers" have the meanings specified in the
recitals to this Agreement, provided that (i) the use of the singular includes
the plural and the use of the plural includes the singular, and (ii) where the
context requires, the term Sellers excludes Durwood and refers to CCC and CTC
both together and each as a separate Seller.
"Sellers' Ancillary Documents" has the meaning specified in
Section 4.2 hereof.
"Stock Value" means the price at which shares of common stock,
par value $.01 per share, of Holdings are sold by Holdings to the Holdings
Equity Purchaser.
"Stockholders Agreement" means the stockholders agreement
among the holders of equity securities of Holdings.
"Survey" has the meaning specified in Section 3.7(a).
"Surveyor" has the meaning specified in Section 3.7(a).
"Taxes" means all taxes, charges, fees, levies or other
assessments (including, but not limited to, income, gross receipts, excise,
property, sales, occupation, use, service use, license, payroll, franchise,
transfer and recording taxes, fees and charges) imposed by any Governmental
Authority, whether computed on a separate, consolidated, unitary or combined
basis or in any other manner, and includes any interest, penalties and
additions to any tax.
6
<PAGE> 12
"Theaters" means the Fee Theaters and the Leased Theaters.
"Third Party Claims" means claims, charges or complaints made
or threatened by third parties or employees of CTC or CCC arising from events
occurring outside the ordinary course of business of CTC or CCC, including, but
not limited to, harassing or illegal acts committed by employees of CTC or CCC
or charges or complaints made by employees to the Equal Employment Opportunity
Commission or any other federal, state or local agency responsible for the
prevention of unlawful employment practices.
"Title Commitment" has the meaning specified in Section
3.7(b).
"Title Company" means Hall Abstract, as agent for Chicago
Title Company, at the address of 200 South 8th Street, St. Joseph, MO 64501,
Attn: Steve Crawford.
"Title Policies" has the meaning specified in Section 3.7(d).
"TLCF" means, with respect to any specified period, the
theater level cash flow of a particular Theater or Theaters, as determined by
reference to the theater level cash flow statements of Sellers for such Theater
or Theaters, prepared consistently in all material respects with Sellers'
historical theater level cash flow statements, as heretofore provided by
Sellers to Buyer, calculated as described in Section 4.6 and as shown on
Schedule 4.6 hereto. The parties acknowledge that TLCF does not include
interest, amortization, depreciation or allocations of general and
administrative expenses or income taxes.
"Transition Time" means 12:00 midnight on Sunday, September 8,
1996.
"UCC" has the meaning specified in Section 3.5(a)(vii).
ARTICLE II
SALE AND TRANSFER OF ASSETS
SECTION 2.1 Sale and Transfer of Assets. In accordance
with the terms and provisions set forth herein, at the Closing Sellers shall
sell, convey, transfer and deliver to Buyer (i) the CTC Stock, free and clear
of all Liens and (ii) all of CCC's and Durwood's right, title and interest in
and to the following properties and assets (collectively, the "CCC Assets"):
(a) the Fee Theaters, including the Real Property
identified on Schedule 2.1(a) hereto and the Improvements;
(b) the leasehold interests in the Leases identified on
Schedule 2.1(b) hereto;
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(c) all tangible personal property, equipment and
fixtures of any kind owned or leased by Sellers and attached to or
located within or on or customarily used in connection with the
operation of the Theaters, including but not limited to seats,
merchandise, inventory, merchantable food and drink, cleaning
equipment, office equipment, projection and sound equipment, screens,
carpets, draperies, soundfold, wall coverings, cash registers, ticket
machines, signs (including marquees), projection supplies, concessions
equipment and prepaid utility and rent deposits in each case, except
for Sellers' rights or interests in any Excluded Assets;
(d) the consents, approvals, licenses, permits,
franchises and other authorizations possessed by Sellers identified in
Schedule 2.1(d) hereto relating to the Theaters to the extent
transferable;
(e) to and under the Contracts listed on Schedule 2.1(e)
hereof (the "Assumed Contracts");
(f) the names "Crown," "Crown Cinema" and "Crown
Theaters," the names of each of the Theaters and any derivatives or
designs of any thereof, either in word form or as a design, and any
other names, trademarks, service marks, trade names, brand names,
logos or slogans incidental thereto or associated therewith;
(g) all records of Sellers that are necessary to the
continuing operation of the Theaters;
(h) all other properties and assets of any kind,
character and description whatsoever (whether or not reflected on the
books of Seller and whether real, personal or mixed, tangible or
intangible, contingent or otherwise) used, or available for use, in
the business or operations of Sellers at the Theaters or necessary for
the continuation of such business or operations consistent with past
practice, other than the assets specifically identified on Schedule
2.1(h) hereto (the "Excluded Assets").
SECTION 2.2 Acquisition of Assets. In consideration of
the sale, conveyance, transfer and delivery of the Acquired Assets, at the
Closing Buyer shall pay and, subject to Section 2.6 hereof, deliver the
following (the "Purchase Price"):
(a) to CCC in consideration of the CCC Assets, the Cash
Purchase Price. The term "Cash Purchase Price" means the sum of (x)
an amount equal to 6.5 times the TLCF for all Theaters, other than
with respect to any new screens opened in 1996 at any Development
Theaters, for the twelve month period ending September 8, 1996 minus
$1,360,779, plus (y) an amount equal to the amount of Existing Debt
incurred in connection with the new screens that opened in 1996 at the
Development Theaters (estimated at $2,800,000) plus (z) to the extent
not financed with the Existing Debt amount referred to in clause (y)
above, actual costs incurred (including engineering, architectural and
legal fees and land purchase price all as estimated on Schedule
2.2(a)) prior to the Closing Date in respect of the development
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of the Development Theaters. Sellers shall estimate the amount of the
Cash Purchase Price by reference to actual TLCF statements for the
relevant Theaters and/or screens for the twelve month period ended
July 31, 1996 and estimates of TLCF for August 1996 and the portion of
September 1996 prior to Closing. Buyer may perform at its expense
during the Inspection Period all procedures it deems necessary or
appropriate to confirm the estimated Cash Purchase Price, including
having its independent accounting firm review the relevant financial
statements and related accounting records of Sellers.
(b) to Durwood in consideration of the CTC Stock, the
Holdings Common Stock. The term "Holdings Common Stock" means a number
of shares of the common stock, par value $.01 per share, of Holdings
equal to the quotient of (x) an amount equal to 0.5 times the TLCF for
all Theaters, other than with respect to any new screens opened in
1996 at any Development Theaters, for the twelve month period ending
September 8, 1996 (determined in a manner consistent with the
calculation of clause (x) of the definition of Cash Purchase Price),
divided by (y) the Stock Value.
SECTION 2.3 Expenses; Prorations of Expenses.
(a) CCC agrees to pay all debts, Expenses and contractual
obligations that arise or are incurred, or with respect to which the
event creating such debt, liability, Expense or obligation arises or
occurred, on or prior to the Transition Time in connection with the
operation and business of the Theaters or related to the Acquired
Assets, whether or not Sellers are aware of such debts, Expenses,
obligations or events. CCC agrees to pay all Third Party Claims that
arise or are incurred, or with respect to which the event creating
such liability or obligation arises or occurs, on or prior the Closing
Date in connection with the operation and business of the Theaters or
related to the Acquired Assets, whether or not Sellers are aware of
such liabilities, obligations or events. Buyer agrees to pay all
debts, Expenses or contractual obligations that arise or are incurred,
or with respect to which the event creating such debt, liability,
Expense or contractual obligation arises or occurs, after the
Transition Time and prior to the Closing (excluding Third Party
Claims) in connection with the operation and business of the Theaters
or related to the Acquired Assets (including general and
administrative and reasonable and customary corporate level expenses).
Buyer agrees to pay all debts, Expenses, contractual obligations,
liabilities and other obligations that arise or are incurred, or with
respect to which the event creating such liability or obligation
arises or occurs, after the Closing in connection with the operation
and business of the Theaters or related to the Acquired Assets. To
the extent that any Expenses required to be prorated are readily
ascertainable as of the Closing Date, Sellers and Buyer agree to pay
such amounts at Closing. With respect to such amounts that are not
readily ascertainable as of the Closing Date, including with respect
to debts, Expenses and contractual obligations incurred by Sellers
after the Transition Time but on or prior to the Closing Date as
described above, Sellers and Buyer shall make payments after the
Closing promptly after such amounts are ascertained, and in any event
within 10 days after evidence of such amounts is received from the
party claiming the right to reimbursement, subject to the following
paragraph (b).
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(b) Sellers and/or Buyer may dispute in good faith any
amounts the other claims to be payable pursuant to this Section 2.3 by
delivering a written notice to the other party or parties setting
forth in reasonable detail the amount and nature of each disputed
matter (each such notice being hereinafter referred to as a "Dispute
Notice") within ten days after receiving a notice that any such amount
is due under Section 2.3(a). Each party shall provide the other party
with such additional information as it may reasonably request as to
the basis of such dispute. The parties shall attempt in good faith to
resolve any dispute as to any matter set forth in a Dispute Notice.
If within 30 days following the date of the receipt of the Dispute
Notice (the "Expiration Date") the dispute cannot be resolved through
negotiation between the parties, the dispute shall be submitted for
resolution by binding arbitration in accordance with Section 8.6
hereof.
SECTION 2.4 Allocation of Purchase Price. Buyer and
Sellers each agree that the Purchase Price is to be allocated hereto among the
Acquired Assets and the Covenant Not to Compete provided in Section 6.12
hereof, and that the portion of the Purchase Price so allocated to the Acquired
Assets is to be allocated among the Acquired Assets as agreed to by the
parties. The parties agree to be bound for all purposes by the foregoing
allocations and will file all tax returns and all tax elections in a manner
consistent with such allocations.
SECTION 2.5 Retained Liabilities. Notwithstanding
anything to the contrary contained in this Agreement, Buyer shall not assume,
pay, perform or discharge any debts, liabilities, Expenses or obligations of
Seller of any kind, character or description whatsoever (whether absolute or
contingent, known or unknown, asserted or unasserted, whether or not the same
are disclosed to Buyer in or pursuant to this Agreement) that arise or are
incurred, or with respect to which the event creating such debt, liability,
Expense or obligation arises or occurred, (i) prior to the Transition Time, in
the case of debts, Expenses and contractual obligations (including general and
administrative and corporate level expenses), and (ii) on or prior to the
Closing Date in the case of all other liabilities and obligations, in each
case in connection with the operation and business of the Theaters or related
to the Acquired Assets (collectively, the "Retained Liabilities"), which
Retained Liabilities include, without limitation, the Existing Debt.
SECTION 2.6 Escrow Agreement; Purchase Price
Adjustments; Post-Closing Payment.
(a) At the Closing, Buyer and Seller shall enter into an
escrow agreement (the "Escrow Agreement") substantially in the form
attached as Exhibit D hereto, pursuant to which Buyer shall deposit
funds from the Cash Purchase Price in an amount equal to $1,000,000.00
(the "Escrowed Funds").
(b) The Purchase Price shall be (i) decreased after the
Closing Date by the amount by which actual TLCF for all Theaters for
the twelve-month period ending September 8, 1996, is lower than the
estimated TLCF for all Theaters (as determined pursuant to Section
2.2(a)) for such period, and (ii) increased by the amount that actual
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TLCF for all Theaters for the twelve-month period ending September 8,
1996 is greater than estimated TLCF for all Theaters (as determined
pursuant to Section 2.2(a)) for such period.
(c) Within sixty days after the Transition Time, Sellers
shall provide to Buyer their estimate of TLCF for all Theaters for the
twelve month period ending on September 8, 1996. Any film
distribution agreements which are not settled within 60 days after the
Transition Time will be deemed as between Buyer and Sellers to be
settled at the amount accrued thereon on Sellers' books (provided such
accruals are made consistent with past practice). If Buyer does not
object to Sellers' determination of TLCF within 30 days after delivery
of Sellers' estimate, Sellers' calculation shall be binding on the
parties. If Buyer does timely object to Sellers' calculation, the
dispute shall be resolved by the same process by which disputes are
resolved in Section 2.3(b).
(d) Within 15 days after the actual TLCF for all Theaters
for the twelve-month period ending September 8, 1996 as determined
pursuant to Section 2.6(c) hereof, the amount of the Purchase Price
adjustments shall be determined and
(i) if no adjustment in the Purchase Price, is
required, Buyer shall cause the Escrowed Funds, together with
all interest and other income accrued thereon, to be paid to
Sellers in accordance with the terms and provisions of the
Escrow Agreement;
(ii) if there are any adjustments in the Purchase
Price that decrease the Purchase Price, (A) Buyer shall be
paid out of the Escrowed Funds an amount equal to the amount
of the decrease in the Purchase Price, together with all
interest and other income accrued on such amount of the
Escrowed Funds, and (B) Buyer shall cause the balance of the
Escrowed Funds, together with all interest and other income
accrued on such amount of the Escrowed Funds, to be paid to
Sellers, in each case in accordance with the terms and
provisions of the Escrow Agreement; and
(iii) if there are any adjustments in the Purchase
Price that increase the Purchase Price, (A) Buyer shall cause
the Escrowed Funds, together with all interest and other
income accrued thereon, to be paid to Sellers in accordance
with the terms and provisions of the Escrow Agreement and (B)
Buyer shall pay an additional amount equal to the increase in
the Purchase Price to Sellers together with interest on such
amount from the Closing Date to the date of payment at a rate
equal to the rate of interest that accrued on the Escrowed
Funds during such period.
SECTION 2.7 Earnest Money Deposit.
(a) The Earnest Money Deposit under this Agreement shall
be as follows: on the date of this Agreement, Buyer shall deliver to
the Title Company the sum of $250,000.00 in immediately available
funds, which is to be held by the Title Company for the benefit of
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Buyer and Sellers in accordance with the terms and conditions of this
Agreement (the "Earnest Money Deposit"). The Title Company shall
deposit the Earnest Money Deposit in an interest-bearing account at a
federally insured national bank. From time to time as directed by
Buyer, the Title Company shall pay any interest earned on the Earnest
Money Deposit to Buyer. The Earnest Money Deposit shall be refunded
to Buyer, together with any interest thereon, if Buyer terminates this
Agreement during the Inspection Period in accordance with the terms of
Section 3.6 hereof; provided, however, that if Buyer terminates this
Agreement for any reason other than as a result of breach of the terms
hereof by Sellers, a portion of the Earnest Money Deposit not to
exceed $50,000 shall be paid to Sellers in an amount equal to the
reasonable legal and accounting fees and expenses incurred by Sellers
in connection with the transactions contemplated hereby, provided
Sellers provide supporting documentation for such fees and expenses.
If Buyer does not terminate this Agreement during the Inspection
Period pursuant to Section 3.6, the Earnest Money Deposit will become
non-refundable (except as otherwise provided for in (c) below) and the
parties will proceed to Closing, at which the Earnest Money Deposit
shall be applied as a credit toward the payment of the Cash Purchase
Price. Notwithstanding the foregoing except as provided in (c) below,
if this Agreement terminates in accordance with Sections 3.4(a), (c),
(d) or (e), the Earnest Money Deposit shall be refunded to Buyer,
together with any interest thereon; provided, however, that if Buyer
terminates this Agreement for any reason other than as a result of
breach of the terms hereof by Sellers, a portion of the Earnest Money
Deposit not to exceed $50,000 shall be paid to Sellers in an amount
equal to the reasonable legal and accounting fees and expenses
incurred by Sellers in connection with the transactions contemplated
hereby, provided Sellers provide supporting documentation for such
fees and expenses. If Sellers terminate this Agreement in accordance
with Section 3.4(b), the Earnest Money Deposit shall be remitted to
Sellers, and any interest accrued thereon and not previously
distributed shall be remitted to Buyer.
(b) In addition, Buyer shall pay to Sellers the sum of
One Hundred and no/100 Dollars ($100.00) (the "Non-Refundable Earnest
Money Deposit") in consideration for this Agreement and the Inspection
Period. Notwithstanding anything in this Agreement to the contrary,
the Non-Refundable Earnest Money Deposit shall be non-refundable to
Buyer in any event.
(c) In addition, if the Closing has not occurred by 2:00
p.m. Central time on September 15, 1996, then on September 16, 1996
Buyer shall pay to Sellers the Earnest Money Deposit plus an
additional Two Hundred Fifty Thousand Dollars ($250,000) (the
"Additional Deposit"). The Earnest Money Deposit and the Additional
Deposit will be applied against the Cash Purchase Price if the Closing
occurs, but as of 2:00 p.m. on September 15, 1996 will be otherwise
non-refundable, except if (i) Buyer terminates this Agreement pursuant
to Sections 3.4(e), or (ii) Sellers terminate this Agreement pursuant
to Section 3.4(g), and upon the occurrence of any of (i) or (ii)
hereof Sellers will refund Buyer all of the Additional Deposit, and
the Earnest Money Deposit will be distributed as provided in Section
2.7(a)).
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SECTION 2.8 Consulting Agreement. On the Closing Date, Buyer
and Durwood will enter into the Consulting Agreement in substantially the form
of Exhibit E hereto pursuant to which Durwood will provide specified services
to Buyer during the term of such agreement in exchange for the consideration
provided under such agreement (the "Consulting Agreement").
SECTION 2.9 Further Assurances. Sellers hereby agree that
from time to time after Closing each of them shall (a) execute, deliver,
acknowledge, file and record, or cause to be executed, delivered, acknowledged,
filed and recorded, such further bills of sale, deeds, general conveyances,
endorsements, assignments and other good and sufficient instruments of sale,
conveyance, transfer and delivery and such further consents, certifications,
affidavits and assurances as are required in order to vest in Buyer all of
Sellers' right, title and interests in and to the Acquired Assets or otherwise
to consummate and make effective the transactions contemplated by this
Agreement and (b) take, or cause to be taken, all actions and do, or cause to
be done, all things, as are required in order to put Buyer in actual possession
and operating control of the Theaters and the Acquired Assets or otherwise to
accomplish the purposes of this Agreement. Buyer agrees to pay all reasonable
expenses associated with any actions required to be taken under this Section
2.9.
SECTION 2.10 Non-Assignable Assumed Contracts. This Agreement
and any document delivered hereunder shall not constitute an assignment or an
attempted assignment of any right under an Assumed Contract contemplated to be
assigned to Buyer hereunder:
(a) which is not assignable without the consent of a
third party if such consent has not been obtained and such assignment
or attempted assignment would constitute a breach thereof; or
(b) if the remedies for the enforcement or any other
particular provisions thereof available to Sellers would not pass to
Buyer.
Sellers shall use reasonable efforts to obtain such consents of third parties
as may be necessary for the assignment of the Assumed Contracts provided that
Seller shall not be obligated to make any payments to such third parties in
addition to those required pursuant to any agreement with third parties in
order obtain such consents, unless Buyer reimburses Seller for such payments at
the time such payments are made. To the extent that any of the Assumed
Contracts are not assignable by the terms thereof or where consents to the
assignment thereof cannot be obtained as herein provided, Sellers shall, at the
Closing, assign to Buyer the full benefit thereof (which shall be deemed to be
Assets) and grant to Buyer an irrevocable power of attorney to perform Sellers'
covenants and obligations thereunder in respect of the period after the Closing
Date, and to enforce Sellers' rights thereunder in the name of Sellers but for
the benefit of Buyer. Sellers shall take or cause to be taken such action in
its name or otherwise as Buyer may require so as to provide Buyer with the
benefits thereof and to effect collection of money or other consideration to
become due and payable under such items and Sellers shall promptly pay over to
Buyer money received by Sellers in respect of all of the foregoing items.
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ARTICLE III
THE CLOSING; TERMINATION
SECTION 3.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on September
27, 1996, or on such other date as has been mutually agreed upon between Buyer
and Sellers (the "Closing Date"), at the offices of Baker & Botts, L.L.P., 2001
Ross Avenue, Dallas, Texas 75201.
SECTION 3.2 Conditions Precedent to Obligations of Buyer.
The obligations of Buyer at the Closing hereunder are subject to the
satisfaction on or prior to the Closing Date of the conditions set forth below.
(a) The representations and warranties of Sellers
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the
Closing Date; Sellers shall have performed and complied with all
agreements required by this Agreement to be performed or complied with
by Sellers at or prior to the Closing Date; and Buyer shall have
received certificates, dated as of the Closing Date, signed by Sellers
to the foregoing effect.
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the possible effect of enjoining or
preventing the consummation of this Agreement or seeking damages on
account thereof.
(c) From the date hereof until Closing, there shall not
have occurred any material casualty or damage (whether or not insured)
to any 2 or more Theaters listed on Schedule 3.2(c) and the business
of Sellers shall have been conducted only in the ordinary course
consistent with past practices.
(d) All necessary action (corporate or otherwise) shall
have been taken by Sellers to authorize, approve, and adopt this
Agreement and the consummation and performance of the transactions
contemplated hereby, and Buyer shall have received a certificate,
dated as of the Closing Date, of Sellers to the foregoing effect.
(e) Buyer, Sellers, and the escrow agent shall have
entered into the Escrow Agreement.
(f) Buyer and Durwood shall have entered into the
Consulting Agreement.
(g) CCC shall have terminated all contracts relating to
the Acquired Assets, other than the Assumed Contracts (including, but
not limited to the contracts listed on Schedule 4.4 hereof).
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(h) Sellers shall have delivered executed written leases
documenting the terms of the oral leases listed on Schedule 4.4
hereto, which leases shall contain rent terms identical to the
respective rental amounts used to calculate TLCF.
(i) Buyer shall have obtained financing for the Cash
Purchase Price on terms acceptable to it.
(j) Buyer shall have received executed Subordination and
Non-Disturbance Agreements from each lender, if any, of the respective
landlords under the Leases, provided that this condition shall be
deemed to have been satisfied so long as lenders for landlords with
respect to no more than two Theaters fail to execute and deliver such
an agreement.
(k) At the Closing, Sellers shall deliver, or cause to be
delivered, to Buyer each of the following:
(i) for each Theater and the related Acquired
Assets, a Bill of Sale and Assignment, duly executed and
acknowledged by Sellers;
(ii) for each Leased Theater and the related
Assumed Contracts, an Assignment and Assumption Agreement,
duly executed and acknowledged by Seller;
(iii) for each Theater, a fully executed Landlord
Consent to Assignment and Subordination, provided that this
condition shall be deemed to have been satisfied so long as
landlords with respect to no more than two Theaters fail to
execute and deliver Landlord Consents to Assignment and
Subordination, and provided further that obtaining the
landlords' agreements to the provisions in such agreements
relating to landlord subordination of liens shall not be a
condition to closing;
(iv) such other bills of sale, deeds, general
conveyances, endorsements, assignments and other good and
sufficient instruments of sale, conveyance, transfer and
delivery as Buyer may reasonably request in order more
effectively to vest in Buyer all of Sellers' right, title and
interest in and to the Acquired Assets, in each case duly
executed and acknowledged by Sellers;
(v) evidence reasonably satisfactory to Buyer
regarding the termination by Seller prior to Closing of all
Persons employed at each Theater;
(vi) such documents as Buyer may request relating
to the existence and good standing of CCC and CTC under the
laws of the State of Missouri, the authority of Sellers to
enter into this Agreement and any other matters relevant
hereto, all in form and substance reasonably satisfactory to
Buyer;
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(vii) an opinion from Bryan Cave LLP, counsel to
Sellers, to the effect set forth in Exhibit F, incorporating
such reliance, assumptions, qualifications and limitations as
are customary and reasonable;
(viii) an executed counterpart of the Stockholders
Agreement (the stockholders agreement will provide, among
other things, that to the extent Holdings has not completed an
initial public offering on or before the fifth anniversary of
the Closing Date, Trustee shall have the right to "put" all of
its shares to Holdings for the same formula price per common
share at which the holders of Holdings' outstanding preferred
stock may put shares to Holdings);
(ix) evidence satisfactory to Buyer that all
Existing Debt has been repaid in full and all related liens
released; and
(x) stock certificates evidencing the CTC Stock
together with stock powers duly endorsed for transfer of such
shares to Buyer.
(xi) immediately available funds sufficient to
provide for the repair, maintenance or replacement, if any, of
Acquired Assets as contemplated pursuant to Section 3.5(c)(ii)
hereof (unless the Sellers reduce the Purchase Price in
accordance with Section 3.5(c)(iii) hereof).
SECTION 3.3 Conditions Precedent to Obligations of Seller.
The obligations of Sellers at the Closing are subject to the satisfaction on or
prior to the Closing Date of the conditions set forth below.
(a) Buyer's representations and warranties contained in
this Agreement shall be true and correct in all material respects at
and as of the Closing Date with the same effect as though such
representations and warranties had been made as of the Closing Date;
Buyer shall have performed and complied with all agreements required
by this Agreement to be performed or complied with by Buyer at or
prior to the Closing; and Sellers shall have received a certificate,
dated as of the Closing Date, signed by Buyer to the foregoing
effects.
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the possible effect of enjoining or
preventing the consummation of this Agreement or seeking damages on
account thereof.
(c) All necessary action (corporate or otherwise) shall
have been taken by Buyer and Holdings to authorize, approve and adopt
this Agreement and the consummation and performance of the
transactions contemplated hereby, and Sellers shall have received a
certificate, dated as of the Closing Date, of Buyer and Holdings to
the foregoing effect.
(d) Buyer, Seller and the escrow agent shall have entered
in to the Escrow Agreement.
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(e) Buyer and Durwood shall have entered into the
Consulting Agreement.
(f) Sellers and Holdings shall have entered into the
Registration Rights Agreement.
(g) At the Closing, Buyer shall deliver, or cause to be
delivered, to Sellers each of the following:
(i) the Purchase Price, less the Escrowed Funds;
(ii) such documents as Sellers may request
relating to the existence and good standing of Buyer and
Holdings under the laws of the State of Delaware, the
authority of Buyer and Holdings to enter into this Agreement
and any other matters relevant hereto, all in form and
substance reasonably satisfactory to Sellers;
(iii) an opinion from Baker & Botts, L.L.P.,
counsel to Buyer and Holdings, to the effect set forth in
Exhibit G, incorporating such reliance, assumptions,
qualifications and limitations as are customary and
reasonable; and
(iv) An assumption of the lease (which shall be
satisfactory to Buyer and shall contain the rent amounts and
term set forth on Schedule 3.3 hereto) regarding the Theater
in St. Joseph, Missouri.
SECTION 3.4 Termination. This Agreement may be terminated
prior to the Closing by (a) the mutual consent of Buyer and Sellers, (b)
Sellers upon the failure of Buyer to perform or comply with any of its
covenants or agreements contained herein prior to or at the Closing or if any
representation or warranty of Buyer hereunder shall not have been true and
correct in all material respects as of the time at which such was made, (c)
Buyer upon the failure of any Seller to perform or comply with any of its
covenants or agreements contained herein prior to or at the Closing or if any
representation or warranty of Sellers hereunder shall not have been true and
correct in all material respects as of the time at which such was made, (d)
Buyer if, at any time from the date hereof and prior to Closing, Buyer shall
have determined in its reasonable discretion that it will be unable to arrange
for the financing on terms and conditions that are satisfactory to it, (e)
Buyer if Sellers elect not to allow Buyer to collect any soil samples or
conduct any drilling at any Theaters requested by Buyer pursuant to Section
3.5(b) hereof, (f) Buyer if any Hazardous Substance (i) exists at any of the
Theaters (including underground storage tanks on the land occupied by the
Theaters, except in compliance with Environmental Laws), (ii) has been disposed
of on, to or from any of the Theaters, except in compliance with Environmental
Laws, (iii) has been released into, onto or out of the land occupied by the
Theaters, except in compliance with Environmental Laws, or (iv) has been
generated, managed, treated or transported to or from any of the Theaters,
except in compliance with Environmental Laws, (g) Sellers if the amount
required to remedy an environmental problem at any of the Fee theaters or
Leased Theaters exceeds $4 million, or (h) either Sellers or Buyer if the
Closing does not occur by October 25, 1996, provided, that no party
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may terminate this Agreement pursuant to (b) or (c) above if such party is, at
the time of any such attempted termination, in breach of any term hereof.
SECTION 3.5 Buyer's Inspection of the Acquired Assets.
(a) Deliveries. Sellers shall provide to Buyer in
Dallas, Texas, on or before 5:00 p.m. Dallas time on the date ten
business days after the Effective Date ("Delivery Date") the following
items and documents relating to the Acquired Assets to the extent the
same are in Sellers' possession or are readily obtainable by Sellers
(all of the following are herein called the "Delivered Documents"):
(i) copies of all ADA, engineering, structural,
elevator, curtain wall, mechanical, roof, environmental and
seismographic reports, a current site plan, the most recent
survey for the Theaters and the land on which they are
situated, elevator specifications, if any, and as-built
architectural, structural, mechanical, and electrical plans
and specifications of the Theaters;
(ii) copies of all monthly operating statements
for each Theatre for each month during 1994, 1995 and 1996;
(iii) copies of all certificates of occupancy,
licenses, permits, authorizations and approvals as required by
law for the construction, occupancy and operation of the
Theaters and the land on which they are situated;
(iv) copies of all real estate tax bills for 1994,
1995 and 1996, including evidence of payment thereof;
(v) a schedule of all guarantees and warranties
in Sellers' possession and still in effect issued or made in
connection with the construction, improvement, alteration or
repair of the Fee Theaters, including without limitation,
guaranties and warranties pertaining to roofs, elevators,
masonry, landscaping and heating and air conditioning systems;
(vi) an insurance certificate showing the amounts
and types of insurance coverage currently carried by Sellers
with respect to the Acquired Assets;
(vii) Uniform Commercial Code ("UCC") search
certificates from the Secretaries of State of Kansas, Missouri
and Ohio reflecting any effective UCC financing statements
then of record that name any Seller as debtor; and
(viii) of any notices of violations of laws or
insurance requirements which relate to the Acquired Assets and
were issued during 1992 or any subsequent year.
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As used herein, "readily obtainable" means that the material either is
in any Sellers' files or in the files of a third-party agent,
contractor or consultant of any Seller and can be obtained by
contacting such third party. Sellers shall not be required to contact
any governmental agencies or authorities nor spend sums of money in
excess of photocopying charges to obtain any of the Delivered
Documents. One complete set of the Delivered Documents shall be
delivered to Buyer at its offices in Dallas, Texas, and if Buyer
requests, a second set of the as-built plans and specifications
specified in clause (a) only shall also be delivered but such second
set shall be copied and delivered at the expense of Buyer.
(b) Buyer's Access to the Acquired Assets. Sellers
covenant and agree that from and after the Effective Date until
Closing or earlier termination of this Agreement, Buyer and its
contractors, agents and employees, at the sole expense of Buyer, may
enter upon any portion of the Real Property and the Theaters from time
to time during reasonable business hours, without any disruption of
the normal conduct of Sellers' business, and with reasonable prior
notice to Sellers for the purposes of inspection (mechanical,
structural and otherwise), tests, including environmental testing and
examination of the operating condition of the Acquired Assets,
provided that Buyer will not take any soil samples or conduct any
drilling without the prior written consent of Sellers, which consent
may be withheld for any reason. If the Closing does not occur, Buyer
will compensate Sellers for any damage to the Acquired Assets caused
by Buyer's negligent conduct during its inspection activities.
(c) Inspection of Condition of the Acquired Assets.
After the Effective Date and prior to Transition Date (except for
environmental problems, for which Buyer may inspect and deliver a list
of problems up to the date of Closing), Buyer may deliver to Sellers
an itemized list or lists of Acquired Assets that reasonably require
repair, maintenance or replacement, and Sellers agree to either (i)
provide such maintenance or replacement, or (ii) deliver to Buyer at
Closing sufficient funds to provide for such maintenance or
replacement, or (iii) reduce the Purchase Price by the estimated
amount required to repair, provide maintenance or replace such
Acquired Assets; provided, however, that Sellers agree to indemnify
Buyer for the difference, if any, between the actual costs and the
estimated costs, and Buyer agrees to pay Sellers the difference, if
any, between the estimated costs and the actual costs. Sellers may
dispute in good faith any repairs, maintenance or replacements
requested by Buyer by delivering the Buyer a written notice setting
forth such objection in reasonable detail to Buyer within two days of
receipt of the Buyer's list. If Buyer objects, the dispute shall be
submitted for resolution by binding arbitration in accordance with
Section 8.6 hereof.
SECTION 3.6 Termination by Buyer. Buyer may terminate this
Agreement during the Inspection Period for any reason or no reason, by
notifying Sellers in writing of its election to terminate this Agreement prior
to the expiration of the Inspection Period. If Buyer terminates this Agreement
within such time period, then Buyer shall promptly deliver to Sellers a copy of
any and all tests, studies and examinations conducted by Buyer related to the
Acquired Assets, Buyer shall receive a prompt refund of the Earnest Money
Deposit, and both parties shall be released from all further obligations under
this Agreement.
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SECTION 3.7 Survey and Title.
(a) Survey. As soon as reasonably possible after the
Effective Date and no later than 10 days after the Effective Date,
Sellers, at their expense, shall provide Buyer and its attorney with
all surveys regarding the Theaters that are in their possession or
otherwise reasonably available to them at no cost or de minimus
expense. At its option, Buyer at its expense may obtain a current
on-the-ground staked "as-built" survey of the Fee Theaters made in
accordance with Minimum Standard Detail Requirements for ALTA/ACSM
Land Title Surveys jointly established by ALTA and ACSM in 1992 and
meeting the accuracy requirements of the Urban Survey, as included
therein, and shall include items 1 through 11 and 15 or such other
standards as Buyer deems appropriate (the "Survey") prepared by a
registered land surveyor licensed in the State of Texas or the state
in which the applicable Theater is located and approved by Buyer (the
"Surveyor"). The Survey (including specifically the certificate of
the Surveyor forming a part thereof) shall be in form and substance
acceptable to the Title Company and Buyer and shall locate all
existing improvements, easements, rights-of-way, setback lines (which
shall show recording data, if applicable), encroachments, conflicts,
overlaps and protrusions affecting the Fee Theaters (to the extent
visible on the ground or listed in the Title Commitment) and other
matters noted on the Title Commitment, shall set forth the outside
perimeter of the Real Property, shall contain a metes and bounds
description of the Real Property and shall set forth the acres
included within the Real Property. The Survey shall contain a
statement on the face thereof certifying that no part of the Real
Property (excluding up to nine Theaters) lies within a flood plain or
flood prone area or a flood way of any body of water as determined by
reference to the current Flood Insurance Rate Map published by the
Federal Emergency Management Agency for the community in which the
Real Property is located except as shown or described on the Survey.
The Survey shall reflect that there is access to and from the Real
Property from a publicly dedicated street or road and shall be
sufficient to cause the Title Company to delete (except for "shortages
in area") the printed exception for "discrepancies, conflicts, or
shortages in area or boundary lines, or encroachments, or any
overlapping of improvements" in the Title Policy to be delivered
pursuant to Section 3.7(d). The Survey also shall show all
underground parking spaces (as striped). The Survey shall be
certified to Buyer, the Title Company and any financing source of
Buyer in a manner reasonably satisfactory to Buyer, Title Company and
such financing source. In the event the metes and bounds legal
description contained on the Survey varies from the metes and bounds
legal description set forth on Schedule 2.1(a) attached hereto, the
Deed shall contain the legal description set forth in the Survey.
(b) Title Commitment. As soon as reasonably possible
after the date hereof and no later than 15 days after the Effective
Date, Sellers, at their cost and expense, shall cause to be issued and
delivered to Buyer and its attorney (i) an Owner's Title Policy
Commitment (the "Title Commitment") from the Title Company setting
forth the status of the title to each of the Fee Theaters, pursuant to
which the Title Company agrees to insure title to each of the Fee
Theaters under an ALTA Owner's Policy Form B (4-6-90) Extended
Coverage in the full amount set forth on Schedule 3.7(b) (which
amounts approximate 7.0 times the twelve
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month TLCF of each such Theater for the period ending at the
Transition Time), calling for standard printed exceptions 1 through 5
(excluding the deletion of survey exceptions if Buyer elects not to
obtain surveys) to be deleted upon receipt of a current tax
certificate and mechanics' lien affidavits from Sellers (such
affidavits to be in form and content reasonably acceptable to Sellers
and Buyer, respectively), with the exception for taxes and assessments
to be limited to real property taxes and assessments for the year in
which the Closing occurs marked "not yet due and payable," and with
the title exception for leases and tenancies to reflect none, (ii)
copies of all documents referred to in the Title Commitment, including
but not limited to, deeds, lien instruments, plats, reservations,
restrictions and easements, and (iii) to the extent not covered by the
Title Commitments, certificates of taxes due covering the Theaters and
prepared by the appropriate tax authorities.
(c) In the event any exceptions appear in the Title
Commitment (or any new exceptions appear in any date down endorsement
or revised commitment, referred to herein collectively as a "Revised
Commitment"), other than the standard printed exceptions (which shall
be modified in the Title Policy as described in Section 3.7(b) above),
that are unacceptable to Buyer, then Buyer shall, within 15 days after
the receipt of the Title Commitment or the Survey, whichever shall be
last received (or within five days after receipt of a Revised
Commitment and copies of any new documents as applicable), notify
Sellers in writing of such fact. If Sellers fail to cure any such
objection (without having any obligation to do so, except as otherwise
provided herein) on or prior to the end of the Inspection Period (or
within five days after Buyer's objection if such objection pertains to
any new exception first appearing in a Revised Commitment received
after five days prior to the end of the Inspection Period), then Buyer
may either (i) terminate this Agreement, and upon such termination
Buyer shall be entitled to a prompt return of the Earnest Money
Deposit or, (ii) so long as the amount which would be required to
satisfy any lien or encumbrance (other than with respect to Existing
Debt to be discharged at Closing) or to cure such defect does not
exceed $4 million, waive the objection and the Cash Purchase Price
shall be reduced by the amount which would be required to satisfy any
lien or encumbrance or to cure such defect, which election shall be
made by delivering written notice to Seller on or before two business
days after the end of the Inspection Period (or within two business
days after the five day cure period as to a Revised Commitment, as
applicable). Sellers may dispute in good faith the amount of any
defect by delivering to Buyer a written notice setting forth such
objection in reasonable detail to Buyer within 2 days. If Buyer
objects, the dispute shall be submitted for resolution by binding
arbitration in accordance with Section 8.6 hereof. For the purposes
of this section, unless Buyer exercises option (i), the modification
of the standard exceptions, as described above, and all easements,
restrictions or other conditions which are shown on the Title
Commitment (or any Revised Commitment) and/or the Survey (to the
extent only such Survey items are ultimately contained in the Title
Policy) and which are not cured by Seller as described above are
hereinafter collectively referred to as the "Permitted Exceptions."
Notwithstanding the foregoing, (i) Sellers shall be obligated
to remove at Closing any mortgage or other lien which secures payment
of a monetary obligation and which may
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burden the Theaters, except for any landlord's lien imposed by the
landlords under the Leases (however, any such landlord lien must be
subordinate to the lease as to such theater or the lienholder must
have entered into a nondisturbance agreement with Seller agreeing not
to disturb Seller or any successor tenant in the event of a
foreclosure of its lien) and liens that arise by, through or under
Buyer or its consultants and agents, and (ii) Sellers agree to remove
any exceptions or encumbrances to title that are created after the
Effective Date as the result of the acts or failure to act by Sellers
or their agents, employees or representatives, failing which Sellers
shall be in default under this Agreement and Buyer shall have the
rights set forth in Section 7.2.
(d) Title. At Closing, Sellers, at their cost and
expense, shall furnish to Buyer a standard form ALTA Owner's Policy of
Title Insurance for all Fee Theaters detailed in Section 3.7(b) above,
issued by the Title Company in Buyer's favor, in the amounts set forth
in Schedule 3.7(b), insuring Buyer's title to the Fee Theaters subject
only to the Permitted Exceptions (collectively, the "Title Policies");
provided, however, at Closing, upon the written request of Buyer to
Sellers and the Title Company, Buyer shall have the right to elect to
waive the requirement that Sellers provide to Buyer a Title Policy for
the Fee Theaters, in which case Buyer shall receive a credit to the
Purchase Price in the amount that Sellers would have expended to
secure from the Title Company such Title Policy as required herein,
less any report or cancellation fees payable by Sellers to the Title
Company as a result of such policy not being issued.
(e) Condition of Title. Sellers shall convey to Buyer
good, marketable and insurable fee simple title to the Fee Theaters
and leasehold title to the Leasehold Theaters, free and clear of all
matters except the Permitted Exceptions. Upon conveyance, transfer
and delivery of the Acquired Assets, Buyer will continue to enjoy
peaceful possession of the Acquired Assets held under the Leases.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Sellers hereby jointly and severally represent and warrant to
Buyer as follows:
SECTION 4.1 Organization and Authority. Each of CCC and CTC
is a corporation duly organized and validly existing and in good standing under
the laws of the State of Missouri and has all requisite corporate power and
authority to own, lease and operate the Theaters and the Acquired Assets as
currently conducted. Sellers have furnished to Buyer true and correct copies
of the charter and bylaws of CCC and CTC as amended to date. Durwood is over
21 years of age, is a resident of the State of Kansas and has no current
intention of becoming a resident of any other state or jurisdiction in the
foreseeable future.
SECTION 4.2 Authority; Binding Effect. Each of Sellers has
all requisite power and authority to enter into this Agreement and each of the
other agreements and instruments to be
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executed and delivered by such Seller pursuant to the terms of this Agreement
(each a "Sellers' Ancillary Document" and, collectively, the "Sellers'
Ancillary Documents") and to perform its obligations hereunder and thereunder.
The execution and delivery by each Seller of this Agreement and each Sellers'
Ancillary Documents, and the performance by each Seller of its respective
obligations hereunder and thereunder and the consummation by each Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on the part of such Seller. This Agreement
and Sellers' Ancillary Documents have been duly executed and delivered by each
Seller and constitute legal, valid and binding agreements of each Seller,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights generally or by general principles of equity.
SECTION 4.3 Absence of Conflicts. Except as set forth on
Schedule 4.3 hereof, the execution and delivery by Sellers of this Agreement
and Sellers' Ancillary Documents, the performance by each Seller of its
respective obligations hereunder and thereunder and the consummation by each
Seller of the transactions contemplated hereby or thereby will not (a) conflict
with, or result in any violation or breach of, any provision of the charter or
bylaws of such Seller, (b) as of the Closing, conflict with, result in any
violation or breach of, constitute a default under, give rise to any right of
termination or acceleration (with or without notice or the lapse of time or
both) pursuant to, or result in being declared void, voidable or without
further effect, any term or provision of any material note, bond, mortgage,
indenture, lease, franchise, permit, license, Contract or other instrument or
document to which the Acquired Assets are or may be bound, (c) require any
Seller to obtain any consent, approval, permit, notice, action, authorization
or waiver (each, a "Consent") of or file with or give notice to any
Governmental Authority or any other Person not a party to this Agreement,
except for the Consents listed on Schedule 4.3 hereto which have been obtained
and remain in full force and effect, (d) conflict with, or result in any
violation of, any material law, ordinance, statute, rule or regulation of any
Governmental Authority known to Seller to be applicable to the business or
operations of the Theaters or the Acquired Assets or of any order, writ,
injunction, judgment or decree of any court, arbitrator or Governmental
Authority applicable to Seller or its properties or assets or (e) result in the
creation of, or impose on Seller the obligation to create, any Lien upon the
Acquired Assets.
SECTION 4.4 Title to Assets. Except as set forth on Schedule
4.4, Sellers have good and marketable title to the Acquired Assets owned by
Sellers, and have valid leasehold interests in the Acquired Assets leased by
Sellers, in each case free and clear of all Liens (except for any landlord's
lien imposed by the landlords under the Leases however, any such landlord lien
must be subordinate to the lease as to each theater or the lienholder must have
entered into a nondisturbance agreement with Seller agreeing not to disturb
Seller or any successor tenant in the event of a foreclosure of its lien). The
leases of properties or assets included in the Acquired Assets, including, but
not limited to the Leases, are valid, subsisting and effective in accordance
with their respective terms, and Sellers enjoy peaceful possession of all such
properties and assets. True and complete copies of all leases, including but
not limited to the Leases, including all amendments, modifications and
supplements thereto through the date hereof have been delivered to Buyer. The
Leases referred to on Schedule 2.1(b) constitute all of the Theater leases.
Except as set forth on Schedule 4.4 hereto,
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there are no leases, surface or subsurface use agreements, tenancy,
arrangements, service contracts, management contracts, or other agreements,
instruments or encumbrances that will be in force or effect as of the Closing
that grant to any Person, any right, title, interest or benefit in or to all or
any part of the Acquired Assets or any right relating to the ownership, use,
operation, management, maintenance or repair of all or any part of the Acquired
Assets, and no Person has any rights to acquire any of the Acquired Assets.
Except as set forth on Schedule 4.4 hereof, there are no third parties in
possession of any portion of the Theaters as lessees, tenants at sufferance,
trespassers or otherwise. Upon the sale, conveyance, transfer and delivery of
the Acquired Assets in accordance with the terms of this Agreement, Buyer will
(i) acquire good and marketable title to the Acquired Assets owned by Sellers,
free and clear of all Liens except, with respect to Fee Theaters, Permitted
Exceptions, and (ii) continue to enjoy peaceful possession of all Acquired
Assets held under lease.
SECTION 4.5 Proprietary Rights. Schedule 4.5 hereto sets
forth a correct and complete list of (a) all of Sellers' Proprietary Rights in
the Acquired Assets and (b) all licenses, sublicenses and other Contracts to
which any Seller is a party or by which it is bound relating to the ownership,
use or exploitation of any Proprietary Rights. To the Knowledge of Sellers,
Sellers have the right to use and exploit all Proprietary Rights included in
the Acquired Assets without infringing upon or otherwise violating the rights
of any other Person, and to the Knowledge of Sellers no consent, approval or
authorization of any other Person will be required for the use or exploitation
by Buyer after the Closing Date of any Proprietary Rights included in the
Acquired Assets. There is no claim pending or, to the Knowledge of Sellers,
threatened against any Seller that draws into question or otherwise affects any
right of Sellers to use or exploit any Proprietary Rights included in the
Acquired Assets, and Sellers are not aware of any basis for such a claim.
SECTION 4.6 Financials. The unaudited statements of
operations and cash flows and the TLCF statements for the years ended December
31, 1993, 1994 and 1995 which are attached hereto as Schedule 4.6, fairly
present in all material respects, the results of operations and cash flows and
the TLCF's of the Theaters for such twelve-month periods and contain no
material inaccuracies. Such statements were prepared using the same principles
and procedures as used for Seller's audited financials, which audited
financials were prepared in conformity with generally accepted accounting
principles, except as noted therein. The numbers shown as "Theater Level Cash
Flow" on Schedule 4.6 were calculated as follows: (a) all revenue of Sellers
during such periods derived from the respective Theaters, including, without
limitation, ticket revenue, advertising revenue and revenue from concession
sales (providing, however, certain immaterial rebates and other similar amounts
may not have been allocated to the theater level), less (b) all expenses
incurred by Sellers during such period in connection with the ownership,
leasing and operation of the respective Theaters during such periods. The
"Theater Level Cash Flow" on Schedule 4.6 does not include interest,
depreciation, amortization or allocations of general and administrative
expenses or income taxes.
SECTION 4.7 Conduct of Business. Except as set forth on
Schedule 4.7 and except as contemplated in this Agreement, since December 31,
1995, there has not been:
(a) any material adverse change in Sellers' business,
operations, affairs, condition (financial or otherwise), results of
operations, properties, assets or liabilities;
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(b) any sale, assignment or disposition of any
substantial properties or assets (other than the Excluded Assets), of
any kind or character relating to the operations of the Theaters,
except for personal property sold, assigned or disposed of in the
ordinary course of business and consistent with past practice and
custom;
(c) any damage, destruction or loss (whether or not
insured against) affecting the Acquired Assets;
(d) any revocation or termination, or any notice of any
threatened revocation or termination, of any Consents or permits
relating to the operations of the Theaters;
(e) any material change or any anticipated change in the
present relationships between Sellers and any of their significant
suppliers, insurers, lessors, licensors, licensees and distributors
with respect to the Acquired Assets; or
(f) any other material transaction other than in the
ordinary course of business and consistent with past practice and
custom.
SECTION 4.8 Contracts and Other Agreements. Schedule 4.8
sets forth a list of all material of the Contracts, whether written or oral, to
which any Seller is a party relating to the operation of the Theaters which
cannot be terminated by Seller upon 30 days notice. Sellers have delivered or
made available to Buyer true and complete copies of each written Contract
listed on Schedule 4.8 and, in the case of Contracts not reduced to writing,
have provided to Buyer a written summary of the material terms thereof. Each
Contract described in Schedule 4.8 is valid, in full force and effect, and
binding upon Seller that is a party thereto, in accordance with its terms.
Sellers are not in default under any of the Contracts described in Schedule 4.8
and, except as set forth on Schedule 4.8, there exists no event which, with the
giving of notice or lapse of time, or both, would become a default, in each
case with such exceptions thereto as do not, individually or in the aggregate,
have a Material Adverse Effect. Sellers have not received any written notice
from any other party to any Contract listed on Schedule 4.8 of the termination,
or threatened termination, thereof, and, to Sellers' Knowledge, there has
occurred no event that would allow such other party to terminate any Contract.
None of the Acquired Assets is bound by any Contract that was not entered into
in the ordinary course of business and consistent with past practice and
custom.
SECTION 4.9 Theater Locations. Schedule 4.9 sets forth a
true, correct and complete list of the names and locations of all motion
picture theaters (the "Theaters") operated by Sellers on the date hereof and on
the Closing Date.
SECTION 4.10 Solvency. Each Seller is able to pay its debts
as they become due, has capital sufficient to carry on its business as
presently conducted and proposed to be conducted, owns property which has both
a fair value and a fair saleable value in excess of the amount required to pay
its debts as they become due and is solvent. Sellers will not be rendered
insolvent by the transactions contemplated by this Agreement, and following the
consummation of such transactions, each Seller will be able to pay its debts as
they become due, will have capital sufficient to carry on
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its business as then conducted and proposed to be conducted, and will own
property which has a fair value and a fair saleable value in excess of the
amount required to pay its debts as they become due.
SECTION 4.11 Assets Necessary to Business; Effect of
Transfer. The Acquired Assets are sufficient in all material respects to carry
on the business and operations as presently conducted by Sellers at the
Theaters. The Acquired Assets are fit for the purposes for which they are
presently being used and are in all material respects in good operating
condition and repair, ordinary wear and tear excepted, and to Seller's
Knowledge conform in all material respects to all applicable laws relating to
their use and operation (including the provisions of the Americans with
Disabilities Act of 1990, Public Law 101-336, 42 U.S.C. Section 12101 et seq.
(the "ADA"). The Theaters were constructed and have been maintained in
accordance and material compliance with the ADA to the extent applicable.
Sellers have not received any notice to the effect that, or otherwise been
advised that, the Theaters are not in compliance with the ADA, and Sellers have
no reason to anticipate that any existing circumstances at any of the Theaters
are likely to result in violations of the ADA as the Theaters currently exist.
No representation or warranty is being made herein regarding the subject matter
hereof which may arise or otherwise occur as a result of any alterations,
changes or additions of any nature made to any of the Theaters by Buyer.
Sellers are in possession of all material licenses, permits, consents,
approvals and other authorizations that to Sellers' knowledge are required by
any Governmental Authority in connection with the ownership or lease of the
Acquired Assets or the conduct of the business and operations of Sellers at the
Theaters. Upon obtaining the Consents set forth on Schedule 4.3 hereto the
consummation of the transactions contemplated by this Agreement will not
deprive Buyer of the benefits of any material properties included in the
Acquired Assets or any rights or interests relating thereto, or result in the
imposition of any debts, liabilities or obligations on Buyer, except for the
debts, obligations and liabilities created by Buyer in connection with
financing the acquisition of the Acquired Assets.
SECTION 4.12 Litigation. Except as set forth on
Schedule 4.12 hereto, there is no action, suit, inquiry, investigation or other
proceeding pending against, or to Sellers' Knowledge threatened against or
affecting, any Seller or Sellers' properties or assets in any court or before
any arbitrator or any foreign or United States federal, state or local
Governmental Authority (a) in which an adverse decision could, either in any
case or in the aggregate, have a Material Adverse Effect or (b) which in any
manner draws into question the validity of or otherwise affects this Agreement,
the transactions contemplated hereby or the ability of Sellers to perform their
obligations hereunder.
SECTION 4.13 Taxes.
(a) Each Seller has filed or will file in a timely manner
with the appropriate Governmental Authority all tax returns required
to be filed prior to or on the date hereof relating to Taxes due and
payable or Taxes accrued and not yet payable on or before the Closing
Date, and each such tax return has been or will be prepared in
compliance in all material respects with all applicable laws and
regulations.
(b) Each Seller has paid or will pay on the applicable
due date all Taxes that are due and payable or Taxes accrued and not
yet payable on or before the Closing Date
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(including all Taxes shown to be due on such returns or pursuant to
any assessment received by such Seller from any taxing authority),
except such Taxes, if any, as are being contested in good faith by
appropriate proceedings diligently conducted.
(c) There are no claims for Taxes pending against any
Seller nor to the Knowledge of any Seller, any threatened claims for
Tax deficiencies against any Seller for which the Acquired Assets
could be liable, and Sellers do not know of any basis for such claims.
(d) There exist no actual or, to the knowledge of
Sellers, proposed additional assessments or adjustments of Taxes by
any taxing authority for which the Acquired Assets could be liable.
(e) There are no pending audits, actions, proceedings,
disputes, claims or, to Sellers' Knowledge, there are no
investigations with respect to any Taxes payable by or asserted
against any Seller and there is no basis on which any claim for
material Taxes can be asserted against any Seller. No Seller has
received notice from any Governmental Authority of its intent to
examine or audit any Tax Returns of any Seller.
(f) All Taxes required to be withheld or collected by
Seller (including, but not limited to, Tax required to be withheld
with respect to amounts paid or owing to any officer, employee,
creditor, shareholder, independent contractor or other Person) have
been timely withheld or collected and, to the extent required, have
been timely paid, remitted or deposited to or with the relevant
Governmental Authority.
(g) There are no proposed reassessments of the taxable
value of any of the Acquired Assets or similar matters pending with
respect to any taxing authority.
(h) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against a Seller for which the Acquired Assets
could be liable.
(i) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) imposed upon the Acquired Assets.
(j) There are no unsatisfied actual or proposed
adjustments or assessments for Taxes against CTC or against Durwood in
his capacity as a shareholder of CTC or, to the Knowledge of Sellers,
any basis for any such assessment or adjustment.
(k) No closing agreement or agreements pursuant to
section 7121 of the Code or any similar provision of any state or
local Law has been entered into by CTC or by Durwood in his capacity
as a shareholder of CTC.
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(l) No taxing authority has raised any issue with respect
to the liability of CTC or any Affiliate thereof (including, without
limitation, Durwood) for any Tax that would likely result in the
issuance by any taxing authority of a notice of deficiency or similar
notice for Taxes against Durwood or CTC.
(m) Except for the United States of America, the State of
Ohio, the city of Heath, Ohio, the city of Newark, Ohio, the State of
Missouri, the city of Kansas City, Missouri and the State of Kansas,
there are no other jurisdictions in which income or franchise tax
returns and reports, and returns and reports relating to the payment
of Tax based upon the ownership or use of property therein or the
derivation of income therefrom or measured by premiums or investments
in tangible or intangible property, were, or were required to be,
filed by Sellers or in which Sellers were required to be included.
(n) There are no requests for rulings, outstanding
subpoenas or requests for information with respect to Taxes of CTC or
of Durwood in his capacity as shareholder of CTC, proposed
reassessments of any assets or any property owned or leased by CTC, or
similar matters pending with respect to any taxing authority.
(o) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against CTC or Durwood in his capacity as
shareholder of CTC or for which CTC or Durwood in such capacity may be
liable.
(p) CTC has been subject to a valid and effective
election (a "Subchapter S election") to be an S corporation, within
the meaning of section 1361(a)(1) of the Code from November 29, 1989
to the date hereof, and such Subchapter S election has not been
terminated (within the meaning of section 1362(d) of the Code) at any
time prior to the date hereof.
SECTION 4.14 Environmental Compliance.
(a) Sellers are not subject to any existing, pending or
to Sellers' Knowledge threatened action, suit, investigation, inquiry
or proceeding by any Governmental Authority under, and are not
currently in violation of, or subject to, any remedial obligation
under, any Environmental Law.
(b) All material environmental notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed in
connection with the operation of the Theaters have been obtained or
filed.
(c) Hazardous Substances have not been disposed of on, to
or from any of the Theaters during the time of any Seller's ownership
or possession of the Acquired Assets and
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the operation of the Theaters or to Sellers' knowledge prior thereto,
except in compliance with Environmental Laws in effect at the time
such activity was undertaken.
(d) No Hazardous Substances have been generated, managed,
treated or transported to or from the Theaters, except in compliance
with Environmental Laws at the time such activity was undertaken.
(e) To the Knowledge of Sellers, there is not now at, on
or in the Theaters any asbestos, PCBs or, to the extent only it exists
at levels which are considered hazardous to human health, radon gas.
(f) No underground storage tanks currently exist or to
Sellers' Knowledge have existed on the land occupied by the Theaters.
(g) During the time the Theaters have been occupied by
Sellers, there has not been a Release of Hazardous Substances into,
onto or out of the land occupied by the Theaters.
(h) Except as set forth on Schedule 4.14 hereto, no
Seller is a party, whether as a direct signatory or as successor,
assignee or third party beneficiary, or otherwise bound, to any lease
or other Contract relating to the Acquired Assets under which such
Seller is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant,
restriction or other undertaking concerning a Release of Hazardous
Substances or non-compliance with Environmental Laws.
(i) Except for the Sellers' lenders or as provided in the
Leases, no Seller has released any other Person from any claim under
any Environmental Law or waived any rights concerning any Releases of
Hazardous Substances into, onto or out of or with respect to the land
occupied by the Theaters.
SECTION 4.15 Utilities.
(a) The Theaters are connected to and are served by
water, solid waste and sewage disposal, drainage, telephone, gas,
electricity and other utility equipment facilities and services
required by law or necessary for the operation or use of the Theaters;
such facilities and services are adequate for the present use and
operation of the Theaters on a fully occupied basis, and are installed
and connected pursuant to valid permits and are in material compliance
with all governmental regulations; and no fact or condition exists
which would result in the termination or curtailment in the furnishing
of utility services to the Theaters.
(b) Sellers have not received notice from any supplier of
water, solid waste and sewage disposal, drainage, telephone, gas,
electricity or other utility services to the Theaters
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that such service is being or will be terminated or curtailed and
Sellers have no knowledge that such termination or curtailment may
occur.
SECTION 4.16 Defects. Except as set forth on Schedules
4.17, there are no material structural defects in the Theaters or any material
defects in the Theaters' mechanical, electrical and plumbing systems.
SECTION 4.17 Condemnation. There are no pending or to
Sellers' Knowledge threatened condemnation or similar proceedings or
assessments affecting the Acquired Assets or any part thereof, nor to the
knowledge of Seller are any such proceedings or assessments contemplated by any
Governmental Authority.
SECTION 4.18 Books and Records. The books and records
of Sellers fairly reflect in all material respects the transactions to which
the Acquired Assets are or were bound, and such books and records are and have
been properly kept and maintained, with the revenues, expenses, assets and
liabilities of Sellers accurately recorded in all material respects therein on
the accrual basis of accounting. True, complete and correct copies of such
books and records have been made available for review by Buyer.
SECTION 4.19 Brokers, Finders, etc. Except as described
in Schedule 4.19, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of Sellers in such manner as to give rise to a
valid claim against any of the parties hereto for any broker's or finder's
commission. Except as described in Schedule 4.19, Sellers have not retained
any broker or finder in connection with the transactions contemplated hereby.
Any fees, expenses, commissions or other amounts payable to the Persons
identified on Schedule 4.19 shall be payable by Sellers and shall not be the
responsibility of Buyer.
SECTION 4.20 ERISA Matters.
(a) Schedule 4.20 contains a list and brief description
of each "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), "employee welfare benefit plan" (as defined in Section 3(1)
of ERISA), stock option, stock purchase, deferred compensation plan or
arrangement, and other employee fringe benefit plan or arrangement
maintained, contributed to or required to be maintained or contributed
to by Sellers for the benefit of any present or former employees of
the Theaters or their beneficiaries (all the foregoing being herein
called "Benefit Plans"). Sellers have delivered to Buyer true,
complete and correct copies of (1) each Benefit Plan (or, in the case
of any unwritten Benefit Plans, descriptions hereof) and (2) the most
recent summary plan description for each Benefit Plan (if any such
description was required).
(b) Each of the Sellers comply with the applicable
requirements of Section 4980B(f) of the Internal Revenue Code of 1986,
as amended (the "Code"), with respect to
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each Benefit Plan that is a group health plan, as such term is defined
in Section 5000(b) (1) of the Code.
(c) Each Benefit Plan has been administered in all
material respects in accordance with its terms. Sellers and all the
Benefit Plans are in compliance in all material respects with the
applicable provisions of ERISA and the Code, including without
limitation the requirements of section 401(a)(4) of the Code regarding
the allocation of employer contributions. All reports, returns and
similar documents with respect to the Benefit Plans required to be
filed with any governmental agency or distributed to any Benefit Plan
participant have been duly and timely filed or distributed. There are
no investigations by any Governmental Authority, termination
proceedings or other claims (except claims for benefits payable in the
normal operation of the Benefit Plans), suits or proceedings against
or involving any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan that could give rise to any material
liability, and there are not any facts that could give rise to any
material liability in the event of any such investigation, claim, suit
or proceeding.
(d) (i) All contributions to, and payments from, the
Benefit Plans that may have been required to be made in accordance
with the terms of the Benefit Plans or any applicable Law have been
timely made and (ii) Sellers and any ERISA Affiliates do not maintain,
and are not required to contribute to, any Pension Plan that is a
defined benefit pension plan (as defined in Section 3(35) of ERISA).
All such contributions to, and payments from, the Benefit Plans,
except those payments to be made from a trust qualified under section
401(a) of the Code, for any period ending before the Closing Date that
are not yet, but will be required to be made, will be properly
accrued.
(e) (i) No "prohibited transaction" (as defined in
section 4975 of the Code or Section 406 of ERISA) has occurred that
involves the assets of any Benefit Plan, and (ii) no prohibited
transaction has occurred that could subject the Sellers or any of
their employees, or, to the Knowledge of Sellers, a trustee,
administrator or other fiduciary of any trust created under any
Benefit Plan to the tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under Title I of
ERISA.
(f) No employee of Sellers will be entitled to any
additional benefits or any acceleration of the time of payment or
vesting of any benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement.
SECTION 4.21 Holdings Common Stock.
(a) Sellers are acquiring Holdings Common Stock for their
own account, for investment purposes only and not with a view to
resale or any other distribution thereof, in whole or in part.
Sellers acknowledge and agree that they may not assign, sell,
hypothecate or otherwise transfer the Holdings Common Stock unless (i)
(A) a registration statement is in effect under the Securities Act
with respect to such Holdings Common Stock or (B) a
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written opinion of counsel acceptable to Holdings is obtained to the
effect that no such registration is required and (ii) except in the
case of publicly traded Holdings Common Stock, the transferee is an
"accredited investor" as defined in Regulation D under the Securities
Act. Sellers have no reason to anticipate any change in their
circumstances, financial or otherwise, that would cause or require any
sale or distribution of the Holdings Common Stock.
(b) Sellers acknowledge, agree and are aware that (i) an
investment in the Holdings Common Stock involves a high degree of risk
and that Sellers may lose the entire amount of their investment; (ii)
no United States federal or state or any foreign agency has passed
upon the accuracy, validity or completeness of this Agreement or made
any finding or determination as to the fairness of an investment in
the Holdings Common Stock; (iii) the Holdings Common Stock is
illiquid, and Sellers must bear the economic risk of investment in the
Holdings Common Stock for an indefinite period of time; (iv) this
Agreement and the Stockholders Agreement contain substantial
restrictions on the transferability of the Holdings Common Stock; (v)
there is no existing public or other market for the Holdings Common
Stock there can be no assurance that the Sellers will be able to sell
or dispose of their Holdings Common Stock; (vi) the Holdings Common
Stock has not been registered under the Securities Act or under the
securities laws of any other jurisdiction, including the states of the
United States, and Holdings is under no obligation to register or
qualify the Holdings Common Stock or any of its securities for resale
by Sellers or assist Sellers in complying with any exemption under the
Securities Act or the securities laws of any such jurisdiction or any
other jurisdiction, except as provided in the Registration Rights
Agreement; (vii) an offer or sale of Holdings Common Stock by Sellers
in the absence of registration under the Securities Act will require
the availability of an exemption thereunder; (viii) a restrictive
legend in substantially the form set forth in Section 8.7(a) hereof
shall be placed on the certificates representing the Holdings Common
Stock; and (ix) a notation shall be made in the appropriate records of
Holdings indicating that such Holdings Common Stock are subject to
restrictions on transfer.
(c) Each Seller qualifies as an "accredited investor"
within the meaning of Rule 501 under the Securities Act.
(d) Sellers acknowledge that they (i) have been given the
opportunity to ask questions of, and receive answers from, Holdings
and its officers and employees concerning the terms of an investment
in Holdings Common Stock and other matters pertaining to an investment
in the Holdings Common Stock, (ii) been given the opportunity to
obtain such additional information necessary to evaluate the merits
and risks of an investment in Holdings Common Stock to the extent
Holdings possesses such information, and have received all documents
and information that they have requested relating to an investment in
the Holdings Common Stock; (iii) have not relied upon any
representations or other information (whether oral or written) from
Holdings or its directors, officers or affiliates, or from any other
persons, other than the representations contained in this Agreement;
and (iv) are familiar with the nature of and risks attendant to
investments in the business of
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Holdings and securities in general and have carefully considered and
have, to the extent they believe such discussion necessary, discussed
with their professional legal, financial and tax advisers, the
suitability of an investment in Holdings Common Stock for Sellers'
particular financial and tax situations and has determined that the
Holdings Common Stock is a suitable investment for Sellers.
SECTION 4.22 CTC Capitalization.
(a) CTC is authorized to issue only one class of shares
of stock. The authorized capital stock of CTC consists solely of
shares of common stock, par value $1.00 per share, of which 500 shares
are issued and outstanding. All such shares of stock are owned
beneficially and of record by Trustee free and clear of all Liens.
Trustee has the full right, power and authority to vote the CTC Stock,
the certificates representing the CTC Stock are valid and genuine, and
the delivery of the certificates representing the CTC Stock pursuant
to this Agreement will transfer legal and valid title thereto, free
and clear of any and all Liens, other than those imposed by Buyer.
None of the capital stock of CTC has been or is owned, beneficially or
of record, by any Person other than Durwood and Trustee. There are
not now, nor have there ever been, any outstanding subscriptions,
options, convertible securities, warrants or calls of any kind issued
or granted by, or binding upon, CTC, Durwood or Trustee to purchase or
otherwise acquire any security of, or any equity interest in, CTC.
All of the CTC Stock is duly authorized, validly issued, fully paid
and nonassessable, and no shares of stock of CTC have been issued in
violation of the preemptive rights of any shareholder of CTC.
(b) Durwood and CTC have delivered to Buyer true and
complete copies of the articles of incorporation and bylaws, each as
amended to date, of CTC. Such articles of incorporation and bylaws
are in full force and effect, and CTC is not in violation of any of
the provisions thereof. The stock transfer records of CTC are true
and complete and reflect all issues and transfers of the capital stock
of CTC. The corporate records of the meetings of the directors and
shareholders of CTC, as contained in the minute books, reflect all
material corporate actions and proceedings of such bodies to date.
Durwood and CTC have delivered true and complete copies of such stock
transfer records and minute books to Buyer and its counsel.
SECTION 4.23 Labor Matters. Except as listed on
Schedule 4.23, each Seller, with respect to employees and former
employees, (a) has no written handbook applicable to such employees,
(b) is and has been in compliance since January 1, 1996, with all
applicable Laws regarding employment and employment practices, terms
and conditions of employment, wages and hours, occupational safety and
health and workers' compensation and is not engaged in any unfair
labor practices, which the failure to comply with could reasonably be
expected to have a Material Adverse Effect, (c) has no grievances
pending or, to the
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Knowledge of Sellers, threatened against Sellers that could reasonably
be expected to have a Material Adverse Effect and (d) has no charges
or complaints pending or, to the Knowledge of Sellers, threatened
against Sellers before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other federal, state or local
agency responsible for the prevention of unlawful employment
practices. There is no labor strike, slowdown, work stoppage or
lockout actually pending or, to the Knowledge of Sellers, threatened
against or affecting the Theaters or the Acquired Assets. Except as
listed on Schedule 4.23, Sellers are not a party to any collective
bargaining agreement, no such agreement determines the terms and
conditions of the employment of any employee or former employee, and
no collective bargaining agent has been certified as a representative
of any of the employees or former employees. Except as listed on
Schedule 4.23, to the Knowledge of Sellers, no union organizational
campaign is currently pending with respect to any of the employees or
former employees.
SECTION 4.24 Trustee. The Trust has been duly formed in
accordance with applicable Law. The Trustee has been duly appointed
as trustee of the Trust, and is the sole trustee of the Trust. The
Trustee is duly authorized to enter into this Agreement on behalf of
the Trust and to perform its obligations hereunder, including with
respect to indemnification of Buyer pursuant to Article VII.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS
Buyer and Holdings represent and warrant to Sellers as
follows:
SECTION 5.1 Corporate Organization and Authority. Each
of Holdings and Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its assets and
properties and conduct its business and operations as it is currently
conducted.
SECTION 5.2 Authority; Binding Effect. Each of
Holdings and Buyer has all requisite corporate power and authority to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement, the performance by each of them of their respective obligations
hereunder and the consummation by them of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Holdings and Buyer. This Agreement has been duly executed and
delivered by Holdings and Buyer and constitutes a legal, valid and binding
agreement of Holdings and Buyer, respectively, enforceable against each of them
in accordance with the terms hereof.
SECTION 5.3 Absence of Conflicts. The execution and
delivery by Holdings and Buyer of this Agreement, the performance by each of
them of their respective obligations hereunder and the consummation by them of
the transactions contemplated hereby will not:
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(a) conflict with, or result in any violation or breach
of, any provision of the charter or bylaws of Holdings or Buyer;
(b) except for such conflicts referred to on Schedule 5.3
for which consents or waivers will be obtained prior to Closing
conflict with, result in any violation or breach of, constitute a
default under, give rise to any right of termination or acceleration
(with or without notice or the lapse of time or both) pursuant to, or
result in being declared void, voidable or without further effect, any
term or provision of any material note, bond, mortgage, indenture,
lease, franchise, permit, license, Contract or other instrument or
document to which Holdings or Buyer is a party or by which their
respective properties or assets are or may be bound; or
(c) conflict with, or result in any violation of, any
material law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment or
decree of any court, arbitrator or Governmental Authority applicable
to Holdings or Buyer or their respective properties or assets.
SECTION 5.4 Governmental Authorizations and Filings.
There is no requirement applicable to Holdings or Buyer to obtain any consent,
approval or authorization of, or to make or effect any declaration, filing or
registration with, any Governmental Authority for the valid execution and
delivery by Holdings or Buyer of this Agreement, the due performance by them of
their respective obligations hereunder or the lawful consummation by it of the
transactions contemplated hereby.
SECTION 5.5 Brokers, Finders, etc. All negotiations
relating to this Agreement and the transactions contemplated hereby have been
carried on without the intervention of any Person acting on behalf of Holdings
or Buyer in such manner as to give rise to a valid claim against any of the
parties hereto for any broker's or finder's commission. Neither Holdings nor
Buyer has retained any broker or finder in connection with the transactions
contemplated hereby.
SECTION 5.6 Holdings Common Stock. The issuance of the
shares of Holdings Common Stock pursuant hereto has been duly authorized by
Holdings and, at closing, the shares of Holdings Common Stock to be delivered
to Sellers pursuant hereto will be validly issued, fully paid and
nonassessable. The issuance and delivery of the Holdings Common Stock is
intended to be exempt from the provisions of Section 5 of the Securities Act.
Neither Holdings, Buyer nor anyone acting on their behalf has taken any action
with respect to the Holdings Common Stock or any securities similar to the
Holdings Common Stock, or otherwise, that would cause the issuance and delivery
of the Holdings Common Stock pursuant hereto not to be exempt from the
provisions of Section 5 of the Securities Act or would require the registration
of the issuance and delivery of such shares pursuant to this Agreement under
the Securities Act or would violate any applicable state securities or blue sky
laws.
SECTION 5.7 Financial Statements. Holdings has
furnished to Sellers the audited consolidated balance sheets of Holdings as of
December 31, 1995, and the related consolidated
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statements of operations for the periods then ended (the "Holdings Financial
Statements"). Holdings Financial Statements are attached hereto as Schedule
5.7. Holdings Financial Statements present fairly the financial condition and
results of operations of Holdings as of the dates and for the periods
indicated, and the Holdings Financial Statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis with prior periods.
SECTION 5.8 Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against, or to Buyer's
knowledge threatened against or affecting, the Buyer's or Holdings' properties
or assets in any court or before any arbitrator or any foreign or United States
federal, state or local Governmental Authority in which an adverse decision
could, either in any case or in the aggregate, have a material adverse effect
on the business, operations, affairs, condition (financial or otherwise),
results of operation, properties, assets or liabilities of Buyer or Holdings.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1 Inspection. From the date hereof to the
Closing, Sellers shall give to Buyer and its officers, attorneys, accountants,
and representatives free, full, and complete access during reasonable business
to the Acquired Assets as Buyer may deem necessary or appropriate; provided,
that such due diligence review will not unreasonably interfere with the
operations by Sellers of the Acquired Assets. Sellers will provide Buyer and
its officers, attorneys, accountants and representatives with any information
reasonably requested by them pertaining to income derived from or expenses
associated with the Acquired Assets.
SECTION 6.2 Compliance. From the date hereof to the
Closing, Sellers shall not take or fail to take any action which action or
failure to take such action shall cause the representations and warranties made
by Sellers herein to be untrue or incorrect as of the Closing.
SECTION 6.3 Satisfaction of All Conditions Precedent.
From the date hereof to the Closing, Sellers shall use reasonable efforts to
cause all conditions precedent in Article III to be satisfied by the Closing.
SECTION 6.4 No Solicitation. From the date hereof to
October 25, 1996, Sellers shall not offer any of Acquired Assets for sale, or
solicit offers to buy the Acquired Assets or hold discussions with any party
(other than Buyer and Holdings) looking toward such an offer or solicitation or
toward a sale of equity or a merger or consolidation of Sellers with or into
another entity or any similar transaction. Sellers shall not enter into any
agreement with any party other than Buyer and Holdings with respect to the sale
or other disposition of either the equity interests of Sellers or the Acquired
Assets or with respect to any merger, consolidation, or similar transaction
involving any Seller.
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SECTION 6.5 Material Developments. From the date
hereof to the Closing, Sellers shall notify Buyer of any material problems or
developments with respect to the business or operations of the Theaters of
which Sellers have Knowledge.
SECTION 6.6 Notice of Breach. From the date hereof to
the Closing, Sellers shall, immediately upon becoming aware thereof, give
detailed written notice to Buyer of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach,
or would have caused or constituted a breach had such event occurred or been
known to Sellers prior to the date of this Agreement, of any of their
covenants, agreements, representations, or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
SECTION 6.7 Notice of Litigation. From the date hereof
to the Closing, immediately upon becoming aware thereof, Sellers shall notify
Buyer of (a) any suit, action, or proceeding to which any Seller becomes a
party or which is threatened against a Seller in writing, (b) any order or
decree or any complaint praying for an order or decree restraining or enjoining
the consummation of this Agreement or the transactions contemplated hereby, or
(c) any notice from any tribunal of its intention to institute an investigation
into, or to institute a suit or proceeding to restrain or enjoin the
consummation of, this Agreement or the transactions contemplated hereby or to
nullify or render ineffective this Agreement or such transactions if
consummated.
SECTION 6.8 Continuation of Insurance Coverage. From
the date hereof to the Closing, Sellers shall keep in full force and effect
insurance coverage for the Theaters and the Acquired Assets in the same amount
and scope to the coverage now maintained covering the Theaters and the Acquired
Assets. At the Transition Time, Sellers shall deliver to Buyer documentation
indicating that the Buyer has been named an additional insured on the insurance
policies in effect for the Theaters.
SECTION 6.9 Interim Operations of the Company.
(a) Except as set forth in Schedule 6.9 hereto, from the
date hereof to the Closing, Sellers shall conduct their business only
in the ordinary course consistent with past practice, and shall not,
unless Buyer gives its prior written approval (i) sell, pledge,
dispose of, or encumber, or agree to sell, pledge, dispose of, or
encumber, any of the Acquired Assets (except in the ordinary course of
business), (ii) modify, extend, or renew any Lease, or (iii) make any
material acquisition or capital expenditure or commit to make any such
acquisition or expenditure.
(b) From the date hereof to the Closing, Sellers will use
reasonable efforts to maintain the Theaters and the Acquired Assets in
their present operating condition and repair, ordinary wear and tear
excepted. Except for inventory and other assets disposed of in the
ordinary course of business consistent with past practice, all of the
Acquired Assets as of the Transition Time shall be delivered at
Closing by Sellers to Buyer.
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(c) If required by law, Sellers shall offer COBRA
benefits to those employees of CCC eligible to receive such benefits
in connection with the sale by Sellers of the Acquired Assets. Upon
termination of CTC employee benefits pursuant to Section 6.14 hereof,
Sellers shall offer COBRA benefits to those employees of CTC eligible
to receive such benefits if required by law.
(d) At Closing Sellers shall provide Buyer with a
schedule of all accrued but untaken vacation days with respect to each
theater level employee of CCC for calendar year 1996 which has not
been taken as of the Transition Time ("Accrued Vacation Obligations").
To the extent such employees of CCC are employed by Buyer immediately
following the Closing and remain in such employ (subject to Buyers
right to terminate any employee for any reason or no reason at will),
Buyer will honor accrued and unused vacation days as outlined on such
schedule in consideration of Sellers payment to Buyer at Closing of an
amount sufficient to cover the costs of such obligation, such amount
to be agreed to by Buyer and Sellers prior to Closing. Buyer will not
honor the vacation of any employee that accrues between the Transition
Time and the Closing. Except for the Accrued Vacation Obligations,
any employees of CTC or CCC who become employees of Buyer after the
Closing will be subject to the terms and conditions of the Buyer's
employee benefit plans.
SECTION 6.10 Transfer Taxes. Sellers shall be responsible
for and shall pay any and all taxes and recording fees, if any, payable as a
result of the sale, conveyance, transfer and delivery of the Acquired Assets
upon the terms and conditions hereof, provided that Buyer shall be responsible
for all recording and other fees relating to its financing of the Purchase
Price, including any applicable mortgage registration taxes.
SECTION 6.11 Preservation of Books and Records. For a period
of two years from the date hereof, Buyer and Sellers will preserve and maintain
the corporate, accounting, auditing and tax books and records relating to the
Acquired Assets that are held by them on the date hereof and will make such
books and records available to each other upon reasonable notice and at
reasonable times, it being understood that Buyer and Sellers shall be entitled
to make copies of any such books and records as they shall deem reasonably
necessary for purposes of making the same available to appropriate Governmental
Authorities or for other proper purposes.
SECTION 6.12 Covenant Not to Compete. Except as otherwise
consented to or approved in writing by Buyer and except for theaters owned or
operated by Cinema Venture Partners and listed on Schedule 6.12 hereto, Seller,
and Sellers' Affiliates will not at any time for a period of three years
following the Closing, directly or indirectly, acting alone or as a member of a
partnership or as a holder, beneficially or of record, of in excess of 5% of
any security of any class, or as a consultant to or representative of, any
corporation, other business entity or Person (excluding Holdings):
(a) engage in the business of Buyer or Holdings as it is
being conducted immediately following the Closing in competition with
Buyer or Holdings at any location within a 25 mile radius of any
Theater or Development Theater location; or
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(b) request any present or future supplier of,
distributor to or provider of services to Buyer to curtail or cancel
its business with Buyer or Holdings in respect of the operations at
any Theater and the use and operation of the Acquired Assets; or
(c) unless otherwise required by law, disclose to any
Person any details of the organization or affairs of the business of
Buyer or Holdings or any other nonpublic information concerning the
Acquired Assets or the conduct of the operations at the Theaters; or
(d) hire, attempt to hire or assist any other Person in
hiring or attempting to hire any employee of Buyer or Holdings or any
Person who was an employee of Buyer or Holdings within the prior
six-month period.
Sellers and Sellers' Affiliates acknowledge that, in the event the scope of the
covenants set forth in this Section 6.12, is deemed to be too broad in any
court proceeding, the court may reduce such scope to that which it deems
reasonable under the circumstances. The parties hereto agree and acknowledge
that Buyer and Holdings do not have any adequate remedy at law for the breach
or threatened breach by Sellers or Sellers' Affiliates of the agreements set
forth in this Section 6.12 and, accordingly, Sellers and each Sellers'
Affiliate further agree that the provisions of Section 8.6 hereof do not apply
to this Section 6.12 and that Buyer may, in lieu of or in addition to the other
remedies that may be available to it hereunder (including its rights under
Section 7.2) or under applicable law, file a suit in equity to enjoin Sellers
or Sellers' Affiliates from such breach or threatened breach and consent to the
issuance of injunctive relief hereunder.
SECTION 6.13 Use of Corporate Names. Sellers acknowledges
that, from and after the Closing, they will have no right, title or interest in
or to the names "Crown," "Crown Cinema," "Crown Theaters" or any variations
thereof containing the word "Crown" or a variation thereof. Neither Sellers
nor any of their Affiliates shall use any such names in any business or venture
in which such Persons are engaged at any time following the Closing. The
covenant set forth in this Section 6.13. shall survive the Closing and shall
continue in full force and effect forever and without any limit upon duration.
SECTION 6.14 Termination of CTC Employee Benefit Plans.
Prior to Closing, Sellers shall terminate all employee benefit plans relating
to employees of CTC in effect prior to Closing.
SECTION 6.15 Tax Treatment of Sale of CTC Stock. The parties
intend that the transfer of the CTC Stock in exchange for the Holdings Stock
constitutes a B Reorganization, Buyers will not take any action (including
filing 338(h)(10) or similar election) which would jeopardize the treatment for
tax purposes of the transaction as a tax-free reorganization.
SECTION 6.16 Corporate Office Lease. The Buyer agrees to
reimburse Sellers the actual lease payments due and payable on the office lease
agreement at 34th and Broadway from the Transition Time through December 31,
1996.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS; INDEMNIFICATION
SECTION 7.1 Survival of Representations and Agreements.
All representations and warranties contained in this Agreement, any Sellers'
Ancillary Documents or in any certificate, document, affidavit or instrument
delivered pursuant to this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and thereby and shall
continue in full force and effect:
(a) forever and without any limit upon duration in the
case of the representations and warranties of Sellers set forth in
Sections 4.4, 4.13, 4.14 and 4.22;
(b) for a period of one year in the case of all other
representations made with respect to CTC, its assets, business and
operations;
(c) all other representations and warranties shall not
survive the Closing; and
(d) for the comparable periods of time set forth above in
this Section 7.1 in the case of each representation and warranty (but
no covenant) set forth in any Sellers' Ancillary Document or any
certificate, document, affidavit or instrument delivered pursuant to
this Agreement, based upon the nature of such representation and
warranty when compared to the most analogous representation and
warranty set forth above.
Each covenant and agreement set forth in this Agreement or in any Sellers'
Ancillary Document to be performed after the Closing will survive the Closing
in accordance with its terms. All representations, warranties, covenants and
agreements made or contained in this Agreement or in any Sellers' Ancillary
Document or any certificate, document, affidavit or instrument delivered in
accordance with this Agreement shall be deemed to be material and to have been
relied upon by the parties hereto.
SECTION 7.2 Indemnification of Buyer. From and after
the Closing, CCC and Durwood shall jointly and severally indemnify and hold
Buyer and its directors, officers, employees, agents and Affiliates harmless
against any and all damages, losses, deficiencies, liabilities, obligations,
commitments, costs or expenses (including legal and other expenses reasonably
incurred in investigating and defending against the same) (collectively,
"Liabilities" and each a "Liability") incurred by Buyer resulting from (a) the
breach of any representation or warranty of Sellers contained in Article IV of
this Agreement or in any Sellers' Ancillary Document that is known to Sellers
or Buyer on or prior to the Transition Time (it being acknowledged that Buyer
shall have a continuing right of inspection with respect to the Theaters and
Acquired Assets through the Closing Date), (b) any breach of any agreement or
covenant of Sellers contained in this Agreement or in Sellers' Ancillary
Documents, (c) the conduct of the business and operations of the Theaters and
the Acquired Assets on and prior to the Transition Time (exclusive of amounts
reimbursable to Sellers
40
<PAGE> 46
by Buyer during the period following the Transition Time as specified in
Section 2.3 hereof), (d) Third Party Claims arising after the Transition Time
and prior to Closing, (e) the termination of contracts pursuant to Section
3.2(g) hereof, (f) the Retained Liabilities, other than with respect to
Liabilities relating to or arising from Buyer's breach of a representation,
warrant, covenant or agreement made by Buyer, or (g) any liabilities arising
from the operation of any Employee Benefit Plan or the termination of any
Employee Benefit Plan prior to or after Closing, provided, however, that
notwithstanding anything to the contrary herein no amount shall be payable to
Buyer in indemnification under this Section 7.2 unless the aggregate amount of
Liabilities exceeds $50,000. Except in the case of the representations and
warranties of Sellers set forth in Section 4.14, in the event that such
aggregate amount of Liabilities exceeds $50,000, the Sellers shall be liable
only for the amount of the excess of $50,000 but not more than the Cash
Purchase Price.
SECTION 7.3 Indemnification of Seller. From and after
the Closing, Buyer and Holding shall jointly and severally indemnify and hold
CCC and Durwood and their directors, officers, limited partners, employees,
agents and Affiliates harmless against any and all Liabilities incurred by
Sellers resulting from (a) the breach by Buyer or Holdings of any
representation or warranty made by Buyer and Holdings and contained in Article
V, (b) any breach of any agreement or covenant of Buyer and Holdings contained
in this Agreement, and (c) the conduct of the business or operations of the
Theaters by Buyer and Holdings after the Closing Date (subject to the
allocation of certain debts, Expenses and contractual obligations to Buyer
following the Transition Time as specified in Section 2.3 hereof), other than
with respect to Liabilities relating to or arising from a breach of a
representation, warranty, covenant or agreement by Seller.
SECTION 7.4 Indemnification for Third Party Claims.
The following procedures shall be applicable with respect to indemnification
for third party claims arising in connection with any provision of this
Agreement.
(a) Promptly after receipt by the party seeking
indemnification hereunder (an "Indemnitee") of written notice of the
assertion or the commencement of any claim, liability or obligation by
a third party, whether by legal process or otherwise (a "Claim"), with
respect to any matter within the scope of Sections 7.2 or 7.3 hereof,
the Indemnitee shall give written notice thereof (the "Notice") to the
Person from whom indemnification is sought pursuant hereto (the
"Indemnitor") and shall thereafter keep the Indemnitor reasonably
informed with respect thereto, provided that the failure of the
Indemnitee to give the Indemnitor prompt notice as provided herein
shall not relieve the Indemnitor of its obligations hereunder unless
such failure results in (i) a default judgment, (ii) the expiration of
the time to answer a complaint or (iii) material prejudice to
Indemnitor's defense of such Claim. In case any such Claim is brought
against any Indemnitee, the Indemnitor shall be entitled to assume the
defense thereof, by written notice of its intention to the Indemnitee
within 30 days after receipt of the Notice, with counsel reasonably
satisfactory to the Indemnitee at the Indemnitor's own expense. If
the Indemnitor shall assume the defense of such Claim, it shall not
settle such Claim without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld. Notwithstanding the
assumption by the Indemnitor of the defense of any Claim as provided
in this Section 7.4(a), the Indemnitee
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<PAGE> 47
shall be permitted to join in the defense of such Claim and to employ
counsel at its own expense.
(b) If the Indemnitor shall fail to notify the Indemnitee
of its desire to assume the defense of any such Claim within the
prescribed period of time, or shall notify the Indemnitee that it will
not assume the defense of any such Claim, then the Indemnitee shall
assume the defense of any such Claim, in which event it may do so in
such manner as it may deem appropriate, provided that it shall not
settle any Claim which would give rise to the Indemnitor's liability
under Sections 7.2 or 7.3 hereof, as the case may be, without the
Indemnitor's prior written consent, such consent not to be
unreasonably withheld. The Indemnitor shall be permitted to join in
the defense of such Claim and to employ counsel at its own expense.
SECTION 7.5 Exclusive Remedy. The remedies expressly
provided for in Sections 2.3, 6.12, 7, 8.6 and 8.9 shall be parties' exclusive
remedies with respect to the matters covered by this Agreement and no party
shall be liable to the other under this Agreement with respect to any matter
not initiated within the time limits specified in such sections, if any.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Expenses. Except as expressly provided
herein, each of the parties hereto shall bear all costs, expenses and fees
incurred or assumed by it in the preparation and execution of this Agreement
and in complying with the covenants and agreements contained herein.
SECTION 8.2 Notices. All notices and other
communications hereunder shall be given by delivery in person, by registered or
certified mail (return receipt requested with postage prepaid thereon), by a
nationally recognized overnight courier or by facsimile transmission to the
respective parties at the following addresses (or at such other address as
either party shall have furnished to the other in accordance with the terms of
this Section 8.2):
if to any Seller:
Crown Cinema Corporation
404 West 34th Street
Suite 623
Kansas City, MO 64111
Attention: Richard M. Durwood
Facsimile: (816) 931-6021
42
<PAGE> 48
with a copy to:
Herbert M. Kohn
Bryan Cave LLP
3500 One Kansas City Place
Kansas City, MO 64105
Facsimile: (816) 374-3300
if to Buyer or Holdings:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Attention: Thomas W. Stephenson, Jr.
Facsimile: (214) 520-2323
with a copy to:
Carlos A. Fierro
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Facsimile: (214) 953-6503
All notices and other communications hereunder that are addressed as provided
in or pursuant to this Section 8.2 shall be deemed duly and validly given (a)
if delivered in person, upon delivery, (b) if delivered by registered or
certified mail, 72 hours after being placed in a depository of the United
States mails or (c) if delivered by facsimile transmission, upon transmission
thereof and receipt of the appropriate answerback or (d) if by nationally
recognized overnight courier as of 3:00 p.m. on the day after being delivered
to such courier (if delivered to such courier on a timely basis for next day
delivery.
SECTION 8.3 Entire Agreement. This Agreement,
including the Exhibits and Schedules hereto, constitutes the entire agreement
among the parties with respect to the transactions contemplated hereby and
cancels, merges and supersedes all prior oral or written agreements and
understandings with respect thereto and the parties hereto have no agreements,
representations, or warranties relating to the subject matter of this Agreement
which are not set forth herein or in the Sellers' Ancillary Documents. All
Exhibits and Schedules hereto are expressly made a part of this Agreement and
are incorporated herein by reference.
SECTION 8.4 Parties in Interest; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns (it being understood and
agreed that, except as expressly provided herein, nothing contained
43
<PAGE> 49
in this Agreement is intended to confer upon any other Person any rights,
benefits or remedies of any kind or character whatsoever under or by reason of
this Agreement). Neither party may assign this Agreement without the prior
written consent of each of the other parties hereto.
SECTION 8.5 Amendment; Waivers. This Agreement may be
amended only by a written instrument duly executed and delivered on behalf of
each of the parties hereto, and compliance with any term or provision hereof
may be waived only by a written instrument executed by each party entitled to
the benefits thereof. No failure to exercise any right, power or privilege
granted hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege granted hereunder.
SECTION 8.6 Arbitration.
(a) The parties desire to resolve certain disputes,
controversies and claims arising out of this Agreement without
litigation. Accordingly, except in the case of (i) a dispute,
controversy or claim relating to the Covenant Not to Compete in
Section 6.12 hereof or (ii) a suit, action or proceeding to compel
either party to comply with the dispute resolution procedures set
forth in this Section 8.6, the parties agree to use the following
dispute resolution procedures as their sole remedy with respect to any
dispute, controversy or claim arising out of or relating to this
Agreement or any documents ancillary hereto or their breach.
(b) Any party may submit a dispute to arbitration as
contemplated by the provisions of this Section 8.6. The arbitration
shall be heard and determined by a tribunal of three arbitrators
selected in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "Arbitration Panel"). All
decisions and awards by the Arbitration Panel shall be made by
majority vote.
(c) Unless otherwise expressly agreed in writing by the
parties to the arbitration proceedings, the following provisions and
procedures shall govern the conduct of any arbitration proceedings
pursuant to this Section 8.6:
(i) the arbitration proceedings shall be held
in Dallas, Texas, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within 30 days of the appointment of the last
arbitrator, then at a site chosen by the Arbitration Panel;
(ii) the Arbitration Panel shall be and remain
at all times wholly independent and impartial;
(iii) the arbitration proceedings shall be
conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as amended from time
to time;
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<PAGE> 50
(iv) any procedural issues not determined under
the arbitral rules selected pursuant to subparagraph (c)(iii)
above shall be determined by the law of the place of
arbitration, other than those laws which would refer the
matter to another jurisdiction;
(v) the costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the Arbitration Panel;
(vi) the decision of the Arbitration Panel shall
be reduced to writing and shall be final, binding and
conclusive; and any costs or fees incident to enforcing any
award made by the Arbitration Panel shall, to the maximum
extent permitted by Law, be charged against the party
resisting such enforcement; and
(vii) judgment upon any award made by the
Arbitration Panel may be enforced in any court having
jurisdiction over the person or the assets of the party
against whom the award is made.
SECTION 8.7 Restrictions on Transfer. The Holdings
Common Stock shall not be transferable except upon the conditions specified in
this Section 8.7, which are intended to insure compliance with the provisions
of the Securities Act in respect of the transfer of any such shares.
(a) In addition to any other legend that may be required
by applicable law, each certificate representing shares of Holdings
Common Stock shall (unless otherwise permitted by the provisions of
this Section 8.7) be stamped or otherwise imprinted with a legend in
substantially the following form:
"ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDERS OF
SUCH SHARES OF STOCK ARE SUBJECT TO, THE TERMS AND CONDITIONS
CONTAINED IN THAT CERTAIN ASSET PURCHASE AGREEMENT, DATED AS
OF __________, 1996, AS IT MAY BE AMENDED FROM TIME TO TIME,
WHICH IS AVAILABLE FOR EXAMINATION BY HOLDERS OF SHARES OF THE
COMMON STOCK OF HOLLYWOOD THEATER HOLDINGS, INC. (THE
"COMPANY") AT THE REGISTERED OFFICE OF THE COMPANY. IN
ADDITION TO THE FOREGOING RESTRICTIONS, THESE SHARES OF STOCK
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY UNITED STATES STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT IS IN EFFECT
UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SHARES OR A
WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY IS
45
<PAGE> 51
OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED
AND (ii) EXCEPT IN THE CASE OF PUBLICLY TRADED SHARES, THE
TRANSFEREE IS AN "ACCREDITED INVESTOR" AS DEFINED IN
REGULATION D PROMULGATED UNDER THE SECURITIES ACT."
The certificates shall also bear any legend required under any
applicable state securities or "blue sky" laws.
(b) The holder of shares of Holdings Common Stock bearing
a restrictive legend set forth in paragraph (a) above ("Restricted
Shares"), by acceptance thereof, agrees that, unless a registration
statement is in effect under the Securities Act with respect to such
Restricted Shares, prior to any transfer or attempted transfer of such
Restricted Shares, such holder will give Holdings (i) written notice
describing the proposed transfer of any Restricted Shares in
reasonable detail, (ii) certification that the proposed transferee of
the Restricted Shares is an "accredited investor" within the meaning
of Rule 501 under the Securities Act, (iii) such other information
about the proposed transfer of such Restricted Shares or the proposed
transferee of such Restricted Shares as Holdings may request and (iv)
an opinion of counsel reasonably acceptable to Holdings satisfactory
to Holdings to the effect that the proposed transfer of such
Restricted Shares may be effected without registration of such
Restricted Shares under the Securities Act and applicable United
States state securities laws. In addition, if the holder of the
Restricted Shares delivers to Holdings an opinion of counsel that
subsequent transfers of such Restricted Shares will not require
registration or qualification under the Securities Act, Holdings will
cause the transfer agent promptly after such contemplated transfer to
deliver new certificates for such Restricted Shares that do not bear
the legend set forth in paragraph (a) above. If the foregoing
conditions entitling the holder to effect a proposed transfer of such
Restricted Shares without registration under the Securities Act have
not been satisfied, the holder shall not transfer the Restricted
Shares, and Holdings will cause the transfer agent not to transfer
such Restricted Shares on its books or issue any certificates
representing such Restricted Shares. Any purported transfer not in
accordance with the terms hereof shall be void. The restrictions
imposed by this Section 8.7(b) upon the transferability of any
particular Restricted Shares shall cease and terminate when such
Restricted Shares have been sold pursuant to an effective registration
statement under the Securities Act or transferred pursuant to Rule 144
promulgated under the Securities Act. The holder of any Restricted
Shares as to which such restrictions shall have terminated shall be
entitled to receive from Holdings, without expense, a new certificate
representing shares of Holdings Common Stock that does not bear the
restrictive legend set forth above and does not contain any other
reference to the restrictions imposed by this Section 8.7(b). As used
in this Section 8.7(b), the term "transfer" encompasses any sale,
transfer, pledge or other disposition of any shares of Holdings Common
Stock referred to herein.
SECTION 8.8 Severability. In the event that any term or
provision contained in this Agreement is held to be invalid, illegal or
unenforceable for any reason, the invalidity, illegality or
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<PAGE> 52
unenforceability thereof shall not affect any other term or provision hereof
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained therein.
SECTION 8.9 Specific Performance. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with the terms
hereof. Accordingly, the parties agree that each of them shall be entitled to
injunctive relief to prevent breaches of the terms of this Agreement and to
obtain specific performance of the terms hereof, in addition to any other
remedy now or hereafter available at law or in equity, or otherwise.
SECTION 8.10 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas, without
regard to principles of conflicts of law, except to the extent that mandatory
principles of conflicts of law require the application of laws of another
jurisdiction wherein any of the Acquired Assets are located to determine the
validity or effect of the sale, conveyance, transfer or delivery thereof in
accordance with the provisions of this Agreement.
SECTION 8.11 Headings. The Article and Section headings
contained in this Agreement are for convenience of reference only, do not
constitute a part of this Agreement and shall not limit, extend or otherwise
affect the meaning or interpretation of the provisions hereof.
SECTION 8.12 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.13 Press Releases. None of the parties hereto
shall issue press releases or other public communications of any sort relating
to this Agreement prior to closing; provided, however, that the parties shall
be entitled to make such disclosures as may be required pursuant to applicable
law or the lawful requirement of any Governmental Authority or by order of a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
/s/ Richard M. Durwood
--------------------------------------
RICHARD M. DURWOOD
RICHARD M. DURWOOD REVOCABLE TRUST
By: /s/ Richard M. Durwood
-----------------------------------
Richard M. Durwood,
Trustee
CROWN CINEMA CORPORATION
By: /s/ Richard M. Durwood
-----------------------------------
Richard M. Durwood
President
CROWN THEATRE CORPORATION
By: /s/ Richard M. Durwood
-----------------------------------
Richard M. Durwood
President
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-----------------------------------
Thomas W. Stephenson, Jr.
President
48
<PAGE> 54
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-----------------------------------
Thomas W. Stephenson, Jr.
President
49
<PAGE> 55
LETTER AGREEMENT
November 1, 1996
Hollywood Theaters, Inc.
Hollywood Theaters Holdings, Inc.
2911 Turtle Creek Blvd., Suite 1150
Dallas, Texas 75219
Re: ASSET AND STOCK PURCHASE AGREEMENT DATED AS OF
AUGUST 26, 1996 (THE "AGREEMENT")
Dear Gentlemen:
This Letter Agreement will serve as an amendment to and supplement of
the Agreement. Our agreements are as follows:
1 . Pursuant to Section 2.2(b) of the Agreement
(capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Agreement), Buyer is to deliver to the Trustee, the
Holdings Common Stock. At the Closing, Buyer will deliver to the Trustee 80%
of the Holdings Common Stock based on the estimated TLCF. When the actual TLCF
is determined pursuant to Section 2.6 of the Agreement, Buyer will cause the
remainder of the Holdings Common Stock to be issued to the Trustee.
2. The current health benefit program for CCC and CTC
will cover participant claims with respect to covered health services provided
to participants and beneficiaries prior to the Transition Time.
If the foregoing meets with your approval, please execute the
enclosed copy of this Letter Agreement and return it to the undersigned.
Very truly yours,
CROWN CINEMA CORPORATION
By /s/ Richard M. Durwood
-------------------------------
President
CROWN THEATRE CORPORATION
By /s/ Richard M. Durwood
-------------------------------
President
1
<PAGE> 56
Page 2
/s/ Richard M. Durwood
---------------------------------
Richard M. Durwood
RICHARD M. DURWOOD
REVOCABLE TRUST
By /s/ Richard M. Durwood
---------------------------------
Richard M. Durwood, Trustee
Accepted and Agreed to this lst day of November, 1996.
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
--------------------------------------------
Thomas W. Stephenson, Jr., President
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
--------------------------------------------
Thomas W. Stephenson, Jr., President
2
<PAGE> 1
EXHIBIT 10.7
ASSET PURCHASE AGREEMENT
BETWEEN
DICKINSON, INC.
AND
HOLLYWOOD THEATERS, INC.
DATED AS OF AUGUST 19, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SALE AND TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1 Sale and Transfer of Dickinson Assets . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2 Sale and Transfer of Hollywood Assets . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.3 Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.4 Expenses; Proration of Cash and Expenses . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.5 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.6 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.8 Non-Assignable Assumed Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
THE CLOSING; TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.2 Conditions Precedent to Obligations of Hollywood . . . . . . . . . . . . . . . . . 13
SECTION 3.3 Conditions Precedent to Obligations of Dickinson . . . . . . . . . . . . . . . . . 15
SECTION 3.5 Hollywood's Inspection of the Dickinson Assets . . . . . . . . . . . . . . . . . . 18
SECTION 3.6 Dickinson's Inspection of the Hollywood Assets . . . . . . . . . . . . . . . . . . 19
SECTION 3.7 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.8 Survey and Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DICKINSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.5 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.6 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.7 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.8 Contracts and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4.9 Theater Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.11 Assets Necessary to Business; Effect of Transfer . . . . . . . . . . . . . . . . . 28
SECTION 4.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.14 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.15 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.16 Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.17 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.18 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.19 Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.20 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HOLLYWOOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.5 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.6 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.7 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.8 Contracts and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.9 Theater Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.11 Assets Necessary to Business; Effect of Transfer . . . . . . . . . . . . . . . . . 36
SECTION 5.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.14 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.15 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.16 Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.17 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.18 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.19 Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.20 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI
DICKINSON COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.1 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.2 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.3 Satisfaction of All Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.5 Material Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.6 Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.7 Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.8 Continuation of Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.9 Interim Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.11 Preservation of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.12 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.13 Use of Corporate Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
HOLLYWOOD COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.1 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.2 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.3 Satisfaction of All Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.5 Material Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.6 Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.7 Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.8 Continuation of Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.9 Interim Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.11 Preservation of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.12 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.13 Use of Corporate Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.14 Ramada 4 Theater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 47
SECTION 8.1 Survival of Representations and Agreements . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.2 Indemnification of Hollywood . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.3 Indemnification of Dickinson . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.4 Indemnification for Third Party Claims . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.5 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.4 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.5 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.8 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.12 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
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<TABLE>
<S> <C>
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Bill of Sale and Assignment
Exhibit C - Form of Landlord Consent and Subordination
</TABLE>
<TABLE>
<S> <C>
Schedule 2.1(a) - Dickinson Fee Theater
Schedule 2.1(b) - Dickinson Leased Theaters
Schedule 2.1(d) - Dickinson Assignable Consents, Licenses and Authorizations
Schedule 2.1(e) - Dickinson Assumed Contracts
Schedule 2.1(g) - Dickinson Excluded Assets
Schedule 2.2(a) - Hollywood Fee Theaters
Schedule 2.2(b) - Hollywood Leased Theaters
Schedule 2.2(d) - Hollywood Assignable Consents, Licenses and Authorizations
Schedule 2.2(e) - Hollywood Assumed Contracts
Schedule 2.2(g) - Hollywood Excluded Assets
Schedule 2.6(a) - Dickinson Existing Debt
Schedule 2.6(b) - Hollywood Existing Debt
Schedule 3.8(b) - Title Commitments
Schedule 4.3 - Dickinson Conflicts and Consents
Schedule 4.4 - Dickinson Liens; Agreements Granting Rights to Third Parties
Schedule 4.5 - Dickinson Proprietary Rights
Schedule 4.6 - Dickinson Financial Statements
Schedule 4.7 - Dickinson Conduct of Business
Schedule 4.8 - Dickinson Contracts and Other Agreements
Schedule 4.9 - Dickinson Theater Locations
Schedule 4.12 - Dickinson Litigation
Schedule 4.14 - Dickinson Environmental Law Undertakings
Schedule 4.16 - Dickinson Defects
Schedule 4.19 - Dickinson Brokers
Schedule 5.3 - Hollywood Conflicts and Consents
Schedule 5.4 - Hollywood Liens; Agreements Granting Rights to Third Parties
Schedule 5.5 - Hollywood Proprietary Rights
Schedule 5.6 - Hollywood Financial Statements
Schedule 5.7 - Hollywood Conduct of Business
Schedule 5.8 - Hollywood Contracts and Other Agreements
Schedule 5.9 - Hollywood Theater Locations
Schedule 5.12 - Hollywood Litigation
Schedule 5.14 - Hollywood Environmental Law Undertakings
Schedule 5.16 - Hollywood Defects
Schedule 5.19 - Hollywood Brokers
</TABLE>
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<PAGE> 7
ASSET AND STOCK PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), is entered
into effective as of August 19, 1997 (the "Effective Date") by and between
Dickinson, Inc., a Kansas corporation, doing business in the name of Dickinson
Theaters ("Dickinson"), and Hollywood Theaters, Inc., a Delaware corporation
("Hollywood").
W I T N E S S E T H:
WHEREAS, on July 8, 1997, Dickinson and Hollywood entered into
a Letter of Intent (the "Letter of Intent") whereby (i) Hollywood proposed to
buy and Dickinson agreed to sell the Dickinson Assets (as hereinafter defined)
and (ii) Dickinson proposed to buy and Hollywood agreed to sell the Hollywood
Assets (as hereinafter defined), in each case subject to the execution of a
definitive agreement; and
WHEREAS, Hollywood and Dickinson now desire to enter into a
definitive agreement whereby (i) Dickinson will sell, convey, transfer and
deliver the Dickinson Assets to Hollywood free and clear of all Liens (as
hereinafter defined), title imperfections, claims, charges, levies or
assessments, and Hollywood will acquire the Dickinson Assets from Dickinson and
(ii) Hollywood will sell, convey, transfer and deliver the Hollywood Assets to
Dickinson free and clear of all Liens, title imperfections, claims, charges,
levies or assessments, and Dickinson will acquire the Hollywood Assets from
Hollywood, all upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. For purposes of this Agreement,
the terms set forth below shall have the following respective meanings:
"ADA" has the meaning specified in Section 4.11.
"Affiliate" shall mean, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. As used herein, the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether by the
ownership of voting securities, by contract or otherwise.
<PAGE> 8
"Arbitration Panel" has the meaning specified in Section
9.6(b).
"Assignment and Assumption Agreement" means an assignment and
assumption document to be executed as of the Closing Date by either Dickinson
or Hollywood, as appropriate, in the form attached as Exhibit A.
"Bill of Sale and Assignment" means a sale and assignment
document to be executed as of the Closing Date by either Dickinson or
Hollywood, as appropriate, in the form attached as Exhibit B hereto.
"Cash Purchase Price" has the meaning specified in Section
2.3.
"Closing" has the meaning specified in Section 3.1.
"Closing Date" has the meaning specified in Section 3.1.
"Consent" has the meaning specified in Section 4.3.
"Contract" means any contract, agreement, arrangement,
understanding or other instrument or obligation (whether oral or written,
pending or executory).
"Delivery Date" has the meaning specified in Section 3.5(a).
"Dickinson" has the meaning specified in the preamble to this
Agreement.
"Dickinson Assets" has the meaning specified in Section 2.1.
"Dickinson Assumed Contracts" has the meaning specified in
Section 2.1(e).
"Dickinson Delivered Documents" has the meaning specified in
Section 3.5(a).
"Dickinson Excluded Assets" has the meaning specified in
Section 2.1(g).
"Dickinson Existing Debt" means the indebtedness identified on
Schedule 2.6(a) hereto (i) relating to or secured by liens on any Dickinson
Theaters, or (ii) whether or not relating to or secured by liens on any
Dickinson Theaters, for which Dickinson or any of the Dickinson Assets are
obligated or bound.
"Dickinson Expenses" means any and all fees or expenses or
capital expenditures relating to the replacement of equipment arising out of
or relating to the operation of the Dickinson Theaters and the Dickinson Assets
in the ordinary course of business, including, but not limited to, prepaid
fees, Taxes, utility charges, lease charges, film rental expenses, minimum rent
and
2
<PAGE> 9
percentage rent under the Dickinson Leases, concession expenses, wages and
salaries and other trade payables.
"Dickinson Fee Theater" means the Dickinson Real Property and
Dickinson Improvements.
"Dickinson Improvements" means all buildings and other
improvements situated on the Dickinson Real Property.
"Dickinson Leased Theaters" means all of Dickinson's right,
title and interest as tenant in, to and under the Dickinson Leases covering the
four Dickinson Theaters which are identified as "Dickinson Leased Theaters" on
Schedule 4.9.
"Dickinson Leases" means those written leases, together with
all amendments, supplements and modifications thereto, relating to the
Dickinson Leased Theaters as of the date hereof, which Dickinson Leases are
identified on Schedule 2.1(b).
"Dickinson Real Property" means fee simple title in and to
that certain tract of real property on which is located one Dickinson Theater
identified as "Dickinson Fee Theater" on Schedule 4.9 hereto, which property is
more particularly described on Schedule 2.1(a) hereto, together with all of
Dickinson's right, title and interest in and to adjacent streets, roads,
alleys, rights of way, easements, rail usage and any strips or gores of real
estate abutting or bounding such property, and all rights, titles and interests
of Dickinson appurtenant to such real property and the Dickinson Improvements.
"Dickinson Retained Liabilities" has the meaning specified in
Section 2.6 (a).
"Dickinson Theaters" means the Dickinson Fee Theater and the
Dickinson Leased Theaters.
"Dickinson's Ancillary Documents" has the meaning specified in
Section 4.2.
"Dispute Notice" has the meaning specified in Section 2.4(e).
"Environmental Laws" means any federal, state, local and
foreign laws (including common law), statutes, codes, ordinances, guides,
written policy rules and regulations that are applicable to either the
Dickinson Assets or the Hollywood Assets, and in each case as amended, and any
judicial or administrative interpretation thereof, relating to pollution or
protection of human health, the environment or natural resources (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws, statutes, codes,
ordinances, rules, regulations, consent decrees and judgments relating to
emissions, discharges, releases or threatened releases of Hazardous Substances,
or otherwise relating to the
3
<PAGE> 10
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"Expiration Date" has the meaning specified in Section 2.4(e).
"GAAP" means generally accepted accounting principles and
practices as in effect in the United States at the time of the application
thereof, consistently applied for all periods so as to fairly reflect the
financial condition, the results of operations and the cash flows of the
relevant Person or Persons.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and any
other agency, body, authority or entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Hazardous Substance" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form, polychlorinated biphenyl
("PCBs") and, to the extent only it exists at levels which are considered
hazardous to human health, radon gas; and (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous waste," "hazardous materials," "extremely hazardous substances,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants" or
words of similar import, under any applicable Environmental Laws.
"Hollywood" has the meaning specified in the preamble to this
Agreement.
"Hollywood Assets" has the meaning specified in Section 2.2.
"Hollywood Assumed Contracts" has the meaning specified in
Section 2.2(e).
"Hollywood Delivered Documents" has the meaning specified in
Section 3.6(a).
"Hollywood Excluded Assets" has the meaning specified in
Section 2.2(g).
"Hollywood Existing Debt" means the indebtedness identified on
Schedule 2.6(b) hereto (i) relating to or secured by liens on any Hollywood
Theaters, or (ii) whether or not relating to or secured by liens on any
Hollywood Theaters, for which Hollywood or any of the Hollywood Assets are
obligated or bound.
"Hollywood Expenses" means any and all fees or expenses or
capital expenditures relating to the replacement of equipment arising out of
or relating to the operation of the Hollywood Theaters and the Hollywood Assets
in the ordinary course of business, including, but not limited to, prepaid
fees, Taxes, utility charges, lease charges, film rental expenses, minimum rent
and
4
<PAGE> 11
percentage rent under the Hollywood Leases, concession expenses, wages and
salaries and other trade payables.
"Hollywood Fee Theaters" means the Hollywood Real Property and
Hollywood Improvements.
"Hollywood Improvements" means all buildings and other
improvements situated on the Hollywood Real Property.
"Hollywood Leased Theaters" means all of Hollywood's right,
title and interest as tenant in, to and under the Hollywood Leases covering the
five Hollywood Theaters which are identified as "Hollywood Leased Theaters" on
Schedule 5.9.
"Hollywood Leases" means those written leases, together with
all amendments, supplements and modifications thereto, relating to the
Hollywood Leased Theaters as of the date hereof, which Hollywood Leases are
identified on Schedule 2.2(b).
"Hollywood Real Property" means fee simple title in and to
those certain tracts of real property on which are located an aggregate of two
Hollywood Theaters identified as "Hollywood Fee Theaters" on Schedule 4.9
hereto, which property is more particularly described on Schedule 2.1(a)
hereto, together with all of Hollywood's right, title and interest in and to
adjacent streets, roads, alleys, rights of way, easements, rail usage and any
strips or gores of real estate abutting or bounding such property, and all
rights, titles and interests of Hollywood appurtenant to such real property and
the Hollywood Improvements.
"Hollywood Retained Liabilities" has the meaning specified in
Section 2.6(b).
"Hollywood Theaters" means the Hollywood Fee Theaters and the
Hollywood Leased Theaters.
"Hollywood's Ancillary Documents" has the meaning specified in
Section 5.2.
"Inspection Period" means the period beginning on the date of
this Agreement and ending on the close of business on September 2, 1997.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended and as the same may be amended from time to time, and any
successor statute thereto.
"Knowledge" means the actual knowledge of Dickinson or
Hollywood, as appropriate, after reasonable inquiry of all district managers
and corporate staff of Dickinson or Hollywood, respectively.
5
<PAGE> 12
"Landlord Consent to Assignment and Subordination" means a
written consent to, among other things, the assignment of each Dickinson Lease
or Hollywood Lease, as appropriate, by the respective landlord of such lease,
substantially in the form attached as Exhibit C hereto.
"Letter of Intent" has the meaning specified in the recitals
hereto.
"Liability" has the meaning specified in Section 8.2.
"Lien" means, with respect to any properties or assets, any
mortgage, pledge, hypothecation, assignment, security interest, lien or
encumbrance or any preference, priority or other security agreement or
preferential arrangement of any kind or character whatsoever (including, but
not limited to, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction) in
respect of such properties or assets.
"Material Adverse Effect" means a material adverse effect on
the business, operations, affairs, condition (financial or otherwise), results
of operation, properties, assets or liabilities of the Dickinson Theaters
and/or the Hollywood Theaters, as appropriate, individually or in the
aggregate.
"Permitted Exceptions" has the meaning specified in Section
3.8(c).
"Person" means any individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization of
any kind or character, including any Governmental Authority.
"Proprietary Rights" means any United States and foreign
letters patent, patents, patent applications, trademarks, trade names, service
marks, brand names, logos and other trade registrations (including unregistered
names and marks), trademark and service mark registrations and applications,
copyrights and copyright registrations and applications, inventions, invention
disclosures, trade secrets, processes, designs, technology, know-how and other
similar rights, including proprietary theater ticketing systems and the related
software.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the outdoor environment, or into, onto, or out of the Dickinson
Theaters or the Hollywood Theaters, as the case may be, including the movement
of any Hazardous Substance or other substance through or in the air, soil,
surface water, groundwater or other property.
"Revised Commitment" has the meaning specified in Section
3.8(c).
6
<PAGE> 13
"Surveyor" has the meaning specified in Section 3.8(a).
"Surveys" has the meaning specified in Section 3.8(a).
"Taxes" means all taxes, charges, fees, levies or other
assessments (including, but not limited to, income, gross receipts, excise,
property, sales, occupation, use, service use, license, payroll, franchise,
transfer and recording taxes, fees and charges) imposed by any Governmental
Authority, whether computed on a separate, consolidated, unitary or combined
basis or in any other manner, and includes any interest, penalties and
additions to any tax.
"Theaters" means the Dickinson Theaters and the Hollywood
Theaters.
"Third Party Claims" means claims, charges or complaints made
or threatened by third parties or employees of Dickinson or Hollywood arising
from events occurring outside the ordinary course of business of Dickinson or
Hollywood, including, but not limited to, harassing or illegal acts committed
by employees of Dickinson or Hollywood or charges or complaints made by
employees to the Equal Employment Opportunity Commission or any other federal,
state or local agency responsible for the prevention of unlawful employment
practices.
"Title Commitment" has the meaning specified in Section
3.8(b).
"Title Company" means (i) with respect to Dickinson, Columbian
National Title Insurance of Topeka, Inc., as agent for Columbia National Title
Insurance, at the address of 820 Southeast Quincy, Topeka, Kansas 66612, Attn:
Eric Deitcher and (ii) with respect to Hollywood, Hall Abstract, as agent for
Chicago Title Company, at the address of 200 South 8th Street, St. Joseph,
Missouri 64501, Attn: Steve Crawford.
"Title Policies" has the meaning specified in Section 3.8(d).
"TLCF" means, with respect to each Theater, the higher of the
theater level cash flow of such Theater for the twelve months ended March 31,
1996 and the twelve months ended March 31, 1997, as determined by reference to
the theater level cash flow statements of Dickinson or Hollywood, as
appropriate, for such Theater, prepared in accordance with GAAP, and prepared
consistently in all material respects with Dickinson's or Hollywood's
historical theater level cash flow statements, as heretofore provided by
Dickinson to Hollywood and by Hollywood to Dickinson. The parties acknowledge
that TLCF does not include interest, amortization, depreciation or allocations
of general and administrative expenses or income taxes.
"UCC" has the meaning specified in Section 3.5(a)(vii).
7
<PAGE> 14
ARTICLE II
SALE AND TRANSFER OF ASSETS
SECTION 2.1 Sale and Transfer of Dickinson Assets. In
accordance with the terms and provisions set forth herein, at the Closing
Dickinson shall sell, convey, transfer and deliver to Hollywood all of
Dickinson's right, title and interest in and to the following properties and
assets (collectively, the "Dickinson Assets"):
(a) the Dickinson Fee Theater, including the Dickinson
Real Property identified on Schedule 2.1(a) hereto and the Dickinson
Improvements;
(b) the leasehold interests, including leasehold
improvements, in the Dickinson Leases identified on Schedule 2.1(b)
hereto;
(c) all tangible personal property, equipment and
fixtures of any kind owned or leased by Dickinson and attached to or
located within or on or customarily used in connection with the
operation of the Dickinson Theaters, including but not limited to
seats, merchandise, inventory, merchantable food and drink, cleaning
equipment, office equipment, projection and sound equipment, screens,
carpets, draperies, soundfold, wall coverings, cash registers, ticket
machines, signs (including marquees), projection supplies, concessions
equipment and prepaid utility and rent deposits in each case, except
for Dickinson's rights or interests in any Dickinson Excluded Assets;
(d) the consents, approvals, licenses, permits,
franchises and other authorizations possessed by Dickinson identified
in Schedule 2.1(d) hereto relating to the Dickinson Theaters to the
extent transferable;
(e) the Contracts listed on Schedule 2.1(e) hereof (the
"Dickinson Assumed Contracts");
(f) all business books and records of Dickinson that are
necessary to the continuing operation of the Dickinson Theaters;
(g) all other properties and assets of any kind,
character and description whatsoever (whether or not reflected on the
books of Dickinson and whether real, personal or mixed, tangible or
intangible, contingent or otherwise) used, or available for use, in
the business or operations of Dickinson at the Dickinson Theaters or
necessary for the continuation of such business or operations
consistent with past practice, other than the assets specifically
identified on Schedule 2.1(g) hereto (the "Dickinson Excluded
Assets").
SECTION 2.2 Sale and Transfer of Hollywood Assets. In
accordance with the terms and provisions set forth herein, at the Closing
Hollywood shall sell, convey, transfer and deliver to
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Dickinson all of Hollywood's right, title and interest in and to the following
properties and assets (collectively, the "Hollywood Assets"):
(a) the Hollywood Fee Theaters, including the Hollywood
Real Property identified on Schedule 2.2(a) hereto and the Hollywood
Improvements;
(b) the leasehold interests, including leasehold
improvements, in the Hollywood Leases identified on Schedule 2.2(b)
hereto;
(c) all tangible personal property, equipment and
fixtures of any kind owned or leased by Hollywood and attached to or
located within or on or customarily used in connection with the
operation of the Hollywood Theaters, including but not limited to
seats, merchandise, inventory, merchantable food and drink, cleaning
equipment, office equipment, projection and sound equipment, screens,
carpets, draperies, soundfold, wall coverings, cash registers, ticket
machines, signs (including marquees), projection supplies, concessions
equipment and prepaid utility and rent deposits in each case, except
for Hollywood's rights or interests in any Hollywood Excluded Assets;
(d) the consents, approvals, licenses, permits,
franchises and other authorizations possessed by Hollywood identified
in Schedule 2.2(d) hereto relating to the Hollywood Theaters to the
extent transferable;
(e) the Contracts listed on Schedule 2.2(e) hereof (the
"Hollywood Assumed Contracts");
(f) all business books and records of Hollywood that are
necessary to the continuing operation of the Hollywood Theaters;
(g) all other properties and assets of any kind,
character and description whatsoever (whether or not reflected on the
books of Hollywood and whether real, personal or mixed, tangible or
intangible, contingent or otherwise) used, or available for use, in
the business or operations of Hollywood at the Hollywood Theaters or
necessary for the continuation of such business or operations
consistent with past practice, other than the assets specifically
identified on Schedule 2.2(g) hereto (the "Hollywood Excluded
Assets").
SECTION 2.3 Cash Purchase Price. At Closing, Dickinson
shall pay and deliver to Hollywood in immediately available same day funds
$1,118,000 (the "Cash Purchase Price").
SECTION 2.4 Expenses; Proration of Cash and Expenses.
(a) Dickinson agrees to pay all debts, Dickinson Expenses
and contractual obligations that arise or are incurred, or with
respect to which the event creating such debt, liability, Dickinson
Expense or obligation arises or occurred, on or prior to the Closing
Date
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in connection with the operation and business of the Dickinson
Theaters or related to the Dickinson Assets, whether or not Dickinson
is aware of such debts, Dickinson Expenses, obligations or events.
Dickinson agrees to pay all Third Party Claims that arise or are
incurred, or with respect to which the event creating such liability
or obligation arises or occurs, on or prior the Closing Date in
connection with the operation and business of the Dickinson Theaters
or related to the Dickinson Assets, whether or not Dickinson is aware
of such liabilities, obligations or events.
(b) Hollywood agrees to pay all debts, Hollywood
Expenses and contractual obligations that arise or are incurred, or
with respect to which the event creating such debt, liability,
Hollywood Expense or obligation arises or occurred, on or prior to the
Closing Date in connection with the operation and business of the
Hollywood Theaters or related to the Hollywood Assets, whether or not
Hollywood is aware of such debts, Hollywood Expenses, obligations or
events. Hollywood agrees to pay all Third Party Claims that arise or
are incurred, or with respect to which the event creating such
liability or obligation arises or occurs, on or prior the Closing Date
in connection with the operation and business of the Hollywood
Theaters or related to the Hollywood Assets, whether or not Hollywood
is aware of such liabilities, obligations or events.
(c) To the extent that any Dickinson Expenses, Hollywood
Expenses are readily ascertainable as of the Closing Date, Dickinson
and Hollywood agree to pay such amounts at Closing. With respect to
such amounts that are not readily ascertainable as of the Closing
Date, Dickinson and Hollywood shall make payments after the Closing
promptly after such amounts are ascertained, and in any event within
10 days after evidence of such amounts is received from the party
claiming the right to reimbursement, subject to paragraph (e) of this
Section 2.4.
(d) At the close of business on the Closing Date, each of
Hollywood and Dickinson shall take inventory of all unopened
perishable concession goods on site at each of the Hollywood Theaters
and Dickinson Theaters, respectively. Within ten (10) days after the
Closing Date, each of Hollywood and Dickinson agrees to pay to the
other party hereto their respective cost for such unopened perishable
concessions.
(e) Either party hereto may dispute in good faith any
amounts the other claims to be payable pursuant to this Section 2.4 by
delivering a written notice to the other party or parties setting
forth in reasonable detail the amount and nature of each disputed
matter (each such notice being hereinafter referred to as a "Dispute
Notice") within ten days after receiving a notice that any such amount
is due under Section 2.4(a) or Section 2.4(b), as the case may be.
Each party shall provide the other party with such additional
information as it may reasonably request as to the basis of such
dispute. The parties shall attempt in good faith to resolve any
dispute as to any matter set forth in a Dispute Notice. If within 30
days following the date of the receipt of the Dispute Notice (the
"Expiration Date") the dispute cannot be resolved through negotiation
between the parties, the dispute shall be submitted for resolution by
binding arbitration in accordance with Section 9.6 hereof.
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SECTION 2.5 [Intentionally Omitted]
SECTION 2.6 Retained Liabilities.
(a) Notwithstanding anything to the contrary contained in
this Agreement, Hollywood shall not assume, pay, perform or discharge
any debts, liabilities, Dickinson Expenses or obligations of Dickinson
of any kind, character or description whatsoever (whether absolute or
contingent, known or unknown, asserted or unasserted, whether or not
the same are disclosed to Hollywood in or pursuant to this Agreement)
that arise or are incurred, or with respect to which the event
creating such debt, liability, Dickinson Expense or obligation arises
or occurs, on or prior to the Closing Date, in each case in connection
with the operation and business of the Dickinson Theaters or related
to the Dickinson Assets (collectively, the "Dickinson Retained
Liabilities"), which Dickinson Retained Liabilities include, without
limitation, the Dickinson Existing Debt.
(b) Notwithstanding anything to the contrary contained in
this Agreement, Dickinson shall not assume, pay, perform or discharge
any debts, liabilities, Hollywood Expenses or obligations of Hollywood
of any kind, character or description whatsoever (whether absolute or
contingent, known or unknown, asserted or unasserted, whether or not
the same are disclosed to Dickinson in or pursuant to this Agreement)
that arise or are incurred, or with respect to which the event
creating such debt, liability, Hollywood Expense or obligation arises
or occurs, on or prior to the Closing Date, in each case in connection
with the operation and business of the Hollywood Theaters or related
to the Hollywood Assets (collectively, the "Hollywood Retained
Liabilities"), which Hollywood Retained Liabilities include, without
limitation, the Hollywood Existing Debt.
SECTION 2.7 Further Assurances. The parties hereby agree
that from time to time after Closing each of them shall (a) execute, deliver,
acknowledge, file and record, or cause to be executed, delivered, acknowledged,
filed and recorded, such further bills of sale, deeds, general conveyances,
endorsements, assignments and other good and sufficient instruments of sale,
conveyance, transfer and delivery and such further consents, certifications,
affidavits and assurances as are required in order to (i) vest in Hollywood all
of Dickinson's right, title and interests in and to the Dickinson Assets or
otherwise to consummate and make effective the transactions contemplated by
this Agreement, (ii) vest in Dickinson all of Hollywood's right, title and
interests in and to the Hollywood Assets or otherwise to consummate and make
effective the transactions contemplated by this Agreement, (iii) take, or cause
to be taken, all actions and do, or cause to be done, all things, as are
required in order to put Hollywood in actual possession and operating control
of the Dickinson Theaters and the Dickinson Assets or otherwise to accomplish
the purposes of this Agreement and (iv) take, or cause to be taken, all actions
and do, or cause to be done, all things, as are required in order to put
Dickinson in actual possession and operating control of the Hollywood Theaters
and the
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Hollywood Assets or otherwise to accomplish the purposes of this Agreement.
Each party agrees to pay its own expenses associated with any actions required
to be taken by each of them under this Section 2.7.
SECTION 2.8 Non-Assignable Assumed Contracts. This
Agreement and any document delivered hereunder shall not constitute an
assignment or an attempted assignment of any right under a Dickinson Assumed
Contract or a Hollywood Assumed Contract contemplated to be assigned hereunder:
(a) which is not assignable without the consent of a
third party if such consent has not been obtained and such assignment
or attempted assignment would constitute a breach thereof; or
(b) if the remedies for the enforcement or any other
particular provisions thereof available to Dickinson or Hollywood, as
applicable, would not pass to the other party hereto.
Dickinson and Hollywood shall use reasonable efforts to obtain such consents of
third parties as may be necessary for the assignment of the Dickinson Assumed
Contracts and the Hollywood Assumed Contracts, as the case may be, provided
that neither party shall be obligated to make any payments to such third
parties in addition to those required pursuant to any agreement with third
parties in order obtain such consents, unless Dickinson and Hollywood reimburse
one another for such payments at the time such payments are made. To the
extent that any of the Dickinson Assumed Contracts or Hollywood Assumed
Contracts are not assignable by the terms thereof or where consents to the
assignment thereof cannot be obtained as herein provided, Dickinson and
Hollywood, as applicable, shall, at the Closing, assign to the other party the
full benefit thereof (which shall be deemed to be Dickinson Assets or Hollywood
Assets, as applicable) and grant to the other party an irrevocable power of
attorney to perform the covenants and obligations thereunder in respect of the
period after the Closing Date, and to enforce such assignee's rights thereunder
in the name of such assignee but for the benefit of the assigning party hereto.
Dickinson or Hollywood, as applicable, shall take or cause to be taken such
action in its name or otherwise as the other party hereto may require so as to
provide Dickinson or Hollywood with the benefits thereof and to effect
collection of money or other consideration to become due and payable under such
items, and Dickinson and Hollywood shall promptly pay over to the other party
money received by each party in respect of all of the foregoing items.
ARTICLE III
THE CLOSING; TERMINATION
SECTION 3.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on August 28,
1997, or on such other date as has been mutually agreed upon between Hollywood
and Dickinson (the "Closing Date"), at the offices of Baker & Botts, L.L.P.,
2001 Ross Avenue, Dallas, Texas 75201 and shall be effective as of 11:59 p.m.
on the Closing Date.
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SECTION 3.2 Conditions Precedent to Obligations of
Hollywood. The obligations of Hollywood at the Closing hereunder are subject
to the satisfaction on or prior to the Closing Date of the conditions set forth
below.
(a) The representations and warranties of Dickinson
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the
Closing Date; Dickinson shall have performed and complied with all
agreements required by this Agreement to be performed or complied with
by Dickinson at or prior to the Closing Date; and Hollywood shall have
received certificates, dated as of the Closing Date, signed by
Dickinson to the foregoing effect.
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the possible effect of enjoining or
preventing the consummation of this Agreement or seeking damages on
account thereof.
(c) From the date hereof until Closing, there shall not
have occurred any material casualty or damage (whether or not insured)
to any Dickinson Theater and the business of Dickinson shall have been
conducted only in the ordinary course consistent with past practices.
(d) All necessary action (corporate or otherwise) shall
have been taken by Dickinson to authorize, approve, and adopt this
Agreement and the consummation and performance of the transactions
contemplated hereby, and Hollywood shall have received a certificate,
dated as of the Closing Date, of Dickinson to the foregoing effect.
(e) Dickinson shall have terminated all contracts
relating to the Dickinson Assets, other than the Dickinson Assumed
Contracts.
(f) Hollywood shall have received executed Subordination
and Non-Disturbance Agreements from each lender, if any, of the
respective landlords under the Dickinson Leases, provided that this
condition shall be deemed to have been satisfied so long as lenders
for landlords with respect to no more than two Dickinson Theaters fail
to execute and deliver such an agreement.
(g) Dickinson shall have completed such environmental
reviews with respect to the Dickinson Fee Theater as Hollywood deems
necessary.
(h) Dickinson shall have amended the Lease Agreement for
Premises at Northpark Mall, by and between Northpark Mall Management
Company, Agent, and
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Dickinson, Inc. (the "NMMC Lease"), to conform the terms and
conditions of such lease to the terms and conditions of the Lease
Agreement for Premises at Joplin, Missouri, Northpark Mall Shopping
Center, by and between The First National Bank & Trust Company of
Joplin, Trustee, and Dickinson, Inc., dated October 1, 1971,
including, without limitation, the provisions of Section 8.2(B) of the
NMMC Lease prohibiting the tenant from conducting business from the
leased premises on Sunday, and Section 8.2(D) of the NMMC Lease
prohibiting the tenant from operating any device for the sale of
merchandise, food, beverages or other goods or services without the
prior written consent of the landlord.
(i) At the Closing, Dickinson shall deliver, or cause to
be delivered, to Hollywood each of the following:
(i) for each Dickinson Theater and the related
Dickinson Assets, a Bill of Sale and Assignment, duly executed
and acknowledged by Dickinson;
(ii) for each Dickinson Leased Theater and the
related Dickinson Assumed Contracts, an Assignment and
Assumption Agreement, duly executed and acknowledged by
Dickinson;
(iii) for each Dickinson Theater, a fully executed
Landlord Consent to Assignment and Subordination;
(iv) for each Dickinson Fee Theater, a title
opinion acceptable to Hollywood.
(v) such other bills of sale, deeds, general
conveyances, endorsements, assignments and other good and
sufficient instruments of sale, conveyance, transfer and
delivery as Hollywood may reasonably request in order more
effectively to vest in Hollywood all of Dickinson's right,
title and interest in and to the Dickinson Assets, in each
case duly executed and acknowledged by Dickinson;
(vi) evidence reasonably satisfactory to Hollywood
regarding the termination by Dickinson prior to Closing of all
Persons employed at each Dickinson Theater;
(vii) such documents as Hollywood may request
relating to the existence and good standing of Dickinson under
the laws of the State of Kansas, the authority of Dickinson to
enter into this Agreement and any other matters relevant
hereto, all in form and substance reasonably satisfactory to
Hollywood;
(viii) evidence satisfactory to Hollywood that all
liens on any Dickinson Assets have been released;
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(ix) the Cash Purchase Price; and
(x) immediately available funds sufficient to
provide for the repair, maintenance or replacement, if any, of
Dickinson Assets as contemplated pursuant to Section
3.5(c)(ii).
SECTION 3.3 Conditions Precedent to Obligations of
Dickinson. The obligations of Dickinson at the Closing are subject to the
satisfaction on or prior to the Closing Date of the conditions set forth below.
(a) Hollywood's representations and warranties contained
in this Agreement shall be true and correct in all material respects
at and as of the Closing Date with the same effect as though such
representations and warranties had been made as of the Closing Date;
Hollywood shall have performed and complied with all agreements
required by this Agreement to be performed or complied with by
Hollywood at or prior to the Closing; and Dickinson shall have
received a certificate, dated as of the Closing Date, signed by
Hollywood to the foregoing effects.
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the possible effect of enjoining or
preventing the consummation of this Agreement or seeking damages on
account thereof.
(c) From the date hereof until Closing, there shall not
have occurred any material casualty or damage (whether or not insured)
to any Hollywood Theater and the business of Hollywood shall have been
conducted only in the ordinary course consistent with past practices.
(d) All necessary action (corporate or otherwise) shall
have been taken by Hollywood to authorize, approve and adopt this
Agreement and the consummation and performance of the transactions
contemplated hereby, and Dickinson shall have received a certificate,
dated as of the Closing Date, of Hollywood to the foregoing effect.
(e) Hollywood shall have terminated all contracts
relating to the Hollywood Assets, other than the Hollywood Assumed
Contracts.
(f) Dickinson shall have received executed Subordination
and Non-Disturbance Agreements from each lender, if any, of the
respective landlords under the Hollywood Leases, provided that this
condition shall be deemed to have been satisfied so long as lenders
for landlords with respect to no more than two Hollywood Theaters fail
to execute and deliver such an agreement.
(g) Hollywood shall have completed such environmental
reviews with respect to the Hollywood Fee Theaters as Dickinson deems
necessary.
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(h) At the Closing, Hollywood shall deliver, or cause to
be delivered, to Dickinson each of the following:
(i) for each Hollywood Theater and the related
Hollywood Assets, a Bill of Sale and Assignment, duly executed
and acknowledged by Hollywood;
(ii) for each Hollywood Leased Theater and the
related Hollywood Assumed Contracts, an Assignment and
Assumption Agreement, duly executed and acknowledged by
Hollywood;
(iii) for each Hollywood Theater, a fully executed
Landlord Consent to Assignment and Subordination;
(iv) for each Hollywood Fee Theater, a title
opinion acceptable to Dickinson.
(v) such other bills of sale, deeds, general
conveyances, endorsements, assignments and other good and
sufficient instruments of sale, conveyance, transfer and
delivery as Dickinson may reasonably request in order more
effectively to vest in Dickinson all of Hollywood's right,
title and interest in and to the Hollywood Assets, in each
case duly executed and acknowledged by Hollywood;
(vi) evidence reasonably satisfactory to Dickinson
regarding the termination by Hollywood prior to Closing of all
Persons employed at each Hollywood Theater;
(vii) such documents as Dickinson may request
relating to the existence and good standing of Hollywood under
the laws of the State of Delaware, the authority of Hollywood
to enter into this Agreement and any other matters relevant
hereto, all in form and substance reasonably satisfactory to
Dickinson;
(viii) evidence satisfactory to Dickinson that all
liens on any Hollywood Assets have been released; and
(ix) immediately available funds sufficient to
provide for the repair, maintenance or replacement, if any, of
Hollywood Assets as contemplated pursuant to Section
3.6(c)(ii) hereof.
SECTION 3.4 Termination. This Agreement may be
terminated prior to the Closing by:
(a) the mutual consent of Hollywood and Dickinson;
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(b) Dickinson upon the failure of Hollywood to perform or
comply with any of its covenants or agreements contained herein prior
to or at the Closing or if any representation or warranty of Hollywood
hereunder shall not have been true and correct in all material
respects as of the time at which such was made;
(c) Hollywood upon the failure of Dickinson to perform or
comply with any of its covenants or agreements contained herein prior
to or at the Closing or if any representation or warranty of Dickinson
hereunder shall not have been true and correct in all material
respects as of the time at which such was made;
(d) Dickinson if Hollywood elects not to allow Dickinson
to collect any soil samples or conduct any drilling at any Hollywood
Theaters requested by Dickinson pursuant to Section 3.6(b) hereof;
(e) Hollywood if Dickinson elects not to allow Hollywood
to collect any soil samples or conduct any drilling at any Dickinson
Theaters requested by Hollywood pursuant to Section 3.5(b) hereof;
(f) Hollywood if any Hazardous Substance (i) exists at
any of the Dickinson Theaters (including underground storage tanks on
the land occupied by the Dickinson Theaters, except in compliance with
Environmental Laws), (ii) has been disposed of on, to or from any of
the Dickinson Theaters, except in compliance with Environmental Laws,
(iii) has been released into, onto or out of the land occupied by the
Dickinson Theaters, except in compliance with Environmental Laws, or
(iv) has been generated, managed, treated or transported to or from
any of the Dickinson Theaters, except in compliance with Environmental
Laws;
(g) Dickinson if any Hazardous Substance (i) exists at
any of the Hollywood Theaters (including underground storage tanks on
the land occupied by the Hollywood Theaters, except in compliance with
Environmental Laws), (ii) has been disposed of on, to or from any of
the Hollywood Theaters, except in compliance with Environmental Laws,
(iii) has been released into, onto or out of the land occupied by the
Hollywood Theaters, except in compliance with Environmental Laws, or
(iv) has been generated, managed, treated or transported to or from
any of the Hollywood Theaters, except in compliance with Environmental
Laws;
(h) Dickinson, if there is an environmental problem or a
defect in title at any of the Hollywood Fee Theaters or Hollywood
Leased Theaters that Hollywood is unwilling to cure, or that cannot be
cured to Dickinson's reasonable satisfaction;
(i) Hollywood, if there is an environmental problem or a
defect in title at any of the Dickinson Fee Theater or Dickinson
Leased Theaters that Dickinson is unwilling to cure or that cannot be
cured to Hollywood's reasonable satisfaction; or
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(j) either Dickinson or Hollywood if the Closing does not
occur by September 25, 1997.
SECTION 3.5 Hollywood's Inspection of the Dickinson
Assets.
(a) Deliveries. Dickinson shall provide to Hollywood in
Dallas, Texas, on or before 5:00 p.m. Dallas time on the date ten
business days after the Effective Date ("Delivery Date") the following
items and documents relating to the Dickinson Assets to the extent the
same are in Dickinson's possession or are readily obtainable by
Dickinson (all of the following are herein called the "Dickinson
Delivered Documents"):
(i) copies of all ADA, engineering, structural,
elevator, curtain wall, mechanical, roof, environmental and
seismographic reports, a current site plan, the most recent
survey for the Dickinson Theaters and the land on which they
are situated, elevator specifications, if any, and as-built
architectural, structural, mechanical, and electrical plans
and specifications of the Dickinson Theaters;
(ii) copies of all certificates of occupancy,
licenses, permits, authorizations and approvals as required by
law for the construction, occupancy and operation of the
Dickinson Theaters and the land on which they are situated;
(iii) copies of all real estate tax bills for 1995,
1996 and 1997, including evidence of payment thereof;
(iv) a schedule of all guarantees and warranties
in Dickinson's possession and still in effect issued or made
in connection with the construction, improvement, alteration
or repair of the Dickinson Fee Theater, including without
limitation, guaranties and warranties pertaining to roofs,
elevators, masonry, landscaping and heating and air
conditioning systems;
(v) Uniform Commercial Code ("UCC") search
certificates from the Secretary of State of the State of
Missouri and the Secretary of State of the State of Kansas
reflecting any effective UCC financing statements then of
record that name Dickinson as debtor; and
(vi) of any notices of violations of laws or
insurance requirements which relate to the Dickinson Assets
and were issued during 1993 or any subsequent year.
As used herein, "readily obtainable" means that the material either is
in any Dickinson's files or in the files of a third-party agent,
contractor or consultant of Dickinson and can be obtained by
contacting such third party. Dickinson shall not be required to
contact any governmental agencies or authorities nor spend sums of
money in excess of photocopying charges to obtain any of the Dickinson
Delivered Documents. One complete set of the
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Dickinson Delivered Documents shall be delivered to Hollywood at its
offices in Dallas, Texas, and if Hollywood requests, a second set of
the as-built plans and specifications specified in clause (i) only
shall also be delivered but such second set shall be copied and
delivered at the expense of Hollywood.
(b) Hollywood's Access to the Dickinson Assets.
Dickinson covenants and agrees that from and after the Effective Date
until Closing or earlier termination of this Agreement, Hollywood and
its contractors, agents and employees, at the sole expense of
Hollywood, may enter upon any portion of the Dickinson Real Property
and the Dickinson Theaters from time to time during reasonable
business hours, without any disruption of the normal conduct of
Dickinson's business, and with reasonable prior notice to Dickinson
for the purposes of inspection (mechanical, structural and otherwise),
tests, including environmental testing and examination of the
operating condition of the Dickinson Assets, provided that Hollywood
will not take any soil samples or conduct any drilling without the
prior written consent of Dickinson, which consent may be withheld for
any reason. If the Closing does not occur, Hollywood will compensate
Dickinson for any damage to the Dickinson Assets caused by Hollywood's
negligent conduct during its inspection activities.
(c) Inspection of Condition of the Dickinson Assets.
During the Inspection Period (except for environmental problems, for
which Hollywood may inspect and deliver a list of problems up to the
date of Closing), Hollywood may deliver to Dickinson an itemized list
or lists of Dickinson Assets that (x) reasonably require repair,
maintenance or replacement, (y) relate to the operation of the related
Theater and (z) individually are estimated to cost in excess of
$1,000, and Dickinson agrees to either (i) provide such maintenance or
replacement or (ii) deliver to Hollywood at Closing sufficient funds
to provide for such maintenance or replacement; provided, however,
that Dickinson agrees to indemnify Hollywood for the difference, if
any, between the actual costs and the estimated costs, and Hollywood
agrees to pay Dickinson the difference, if any, between the estimated
costs and the actual costs. Dickinson may dispute in good faith any
repairs, maintenance or replacements requested by Hollywood by
delivering to Hollywood a written notice setting forth such objection
in reasonable detail to Hollywood within two days of receipt of the
Hollywood's list. If Hollywood objects, the dispute shall be
submitted for resolution by binding arbitration in accordance with
Section 9.6 hereof.
SECTION 3.6 Dickinson's Inspection of the Hollywood
Assets.
(a) Deliveries. Hollywood shall provide to Dickinson in
Mission, Kansas, on or before 5:00 p.m. Mission, Kansas time on the
Delivery Date the following items and documents relating to the
Hollywood Assets to the extent the same are in Hollywood's possession
or are readily obtainable by Hollywood (all of the following are
herein called the "Hollywood Delivered Documents"):
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(i) copies of all ADA, engineering, structural,
elevator, curtain wall, mechanical, roof, environmental and
seismographic reports, a current site plan, the most recent
survey for the Hollywood Theaters and the land on which they
are situated, elevator specifications, if any, and as-built
architectural, structural, mechanical, and electrical plans
and specifications of the Hollywood Theaters;
(ii) copies of all certificates of occupancy,
licenses, permits, authorizations and approvals as required by
law for the construction, occupancy and operation of the
Hollywood Theaters and the land on which they are situated;
(iii) copies of all real estate tax bills for 1995,
1996 and 1997, including evidence of payment thereof;
(iv) a schedule of all guarantees and warranties
in Hollywood's possession and still in effect issued or made
in connection with the construction, improvement, alteration
or repair of the Hollywood Fee Theaters, including without
limitation, guaranties and warranties pertaining to roofs,
elevators, masonry, landscaping and heating and air
conditioning systems;
(v) UCC search certificates from the Secretary of
State of the State of Missouri and Secretary of State of the
State of Kansas reflecting any effective UCC financing
statements then of record that name Hollywood as debtor; and
(vi) of any notices of violations of laws or
insurance requirements which relate to the Hollywood Assets
and were issued during 1993 or any subsequent year.
As used herein, "readily obtainable" means that the material either is
in Hollywood's files or in the files of a third-party agent,
contractor or consultant of Hollywood and can be obtained by
contacting such third party. Hollywood shall not be required to
contact any governmental agencies or authorities nor spend sums of
money in excess of photocopying charges to obtain any of the Hollywood
Delivered Documents. One complete set of the Hollywood Delivered
Documents shall be delivered to Dickinson at its offices in Mission,
Kansas, and if Dickinson requests, a second set of the as-built plans
and specifications specified in clause (i) only shall also be
delivered but such second set shall be copied and delivered at the
expense of Dickinson.
(b) Dickinson's Access to the Hollywood Assets. Hollywood
covenants and agrees that from and after the Effective Date until
Closing or earlier termination of this Agreement, Dickinson and its
contractors, agents and employees, at the sole expense of Dickinson,
may enter upon any portion of the Hollywood Real Property and the
Hollywood Theaters from time to time during reasonable business hours,
without any disruption of the normal conduct of Hollywood's business,
and with reasonable prior notice to Hollywood for the purposes of
inspection (mechanical, structural and otherwise), tests, including
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environmental testing and examination of the operating condition of
the Hollywood Assets, provided that Dickinson will not take any soil
samples or conduct any drilling without the prior written consent of
Hollywood, which consent may be withheld for any reason. If the
Closing does not occur, Dickinson will compensate Hollywood for any
damage to the Hollywood Assets caused by Dickinson's negligent conduct
during its inspection activities.
(c) Inspection of Condition of the Hollywood Assets.
During the Inspection Period (except for environmental problems for
which Dickinson may inspect and deliver a list of problems up to the
date of Closing), Dickinson may deliver to Hollywood an itemized list
or lists of Hollywood Assets that (x) reasonably require repair,
maintenance or replacement, (y) relate to the operation of the related
Theater and (z) individually are estimated to cost in excess of
$1,000, and Hollywood agrees to either (i) provide such maintenance or
replacement, or (ii) deliver to Dickinson at Closing sufficient funds
to provide for such maintenance or replacement, or (iii) reduce the
Cash Purchase Price by the estimated amount required to repair,
provide maintenance or replace such Hollywood Assets; provided,
however, that Hollywood agrees to indemnify Dickinson for the
difference, if any, between the actual costs and the estimated costs,
and Dickinson agrees to pay Hollywood the difference, if any, between
the estimated costs and the actual costs. Hollywood may dispute in
good faith any repairs, maintenance or replacements requested by
Dickinson by delivering to Dickinson a written notice setting forth
such objection in reasonable detail to Hollywood within two days of
receipt of the Dickinson's list. If Dickinson objects, the dispute
shall be submitted for resolution by binding arbitration in accordance
with Section 9.6 hereof.
SECTION 3.7 Termination. Either party hereto may
terminate this Agreement during the Inspection Period for any reason or no
reason, by notifying the other party in writing of its election to terminate
this Agreement prior to the expiration of the Inspection Period. If one party
terminates this Agreement within such time period, then the other party shall
promptly deliver to the party seeking termination a copy of any and all tests,
studies and examinations conducted by such party related to the Dickinson
Assets or Hollywood Assets, as applicable, and both parties shall be released
from all further obligations under this Agreement.
SECTION 3.8 Survey and Title.
(a) Survey. As soon as reasonably possible after the
Effective Date, Dickinson and Hollywood, as the case may be, at their
own expense, shall provide the other party and its attorney with
current on-the- ground staked "as-built" surveys of the Dickinson Fee
Theater and the Hollywood Fee Theaters, respectively. The surveys
delivered pursuant to this Section 3.8 shall be made in accordance
with Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys jointly established by ALTA and ACSM in 1992 and meeting the
accuracy requirements of the Urban Survey, as included therein, and
shall include items 1 through 11 and 15 or such other standards as
such requesting party deems appropriate (the "Surveys") prepared by a
registered land surveyor licensed in the state in which the applicable
Theater is located and approved by the requesting party (the
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"Surveyor"). The Surveys (including specifically the certificate of
the Surveyor forming a part thereof) shall be in form and substance
acceptable to each Title Company and the requesting party and shall
locate all existing improvements, easements, rights-of-way, setback
lines (which shall show recording data, if applicable), encroachments,
conflicts, overlaps and protrusions affecting the Dickinson Fee
Theater or the Hollywood Fee Theaters, as the case may be, (to the
extent visible on the ground or listed in the Title Commitment) and
other matters noted on the Title Commitment, shall set forth the
outside perimeter of the Dickinson Real Property or Hollywood Real
Property, as applicable, shall contain a metes and bounds description
of the Dickinson Real Property or Hollywood Real Property, as the case
may be, and shall set forth the acres included within the Dickinson
Real Property or Hollywood Real Property, as applicable. The Survey
shall contain a statement on the face thereof certifying that no part
of the Dickinson Real Property or Hollywood Real Property, as the case
may be, lies within a flood plain or flood prone area or a flood way
of any body of water as determined by reference to the current Flood
Insurance Rate Map published by the Federal Emergency Management
Agency for the community in which the Dickinson Real Property or
Hollywood Real Property, as the case may be, is located except as
shown or described on the Surveys. The Surveys shall reflect that
there is access to and from the Dickinson Real Property or Hollywood
Real Property, as the case may be, from a publicly dedicated street or
road and shall be sufficient to cause the Title Company to delete
(except for "shortages in area") the printed exception for
"discrepancies, conflicts, or shortages in area or boundary lines, or
encroachments, or any overlapping of improvements" in the Title Policy
to be delivered pursuant to Section 3.8(d). The Surveys also shall
show all underground parking spaces (as striped). The Surveys shall
be certified to the requesting party, the Title Company and any
financing source of the requesting party in a manner reasonably
satisfactory to the requesting party, Title Company and such financing
source. In the event the metes and bounds legal description contained
on any Survey varies from the metes and bounds legal description set
forth on Schedule 2.1(b) attached hereto, the Deed shall contain the
legal description set forth in the Survey.
(b) Title Commitment. As soon as reasonably possible
after the date hereof, each party, at its own cost and expense, shall
cause to be issued and delivered to the other party and its attorney
(i) an Owner's Title Policy Commitment (the "Title Commitment") from
the Title Company setting forth the status of the title to each of the
Dickinson Fee Theater or Hollywood Fee Theaters, as applicable,
pursuant to which the Title Company agrees to insure title to each of
the Dickinson Fee Theater, in the case of Dickinson, or Hollywood Fee
Theaters, in the case of Hollywood, under an ALTA Owner's Policy Form
B (4-6-90) Extended Coverage in the full amount set forth on Schedule
3.8(b), calling for standard printed exceptions 1 through 5 (excluding
the deletion of survey exceptions if either party elects not to obtain
surveys) to be deleted upon receipt of a current tax certificate and
mechanics' lien affidavits from Dickinson or Hollywood, as applicable
(such affidavits to be in form and content reasonably acceptable to
Dickinson and Hollywood, respectively), with the exception for taxes
and assessments to be limited to real property taxes and assessments
for the year in which the Closing occurs marked "not yet due and
payable," and with the title
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exception for leases and tenancies to reflect none, (ii) copies of all
documents referred to in the Title Commitment, including but not
limited to, deeds, lien instruments, plats, reservations, restrictions
and easements, and (iii) to the extent not covered by the Title
Commitments, certificates of taxes due covering the Theaters and
prepared by the appropriate tax authorities.
(c) In the event any exceptions appear in the Title
Commitment (or any new exceptions appear in any date down endorsement
or revised commitment, referred to herein collectively as a "Revised
Commitment"), other than the standard printed exceptions (which shall
be modified in the Title Policy as described in Section 3.8(b) above),
that are unacceptable to either party hereto, then the other party
shall, within 15 days after the receipt of the Title Commitment or the
Survey, whichever shall be last received (or within five days after
receipt of a Revised Commitment and copies of any new documents as
applicable), notify the other party in writing of such fact. If such
party fails to cure any such objection (without having any obligation
to do so, except as otherwise provided herein) on or prior to the end
of the Inspection Period (or within five days after the objecting
party's objection if such objection pertains to any new exception
first appearing in a Revised Commitment received after five days prior
to the end of the Inspection Period), then the objecting party may
either (i) terminate this Agreement or, (ii) so long as the amount
which would be required to satisfy any lien or encumbrance (other than
with respect to Dickinson Existing Debt or Hollywood Existing Debt, as
applicable, to be discharged at Closing) or to cure such defect does
not exceed $100,000, waive the objection and the Cash Purchase Price
shall be, if Hollywood is the objecting party, increased, or, if
Dickinson is the objecting party, reduced by the amount which would be
required to satisfy any lien or encumbrance or to cure such defect,
which election shall be made by delivering written notice to the other
party on or before two business days after the end of the Inspection
Period (or within two business days after the five day cure period as
to a Revised Commitment, as applicable). Each party hereto may
dispute in good faith the amount of any defect by delivering to the
other party a written notice setting forth such objection in
reasonable detail within 2 days. If such other party objects, the
dispute shall be submitted for resolution by binding arbitration in
accordance with Section 9.6 hereof. For the purposes of this section,
unless either party exercises option (i), the modification of the
standard exceptions, as described above, and all easements,
restrictions or other conditions which are shown on the applicable
Title Commitment (or any Revised Commitment) and/or the Survey (to the
extent only such Survey items are ultimately contained in the Title
Policy) and which are not cured by the other party as described above
are hereinafter collectively referred to as the "Permitted
Exceptions."
Notwithstanding the foregoing, (i) each party shall be
obligated to remove at Closing any mortgage or other lien which
secures payment of a monetary obligation and which may burden its
respective Theaters, except for any landlord's lien imposed by the
landlords under the Dickinson Leases or the Hollywood Leases, as the
case may be, (however, any such landlord lien must be subordinate to
the lease as to such theater or the lienholder must have entered into
a nondisturbance agreement with such party agreeing not to disturb
such party
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or any successor tenant in the event of a foreclosure of its lien) and
liens that arise by, through or under each party or its consultants
and agents, and (ii) each party agrees to remove any exceptions or
encumbrances to title that are created after the Effective Date as the
result of the acts or failure to act by such party or its agents,
employees or representatives, failing which such party shall be in
default under this Agreement and the other party shall have the rights
set forth in Section 8.2 or Section 8.3, as applicable.
(d) Title. At Closing, Dickinson and Hollywood, as the
case may be, at their own cost and expense, shall furnish to the other
party a standard form ALTA Owner's Policy of Title Insurance for the
Dickinson Fee Theater or Hollywood Fee Theaters, respectively,
detailed in Section 3.8(b) above, issued by the Title Company in such
party's favor, in the amounts set forth in Schedule 3.8(b), insuring
such party's title to the Dickinson Fee Theater or Hollywood Fee
Theaters, as applicable, subject only to the Permitted Exceptions
(collectively, the "Title Policies"); provided, however, at Closing,
upon the written request of one party to the other and the Title
Company, each party shall have the right to elect to waive the
requirement that the other party provide a Title Policy for any
Theater, in which case there shall be an offsetting adjustment to the
Cash Purchase Price in the amount that such party would have expended
to secure from the Title Company such Title Policy as required herein,
less any report or cancellation fees payable by such party to the
Title Company as a result of such policy not being issued.
(e) Condition of Title. Dickinson and Hollywood,
respectively, shall convey to the other party good, marketable and
insurable fee simple title to the Dickinson Fee Theater, with respect
to Dickinson, and the Hollywood Fee Theaters, with respect to
Hollywood, and leasehold title to the Dickinson Leasehold Theaters,
with respect to Dickinson, and Hollywood Leasehold Theaters, with
respect to Hollywood, free and clear of all matters except the
Permitted Exceptions. Upon conveyance, transfer and delivery of the
Dickinson Assets and the Hollywood Assets, Hollywood and Dickinson,
respectively, will continue to enjoy peaceful possession of the
Dickinson Assets, with respect to Dickinson, and the Hollywood Assets,
with respect to Hollywood.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DICKINSON
Dickinson hereby represents and warrants to Hollywood as
follows:
SECTION 4.1 Organization and Authority. Dickinson is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Kansas and has all requisite corporate power and authority
to own, lease and operate the Dickinson Theaters and the Dickinson Assets as
currently conducted. Dickinson has furnished to Hollywood true and correct
copies of the charter and bylaws of Dickinson as amended to date.
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SECTION 4.2 Authority; Binding Effect. Dickinson has all
requisite power and authority to enter into this Agreement and each of the
other agreements and instruments to be executed and delivered by Dickinson
pursuant to the terms of this Agreement (each a "Dickinson's Ancillary
Document" and, collectively, the "Dickinson's Ancillary Documents") and to
perform its obligations hereunder and thereunder. The execution and delivery
by Dickinson of this Agreement and each Dickinson's Ancillary Documents, and
the performance by Dickinson of its obligations hereunder and thereunder and
the consummation by Dickinson of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of Dickinson. This Agreement and Dickinson's Ancillary Documents have
been duly executed and delivered by Dickinson and constitute legal, valid and
binding agreements of Dickinson, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting creditors' rights generally or by general principles of equity.
SECTION 4.3 Absence of Conflicts. Except as set forth on
Schedule 4.3 hereof, the execution and delivery by Dickinson of this Agreement
and Dickinson's Ancillary Documents, the performance by Dickinson of its
obligations hereunder and thereunder and the consummation by Dickinson of the
transactions contemplated hereby or thereby will not (a) conflict with, or
result in any violation or breach of, any provision of the charter or bylaws of
Dickinson, (b) as of the Closing, conflict with, result in any violation or
breach of, constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
or result in being declared void, voidable or without further effect, any term
or provision of any material note, bond, mortgage, indenture, lease, franchise,
permit, license, Contract or other instrument or document to which the
Dickinson Assets are or may be bound, (c) require Dickinson to obtain any
consent, approval, permit, notice, action, authorization or waiver (each, a
"Consent") of or file with or give notice to any Governmental Authority or any
other Person not a party to this Agreement, except for the Consents listed on
Schedule 4.3 hereto which have been obtained and remain in full force and
effect, (d) conflict with, or result in any violation of, any material law,
ordinance, statute, rule or regulation of any Governmental Authority known to
Dickinson to be applicable to the business or operations of the Dickinson
Theaters or the Dickinson Assets or of any order, writ, injunction, judgment or
decree of any court, arbitrator or Governmental Authority applicable to
Dickinson or its properties or assets or (e) result in the creation of, or
impose on Dickinson the obligation to create, any Lien upon the Dickinson
Assets.
SECTION 4.4 Title to Assets. Except as set forth on
Schedule 4.4, Dickinson has good and marketable title to the Dickinson Assets
owned by Dickinson, and has valid leasehold interests in the Dickinson Assets
leased by Dickinson, in each case free and clear of all Liens (except for any
landlord's lien imposed by the landlords under the Dickinson Leases, however,
any such landlord lien must be subordinate to the lease as to each theater or
the lienholder must have entered into a nondisturbance agreement with Dickinson
agreeing not to disturb Dickinson or any successor tenant in the event of a
foreclosure of its lien). The leases of properties or assets included in the
Dickinson Assets, including, but not limited to the Dickinson Leases, are
valid, subsisting and effective in accordance with their respective terms, and
Dickinson enjoys peaceful possession of all
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such properties and assets. True and complete copies of all of the Dickinson
Leases, including all amendments, modifications and supplements thereto through
the date hereof have been delivered to Hollywood. The Dickinson Leases
referred to on Schedule 2.1(b) constitute all of the Dickinson Theater leases.
Except as set forth on Schedule 4.4 hereto, there are no leases, surface or
subsurface use agreements, tenancy, arrangements, service contracts, management
contracts, or other agreements, instruments or encumbrances that will be in
force or effect as of the Closing that grant to any Person, any right, title,
interest or benefit in or to all or any part of the Dickinson Assets or any
right relating to the ownership, use, operation, management, maintenance or
repair of all or any part of the Dickinson Assets, and no Person has any rights
to acquire any of the Dickinson Assets. Except as set forth on Schedule 4.4
hereof, there are no third parties in possession of any portion of the
Dickinson Theaters as lessees, tenants at sufferance, trespassers or otherwise.
Upon the sale, conveyance, transfer and delivery of the Dickinson Assets in
accordance with the terms of this Agreement, Hollywood will (i) acquire good
and marketable title to the Dickinson Assets owned by Dickinson, free and clear
of all Liens except, with respect to Dickinson Fee Theater, Permitted
Exceptions, and (ii) continue to enjoy peaceful possession of all Dickinson
Assets held under lease.
SECTION 4.5 Proprietary Rights. Schedule 4.5 hereto sets
forth a correct and complete list of (a) all of Dickinson's Proprietary Rights
in the Dickinson Assets and (b) all licenses, sublicenses and other Contracts
to which Dickinson is a party or by which it is bound relating to the
ownership, use or exploitation of any Proprietary Rights. To the Knowledge of
Dickinson, Dickinson has the right to use and exploit all Proprietary Rights
included in the Dickinson Assets without infringing upon or otherwise violating
the rights of any other Person, and to the Knowledge of Dickinson no consent,
approval or authorization of any other Person will be required for the use or
exploitation by Hollywood after the Closing Date of any Proprietary Rights
included in the Dickinson Assets. There is no claim pending or, to the
Knowledge of Dickinson, threatened against Dickinson that draws into question
or otherwise affects any right of Dickinson to use or exploit any Proprietary
Rights included in the Dickinson Assets, and Dickinson is not aware of any
basis for such a claim.
SECTION 4.6 Financials. The unaudited statements of
operations and cash flows and the TLCF statements for the twelve months ending
March 31, 1996 and March 31, 1997, which are attached hereto as Schedule 4.6,
fairly present in all material respects, the results of operations and cash
flows and the TLCF's of the Dickinson Theaters for such twelve-month periods
and contain no material inaccuracies. Such statements were prepared using the
same principles and procedures as used for Dickinson's audited financials,
which audited financials were prepared in conformity with generally accepted
accounting principles, except as noted therein. The numbers shown as "Theater
Level Cash Flow" on Schedule 4.6 were calculated as follows: (a) all revenue
of Dickinson during such periods derived from the respective Dickinson
Theaters, including, without limitation, ticket revenue, advertising revenue
and revenue from concession sales (providing, however, certain immaterial
rebates and other similar amounts may not have been allocated to the theater
level), less (b) all expenses incurred by Dickinson during such period in
connection with the ownership, leasing and operation of the respective
Dickinson Theaters during such periods. The Theater Level Cash
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Flow on Schedule 4.6 does not include interest, depreciation, amortization or
allocations of general and administrative expenses or income taxes.
SECTION 4.7 Conduct of Business. Except as set forth on
Schedule 4.7 and except as contemplated in this Agreement, since December 31,
1996, there has not been:
(a) any material adverse change in Dickinson's business,
operations, affairs, condition (financial or otherwise), results of
operations, properties, assets or liabilities;
(b) any sale, assignment or disposition of any
substantial properties or assets (other than the Dickinson Excluded
Assets), of any kind or character relating to the operations of the
Dickinson Theaters, except for personal property sold, assigned or
disposed of in the ordinary course of business and consistent with
past practice and custom;
(c) any damage, destruction or loss (whether or not
insured against) affecting the Dickinson Assets;
(d) any revocation or termination, or any notice of any
threatened revocation or termination, of any Consents or permits
relating to the operations of the Dickinson Theaters;
(e) any material change or any anticipated change in the
present relationships between Dickinson and any of their significant
suppliers, insurers, lessors, licensors, licensees and distributors
with respect to the Dickinson Assets; or
(f) any other material transaction other than in the
ordinary course of business and consistent with past practice and
custom.
SECTION 4.8 Contracts and Other Agreements. Schedule 4.8
sets forth a list of all material Contracts, whether written or oral, to which
Dickinson is a party relating to the operation of the Dickinson Theaters which
cannot be terminated by Dickinson upon 30 days notice. Dickinson has delivered
or made available to Hollywood true and complete copies of each written
Contract listed on Schedule 4.8 and, in the case of Contracts not reduced to
writing, has provided to Hollywood a written summary of the material terms
thereof. Each Contract described in Schedule 4.8 is valid, in full force and
effect, and binding upon Dickinson that is a party thereto, in accordance with
its terms. Dickinson is not in default under any of the Contracts described in
Schedule 4.8 and, except as set forth on Schedule 4.8, there exists no event
which, with the giving of notice or lapse of time, or both, would become a
default, in each case with such exceptions thereto as do not, individually or
in the aggregate, have a Material Adverse Effect. Dickinson has not received
any written notice from any other party to any Contract listed on Schedule 4.8
of the termination, or threatened termination, thereof, and, to Dickinson's
Knowledge, there has occurred no event that would allow such other party to
terminate any Contract. None of the Dickinson Assets are bound by any Contract
that was not entered into in the ordinary course of business and consistent
with past practice and custom.
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SECTION 4.9 Theater Locations. Schedule 4.9 sets forth a
true, correct and complete list of the names and locations of all Dickinson
Theaters on the date hereof and on the Closing Date.
SECTION 4.10 Solvency. Dickinson is able to pay its debts
as they become due, has capital sufficient to carry on its business as
presently conducted and proposed to be conducted, owns property which has both
a fair value and a fair saleable value in excess of the amount required to pay
its debts as they become due and is solvent. Dickinson will not be rendered
insolvent by the transactions contemplated by this Agreement, and following the
consummation of such transactions, Dickinson will be able to pay its debts as
they become due, will have capital sufficient to carry on its business as then
conducted and proposed to be conducted, and will own property which has a fair
value and a fair saleable value in excess of the amount required to pay its
debts as they become due.
SECTION 4.11 Assets Necessary to Business; Effect of
Transfer. The Dickinson Assets are sufficient in all material respects to
carry on the business and operations as presently conducted by Dickinson at the
Dickinson Theaters. The Dickinson Assets are fit for the purposes for which
they are presently being used and are in all material respects in good
operating condition and repair, ordinary wear and tear excepted, and to
Dickinson's Knowledge conform in all material respects to all applicable laws
relating to their use and operation (including the provisions of the Americans
with Disabilities Act of 1990, Public Law 101-336, 42 U.S.C. Section 12101 et
seq. (the "ADA"). The Dickinson Theaters were constructed and have been
maintained in accordance and material compliance with the ADA to the extent
applicable. Dickinson has not received any notice to the effect that, or
otherwise been advised that, the Dickinson Theaters are not in compliance with
the ADA, and Dickinson has no reason to anticipate that any existing
circumstances at any of the Dickinson Theaters are likely to result in
violations of the ADA as the Dickinson Theaters currently exist. No
representation or warranty is being made herein regarding the subject matter
hereof which may arise or otherwise occur as a result of any alterations,
changes or additions of any nature made to any of the Theaters by Hollywood.
Dickinson is in possession of all material licenses, permits, consents,
approvals and other authorizations that to Dickinson's knowledge are required
by any Governmental Authority in connection with the ownership or lease of the
Dickinson Assets or the conduct of the business and operations of Dickinson at
the Dickinson Theaters. Upon obtaining the Consents set forth on Schedule 4.3
hereto the consummation of the transactions contemplated by this Agreement will
not deprive Hollywood of the benefits of any material properties included in
the Dickinson Assets or any rights or interests relating thereto, or result in
the imposition of any debts, liabilities or obligations on Hollywood, except
for the debts, obligations and liabilities created by Hollywood in connection
with financing the acquisition of the Dickinson Assets.
SECTION 4.12 Litigation. Except as set forth on Schedule
4.12 hereto, there is no action, suit, inquiry, investigation or other
proceeding pending against, or to Dickinson's Knowledge threatened against or
affecting, Dickinson's properties or assets in any court or before any
arbitrator or any foreign or United States federal, state or local Governmental
Authority (a) in which an adverse decision could, either in any case or in the
aggregate, have a Material Adverse
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Effect or (b) which in any manner draws into question the validity of or
otherwise affects this Agreement, the transactions contemplated hereby or the
ability of Dickinson to perform their obligations hereunder.
SECTION 4.13 Taxes.
(a) Dickinson has filed or will file in a timely manner
with the appropriate Governmental Authority all tax returns required
to be filed prior to or on the date hereof relating to Taxes due and
payable or Taxes accrued and not yet payable on or before the Closing
Date, and each such tax return has been or will be prepared in
compliance in all material respects with all applicable laws and
regulations.
(b) Dickinson has paid or will pay on the applicable due
date all Taxes that are due and payable or Taxes accrued and not yet
payable on or before the Closing Date (including all Taxes shown to be
due on such returns or pursuant to any assessment received by
Dickinson from any taxing authority), except such Taxes, if any, as
are being contested in good faith by appropriate proceedings
diligently conducted.
(c) There are no claims for Taxes pending against
Dickinson nor to the Knowledge of Dickinson, any threatened claims for
Tax deficiencies against Dickinson for which the Dickinson Assets
could be liable, and Dickinson does not know of any basis for such
claims.
(d) There exist no actual or, to the Knowledge of
Dickinson, proposed additional assessments or adjustments of Taxes by
any taxing authority for which the Dickinson Assets could be liable.
(e) There are no pending audits, actions, proceedings,
disputes, claims or, to Dickinson's Knowledge, there are no
investigations with respect to any Taxes payable by or asserted
against Dickinson and there is no basis on which any claim for
material Taxes can be asserted against Dickinson. Dickinson has not
received notice from any Governmental Authority of its intent to
examine or audit any Tax Returns of Dickinson.
(f) All Taxes required to be withheld or collected by
Dickinson (including, but not limited to, Tax required to be withheld
with respect to amounts paid or owing to any officer, employee,
creditor, shareholder, independent contractor or other Person) have
been timely withheld or collected and, to the extent required, have
been timely paid, remitted or deposited to or with the relevant
Governmental Authority.
(g) There are no proposed reassessments of the taxable
value of any of the Dickinson Assets or similar matters pending with
respect to any taxing authority.
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(h) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against Dickinson for which the Dickinson
Assets could be liable.
(i) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) imposed upon the Dickinson Assets.
(j) No taxing authority has raised any issue with respect
to the liability of Dickinson or any Affiliate thereof for any Tax
that would likely result in the issuance by any taxing authority of a
notice of deficiency or similar notice for Taxes against Dickinson.
(k) Except for the United States of America, the State of
Kansas, the city of Topeka, the State of Kansas, the city of
Lawrence, the State of Missouri, the city of Joplin, there are no
other jurisdictions in which income or franchise tax returns and
reports, and returns and reports relating to the payment of Tax based
upon the ownership or use of property therein or the derivation of
income therefrom or measured by premiums or investments in tangible or
intangible property, were, or were required to be, filed by Dickinson
or in which Dickinson was required to be included.
(l) There are no requests for rulings, outstanding
subpoenas or requests for information with respect to Taxes of
Dickinson, proposed reassessments of any assets or any property owned
or leased by Dickinson, or similar matters pending with respect to any
taxing authority.
(m) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against Dickinson or for which Dickinson may
be liable.
SECTION 4.14 Environmental Compliance.
(a) Dickinson is not subject to any existing, pending or
to Dickinson's Knowledge threatened action, suit, investigation,
inquiry or proceeding by any Governmental Authority under, and are not
currently in violation of, or subject to, any remedial obligation
under, any Environmental Law.
(b) All material environmental notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed in
connection with the operation of the Dickinson Theaters have been
obtained or filed.
(c) Hazardous Substances have not been disposed of on, to
or from any of the Dickinson Theaters during the time of Dickinson's
ownership or possession of the Dickinson Assets and the operation of
the Dickinson Theaters or to Dickinson's Knowledge prior
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thereto, except in compliance with Environmental Laws in effect at the
time such activity was undertaken.
(d) No Hazardous Substances have been generated, managed,
treated or transported to or from the Dickinson Theaters, except in
compliance with Environmental Laws at the time such activity was
undertaken.
(e) To the Knowledge of Dickinson, there is not now at,
on or in the Dickinson Theaters any asbestos, PCBs or, to the extent
only it exists at levels which are considered hazardous to human
health, radon gas.
(f) No underground storage tanks currently exist or to
Dickinson's Knowledge have existed on the land occupied by the
Dickinson Theaters.
(g) During the time the Dickinson Theaters have been
occupied by Dickinson, there has not been a Release of Hazardous
Substances into, onto or out of the land occupied by the Dickinson
Theaters.
(h) Except for the Dickinson Leases and as set forth on
Schedule 4.14 hereto, Dickinson is not a party, whether as a direct
signatory or as successor, assignee or third party beneficiary, or
otherwise bound, to any lease or other Contract relating to the
Dickinson Assets under which Dickinson is obligated by or entitled to
the benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
a Release of Hazardous Substances or non-compliance with Environmental
Laws.
(i) Except for the Dickinson's lenders or as provided in
the Dickinson Leases, Dickinson has not released any other Person
from any claim under any Environmental Law or waived any rights
concerning any Releases of Hazardous Substances into, onto or out of
or with respect to the land occupied by the Dickinson Theaters.
SECTION 4.15 Utilities.
(a) The Dickinson Theaters are connected to and are
served by water, solid waste and sewage disposal, drainage, telephone,
gas, electricity and other utility equipment facilities and services
required by law or necessary for the operation or use of the Dickinson
Theaters; such facilities and services are adequate for the present
use and operation of the Dickinson Theaters on a fully occupied basis,
and are installed and connected pursuant to valid permits and are in
material compliance with all governmental regulations; and no fact or
condition exists which would result in the termination or curtailment
in the furnishing of utility services to the Dickinson Theaters.
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(b) Dickinson has not received notice from any supplier
of water, solid waste and sewage disposal, drainage, telephone, gas,
electricity or other utility services to the Dickinson Theaters that
such service is being or will be terminated or curtailed and Dickinson
has no knowledge that such termination or curtailment may occur.
SECTION 4.16 Defects. Except as set forth on Schedule
4.16, there are no material structural defects in the Dickinson Theaters or any
material defects in the Dickinson Theaters' mechanical, electrical and plumbing
systems.
SECTION 4.17 Condemnation. There are no pending or to
Dickinson's Knowledge threatened condemnation or similar proceedings or
assessments affecting the Dickinson Assets or any part thereof, nor to the
Knowledge of Dickinson are any such proceedings or assessments contemplated by
any Governmental Authority.
SECTION 4.18 Books and Records. The books and records of
Dickinson fairly reflect in all material respects the transactions to which the
Dickinson Assets are or were bound, and such books and records are and have
been properly kept and maintained, with the revenues, expenses, assets and
liabilities of Dickinson accurately recorded in all material respects therein
on the accrual basis of accounting. True, complete and correct copies of such
books and records have been made available for review by Hollywood.
SECTION 4.19 Brokers, Finders, etc. Except as described
in Schedule 4.19, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of Dickinson in such manner as to give rise to a
valid claim against any of the parties hereto for any broker's or finder's
commission. Except as described in Schedule 4.19, Dickinson has not retained
any broker or finder in connection with the transactions contemplated hereby.
Any fees, expenses, commissions or other amounts payable to the Persons
identified on Schedule 4.19 shall be payable by Dickinson and shall not be the
responsibility of Hollywood.
SECTION 4.20 Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against, or to Dickinson's
Knowledge threatened against or affecting, Dickinson's properties or assets in
any court or before any arbitrator or any foreign or United States federal,
state or local Governmental Authority in which an adverse decision could,
either in any case or in the aggregate, have a material adverse effect on the
business, operations, affairs, condition (financial or otherwise), results of
operation, properties, assets or liabilities of Dickinson.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HOLLYWOOD
Hollywood represents and warrants to Dickinson as follows:
SECTION 5.1 Organization and Authority. Hollywood is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate the Hollywood Theaters and the Hollywood
Assets as currently conducted. Hollywood has furnished to Dickinson true and
correct copies of the charter and bylaws of Hollywood as amended to date.
SECTION 5.2 Authority; Binding Effect. Hollywood has all
requisite power and authority to enter into this Agreement and each of the
other agreements and instruments to be executed and delivered by Hollywood
pursuant to the terms of this Agreement (each a "Hollywood's Ancillary
Document" and, collectively, the "Hollywood's Ancillary Documents") and to
perform its obligations hereunder and thereunder. The execution and delivery
by Hollywood of this Agreement and each Hollywood's Ancillary Documents, and
the performance by Hollywood of its obligations hereunder and thereunder and
the consummation by Hollywood of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of Hollywood. This Agreement and Hollywood's Ancillary Documents have
been duly executed and delivered by Hollywood and constitute legal, valid and
binding agreements of Hollywood, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting creditors' rights generally or by general principles of equity.
SECTION 5.3 Absence of Conflicts. Except as set forth on
Schedule 5.3 hereof, the execution and delivery by Hollywood of this Agreement
and Hollywood's Ancillary Documents, the performance by Hollywood of its
obligations hereunder and thereunder and the consummation by Hollywood of the
transactions contemplated hereby or thereby will not (a) conflict with, or
result in any violation or breach of, any provision of the charter or bylaws of
Hollywood, (b) as of the Closing, conflict with, result in any violation or
breach of, constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
or result in being declared void, voidable or without further effect, any term
or provision of any material note, bond, mortgage, indenture, lease, franchise,
permit, license, Contract or other instrument or document to which the
Hollywood Assets are or may be bound, (c) require Hollywood to obtain any
Consent of or file with or give notice to any Governmental Authority or any
other Person not a party to this Agreement, except for the Consents listed on
Schedule 5.3 hereto which have been obtained and remain in full force and
effect, (d) conflict with, or result in any violation of, any material law,
ordinance, statute, rule or regulation of any Governmental Authority known to
Hollywood to be applicable to the business or operations of the Hollywood
Theaters or the Hollywood Assets or of any order, writ, injunction, judgment or
decree of any court, arbitrator or
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Governmental Authority applicable to Hollywood or its properties or assets or
(e) result in the creation of, or impose on Hollywood the obligation to create,
any Lien upon the Hollywood Assets.
SECTION 5.4 Title to Assets. Except as set forth on
Schedule 5.4, Hollywood has good and marketable title to the Hollywood Assets
owned by Hollywood, and has valid leasehold interests in the Hollywood Assets
leased by Hollywood, in each case free and clear of all Liens (except for any
landlord's lien imposed by the landlords under the Hollywood Leases, however,
any such landlord lien must be subordinate to the lease as to each theater or
the lienholder must have entered into a nondisturbance agreement with Hollywood
agreeing not to disturb Hollywood or any successor tenant in the event of a
foreclosure of its lien). The leases of properties or assets included in the
Hollywood Assets, including, but not limited to the Hollywood Leases, are
valid, subsisting and effective in accordance with their respective terms, and
Hollywood enjoys peaceful possession of all such properties and assets. True
and complete copies of all of the Hollywood Leases, including all amendments,
modifications and supplements thereto through the date hereof have been
delivered to Dickinson. The Hollywood Leases referred to on Schedule 2.1(b)
constitute all of the Hollywood Theater leases. Except as set forth on
Schedule 5.4 hereto, there are no leases, surface or subsurface use agreements,
tenancy, arrangements, service contracts, management contracts, or other
agreements, instruments or encumbrances that will be in force or effect as of
the Closing that grant to any Person, any right, title, interest or benefit in
or to all or any part of the Hollywood Assets or any right relating to the
ownership, use, operation, management, maintenance or repair of all or any part
of the Hollywood Assets, and no Person has any rights to acquire any of the
Hollywood Assets. Except as set forth on Schedule 5.4 hereof, there are no
third parties in possession of any portion of the Hollywood Theaters as
lessees, tenants at sufferance, trespassers or otherwise. Upon the sale,
conveyance, transfer and delivery of the Hollywood Assets in accordance with
the terms of this Agreement, Dickinson will (i) acquire good and marketable
title to the Hollywood Assets owned by Hollywood, free and clear of all Liens
except, with respect to Hollywood Fee Theaters, Permitted Exceptions, and (ii)
continue to enjoy peaceful possession of all Hollywood Assets held under lease.
SECTION 5.5 Proprietary Rights. Schedule 5.5 hereto sets
forth a correct and complete list of (a) all of Hollywood's Proprietary Rights
in the Hollywood Assets and (b) all licenses, sublicenses and other Contracts
to which Hollywood is a party or by which it is bound relating to the
ownership, use or exploitation of any Proprietary Rights. To the Knowledge of
Hollywood, Hollywood has the right to use and exploit all Proprietary Rights
included in the Hollywood Assets without infringing upon or otherwise violating
the rights of any other Person, and to the Knowledge of Hollywood no consent,
approval or authorization of any other Person will be required for the use or
exploitation by Dickinson after the Closing Date of any Proprietary Rights
included in the Hollywood Assets. There is no claim pending or, to the
Knowledge of Hollywood, threatened against Hollywood that draws into question
or otherwise affects any right of Hollywood to use or exploit any Proprietary
Rights included in the Hollywood Assets, and Hollywood is not aware of any
basis for such a claim.
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SECTION 5.6 Financials. The unaudited statements of
operations and cash flows and the TLCF statements for the twelve months ending
March 31, 1996 and March 31, 1997, which are attached hereto as Schedule 5.6,
fairly present in all material respects, the results of operations and cash
flows and the TLCF's of the Hollywood Theaters for such twelve-month periods
and contain no material inaccuracies. Such statements were prepared using the
same principles and procedures as used for Hollywood's audited financials,
which audited financials were prepared in conformity with generally accepted
accounting principles, except as noted therein. The numbers shown as "Theater
Level Cash Flow" on Schedule 5.6 were calculated as follows: (a) all revenue
of Hollywood during such periods derived from the respective Hollywood
Theaters, including, without limitation, ticket revenue, advertising revenue
and revenue from concession sales (providing, however, certain immaterial
rebates and other similar amounts may not have been allocated to the theater
level), less (b) all expenses incurred by Hollywood during such period in
connection with the ownership, leasing and operation of the respective
Hollywood Theaters during such periods. The Theater Level Cash Flow on
Schedule 5.6 does not include interest, depreciation, amortization or
allocations of general and administrative expenses or income taxes.
SECTION 5.7 Conduct of Business. Except as set forth on
Schedule 5.7 and except as contemplated in this Agreement, since December 31,
1996, there has not been:
(a) any material adverse change in Hollywood's business,
operations, affairs, condition (financial or otherwise), results of
operations, properties, assets or liabilities;
(b) any sale, assignment or disposition of any
substantial properties or assets (other than the Hollywood Excluded
Assets), of any kind or character relating to the operations of the
Hollywood Theaters, except for personal property sold, assigned or
disposed of in the ordinary course of business and consistent with
past practice and custom;
(c) any damage, destruction or loss (whether or not
insured against) affecting the Hollywood Assets;
(d) any revocation or termination, or any notice of any
threatened revocation or termination, of any Consents or permits
relating to the operations of the Hollywood Theaters;
(e) any material change or any anticipated change in the
present relationships between Hollywood and any of their significant
suppliers, insurers, lessors, licensors, licensees and distributors
with respect to the Hollywood Assets; or
(f) any other material transaction other than in the
ordinary course of business and consistent with past practice and
custom.
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SECTION 5.8 Contracts and Other Agreements.
Schedule 5.8 sets forth a list of all material Contracts, whether
written or oral, to which Hollywood is a party relating to the
operation of the Hollywood Theaters which cannot be terminated by
Hollywood upon 30 days notice. Hollywood has delivered or made
available to Dickinson true and complete copies of each written
Contract listed on Schedule 5.8 and, in the case of Contracts not
reduced to writing, has provided to Hollywood a written summary of the
material terms thereof. Each Contract described in Schedule 5.8 is
valid, in full force and effect, and binding upon Hollywood that is a
party thereto, in accordance with its terms. Hollywood is not in
default under any of the Contracts described in Schedule 5.8 and,
except as set forth on Schedule 5.8, there exists no event which, with
the giving of notice or lapse of time, or both, would become a
default, in each case with such exceptions thereto as do not,
individually or in the aggregate, have a Material Adverse Effect.
Hollywood has not received any written notice from any other party to
any Contract listed on Schedule 5.8 of the termination, or threatened
termination, thereof, and, to Hollywood's Knowledge, there has
occurred no event that would allow such other party to terminate any
Contract. None of the Hollywood Assets are bound by any Contract that
was not entered into in the ordinary course of business and consistent
with past practice and custom.
SECTION 5.9 Theater Locations. Schedule 5.9 sets forth a
true, correct and complete list of the names and locations of all Hollywood
Theaters on the date hereof and on the Closing Date.
SECTION 5.10 Solvency. Hollywood is able to pay its debts
as they become due, has capital sufficient to carry on its business as
presently conducted and proposed to be conducted, owns property which has both
a fair value and a fair saleable value in excess of the amount required to pay
its debts as they become due and is solvent. Hollywood will not be rendered
insolvent by the transactions contemplated by this Agreement, and following the
consummation of such transactions, Hollywood will be able to pay its debts as
they become due, will have capital sufficient to carry on its business as then
conducted and proposed to be conducted, and will own property which has a fair
value and a fair saleable value in excess of the amount required to pay its
debts as they become due.
SECTION 5.11 Assets Necessary to Business; Effect of
Transfer. The Hollywood Assets are sufficient in all material respects to
carry on the business and operations as presently conducted by Hollywood at the
Hollywood Theaters. The Hollywood Assets are fit for the purposes for which
they are presently being used and are in all material respects in good
operating condition and repair, ordinary wear and tear excepted, and to
Hollywood's Knowledge conform in all material respects to all applicable laws
relating to their use and operation (including the provisions of the ADA). The
Hollywood Theaters were constructed and have been maintained in accordance and
material compliance with the ADA to the extent applicable. Hollywood has not
received any notice to the effect that, or otherwise been advised that, the
Hollywood Theaters are not in compliance with the ADA, and Hollywood has no
reason to anticipate that any existing circumstances at any of the Hollywood
Theaters are likely to result in violations of the ADA as the Hollywood
Theaters currently exist. No representation or warranty is being made herein
regarding the subject matter hereof which may arise or otherwise occur as a
result of any alterations, changes
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or additions of any nature made to any of the Theaters by Dickinson. Hollywood
is in possession of all material licenses, permits, consents, approvals and
other authorizations that to Hollywood's knowledge are required by any
Governmental Authority in connection with the ownership or lease of the
Hollywood Assets or the conduct of the business and operations of Hollywood at
the Hollywood Theaters. Upon obtaining the Consents set forth on Schedule 5.3
hereto the consummation of the transactions contemplated by this Agreement will
not deprive Dickinson of the benefits of any material properties included in
the Hollywood Assets or any rights or interests relating thereto, or result in
the imposition of any debts, liabilities or obligations on Hollywood, except
for the debts, obligations and liabilities created by Dickinson in connection
with financing the acquisition of the Hollywood Assets.
SECTION 5.12 Litigation. Except as set forth on Schedule
5.12 hereto, there is no action, suit, inquiry, investigation or other
proceeding pending against, or to Hollywood's Knowledge threatened against or
affecting, Hollywood's properties or assets in any court or before any
arbitrator or any foreign or United States federal, state or local Governmental
Authority (a) in which an adverse decision could, either in any case or in the
aggregate, have a Material Adverse Effect or (b) which in any manner draws into
question the validity of or otherwise affects this Agreement, the transactions
contemplated hereby or the ability of Hollywood to perform their obligations
hereunder.
SECTION 5.13 Taxes.
(a) Hollywood has filed or will file in a timely manner
with the appropriate Governmental Authority all tax returns required
to be filed prior to or on the date hereof relating to Taxes due and
payable or Taxes accrued and not yet payable on or before the Closing
Date, and each such tax return has been or will be prepared in
compliance in all material respects with all applicable laws and
regulations.
(b) Hollywood has paid or will pay on the applicable due
date all Taxes that are due and payable or Taxes accrued and not yet
payable on or before the Closing Date (including all Taxes shown to be
due on such returns or pursuant to any assessment received by
Hollywood from any taxing authority), except such Taxes, if any, as
are being contested in good faith by appropriate proceedings
diligently conducted.
(c) There are no claims for Taxes pending against
Hollywood nor to the Knowledge of Hollywood, any threatened claims for
Tax deficiencies against Hollywood for which the Hollywood Assets
could be liable, and Hollywood does not know of any basis for such
claims.
(d) There exist no actual or, to the Knowledge of
Hollywood, proposed additional assessments or adjustments of Taxes by
any taxing authority for which the Hollywood Assets could be liable.
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(e) There are no pending audits, actions, proceedings,
disputes, claims or, to Hollywood's Knowledge, there are no
investigations with respect to any Taxes payable by or asserted
against Hollywood and there is no basis on which any claim for
material Taxes can be asserted against Hollywood. Hollywood has not
received notice from any Governmental Authority of its intent to
examine or audit any Tax Returns of Hollywood.
(f) All Taxes required to be withheld or collected by
Hollywood (including, but not limited to, Tax required to be withheld
with respect to amounts paid or owing to any officer, employee,
creditor, shareholder, independent contractor or other Person) have
been timely withheld or collected and, to the extent required, have
been timely paid, remitted or deposited to or with the relevant
Governmental Authority.
(g) There are no proposed reassessments of the taxable
value of any of the Hollywood Assets or similar matters pending with
respect to any taxing authority.
(h) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against Hollywood for which the Hollywood
Assets could be liable.
(i) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) imposed upon the Hollywood Assets.
(j) No taxing authority has raised any issue with respect
to the liability of Hollywood or any Affiliate thereof for any Tax
that would likely result in the issuance by any taxing authority of a
notice of deficiency or similar notice for Taxes against Hollywood.
(k) Except for the United States of America, the State of
Kansas, the city of Garden City, the State of Kansas, the city of
Hutchinson, the State of Missouri, the city of Jefferson City, there
are no other jurisdictions in which income or franchise tax returns
and reports, and returns and reports relating to the payment of Tax
based upon the ownership or use of property therein or the derivation
of income therefrom or measured by premiums or investments in tangible
or intangible property, were, or were required to be, filed by
Hollywood or in which Hollywood was required to be included.
(l) There are no requests for rulings, outstanding
subpoenas or requests for information with respect to Taxes of
Hollywood, proposed reassessments of any assets or any property owned
or leased by Hollywood, or similar matters pending with respect to any
taxing authority.
(m) There are no outstanding agreements or waivers that
would extend the statutory period in which a taxing authority may
assess or collect a Tax against Hollywood or for which Hollywood may
be liable.
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SECTION 5.14 Environmental Compliance.
(a) Hollywood is not subject to any existing, pending or
to Hollywood's Knowledge threatened action, suit, investigation,
inquiry or proceeding by any Governmental Authority under, and are not
currently in violation of, or subject to, any remedial obligation
under, any Environmental Law.
(b) All material environmental notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed in
connection with the operation of the Hollywood Theaters have been
obtained or filed.
(c) Hazardous Substances have not been disposed of on, to
or from any of the Hollywood Theaters during the time of Hollywood's
ownership or possession of the Hollywood Assets and the operation of
the Hollywood Theaters or to Hollywood's Knowledge prior thereto,
except in compliance with Environmental Laws in effect at the time
such activity was undertaken.
(d) No Hazardous Substances have been generated, managed,
treated or transported to or from the Hollywood Theaters, except in
compliance with Environmental Laws at the time such activity was
undertaken.
(e) To the Knowledge of Hollywood, there is not now at,
on or in the Hollywood Theaters any asbestos, PCBs or, to the extent
only it exists at levels which are considered hazardous to human
health, radon gas.
(f) No underground storage tanks currently exist or to
Hollywood's Knowledge have existed on the land occupied by the
Hollywood Theaters.
(g) During the time the Hollywood Theaters have been
occupied by Hollywood, there has not been a Release of Hazardous
Substances into, onto or out of the land occupied by the Hollywood
Theaters.
(h) Except for the Hollywood Leases and as set forth on
Schedule 4.14 hereto, Hollywood is not a party, whether as a direct
signatory or as successor, assignee or third party beneficiary, or
otherwise bound, to any lease or other Contract relating to the
Hollywood Assets under which Hollywood is obligated by or entitled to
the benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
a Release of Hazardous Substances or non-compliance with Environmental
Laws.
(i) Except for the Hollywood's lenders or as provided in
the Hollywood Leases, Hollywood has not released any other Person
from any claim under any Environmental Law
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or waived any rights concerning any Releases of Hazardous Substances
into, onto or out of or with respect to the land occupied by the
Hollywood Theaters.
SECTION 5.15 Utilities.
(a) The Hollywood Theaters are connected to and are
served by water, solid waste and sewage disposal, drainage, telephone,
gas, electricity and other utility equipment facilities and services
required by law or necessary for the operation or use of the Hollywood
Theaters; such facilities and services are adequate for the present
use and operation of the Hollywood Theaters on a fully occupied basis,
and are installed and connected pursuant to valid permits and are in
material compliance with all governmental regulations; and no fact or
condition exists which would result in the termination or curtailment
in the furnishing of utility services to the Hollywood Theaters.
(b) Hollywood has not received notice from any supplier
of water, solid waste and sewage disposal, drainage, telephone, gas,
electricity or other utility services to the Hollywood Theaters that
such service is being or will be terminated or curtailed and Hollywood
has no knowledge that such termination or curtailment may occur.
SECTION 5.16 Defects. Except as set forth on Schedule
5.16, there are no material structural defects in the Hollywood Theaters or any
material defects in the Hollywood Theaters' mechanical, electrical and plumbing
systems.
SECTION 5.17 Condemnation. There are no pending or to
Hollywood's Knowledge threatened condemnation or similar proceedings or
assessments affecting the Hollywood Assets or any part thereof, nor to the
Knowledge of Hollywood are any such proceedings or assessments contemplated by
any Governmental Authority.
SECTION 5.18 Books and Records. The books and records of
Hollywood fairly reflect in all material respects the transactions to which the
Hollywood Assets are or were bound, and such books and records are and have
been properly kept and maintained, with the revenues, expenses, assets and
liabilities of Hollywood accurately recorded in all material respects therein
on the accrual basis of accounting. True, complete and correct copies of such
books and records have been made available for review by Hollywood.
SECTION 5.19 Brokers, Finders, etc. Except as described
in Schedule 5.19, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of Hollywood in such manner as to give rise to a
valid claim against any of the parties hereto for any broker's or finder's
commission. Except as described in Schedule 5.19, Hollywood has not retained
any broker or finder in connection with the transactions contemplated hereby.
Any fees, expenses, commissions or other amounts payable to the Persons
identified on Schedule 5.19 shall be payable by Hollywood and shall not be the
responsibility of Hollywood.
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SECTION 5.20 Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against, or to Hollywood's
Knowledge threatened against or affecting, Hollywood's properties or assets in
any court or before any arbitrator or any foreign or United States federal,
state or local Governmental Authority in which an adverse decision could,
either in any case or in the aggregate, have a material adverse effect on the
business, operations, affairs, condition (financial or otherwise), results of
operation, properties, assets or liabilities of Hollywood.
ARTICLE VI
DICKINSON COVENANTS AND AGREEMENTS
SECTION 6.1 Inspection. From the date hereof to the
Closing, Dickinson shall give to Hollywood and its officers, attorneys,
accountants, and representatives free, full, and complete access during
reasonable business hours to the Dickinson Assets as Hollywood may deem
necessary or appropriate; provided, that such due diligence review will not
unreasonably interfere with the operations by Dickinson of the Dickinson
Assets. Dickinson will provide Hollywood and its officers, attorneys,
accountants and representatives with any information reasonably requested by
them pertaining to income derived from or expenses associated with the
Dickinson Assets.
SECTION 6.2 Compliance. From the date hereof to the
Closing, Dickinson shall not take or fail to take any action which action or
failure to take such action shall cause the representations and warranties made
by Dickinson herein to be untrue or incorrect as of the Closing.
SECTION 6.3 Satisfaction of All Conditions Precedent.
From the date hereof to the Closing, Dickinson shall use reasonable efforts to
cause all conditions precedent in Article III to be satisfied by the Closing.
SECTION 6.4 No Solicitation. From the date hereof to
September 25, 1997, Dickinson shall not offer any of Dickinson Assets for sale,
or solicit offers to buy the Dickinson Assets or hold discussions with any
party (other than Hollywood) looking toward such an offer or solicitation or
toward a sale of equity or a merger or consolidation of Dickinson with or into
another entity or any similar transaction. Dickinson shall not enter into any
agreement with any party other than Hollywood with respect to the sale or other
disposition of either the equity interests of Dickinson or the Dickinson Assets
or with respect to any merger, consolidation, or similar transaction involving
Dickinson.
SECTION 6.5 Material Developments. From the date hereof
to the Closing, Dickinson shall notify Hollywood of any material problems or
developments with respect to the business or operations of the Dickinson
Theaters of which Dickinson has Knowledge.
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SECTION 6.6 Notice of Breach. From the date hereof to
the Closing, Dickinson shall, immediately upon becoming aware thereof, give
detailed written notice to Hollywood of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach,
or would have caused or constituted a breach had such event occurred or been
known to Dickinson prior to the date of this Agreement, of any of their
covenants, agreements, representations, or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
SECTION 6.7 Notice of Litigation. From the date hereof
to the Closing, immediately upon becoming aware thereof, Dickinson shall notify
Hollywood of (a) any suit, action, or proceeding to which Dickinson becomes a
party or which is threatened against Dickinson in writing that involves the
Dickinson Assets, (b) any order or decree or any complaint praying for an order
or decree restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereby, or (c) any notice from any tribunal of its
intention to institute an investigation into, or to institute a suit or
proceeding to restrain or enjoin the consummation of, this Agreement or the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
SECTION 6.8 Continuation of Insurance Coverage. From the
date hereof to the Closing, Dickinson shall keep in full force and effect
insurance coverage for the Dickinson Theaters and the Dickinson Assets in the
same amount and scope to the coverage now maintained covering the Dickinson
Theaters and the Dickinson Assets.
SECTION 6.9 Interim Operations of the Company.
(a) From the date hereof to the Closing, Dickinson shall
conduct their business only in the ordinary course consistent with
past practice, and shall not, unless Hollywood gives its prior written
approval (i) sell, pledge, dispose of, or encumber, or agree to sell,
pledge, dispose of, or encumber, any of the Dickinson Assets (except
in the ordinary course of business), (ii) modify, extend, or renew any
Dickinson Lease, or (iii) make any material acquisition or capital
expenditure or commit to make any such acquisition or expenditure.
(b) From the date hereof to the Closing, Dickinson will
use reasonable efforts to maintain the Dickinson Theaters and the
Dickinson Assets in their present operating condition and repair,
ordinary wear and tear excepted.
(c) If required by law, Dickinson shall offer COBRA
benefits to those employees of Dickinson eligible to receive such
benefits in connection with the sale by Dickinson of the Dickinson
Assets. Upon termination of Dickinson employee benefits pursuant to
Section 6.14 hereof, Dickinson shall offer COBRA benefits to those
employees of Dickinson eligible to receive such benefits if required
by law.
SECTION 6.10 Transfer Taxes. Dickinson shall be
responsible for and shall pay any and all taxes and recording fees, if any,
payable as a result of the sale, conveyance, transfer and delivery of the
Dickinson Assets upon the terms and conditions hereof.
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SECTION 6.11 Preservation of Books and Records. For a
period of two years from the date hereof, Hollywood and Dickinson will preserve
and maintain the corporate, accounting, auditing and tax books and records
relating to the Dickinson Assets that are held by them on the date hereof and
will make such books and records available to each other upon reasonable notice
and at reasonable times, it being understood that Hollywood and Dickinson shall
be entitled to make copies of any such books and records as they shall deem
reasonably necessary for purposes of making the same available to appropriate
Governmental Authorities or for other proper purposes.
SECTION 6.12 Covenant Not to Compete. Except as otherwise
consented to or approved in writing by Hollywood, Dickinson, and Dickinson's
Affiliates will not at any time for a period of three years following the
Closing:
(a) participate in, directly or indirectly, acting alone
or as a member of a partnership or as a holder, beneficially or of
record, of in excess of 5% of any security of any class, or as a
consultant to or representative of, any corporation, other business
entity or Person that is engaged in the business of Hollywood as it is
being conducted immediately following the Closing in competition with
Hollywood at any location within a 25 mile radius of any Dickinson
Theater; provided, however, the provisions of this Section
6.12(a)shall not apply to the Webb City Drive-In movie theatre
currently operated by Dickinson so long as such movie theater is
operated as a "sub-run" theater; or
(b) request any present or future supplier of,
distributor to or provider of services to Hollywood to curtail or
cancel its business with Hollywood in respect of the operations at any
Dickinson Theater and the use and operation of the Dickinson Assets;
or
(c) unless otherwise required by law, disclose to any
Person any details of the organization or affairs of the business of
Hollywood or any other nonpublic information concerning the Dickinson
Assets or the conduct of the operations at the Dickinson Theaters; or
(d) hire, attempt to hire or assist any other Person in
hiring or attempting to hire any employee of Hollywood or any Person
who was an employee of Hollywood within the prior six-month period and
who is or was employed as a Hollywood District Manager, or a position
senior thereto.
Dickinson and Dickinson's Affiliates acknowledge that, in the event the scope
of the covenants set forth in this Section 6.12, is deemed to be too broad in
any court proceeding, the court may reduce such scope to that which it deems
reasonable under the circumstances. The parties hereto agree and acknowledge
that Hollywood does not have any adequate remedy at law for the breach or
threatened breach by Dickinson or Dickinson's Affiliates of the agreements set
forth in this Section 6.12 and, accordingly, Dickinson and each Dickinson's
Affiliate further agree that the provisions of Section 9.6 hereof do not apply
to this Section 6.12 and that Hollywood may, in lieu of or in addition to the
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other remedies that may be available to it hereunder (including its rights
under Section 8.2) or under applicable law, file a suit in equity to enjoin
Dickinson or Dickinson's Affiliates from such breach or threatened breach and
consent to the issuance of injunctive relief hereunder.
SECTION 6.13 Use of Corporate Names. Dickinson
acknowledges that, from and after the Closing, it will have no right, title or
interest in or to the name "Hollywood" or any variations thereof. Neither
Dickinson nor any of their Affiliates shall use any such names in any business
or venture in which such Persons are engaged at any time following the Closing.
The covenant set forth in this Section 6.13. shall survive the Closing and
shall continue in full force and effect forever and without any limit upon
duration.
ARTICLE VII
HOLLYWOOD COVENANTS AND AGREEMENTS
SECTION 7.1 Inspection. From the date hereof to the
Closing, Hollywood shall give to Dickinson and its officers, attorneys,
accountants, and representatives free, full, and complete access during
reasonable business hours to the Hollywood Assets as Dickinson may deem
necessary or appropriate; provided, that such due diligence review will not
unreasonably interfere with the operations by Hollywood of the Hollywood
Assets. Hollywood will provide Dickinson and its officers, attorneys,
accountants and representatives with any information reasonably requested by
them pertaining to income derived from or expenses associated with the
Hollywood Assets.
SECTION 7.2 Compliance. From the date hereof to the
Closing, Hollywood shall not take or fail to take any action which action or
failure to take such action shall cause the representations and warranties made
by Hollywood herein to be untrue or incorrect as of the Closing.
SECTION 7.3 Satisfaction of All Conditions Precedent.
From the date hereof to the Closing, Hollywood shall use reasonable efforts to
cause all conditions precedent in Article III to be satisfied by the Closing.
SECTION 7.4 No Solicitation. From the date hereof to
September 25, 1997, Hollywood shall not offer any of Hollywood Assets for sale,
or solicit offers to buy the Hollywood Assets or hold discussions with any
party (other than Dickinson) looking toward such an offer or solicitation or
toward a sale of equity or a merger or consolidation of Hollywood with or into
another entity or any similar transaction. Hollywood shall not enter into any
agreement with any party other than Dickinson with respect to the sale or other
disposition of either the equity interests of Hollywood or the Hollywood Assets
or with respect to any merger, consolidation, or similar transaction involving
Hollywood.
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SECTION 7.5 Material Developments. From the date hereof
to the Closing, Hollywood shall notify Dickinson of any material problems or
developments with respect to the business or operations of the Hollywood
Theaters of which Hollywood has Knowledge.
SECTION 7.6 Notice of Breach. From the date hereof to
the Closing, Hollywood shall, immediately upon becoming aware thereof, give
detailed written notice to Hollywood of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach,
or would have caused or constituted a breach had such event occurred or been
known to Hollywood prior to the date of this Agreement, of any of their
covenants, agreements, representations, or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
SECTION 7.7 Notice of Litigation. From the date hereof
to the Closing, immediately upon becoming aware thereof, Hollywood shall notify
Dickinson of (a) any suit, action, or proceeding to which Hollywood becomes a
party or which is threatened against Hollywood in writing that involves the
Hollywood Assets, (b) any order or decree or any complaint praying for an order
or decree restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereby, or (c) any notice from any tribunal of its
intention to institute an investigation into, or to institute a suit or
proceeding to restrain or enjoin the consummation of, this Agreement or the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
SECTION 7.8 Continuation of Insurance Coverage. From the
date hereof to the Closing, Hollywood shall keep in full force and effect
insurance coverage for the Hollywood Theaters and the Hollywood Assets in the
same amount and scope to the coverage now maintained covering the Hollywood
Theaters and the Hollywood Assets.
SECTION 7.9 Interim Operations of the Company.
(a) From the date hereof to the Closing, Hollywood shall
conduct their business only in the ordinary course consistent with
past practice, and shall not, unless Dickinson gives its prior written
approval (i) sell, pledge, dispose of, or encumber, or agree to sell,
pledge, dispose of, or encumber, any of the Hollywood Assets (except
in the ordinary course of business), (ii) modify, extend, or renew any
Hollywood Lease, or (iii) make any material acquisition or capital
expenditure or commit to make any such acquisition or expenditure.
(b) From the date hereof to the Closing, Hollywood will
use reasonable efforts to maintain the Hollywood Theaters and the
Hollywood Assets in their present operating condition and repair,
ordinary wear and tear excepted.
(c) If required by law, Hollywood shall offer COBRA
benefits to those employees of Hollywood eligible to receive such
benefits in connection with the sale by
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Hollywood of the Hollywood Assets. Upon termination of Hollywood
employee benefits pursuant to Section 7.14 hereof, Hollywood shall
offer COBRA benefits to those employees of Hollywood eligible to
receive such benefits if required by law.
SECTION 7.10 Transfer Taxes. Hollywood shall be
responsible for and shall pay any and all taxes and recording fees, if any,
payable as a result of the sale, conveyance, transfer and delivery of the
Hollywood Assets upon the terms and conditions hereof, provided that Dickinson
shall be responsible for all recording and other fees relating to its financing
of the Cash Purchase Price, including any applicable mortgage registration
taxes.
SECTION 7.11 Preservation of Books and Records. For a
period of two years from the date hereof, Hollywood and Dickinson will preserve
and maintain the corporate, accounting, auditing and tax books and records
relating to the Hollywood Assets that are held by them on the date hereof and
will make such books and records available to each other upon reasonable notice
and at reasonable times, it being understood that Hollywood and Dickinson shall
be entitled to make copies of any such books and records as they shall deem
reasonably necessary for purposes of making the same available to appropriate
Governmental Authorities or for other proper purposes.
SECTION 7.12 Covenant Not to Compete. Except as otherwise
consented to or approved in writing by Dickinson, Hollywood, and Hollywood's
Affiliates will not at any time for a period of three years following the
Closing:
(a) participate in, directly or indirectly, acting alone
or as a member of a partnership or as a holder, beneficially or of
record, of in excess of 5% of any security of any class, or as a
consultant to or representative of, any corporation, other business
entity or Person that is engaged in the business of Dickinson as it is
being conducted immediately following the Closing in competition with
Dickinson at any location within a 25 mile radius of any Hollywood
Theater; provided, however, the provisions of this Section
7.12(a)shall not apply to the Ramada 4 movie theater in Jefferson
City, Missouri currently operated by Hollywood so long as such movie
theater is operated as a "sub-run" theater; or
(b) request any present or future supplier of,
distributor to or provider of services to Dickinson to curtail or
cancel its business with Dickinson in respect of the operations at any
Hollywood Theater and the use and operation of the Hollywood Assets;
or
(c) unless otherwise required by law, disclose to any
Person any details of the organization or affairs of the business of
Dickinson or any other nonpublic information concerning the Hollywood
Assets or the conduct of the operations at the Hollywood Theaters; or
(d) hire, attempt to hire or assist any other Person in
hiring or attempting to hire any employee of Dickinson or any Person
who was an employee of Dickinson within the
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prior six-month period and who is or was employed as a Dickinson
District Manager, or a position senior thereto.
Hollywood and Hollywood's Affiliates acknowledge that, in the event the scope
of the covenants set forth in this Section 7.12, is deemed to be too broad in
any court proceeding, the court may reduce such scope to that which it deems
reasonable under the circumstances. The parties hereto agree and acknowledge
that Dickinson does not have any adequate remedy at law for the breach or
threatened breach by Hollywood or Hollywood's Affiliates of the agreements set
forth in this Section 7.12 and, accordingly, Hollywood and each Hollywood's
Affiliate further agree that the provisions of Section 9.6 hereof do not apply
to this Section 7.12 and that Dickinson may, in lieu of or in addition to the
other remedies that may be available to it hereunder (including its rights
under Section 8.3) or under applicable law, file a suit in equity to enjoin
Hollywood or Hollywood's Affiliates from such breach or threatened breach and
consent to the issuance of injunctive relief hereunder.
SECTION 7.13 Use of Corporate Names. Hollywood
acknowledges that, from and after the Closing, it will have no right, title or
interest in or to the name "Dickinson" or any variations thereof. Neither
Hollywood nor any of its Affiliates shall use any such names in any business or
venture in which such Persons are engaged at any time following the Closing.
The covenant set forth in this Section 7.13 shall survive the Closing and shall
continue in full force and effect forever and without any limit upon duration.
SECTION 7.14 Ramada 4 Theater. Hollywood shall operate
the Ramada 4 Theater in Jefferson City, Missouri as a "sub run" movie theater
until the earlier of (i) the termination of the lease agreement between
Hollywood and the landlord of the Ramada 4 Theater, at which point Hollywood
shall be obligated to remove all theater-related equipment from such theater or
(ii) Hollywood's assignment of all of its right, title and interest in and to
the lease agreement between Hollywood and the landlord of the Ramada 4 Theater
to Dickinson, which assignment shall be in consideration of Dickinson's
performance under this Agreement, and shall be of no additional cost to
Dickinson at the time of such assignment.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS; INDEMNIFICATION
SECTION 8.1 Survival of Representations and Agreements.
All representations and warranties contained in this Agreement, any Dickinson's
Ancillary Documents, any Hollywood's Ancillary Documents or in any certificate,
document, affidavit or instrument delivered pursuant to this Agreement shall
survive the Closing and the consummation of the transactions contemplated
hereby and thereby and shall continue in full force and effect:
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(a) forever and without any limit upon duration in the
case of the representations and warranties of Dickinson set forth in
Sections 4.4, 4.13 and 4.14;
(b) forever and without any limit upon duration in the
case of the representations and warranties of Hollywood set forth in
Sections 5.4, 5.13 and 5.14;
(c) for a period of one year in the case of all other
representations made with respect to Dickinson and Hollywood, their
assets, business and operations;
(d) all other representations and warranties shall not
survive the Closing; and
(e) for the comparable periods of time set forth above in
this Section 8.1 in the case of each representation and warranty (but
no covenant) set forth in any Dickinson's Ancillary Document,
Hollywood's Ancillary Document or any certificate, document, affidavit
or instrument delivered pursuant to this Agreement, based upon the
nature of such representation and warranty when compared to the most
analogous representation and warranty set forth above.
Each covenant and agreement set forth in this Agreement, in any Hollywood's
Ancillary Document or in any Dickinson's Ancillary Document to be performed
after the Closing will survive the Closing in accordance with its terms. All
representations, warranties, covenants and agreements made or contained in this
Agreement, in any Hollywood's Ancillary Documents, in any Dickinson's Ancillary
Document or any certificate, document, affidavit or instrument delivered in
accordance with this Agreement shall be deemed to be material and to have been
relied upon by the parties hereto.
SECTION 8.2 Indemnification of Hollywood. From and after
the Closing, Dickinson shall indemnify and hold Hollywood and its directors,
officers, employees, agents and Affiliates harmless against any and all
damages, losses, deficiencies, liabilities, obligations, commitments, costs or
expenses (including legal and other expenses reasonably incurred in
investigating and defending against the same) (collectively, "Liabilities" and
each a "Liability") incurred by Hollywood resulting from (a) the breach of any
representation or warranty of Dickinson contained in Article IV of this
Agreement or in any Dickinson's Ancillary Document that is known to Dickinson
or Hollywood on or prior to the Closing (it being acknowledged that Hollywood
shall have a continuing right of inspection with respect to the Dickinson
Theaters and Dickinson Assets through the Closing Date), (b) any breach of any
agreement or covenant of Dickinson contained in this Agreement or in
Dickinson's Ancillary Documents, (c) the conduct of the business and operations
of the Dickinson Theaters and the Dickinson Assets on and prior to the Closing
(exclusive of amounts reimbursable to Dickinson by Hollywood during the period
following the Closing as specified in Section 2.4 hereof), (d) Third Party
Claims arising prior to Closing, (e) the termination of contracts pursuant to
Section 3.2(e) hereof, (f) the Dickinson Retained Liabilities, other than with
respect to Liabilities relating to or arising from Hollywood's breach of a
representation, warranty, covenant or agreement made by Hollywood, or (g) any
liabilities arising from the operation of any Employee Benefit Plan or the
termination of any Employee Benefit Plan prior to or after Closing,
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provided, however, that notwithstanding anything to the contrary herein no
amount shall be payable to Hollywood in indemnification under this Section 8.2
unless the aggregate amount of Liabilities exceeds $50,000. Except in the case
of the representations and warranties of Dickinson set forth in Section 4.14,
in the event that such aggregate amount of Liabilities exceeds $50,000,
Dickinson shall be liable only for the amount of the excess of $50,000.
SECTION 8.3 Indemnification of Dickinson. From and after
the Closing, Hollywood shall indemnify and hold Dickinson and its directors,
officers, employees, agents and Affiliates harmless against any and all
Liabilities incurred by Dickinson resulting from (a) the breach of any
representation or warranty of Hollywood contained in Article V of this
Agreement or in any Hollywood's Ancillary Document that is known to Dickinson
or Hollywood on or prior to the Closing (it being acknowledged that Dickinson
shall have a continuing right of inspection with respect to the Hollywood
Theaters and Hollywood Assets through the Closing Date), (b) any breach of any
agreement or covenant of Hollywood contained in this Agreement or in
Hollywood's Ancillary Documents, (c) the conduct of the business and operations
of the Hollywood Theaters and the Hollywood Assets on and prior to the Closing
(exclusive of amounts reimbursable to Hollywood by Dickinson during the period
following the Closing as specified in Section 2.4 hereof), (d) Third Party
Claims arising prior to Closing, (e) the termination of contracts pursuant to
Section 3.3(e) hereof, (f) the Hollywood Retained Liabilities, other than with
respect to Liabilities relating to or arising from Dickinson's breach of a
representation, warranty, covenant or agreement made by Dickinson, or (g) any
liabilities arising from the operation of any Employee Benefit Plan or the
termination of any Employee Benefit Plan prior to or after Closing, provided,
however, that notwithstanding anything to the contrary herein no amount shall
be payable to Dickinson in indemnification under this Section 8.3 unless the
aggregate amount of Liabilities exceeds $50,000. Except in the case of the
representations and warranties of Hollywood set forth in Section 5.14, in the
event that such aggregate amount of Liabilities exceeds $50,000, Hollywood
shall be liable only for the amount of the excess of $50,000.
SECTION 8.4 Indemnification for Third Party Claims. The
following procedures shall be applicable with respect to indemnification for
third party claims arising in connection with any provision of this Agreement.
(a) Promptly after receipt by the party seeking
indemnification hereunder (an "Indemnitee") of written notice of the
assertion or the commencement of any claim, liability or obligation by
a third party, whether by legal process or otherwise (a "Claim"), with
respect to any matter within the scope of Sections 8.2 or 8.3 hereof,
the Indemnitee shall give written notice thereof (the "Notice") to the
Person from whom indemnification is sought pursuant hereto (the
"Indemnitor") and shall thereafter keep the Indemnitor reasonably
informed with respect thereto, provided that the failure of the
Indemnitee to give the Indemnitor prompt notice as provided herein
shall not relieve the Indemnitor of its obligations hereunder unless
such failure results in (i) a default judgment, (ii) the expiration of
the time to answer a complaint or (iii) material prejudice to
Indemnitor's defense of such Claim. In case any such Claim is brought
against any Indemnitee, the Indemnitor shall be entitled to assume the
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defense thereof, by written notice of its intention to the Indemnitee
within 30 days after receipt of the Notice, with counsel reasonably
satisfactory to the Indemnitee at the Indemnitor's own expense. If
the Indemnitor shall assume the defense of such Claim, it shall not
settle such Claim without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld. Notwithstanding the
assumption by the Indemnitor of the defense of any Claim as provided
in this Section 8.4(a), the Indemnitee shall be permitted to join in
the defense of such Claim and to employ counsel at its own expense.
(b) If the Indemnitor shall fail to notify the Indemnitee
of its desire to assume the defense of any such Claim within the
prescribed period of time, or shall notify the Indemnitee that it will
not assume the defense of any such Claim, then the Indemnitee shall
assume the defense of any such Claim, in which event it may do so in
such manner as it may deem appropriate, provided that it shall not
settle any Claim which would give rise to the Indemnitor's liability
under Sections 8.2 or 8.3 hereof, as the case may be, without the
Indemnitor's prior written consent, such consent not to be
unreasonably withheld. The Indemnitor shall be permitted to join in
the defense of such Claim and to employ counsel at its own expense.
SECTION 8.5 Exclusive Remedy. The remedies expressly
provided for in Sections 2.4, 6.12, 7.12, 8, 9.6 and 9.8 shall be the parties'
exclusive remedies with respect to the matters covered by this Agreement and no
party shall be liable to the other under this Agreement with respect to any
matter not initiated within the time limits specified in such sections, if any.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Expenses. Except as expressly provided
herein, each of the parties hereto shall bear all costs, expenses and fees
incurred or assumed by it in the preparation and execution of this Agreement
and in complying with the covenants and agreements contained herein.
SECTION 9.2 Notices. All notices and other
communications hereunder shall be given by delivery in person, by registered or
certified mail (return receipt requested with postage prepaid thereon), by a
nationally recognized overnight courier or by facsimile transmission to the
respective parties at the following addresses (or at such other address as
either party shall have furnished to the other in accordance with the terms of
this Section 9.2):
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if to Dickinson:
Dickinson, Inc.
5913 Woodson Road
Mission, Kansas
Attention: Frank Torchia
Facsimile: (913) 432-9507
with a copy to:
Steven C. Krueger
Morrison & Hecker L.L.P.
2610 Grand Avenue
Kansas City, Missouri 64108
Facsimile: (816) 474-4208
if to Hollywood:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Attention: Thomas W. Stephenson, Jr.
Facsimile: (214) 520-2323
with a copy to:
Carlos A. Fierro
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Facsimile: (214) 953-6503
All notices and other communications hereunder that are addressed as provided
in or pursuant to this Section 9.2 shall be deemed duly and validly given (a)
if delivered in person, upon delivery, (b) if delivered by registered or
certified mail, 72 hours after being placed in a depository of the United
States mails or (c) if delivered by facsimile transmission, upon transmission
thereof and receipt of the appropriate answerback or (d) if by nationally
recognized overnight courier as of 3:00 p.m. on the day after being delivered
to such courier (if delivered to such courier on a timely basis for next day
delivery).
SECTION 9.3 Entire Agreement. This Agreement, including
the Exhibits and Schedules hereto, constitutes the entire agreement among the
parties with respect to the transactions
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contemplated hereby and cancels, merges and supersedes all prior oral or
written agreements and understandings with respect thereto and the parties
hereto have no agreements, representations, or warranties relating to the
subject matter of this Agreement which are not set forth herein or in the
Dickinson's Ancillary Documents or Hollywood's Ancillary Documents. All
Exhibits and Schedules hereto are expressly made a part of this Agreement and
are incorporated herein by reference.
SECTION 9.4 Parties in Interest; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns (it being understood and
agreed that, except as expressly provided herein, nothing contained in this
Agreement is intended to confer upon any other Person any rights, benefits or
remedies of any kind or character whatsoever under or by reason of this
Agreement). Neither party may assign this Agreement without the prior written
consent of each of the other party hereto.
SECTION 9.5 Amendment; Waivers. This Agreement may be
amended only by a written instrument duly executed and delivered on behalf of
each of the parties hereto, and compliance with any term or provision hereof
may be waived only by a written instrument executed by each party entitled to
the benefits thereof. No failure to exercise any right, power or privilege
granted hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege granted hereunder.
SECTION 9.6 Arbitration.
(a) The parties desire to resolve certain disputes,
controversies and claims arising out of this Agreement without
litigation. Accordingly, except in the case of (i) a dispute,
controversy or claim relating to the Covenant Not to Compete in
Section 6.12 or Section 7.12 hereof or (ii) a suit, action or
proceeding to compel either party to comply with the dispute
resolution procedures set forth in this Section 9.6, the parties agree
to use the following dispute resolution procedures as their sole
remedy with respect to any dispute, controversy or claim arising out
of or relating to this Agreement or any documents ancillary hereto or
their breach.
(b) Any party may submit a dispute to arbitration as
contemplated by the provisions of this Section 9.6. The arbitration
shall be heard and determined by a tribunal of three arbitrators
selected in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "Arbitration Panel"). All
decisions and awards by the Arbitration Panel shall be made by
majority vote.
(c) Unless otherwise expressly agreed in writing by the
parties to the arbitration proceedings, the following provisions and
procedures shall govern the conduct of any arbitration proceedings
pursuant to this Section 9.6:
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(i) the arbitration proceedings shall be held in
Dallas, Texas, in the case of any proceeding commenced by
Hollywood, and in Johnson County, Missouri, in the case of any
proceeding commenced by Dickinson, at a site chosen by mutual
agreement of the parties, or if the parties cannot reach
agreement on a location within 30 days of the appointment of
the last arbitrator, then at a site chosen by the Arbitration
Panel;
(ii) the Arbitration Panel shall be and remain at
all times wholly independent and impartial;
(iii) the arbitration proceedings shall be
conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as amended from time
to time;
(iv) any procedural issues not determined under
the arbitral rules selected pursuant to subparagraph (c)(iii)
above shall be determined by the law of the place of
arbitration, other than those laws which would refer the
matter to another jurisdiction;
(v) the costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the Arbitration Panel;
(vi) the decision of the Arbitration Panel shall
be reduced to writing and shall be final, binding and
conclusive; and any costs or fees incident to enforcing any
award made by the Arbitration Panel shall, to the maximum
extent permitted by Law, be charged against the party
resisting such enforcement; and
(vii) judgment upon any award made by the
Arbitration Panel may be enforced in any court having
jurisdiction over the person or the assets of the party
against whom the award is made.
SECTION 9.7 Severability. In the event that any term or
provision contained in this Agreement is held to be invalid, illegal or
unenforceable for any reason, the invalidity, illegality or unenforceability
thereof shall not affect any other term or provision hereof and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained therein.
SECTION 9.8 Specific Performance. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with the terms
hereof. Accordingly, the parties agree that each of them shall be entitled to
injunctive relief to prevent breaches of the terms of this Agreement and to
obtain specific performance of the terms hereof, in addition to any other
remedy now or hereafter available at law or in equity, or otherwise.
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SECTION 9.9 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Missouri, without regard to principles of conflicts of law, except to the
extent that mandatory principles of conflicts of law require the application of
laws of another jurisdiction wherein any of the Dickinson Assets or Hollywood
Assets are located to determine the validity or effect of the sale, conveyance,
transfer or delivery thereof in accordance with the provisions of this
Agreement.
SECTION 9.10 Headings. The Article and Section headings
contained in this Agreement are for convenience of reference only, do not
constitute a part of this Agreement and shall not limit, extend or otherwise
affect the meaning or interpretation of the provisions hereof.
SECTION 9.11 Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.12 Press Releases. None of the parties hereto
shall issue press releases or other public communications of any sort relating
to this Agreement prior to closing; provided, however, that the parties shall
be entitled to make such disclosures as may be required pursuant to applicable
law or the lawful requirement of any Governmental Authority or by order of a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
DICKINSON, INC.
By: /s/ Glen Wood Dickinson, III
------------------------------------
Glen Wood Dickinson, III
President
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson. Jr.
------------------------------------
Thomas W. Stephenson, Jr.
President
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into
by and between Hollywood Theaters, Inc., a Delaware corporation (the
"Company"), and Thomas W. Stephenson, Jr., a resident of Dallas, Texas (the
"Executive"), effective as of October 1, 1996.
1. Introduction. The Executive is currently the
President of the Company, an owner and operator of motion picture theaters. In
contemplation of the expansion of the business of the Company through the
acquisition and construction of additional theaters, and in connection with the
equity investment of the Beacon Fund III-Focus Value Fund, L.P. in the Company
and the related change in control of the Board of Directors of the Company (the
"Board"), the Company desires to continue to employ Executive and Executive
desires to continue to remain in the employ of the Company. To this end, the
Executive and the Company believe that an agreement is necessary and
appropriate to outline the new employment relationship that will exist between
the Company and the Executive. Therefore, the Company and the Executive intend
by this Agreement to specify the terms and conditions of the Executive's
employment relationship with the Company.
2. Employment. The Company hereby employs the Executive
and the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board to elect and remove
officers, the Executive shall serve the Company as its Chairman of the Board,
President and Chief Executive Officer and shall perform, faithfully and
diligently, the services and functions relating to such offices or otherwise
reasonably incident to such offices as may be designated from time to time by
the Board.
(b) The Executive shall, during the term of this
Agreement (or any extension thereof), devote such of his time, attention,
energies and business efforts to his duties as an executive of the Company as
are reasonably necessary to carry out his duties specified in Section 3(a).
The Executive shall not, during the term of this Agreement (or any extension
thereof), engage in any other business activity (regardless of whether such
business activity is pursued for gain, profit or other pecuniary advantage) if
such business activity would impair the Executive's ability to carry out his
duties hereunder. This Section 3(b), however, shall not be construed to
prevent the Executive from (i) investing his personal assets as a passive
investor in such form or manner as will not contravene the best interests of
the Company, (ii) participating in various charitable efforts or (iii) serving
as a director or member of a committee of any organization when such position
has previously been approved in writing by the Board.
<PAGE> 2
4. Compensation and Other Employee Benefits. As
compensation for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not
less than $275,000, payable in accordance with the then current payroll
policies of the Company. Such annual salary is herein referred to as the "Base
Salary." The Base Salary shall be reviewed annually by the Board and shall be
subject to increase (but not decrease) in the sole discretion of the Board
based upon a review of the performance and accomplishments of the Executive.
(b) In addition to annual Base Salary, the Executive
shall be eligible to receive annual bonus awards (the "Annual Bonus") in cash
upon the achievement by the Executive of performance goals or targets
established by the Board. The Board shall establish these performance goals in
advance of each fiscal year. In the event that the performance goals or
targets established by the Board are satisfied by the Executive at least at the
85% level, the Executive shall be entitled to a bonus for such year equal to at
least 50% of his Base Salary for such year, with the actual percentage subject
to determination of the Board. In addition, the Executive shall have the
opportunity to receive additional bonuses above the level of the Annual Bonus
up to a maximum of 100% of Base Salary for such year based upon the Board's
review of annual achievements of the Company's five-year financial plan and the
determination by the Board, in its sole discretion, that such additional bonus
awards are warranted. Bonuses in excess of that amount in respect of
exceptional performance by the Executive as determined by the Board may be made
in the sole discretion of the Board.
(c) The Executive will be granted non-transferrable
options to purchase shares of common stock, par value $.01 per share (the
"Common Stock"), of Hollywood Theater Holdings, Inc., the parent company of the
Company ("Holdings"), in an initial amount equal to 6% of the fully diluted
shares of Common Stock of Holdings as of the closing by the Company and
Holdings of certain pending acquisitions, equity financings and debt
financings. The exercise price for the initial grant of options will be $175
per share of Common Stock. The options will be granted under an option plan
(the "Option Plan") proposed to be adopted by Holdings in the near future,
which plan will require that the Executive enter into an option agreement (the
"Option Agreement). The options, when granted, will vest in equal amounts on
the first, second, third, fourth and fifth anniversary of grant, subject to
accelerated vesting in the event of an initial public offering of the Common
Stock by Holdings or upon defined change of control events under the Option
Plan, and subject to continued employment. The Option Agreement will restrict
the transfer of shares of Common Stock issuable under the option.
(d) Subject to the right of the Company to amend or
terminate any employee and/or group or senior executive benefit plan, the
Executive shall be entitled to receive the following employee benefits:
(i) the Executive shall have the right to
participate in all current or future employee and/or group welfare
benefit plans of the Company that are available to its exempt
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salaried employees generally (including, without limitation,
disability, accident, medical, life insurance and hospitalization
plans) at the same level and on the same basis as other senior
executives of the Company participate;
(ii) the Executive shall have the right to
participate in the Company's 401(k) savings plan (with matching
contributions to the extent that the Company hereafter offers such
benefit generally to its senior executives) and all future senior
executive benefit plans of the Company, including, without limitation,
any pension or retirement plan that may hereafter be established, all
in accordance with the Company's regular practices with respect to its
senior executive officers;
(iii) the Executive shall be entitled to
reimbursement from the Company for reasonable out- of-pocket business
expenses incurred by him in the course of the performance of his
duties hereunder, subject to receipt of appropriate supporting
documentation;
(iv) the Executive shall be entitled to such
vacation (in no event less than three weeks per year), holidays and
other paid or unpaid leaves of absence as are consistent with the
Company's normal policies or as are otherwise approved by the Board;
and
(v) the Executive shall be entitled to an
automobile allowance in the amount of $850 per month during the
Employment Term to cover the cost of personally leasing an automobile
and related operating expenses.
5. Term.
(a) Subject to the provisions of Section 7, the term of
this Agreement shall commence on October 1, 1996 and shall end on September 30,
1998. The term of this Agreement is referred to herein as the "Employment
Term."
(b) The term of this Agreement may be extended for
additional one year periods by mutual consent of the Executive and the Board,
acting on behalf of the Company, with the first renewal being automatic unless
the Executive is terminated for Due Cause (as defined in Section 7(a)].
(c) If the Company elects not to renew this Agreement
after termination pursuant to this Section 5, then the Company shall pay to the
Executive, at such times as they would otherwise be paid in accordance with the
Company's payroll practices, his full Annual Salary for a period of one year
from the date of termination.]
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6. Competition and Confidentiality.
(a) If, during the Employment Term (or any extension
thereof), the employment of the Executive is terminated pursuant to Section
7(a) or the Executive voluntarily terminates his employment pursuant to Section
7(d), or if the Company elects not renew this Agreement after the first
automatic renewal referred to in Section 5(b) (subject to the Company's right
to terminate for Due Cause) for one year from the date of such termination, the
Executive shall not, without the prior written consent of the Board (which
consent shall not be unreasonably withheld), with respect to the States of
Texas, Oklahoma, Kansas, Missouri, Ohio, Idaho and any other state in which the
Company owns, leases or operates motion picture theaters at the time of
termination, (i) accept employment or render service to any person, firm or
corporation that is engaged in a business directly competitive with the
business then engaged in by the Company in such states or (ii) directly or
indirectly enter into or in any manner take part in or lend his name, counsel
or assistance to any venture, enterprise, business or endeavor, either as
proprietor, principal, investor, partner, director, officer, employee,
consultant, advisor, agent, independent contractor, or in any other capacity
whatsoever, for any purpose that would be competitive with the business of the
Company in such states.
(b) It is the desire and intent of each of the parties
that the provisions of Section 6(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of Texas.
Accordingly, if any particular portion of Section 6(a) shall be adjudicated to
be invalid or unenforceable, Section 6(a) shall be deemed amended to (i) reform
the particular portion to provide for such maximum restrictions as will be
valid and enforceable, or if that is not possible, then (ii) delete therefrom
the portion thus adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive
will not divulge or appropriate to his own use or to the use of others any
secret or confidential information or secret or confidential knowledge
pertaining to the business of the Company obtained by the Executive in any way
while he was employed by the Company. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(d) The Executive acknowledges that Sections 6(a) and (c)
are expressly for the benefit of the Company, that the Company would be
irreparably injured by a violation of Section 7(a) or (c), and that the Company
would have no adequate remedy at law in the event of such violation.
Therefore, the Executive acknowledges and agrees that injunctive relief,
specific
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performance or any other appropriate equitable remedy (without any bond or
other security being required) are appropriate remedies to enforce compliance
by the Company with Sections 6(a) and (c).
7. Termination of Employment.
(a) For Due Cause. Nothing herein shall prevent the
Company from terminating, without prior notice, the Executive for "Due Cause"
(as hereinafter defined), in which event the Executive shall be entitled to
receive his Base Salary on a pro rata basis to the date of termination. In the
event of such termination for Due Cause, all other rights and benefits the
Executive may have under the employee and/or group or senior executive benefit
plans and programs of the Company, generally, shall be determined in accordance
with the terms and conditions of such plans and programs. The term "Due Cause"
shall mean (i) the Executive has committed a willful serious act, such as
embezzlement, against the Company intending to enrich himself at the expense of
the Company or been convicted of a felony, (ii) the Executive has engaged in
conduct which has caused demonstrable and serious injury, monetary or
otherwise, to the Company as evidenced by a binding and final judgment, order
or decree of a court or administrative agency of competent jurisdiction in
effect after exhaustion of all rights of appeal of the action, suit or
proceeding, whether civil, criminal, administrative or investigative, (iii) the
Executive, in carrying out his duties hereunder, has been guilty of willful
gross neglect or willful gross misconduct, resulting in either case in material
harm to the Company, or (iv) the Executive has refused to carry out his duties
in gross dereliction of duty and, after receiving notice to such effect from
the Board, the Executive fails to cure the existing problem within 30 days.
(b) Due To Death. In the event of the death of the
Executive, this Agreement shall terminate on the date of death and the estate
of the Executive shall be entitled to (i) the Executive's Base Salary through
the end of the month in which he died, and (ii) a cash payment equal to the pro
rata portion (calculated through the end of the month in which he died) of the
annual bonus, if any, received by the Executive in respect of the full calendar
year next preceding his death. In the event of such termination due to death,
all other rights and benefits the Executive (or his estate) may have under the
employee and/or group or senior executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereinafter defined), this Agreement shall terminate on "the
date on which the Disability occurs" (as hereinafter defined) and the Executive
shall be entitled to (i) his Base Salary through the end of the month in which
his employment is terminated due to the Disability, and (ii) a cash payment
equal to the pro rata portion (calculated through the end of the month in which
his employment is terminated due to Disability) of the annual bonus, if any,
received by the Executive in respect of the full calendar year next preceding
his Disability. In the event of such termination due to Disability, all other
rights and benefits the Executive may have under the employee and/or group or
senior executive benefit plans and programs of the Company, generally, shall be
determined in accordance with the terms and
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<PAGE> 6
conditions of such plans and programs. For purposes of this Agreement,
"Disability" shall mean the inability or incapacity of the Employee for six
months to perform the essential functions of the job or position with the
Company described in Section 3, even with reasonable accommodation, and "the
date on which the Disability occurs" shall mean the first day following such
six month period. Such inability or incapacity shall be documented to the
reasonable satisfaction of the Board by appropriate correspondence from
registered physicians reasonably satisfactory to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive his Base Salary until the date his employment
terminates and all other benefits the Executive may have under the employee
and/or group or senior executive benefit plans and programs of the Company,
generally, shall be determined in accordance with the terms and conditions of
such plans and programs.
(e) Other Termination. If the Company terminates the
employment of the Executive other than for Due Cause or because of a
Disability, then the Company shall pay to the Executive, at such times as they
would otherwise be paid in accordance with the Company's payroll practices, his
full Annual Salary for a period of one year from the date of termination. All
benefits under the Company's employee and/or group or senior executive benefit
plans and programs shall continue to the extent permissible in accordance with
the terms and conditions of such plans and programs. To the extent that the
Board determines such payments are appropriate, the Executive shall also be
entitled to any bonus payments that the Board may award in its sole discretion.
8. Preservation of Business; Fiduciary Responsibility.
The Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
present employees and to preserve the business relations of the Company with
suppliers, distributors, customers and others. The Executive shall not commit
any act, or in any way assist others to commit any act, that would injure the
Company. So long as the Executive is employed by the Company, the Executive
shall observe and fulfill proper standards of fiduciary responsibility
attendant upon his service and office.
9. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person or when mailed, by certified
mail (return receipt requested), postage prepaid, addressed as follows (or to
such other address as a party may specify by notice pursuant to this
provision):
(a) To the Company:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, TX 75219
Attn: Chief Executive Officer
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(b) To the Executive:
Robert E. Painter
115 Skyline Drive
Westwood, MA 02090
10. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
11. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled by arbitration in
Dallas, Texas. In the proceeding, the Executive shall select one arbitrator,
the Company shall select one arbitrator and the two arbitrators so selected
shall select a third arbitrator. The decision of a majority of the arbitrators
shall be binding on the Executive and the Company. Should one party fail to
select an arbitrator within five days after notice of the appointment of an
arbitrator by the other party or should the two arbitrators selected by the
Executive and the Company fail to select an arbitrator within ten days after
the date of the appointment of the last of such two arbitrators, any person
sitting as a Judge of the United States District Court for the Federal District
of Texas in which the City of Dallas is then situated, upon application of the
Executive or the Company, shall appoint an arbitrator to fill such space with
the same force and effect as though such arbitrator had been appointed in
accordance with the first sentence of this Section 11. Any arbitration
proceeding pursuant to this Section 11 shall be conducted in accordance with
the rules of the American Arbitration Association. Judgment may be entered on
the arbitrators' award in any court having jurisdiction.
12. Additional Instruments. The Executive and the
Company shall execute and deliver any and all additional instruments and
agreements that may be necessary or proper to carry out the purposes of this
Agreement.
13. Entire Agreement and Amendments. This Agreement
(together with the Option Plan and Option Agreement, upon the effectiveness
thereof) contains the entire agreement of the Executive and the Company
relating to the matters contained herein and supersedes all prior agreements
and understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
14. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
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15. Assignments. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
rights and obligations of the Executive under this Agreement are personal to
him, and no such rights, benefits or obligations shall be subject to voluntary
or involuntary alienation, assignment or transfer. This Agreement shall be
binding upon the Executive and his heirs, executors, administrators, legal
representatives and assigns.
16. Execution. This Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
17. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
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IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement effective as of the date first above written.
"COMPANY"
HOLLYWOOD THEATERS, INC.
By: /s/ James Featherstone
-------------------------------------
James Featherstone
Chief Financial Officer
"EXECUTIVE"
/s/ Thomas W. Stephenson, Jr.
----------------------------------------
Thomas W. Stephenson, Jr.
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into by
and between Hollywood Theaters, Inc., a Delaware corporation (the "Company"),
and James R. Featherstone, a resident of Dallas, Texas (the "Executive"),
effective as of October 1, 1996.
1. Introduction. The Executive is currently the Chief
Financial Officer of the Company, an owner and operator of motion picture
theaters. In contemplation of the expansion of the business of the Company
through the acquisition and construction of additional theaters, and in
connection with the equity investment of the Beacon Fund III-Focus Value Fund,
L.P. in the Company and the related change in control of the Board of Directors
of the Company (the "Board"), the Company desires to continue to employ
Executive and Executive desires to continue to remain in the employ of the
Company. To this end, the Executive and the Company believe that an agreement
is necessary and appropriate to outline the new employment relationship that
will exist between the Company and the Executive. Therefore, the Company and
the Executive intend by this Agreement to specify the terms and conditions of
the Executive's employment relationship with the Company.
2. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board to elect and remove
officers, the Executive shall serve the Company as its Vice President and Chief
Financial Officer and shall perform, faithfully and diligently, the services
and functions relating to such offices or otherwise reasonably incident to such
offices as may be designated from time to time by the Board.
(b) The Executive shall, during the term of this Agreement (or
any extension thereof), devote such of his time, attention, energies and
business efforts to his duties as an executive of the Company as are reasonably
necessary to carry out his duties specified in Section 3(a). The Executive
shall not, during the term of this Agreement (or any extension thereof), engage
in any other business activity (regardless of whether such business activity is
pursued for gain, profit or other pecuniary advantage) if such business
activity would impair the Executive's ability to carry out his duties
hereunder. This Section 3(b), however, shall not be construed to prevent the
Executive from (i) investing his personal assets as a passive investor in such
form or manner as will not contravene the best interests of the Company, (ii)
participating in various charitable efforts or (iii)
<PAGE> 2
serving as a director or member of a committee of any organization when such
position has previously been approved in writing by the Board.
4. Compensation and Other Employee Benefits. As compensation
for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not less
than $110,000, payable in accordance with the then current payroll policies of
the Company. Such annual salary is herein referred to as the "Base Salary."
The Base Salary shall be reviewed annually by the Board and shall be subject to
increase (but not decrease) in the sole discretion of the Board based upon a
review of the performance and accomplishments of the Executive.
(b) In addition to annual Base Salary, the Executive shall be
eligible to receive annual bonus awards (the "Annual Bonus") in cash upon the
achievement by the Executive of performance goals or targets established by the
Board. The Board shall establish these performance goals in advance of each
fiscal year. In the event that the performance goals or targets established by
the Board are satisfied by the Executive at least at the 85% level, the
Executive shall be entitled to a bonus for such year equal to at least 50% of
his Base Salary for such year, with the actual percentage subject to
determination of the Board. In addition, the Executive shall have the
opportunity to receive additional bonuses above the level of the Annual Bonus
up to a maximum of 100% of Base Salary for such year based upon the Board's
review of annual achievements of the Company's five-year financial plan and the
determination by the Board, in its sole discretion, that such additional bonus
awards are warranted. Bonuses in excess of that amount in respect of
exceptional performance by the Executive as determined by the Board may be made
in the sole discretion of the Board.
(c) The Executive will be granted non-transferrable options to
purchase shares of common stock, par value $.01 per share (the "Common Stock"),
of Hollywood Theater Holdings, Inc., the parent company of the Company
("Holdings"), in an initial amount equal to 1.5% of the fully diluted shares of
Common Stock of Holdings as of the closing by the Company and Holdings of
certain pending acquisitions, equity financings and debt financings. The
exercise price for the initial grant of options will be $175 per share of
Common Stock. The options will be granted under an option plan (the "Option
Plan") proposed to be adopted by Holdings in the near future, which plan will
require that the Executive enter into an option agreement (the "Option
Agreement). The options, when granted, will vest in equal amounts on the
first, second, third, fourth and fifth anniversary of grant, subject to
accelerated vesting in the event of an initial public offering of the Common
Stock by Holdings or upon defined change of control events under the Option
Plan, and subject to continued employment. The Option Agreement will restrict
the transfer of shares of Common Stock issuable under the option.
(d) Subject to the right of the Company to amend or terminate
any employee and/or group or senior executive benefit plan, the Executive shall
be entitled to receive the following employee benefits:
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(i) the Executive shall have the right to participate
in all current or future employee and/or group welfare benefit plans of
the Company that are available to its exempt salaried employees
generally (including, without limitation, disability, accident, medical,
life insurance and hospitalization plans) at the same level and on the
same basis as other senior executives of the Company participate;
(ii) the Executive shall have the right to participate
in the Company's 401(k) savings plan (with matching contributions to the
extent that the Company hereafter offers such benefit generally to its
senior executives) and all future senior executive benefit plans of the
Company, including, without limitation, any pension or retirement plan
that may hereafter be established, all in accordance with the Company's
regular practices with respect to its senior executive officers;
(iii) the Executive shall be entitled to reimbursement
from the Company for reasonable out-of-pocket business expenses incurred
by him in the course of the performance of his duties hereunder, subject
to receipt of appropriate supporting documentation;
(iv) the Executive shall be entitled to such vacation
(in no event less than four weeks per year), holidays and other paid or
unpaid leaves of absence as are consistent with the Company's normal
policies or as are otherwise approved by the Board; and
(v) the Executive shall be entitled to an automobile
allowance in the amount of $850 per month during the Employment Term to
cover the cost of personally leasing an automobile and related operating
expenses.
5. Term.
(a) Subject to the provisions of Section 7, the term of this
Agreement shall commence October 1, 1996 and shall end on September 30, 1998.
The term of this Agreement is referred to herein as the "Employment Term."
(b) The term of this Agreement may be extended for additional
one year periods by mutual consent of the Executive and the Board, acting on
behalf of the Company, with the first renewal being automatic unless the
Executive is terminated for Due Cause (as defined in Section 7(a).
(c) If the Company elects not to renew this Agreement after
termination pursuant to this Section 5, then the Company shall pay to the
Executive, at such times as they would otherwise be paid in accordance with the
Company's payroll practices, his full Annual Salary for a period of one year
from the date of termination.
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6. Competition and Confidentiality.
(a) If, during the Employment Term (or any extension thereof),
the employment of the Executive is terminated pursuant to Section 7(a) or the
Executive voluntarily terminates his employment pursuant to Section 7(d), or if
the Company elects not renew this Agreement after the first automatic renewal
referred to in Section 5(b) (subject to the Company's right to terminate for
Due Cause) for one year from the date of such termination, the Executive shall
not, without the prior written consent of the Board (which consent shall not be
unreasonably withheld), with respect to the States of Texas, Oklahoma, Kansas,
Missouri, Ohio, Idaho and any other state in which the Company owns, leases or
operates motion picture theaters at the time of termination, (i) accept
employment or render service to any person, firm or corporation that is engaged
in a business directly competitive with the business then engaged in by the
Company in such states or (ii) directly or indirectly enter into or in any
manner take part in or lend his name, counsel or assistance to any venture,
enterprise, business or endeavor, either as proprietor, principal, investor,
partner, director, officer, employee, consultant, advisor, agent, independent
contractor, or in any other capacity whatsoever, for any purpose that would be
competitive with the business of the Company in such states.
(b) It is the desire and intent of each of the parties that
the provisions of Section 6(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of Texas.
Accordingly, if any particular portion of Section 6(a) shall be adjudicated to
be invalid or unenforceable, Section 6(a) shall be deemed amended to (i) reform
the particular portion to provide for such maximum restrictions as will be
valid and enforceable, or if that is not possible, then (ii) delete therefrom
the portion thus adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive will
not divulge or appropriate to his own use or to the use of others any secret or
confidential information or secret or confidential knowledge pertaining to the
business of the Company obtained by the Executive in any way while he was
employed by the Company. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated companies
and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(d) The Executive acknowledges that Sections 6(a) and (c) are
expressly for the benefit of the Company, that the Company would be irreparably
injured by a violation of Section 7(a) or (c), and that the Company would have
no adequate remedy at law in the event of such violation. Therefore, the
Executive acknowledges and agrees that injunctive relief, specific
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performance or any other appropriate equitable remedy (without any bond or
other security being required) are appropriate remedies to enforce compliance
by the Company with Sections 6(a) and (c).
7. Termination of Employment.
(a) For Due Cause. Nothing herein shall prevent the Company
from terminating, without prior notice, the Executive for "Due Cause" (as
hereinafter defined), in which event the Executive shall be entitled to receive
his Base Salary on a pro rata basis to the date of termination. In the event
of such termination for Due Cause, all other rights and benefits the Executive
may have under the employee and/or group or senior executive benefit plans and
programs of the Company, generally, shall be determined in accordance with the
terms and conditions of such plans and programs. The term "Due Cause" shall
mean (i) the Executive has committed a willful serious act, such as
embezzlement, against the Company intending to enrich himself at the expense of
the Company or been convicted of a felony, (ii) the Executive has engaged in
conduct which has caused demonstrable and serious injury, monetary or
otherwise, to the Company as evidenced by a binding and final judgment, order
or decree of a court or administrative agency of competent jurisdiction in
effect after exhaustion of all rights of appeal of the action, suit or
proceeding, whether civil, criminal, administrative or investigative, (iii) the
Executive, in carrying out his duties hereunder, has been guilty of willful
gross neglect or willful gross misconduct, resulting in either case in material
harm to the Company, or (iv) the Executive has refused to carry out his duties
in gross dereliction of duty and, after receiving notice to such effect from
the Board, the Executive fails to cure the existing problem within 30 days.
(b) Due To Death. In the event of the death of the Executive,
this Agreement shall terminate on the date of death and the estate of the
Executive shall be entitled to (i) the Executive's Base Salary through the end
of the month in which he died, and (ii) a cash payment equal to the pro rata
portion (calculated through the end of the month in which he died) of the
annual bonus, if any, received by the Executive in respect of the full calendar
year next preceding his death. In the event of such termination due to death,
all other rights and benefits the Executive (or his estate) may have under the
employee and/or group or senior executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereinafter defined), this Agreement shall terminate on "the
date on which the Disability occurs" (as hereinafter defined) and the Executive
shall be entitled to (i) his Base Salary through the end of the month in which
his employment is terminated due to the Disability, and (ii) a cash payment
equal to the pro rata portion (calculated through the end of the month in which
his employment is terminated due to Disability) of the annual bonus, if any,
received by the Executive in respect of the full calendar year next preceding
his Disability. In the event of such termination due to Disability, all other
rights and benefits the Executive may have under the employee and/or group or
senior executive benefit plans and programs of the Company, generally, shall be
determined in accordance with the terms and
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<PAGE> 6
conditions of such plans and programs. For purposes of this Agreement,
"Disability" shall mean the inability or incapacity of the Employee for six
months to perform the essential functions of the job or position with the
Company described in Section 3, even with reasonable accommodation, and "the
date on which the Disability occurs" shall mean the first day following such
six month period. Such inability or incapacity shall be documented to the
reasonable satisfaction of the Board by appropriate correspondence from
registered physicians reasonably satisfactory to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive his Base Salary until the date his employment
terminates and all other benefits the Executive may have under the employee
and/or group or senior executive benefit plans and programs of the Company,
generally, shall be determined in accordance with the terms and conditions of
such plans and programs.
(e) Other Termination. If the Company terminates the
employment of the Executive other than for Due Cause or because of a
Disability, then the Company shall pay to the Executive, at such times as they
would otherwise be paid in accordance with the Company's payroll practices, his
full Annual Salary for a period of one year from the date of termination. All
benefits under the Company's employee and/or group or senior executive benefit
plans and programs shall continue to the extent permissible in accordance with
the terms and conditions of such plans and programs. To the extent that the
Board determines such payments are appropriate, the Executive shall also be
entitled to any bonus payments that the Board may award in its sole discretion.
8. Preservation of Business; Fiduciary Responsibility. The
Executive shall use his best efforts to preserve the business and organization
of the Company, to keep available to the Company the services of present
employees and to preserve the business relations of the Company with suppliers,
distributors, customers and others. The Executive shall not commit any act, or
in any way assist others to commit any act, that would injure the Company. So
long as the Executive is employed by the Company, the Executive shall observe
and fulfill proper standards of fiduciary responsibility attendant upon his
service and office.
9. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person or when mailed, by certified
mail (return receipt requested), postage prepaid, addressed as follows (or to
such other address as a party may specify by notice pursuant to this
provision):
(a) To the Company:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, TX 75219
Attn: Chief Executive Officer
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<PAGE> 7
(b) To the Executive:
James R. Featherstone
7135 Cornelia Lane
Dallas, Texas 75214
10. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
11. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by arbitration in Dallas,
Texas. In the proceeding, the Executive shall select one arbitrator, the
Company shall select one arbitrator and the two arbitrators so selected shall
select a third arbitrator. The decision of a majority of the arbitrators shall
be binding on the Executive and the Company. Should one party fail to select
an arbitrator within five days after notice of the appointment of an arbitrator
by the other party or should the two arbitrators selected by the Executive and
the Company fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court for the Federal District of Texas in which
the City of Dallas is then situated, upon application of the Executive or the
Company, shall appoint an arbitrator to fill such space with the same force and
effect as though such arbitrator had been appointed in accordance with the
first sentence of this Section 11. Any arbitration proceeding pursuant to this
Section 11 shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the arbitrators' award in
any court having jurisdiction.
12. Additional Instruments. The Executive and the Company
shall execute and deliver any and all additional instruments and agreements
that may be necessary or proper to carry out the purposes of this Agreement.
13. Entire Agreement and Amendments. This Agreement (together
with the Option Plan and Option Agreement, upon the effectiveness thereof)
contains the entire agreement of the Executive and the Company relating to the
matters contained herein and supersedes all prior agreements and
understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
14. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
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<PAGE> 8
15. Assignments. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. The rights and
obligations of the Executive under this Agreement are personal to him, and no
such rights, benefits or obligations shall be subject to voluntary or
involuntary alienation, assignment or transfer. This Agreement shall be
binding upon the Executive and his heirs, executors, administrators, legal
representatives and assigns.
16. Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
17. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
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<PAGE> 9
IN WITNESS WHEREOF, the Executive and the Company have executed
this Agreement effective as of the date first above written.
"COMPANY"
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
----------------------------------
Thomas W. Stephenson, Jr.
President and Chief Executive
Officer
"EXECUTIVE"
/s/ James R. Featherstone
-------------------------------------
James R. Featherstone
9
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into by
and between Hollywood Theaters, Inc., a Delaware corporation (the "Company"),
and Robert E. Painter, a resident of Westwood, Massachusetts (the "Executive"),
effective as of October 1, 1996.
1. Introduction. The Executive is currently a consultant to
the Company, an owner and operator of motion picture theaters. In
contemplation of the expansion of the business of the Company through the
acquisition and construction of additional theaters, the Company desires to
employ Executive, and Executive desires to become employed by the Company. To
this end, the Executive and the Company believe that an agreement is necessary
and appropriate to outline the new employment relationship that will exist
between the Company and the Executive. Therefore, the Company and the Executive
intend by this Agreement to specify the terms and conditions of the Executive's
employment relationship with the Company.
2. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board of Directors of the
Company (the "Board") to elect and remove officers, the Executive shall serve
the Company as the Chief Operating Officer and shall perform, faithfully and
diligently, the services and functions relating to such office or otherwise
reasonably incident to such office as may be designated from time to time by
the Board.
(b) The Executive shall, during the term of this Agreement (or
any extension thereof), devote such of his time, attention, energies and
business efforts to his duties as an executive of the Company as are reasonably
necessary to carry out his duties specified in Section 3(a). The Executive
shall not, during the term of this Agreement (or any extension thereof), engage
in any other business activity (regardless of whether such business activity is
pursued for gain, profit or other pecuniary advantage) if such business
activity would impair the Executive's ability to carry out his duties
hereunder. This Section 3(b), however, shall not be construed to prevent the
Executive from (i) investing his personal assets as a passive investor in such
form or manner as will not contravene the best interests of the Company, (ii)
participating in various charitable efforts or (iii) serving as a director or
member of a committee of any organization when such position has previously
been approved in writing by the Board.
<PAGE> 2
4. Compensation and Other Employee Benefits. As compensation
for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not less
than $175,000, payable in accordance with the then current payroll policies of
the Company. Such annual salary is herein referred to as the "Base Salary."
The Base Salary shall be reviewed annually by the Board and shall be subject to
increase (but not decrease) in the sole discretion of the Board based upon a
review of the performance and accomplishments of the Executive.
(b) In addition to annual Base Salary, the Executive shall be
eligible to receive annual bonus awards (the "Annual Bonus") in cash upon the
achievement by the Executive of performance goals or targets established by the
Board. The Board shall establish these performance goals in advance of each
fiscal year. In the event that the performance goals or targets established by
the Board are satisfied by the Executive at least at the 85% level, the
Executive shall be entitled to a bonus for such year equal to at least 50% of
his Base Salary for such year, with the actual percentage subject to
determination of the Board. In addition, the Executive shall have the
opportunity to receive additional bonuses above the level of the Annual Bonus
up to a maximum of 100% of Base Salary for such year based upon the Board's
review of annual achievements of the Company's five-year financial plan and the
determination by the Board, in its sole discretion, that such additional bonus
awards are warranted. Bonuses in excess of that amount in respect of
exceptional performance by the Executive as determined by the Board may be made
in the sole discretion of the Board.
(c) The Executive will be granted non-transferrable options to
purchase shares of common stock, par value $.01 per share (the "Common Stock"),
of Hollywood Theater Holdings, Inc., the parent company of the Company
("Holdings"), in an initial amount equal to 3% of the fully diluted shares of
Common Stock of Holdings as of the closing by the Company and Holdings of
certain pending acquisitions, equity financings and debt financings. The
exercise price for the initial grant of options will be $175 per share of
Common Stock. The options will be granted under an option plan (the "Option
Plan") proposed to be adopted by Holdings in the near future, which plan will
require that the Executive enter into an option agreement (the "Option
Agreement). The options, when granted, will vest in equal amounts on the
first, second, third, fourth and fifth anniversary of grant, subject to
accelerated vesting in the event of an initial public offering of the Common
Stock by Holdings or upon defined change of control events under the Option
Plan, and subject to continued employment. The Option Agreement will restrict
the transfer of shares of Common Stock issuable under the option.
(d) Subject to the right of the Company to amend or terminate
any employee and/or group or senior executive benefit plan, the Executive shall
be entitled to receive the following employee benefits:
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<PAGE> 3
(i) the Executive shall have the right to participate
in all current or future employee and/or group welfare benefit plans of
the Company that are available to its exempt salaried employees
generally (including, without limitation, disability, accident, medical,
life insurance and hospitalization plans) at the same level and on the
same basis as other senior executives of the Company participate;
(ii) the Executive shall have the right to participate
in the Company's 401(k) savings plan (with matching contributions to the
extent that the Company hereafter offers such benefit generally to its
senior executives) and all future senior executive benefit plans of the
Company, including, without limitation, any pension or retirement plan
that may hereafter be established, all in accordance with the Company's
regular practices with respect to its senior executive officers;
(iii) the Executive shall be entitled to reimbursement
from the Company for reasonable out-of-pocket business expenses incurred
by him in the course of the performance of his duties hereunder, subject
to receipt of appropriate supporting documentation;
(iv) the Executive shall be entitled to such vacation
(in no event less than three weeks per year), holidays and other paid or
unpaid leaves of absence as are consistent with the Company's normal
policies or as are otherwise approved by the Board; and
(v) the Executive shall be entitled to an automobile
allowance in the amount of $850 per month during the Employment Term to
cover the cost of personally leasing an automobile and related operating
expenses.
5. Interim Arrangements Pending Relocation of the Executive;
Relocation Expenses.
(a) The Executive acknowledges and agrees that the performance
of his duties hereunder will require his relocation to Dallas, Texas, where the
headquarters office of the Company is located, and that his employment is
subject to his relocation to Dallas, Texas, as promptly as practicable (a
period six to twelve months is contemplated). The Executive agrees to use his
best efforts to limit the period required for relocation (the "Interim
Period"). The Executive also acknowledges and agrees that during the Interim
Period, he will be required to work on a full time basis in Dallas, Texas, or
such other locations as the Company may require (including cities and towns in
which the Company owns or proposes to construct or acquire motion picture
theaters) for the performance of his duties. Until relocation is accomplished:
(i) The Executive shall be entitled to reimbursement
from the Company for the cost of reasonable living accommodations, to
include rent for a furnished apartment, utilities and parking, subject
to a monthly maximum to be mutually agreed upon by the
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<PAGE> 4
Company and the Executive and receipt of appropriate supporting
documentation. Food and entertainment expenses shall not be
reimbursable pursuant to this clause (i).
(ii) The Executive shall be entitled to reimbursement
from the Company for the cost of travel to and from Dallas, Texas, and
the employee's primary residence in Westwood, Massachusetts, or,
alternatively, for the cost of travel for spousal trips to and from
Dallas and the primary residence, subject to an aggregate monthly
maximum to be mutually agreed upon by the Company and the Executive and
receipt of appropriate supporting documentation.
(b) To assist the Executive in relocating to Dallas, Texas,
the Company agrees that it will reimburse the Executive for standard broker's
commissions paid by the Executive with respect to the sale of the Executive's
home at 115 Skyline Drive, Westwood, Massachusetts 02090, and all related
closing costs incident thereto, other than the satisfaction of any property,
school or other tax liabilities or amounts required to satisfy buyer objections
to title or with respect to inspection of the property (such as any required
repairs). The Company will not reimburse the Executive for any loss that may be
incurred upon the sale (as compared to the initial purchase price paid by the
Executive for the property). Reimbursement pursuant to this clause shall be
subject to receipt of appropriate supporting documentation.
(c) To assist the Executive in relocating to Dallas, Texas,
the Company agrees that it will reimburse the Executive for (i) any points to
be paid by the Executive to his mortgage lender in connection with the purchase
of a home in Dallas, Texas, as the Executive's new primary residence (a maximum
of 2 points) and (ii) all related closing costs incident thereto, other than
amounts required to fund escrows for the satisfaction of any property, school
or other tax liabilities or insurance coverages and the like, or amounts
required to make improvements required by the Executive. Reimbursement
pursuant to this clause shall be subject to receipt of appropriate supporting
documentation.
(d) To assist the Executive in relocating to Dallas, Texas,
the Company agrees that it will reimburse the Executive for the reasonable
costs of fully insured transportation and storage, if required, of all
household goods and personal belongings of the Executive from Westwood,
Massachusetts, to Dallas, Texas. Reimbursement pursuant to this clause shall
be subject to receipt of appropriate supporting documentation.
6. Term.
(a) Subject to the provisions of Section 8, the term of this
Agreement shall commence on October 1, 1996 and shall end on September 30,
1998. The term of this Agreement is referred to herein as the "Employment
Term."
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<PAGE> 5
(b) The term of this Agreement may be extended for additional
one year periods by mutual consent of the Executive and the Board, acting on
behalf of the Company, with the first renewal being automatic unless the
Executive is terminated for Due Cause (as defined in Section 8(a).
(c) If the Company elects not to renew this Agreement after
termination pursuant to this Section 6, then the Company shall pay to the
Executive, at such times as they would otherwise be paid in accordance with the
Company's payroll practices, his full Annual Salary for a period of one year
from the date of termination.
7. Competition and Confidentiality.
(a) If, during the Employment Term (or any extension thereof),
the employment of the Executive is terminated pursuant to Section 8(a) or the
Executive voluntarily terminates his employment pursuant to Section 8(d), or if
the Company elects not renew this Agreement after the first automatic renewal
referred to in Section 6(b) (subject to the Company's right to terminate for
Due Cause) for one year from the date of such termination, the Executive shall
not, without the prior written consent of the Board (which consent shall not be
unreasonably withheld), with respect to the States of Texas, Oklahoma, Kansas,
Missouri, Ohio, Idaho and any other state in which the Company owns, leases or
operates motion picture theaters at the time of termination, (i) accept
employment or render service to any person, firm or corporation that is engaged
in a business directly competitive with the business then engaged in by the
Company in such states or (ii) directly or indirectly enter into or in any
manner take part in or lend his name, counsel or assistance to any venture,
enterprise, business or endeavor, either as proprietor, principal, investor,
partner, director, officer, employee, consultant, advisor, agent, independent
contractor, or in any other capacity whatsoever, for any purpose that would be
competitive with the business of the Company in such states.
(b) It is the desire and intent of each of the parties that
the provisions of Section 7(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of Texas.
Accordingly, if any particular portion of Section 7(a) shall be adjudicated to
be invalid or unenforceable, Section 7(a) shall be deemed amended to (i) reform
the particular portion to provide for such maximum restrictions as will be
valid and enforceable, or if that is not possible, then (ii) delete therefrom
the portion thus adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive will
not divulge or appropriate to his own use or to the use of others any secret or
confidential information or secret or confidential knowledge pertaining to the
business of the Company obtained by the Executive in any way while he was
employed by the Company. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its
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<PAGE> 6
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(d) The Executive acknowledges that Sections 7(a) and (c) are
expressly for the benefit of the Company, that the Company would be irreparably
injured by a violation of Section 7(a) or (c), and that the Company would have
no adequate remedy at law in the event of such violation. Therefore, the
Executive acknowledges and agrees that injunctive relief, specific performance
or any other appropriate equitable remedy (without any bond or other security
being required) are appropriate remedies to enforce compliance by the Company
with Sections 7(a) and (c).
8. Termination of Employment.
(a) For Due Cause. Nothing herein shall prevent the Company
from terminating, without prior notice, the Executive for "Due Cause" (as
hereinafter defined), in which event the Executive shall be entitled to receive
his Base Salary on a pro rata basis to the date of termination. In the event
of such termination for Due Cause, all other rights and benefits the Executive
may have under the employee and/or group or senior executive benefit plans and
programs of the Company, generally, shall be determined in accordance with the
terms and conditions of such plans and programs. The term "Due Cause" shall
mean (i) the Executive has committed a willful serious act, such as
embezzlement, against the Company intending to enrich himself at the expense of
the Company or been convicted of a felony, (ii) the Executive has engaged in
conduct which has caused demonstrable and serious injury, monetary or
otherwise, to the Company as evidenced by a binding and final judgment, order
or decree of a court or administrative agency of competent jurisdiction in
effect after exhaustion of all rights of appeal of the action, suit or
proceeding, whether civil, criminal, administrative or investigative, (iii) the
Executive, in carrying out his duties hereunder, has been guilty of willful
gross neglect or willful gross misconduct, resulting in either case in material
harm to the Company, or (iv) the Executive has refused to carry out his duties
in gross dereliction of duty and, after receiving notice to such effect from
the Board, the Executive fails to cure the existing problem within 30 days.
(b) Due To Death. In the event of the death of the Executive,
this Agreement shall terminate on the date of death and the estate of the
Executive shall be entitled to (i) the Executive's Base Salary through the end
of the month in which he died, and (ii) a cash payment equal to the pro rata
portion (calculated through the end of the month in which he died) of the
annual bonus, if any, received by the Executive in respect of the full calendar
year next preceding his death. In the event of such termination due to death,
all other rights and benefits the Executive (or his estate) may have under the
employee and/or group or senior executive benefit plans and programs
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<PAGE> 7
of the Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereinafter defined), this Agreement shall terminate on "the
date on which the Disability occurs" (as hereinafter defined) and the Executive
shall be entitled to (i) his Base Salary through the end of the month in which
his employment is terminated due to the Disability, and (ii) a cash payment
equal to the pro rata portion (calculated through the end of the month in which
his employment is terminated due to Disability) of the annual bonus, if any,
received by the Executive in respect of the full calendar year next preceding
his Disability. In the event of such termination due to Disability, all other
rights and benefits the Executive may have under the employee and/or group or
senior executive benefit plans and programs of the Company, generally, shall be
determined in accordance with the terms and conditions of such plans and
programs. For purposes of this Agreement, "Disability" shall mean the
inability or incapacity of the Employee for six months to perform the essential
functions of the job or position with the Company described in Section 3, even
with reasonable accommodation, and "the date on which the Disability occurs"
shall mean the first day following such six month period. Such inability or
incapacity shall be documented to the reasonable satisfaction of the Board by
appropriate correspondence from registered physicians reasonably satisfactory
to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive his Base Salary until the date his employment
terminates and all other benefits the Executive may have under the employee
and/or group or senior executive benefit plans and programs of the Company,
generally, shall be determined in accordance with the terms and conditions of
such plans and programs.
(e) Other Termination. If the Company terminates the
employment of the Executive other than for Due Cause or because of a
Disability, then the Company shall pay to the Executive, at such times as they
would otherwise be paid in accordance with the Company's payroll practices, his
full Annual Salary for a period of one year from the date of termination. All
benefits under the Company's employee and/or group or senior executive benefit
plans and programs shall continue to the extent permissible in accordance with
the terms and conditions of such plans and programs. To the extent that the
Board determines such payments are appropriate, the Executive shall also be
entitled to any bonus payments that the Board may award in its sole discretion.
9. Preservation of Business; Fiduciary Responsibility. The
Executive shall use his best efforts to preserve the business and organization
of the Company, to keep available to the Company the services of present
employees and to preserve the business relations of the Company with suppliers,
distributors, customers and others. The Executive shall not commit any act, or
in any way assist others to commit any act, that would injure the Company. So
long as the Executive is employed by the Company, the Executive shall observe
and fulfill proper standards of fiduciary responsibility attendant upon his
service and office.
7
<PAGE> 8
10. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person or when mailed, by certified
mail (return receipt requested), postage prepaid, addressed as follows (or to
such other address as a party may specify by notice pursuant to this
provision):
(a) To the Company:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, TX 75219
Attn: Chief Executive Officer
(b) To the Executive:
Robert E. Painter
115 Skyline Drive
Westwood, MA 02090
11. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
12. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by arbitration in Dallas,
Texas. In the proceeding, the Executive shall select one arbitrator, the
Company shall select one arbitrator and the two arbitrators so selected shall
select a third arbitrator. The decision of a majority of the arbitrators shall
be binding on the Executive and the Company. Should one party fail to select
an arbitrator within five days after notice of the appointment of an arbitrator
by the other party or should the two arbitrators selected by the Executive and
the Company fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court for the Federal District of Texas in which
the City of Dallas is then situated, upon application of the Executive or the
Company, shall appoint an arbitrator to fill such space with the same force and
effect as though such arbitrator had been appointed in accordance with the
first sentence of this Section 12. Any arbitration proceeding pursuant to this
Section 12 shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the arbitrators' award in
any court having jurisdiction.
13. Additional Instruments. The Executive and the Company
shall execute and deliver any and all additional instruments and agreements
that may be necessary or proper to carry out the purposes of this Agreement.
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14. Entire Agreement and Amendments. This Agreement (together
with the Option Plan and Option Agreement, upon the effectiveness thereof)
contains the entire agreement of the Executive and the Company relating to the
matters contained herein and supersedes all prior agreements and
understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
15. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
16. Assignments. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. The rights and
obligations of the Executive under this Agreement are personal to him, and no
such rights, benefits or obligations shall be subject to voluntary or
involuntary alienation, assignment or transfer. This Agreement shall be
binding upon the Executive and his heirs, executors, administrators, legal
representatives and assigns.
17. Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
18. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
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<PAGE> 10
IN WITNESS WHEREOF, the Executive and the Company have executed
this Agreement effective as of the date first above written.
"COMPANY"
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
---------------------------------
Thomas W. Stephenson, Jr.
President
"EXECUTIVE"
/s/ Robert E. Painter
------------------------------------
Robert E. Painter
10
<PAGE> 1
EXHIBIT 10.11
HOLLYWOOD THEATERS, INC.
SAVINGS AND PROFIT SHARING PLAN
as amended and restated
effective July 10, 1995
<PAGE> 2
PREAMBLE
The purpose of this Plan and Trust is to provide, in accordance with its
provisions, a defined contribution plan providing retirement and other related
benefits for those Employees of the Employer who are eligible to participate
hereunder. This document is a complete amendment and restatement of the
Hollywood Theaters, Inc. Savings and Profit Sharing Plan, which was originally
effective as of January 1, 1993.
It is intended that the Plan qualify for approval under Sections 401 and 410
through 417 of the Internal Revenue Code. It is intended that the Trust
qualify for approval under Section 501 of the Code. It is further intended
that the Plan comply with the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). In case of any ambiguity in the Plan's language,
it will be interpreted to accomplish the Plan's intent of qualifying under the
Code and complying with ERISA. This Plan and Trust is exclusively for the
benefit of the eligible Employees and their Beneficiaries. Neither the
Employer, the Plan Administrator nor the Trustee will apply or interpret the
terms of the Plan in any manner that permits discrimination in favor of Highly
Compensated Employees. All Employees under similar circumstances will be
treated alike.
The undersigned Employer and Trustee hereby adopt this restatement of the
Hollywood Theaters, Inc. Savings and Profit Sharing Plan to be effective as of
July 10, 1995.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1-1
ARTICLE 2 - PARTICIPATION . . . . . . . . . . . . . . . . . . . . 2-1
ARTICLE 3 - PARTICIPANT ACCOUNTS . . . . . . . . . . . . . . . . 3-1
ARTICLE 4 - ACCOUNTING AND VALUATION . . . . . . . . . . . . . . 4-1
ARTICLE 5 - RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . 5-1
ARTICLE 6 - DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . 6-1
ARTICLE 7 - LIMITATIONS ON BENEFITS . . . . . . . . . . . . . . . 7-1
ARTICLE 8 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 8-1
ARTICLE 9 - ADMINISTRATION . . . . . . . . . . . . . . . . . . . 9-1
ARTICLE 10 - AMENDMENT OR TERMINATION OF PLAN . . . . . . . . . 10-1
ARTICLE 11 - TRUSTEE AND TRUST FUND . . . . . . . . . . . . . . 11-1
</TABLE>
<PAGE> 4
ARTICLE 1.
DEFINITIONS
As used in this document, unless otherwise defined or required by the
context, the following terms have the meanings set forth in this Article 1.
Some of the terms used in this document are not defined in Article 1, but for
convenience are defined as they are introduced in the text.
1.01 Account
Account means a separate account maintained for each Participant
reflecting applicable contributions, applicable forfeitures, investment
income (loss) allocated to the account and distributions.
1.02 Accounting Date, Valuation Date
The term Accounting Date means the last day of each Accounting Period and
any other days within the Accounting Period upon which, consistent with
established methods and guidelines, the Plan Administrator applies the
accounting procedures specified in Section 4.02. The term Valuation Date,
unless otherwise specified, means any business day on which the New York
Stock Exchange is open.
1.03 Accounting Period
Accounting Period means each of the 3-month periods which end on March
31st, June 30th, September 30th and December 31st.
1.04 Accrued Benefit
A Participant's Accrued Benefit means the total value, as of a given
date, of his Accounts determined as of the Valuation Date immediately
preceding the date of determination. A Participant's Accrued Benefit
will not be reduced solely on account of any increase in the
Participant's age or service or on account of an amendment to the Plan.
A Participant's Vested Accrued Benefit is equal to his Vested Percentage
of that portion of his Accrued Benefit which is subject to the Vesting
Schedule plus 100% of the remaining portion of his Accrued Benefit.
1.05 Beneficiary
Beneficiary means the person, persons, trust or other entity who is
designated to receive any amount payable upon the death of a Participant.
1.06 Cash-Out Distribution
Cash-Out Distribution means, as described in Article 5, a distribution to
a Participant upon termination of employment of his Vested Accrued
Benefit.
1-1
<PAGE> 5
1.07 Code and ERISA
Code means the Internal Revenue Code of 1986, as it may be amended from
time to time, and all regulations issued thereunder. Reference to a
section of the Code includes that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes
such section and any regulations issued thereunder.
ERISA means Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as it may be amended from time to time, and all
regulations issued thereunder. Reference to a section of ERISA includes
that section and any comparable section or sections of any future
legislation that amends. supplements or supersedes such section and any
regulations issued thereunder.
1.08 Compensation
Except where otherwise specifically provided in this Plan, Compensation
means Aggregate Compensation as defined in Section 7.03(a).
Compensation also includes any amounts contributed by the Employer or any
Related Employer on behalf of any Employee pursuant to a salary reduction
agreement which are not includable in the gross income of the Employee
due to Code Section 125, 401(k), 402(h) or 403(b).
Notwithstanding the foregoing, for all purposes under this Plan,
Compensation in excess of the Statutory Compensation Limit will be
disregarded. For purposes of applying this compensation limit, a Family
Member of a Highly Compensated Employee is subject to the single
aggregate compensation limit imposed on the Highly Compensated Employee
if the Family Member is either the Employee's spouse or is a lineal
descendant who has not attained the age of 19 by the end of the Plan
Year.
Statutory Compensation Limit means $150,000 ($200,000 for Plan Years
beginning before 1994), as adjusted in accordance with Code Section
401(a)(17)(B).
With respect to a given period, a Participant's Excess Compensation is
that portion, if any, of his Compensation which is in excess of his
Integration Level.
For any given Plan Year, a Participant's annual Integration Level is
equal to 100% of the Taxable Wage Base for the calendar year in which the
Plan Year begins.
Taxable Wage Base means the Social Security taxable wage base under Code
Section 3121(a)(1) which is in effect at the beginning of the Plan Year.
1.09 Effective Date
The Effective Date of the Plan is January 1, 1993.
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<PAGE> 6
Except as specified elsewhere in this document, the effective date of
this restatement of the Plan is July 10, 1995.
Section 4.05 is effective January 1, 1993.
1.10 Eligible Employee Classification
An Eligible Employee Classification is a classification of Employees, the
members of which are eligible to participate in the Plan. The Plan
covers all employee classifications except Leased Employees.
1.11 Eligible Participant
An Eligible Participant is a Participant who is eligible to share in the
allocation of a given Employer contribution; Eligible Participant means
any Participant who:
o is actively employed on the last day of the Plan Year; or
o retires, dies or becomes disabled during the Plan Year.
1.12 Employee
(a) In General
An Employee is any person who is employed by the Employer or a
Participating Employer.
(b) Leased Employee
A Leased Employee means any person who. pursuant to an agreement
between the Employer or any Related Employer ("Recipient
Employer") and any other person ("leasing organization"), has
performed services for the Recipient Employer on a substantially
full-time basis for a period of at least one year and such
services are of a type historically performed by employees in the
business field of the Recipient Employer.
Any Leased Employee will be treated as an Employee of the
Recipient Employer; however, contributions or benefits provided by
the leasing organization which are attributable to the services
performed for the Recipient Employer will be treated as provided
by the Recipient Employer. If all Leased Employees constitute
less than 20% of the Employer's non-highly-compensated work force
within the meaning of Code Section 414(n)(1)(C)(ii), then the
preceding sentence will not apply to any Leased Employee if such
Employee is covered by a money purchase pension plan ("Safe Harbor
Plan") which provides: (1) a nonintegrated employer contribution
rate of at least 10% of compensation, (2) immediate participation,
and (3) full and immediate vesting.
1-3
<PAGE> 7
Years of Eligibility Service for purposes of eligibility to
participate in the Plan and Years of Vesting Service for purposes
of determining a Participant's Vested Percentage include service
by an Employee as a Leased Employee.
1.13 Employer
The Employer and Plan Sponsor is Hollywood Theaters, Inc. A
Participating Employer is any organization which has adopted this Plan
and Trust in accordance with Section 8.07.
Predecessor Employer means Trans Texas Amusements, Inc. Service with a
Predecessor Employer will be included as Service with the Employer for
all purposes under this Plan.
1.14 Employment Commencement Date
The date an Employee first performs an Hour of Service for the Employer
is his Employment Commencement Date.
1.15 Entry Date
Effective January 1, 1996, Entry Date means the January 1st, April 1st,
July 1st or October 1st which coincides with or next follows the date
upon which the eligibility requirements are met.
Prior to January 1, 1996, Entry Date means the January 1st or July 1st
which coincides with or next follows the date upon which the eligibility
requirements are met.
1.16 Fiscal Year
Fiscal Year means the taxable year of the Plan Sponsor. The Fiscal Year
of the Plan Sponsor is the 12 month period beginning January 1 and ending
December 31.
1.17 Forfeiture
The term Forfeiture refers to that portion, if any, of a Participant's
Accrued Benefit which is in excess of his Vested Accrued Benefit
following the termination of the Participant's employment.
A Forfeiture is considered to occur as of the earlier of (a) the date of
the occurrence of the fifth of 5 consecutive One Year Breaks-in-Service
or (b) the date a Cash-Out Distribution occurs in accordance with the
provisions of Article 5.
1.18 Highly Compensated Definitions
(a) Compensation
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
1-4
<PAGE> 8
Employee under Code Section 125, 401(k), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation Limit will be
disregarded.
(b) Determination Year
Determination Year means the Plan Year for which the determination
of who is Highly Compensated is being made.
(c) Family Member
Family Member means an Employee who is the spouse, a lineal
ascendant or descendant, or the spouse of a lineal ascendant or
descendant of:
o a 5-percent owner (within the meaning of Code Section
416(i)) of the Employer or any Related Employer who is an
active or former Employee; or
o a Highly Compensated Employee who is one of the 10 most
highly compensated employees ranked on the basis of
Compensation paid by the Employer during the Determination
Year or the Lookback Year.
For purposes of this Section, the Family Member and the Highly
Compensated Employee will be considered one Employee. A Family
Member's Compensation and benefits will be aggregated with those
of the Highly Compensated Employee irrespective of whether the
Family Member would otherwise be treated as a Highly-Compensated
Employee or is in a category of Employees which may be excluded in
determining the number of Employees in the Top-Paid Group.
If an Employee is required to be aggregated as a member of more
than one family group, all eligible employees who are members of
those family groups which include that employee will be aggregated
as one family group.
For purposes of applying the compensation limit under Code Section
401(a)(17), a Family Member is subject to the single aggregate
compensation limit imposed on the Highly Compensated Employee if
the Family Member is either the Employee's spouse or is a lineal
descendant who has not attained the age of 19 by the end of the
Plan Year.
(d) Highly Compensated Employee
Highly Compensated Employee means any individual who is a Highly
Compensated Active Employee or a Highly Compensated Former
Employee within the meaning of Code Section 414(q) and the
regulations thereunder.
(e) Highly Compensated Active Employee
Highly Compensated Active Employee means any individual who during
the Determination Year or the Lookback Year:
1-5
<PAGE> 9
(1) Was at any time a 5-percent Owner (within the meaning of
Code Section 416(i)) of the Employer or any Related
Employer;
(2) Received Compensation from the Employer and all Related
Employers in excess of $75,000 (or any greater amount
determined by regulations issued by the Secretary of the
Treasury under Code Section 415(d));
(3) Received Compensation from the Employer and all Related
Employers in excess of $50,000 (or any greater amount
determined by regulations issued by the Secretary of the
Treasury under Code Section 415(d)) and was in the Top-Paid
Group of Employees; or
(4) Was an Officer of the Employer or any Related Employer (as
that term is defined in the regulations under Code Section
416(i)) and received Compensation greater than 50% of the
Defined Benefit Dollar Limit described in Section 7.03(f)
for the applicable year. For this purpose. if no Officer
received enough Compensation to be a Highly Compensated
Employee under the preceding sentence, the highest-paid
Officer will be treated as a Highly Compensated Employee.
The maximum number of Officers who will be treated as Highly
Compensated Active Employees under this paragraph is equal
to 10% of all Employees determined without regard to
statutory or other exclusions, subject to a minimum of 3
Employees and a maximum of 50 Employees.
No individual described in subparagraphs (2), (3) or (4) above
will be treated as a Highly Compensated Active Employee for the
Determination Year unless he (i) was a Highly Compensated Active
Employee for the Lookback Year (or would have been except that he
was not among the 100 most highly compensated Employees of the
Employer and all Related Employers for the Lookback Year) or (ii)
was among the 100 most highly compensated Employees of the
Employer and all Related Employers for the Determination Year.
(f) Highly Compensated Former Employee
Highly Compensated Former Employee means any Former Employee who
had a Separation Year (within the meaning of Treasury Regulation
Section 1.414(q)-lT Q&A-5) and was a Highly Compensated Active
Employee for either the Separation Year or any Determination Year
ending on or after the Employee's 55th birthday.
(g) Highly Compensated Group
Highly Compensated Group means all Highly Compensated Employees.
1-6
<PAGE> 10
(h) Lookback Year
Lookback Year means the 12-month period immediately preceding the
Determination Year.
(i) Non-Highly Compensated Employee
Non-Highly Compensated Employee means an Employee who is neither a
Highly Compensated Employee nor a Family Member.
(j) Non-Highly Compensated Group
Non-Highly Compensated Group means all Non-Highly Compensated
Employees.
(k) Top-Paid Group
Top-Paid Group means those individuals who are among the top 20
percent of Employees of the Employer and all Related Employers
when ranked on the basis of Compensation received during the year.
In determining the number of individuals in the Top-Paid Group
(but not the identity of those individuals), the following
individuals may be excluded:
(1) Employees who have not completed 6 months of Service by the
end of the year. For this purpose, an Employee who has
completed One Hour of Service in any calendar month will be
credited with one month of Service;
(2) Employees who normally work fewer than 17 1/2 hours per
week;
(3) Employees who normally work fewer than 6 months during any
year. For this purpose, an Employee who has worked on one
day of a month is treated as having worked for the whole
month;
(4) Employees who have not reached age 21 by the end of the
year;
(5) Nonresident aliens who received no earned income (which
constitutes income from sources within the United States)
within the year from the Employer or any Related Employer;
and
(6) Employees covered by a collective bargaining agreement
negotiated in good faith between the employee
representatives and the Employer or a group of employers of
which the Employer is a member if (i) 90% or more of all
employees of the Employer and all Related Employers are
covered by collective bargaining agreements, and (ii) this
Plan covers only Employees who are not covered under a
collective bargaining agreement.
1.19 Hour of Service
An Hour of Service means:
1-7
<PAGE> 11
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours will
be credited to the Employee for the computation period in which
the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military
duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph for any 12-month period. Hours
under this paragraph will be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations which
are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service will not be credited both under paragraphs (a) or
(b), as the case may be. and under this paragraph (c). These
hours will be credited to the Employee for the computation period
or periods to which the award or agreement pertains rather than
the computation period in which the award. agreement or payment
is made.
Hours of Service for all Employees will be determined on the basis
of actual hours for which an Employee is paid or is entitled to
payment. Hours of Service will be credited for employment with
any Related Employer or any Predecessor Employer. Hours of
Service will be credited for any individual considered an employee
under Code Section 414(n) or 414(o) and the regulations
thereunder.
Solely for purposes of determining whether a One Year
Break-in-Service has occurred, a Participant who is absent from
work on an authorized Leave of Absence or by reason of the
Participant's pregnancy, birth of the Participant's child,
placement of a child with the Participant in connection with the
adoption of such child, or for the purpose of caring for such
child for a period immediately following such birth or placement,
will receive credit for the Hours of Service which otherwise would
have been credited to the Participant but for such absence. The
Hours of Service credited under this paragraph will be credited in
the Plan Year in which the absence begins if such crediting is
necessary to prevent a One Year Break-in-Service in such Plan
Year; otherwise, such Hours of Service will be credited in the
following Plan Year. The Hours of Service credited under this
paragraph are those which would normally have been credited but
for such absence; in any case in which the Plan Administrator is
unable to determine such hours normally credited, 8 Hours of
Service per day will be credited. No more than 501 Hours of
Service will be credited under this paragraph for any 12-month
period. The Date of Severance is the second anniversary of the
date on which the absence begins. The period between the initial
date of absence and the first anniversary of the initial date of
absence is deemed to be a
1-8
<PAGE> 12
period of Service. The period between the first and second
anniversaries of the initial date of absence is neither a period
of service nor a period of severance.
1.20 Reserved
1.21 Leave of Absence
An authorized Leave of Absence means a period of time of one year or less
granted to an Employee by the Employer due to illness, injury, temporary
reduction in work force, or other appropriate cause or due to military
service during which the Employee's reemployment rights are protected by
law, provided the Employee returns to the service of the Employer on or
before the expiration of such leave, or in the case of military service,
within the time his reemployment rights are so protected or within 60
days of his discharge from military service if no federal law is
applicable. All authorized Leaves of Absence are granted or denied by
the Employer in a uniform and nondiscriminatory manner, treating
Employees in similar circumstances in a like manner.
If the Participant does not return to active service with the Employer on
or prior to the expiration of his authorized Leave of Absence he will be
considered to have had a Date of Severance as of the earlier of the date
on which his authorized Leave of Absence expired, the first anniversary
of the last date he worked at least one hour as an Active Participant, or
the date on which he resigned or was discharged.
1.22 Reserved
1.23 Normal Retirement Age
A Participant's Normal Retirement Age is his attained age on the date
which he satisfies the following requirements:
(a) Attainment of age 65, and
(b) Attainment of the fifth anniversary of the time the Participant
commenced participation in the Plan.
1.24 Normal Retirement Date
A Participant's Normal Retirement Date is the date on which the
Participant attains Normal Retirement Age.
1.25 One Year Break-in-Service
One Year Break-in-Service is defined in Section 1.42(a).
1-9
<PAGE> 13
1.26 Participant
The term Participant means an Employee or former Employee who is eligible
to participate in this Plan and who is or who may become eligible to
receive a benefit of any type from this Plan or whose Beneficiary may be
eligible to receive any such benefit.
(a) Active Participant means a Participant who is currently an
Employee in an Eligible Employee Classification.
(b) Disabled Participant means a Participant who has terminated his
employment with the Employer due to his Disability and who is
receiving or is entitled to receive benefits from the Plan.
(c) Retired Participant means a Participant who has terminated his
employment with the Employer after meeting the requirements for
his Normal Retirement Date and who is receiving or is entitled to
receive benefits from the Plan.
(d) Vested Terminated Participant means a Participant who has
terminated his employment with the Employer and who has a
nonforfeitable right to all or a portion of his or her Accrued
Benefit and who has not received a distribution of the value of
his or her Vested Accrued Benefit.
(e) Inactive Participant means a Participant who has (i) interrupted
his status as an Active Participant without becoming a Disabled,
Retired or Vested Terminated Participant and (ii) has a
non-forfeitable right to all or a portion of his Accrued Benefit
and has not received a complete distribution of his benefit.
(f) Former Participant means a Participant who has terminated his
employment with the Employer and who currently has no
nonforfeitable right to any portion of his or her Accrued Benefit.
1.27 Payroll Withholding Agreement
If a written Payroll Withholding Agreement is required pursuant to the
provisions of Article 3, then each Participant who elects to participate
in the Plan will file such agreement on or before the first day of the
payroll period for which the agreement is applicable (or at some other
time as specified by the Plan Administrator). Such agreement will be
effective for each payroll period thereafter until modified or amended.
The terms of Such agreement will provide that the Participant agrees to
have the Employer withhold, each payroll period, any whole percentage of
his Compensation (or such other amount as allowed by the Plan
Administrator under rules applied on a uniform and nondiscriminatory
basis), not to exceed the limitations of Article 7. In consideration of
such agreement, the Employer periodically will make a contribution to the
Participant's proper Account(s) in an amount equal to the total amount by
which the Participant's Compensation
1-10
<PAGE> 14
from the Employer was reduced during applicable payroll periods pursuant
to the Payroll Withholding Agreement.
Notwithstanding the above, Payroll Withholding Agreements will be
governed by the following general guidelines:
(a) A Payroll Withholding Agreement will apply to each payroll period
during which an effective agreement is on file with the Employer.
Upon termination of employment, such agreement will become void.
(b) The Plan Administrator will establish and apply guidelines
concerning the frequency and timing of amendments or changes to
Payroll Withholding Agreements. Notwithstanding the foregoing, a
Participant may revoke his Payroll Withholding Agreement at any
time and discontinue all future withholding.
(c) The Plan Administrator may amend or revoke its Payroll Withholding
Agreement with any Participant at any time. if the Employer
determines that such revocation or amendment is necessary to
insure that a Participant's Annual Additions for any Plan Year
will not exceed the limitations of Article 7 or to insure that the
requirements of Sections 401(k) and 401(m) of the Code have been
satisfied with respect to the amount which may be withheld and
contributed on behalf of the Highly Compensated Group.
(d) Except as provided above, a Payroll Withholding Agreement may not
be revoked or amended by the Participant or the Employer.
1.28 Plan, Plan and Trust, Trust
The terms Plan, Plan and Trust and Trust mean Hollywood Theaters, Inc.
Savings and Profit Sharing Plan. The Plan Identification Number is 001.
The Plan is a profit sharing plan.
The term Predecessor Plan means any qualified plan previously established
and maintained by the Employer and to which this Plan is the successor.
1.29 Plan Administrator
The Plan Administrator is Hollywood Theaters, Inc.
1.30 Plan Year
The Plan Year is the 12 month period beginning January 1 and ending
December 31. The Limitation Year coincides with the Plan Year.
1.31 Reserved
1-11
<PAGE> 15
1.32 Qualified Election
Qualified Election means the designation of a specific Beneficiary other
than the Participant's Surviving Spouse. Such Qualified Election must be
in writing and must be consented to by the Participant's spouse. The
spouse's written consent to a Qualified Election must be witnessed by a
representative of the Plan Administrator or a notary public. Such
consent will not be required if the Participant establishes to the
satisfaction of the Plan Administrator that such written consent may not
be obtained because there is no spouse, the spouse cannot be located or
other circumstances that may be prescribed by Treasury Regulations. Any
consent necessary under this provision will be valid only with respect to
the spouse who signs the consent (or in the event of a deemed Qualified
Election, the designated spouse). Additionally, a revocation of a prior
Qualified Election may be made by a Participant without the consent of
the spouse at any time before the commencement of benefits; however, any
Qualified Election which follows such revocation must be in writing and
must be consented to by the Participant's spouse. The number of
Qualified Elections or revocations of such Qualified Elections will not
be limited.
1.33 Related Employer
The terms Related Employer and Affiliated Employer are used
interchangeably and mean any other corporation, association, company or
entity on or after the Effective Date which is, along with the Employer,
a member of a controlled group of corporations (as defined in Code
Section 414(b)), a group of trades or businesses which are under common
control (as defined in Code Section 414(c)), an affiliated service group
(as defined in Code Section 414(m)), or any organization or arrangement
required to be aggregated with the Employer by Treasury Regulations
issued under Code Section 414(o).
1.34 Required Beginning Date
A Participant's Required Beginning Date for the commencement of benefit
payments from the Plan is the April 1 immediately following the calendar
year in which he attains age 70-1/2.
1.35 Surviving Spouse
Surviving Spouse means a deceased Participant's spouse who was married to
the Participant on the Participant's date of death. The Plan
Administrator and the Trustee may rely conclusively on a Participant's
written statement of his marital status. Neither the Plan Administrator
nor the Trustee is required at any time to inquire into the validity of
any marriage. the effectiveness of a common-law relationship or the claim
of any alleged spouse which is inconsistent with the Participant's report
of his marital status and the identity of his spouse.
1-12
<PAGE> 16
1.36 Top-Heavy Definitions
(a) Aggregate Account
Aggregate Account means, with respect to each Participant, the
value of all accounts maintained on behalf of the Participant,
whether attributable to Employer or Employee contributions, used
to determine Top-Heavy Plan status under the provisions of a
defined contribution plan. A Participant's Aggregate Account as
of the Determination Date will be the sum of:
o the balance of his Account(s) as of the most recent
valuation date occurring within a 12-month period ending on
the Determination Date (excluding any amounts attributable
to deductible voluntary employee contributions); plus
o contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are
not yet made or required to be made; plus
o any Plan Distributions made within the Plan Year that
includes the Determination Date or within the four preceding
Plan Years.
(b) Aggregation Group
Aggregation Group means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group
Each plan of the Employer in which a Key Employee is a
Participant, and each other plan of the Employer which
enables any plan in which a Key Employee participates to
meet the requirements of Code Section 401(a)(4) or 410, will
be aggregated and the resulting group will be known as a
Required Aggregation Group.
Each plan in the Required Aggregation Group will be
considered a Top-Heavy Plan if the Required Aggregation
Group is a Top-Heavy Group. No plan in the Required
Aggregation Group will be considered a Top-Heavy Plan if the
Required Aggregation Group is not a Top-Heavy Group.
(2) Permissive Aggregation Group
The Employer may also include any other plan not required to
be included in the Required Aggregation Group, provided the
resulting group (to be known as a Permissive Aggregation
Group), taken as a whole, would continue to satisfy the
provisions of Code Sections 401(a)(4) and 410.
1-13
<PAGE> 17
Only a plan that is part of the Required Aggregation Group
will be considered a Top-Heavy Plan if the Permissive
Aggregation Group is a Top-Heavy Group. No plan in the
Permissive Aggregation Group will be considered a Top-Heavy
Plan if the Permissive Aggregation Group is not a Top-Heavy
Group.
Only those plans of the Employer in which the Determination
Dates fall within the same calendar year will be aggregated
in order to determine whether the plans are Top-Heavy Plans.
(c) Determination Date
Determination Date means the last day of the preceding Plan Year,
or, in the case of the first Plan Year, the last day of the first
Plan Year.
(d) Key Employee
Key Employee means any Employee or former Employee (and his
Beneficiary) who, at any time during the Plan Year or any of the
preceding four Plan Years, was:
(1) A "Five Percent Owner" of the Employer. "Five Percent
Owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than 5% of the
value of the outstanding stock of the Employer or stock
possessing more than 5% of the total combined voting power
of all stock of the Employer. If the Employer is not a
corporation, Five Percent Owner means any person who owns
more than 5% of the capital or profits interest in the
Employer. In determining percentage ownership hereunder,
Related Employers will be treated as separate Employers; or
(2) A "One Percent Owner" of the Employer having Compensation
from the Employer of more than $150,000. "One Percent
Owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than 1% of the
value of the outstanding stock of the Employer or stock
possessing more than 1% of the total combined voting power
of all stock of the Employer. If the Employer is not a
corporation, One Percent Owner means any person who owns
more than 1% of the capital or profits interest in the
Employer. In determining percentage ownership hereunder,
Related Employers will be treated as separate Employers.
However, in determining whether an individual has
Compensation of more than $150,000, Compensation from each
Related Employer will be taken into account.
(3) One of the 10 Employees having Compensation not less than
the Defined Contribution Dollar Limit (as defined in Section
7.03(j) for the Plan Year) who owns (or is considered as
owning within the meaning of Code Section
1-14
<PAGE> 18
318) both greater than 1/2% interest and the largest
interests in all Employers required to be aggregated under
Code Sections 414(b), (c), (m) and (o);
(4) An officer (within the meaning of the regulations under Code
Section 416) of the Employer having Compensation greater
than 50% of the Defined Benefit Dollar Limit as defined in
Section 7.03(f) for the Plan Year;
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus any amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
Employee under Code Section 125, 401(k), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation Limit
is disregarded.
(e) Non-Key Employee
Non-Key Employee means any Employee (and his Beneficiaries) who is
not a Key Employee.
(f) Plan Distributions
Plan distributions include distributions made before January 1,
1984, and distributions under a terminated plan which, if it had
not been terminated, would have been required to be included in an
aggregation group. However, distributions made after the
valuation date and before the Determination Date are not included
to the extent that they are already included in the Participant's
Single Sum Benefit as of the valuation date.
With respect to "unrelated" rollovers and plan-to-plan transfers
(those which are both initiated by an employee and made from a
plan maintained by one employer to a plan maintained by another
employer), if such a rollover or plan-to-plan transfer is made
from this Plan. it will be considered as a distribution for
purposes of this Section. If such a rollover or plan-to-plan
transfer is made to this Plan, it will not be considered as part
of the Participant's Single Sum Benefit. However, an unrelated
rollover or plan-to-plan transfer accepted before January 1. 1984.
will be considered as part of the Participant's Single Sum
Benefit.
With respect to "related" rollovers and plan-to-plan transfers
(those which are either not initiated by an employee or are made
from one plan to another plan maintained by the same employer), if
such a rollover or plan-to-plan transfer is made from this Plan,
it will not be considered as a distribution for purposes of this
Section. If such a rollover or plan-to-plan transfer is made to
this Plan, it will be considered as part of the Participant's
Single Sum Benefit.
1-15
<PAGE> 19
(g) Present Value of Accrued Benefit
In the case of the defined benefit plan, a Participant's Present
Value of Accrued Benefit, for Top-Heavy determination purposes.
will be determined using the following rules:
(1) The Present Value of Accrued Benefit will be determined as
of the most recent "valuation date" within a 12-month period
ending on the Determination Date.
(2) For the first Plan Year, the Present Value of Accrued
Benefit will be determined as if (A) the Participant
terminated service as of the Determination Date; or (B) the
Participant terminated service as of the valuation date, but
taking into account the estimated Present Value of Accrued
Benefits as of the Determination Date.
(3) For any other Plan Year, the Present Value of Accrued
Benefit will be determined as if the Participant terminated
service as of the valuation date.
(4) The valuation date must be the same date used for computing
the defined benefit plan minimum funding costs, regardless
of whether a calculation is performed that plan year.
(5) A Participant's Present Value of Accrued Benefit as of a
Determination Date will be the sum of:
o the present value of his Accrued Benefit determined
using the actuarial assumptions which are specified
below; plus
o any Plan Distributions made within the Plan Year that
includes the Determination Date or within the four
preceding Plan Years; plus
o any employee contributions, whether voluntary or
mandatory. However, amounts attributable to
qualified voluntary employee contributions, as
defined in Code Section 219(e)(2) will not be
considered to be a part of the Participant's Present
Value of Accrued Benefit.
For purposes of this Section, the present value of a
Participant's Accrued Benefit will be equal to the greater
of the present value determined using the actuarial
assumptions which are specified for Actuarial Equivalent
purposes or the present value determined using the
"Applicable Interest Rate." The Applicable Interest Rate is
the rate or rates that would be used by the Pension Benefit
Guaranty Corporation for a trusteed single-employer plan to
value a
1-16
<PAGE> 20
Participant's or Beneficiary's benefit on the date of
distribution (the "PBGC Rate"). If the present value using
the PBGC Rate exceeds $25,000, the Applicable Interest Rate
is 120% of the PBGC Rate. However, the use of 120% of the
PBGC Rate will never result in a present value less than
$25,000.
(6) Solely for the purpose of determining if this Plan (or any
other plan included in a Required Aggregation Group of which
this Plan is a part) is Top- Heavy, the Accrued Benefit of
any Employee other than a Key Employee will be determined
under
(A) the method, if any, that uniformly applies for
accrual purposes under all plans maintained by the
Employer or any Related Employer, or
(B) if there is no such method, as if the benefit accrued
no more rapidly than the slowest accrual rate
permitted under the fractional accrual rate of Code
Section 411(b)(1)(C).
(h) Single Sum Benefit
The Single Sum Benefit for any Participant in a defined benefit
pension plan will be equal to his Present Value of Accrued
Benefit. The Single Sum Benefit for any Participant in a defined
contribution plan will be equal to his Aggregate Account.
(i) Top-Heavy Group
Top-Heavy Group means an Aggregation Group in which, as of the
Determination Date, the Single Sum Benefits of all Key Employees
under all plans included in the group exceeds 60% of a similar sum
determined for all Participants.
Super Top-Heavy Group means an Aggregation Group in which, as of
the Determination Date, the sum of (1) the Single Sum Benefits of
all Key Employees under all defined benefit plans included in the
group, plus (2) the Single Sum Benefit of all Key Employees under
all defined contribution plans included in the group exceeds 90%
of a similar sum determined for all Participants.
(j) Top-Heavy Plan
This Plan will be a Top-Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date,
the Single Sum Benefits of all Key Employees exceed 60% of the
Single Sum Benefits of all Participants under this Plan.
This Plan will be a Super Top-Heavy Plan for any Plan Year
beginning after December 31, 1983, in which, as of the
Determination Date, the Single Sum Benefits
1-17
<PAGE> 21
of all Key Employees exceed 90% of the Single Sum Benefits of all
Participants under this Plan.
If any Participant is a Non-Key Employee for a given Plan Year,
but was a Key Employee for any prior Plan Year, the Participant's
Single Sum Benefit will not be taken into account for purposes of
determining whether this Plan is a Top-Heavy or Super Top-Heavy
Plan (or whether any Aggregation Group which includes this Plan is
a Top-Heavy or Super Top-Heavy Group).
If an individual has performed no services for the Employer at any
time during the 5-year period ending on the Determination Date,
any Single Sum Benefit of such individual will not be taken into
account for purposes of determining whether this Plan is a
Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation
Group which includes this Plan is a Top-Heavy Group or Super
Top-Heavy Group).
1.37 Trust Fund, Trust
These terms mean the total cash, securities, real property, insurance
contracts and any other property held by the Trustee.
1.38 Trustee
The Trustee is Texas Commerce Bank, NA. Effective January 1, 1996, the
Trustee is Charles Schwab Trust Company or any successor Trustee.
1.39 Vested Percentage
A Participant's Vested Percentage as of a given date will be that
percentage determined in accordance with the Vesting Schedule.
Notwithstanding the preceding, a Participant will be 100% vested upon
reaching the earlier of (a) his Normal Retirement Age or (b) the later of
the date upon which the Participant attains age 65 or reaches the 5th
anniversary of the date he commenced participation in the Plan.
1.40 Vesting Schedule
A Participant's Vested Percentage will be determined in accordance with
the following table:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 3 Years 0%
3 Years 20%
4 Years 40%
5 Years 60%
6 Years 80%
7 Years or more 100%
</TABLE>
1-18
<PAGE> 22
Notwithstanding the foregoing, in any Plan Year in which the Plan is
determined to be a Top-Heavy Plan, the following Vesting Schedule will
apply in lieu of the Vesting Schedule provided for above:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 80%
6 Years or more 100%
</TABLE>
If in any subsequent Plan Year the Plan ceases to be a Top-Heavy Plan,
the above Vesting Schedule will continue to apply unless the Employer
elects, by Written Resolution, to resume the Vesting Schedule specified
at the beginning of this Section. Any such resolution will be treated as
a Plan Amendment and be subject to the restrictions contained in Section
10.06.
1.41 Written Resolution
The terms Written Resolution and Written Consent are used interchangeably
and reflect decisions, authorizations, etc. by the Employer. A Written
Resolution will be evidenced by a resolution of the Board of Directors of
the Employer.
1.42 Year of Service
(a) Crediting Years of Service
Years of Service are determined using the Elapsed Time Method
and/or the Hours of Service Method as specified in this Section.
(1) Elapsed Time Method
Under the Elapsed Time Method, Years of Service are based
upon an Employee's Elapsed Time of employment irrespective
of the number of hours actually worked during such period; a
Year of Service (including a fraction thereof) will be
credited for each completed 365 days of Elapsed Time which
need not be consecutive. The following terms are used in
determining Years of Service under the Elapsed Time Method:
(A) Date of Severance (Termination) - means the earlier
of (i) the actual date an Employee resigns, is
discharged, dies or retires, or (ii) the first
anniversary of the date an Employee is absent from
work (with or without pay) for any other reason,
e.g., disability, vacation, leave of absence, layoff,
etc.
1-19
<PAGE> 23
(B) Elapsed Time - means the total period of service
which has elapsed between a Participant's Employment
Commencement Date and Date of Termination including
Periods of Severance where a One Year
Break-in-Service does not occur.
(C) Employment Commencement Date - means the date an
Employee first performs one Hour of Service for the
Employer.
(D) One Year Break-in-Service - means any 365-day period
following an Employee's Date of Termination as
defined above in which the Employee does not complete
at least one Hour of Service.
(E) Period of Severance - is the time between the actual
Date of Severance as defined above and the subsequent
date, if any, on which the Employee performs an Hour
of Service.
All periods of employment will be aggregated including
Periods of Severance unless there is a One Year
Break-in-Service.
(2) Hours of Service Method
Under the Hours of Service Method, a Year of Service is
credited for each 12 consecutive month Computation Period
during which an Employee is credited with a specified number
of Hours of Service.
Under the Hours of Service Method, a One Year
Break-in-Service means any Computation Period during which
an Employee completes 500 or fewer Hours of Service.
Years of Eligibility Service for purposes of determining
eligibility to participate in the Plan and Years of Vesting
Service for purposes of determining a Participant's Vested
Percentage include service with any organization which is a
Related Employer with respect to the Employer.
(b) For Eligibility Purposes
Years of Service for purposes of eligibility to participate in the
Plan are referred to as Years of Eligibility Service and are
determined using the Hours of Service Method.
A Year of Eligibility Service is credited for each Computation
Period during which an Employee is credited with at least 1,000
Hours of Service. The initial Computation Period is the 12
consecutive month period beginning with the Employee's Employment
Commencement Date. Thereafter, the Computation Period
1-20
<PAGE> 24
is the Plan Year beginning with the Plan Year in which the initial
Computation Period ends.
All of an Employee's Years of Eligibility Service are taken into
account in determining his eligibility to participate.
(c) For Vesting Purposes
Years of Service for purposes of computing a Participant's Vested
Percentage are referred to as Years of Vesting Service and are
determined using the Elapsed Time Method.
All of a Participant's Years of Vesting Service are taken into
account in determining his Vested Percentage.
1-21
<PAGE> 25
ARTICLE 2
PARTICIPATION
2.01 Participation
An Employee will become eligible to participate in the Plan on the Entry
Date which coincides with or next follows the attainment of age 21 and
the completion of one Year of Eligibility Service.
An Employee who is eligible to participate as of the Effective Date or as
of a given Entry Date will automatically become a Participant as of such
date. An Employee who is otherwise eligible to participate may
irrevocably elect not to participate in the Plan. Any election under
this paragraph must be in writing and according to guidelines established
by the Plan Administrator.
2.02 Participation After Reemployment
An Employee who has satisfied all of the eligibility requirements but
terminates employment prior to his Entry Date will participate in the
Plan immediately upon returning to the employ of the Employer.
A Participant or Former Participant who has terminated employment will
participate as an Active Participant in the Plan immediately upon
returning to the employ of the Employer.
2.03 Change in Employment Classification
In the event a Participant becomes ineligible to participate because he
is no longer a member of an Eligible Employee Classification, the
Participant will participate immediately upon his return to an Eligible
Employee Classification.
In the event an Employee who is not a member of an Eligible Employee
Classification becomes a member of such a classification, such Employee
will begin to participate immediately if he has satisfied the eligibility
requirements which are specified in Section 2.01.
2-1
<PAGE> 26
ARTICLE 3
PARTICIPANT ACCOUNTS
3.01 Salary Deferral Account
Salary Deferral Account means the Account of a Participant reflecting
applicable contributions, investment income or loss allocated thereto and
distributions. A Participant's Salary Deferral Account is 100% vested at
all times.
(a) Salary Deferral Contributions
(1) Amount of Contribution
Each Participant may elect to make a Salary Deferral
Contribution each Contribution Period not to exceed 15% of
the Participant's Compensation. Such contribution will be
designated as a percentage of Compensation and will be equal
to an even multiple of 1% or such other amount as allowed by
the Plan Administrator.
(2) Payroll Withholding
All Salary Deferral Contributions will be made pursuant to a
Payroll Withholding Agreement in accordance with Section
1.27.
(3) Nondiscrimination Requirements
All Salary Deferral Contributions are Elective Contributions
within the meaning of Section 4.05(a) and must satisfy the
Nondiscrimination Requirements of Section 4.05.
(4) Excess Deferrals
The maximum amount of Salary Deferral Contribution which can
be made under the Plan on behalf of any Participant during
any calendar year will be limited to that amount which would
not constitute an Excess Deferral as defined in Section
4.05. The Plan Administrator will distribute any Excess
Deferral, together with the income allocable to it, to the
Participant no later than April 15 of the calendar year
immediately following the year of the Excess Deferral. If a
Participant notifies the Plan Administrator before March 1
of any calendar year that Excess Deferrals have been made on
his account for the previous calendar year by reason of
participation in a Cash or Deferred Arrangement maintained
by another employer or employers, and if the Participant
requests that the Plan Administrator distribute a specific
amount to him on account of Excess Deferrals and certifies
that the requested amount is an Excess Deferral, the Plan
Administrator will designate the amount requested together
with the income allocable to it as a distribution of
3-1
<PAGE> 27
Excess deferrals and distribute such amount no later than
April 15 of that calendar year. The amount of Excess
Deferrals to be distributed will be reduced by any Excess
Contributions previously distributed or recharacterized with
respect to the Plan Year beginning with or within the
calendar year. The amount of income allocable to the Excess
Deferral will be determined as described in Section 4.05.
(5) Timing of Deposits
The Employer will deposit all Salary Deferral Contributions
no later than 90 days after the date on which the amounts
withheld would otherwise have been paid to the Participant
in cash.
The Contribution Period for Salary Deferral Contributions is
each month.
(b) Financial Hardship Withdrawals
A Participant may file with the Plan Administrator a written
request to withdraw, in order to avoid or alleviate a Financial
Hardship, any amount not to exceed that portion of his Salary
Deferral Account which represents his total Salary Deferral
Contributions.
The Plan Administrator will allow Financial Hardship withdrawals
only if they are necessary to satisfy a Participant's immediate
and heavy financial need.
(1) Immediate and Heavy Financial Need
A withdrawal will be deemed to be made due to an immediate
and heavy financial need of the Participant if it is made
because of:
o Expenses for medical care described in Code Section
213(d) previously incurred by the Participant, his
spouse or any of his dependents (as defined in Code
Section 152) or necessary for these Persons to obtain
medical care described in Code Section 213(d);
o Costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the
Participant;
o Payment of tuition or educational fees for the next
12 months of post-secondary education for the
Participant, his spouse, children or dependents (as
defined in Code Section 152);
o Prevention of the eviction of the Participant from
his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
3-2
<PAGE> 28
(2) Necessary To Satisfy Financial Need
No withdrawal may exceed the amount necessary to satisfy the
Participant's immediate and heavy financial need. However,
the amount of an immediate and heavy financial need may
include any amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to
result from the distribution. The Plan Administrator will
allow the withdrawal if it determines, after a full review
of the Participant's written request and evidence presented
by the Participant showing immediate and heavy financial
need as well as the Participant's lack of other reasonably
available resources, that the withdrawal is necessary to
satisfy the need. No withdrawal will be treated as
necessary to the extent it can be satisfied from other
resources which are reasonably available to the Participant,
including those of the Participant's spouse and minor
children. A withdrawal will be treated as necessary to the
extent the Participant demonstrates to the satisfaction of
the Plan Administrator that the need cannot be relieved by
any of the following:
o Reimbursement or compensation by insurance or
otherwise;
o Reasonable liquidation of assets to the extent the
liquidation would not itself cause an immediate and
heavy financial need;
o Cessation of Salary Deferral Contributions or
Employee Contributions (as defined in Section
4.05(a)) or both under any plan maintained by any
employer;
o Other distributions or nontaxable (at the time of the
loan) loans from plans maintained by any employer;
o Borrowing from commercial sources on reasonable
commercial terms.
Unless the Plan Administrator has evidence to the contrary,
it may rely upon the Participant's written representation
that the need cannot be relieved by any of the foregoing.
(3) Safe Harbor
The Plan Administrator will not allow any withdrawal until
the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently
available to the Participant under all plans maintained by
the Employer. Upon the withdrawal of any portion of a
Participant's Salary Deferral Account, the Participant will
become ineligible for any Elective Contribution to this Plan
or any other plan maintained by the Employer, or to make any
contribution to this Plan or any other plan maintained by
the
3-3
<PAGE> 29
Employer until the first day of the first payroll period
which begins not less than 12 months following the date of
withdrawal. For this purpose the phrase "any other plan
maintained by the Employer" means all qualified and
nonqualified plans of deferred compensation maintained by
the Employer. The phrase includes stock option, stock
purchase, or similar plans, or a cash or deferred
arrangement that is part of a cafeteria plan within the
meaning of Code Section 125. It does not include the
mandatory employee contribution portion of a defined benefit
plan, nor does it include a health or welfare benefit plan
(including one that is part of a cafeteria plan within the
meaning of Code Section 125). Furthermore, the maximum
amount of Salary Deferral Contributions which can be made
under the Plan on behalf of any Participant during the
calendar year which follows the calendar year in which the
withdrawal was made will be limited to the amount which
would not be treated as an Excess Deferral for that year
reduced by the amount of Salary Deferral Contributions made
on behalf of the Participant in the calendar year of
withdrawal.
(c) Distributions
No distribution may be made from the Participant's Salary Deferral
Account or any account comprised of Matching Contributions or
Nonelective Contributions which are treated as Elective
Contributions in accordance with the provisions of Section 4.05(h)
except under one of the following circumstances:
o the Participant's retirement, death, disability or
termination of employment;
o the Participant's attaining of age 59 1/2;
o the avoidance or alleviation of a Financial Hardship;
o the termination of this Plan without the establishment of a
successor plan within the meaning of Treasury Regulation
Section 1.401(k)-l(d)(3);
o the sale or other disposition by the Employer of at least 85
percent of the assets used by the Employer in a trade or
business to an unrelated corporation which does not maintain
the plan, but only if the Participant continues employment
with the corporation acquiring the assets and only if the
Employer continues to maintain this Plan; or
o the sale or other disposition by the Employer of its
interest in a subsidiary to an unrelated entity which does
not maintain the plan, but only if the Participant continues
employment with the subsidiary and only if the Employer
continues to maintain this Plan.
3-4
<PAGE> 30
This paragraph does not apply to distributions of Excess
Deferrals, Excess Contributions, or excess Annual Additions.
3.02 Employer Matching Account
Employer Matching Account means the Account of a Participant reflecting
applicable contributions, forfeitures, investment income or loss
allocated thereto and distributions. A Participant's Employer Matching
Account is subject to the Vesting Schedule.
(a) Employer Matching Contributions
Each Plan Year, the Employer may, within the time prescribed by
law for making a deductible contribution, make an Employer
Matching Contribution to the Trust.
For a given Plan Year, the total Employer Matching Contribution,
if any, made by the Employer will be an amount determined and
authorized by the Employer for such Plan Year; however, the
Employer will not authorize Employer Matching Contributions at
such times or in such amounts that the Plan, in operation,
discriminates in favor of Highly Compensated Employees.
The target Employer Matching Contribution to be made to an
Eligible Participant's Employer Matching Account is equal to 50%
of that portion of the Participant's Salary Deferral Contribution
which is not in excess of 4% of the Participant's Compensation.
If the sum of the target Employer Matching Contributions to be
made for all Participants is less than or greater than the total
Employer Matching Contribution made by the Employer in accordance
with the provisions of this Section, then the actual Employer
Matching Contribution allocated to each Eligible Participant's
Employer Matching Account will be adjusted proratably so that the
sum of the actual Employer Matching Contributions made for all
Participants is equal to the total Employer Matching Contribution
made by the Employer.
All Employer Matching Contributions are Matching Contributions
within the meaning of Section 4.05(a) and must satisfy the
Nondiscrimination Requirements of Section 4.05.
(b) Contribution Period
The Contribution Period for Employer Matching Contributions is
each calendar year.
(c) Application of Forfeitures
Forfeitures from a Participant's Employer Matching Account will be
used to reduce Employer Matching Contributions in the Plan Year in
which the Forfeitures are determined to occur.
3-5
<PAGE> 31
(d) Withdrawals
A Participant may not withdraw any portion of his Employer
Matching Account prior to the time when benefits otherwise become
payable in accordance with the provisions of Article 5.
3.03 Profit Sharing Account
Profit Sharing Account means the Account of a Participant reflecting
applicable contributions, forfeitures, investment income or loss
allocated thereto and distributions. A Participant's Profit Sharing
Account is subject to the Vesting Schedule.
(a) Profit Sharing Contributions
Each Plan Year, the Employer may, within the time prescribed by
law for making a deductible contribution, make a Profit Sharing
Contribution to the Trust.
For a given Plan Year, the total Profit Sharing Contribution, if
any, made by the Employer will be an amount determined and
authorized by the Employer for such Plan Year; however, the
Employer will not authorize Profit Sharing Contributions at such
times or in such amounts that the Plan, in operation,
discriminates in favor of Highly Compensated Employees.
The total Profit Sharing Contribution made by the Employer will
first be allocated by the ratio which each Eligible Participant's
Compensation plus Excess Compensation bears to the total
Compensation plus Excess Compensation of all Eligible
Participants. The allocation for each Participant will not exceed
the product of (i) the Participant's Compensation plus Excess
Compensation multiplied by (ii) the rate of tax applicable under
Code Section 3111(a) attributable to old-age insurance as in
effect on the first day of the Plan Year (but not less than 5.7%).
Any remaining Profit Sharing Contributions will be allocated by
the ratio which each Eligible Participant's Compensation bears to
the total Compensation of all Eligible Participants.
With respect to Profit Sharing Contributions, if an Employee
enters the Plan on an Entry Date other than the first day of a
Plan Year, the Employee's Compensation which would otherwise be
considered will be limited to the Compensation actually paid to
the Employee while he is a Participant in the Plan and his
Integration Level will be equal to the annual Integration Level
multiplied by a fraction which is equal to the portion of the
Accounting Period during which the Employee was a participant in
the Plan.
(b) Contribution Period
The Contribution Period for Profit Sharing Contributions is each
calendar year.
3-6
<PAGE> 32
(c) Application of Forfeitures
Forfeitures from a Participant's Profit Sharing Account will be
added to and allocated along with Profit Sharing Contributions in
the Plan Year in which the Forfeitures are determined to occur.
(d) Minimum Allocation for Top-Heavy Plan
Notwithstanding anything contained herein to the contrary, for any
Plan Year in which this Plan is determined to be Top-Heavy, a
Participant (including any Employee who is excluded from the Plan
because his Compensation is less than a stated amount) will be
entitled to a minimum allocation of Profit Sharing Contributions
equal to 3% of the Participant's Aggregate Compensation received
during the Plan Year. This minimum allocation will be provided to
each Participant who is employed by the Employer on the last day
of the Plan Year whether or not he or she is an otherwise Eligible
Participant or fails to make any mandatory Employee contribution
to the Plan.
The percentage referred to in the preceding paragraph will not
exceed the percentage of Aggregate Compensation at which Profit
Sharing Contributions are made or allocated to the Key Employee
for whom such percentage is the largest; provided, however, this
sentence will not apply if the Plan is required to be included in
an Aggregation Group to meet the requirements of Code Sections
401(a)(4) or 410.
(e) Withdrawals
A Participant may not withdraw any portion of his Profit Sharing
Account prior to the time when benefits otherwise become payable
in accordance with the provisions of Article 5.
3.04 Rollover Account
Rollover Account means the Account of a Participant reflecting applicable
contributions, investment income or loss allocated thereto and
distributions. A Participant's Rollover Account is 100% vested at all
times.
(a) Rollover Contributions
Rollover Contribution means a contribution to the Plan by a
Participant where such contribution is the result of a prior
distribution from an Individual Retirement Account, an Individual
Retirement Annuity or another qualified plan. Such prior
contribution must be a rollover amount described in Section
402(c)(4) of the Code or a contribution described in Section
408(d)(3) of the Code.
Each Employee who is a member of an Eligible Employee
Classification, regardless of whether he is a Participant in the
Plan, will have the right to make a Rollover Contribution of cash
(or other property of a form acceptable to the Plan Administrator
and the Trustee) into the Plan from another qualified plan. If
the
3-7
<PAGE> 33
Employee is not a Participant hereunder, his Rollover Account will
constitute his entire interest in the Plan. In no event will the
existence of a Rollover Account entitle the Employee to
participate in any other benefit provided by the Plan.
If specifically provided for in a Written Resolution, Rollover
Contribution will also mean the amount of assets transferred,
pursuant to Section 10.05, to this Plan from another plan which is
qualified under Code Sections 401(a) and 501(a).
(b) Withdrawals
A Participant may withdraw all or any portion of his Rollover
Account at any time. However, if a Participant makes such a
withdrawal, he may not make another withdrawal from his Rollover
Account until three months have elapsed.
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ARTICLE 4
ACCOUNTING AND VALUATION
4.01 General Powers of the Plan Administrator
The Plan Administrator will have the power to establish rules and
guidelines, which will be applied on a uniform and non-discriminatory
basis, as it deems necessary, desirable or appropriate with regard to
accounting procedures and to the timing and method of contributions to
and/or withdrawals from the Plan.
4.02 Valuation Procedure
As of each Valuation Date, the Plan Administrator will determine from the
Trustee the fair market value of Trust assets and will, subject to the
provisions of this Article, determine the allocation of such value among
the Accounts of the Participants; in doing so, the Plan Administrator
will in the following order:
(a) Credit or charge, as appropriate, to the proper Accounts all
contributions, payments, transfers, forfeitures, withdrawals or
other distributions made to or from such Accounts since the last
preceding Valuation Date and that have not been previously
credited or charged.
(b) Credit or charge, as applicable, each Account with its pro rata
portion of the appreciation or depreciation in the fair market
value of the Trust Fund since the prior Valuation Date. Such
appreciation or depreciation will reflect investment income,
realized and unrealized gains and losses, other investment
transactions and expenses paid from the Trust Fund.
4.03 Reserved
4.04 Participant Direction of Investment
(a) Application of this Section
Subject to the provisions of this Section, each Participant will
have the right to direct the investment of all of his Accounts
among the Specific Investment Funds which are made available by
the Plan Administrator.
(b) General Powers of the Trustee
The Trustee will have the power to establish rules and guidelines
as it deems necessary, desirable or appropriate with regard to the
directed investment of contributions in accordance with this
Section. Such rules and guidelines are intended to comply with
Section 404(c) of ERISA and the regulations thereunder. Included
in such powers, but not by way of limitation, are the following
powers and rights.
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(1) To temporarily invest those contributions which are pending
directed investment in a Specific Investment Fund, in the
General Investment Fund or in some other manner as
determined by the Trustee.
(2) To establish rules with regard to the transfer of all or any
part of the balance of an Account or Accounts of a given
Participant from one Investment Fund to another.
(3) To maintain any part of the assets of any Investment Fund in
cash, or in demand or short-term time deposits bearing a
reasonable rate of interest, or in a short-term investment
fund that provides for the collective investment of cash
balances or in other cash equivalents having ready
marketability, including, but not limited to, U.S. Treasury
Bills, commercial paper, certificates of deposit, and
similar types of short-term securities, as may be deemed
necessary by the Trustee in its sole discretion.
The Trustee will not be liable for any loss that results from a
Participant's exercise of control over the investment of the
Participant's Accounts. If the Participant fails to provide
adequate directions, the Plan Administrator will direct the
investment of the Participant's Account. The Trustee will have no
duty to review or make recommendations regarding a Participant's
investment directions.
(c) Accounting
The Plan Administrator will maintain a set of accounts for each
Investment Fund. The accounts of the Plan Administrator for each
Investment Fund will indicate separately the dollar amounts of all
contributions made to such Investment Fund by or on behalf of each
Participant from time to time. The Plan Administrator will
compute the net income from investments; net profits or losses
arising from the sale, exchange, redemption, or other disposition
of assets, and the prorata share attributable to each Investment
Fund of the expenses of the administration of the Plan and Trust
and will debit or credit, as the case may be, such income, profits
or losses, and expenses to the unsegregated balance in each
Investment Fund from time to time. To the extent that the
expenses of the administration of the Plan and Trust are not
directly attributable to a given Investment Fund, such expenses,
as of a given Valuation Date, will be prorated among each
Investment Fund; such allocation of expenses will, in general, be
performed in accordance with the guidelines which are specified in
this Article.
(d) Future Contributions
Each Participant who chooses to participate in the Plan will elect
the percentage of those contributions which are subject to
Participant direction of investment which is to be deposited to
each available Investment Fund. Such election will be in effect
until modified. If any Participant fails to make an election by
the appropriate date,
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he will be deemed to have elected an Investment Fund(s) as
determined by the Plan Administrator. Elections will be limited
to multiples of one percent (or such other reasonable increments
as determined by the Plan Administrator).
(e) Change in Investment of Past Contributions
A Participant may file an election with the Plan Administrator to
shift the aggregate amount or reasonable increments (as determined
by the Plan Administrator) of the balance of his existing Account
or Accounts which are subject to Participant direction of
investment among the various Investment Funds as of the first day
of each Accounting Period (or such other time or times as
determined by the Plan Administrator). Elections will be limited
to multiples of one percent (or such other reasonable increments
as determined by the Plan Administrator).
(f) Changes In Investment Elections
Elections with respect to future contributions and/or with respect
to changes in the investment of past contributions will be in
writing on a form provided by the Plan Administrator, except that
each Participant may authorize the Plan Administrator in writing
on an authorization form provided by the Plan Administrator to
accept such directions as may be made by the Participant by use of
a telephone voice response system maintained for such purpose.
The Plan Administrator may establish additional rules and
procedures with respect to investment election changes including,
for example, the number of allowed changes per specified period,
the amount of reasonable fee, if any, which will be charged to the
Participant for making a change, specified dates or cutoff dates
for making a change, etc.
(g) Addition and Deletion of Specific Investment Funds
Specific Investment Funds may be made available from time to time
by the Trustee. Specific Investment Funds, as are from time to
time made available by the Trustee, may be deleted or added from
time to time by the Plan Administrator. The Plan Administrator
will establish guidelines for the proper administration of
affected Accounts when a Specific Investment Fund is added or
deleted.
4.05 Nondiscrimination Requirements
(a) Definitions Applicable to the Nondiscrimination Requirements
The following definitions apply to this Section:
(1) Aggregate Limit
With respect to a given Plan Year, Aggregate Limit means the
greater of the sum of [(A) + (B)] or the sum of [(C) + (D)]
where:
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(A) is equal to 125% of the greater of DP or CP;
(B) is equal to 2 percentage points plus the lesser of DP
or CP, not to exceed 2 times the lesser of DP or CP;
(C) is equal to 125% of the lesser of DP or CP;
(D) is equal to 2 percentage points plus the greater of
DP or CP, not to exceed 2 times the greater of DP or
CP;
DP represents the Deferral Percentage for the Non-highly
Compensated Group eligible under the Cash or Deferred
Arrangement for the Plan Year; and
CP represents the Contribution Percentage for the Non-highly
Compensated Group eligible under the plan providing for the
Employee Contributions or Employer Matching Contributions
for the Plan Year beginning with or within the Plan Year of
the Cash or Deferred Arrangement.
(2) Cash or Deferred Arrangement (CODA)
A Cash or Deferred Election is any election (or modification
of an earlier election) by an Employee to have the Employer
either:
o provide an amount to the Employee in the form of cash
or some other taxable benefit that is not currently
available, or
o contribute an amount to the Plan (or provide an
accrual or other benefit) thereby deferring receipt
of Compensation.
A Cash or Deferred Election will only be made with respect
to an amount that is not currently available to the Employee
on the date of election. Further, a Cash or Deferred
Election will only be made with respect to amounts that
would have (but for the Cash or Deferred Election) become
currently available after the later of the date on which the
Employer adopts the Cash or Deferred Arrangement or the date
on which the arrangement first becomes effective.
A Cash or Deferred Election does not include a one-time
irrevocable election upon the Employee's commencement of
employment or first becoming an Eligible Employee.
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<PAGE> 38
(3) Compensation
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
Employee under Code Section 125, 401(k), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation Limit
is disregarded.
The period used to determine an Employee's Compensation for
a Plan Year may be limited to that portion of the Plan Year
in which the Employee was an Eligible Employee, provided
that this method is applied uniformly to all Eligible
Employees under the Plan for the Plan Year.
(4) Contribution Percentage
Contribution Percentage means, for any specified group, the
average of the ratios calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the amount of Employee
Contributions and Matching Contributions which are made by
or on behalf of each Participant for a Plan Year to each
Participant's Compensation for the Plan Year.
For purposes of determining the Contribution Percentage,
each Employee who is eligible under the terms of the Plan to
make or to have contributions made on his behalf is treated
as a Participant. The Contribution Percentage of an
eligible Employee who makes no Employee Contribution and
receives no Matching Contribution is zero.
For purposes of determining the Contribution Percentage of a
Participant who is a Highly Compensated Employee, the
Compensation of and all Employee Contributions and Matching
Contributions for the Participant include, in accordance
with the provisions of Section 4.05(d), the Compensation of
and all Employee Contributions and Matching Contributions
for any Family Member of the Participant.
The Contribution Percentage of a Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible
to make Employee Contributions or receive an allocation of
Matching Contributions (including Elective Contributions and
Nonelective Contributions which are treated as Employee or
Matching Contributions for purposes of the Contribution
Percentage Test) allocated to his accounts under two or more
plans which are sponsored by the Employer will be determined
as if the Employee and Matching Contributions were made
under a single plan. For purposes of this paragraph, if a
Highly Compensated Employee participates in two or more such
plans which have different Plan Years, all plans ending with
or within the same calendar year will be treated as a single
plan.
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<PAGE> 39
(5) Contribution Percentage Test
The Contribution Percentage Test is a test applied on a Plan
Year basis to determine whether a plan meets the
requirements of Code Section 401(m). The Contribution
Percentage Test may be met by either satisfying the General
Contribution Percentage Test or the Alternative Contribution
Percentage Test.
The General Contribution Percentage Test is satisfied if the
Contribution Percentage for the Highly Compensated Group
does not exceed 125% of the Contribution Percentage for the
Non-highly Compensated Group.
The Alternative Contribution Percentage Test is satisfied if
the Contribution Percentage for the Highly Compensated Group
does not exceed the lesser of:
o the Contribution Percentage for the Non-highly
Compensated Group plus 2 percentage points, or
o the Contribution Percentage for the Non-highly
Compensated Group multiplied by 2.0.
If (i) one or more Highly Compensated Employees of the
Employer or any Related Employer are eligible to participate
in both a Cash or Deferred Arrangement and a plan which
provides for Employee Contributions or Matching
Contributions, (ii) the Deferral Percentage for the Highly
Compensated Group does not satisfy the General Deferral
Percentage Test, and (iii) the Contribution Percentage for
the Highly Compensated Group does not satisfy the General
Contribution Percentage Test, then the Contribution
Percentage Test will be deemed to be satisfied only if the
sum of the Deferral Percentage and the Contribution
Percentage for the Highly Compensated Group does not exceed
the Aggregate Limit.
The Plan will not fail to satisfy the Contribution
Percentage test merely because all of the Eligible Employees
under the Plan for a Plan Year are Highly Compensated
Employees.
(6) Deferral Percentage
Deferral Percentage means, for any specified group, the
average of the ratios calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the amount of Elective
Contributions which are made on behalf of each Participant
for a Plan Year to each Participant's Compensation for the
Plan Year.
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<PAGE> 40
For purposes of determining the Deferral Percentage, each
Employee who is eligible under the terms of the Plan to have
contributions made on his behalf is treated as a
Participant. The Deferral Percentage of an eligible
Employee who makes no Elective Contribution is zero.
For purposes of determining the Deferral Percentage of a
Participant who is a Highly Compensated Employee, the
Compensation of and Elective Contributions for the
Participant include, in accordance with the provisions of
Section 4.05(d), the Compensation and all Elective
Contributions for any Family Member of the Participant.
The Deferral Percentage of a Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible
to have Elective Contributions (including Nonelective
Contributions or Matching Contributions which are treated as
Elective Contributions for purposes of the Deferral
Percentage Test) allocated to his accounts under two or more
Cash or Deferred Arrangements which are maintained by the
Employer will be determined as if the Elective Contributions
were made under a single Arrangement. For purposes of this
paragraph, if a Highly Compensated Employee participates in
two or more Cash or Deferred Arrangements which have
different Plan Years, all Cash or Deferred Arrangements
ending with or within the same calendar year will be treated
as a single Arrangement.
(7) Deferral Percentage Test
The Deferral Percentage Test is a test applied on a Plan
Year basis to determine whether a plan meets the
requirements of Code Section 401(k). The Deferral
Percentage Test may be met by either satisfying the General
Deferral Percentage Test or the Alternative Deferral
Percentage Test.
The General Deferral Percentage Test is satisfied if the
Deferral Percentage for the Highly Compensated Group does
not exceed 125% of the Deferral Percentage for the
Non-highly Compensated Group.
The Alternative Deferral Percentage Test is satisfied if the
Deferral Percentage for the Highly Compensated Group does
not exceed the lesser of:
o the Deferral Percentage for the Non-highly
Compensated Group plus 2 percentage points, or
o the Deferral Percentage for the Non-highly
Compensated Group multiplied by 2.0.
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<PAGE> 41
If (i) one or more Highly Compensated Employees of the
Employer or any Related Employer are eligible to participate
in both a Cash or Deferred Arrangement and a plan which
provides for Employee Contributions or Matching
Contributions, (ii) the Deferral Percentage for the Highly
Compensated Group does not satisfy the General Deferral
Percentage Test, and (iii) the Contribution Percentage for
the Highly Compensated Group does not satisfy the General
Contribution Percentage Test, then the Deferral Percentage
Test will be deemed to be satisfied only if the sum of the
Deferral Percentage and the Contribution Percentage for the
Highly Compensated Group does not exceed the Aggregate
Limit.
The Plan will not fail to satisfy the Deferral Percentage
test merely because all of the Eligible Employees under the
Plan for a Plan Year are Highly Compensated Employees.
(8) Elective Contribution
Elective Contribution means any contribution made by the
Employer to a Cash or Deferred Arrangement on behalf of and
at the election of an Employee. An Elective Contribution
will be taken into account for a given Plan Year only if:
o The Elective Contribution is allocated to the
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the Employee's
participation in the Plan or performance of services
on any date after the allocation date;
o The Elective Contribution is actually paid to the
trust no later than 12 months after the end of the
Plan Year to which the Elective Contribution relates;
and
o The Elective Contribution relates to Compensation
which either (i) but for the Participant's election
to defer, would have been received by the Participant
in the Plan Year or (ii) is attributable to services
performed by the Participant in the Plan Year and,
but for the Participant's election to defer, would
have been received by the Participant within two and
one-half months after the close of the Plan Year.
Elective Contributions will be treated as Employer
Contributions for purposes of Code Sections 401(a), 401(k),
402(a), 404, 409, 411, 412, 415, 416, and 417.
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<PAGE> 42
(9) Elective Deferral
Elective Deferral means the sum of the following:
o Any Elective Contribution to any Cash or Deferred
Arrangement to the extent it is not includable in the
Participant's gross income for the taxable year of
contribution;
o Any employer contribution to a simplified employee
pension as defined in Code Section 408(k) to the
extent not includable in the Participant's gross
income for the taxable year of contribution;
o Any employer contribution to an annuity contract
under Code Section 403(b) under a salary reduction
agreement to the extent not includable in the
Participant's gross income for the taxable year of
contribution; plus
o Any employee contribution designated as deductible
under a trust described in Code Section 501(c)(18)
for the taxable year of contribution.
(10) Eligible Employee
Eligible Employee means an Employee who is directly or
indirectly eligible to make a Cash or Deferred Election
under the Plan for all or a portion of the Plan Year. An
Employee who is unable to make a Cash or Deferred Election
because the Employee has not contributed to another plan is
also an Eligible Employee. An Employee who would be
eligible to make Elective Contributions but for a suspension
due to a distribution, a loan. or an election not to
participate in the Plan, is treated as an Eligible Employee
for purposes of Code Section 401(k)(3) and 401(m) for a Plan
Year even though the Employee may not make a Cash or
Deferred Election due to the suspension. Also, an Employee
will not fail to be treated as an Eligible Employee merely
because the employee may receive no additional Annual
Additions because of Code Section 415(c)(1) or 415(e).
(11) Employee Contribution
Employee Contribution means any contribution made by an
Employee to any plan maintained by the Employer or any
Related Employer which is other than an Elective
Contribution and which is designated or treated at the time
of contribution as an after-tax contribution. Employee
Contributions include amounts attributable to Excess
Contributions which are recharacterized as Employee
Contributions.
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(12) Excess Contribution
Excess Contribution means, for each member of the Highly
Compensated Group, the amount of Elective Contribution
(including any Qualified Nonelective Contributions and
Qualified Matching Contributions which are treated as
Elective Contributions) which exceeds the maximum
contribution which could be made if the Deferral Percentage
Test were to be satisfied.
(13) Excess Aggregate Contribution
Excess Aggregate Contribution means, for each member of the
Highly Compensated Group, the amount of Employee and
Matching Contributions (including any Qualified Nonelective
Contributions and Elective Contributions which are treated
as Matching Contributions) which exceeds the maximum
contribution which could be made if the Contribution
Percentage Test were to be satisfied.
(14) Excess Deferral
Excess Deferral means, for a given calendar year, that
amount by which each Participant's total Elective Deferrals
under all plans of all employers exceed the dollar limit in
effect under Code Section 402(g) for the calendar year.
(15) Matching Contribution
Matching Contribution means any contribution made by the
Employer to any plan maintained by the Employer or any
Related Employer which is based on an Elective Contribution
or an Employee Contribution together with any forfeiture
allocated to the Participant's Account on the basis of
Elective Contributions, Employee Contributions or Matching
Contributions. A Matching Contribution will be taken into
account for a given Plan Year only if:
o The Matching Contribution is allocated to a
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the Employee's
participation in the Plan or performance of services
on any date after the allocation date;
o The Matching Contribution is actually paid to the
Trust no later than 12 months after the end of the
Plan Year to which the Matching Contribution relates;
and
o The Matching Contribution is based on an Elective or
Employee Contribution for the Plan Year.
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<PAGE> 44
Any contribution or allocation, other than a Qualified
Nonelective Contribution, which is used to meet the minimum
contribution or benefit requirement of Code Section 416 is
not treated as being based on Elective Contributions or
Employee Contributions and therefore is not treated as a
Matching Contribution.
Qualified Matching Contribution means a Matching
Contribution which is 100% vested and may be withdrawn or
distributed only under the conditions described in Treasury
Regulation 1.401(k)-l(d).
(16) Nonelective Contribution
Nonelective Contribution means any Employer Contribution,
other than a Matching Contribution, which meets all of the
following requirements:
o The Nonelective Contribution is allocated to a
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the Employee's
participation in the Plan or performance of services
on any date after the allocation date;
o The Nonelective Contribution is actually paid to the
Trust no later than 12 months after the end of the
Plan Year to which the Nonelective Contribution
relates; and
o The Employee may not elect to have the Nonelective
Contribution paid in cash in lieu of being
contributed to the Plan.
Qualified Nonelective Contribution means a Nonelective
Contribution which is 100% vested and may be withdrawn or
distributed only under the conditions described in Treasury
Regulation 1.401(k)-l(d).
(b) Application of Deferral Percentage Test
All Elective Contributions, including any Elective Contributions
which are treated as Employee or Matching Contributions with
respect to the Contribution Percentage Test, must satisfy the
Deferral Percentage Test. Furthermore, any Elective Contributions
which are not treated as Employee or Matching Contributions with
respect to the Contribution Percentage Test must satisfy the
Deferral Percentage Test. The Plan Administrator will determine
as soon as administratively feasible after the end of the Plan
Year whether the Deferral Percentage Test has been satisfied. If
the Deferral Percentage Test is not satisfied, the Employer may
elect to make an additional contribution to the Plan on account of
the Non-highly Compensated Group. The additional contribution
will be treated as a Nonelective Contribution.
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<PAGE> 45
If the Deferral Percentage Test is not satisfied after any
Nonelective Contributions, the Plan Administrator may, in its sole
discretion, recharacterize all or any portion of the Excess
Contribution of each Highly Compensated Employee as an Employee
Contribution if Employee Contributions are otherwise allowed by
the Plan. If so, the Plan Administrator will notify all affected
Participants and the Internal Revenue Service of the amount
recharacterized no later than the 15th day of the third month
following the end of the Plan Year in which the Excess
Contribution was made. Excess Contributions will be includable in
the Participant's gross income on the earliest date any Elective
Contribution made on behalf of the Participant during the Plan
Year would have been received by the Participant had the
Participant elected to receive the amount in cash.
Recharacterized Excess Contributions will continue to be treated
as Employer Contributions that are Elective Contributions for all
other purposes under the Code, including Code Sections 401(a)
(other than 401(a)(4) and 401(m)), 404, 409, 411, 412, 415, 416,
417 and 401(k)(2). With respect to the Plan Year for which the
Excess Contribution was made, the Plan Administrator will treat
the recharacterized amount as an Employee Contribution for
purposes of the Deferral Percentage Test and the Contribution
Percentage Test and for purposes of determining whether the Plan
meets the requirements of Code Section 401(a)(4), but not for any
other purposes under this Plan. Therefore, recharacterized
amounts will remain subject to the nonforfeiture requirements and
distribution limitations which apply to Elective Contributions.
If the Deferral Percentage Test is still not satisfied, then after
the close of the Plan Year in which the Excess Contribution arose
but within 12 months after the close of that Plan Year, the Plan
Administrator will distribute the Excess Contributions, together
with allocable income, to the affected Participants of the Highly
Compensated Group to the extent necessary to satisfy the Deferral
Percentage Test. Failure to do so will cause the Plan to not
satisfy the requirements of Code Section 401(a)(4) for the Plan
Year for which the Excess Contribution was made and for all
subsequent Plan Years for which the Excess Contribution remains
uncorrected.
The amount of Excess Contribution to be distributed to a Highly
Compensated Employee for a Plan Year will be reduced by any Excess
Deferrals previously distributed to the Participant for the
calendar year ending with or within the Plan Year in accordance
with Code Section 402(g)(2). Excess Contributions will be treated
as Employer Contributions for purposes of Code Sections 404 and
415 even if distributed from the Plan.
(c) Application of Contribution Percentage Test
Employee Contributions and Matching Contributions, disregarding
any Matching Contributions which are treated as Elective
Contributions with respect to the Deferral Percentage Test, must
satisfy the Contribution Percentage Test. The Plan Administrator
will determine as soon as administratively feasible after the end
of the
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<PAGE> 46
Plan Year whether the Contribution Test has been satisfied. If
the Contribution Percentage Test is not satisfied, the Employer
may elect to make an additional contribution to the Plan for the
benefit of the Non-Highly Compensated Group. The additional
contribution will be treated as a Nonelective Contribution.
If the Contribution Percentage Test is still not satisfied, then
after the close of the Plan Year in which the Excess Aggregate
Contribution arose but within 12 months after the close of that
Plan Year, the Plan Administrator will distribute (or forfeit, to
the extent not vested) the Excess Aggregate Contributions,
together with allocable income, to the affected Participants of
the Highly Compensated Group to the extent necessary to satisfy
the Contribution Percentage Test. Failure to do so will cause the
Plan to not satisfy the requirements of Code Section 401(a)(4) for
the Plan Year for which the Excess Aggregate Contribution was made
and for all subsequent Plan Years for which the Excess Aggregate
Contribution remains uncorrected.
The determination of any Excess Aggregate Contributions will be
made after the recharacterization of any Excess Contributions as
Employee Contributions.
Excess Aggregate Contributions, including forfeited Matching
Contributions, will be treated as Employer Contributions for
purposes of Code Sections 404 and 415 even if they are distributed
from the Plan.
Forfeited Matching Contributions that are reallocated to the
Accounts of other Participants are treated as Annual Additions
under Code Section 415 for the Participant whose Accounts they are
reallocated to and for the Participants from whose Accounts they
are forfeited.
(d) Family Aggregation
The Deferral Percentage or the Contribution Percentage (the
"Relevant Percentage") for any Highly Compensated Employee who is
subject to the family aggregation rules of Section 1.18(c) will be
determined by combining the Elective Contributions, Employee
Contributions, Matching Contribution, amounts treated as Elective
or Matching Contributions and Compensation of all the eligible
Family Members.
The determination and correction of Excess Contributions and
Excess Aggregate Contributions of a Highly Compensated Employee
whose Relevant Percentage is determined under the family
aggregation rules is accomplished by reducing the Relevant
Percentage as provided for in Sections 4.05(b) and 4.05(c) and
Excess Contributions or Excess Aggregate Contributions for the
family group are allocated among the Family Members whose
contributions were combined to determine the Relevant Percentage
in proportion to the Elective Contributions or Nonelective and
Matching Contributions of each Family Member.
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<PAGE> 47
For all purposes under this Section, the contributions and
compensation of eligible Family Members who are not Highly
Compensated Employees without regard to family aggregation are
disregarded when determining the Relevant Percentage for the
Non-highly Compensated Group.
(e) Reduction of Excess Amounts
The total Excess Contribution or total Excess Aggregate
Contribution will be reduced in a manner so that the Deferral
Percentage or the Contribution Percentage (Relevant Percentage) of
the affected Participant(s) with the highest Relevant Percentage
will first be lowered to a point not less than the level of the
affected Participant(s) with the next highest Relevant Percentage.
If further overall reductions are required to satisfy the relevant
test. each of the above Participants' (or groups of Participants')
Relevant Percentage will be lowered to a point not less than the
level of the affected Participant(s) with the next highest
Relevant Percentage, and so on continuing until sufficient total
reductions have occurred to achieve satisfaction of the relevant
test.
(f) Priority of Reductions
The Plan Administrator will determine the method and order of
correcting Excess Contributions and Excess Aggregate
Contributions. The method of correcting Excess Contributions and
Excess Aggregate Contributions must meet the requirements of Code
Section 401(a)(4). The determination of whether a rate of
Matching Contribution discriminates under Code Section 401(a)(4)
will be made after making any corrective distributions of Excess
Deferrals, Excess Contributions and Excess Aggregate
Contributions.
Excess Aggregate Contributions (and any attributable income) will
be corrected first, by distributing any excess Employee
Contributions (and any attributable income); then by distributing
vested excess Matching Contributions (and any attributable
income); and finally, by forfeiting or distributing non-vested
Matching Contributions (and any attributable income). The Plan
will not distribute Employee Contributions while the Matching
Contributions based upon those Employee Contributions remain
allocated.
(g) Income
The income allocable to any Excess Contribution made to a given
Account for a given Plan Year will be equal to the total income
allocated to the Account for the Plan Year, multiplied by a
fraction, the numerator of which is the amount of the Excess
Contribution and the denominator of which is equal to the sum of
the balance of the Account at the beginning of the Plan Year plus
the Participant's Elective Contributions and amounts treated as
Elective Contributions for the Plan Year.
The income allocable to any Excess Aggregate Contribution made to
a given Account for a given Plan Year will be equal to the total
income allocated to the Account for
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the Plan Year, multiplied by a fraction, the numerator of which is
the amount of the Excess Aggregate Contribution and the
denominator of which is equal to the sum of the balance of the
Account at the beginning of the Plan Year plus the Participant's
Employee and Matching Contributions and amounts treated as
Employee and Matching Contributions for the Plan Year.
Notwithstanding the foregoing, the Plan may use any reasonable
method for computing the income allocable to any Excess
Contribution or Excess Aggregate Contribution provided the method
does not violate Code Section 401(a)(4), is used consistently for
all corrective distributions under the Plan for the Plan Year, and
is used by the Plan for allocating income to the Participants'
Accounts.
Income includes all earnings and appreciation, including interest.
dividends. rents, royalties, gains from the sale of property, and
appreciation in the value of stocks, bonds, annuity and life
insurance contracts and other property, regardless of whether the
appreciation has been realized.
(h) Treatment as Elective Contributions
The Plan Administrator may, in its discretion, treat all or any
portion of Qualified Nonelective Contributions or Qualified
Matching Contributions or both, whether to this Plan or to any
other qualified plan which has the same Plan Year and is
maintained by the Employer or a Related Employer, as Elective
Contributions for purposes of satisfying the Deferral Percentage
Test if they meet all of the following requirements:
o All Nonelective Contributions, including the Qualified
Nonelective Contributions treated as Elective Contributions
for purposes of the Deferral Percentage Test, satisfy the
requirements of Code Section 401(a)(4);
o Any Nonelective Contributions which are not treated as
Elective Contributions for purposes of the Deferral
Percentage Test or as Matching Contributions for purposes of
the Contribution Percentage Test satisfy the requirements of
Code Section 401(a)(4);
o The Qualified Matching Contributions which are treated as
Elective Contributions for purposes of the Deferral
Percentage Test are not taken into account in determining
whether any Employee Contributions or other Matching
Contributions satisfy the Contribution Percentage Test;
o Any Matching Contributions which are not treated as Elective
Contributions for purposes of the Deferral Percentage Test
satisfy the requirements of Code Section 401(m); and
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<PAGE> 49
o The plan which includes the Cash or Deferred Arrangement and
the plan or plans to which the Qualified Nonelective
Contributions and Qualified Matching Contributions are made
could be aggregated for purposes of Code Section 410(b).
(i) Treatment as Matching Contributions
The Plan Administrator may, in its discretion, treat all or any
portion of Qualified Nonelective Contributions or Elective
Contributions or both, whether to this Plan or to any other
qualified plan which has the same Plan Year and is maintained by
the Employer or a Related Employer. as Matching Contributions for
purposes of satisfying the Contribution Percentage Test if they
meet all of the following requirements:
o All Nonelective Contributions, including the Qualified
Nonelective Contributions treated as Matching Contributions
for purposes of the Contribution Percentage Test, satisfy
the requirements of Code Section 401(a)(4);
o Any Nonelective Contributions which are not treated as
Elective Contributions for purposes of the Deferral
Percentage Test or as Matching Contributions for purposes of
the Contribution Percentage Test satisfy the requirements of
Code Section 401(a)(4);
o The Elective Contributions which are treated as Matching
Contributions for purposes of the Contribution Percentage
Test are not taken into account in determining whether any
other Elective Contributions satisfy the Deferral Percentage
Test;
o The Qualified Nonelective Contributions and Elective
Contributions which are treated as Matching Contributions
for purposes of the Contribution Percentage Test are not
taken into account in determining whether any other
contributions or benefits satisfy Code Section 401(a); and
o All Elective Contributions, including those treated as
Matching Contributions for purposes of the Contribution
Percentage Test, satisfy the requirements of Code Section
401(k)(3); and
o The plan that takes Qualified Nonelective Contributions and
Elective Contributions into account in determining whether
Employee and Matching Contributions satisfy the requirements
of Code Section 401(m)(2)(A) and the plan or plans to which
the Qualified Nonelective Contributions and Elective
Contributions are made could be aggregated for purposes of
Code Section 410(b).
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(j) Aggregation of Plans
If the Employer or a Related Employer sponsors one or more other
plans which include a Cash or Deferred Arrangement, the Employer
may elect to treat any two or more of such plans as an aggregated
single plan for purposes of satisfying Code Sections 401(a)(4),
401(k) and 410(b). The Cash of Deferred Arrangements included in
such aggregated plans will be treated as a single Arrangement for
purposes of this Section. However, only those plans that have the
same plan year may be so aggregated.
If the Employer or a Related Employer sponsors one or more other
plans to which Employee Contributions or Matching Contributions
are made, the Employer may elect to treat any two or more of such
plans as an aggregated single plan for purposes of satisfying Code
Sections 401(a)(4), 401(m) and 410(b). However, only those plans
that have the same plan year may be so aggregated.
Any such aggregation must be made in accordance with Treasury
Regulation 1.401(k)1(b)(3). For example, contributions and
allocations under the portion of a plan described in Code Section
4975(e)(7) (an ESOP) may not be aggregated with the portion of a
plan not described in Code Section 4975(e)(7) (a non-ESOP) for
purposes of determining whether the ESOP or non-ESOP satisfies the
requirements of Code Sections 401(a)(4), 401(k), 401(m) and
410(b).
Plans that could be aggregated under Code Section 410(b) but that
are not actually aggregated for a Plan Year for purposes of Code
Section 410(b) may not be aggregated for purposes of Code Sections
401(k) and 401(m).
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<PAGE> 51
ARTICLE 5
RETIREMENT BENEFITS
5.01 Valuation of Accounts
For purposes of this Article, the value of a Participant's Accrued
Benefit will be determined as of the Valuation Date immediately preceding
the date that benefits are to be distributed.
5.02 Normal Retirement
After an Active Participant reaches his Normal Retirement Date, he may
elect to retire. Upon such retirement he will become a Retired
Participant and his Accrued Benefit will become distributable to him. A
Participant's Accrued Benefit will become nonforfeitable no later than
the date upon which he attains his Normal Retirement Age. The form and
timing of benefit payment will be governed by the provisions of Section
5.05.
5.03 Disability Retirement
In the event of a Participant's termination due to Disability, he will be
entitled to begin to receive a distribution of his Accrued Benefit which
will become nonforfeitable as of his date of termination. The form and
timing of benefit payment will be governed by the provisions of Section
5.05.
Disability means the determination by the Plan Administrator that a
Participant is unable by reason of any medically determinable physical or
mental impairment to perform the usual duties of his employment or of any
other employment for which he is reasonably qualified based upon his
education, training and experience.
5.04 Termination of Employment
(a) In General
If a Participant's employment terminates for any reason other than
retirement, death, or disability, his Accrued Benefit will become
distributable to him as of the last day of the month which
coincides with or next follows the last date upon which any
contributions on the Participant's behalf are made to the Trust
following the Participant's date of termination of employment (or
as of such earlier date as determined by the Plan Administrator in
a uniform and nondiscriminatory manner). The form and timing of
benefit payment will be governed by the provisions of Section
5.05.
(b) Cash-Out Distribution
If a Participant terminates employment and receives a distribution
equal to the Vested Percentage of his Accounts which are subject
to the Vesting Schedule (such
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Accounts are hereinafter referred to as Employer Contribution
Accounts), a Cash-Out Distribution will be deemed to have occurred
if the following conditions are met:
(1) The Participant was less than 100% vested in his Employer
Contribution Accounts; and
(2) The entire distribution is made before the last day of the
second Plan Year following the Plan Year in which the
Participant terminated employment.
(c) Restoration of Employer Contribution Accounts
If, following the date of a Cash-Out Distribution, a Participant
returns to an Eligible Employee Classification prior to incurring
5 consecutive One Year Breaks-in-Service, then the Participant
will have the right to repay to the Trustee, within 5 years after
his return date, the portion of the Cash-Out Distribution which
was attributable to his Employer Contribution Accounts which were
less than 100% vested in order to restore such Accounts to their
value as of the date of the Cash-Out Distribution.
The Plan Administrator will restore an eligible Participant's
Employer Contribution Accounts as of the Accounting Date
coincident with or immediately following the complete repayment of
the Cash-Out Distribution. To restore the Participant's Employer
Contribution Accounts, the Plan Administrator. to the extent
necessary, will, under rules and guidelines applied in a uniform
and nondiscriminatory manner, first allocate to the Participant's
Employer Contribution Accounts the amount, if any, of Forfeitures
which would otherwise be allocated under Article 3. To the extent
such Forfeitures for a particular Accounting Period are
insufficient to enable the Plan Administrator to make the required
restoration, the Employer will contribute such additional amount
as is necessary to enable the Plan Administrator to make the
required restoration. The Plan Administrator will not take into
account the allocation under this Section in applying the
limitation on allocations under Article 7.
(d) Non-Vested Participant
If a Participant who is zero percent vested in his Employer
Contribution Accounts terminates employment, a Cash-Out
Distribution will be deemed to have occurred as of the
Participant's date of termination of employment.
If the Participant subsequently returns to an Eligible Employee
Classification prior to incurring five consecutive One Year
Breaks-in-Service, then the Participant will immediately become
entitled to a complete restoration of his Employer Contribution
Accounts as of the Accounting Date coincident with or next
following his date of re-employment. Such restoration will be
made in accordance with the provisions of Section 5.04(c).
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<PAGE> 53
5.05 Form of Benefit Payment
Subject to the provisions of Section 5.06, the Plan Administrator will
direct the Trustee to make the payment of any benefit provided under this
Plan upon the event giving rise to such benefit within 60 days following
the receipt of a Participant's written request for the payment of
benefits on a form provided by the Plan Administrator. The Plan
Administrator may temporarily suspend such processing in the event of
unusual or extraordinary circumstances such as the conversion of Plan
records from one record keeper to another.
The form of benefit will be a lump sum payment, unless the Participant
elects a direct transfer pursuant to Section 5.07.
If a Participant's Vested Accrued Benefit is in excess of $3,500, any
payment of benefits prior to the Participant's Normal Retirement Date
will be subject to the Participant's written consent. If the value of
his Vested Accrued Benefit at the time of any distribution exceeds
$3,500, the value of his Vested Accrued Benefit at any later time will be
deemed to also exceed $3,500.
5.06 Commencement of Benefit
Subject to the provisions of this Article, commencement of a benefit
will, unless the Participant elects otherwise in writing, begin not later
than the 60th day after the later of the close of the Plan Year in which
the Participant attains Normal Retirement Age or the close of the Plan
Year which contains the date the Participant terminates his service with
the Employer.
Payment of a Participant's benefits must begin no later than his Required
Beginning Date.
All distributions required under this Section will be determined and made
in accordance with the regulations issued under Code Section 401(a)(9),
including those dealing with minimum distribution requirements.
Notwithstanding the provisions of Section 5.05, an Active Participant who
has reached his Required Beginning Date will receive an annual
distribution of his Accrued Benefit equal to the minimum required
distribution determined under Code Section 401(a)(9).
For purposes of this Section, life expectancy and joint and last survivor
expectancy are to be computed by the use of the return multiples
contained in Section 1.72-9 of the Income Tax Regulations.
If the Participant dies after distribution of his interest has begun, the
remaining portion of the interest will continue to be distributed at
least as rapidly as under the method of distribution being used before
the Participant's death.
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<PAGE> 54
5.07 Directed Transfer of Eligible Rollover Distributions
(a) General
This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
(b) Eligible Rollover Distribution
An Eligible Rollover Distribution is any to the credit of the
Distributee, except that an eligible Rollover Distribution doe
snot include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or
distribution of all or any portion of the balance for a specified
period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(c) Eligible Retirement Plan
An Eligible Retirement Plan is an individual retirement account
described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, or a qualified
trust described in section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving spouse,
an Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(d) Distributee
A Distributee includes an Employee or Former Employee. In
addition, the Employee's or Former Employee's surviving spouse and
the Employee's or Former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are Distributees with
regard to the interest of the spouse or former spouse.
(e) Direct Rollover
A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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<PAGE> 55
(f) Waiver of 30-Day Notice
If a distribution is one to which Code Sections 401(a)(11) and 417
do not apply, such distribution may commence less than 30 days
after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given. provided that:
o the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable,
a particular distribution option); and
o the Participant. after receiving the notice. affirmatively
elects to receive a distribution.
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ARTICLE 6
DEATH BENEFIT
6.01 Valuation of Accounts
For purposes of this Article, the value of a Participant's Accrued
Benefit will be determined as of the Valuation Date immediately preceding
the date that benefits are to be distributed.
6.02 Death Benefit
In the event of the death of a Participant prior to the date on which he
receives a complete distribution of his benefit under the Plan, the
Participant's Beneficiary will be entitled to receive the value of the
Participant's Accrued Benefit.
6.03 Designation of Beneficiary
Each Participant will be given the opportunity to designate a Beneficiary
or Beneficiaries, and from time to time the Participant may file with the
Plan Administrator a new or revised designation on the form provided by
the Plan Administrator. If a Participant is married, any designation of
a Beneficiary other than the Participant's spouse must be consented to by
the Participant's spouse pursuant to a Qualified Election.
If a Participant dies without designating a Beneficiary, or if the
Participant is predeceased by all designated Beneficiaries and contingent
Beneficiaries, the Plan Administrator will distribute all benefits which
are payable in the event of the Participant's death in the following
manner and to the first of the following (who are listed in order of
priority) who survive the Participant by at least 30 days:
o All to the Participant's Surviving Spouse;
o Equally among the then living children of the Participant (by
birth or adoption);
o Among the Participant's then living lineal descendants, by right
of representation; or
o The Participant's estate.
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ARTICLE 7
LIMITATIONS ON BENEFITS
7.01 Limitation on Annual Additions
The amount of the Annual Addition which may be allocated under this Plan
to any Participant's Account as of any Allocation Date will not exceed
the Defined Contribution Limit (based upon his Aggregate Compensation up
to such Valuation Date) reduced by the sum of any allocations of annual
additions made to Participant's Accounts under this Plan as of any
preceding Allocation Date within the Limitation Year.
If the Annual Addition under this Plan on behalf of a Participant is to
be reduced as of any Allocation Date as a result of the next preceding
paragraph, the reduction will be, to the extent required, effected by
first reducing Participant contributions (which increase the annual
addition), then Forfeitures (if any), and then Employer contributions to
be allocated under this Plan on behalf of the Participant as of the
Allocation Date.
Any necessary reduction will be made as follows:
(a) The amount of the reduction consisting of nondeductible
Participant contributions will be paid to the Participant as soon
as administratively feasible.
(b) The amount of the reduction consisting of any other Participant
contributions will be paid to the Participant as soon as
administratively feasible.
(c) The amount of the reduction consisting of Forfeitures will be
allocated and reallocated to other Accounts in accordance with the
Plan formula for allocating Forfeitures to the extent that such
allocations do not cause the additions to any other Participant's
Accounts to exceed the lesser of the Defined Contribution Limit or
any other limitation provided in the Plan.
(d) The amount of the reduction consisting of Employer contributions
will be allocated and reallocated to other Accounts in accordance
with the Plan formula for Employer Contributions to the extent
that such allocations do not cause the additions to any other
Participant's Accounts to exceed the lesser of the Defined
Contribution Limit or any other limitation provided in the Plan.
(e) To the extent that the reductions described in paragraph (d)
cannot be allocated to other Participant's Accounts, the
reductions will be allocated to a suspense account as Forfeitures
and held therein until the next succeeding Allocation Date on
which Forfeitures could be applied under the provisions of the
Plan. All amounts held in a suspense account must be applied as
Forfeitures before any additional
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contributions, which would constitute annual additions, may be
made to the Plan. If the Plan terminates, the suspense account
will revert to the Employer to the extent it may not be allocated
to any Participant's Accounts.
(f) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not participate
in the allocation of the Trust Fund's investment gains and losses.
7.02 Where Employer Maintains Another Qualified Plan
(a) Where Employer Maintains Another Qualified Defined Contribution
Plan
If the Employer maintains this Plan and one or more other
qualified defined contribution plans, one or more welfare benefit
funds (as defined in Code Section 419(e)), or one or more
individual medical accounts (as defined in Code Section
415(l)(2)), all of which are referred to in this Article 7 as
"qualified defined contribution plans," the annual additions
allocated under this Plan to any Participant's Accounts will be
limited in accordance with the allocation provisions of this
Section 7.02(a).
The amount of the Annual Additions which may be allocated under
this Plan to any Participant's Accounts as of any Allocation Date
will not exceed the Defined Contribution Limit (based upon
Aggregate Compensation up to the allocation date) reduced by the
sum of any allocations of Annual Additions made to the
Participant's Accounts under this Plan and any other qualified
defined contribution plans maintained by the Employer as of any
earlier Allocation Date within the Limitation Year.
If a Allocation Date of this Plan coincides with a Allocation Date
of any other plan described in the above paragraph, the amount of
Annual Additions to be allocated on behalf of a Participant under
this Plan as of such date will be an amount equal to the product
of the amount described in the next preceding paragraph multiplied
by a fraction (not to exceed 1.0), the numerator of which is the
amount to be allocated under this Plan without regard to this
Article during the Limitation Year and the denominator of which is
the amount that would otherwise be allocated on this Allocation
Date under all plans without regard to this Article 7.
If the Annual Addition under this Plan on behalf of a Participant
is to be reduced as of any Allocation Date as a result of the next
preceding two paragraphs, the reduction will be, to the extent
required, effected by first reducing Participant contributions
(which increase the annual addition), then Forfeitures (if any),
and then any Employer contributions, to be allocated under this
Plan on behalf of the Participant as of the Allocation Date.
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<PAGE> 59
If as a result of the first four paragraphs of this Section 7.02
the allocation of additions is reduced, the reduction will be
treated in the manner described in the third paragraph of Section
7.01.
(b) Where Employer Maintains a Qualified Defined Benefit Plan
(1) In General
If the Employer maintains (or has ever maintained). in
addition to this Plan, one or more qualified defined benefit
plans, then for any Limitation Year, the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan
Fraction will not exceed 1.0. If, in any Limitation Year.
the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction for a Participant would exceed
1.0 without adjustment to the amount of the annual benefit
that can be paid to the Participant under the defined
benefit plan, then the amount of annual benefit that would
otherwise be paid to the Participant under the defined
benefit plan will be reduced to the extent necessary to
reduce the sum of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction for the Participant to
1.0.
(2) Transition Rule under TRA, 186
If a plan was in existence on May 6, 1986, the numerator of
the Defined Contribution Plan Fraction will be reduced (to
not less than zero) as prescribed by the Secretary of the
Treasury by subtracting the amount required to decrease the
sum of the Defined Contribution Plan Fraction plus the
Defined Benefit Plan Fraction to 1.0. Such amount is
determined (as of the first day of the first Limitation Year
beginning on or after January 1. 1987) as the product of:
(A) The amount by which, without this adjustment, the sum
of the Defined Contribution Plan Fraction plus the
Defined Benefit Plan Fraction exceeds 1.0 multiplied
by
(B) The denominator of the Defined Contribution Plan
Fraction, as computed through the last Limitation
Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan
after May 5, 1986.
This subparagraph applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 for all Limitation Years beginning
before January 1, 1987.
(3) Transition Rule under TEFRA
In the case of a plan which met the limitation of Section
415 of the Code for the last Limitation Year beginning
before January 1, 1983, the numerator of
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<PAGE> 60
the Defined Contribution Plan Fraction will be reduced (to
not less than zero) as prescribed by the Secretary of the
Treasury by subtracting the amount required to decrease the
sum of the Defined Contribution Plan Fraction plus the
Defined Benefit Plan Fraction to 1.0. Such amount is
determined (as of the first day of the first Limitation Year
beginning on or after January 1, 1983) as the product of:
(A) The amount by which, without this adjustment, the sum
of the Defined Contribution Plan Fraction plus the
Defined Benefit Plan Fraction exceeds 1.0, multiplied
by
(B) The denominator of the Defined Contribution Plan
Fraction, as computed through the last Limitation
Year beginning before January 1, 1983.
7.03 Definitions Applicable to Article 7
(a) Aggregate Compensation
Aggregate Compensation means a Participant's earned income, wages,
salaries, and fees for professional services, and other amounts
received for personal services actually rendered in the course of
employment with the employer maintaining the plan (including, but
not limited to, commissions paid to salesmen, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips and bonuses), and excluding the
following:
o Employer contributions to a plan of deferred compensation
which are not included in the employee's gross income for
the taxable year in which contributed or employer
contributions under a simplified employee pension plan to
the extent the contributions are deductible by the employee,
or any distributions from a plan of deferred compensation;
o Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
o Amounts realized from the sale. exchange or other
disposition of stock acquired under a qualified stock
option; and
o Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a
salary reduction agreement) toward the purchase of an
annuity described in Code Section 403(b) (whether or not the
amounts are actually excludable from the gross income of the
employee).
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<PAGE> 61
Aggregate Compensation excludes any amounts contributed by the
Employer or any Related Employer on behalf of any Employee
pursuant to a salary reduction agreement which are not includable
in the gross income of the Employee due to Code Section 125,
401(k), 402(h) or 403(b).
Aggregate Compensation in excess of the Statutory Compensation
Limit is disregarded.
Aggregate Compensation for any Limitation Year is the Aggregate
Compensation actually paid or includable in gross income in such
year.
(b) Allocation Date
Allocation Date means the date with respect to which all or a
portion of employer contributions, employee contributions or
forfeitures or both are allocated to participant accounts under a
defined contribution plan.
(c) Annual Additions
For Plan Years beginning after December 31, 1986, Annual Additions
are the sum of the following amounts allocated to any defined
contribution plan maintained by the Employer (including voluntary
contributions to any defined benefit plan maintained by the
Employer) on behalf of a Participant for a Limitation Year:
o All Employee and Employer contributions;
o All reallocated forfeitures;
o Amounts allocated after March 31, 1984, to an individual
medical account, as defined in Code Section 415(l)(2) which
is part of a pension or annuity plan maintained by the
Employer, and amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending
after that date, which are attributable to post-retirement
medical benefits required by Code Section 401(h)(6) to be
allocated to the separate account of a Key Employee under a
welfare benefit plan (as defined in Code Section 419(e))
maintained by the Employer.
Contributions or forfeitures will be treated as Annual Additions
regardless of whether they constitute Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions within the meaning
of the regulations under Code Section 401(k) or 401(m) and
regardless of whether they are corrected through distribution or
recharacterization. Excess deferrals distributed in accordance
with Treasury Regulation 1.402(g)-l(e)(2) or (3) are not Annual
Additions. The Annual Addition for any Limitation Year beginning
before January 1, 1987, will not be recomputed to treat all
Employee contributions as Annual Additions.
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(d) Annual Benefit
Annual Benefit means a benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to
which employees do not contribute and under which no rollover
contributions are made.
(e) Defined Benefit Compensation Limit
The Defined Benefit Compensation Limit is equal to 100% of the
Participant's average Aggregate Compensation for the three
consecutive calendar years (or other twelve consecutive month
periods adopted by the Employer pursuant to a Written Resolution
and applied on a uniform and consistent basis) of service during
which the Participant had the greatest Aggregate Compensation.
Where the annual benefit is payable to a Participant in a form
other than a straight life annuity or a Qualified Joint and
Survivor Annuity, the Defined Benefit Compensation Limit will be
the Actuarial Equivalent of a straight life annuity beginning at
the same age. No adjustment is required for the following:
pre-retirement disability benefits, pre-retirement death benefits
and post-retirement medical benefits. For purposes of this
paragraph, the interest rate used in adjusting the Defined Benefit
Compensation Limit will be the greater of (1) 5%. or (2) the
post-retirement interest rate specified in the plan for Actuarial
Equivalent purposes.
Where the annual benefit is payable to a Participant who has fewer
than 10 years of service with the Employer or any Related or
Predecessor Employer, the Defined Benefit Compensation Limit will
be multiplied by a fraction, the numerator of which is the
Participant's number of years of service with the Employer or
Related or Predecessor Employer, and the denominator of which is
10.
With regard to a Participant who has separated from service with a
nonforfeitable right to an Accrued Benefit, the Defined Benefit
Compensation Limit will be adjusted effective January 1 of each
Calendar year. For any Limitation Year beginning after the
separation occurs, the Defined Benefit Compensation Limit will be
equal to the Defined Benefit Compensation Limit which was
applicable to the Participant in the Limitation Year in which he
separated from service multiplied by a fraction, the numerator of
which is the Defined Benefit Dollar Limit for the Limitation Year
in which the Defined Benefit Compensation Limit is being adjusted
and the denominator of which is the Defined Benefit Dollar Limit
for the Limitation Year in which the Participant separated from
service.
(f) Defined Benefit Dollar Limit
The Defined Benefit Dollar Limit is equal to $90,000 for calendar
years 1984 through 1987. As of January 1, 1988 and as of January
1 of each subsequent calendar year, the dollar limitation
(described in Code Section 415(b)(1)(A)) as determined by the
Secretary of the Treasury for that calendar year will become
effective as the Defined
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Benefit Dollar Limit for the calendar year. For calendar years
between 1976 and 1983, the Defined Benefit Dollar Limit is $75,000
as adjusted by the Secretary of the Treasury under Code Section
415(d) for that calendar year. The Defined Benefit Dollar Limit
for a calendar year applies to Limitation Years ending with or
within that calendar year.
Where the annual benefit is payable to a Participant in a form
other than a straight life annuity or a Qualified Joint and
Survivor Annuity, the Defined Benefit Dollar Limit will be the
Actuarial Equivalent of a straight life annuity beginning at the
same age. No adjustment is required for the following:
pre-retirement disability benefits, pre-retirement death benefits,
and post-retirement medical benefits. For purposes of this
paragraph, the interest rate used for adjusting the Defined
Benefit Dollar Limit will be the greater of (1) 5%, or (2) the
post-retirement interest rate specified for Actuarial Equivalent
purposes.
Where the annual benefit is payable to a Participant who has fewer
than 10 years of participation in the Plan, the Defined Benefit
Dollar Limit will be multiplied by a fraction, the numerator of
which is the Participant's number of years (or part thereof) of
participation in the Plan, and the denominator of which is 10. To
the extent provided by the Secretary of the Treasury, this
paragraph will be applied to each change in the benefit structure
of the Plan.
For a benefit commencing before a Participant's Social Security
Retirement Age but at or after age 62, the Defined Benefit Dollar
Limit will be adjusted in a manner which is consistent with the
reduction for old-age insurance benefits commencing before Social
Security Retirement Age under the Social Security Act. The
reduction will be 5/9 of 1% for each of the first 36 months and
5/12 of 1% for each additional month (up to 24 months) by which
benefits commence before the month of the Participant's Social
Security Retirement Age. The Defined Benefit Dollar Limit for a
benefit commencing before age 62 will be adjusted to the Actuarial
Equivalent of the Defined Benefit Dollar Limit for a benefit
commencing at age 62 based on an interest rate equal to the
greater of (1) 5%, or (2) the interest rate specified in the plan
for determining actuarial equivalence for early retirement.
For a benefit commencing after a Participant's Social Security
Retirement Age. the Defined Benefit Dollar Limit will be adjusted
to the actuarial equivalent of the Defined Benefit Dollar Limit
for a benefit commencing at the Participant's Social Security
Retirement Age. For purposes of this paragraph, the interest rate
used for adjusting the Defined Benefit Dollar Limit will be the
lesser of (1) 5%, or (2) the interest rate specified in the plan
for determining actuarial equivalence for early retirement.
(g) Defined Benefit Limit
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The Defined Benefit Limit is the lesser of the Defined Benefit
Dollar Limit or the Defined Benefit Compensation Limit.
(h) Defined Benefit Plan Fraction Denominator
The Defined Benefit Plan Fraction Denominator with respect to any
Participant is the lesser of (1) the product of the Defined
Benefit Dollar Limit multiplied by 1.25, or (2) the product of the
Defined Benefit Compensation Limit multiplied by 1.4. However,
for purposes of determining the Defined Benefit Plan Fraction
Denominator, "years of service with the Employer or any Related or
Predecessor Employer" will be substituted for "years of
participation in the Plan" wherever it appears in Section 7.03(f).
(i) Defined Benefit Plan Fraction
The Defined Benefit Plan Fraction is a fraction determined as of
the close of a Limitation Year, the numerator of which is the
Projected Annual Benefit payable to a Participant under this Plan
and the denominator of which is the Defined Benefit Fraction
Denominator. If a Participant has participated in more than one
defined benefit plan maintained by the Employer, the numerator of
the Defined Benefit Plan Fraction is the sum of the projected
annual benefits payable to the Participant under all of the
defined benefit plans, whether or not terminated.
(j) Defined Contribution Limit
The Defined Contribution Limit for a given Limitation Year is
equal to the lesser of (1) the Defined Contribution Compensation
Limit, which is 25% of Aggregate Compensation applicable to the
Limitation Year, or (2) the Defined Contribution Dollar Limit,
which, for calendar years after 1983 is the greater of $30,000 or
one-fourth of the Defined Benefit Dollar Limit for the Limitation
Year, and for calendar years between 1976 and 1983 is one-third of
the Defined Benefit Dollar Limit. If a short Limitation Year is
created because of an amendment changing the Limitation Year to a
different 12 consecutive month period, the Defined Contribution
Dollar Limit is multiplied by a fraction, the numerator of which
is equal to the number of months in the short Limitation Year and
the denominator of which is 12.
(k) Defined Contribution Plan Fraction
The Defined Contribution Plan Fraction is a fraction determined as
of the close of a Limitation Year, the numerator of which is the
sum of the Annual Additions to the Participant's Accounts under
all defined contribution plans of the Employer for the current and
all prior Limitation Years and the denominator of which is the sum
of the Annual Additions which would have been made for the
Participant for the current and all prior Limitation Years (for
all prior years of service with the Employer or any predecessor
Employer) if in each Limitation year the Annual Additions equaled
the lesser of (1) the product of the Defined Contribution
Compensation Limit for the Limitation Year multiplied by 1.4, or
(2) the product of the Defined Contribution
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Dollar Limit for the Limitation Year multiplied by 1.25. The
aggregate amount in the numerator of this fraction due to years
beginning before January 1, 1976 may not exceed the aggregate
amount in the denominator of this fraction for all such years.
For purposes of this Section 7.03(k), the Annual Addition for any
Limitation Year beginning before January 1, 1987 will not be
recomputed to treat all Employee contributions as Annual
Additions.
(l) Employer
The Employer is the Employer that adopts this Plan together with
all Related Employers. For this purpose, the definition of
Related Employer in Section 1.33 of this Plan is modified by Code
Section 415(h).
(m) Limitation Year
The Limitation Year will be the 12 consecutive month period which
is specified in Article 1 of this Plan and which is adopted for
all qualified plans maintained by the Employer pursuant to a
Written Resolution adopted by the Employer. In the event of a
change in the Limitation Year, the additional limitations of
Treasury Regulation Section 1.415-2(b)(4)(iii) will also apply.
(n) Projected Annual Benefit
For purposes of this Section, a Participant's Projected Annual
Benefit is equal to the annual benefit to which a Participant in a
defined benefit Plan would be entitled under the terms of the plan
based on the following assumptions:
o The Participant will continue employment until reaching
normal retirement age as determined under the terms of the
plan (or current age, if that is later);
o The Participant's compensation for the Limitation Year under
consideration will remain the same for all future years;
o All other relevant factors used to determine benefits under
the plan for the Limitation Year under consideration will
remain constant for all future Limitation Years; and
o The benefits resulting from any Participant Contributions or
Rollover Contributions are disregarded.
(o) Social Security Retirement Age
Social Security Retirement Age means age 65 for a Participant born
before January 1, 1938; age 66 for a Participant born after
December 31, 1937, but before January 1, 1955; and age 67 for a
Participant born after December 31, 1954.
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7.04 Effect of Top-Heavy Status
(a) General
Notwithstanding the provisions of Section 7.03, "1.0" will be
substituted for "1.25" wherever it appears in Sections 7.03(h) and
7.03(k) for any Limitation Year in which the Plan is found to be
Top-Heavy for the Plan Year which coincides with or ends within
such Limitation Year.
(b) Non-application
Section 7.04(a) will not apply for any Limitation Year in which,
for the Plan Year which coincides with or ends within such
Limitation Year, (1) the Plan is not determined to be Super
Top-Heavy and (2) for any Non-Key Employee who is a Participant in
both this Plan and a defined benefit plan maintained by the
Employer or a Related Employer, the annual allocation of Employer
contributions plus Forfeitures under this Plan is not less than
7.5% of the Non-Key Employee's Aggregate Compensation.
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ARTICLE 8
MISCELLANEOUS
8.01 Employment Rights of Parties Not Restricted
The adoption and maintenance of this Plan will not be deemed a contract
between the Employer and any Employee. Nothing in this Plan will give
any Employee or Participant the right to be retained in the employ of the
Employer or to interfere with the right of the Employer to discharge any
Employee or Participant at any time, nor will it give the Employer the
right to require any Employee or Participant to remain in its employ, or
to interfere with any Employee's or Participant's right to terminate his
employment at any time.
8.02 Alienation
(a) General
No person entitled to any benefit under this Plan will have any
right to sell, assign, transfer, hypothecate, encumber, commute,
pledge, anticipate or otherwise dispose of his interest in the
benefit, and any attempt to do so will be void. No benefit under
this Plan will be subject to any legal process, levy, execution,
attachment or garnishment for the payment of any claim against
such person.
(b) Exceptions
Section 8.02(a) will not apply to the extent a Participant or
Beneficiary is indebted to the Plan under the provisions of the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, the portion of the amount
distributed which equals the indebtedness will be withheld by the
Trustee to apply against or discharge the indebtedness. Before
making a payment, however, the Participant or Beneficiary must be
given written notice by the Plan Administrator that the
indebtedness is to be so paid in whole or part from his
Participant's Accrued Benefit. If the Participant or Beneficiary
does not agree that the indebtedness is a valid claim against his
Vested Accrued Benefit, he will be entitled to a review of the
validity of the claim in accordance with procedures established by
the Plan Administrator.
Section 8.02(a) will not apply to a qualified domestic relations
order (QDRO) as defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Plan
Administrator under the provisions of the Retirement Equity Act of
1984. The Plan Administrator will establish a written procedure
to determine the qualified status of domestic relations orders and
to administer distributions under such qualified orders. Further,
to the extent provided under a QDRO, a former spouse of a
Participant will be treated as the spouse or Surviving Spouse for
all purposes under the Plan. Where, however, because of a QDRO,
more than one individual is to be treated as a Surviving Spouse,
the total amount to be paid
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in the form of a Qualified Survivor Annuity or the survivor
portion of a Qualified Joint and Survivor Annuity may not exceed
the amount that would be paid if there were only one Surviving
Spouse. All rights and benefits, including elections, provided to
a Participant under this Plan will be subject to the rights
afforded to any alternate payee as such term is defined in Code
Section 414(p).
This Plan specifically permits distribution to an alternate payee
under a QDRO (without regard to whether the Participant has
attained his or her earliest retirement age as that term is
defined under Code Section 414(p)) in the same manner that is
provided for a Vested Terminated Participant.
8.03 Qualification of Plan
The Employer will have the sole responsibility for obtaining and
retaining qualification of the Plan under the Code with respect to the
Employer's individual circumstances.
8.04 Construction
To the extent not preempted by ERISA, this Plan will be construed
according to the laws of the state in which the Employer's principal
place of business is located. Words used in the singular will include
the plural, the masculine gender will include the feminine, and vice
versa, whenever appropriate.
8.05 Named Fiduciaries
(a) Allocation of Functions
The authority to control and manage the operation and
administration of the Plan and Trust created by this instrument
will be allocated between the Plan Sponsor, the Trustee, and the
Plan Administrator, all of whom are designated as Named
Fiduciaries with respect to the Plan and Trust as provided for by
Section 402(a)(2) of ERISA. The Plan Sponsor reserves the right
to allocate the various responsibilities for the present execution
of the functions of the Plan, other than the Trustees'
responsibilities, among its Named Fiduciaries. Any person or
group of persons may serve in more than one fiduciary capacity
with regard to the Plan.
(b) Responsibilities of the Plan Sponsor
The Plan Sponsor, in its capacity as a Named Fiduciary, will have
only the following authority and responsibility:
o To appoint or remove the Plan Administrator and furnish the
Trustee with certified copies of any resolutions of the Plan
Sponsor with regard thereto;
o To appoint and remove the Trustee;
o To appoint a successor Trustee or additional Trustees;
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o To communicate information to the Plan Administrator and the
Trustee as needed for the proper performance of the duties
of each;
o To appoint an investment manager (or to refrain from such
appointment), to monitor the performance of the investment
manager so appointed, and to terminate such appointment
(more than one investment manger may be appointed and in
office at any time); and
o To establish and communicate to the Trustee a funding
policy for the Plan.
(c) Limitation on Obligations of Named Fiduciaries
No Named Fiduciary will have authority or responsibility to deal
with matters other than as delegated to it under this Plan or by
operation of law. A Named Fiduciary will not in any event be
liable for breach of fiduciary responsibility or obligation by
another fiduciary (including Named Fiduciaries) if the
responsibility or authority of the act or omission deemed to be a
breach was not within the scope of the Named Fiduciary's authority
or delegated responsibility.
(d) Standard of Care and Skill
The duties of each fiduciary will be performed with the care,
skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of like character and with like objectives.
8.06 Status of Insurer
The term Insurer refers to any legal reserve life insurance company
licensed to do business in the state within which the Employer maintains
its principal office. The Insurer will file such returns, keep such
records, make such reports and supply such information as required by
applicable law or regulation.
8.07 Adoption and Withdrawal by Other Organizations
(a) Procedure for Adoption
Subject to the provisions of this Section 8.07, any organization
now in existence or hereafter formed or acquired, which is not
already a Participating Employer under this Plan and which is
otherwise legally eligible may, in the future, with the consent
and approval of the Plan Sponsor, by formal Written Resolution
(referred to in this Section as an Adoption Resolution), adopt the
Plan and Trust hereby created for all or any classification of
persons in its employment and thereby, from and after the
specified effective date, become a Participating Employer under
this Plan. Such consent will be effected by and evidenced by a
formal Written Resolution of the Plan Sponsor. The Adoption
Resolution may contain such specific changes and variations in
Plan terms and provisions applicable to the adopting Participating
Employer and
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its Employees as may be acceptable to the Plan Sponsor and the
Trustee. However, the sole, exclusive right of any other
amendment of whatever kind or extent to the Plan is reserved to
the Plan Sponsor. The Adoption Resolution will become, as to the
adopting organization and its Employees, a part of this Plan as
then amended or thereafter amended. It will not be necessary for
the adopting organization to sign or execute the original or then
amended Plan and Trust Agreement or any future amendment to the
Plan and Trust Agreement. The effective date of the Plan for the
adopting organization will be that stated in the Adoption
Resolution and from and after such effective date the adopting
organization will assume all the rights, obligations and
liabilities as a Participating Employer under this Plan. The
administrative powers of and control by the Plan Sponsor as
provided in the Plan, including the sole right of amendment or
termination of the Plan, of appointment and removal of the Plan
Administrator and the Trustee, and of appointment and removal of
an investment manager will not be diminished by reason of the
participation of the adopting organization in the Plan.
(b) Withdrawal
Any Participating Employer may withdraw from the Plan at any time,
without affecting the Plan Sponsor or other Participating
Employers not withdrawing. by complying with the provisions of the
Plan. A withdrawing Participating Employer may arrange for the
continuation by itself or its successor of this Plan in separate
forms for its own employees, with such amendments. if any, as it
may deem proper, and may arrange for continuation of the Plan by
merger with an existing plan and transfer of plan assets. The
Plan Sponsor may. it its absolute discretion, terminate a
Participating Employer's participation at any time when in its
judgment the Participating Employer fails or refuses to discharge
its obligations under the Plan.
(c) Adoption Contingent Upon Initial and Continued Qualifications
The adoption of this Plan by an organization as provided is hereby
made contingent and subject to the condition precedent that said
adopting organization meets all the statutory requirements for
qualified plans, including, but not limited to, Sections 401(a)
and 501(a) of the Internal Revenue Code for its Employees. If the
Plan or the Trust, in its operation, becomes disqualified, for any
reason, as to the adopting organization and its Employees, the
portion of the Plan assets allocable to them will be segregated as
soon as is administratively feasible, pending either the prompt
(1) requalification of the Plan as to the organization and its
employees to the satisfaction of the Internal Revenue Service so
as not to affect the continued qualified status thereof as to
other Employers, (2) withdrawal of the organization from this Plan
and a continuation by itself or its successor of its plan
separately from this Plan. or by merger with another existing
plan, with a transfer of its said segregated portion of Plan
assets, or (3) termination of the Plan as to itself and its
Employees.
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8.08 Employer Contributions
Employer contributions made to the Plan and Trust are made and will be
held for the sole purpose of providing benefits to Participants and their
Beneficiaries.
In no event will any contribution made by the Employer to the Plan and
Trust or income therefrom revert to the Employer except as provided in
Section 7.01(e) or as provided below.
(a) Any contribution made to the Plan and Trust by the Employer
because of a mistake of fact may be returned to the Employer
within one year of such contribution.
(b) Notwithstanding any other provision of the Plan and Trust, if the
Internal Revenue Service determines initially that the Plan. as
adopted by the Employer, does not qualify under applicable
sections of the Code and applicable Treasury Department
Regulations, and the Employer does not wish to amend this Plan and
Trust so that it does qualify, the value of all assets will be
distributed by the Trustee to the Employer within one year after
the date such initial qualification is denied. Thereafter, the
Employer's participation in this Plan and Trust will be considered
rescinded and of no force or effect.
(c) Any contribution made by the Employer will be conditioned on the
deductibility of such contribution and may be refunded to the
Employer, to the extent the contribution is determined not to be
deductible, within one year after such determination is made.
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ARTICLE 9
ADMINISTRATION
9.01 Plan Administrator
The Plan Administrator will have the responsibility for the general
supervision and administration of the Plan and will be a fiduciary of the
Plan. The Employer may, by Written Resolution, appoint one or more
individuals to serve as Plan Administrator. If the Employer does not
appoint an individual or individuals as Plan Administrator, the Employer
will function as Plan Administrator. The Employer may at any time, with
or without cause, remove an individual as Plan Administrator or
substitute another individual therefor.
9.02 Powers and Duties of the Plan Administrator
The Plan Administrator will be charged with and will have delegated to it
the power, duty, authority and discretion to interpret and construe the
provisions of this Plan, to determine its meaning and intent and to make
application thereof to the facts of any individual case; to determine in
its discretion the rights and benefits of Participants or the eligibility
of Employees; to give necessary instructions and directions to the
Trustee and the Insurer as herein provided or as may be requested by the
Trustee and the Insurer from time to time; to resolve all questions of
fact relating to any of the foregoing; and to generally direct the
administration of the Plan according to its terms. All decisions of the
Plan Administrator in matters properly coming before it according to the
terms of this Plan, and all actions taken by the Plan Administrator in
the proper exercise of its administrative powers, duties and
responsibilities, will be final and binding upon all Employees,
Participants and Beneficiaries and upon any person having or claiming any
rights or interest in this Plan. The Employer and the Plan Administrator
will make and receive any reports and information, and retain any records
necessary or appropriate to the administration of this Plan or to the
performance of duties hereunder or to satisfy any requirements imposed by
law. In the performance of its duties, the Plan Administrator will be
entitled to rely on information duly furnished by any Employee,
Participant or Beneficiary or by the Employer or Trustee.
9.03 Actions of the Plan Administrator
The Plan Administrator may adopt such rules as it deems necessary,
desirable or appropriate with respect to the conduct of its affairs and
the administration of the Plan. Whenever any action to be taken in
accordance with the terms of the Plan requires the consent or approval of
the Plan Administrator, or whenever an interpretation is to be made of
the terms of the Plan, the Plan Administrator will act in a uniform and
non-discriminatory manner, treating all Employees and Participants in
similar circumstances in a like manner. If the Plan Administrator is a
group of individuals, all of its decisions will be made by a majority
vote. The Plan Administrator will have the authority to employ one or
more persons to render advice or services with regard to the
responsibilities of the Plan Administrator, including but not limited to
attorneys, actuaries, and accountants. Any persons employed to render
advice
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or services will have no fiduciary responsibility for any ministerial
functions performed with respect to this Plan.
9.04 Reliance on Plan Administrator and Employer
Until the Employer gives notice to the contrary, the Trustee and any
persons employed to render advice or services will be entitled to rely on
the designation of Plan Administrator that has been furnished to them.
In addition, the Trustee and any persons employed to render advice or
services will be fully protected in acting upon the written directions
and instructions of the Plan Administrator made in accordance with the
terms of this Plan. If the Plan Administrator is a group of individuals,
unless otherwise specified, any one of such individuals will be
authorized to sign documents on behalf of the Plan Administrator and such
authorized signatures will be recognized by all person dealing with the
Plan Administrator.
The Trustee and any persons employed to render advice or services may
take cognizance of any rules established by the Plan Administrator and
rely upon them until notified to the contrary. The Trustee and any
persons employed to render advice or services will be fully protected in
taking any action upon any paper or document believed to be genuine and
to have been properly signed and presented by the Plan Administrator,
Employer or any agent of the Plan Administrator acting on behalf of the
Plan Administrator.
9.05 Reports to Participants
The Plan Administrator will report in writing to a Participant his
Accrued Benefit under the Plan and the Vested Percentage of such benefit
when the Participant terminates his employment or requests such a report
in writing from the Plan Administrator. To the extent required by law or
regulation, the Plan Administrator will annually furnish to each
Participant, and to each Beneficiary receiving benefits, a report which
fairly summarizes the Plan's most recent report.
9.06 Bond
The Plan Administrator and other fiduciaries of the Plan will be bonded
to the extent required by ERISA or other applicable law. No additional
bond or other security for the faithful performance of any duties under
this Plan will be required.
9.07 Compensation of Plan Administrator
The Compensation of the Plan Administrator will be left to the discretion
of the Plan Sponsor; no person who is receiving full pay from the
Employer will receive compensation for services as Plan Administrator.
All reasonable and necessary expenses incurred by the Plan Administrator
in supervising and administering the Plan will be paid from the Plan
assets by the Trustee at the direction of the Plan Administrator to the
extent not paid by the Plan Sponsor.
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9.08 Claims Procedure
The Plan Administrator will make all determinations as to the rights of
any Employee, Participant, Beneficiary or other person under the terms of
this Plan. Any Employee, Participant or Beneficiary, or person claiming
under them, may make claim for benefit under this Plan by filing written
notice with the Plan Administrator setting forth the substance of the
claim. If a claim is wholly or partially denied, the claimant will have
the opportunity to appeal the denial upon filing with the Plan
Administrator a written request for review within 60 days after receipt
of notice of denial. In making an appeal the claimant may examine
pertinent Plan documents and may submit issues and comments in writing.
Denial of a claim or a decision on review will be made in writing by the
Plan Administrator delivered to the claimant within 60 days after receipt
of the claim or request for review, unless special circumstances require
an extension of time for processing the claim or review, in which event
the Plan Administrator's decision must be made as soon as possible
thereafter but not beyond an additional 60 days. If no action on an
initial claim is taken within 120 days, the claims will be deemed denied
for purposes of permitting the claimant to proceed to the review stage.
The denial of a claim or the decision on review will specify the reasons
for the denial or decision and will make reference to the pertinent Plan
provisions upon which the denial or decision is based. The denial of a
claim will also include a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of the claim review procedure herein described. The Plan
Administrator will serve as an agent for service of legal process with
respect to the Plan unless the Employer, through written resolution,
appoints another agent.
If a Participant or Beneficiary is entitled to a distribution from the
Plan. the Participant or Beneficiary will be responsible for providing
the Plan Administrator with his current address. If the Plan
Administrator notifies the Participant or Beneficiary by registered mail
(return receipt requested) at his last known address that he is entitled
to a distribution and also notifies him of the provisions of this
paragraph, and the Participant or Beneficiary fails to claim his benefits
under the Plan or provide his current address to the Plan Administrator
within one year after such notification, the distributable amount will be
forfeited and used to reduce the cost of the Plan. If the Participant or
Beneficiary is subsequently located, such benefit will be restored.
9.09 Liability of Fiduciaries
Except for a breach of fiduciary responsibility due to gross negligence
or willful misconduct, the Plan Administrator will not incur any
individual liability for any decision, act, or failure to act hereunder.
The Plan Administrator may engage agents to assist it and may engage
legal counsel who may be counsel for the Employer. The Plan
Administrator will not be responsible for any action taken or omitted to
be taken on the advice of counsel.
If there is more than one person serving as a fiduciary in any capacity
(for example, co-Trustees), each will use reasonable care to prevent the
other or others from committing a breach of this Plan. Nothing contained
in this Section will preclude any agreement
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allocating specific responsibilities or obligations among the
co-fiduciaries provided that the agreement does not violate any of the
terms and provisions of this Plan. In those instances where any duties
have been allocated between co-fiduciaries, a fiduciary will not be
liable for any loss resulting to the Plan arising from any act or
omission on the part of another co-fiduciary to whom responsibilities or
obligations have been allocated except under the following circumstances:
o If he participates knowingly in, or knowingly undertakes to
conceal, an act or omission of a co-fiduciary knowing the act or
omission is a breach; or
o If by his failure to comply with his specific responsibilities
which give rise to his status as a fiduciary, he has enabled the
other fiduciary to commit a breach; or
o If he has knowledge of a breach by a co-fiduciary, unless he makes
reasonable efforts under the circumstances to remedy the breach.
9.10 Expenses of Administration
The Employer does not and will not guarantee the Plan assets against
loss. The Employer may in its sole discretion, but will not be obligated
to, pay the ordinary expenses of establishing the Plan, including the
fees of consultants, accountants and attorneys in connection therewith.
The Employer may, in its sole discretion (but will not be obligated to),
pay other costs and expenses of administering the Plan, the taxes imposed
upon the Plan, if any, and the fees, charges or commissions with respect
to the purchase and sale of Plan assets. Unless paid by the Employer,
such costs and expenses, taxes (if any), and fees, charges and
commissions will be a charge upon Plan assets and deducted by the
Trustee.
9.11 Distribution Authority
If any person entitled to receive payment under this Plan is a minor,
declared incompetent or is under other legal disability, the Plan
Administrator may, in its sole discretion, direct the Trustee to:
o Distribute directly to the person entitled to the payment;
o Distribute to the legal guardian or, if none, to a parent of the
person entitled to payment or to a responsible adult with whom the
person entitled to payment maintains his residence;
o Distribute to a custodian for the person entitled to payment under
the Uniform Gifts to Minors Act if permitted by the laws of the
state in which the person entitled to payment resides; or
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o Withhold distribution of the amount payable until a court of
competent jurisdiction determines the rights of the parties
thereto or appoints a guardian of the estate of the person
entitled to payment.
If there is any dispute, controversy or disagreement between any
Beneficiary or person and any other person as to who is entitled to
receive the benefits payable under this Plan, or if the Plan
Administrator is uncertain as to who is entitled to receive benefits, or
if the Plan Administrator is unable to locate the person who is entitled
to benefits, the Plan Administrator may with acquittance interplead the
funds into a court of competent jurisdiction in the judicial district in
which the Employer maintains its principal place of business and, upon
depositing the funds with the clerk of the court, be released from any
further responsibility for the payment of the benefits. If it is
necessary for the Plan Administrator to retain legal counsel or incur any
expense in determining who is entitled to receive the benefits, whether
or not it is necessary to institute court action, the Plan Administrator
will be entitled to reimbursement from the benefits for the amount of its
reasonable costs, expenses and attorneys' fees incurred.
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ARTICLE 10
AMENDMENT OR TERMINATION OF PLAN
10.01 Right of Plan Sponsor to Amend or Terminate
The Plan Sponsor reserves the right to alter, amend, revoke or terminate
this Plan. No amendment will deprive any Participant or Beneficiary of
any vested right nor will it reduce the present value (determined upon an
actuarial equivalent basis) of any Accrued Benefit to which he is then
entitled with respect to Employer contributions previously made, except
as may be required to maintain the Plan as a qualified plan under the
Code. No amendment will change the duties or responsibilities of the
Trustee without its express written consent thereto.
A plan amendment which has the effect of (a) eliminating or reducing an
early retirement benefit or a retirement-type subsidy, or (b) eliminating
an optional benefit form, will, with respect to benefits attributable to
service before the amendment be treated as reducing Accrued Benefits. In
the case of a retirement-type subsidy, the preceding sentence will apply
only with respect to a Participant who satisfies (either before or after
the amendment) the preamendment conditions for the subsidy. In general,
a retirement-type subsidy is a subsidy that continues after retirement
but does not include a disability retirement benefit, a medical benefit,
a social security supplement, a pre-retirement death benefit, or a plant
shutdown benefit (that does not continue after retirement).
A minimum Accrued Benefit value will apply if this Plan is or becomes a
successor to a profit sharing plan, a defined contribution pension plan,
a target benefit plan, or a defined benefit pension plan which was fully
insured, or any plan under which the accrued benefit of a Participant was
determined as a lump sum or account balance. The actuarial equivalent
value of a Participant's Accrued Benefit will not be less than the
actuarial equivalent value of his Accrued Benefit on the Effective Date
of the Plan.
10.02 Allocation of Assets Upon Termination of Plan
If this Plan is revoked or terminated (in whole or in part) or if
contributions are completely discontinued the Accounts of all affected
Participants will become non-forfeitable. The Employer will then arrange
for allocation of all assets among Participants so affected by the total
or partial termination in accordance with the requirements of all
applicable law and the regulations and requirements of the Internal
Revenue Service. All allocated amounts will be retained in the Plan to
the credit of the individual Participants until distribution as directed
by the Employer. Distribution to Participants may be in the form of cash
or other Plan assets or partly in each.
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10.03 Exclusive Benefit
At no time will any part of the principal or income of the Plan assets be
used or diverted for purposes other than the exclusive benefit of
Participants in the Plan and their Beneficiaries, nor may any portion of
the Plan assets revert to the Employer except as provided in Sections
7.01(e) and 8.08.
10.04 Failure to Qualify
Notwithstanding any of the foregoing provisions. if this Plan, upon
adoption by the Employer, is submitted to the Internal Revenue Service
which then determines that the Plan as initially adopted by the Employer
is not a qualified plan under the Code. the Employer may elect to
terminate this Plan by giving written notice thereof. Such termination
will have the same effect as if the Plan were never adopted, all policies
and contracts will be canceled, and all contributions, to the extent
recoverable from the Trustee, will be returned to their source. If any
amendment to this Plan is submitted to the Internal Revenue Service
within the period allowed under Code Section 401(b) which then determines
that the Plan as amended is not a qualified plan under the Code, the
Employer may cancel or modify any or all provisions of the amendment
retroactive to the effective date of the amendment in order to maintain
the qualified status of the Plan, whereupon written notice thereof will
be furnished to all affected Employees, Participants and Beneficiaries.
10.05 Mergers, Consolidations or Transfers of Plan Assets
In the event this Plan is merged or consolidated with another plan which
is qualified under Code Sections 401(a) (and 501(a) if applicable), or in
the event of a transfer of the assets or liabilities of this Plan to
another plan which is qualified under Code Sections 401(a) (and 501(a) if
applicable), the benefit which each Participant would be entitled to
receive under the successor plan or other plan if it were terminated
immediately after the merger, consolidation or transfer will be equal to
or greater than the benefit which the Participant would have received
immediately before the merger, consolidation or transfer if this Plan had
then terminated.
Any transfer of assets and/or liabilities to (or from) this Plan from (or
to) another plan qualified under Code Sections 401(a) (and 501(a) if
Applicable) will be evidenced by a Written Resolution by the Plan Sponsor
of each affected plan which specifically authorizes such transfer of
assets and/or liabilities.
Any transfer of assets to this Plan will be allowed under the provisions
of this Section if such transferred assets are not required to be paid in
the form of a qualified joint & survivor annuity or a qualified survivor
annuity in accordance with Code Section 401(a)(11).
10.06 Effect of Plan Amendment on Vesting Schedule
No amendment to the Vesting Schedule will deprive a Participant of his
nonforfeitable right to his Vested Accrued Benefit as of the date of the
amendment. Further, if the Vesting Schedule of the Plan is amended, or
if the Plan is amended in any way that directly or
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indirectly affects the computation of a Participant's non-forfeitable
percentage, each Participant with at least 3 Years of Vesting Service as
of the last day of the election period described below may elect, within
a reasonable period after the adoption of the amendment, to have his
Vested Percentage computed under the Plan without regard to such
amendment. The period during which such election may be made will
commence with the date the amendment is adopted and will end 60 days
after the latest of:
(a) the date the amendment is adopted;
(b) the date the amendment becomes effective; or
(c) the date the Participant is issued written notice of the amendment
by the Employer.
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ARTICLE 11
TRUSTEE AND TRUST FUND
11.01 Acceptance of Trust
The Trustee, by signing this Agreement. accepts this Trust and agrees to
perform the duties of the Trustee in accordance with the terms and
conditions set forth herein.
11.02 Trust Fund
(a) Purpose and Nature
The Trustee will establish and maintain a Trust Fund for purposes
of providing a means of accumulating the assets necessary to
provide the benefits which become payable under the Plan. The
Trustee will receive, hold and invest all contributions made by
the Employer, any Participating Employers, and the Participants,
including the investment earnings thereon. The Trust Fund arising
from such contributions and earnings will consist of all assets
held by the Trustee under the Plan and Trust. All benefits
payable under the Plan will be paid by the Trustee from the Trust
Fund.
Any person having any claim under the Plan will look solely to the
assets of the Trust Fund for satisfaction. In no event will the
Plan Administrator, the Employer, any Employees, any officer of
the Employer or any agents of the Employer or the Plan
Administrator be liable in their individual capacities to any
person whomsoever, under the provisions of this Plan and Trust,
except as provided by law.
The Trust Fund will be used and applied only in accordance with
the provisions of the Plan and Trust, to provide the benefits
thereof, and no part of the corpus or income of the Trust Fund
will be used for, or diverted to, purposes other than for the
exclusive benefit of the Participants or their Beneficiaries
entitled to benefits under the Plan, except to the extent
specifically provided elsewhere herein.
(b) Investments
The Trustee will invest the Trust Fund in accordance with the
investment policy for the Trust Fund considering the fiduciary
requirements of law, the objectives of the Plan, and the liquidity
needs of the Plan.
(c) Investment Policy
The Plan Sponsor (or the Plan Administrator or an Investment
Committee appointed by the Plan Sponsor) will have the right to
periodically provide the Trustee with a written investment policy
which, in consideration of the needs of the Plan, sets forth
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the investment objectives, policies, and guidelines which the Plan
Sponsor judges to be appropriate and prudent.
If a written investment policy is not so provided, then the
Trustee will set forth the investment policy for the Plan. In
doing so, the Trustee may consult with the Plan Sponsor (or the
Plan Administrator or an Investment Committee appointed by the
Plan Sponsor) to secure information with regard to Plan Sponsor
investment objectives and general investment policy.
(d) Operation of Trust Fund
The Trust Fund will be maintained in accordance with the
accounting requirements of the Plan. No Participant will have any
right to any specific asset or any specific portion of the Trust
Fund prior to distribution of benefits. Withdrawals from the
Trust Fund will be made to provide benefits to Participants and
Beneficiaries in the amounts specified by the Plan, and to pay
expenses authorized by the Plan Administrator.
(e) Plan Sponsor Direction of Investment
The Plan Sponsor will have the right to direct the Trustee with
respect to the investment and reinvestment of assets comprising
the Trust Fund. The Trustee and the Plan Sponsor (or the Plan
Administrator or an Investment Committee appointed by the Plan
Sponsor) will execute a letter of agreement as a part of this Plan
containing such conditions, limitations and other provisions they
deem appropriate before the Trustee will follow any Plan Sponsor
direction with respect to the investment or reinvestment of any
part of the Trust Fund.
11.03 Receipt of Contributions
The Trustee will be accountable to the Employer for the funds contributed
to it, but will have no duty to see that the contributions received
comply with the provisions of the Plan. The Trustee will not be
obligated to collect any contributions from the Employer or the
Participants.
11.04 Powers of the Trustee
Subject to the provisions and limitations contained elsewhere in this
Plan, the Trustee will have full discretion and authority with regard to
the investment of the Trust Fund. The Trustee is authorized and
empowered, but not by way of limitation, with the following powers,
rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, United
States retirement plan bonds, corporate bonds, debentures,
convertible debentures, commercial paper, U.S. Treasury bills,
book entry deposits with the United States Federal Reserve Bank or
System, Master Notes or similar arrangements sponsored by the
Trustee or any other financial
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institution as permitted by law, improved or unimproved real
estate situated in the United States, mortgages, notes or other
property of any kind, real or personal, as a prudent man would so
invest under like circumstances with due regard for the purposes
of this Plan;
(b) To maintain any part of the assets of the Trust fund in cash, or
in demand or short-term time deposits bearing a reasonable rate of
interest (including demand or short-term time deposits of or with
the Trustee), or in a short-term investment fund or in other cash
equivalents having ready marketability, including, but not limited
to, U.S. Treasury Bills, commercial paper, certificates of deposit
(including such certificates of deposit of or with the Trustee),
and similar types of short-term securities, as may be deemed
necessary by the Trustee in its sole discretion;
(c) To manage, sell, contract to sell, grant options to purchase,
convey. exchange. transfer, abandon, improve, repair, insure,
lease for any term even though commencing in the future or
extending beyond the term of the Trust, and otherwise deal with
all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Trustee
will decide;
(d) To credit and distribute the Trust as directed by the Plan
Administrator or any agent of the Plan Administrator. The Trustee
will not be obliged to inquire as to whether any payee or
distributes is entitled to any payment or whether the distribution
is proper or within the terms of the Plan, or as to the manner of
making any payment or distribution. The Trustee will be
accountable only to the Plan Administrator for any payment or
distribution made by it in good faith on the order or direction of
the Plan Administrator or any agent of the Plan Administrator;
(e) To borrow money, assume indebtedness, extend mortgages and
encumber by mortgage or pledge;
(f) To compromise, contest, arbitrate, or abandon claims and demands,
in its discretion;
(g) To have with respect to the Trust all of the rights of an
individual owner, including the power to give proxies, to
participate in any voting trusts, mergers, consolidations or
liquidations, and to exercise or sell stock subscriptions or
conversion rights;
(h) To hold any securities or other property in the name of the
Trustee or its nominee, or in another form as it may deem best,
with or without disclosing the trust relationship;
(i) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment
and distribution of the Trust;
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(j) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until final
adjudication is made by a court of competent jurisdiction;
(k) To file all tax forms or returns required of the Trustee;
(l) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the
Trustee will not be obligated to or required to do so unless
indemnified to its satisfaction; and
(m) To keep any or all of the Trust property at any place or places
within the United States or abroad, or with a depository or
custodian at such place or places; provided, however, that the
Trustee may not maintain the indicia of ownership of outside the
jurisdiction of the District Courts of the United States, except
as may be expressly authorized in U.S. Treasury or U.S. Department
of Labor regulations.
11.05 Investment in Common or Collective Trust Funds
Notwithstanding the provisions of Section 11.04, the Plan Sponsor
specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund in any common or collective trust fund
which at the time of the investment provides for the pooling of the
assets of plans qualified under Code Section 401(a). The authorization
applies only if such common or collective trust fund: (a) is exempt from
taxation under Code Section 584 or 501(a); (b) if exempt under Code
Section 501(a), expressly limits participation to pension and profit
sharing trusts which are exempt under Code Section 501(a) by reason of
qualifying under Code Section 401(a); (c) prohibits that part of its
corpus or income which equitably belongs to any participating trust from
being used for or diverted to any purposes other than for the exclusive
benefit of the Employees or their Beneficiaries who are entitled to
benefits under such participating trust; (d) prohibits assignment by
participating trust of any part of its equity or interest in the group
trust; and (e) the sponsor of the group trust created or organized the
group trust in the United States and maintains the group trust at all
times as a domestic trust in the United States. The provisions of the
common or collective trust fund agreement, as amended by the Trustee from
time to time, are by this reference incorporated within this Plan and
Trust. The provisions of the common or collective trust fund will govern
any investment of Plan assets in that fund. This provision constitutes
the express permission required by Section 408(b)(8) of ERISA.
11.06 Investment in Insurance Company Contracts
The Trustee may invest any portion of the Trust Fund in a deposit
administration, guaranteed investment or similar type of investment
contract (hereinafter referred to as Contract); provided, however, that
no such Contract may provide for an optional form of benefit which would
not be provided for under the provisions hereof. The Trustee will be the
complete and absolute owner of Contracts held in the Trust Fund.
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The Trustee may convert from one form to another any Contract held in the
Trust Fund; designate any mode of settlement; sell or assign any Contract
held in the Trust Fund; surrender for cash any Contract held in the Trust
Fund; agree with the insurance company issuing any Contract to any
release, reduction, modification or amendment thereof; and, without
limitation of any of the foregoing, exercise any and all of the rights,
options and privileges that belong to the absolute owner of any Contract
held in the Trust Fund that are granted by the terms of any such Contract
or by the terms of this Agreement.
The Trustee will hold in the Trust Fund the proceeds of any sale,
assignment or surrender of any Contract held in the Trust Fund and any
and all dividends and other payments of any kind received in respect to
any Contract held in the Trust Fund.
No insurance company which may issue any Contract based upon the
application of the Trustee will be responsible for the validity of this
Plan, be required to look into the terms of this Plan, be required to
question any act of the Plan Administrator or the Trustee hereunder or be
required to verify that any action of the Trustee is authorized by this
Plan. If a conflict should arise between the terms of the Plan and any
such Contract, the terms of the Plan will govern.
11.07 Fees and Expenses from Fund
The Trustee will be entitled to receive reasonable annual compensation as
may be mutually agreed upon from time to time between the Plan Sponsor
and the Trustee. The Trustee will pay all expenses reasonably incurred
by it in its administration and investment of the Trust Fund from the
Trust Fund unless the Plan Sponsor pays the expenses. No person who is
receiving full pay from the Plan Sponsor will receive compensation for
services as Trustee.
11.08 Records and Accounting
The Trustee will keep full and complete records of the administration of
the Trust Fund which the Employer and the Plan Administrator may examine
at any reasonable time. As soon as practical after the end of each Plan
Year and at such other reasonable times as the Employer may direct, the
Trustee will prepare and deliver to the Employer and the Plan
Administrator an accounting of the administration of the Trust, including
a report on the fair market value of all assets of the Trust Fund.
11.09 Distribution Directions
If no one claims a payment or distribution made from the Trust, the
Trustee will notify the Plan Administrator and will dispose of the
payment in accordance with the subsequent direction of the Plan
Administrator.
11.10 Third Party
No person dealing with the Trustee will be obliged to see to the proper
application of any money paid or property delivered to the Trustee, or to
inquire whether the Trustee has acted pursuant to any of the terms of the
Plan. Each person dealing with the Trustee may act upon
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any notice, request or representation in writing by the Trustee, or by
the Trustee's duly authorized agent, and will not be liable to any person
whomsoever in so doing. The certification of the Trustee that it is
acting in accordance with the Plan will be conclusive in favor of any
person relying on the certification.
11.11 Professional Agents, Affiliates and Arbitration
(a) Professional Agents
The Trustee may employ and pay from the Trust Fund reasonable
compensation to agents, attorneys, accountants and other persons
to advise the Trustee as in its opinion may be necessary. The
Trustee may delegate to any agent, attorney. accountant or other
person selected by it any non-Trustee power or duty vested in it
by the Plan; the Trustee may act or refrain from acting on the
advice or opinion of any agent, attorney, accountant or other
person so selected.
(b) Use of Affiliates
(1) Charles Schwab Trust Company (CSTC) is authorized to
contract or make other arrangements with The Charles Schwab
Corporation, Charles Schwab & Co., Inc., their affiliates
and subsidiaries, successors and assigns (collectively
referred to as Schwab), and any other organizations
affiliated with or subsidiaries of CSTC or related entities,
for the provision of services to the Trust Fund or Plan,
except where such arrangements are prohibited by law or
regulation.
(2) CSTC is authorized to place securities orders, settle
securities trades, hold securities in custody and other
related activities on behalf of the Trust Fund through or by
Schwab whenever possible unless the Authorized Person
specifically instructs the use of another Broker. Trades
and related activities conducted through the Broker will be
subject to fees and commissions established by the Broker,
which may be paid from the Trust Fund or netted form the
proceeds of trades.
(3) Trades will not be executed through Schwab unless the Plan
Administrator and the Authorized Person have received
disclosure concerning the relationship of Schwab to CSTC,
and the fees and commissions which may be paid to Schwab,
CSTC and any affiliate or subsidiary of any of them as a
result of using Schwab to execute trades or for other
services.
(4) CSTC is authorized to disclose such information as is
necessary to the operation and administration of the Trust
Fund to Schwab and to such other persons or organizations
that CSTC determines have a legitimate business purpose for
obtaining such information.
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(5) At the direction of the Authorized Person, CSTC may purchase
shares of regulated investment companies (or other
investment vehicles) advised by Schwab or CSTC ("Schwab
Funds"), except to the extent that such investment is
prohibited by law or regulation. Schwab Fund shares may not
be purchased for or held by the Trust Fund unless the Plan
Administrator has received disclosure concerning the
relationship of Schwab or CSTC to the Schwab Funds, and any
fees which may be paid to such entities.
(6) To the extent permitted under applicable laws, CSTC may
invest in deposits, long and short term debt instruments,
stocks and other securities, including those of CSTC or
Schwab.
(7) CSTC and Schwab are authorized to tape record conversations
between CSTC or Schwab and persons acting on behalf of the
Plan or a Participant in order to verify data on
transactions.
(c) Arbitration
Any dispute under this agreement will be resolved by submission of
the issue to a member of the American Arbitration Association who
is chosen by the Employer and the Trustee. If the Employer and
the Trustee cannot agree on such a choice, each will nominate a
member of the American Arbitration Association, and the two
nominees will then select an arbitrator. Expenses of the
arbitration will be paid as decided by the arbitrator.
11.12 Valuation of Trust
The Trustee will value the Trust Fund as of the last day of each Plan
Year to determine the fair market value of the Trust, and the Trustee
will value the Trust Fund on such other date(s) as may be necessary to
carry out the provisions of the Plan.
11.13 Liability of Trustee
The Trustee will be liable only for the safeguarding and administration
of the assets of this Trust Fund in accordance with the provisions hereof
and any amendments hereto and no other duties or responsibilities will be
implied. The Trustee will not be required to pay any interest on funds
paid to or deposited with it or to its credit under the provisions of
this Trust, unless pursuant to a written agreement between the Employer
and the Trustee. The Trustee will not be responsible for the adequacy of
the Trust Fund to meet and discharge any liabilities under the Plan and
will not be required to make any payment of any nature except from funds
actually received as Trustee. The Trustee may consult with legal counsel
(who may be legal counsel for the Employer) selected by the Trustee and
will be fully protected for any action taken, suffered or omitted in good
faith in accordance with the opinion of said legal counsel. It will not
be the duty of the Trustee to determine the identity or mailing address
of any Participant or any other person entitled to benefits hereunder,
such identity and mailing addresses to be furnished by the Employer, the
Plan Administrator or an agent
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of the Plan Administrator. The Trustee will be under no liability in
making payments in accordance with the terms of this Plan and the
certification of the Plan Administrator or an agent of the Plan
Administrator who has been granted such powers by the Plan Administrator.
Except to the extent required by any applicable law, no bond or other
security for the faithful performance of duty hereunder will be required
of the Trustee.
11.14 Removal or Resignation and Successor Trustee
A Trustee may resign at any time upon giving 30 days prior written notice
to the Plan Sponsor or, with the consent of the Plan Sponsor, a Trustee
may resign with less than 30 days prior written notice.
The Plan Sponsor may remove a Trustee by giving at least 30 days prior
written notice to the Trustee.
Upon the removal or resignation of a Trustee, the Plan Sponsor will
appoint and designate a successor Trustee which will be one or more
individual successor Trustees or a corporate Trustee organized under the
laws of the United States or of any state thereof with authority to accept
and execute trusts. Any successor Trustee must accept and acknowledge in
writing its appointment as a successor Trustee before it can act in such
capacity.
Title to all property and records or true copies of such records
necessary to the current operation of the Trust Fund held by the Trustee
hereunder will vest in any successor Trustee acting pursuant to the
provisions hereof, without the execution or filing of any further
instrument. Any resigning or removed Trustee will execute all
instruments and do all acts necessary to vest such title in any successor
Trustee of record. Each successor Trustee will have, exercise and enjoy
all the powers, both discretionary and ministerial, herein conferred upon
his predecessor. No successor Trustee will be obligated to examine the
accounts, records and acts of any previous Trustee or Trustees, and each
successor Trustee in no way or manner will be responsible for any action
or omission to act on the part of any previous Trustee.
Any corporation which results from any merger, consolidation or purchase
to which the Trustee may be a party, or which succeeds to the trust
business of the Trustee, or to which substantially all the trust assets
of the Trustee may be transferred, will be the successor to the Trustee
hereunder without any further act or formality with like effect as if the
successor Trustee had originally been named Trustee herein; and in any
such event it will not be necessary for the Trustee or any successor
Trustee to give notice thereof to any person, and any requirement,
statutory or otherwise, that notice will be given is hereby waived.
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11.15 Appointment of Investment Manager
One or more Investment Managers may be appointed by the Plan Sponsor (or
the Plan II Administrator) to exercise full investment management
authority with respect to all or a portion of the Trust assets.
Authorized payment of the fees and expenses of the Investment Manager(s)
may be made from the Trust assets. For purposes of this agreement, any
Investment Manager so appointed will, during the period of his
appointment, possess fully and absolutely those powers, rights and duties
of the Trustee (to the extent delegated by the Plan Sponsor or the Plan
Administrator) with respect to the investment or reinvestment of that
portion of the Trust assets over which the Investment Manager has
investment management authority. The Investment Manager must be one of
the following:
(a) Registered as an investment advisor under the Investment Advisors
Act of 1940;
(b) A bank, as defined in the Investment Advisors Act of 1940; or
(c) An insurance company qualified to manage, acquire, or dispose of
such Plan assets under the laws of more than one state.
Any Investment Manager will acknowledge in writing to the Plan Sponsor or
the Plan Administrator and to the Trustee that he or it is a fiduciary
with respect to the Plan. During any period of time when the Investment
Manager is so appointed and serving, and with respect to those assets in
the Plan over which the Investment Manager exercises investment
management authority, the Trustee's responsibility will be limited to
holding such assets as a custodian, providing accounting services,
disbursing benefits as authorized, and executing such investment
instructions only as directed by the Investment Manager. The Trustee
will not be responsible for any acts or omissions of the Investment
Manager. Any certificates or other instruments duly signed by the
Investment Manager (or the authorized representative of the Investment
Manager), purporting to evidence any Instruction, direction or order of
the Investment Manager with respect to the investment of those assets of
the Plan over which the Investment Manager has investment management
authority, will be accepted by the Trustee as conclusive proof thereof.
The Trustee will also be fully protected in acting in good faith upon any
notice, instruction, direction, order, certificate, opinion, letter,
telegram or other document believed by the Trustee to be genuine and from
the Investment Manager (or the authorized representative of the
Investment Manager). The Trustee will not be liable for any action taken
or omitted by the Investment Manager or for any mistakes of judgment or
other action made, taken or omitted by the Trustee in good faith upon
direction of the Investment Manager.
11.16 Loans to Participants
The Plan Administrator may authorize the Trustee to lend on a
nondiscriminatory basis to a Participant an amount from the Plan as
specified herein; provided, a reasonable rate of interest will be charged
on the loan, the loan will be secured by 50% of the Participant's, Vested
Accrued Benefit in the Plan, and provision for repayment will be made.
All loans
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will be subject to the approval of the Plan Administrator which will
investigate each application for a loan. The Plan Administrator will
prescribe such rules as may be necessary to provide guidelines as to
under which circumstances and for what purpose loans will be permitted.
The Plan Administrator will prescribe guidelines as to which Account or
Accounts loans may be made from. Each loan made to a Participant will be
made from the Participant's allowable Account or Accounts. All Interest
and principal repayments will be credited to the Participant's Account
from which the loan was made.
In addition to any additional rules and regulations as the Plan
Administrator may adopt all loans will comply with the following terms
and conditions:
(a) Only Active and Inactive Participants will be eligible to apply
for a loan. Each application for a loan will be made in writing
to the Plan Administrator, whose action thereon will be final.
(b) Each loan will be made against collateral being the assignment of
50% of the borrower's entire right, title and interest in and to
the Trust Fund, supported by the borrower's promissory note for
the amount of the loan, including interest payable to the order to
the Trustee, and any additional security deemed necessary to
adequately secure the Loan. If a person fails to make a required
payment within 90 days of the due date set forth in the loan
agreement, the loan will be in default. There will be no
foreclosure against a Participant's Accrued Benefit prior to his
becoming entitled to a distribution of benefits in accordance with
the terms of this Plan. All loans will become due and payable in
full upon the termination of a Participant's employment. If a
Participant with an outstanding loan terminates employment and
becomes entitled to a distribution of benefits from the Plan, then
the outstanding balance of the unpaid loan plus any accrued
interest thereon will be deducted from the amount of otherwise
distributable benefits and the Participant's promissory note will
be distributed to the Participant.
(c) The principal repayment will be amortized over the fixed life of a
loan with installments of principal and interest to be paid not
less often than quarterly. The period of repayment for each loan
will be arrived at by mutual agreement between the Plan
Administrator and the borrower, but in no event will such period
exceed a reasonable period of time. The period of repayment will
in no event exceed 5 years unless the loan is to be used to
acquire, construct, reconstruct or substantially rehabilitate any
dwelling unit which, within a reasonable period of time, is to be
used as a principal residence of the Participant or a member of
the family (spouse, brother, sister, ancestor, or lineal
descendants) of the Participant.
(d) The minimum amount of any loan is equal to $1,000.
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(e) The maximum amount of any loan is such that when the amount of the
loan is added to the outstanding balance of all other loans made
to the Participant from the Plan (and any other plans maintained
by the Employer or any Related Employer) the total does not exceed
the lesser of:
(1) 50% of the Participant's Vested Accrued Benefit; or
(2) $50,000, reduced by the amount, if any, of the highest
balance of all outstanding loans to the Participant during
the one-year period ending on the day prior to the day on
which the loan in question is made.
(f) Each loan will bear interest at a rate equal to the prime rate
which is published in the Wall Street Journal as being
representative of the base rate on corporate loans at large U.S.
money center commercial banks on the last day of the month prior
to the date on which the loan is made, plus 1 percentage point.
(g) A Participant may have no more than two loans outstanding at any
time.
(h) Each loan will require the Participant (and, if the Participant is
married, the Participant's spouse) to consent to the loan and the
possible reduction in the Participant's Accrued Benefit. Such
consent must be made in writing within the 90-day period before
the making of the loan.
(i) No loan will be permitted to a Participant in a year in which he
is either an Owner-Employee or Shareholder-Employee as defined in
Code Section 4975(d).
11-11
<PAGE> 91
IN WITNESS WHEREOF, this instrument has been executed by the duly authorized
and empowered officers of the Employer, this 28th day of December, 1995
Hollywood Theaters, Inc.
By: /s/ Jeffrey L. Lightfoot
-----------------------------
Jeffery L. Lightfoot
Chief Financial Officer
The Trustee agrees to continue to serve as Trustee under the terms of this
instrument.
Charles Schwab Trust Company
By: /s/ Charles Schwab Trust Company
-------------------------------------
<PAGE> 92
RESOLUTION AUTHORIZING RESTATEMENT OF THE
HOLLYWOOD THEATERS, INC.
401(k) SAVINGS PLAN
RESOLVED, that the Trans Texas Amusements, Inc. Retirement Savings Plan and
Trust (the "Plan") be restated effective July 10, 1995 by Hollywood Theaters,
Inc., to continue to provide benefits for its permanent employees to the extent
and in the manner set out in the Plan, as restated; and
RESOLVED FURTHER, that the Plan be renamed to be the Hollywood Theaters, Inc.
401(k) Savings Plan; and
RESOLVED FURTHER, that pursuant to the terms of the Hollywood Theaters, Inc.
401(k) Savings Plan, Hollywood Theaters, Inc. is hereby appointed to direct the
administration of the Plan according to its terms; and
RESOLVED FURTHER, that the officers of Hollywood Theaters, Inc. be authorized
on its behalf to execute said amendment, together with any and all other
instruments of any kind or character required and to take such further action
as may be necessary to maintain said Plan.
***************************
I, Jeffrey L. Lightfoot, Secretary of Hollywood Theaters, Inc., do hereby
certify that the above and foregoing is a true and correct copy of an original
resolution unanimously adopted by the Directors of Hollywood Theaters, Inc. at
their meeting held on the 24th day of January, 1996.
/s/ Jeffrey L. Lightfoot
-----------------------------
Secretary
<PAGE> 93
IN WITNESS WHEREOF, this instrument has been executed by the duly authorized
and empowered officers of the Employer, this 28th day of December, 1995.
Hollywood Theaters, Inc.
By: /s/ Jeffrey L. Lightfoot
-----------------------------
Jeffery L. Lightfoot
Chief Financial Officer
The Trustee agrees to continue to serve as Trustee under the terms of this
instrument.
Charles Schwab Trust Company
By: /s/ Charles Schwab Trust Company
-------------------------------------
<PAGE> 1
EXHIBIT 10.12
HOLLYWOOD THEATER HOLDINGS, INC.
1996 STOCK OPTION AND STOCK AWARD PLAN
<PAGE> 2
HOLLYWOOD THEATER HOLDINGS, INC.
1996 STOCK OPTION AND STOCK AWARD PLAN
<TABLE>
<S> <C>
ARTICLE 1
SCOPE AND PURPOSE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 General Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3
SHARES OF COMMON STOCK SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Maximum Amount of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Limitation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Incentive Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4
ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 The Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Registration and Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5
ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Incentive Stock Option Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 No Board Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Incentive Award Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6
STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 Exercise Price and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Term of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Method of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Limitation on Incentive Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<TABLE>
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ARTICLE 7
STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 Grant of Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 8
RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Grant of Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 9
PERFORMANCE UNITS AND PERFORMANCE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Grants of Performance Units or Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 10
PHANTOM STOCK RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Grant of Phantom Stock Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 11
FORFEITURE AND EXPIRATION OF INCENTIVE AWARDS
DUE TO EMPLOYMENT SEPARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.2 Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.3 Repurchase of Unvested Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.4 Company's Right to Purchase Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 12
ADJUSTMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.1 Common Stock Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.2 Corporate Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.3 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 13
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13.1 No Right to Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13.2 Securities Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13.3 No Right to Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.4 No Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.5 Company's Right to Purchase Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 14
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.1 Amendments; Suspensions; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 15
EFFECTIVE DATE OF PLAN AND DURATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15.1 Effective Date and Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
iii
<PAGE> 5
ARTICLE 1
SCOPE AND PURPOSE OF THE PLAN
1.1 Purpose. The purpose of the Hollywood Theater
Holdings, Inc. 1996 Stock Option and Stock Award Plan (the "Plan") is to
strengthen the ability of Hollywood Theater Holdings, Inc. (the "Company") and
its Subsidiaries to attract, motivate, and retain employees of superior
capability and to encourage valued employees to have a proprietary interest in
the Company. In furtherance of that purpose, selected Employees may receive
Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Units or Performance Shares and Phantom
Stock Rights, or any combination of the foregoing compensatory benefits under
this Plan.
ARTICLE 2
GENERAL DEFINITIONS
2.1 General Definitions. As used in this Plan, the
following terms shall have the meanings set forth in this Section 2.1, unless a
clearly different meaning is required by the context in which the word or
phrase is used:
(a) "Agreement" -- the written instrument
evidencing the grant to a Participant of an Incentive Award. Each
Participant may be issued one or more Agreements from time to time,
containing one or more Incentive Awards, singly, in combination, or in
tandem.
(b) "Board" -- the Board of Directors of the
Company.
(c) "Change in Control" -- a Change of Control of
the Company as described in Section 12.3.
(d) "Code" -- the Internal Revenue Code of 1986,
as amended.
(e) "Committee" -- the Committee that the Board
appoints to administer the Plan, which shall be composed of at least
two directors who are not Employees.
(f) "Common Stock" -- the common shares of the
capital stock of the Company as described in the Company's Articles of
Incorporation, or such other stock as shall be substituted therefore
as provided in Article 12. Shares of Common Stock are subject to
restrictions as set forth in this Plan, and in each Incentive Award
pursuant to which a Participant receives or could receive Common
Stock.
1
<PAGE> 6
(g) "Company" -- Hollywood Theater Holdings,
Inc., or any successor thereto.
(h) "Date of Grant" -- the date on which the
grant of an Incentive Award is authorized by the Committee, unless
another date is specified by the Committee or by a provision in this
Plan applicable to the Incentive Award.
(i) "Disposition" -- any sale, transfer,
encumbrance, gift, donation, assignment, pledge, hypothecation, or
other disposition, whether similar or dissimilar to those previously
enumerated, whether voluntary or involuntary, and whether during the
Participant's lifetime or upon or after his or her death, including,
but not limited to, any disposition by operation of law, by court
order, by judicial process, or by foreclosure, levy, or attachment.
(j) "Employee" -- any full-time employee of the
Company or a Subsidiary.
(k) "Fair Market Value" -- the value of a share
of Common Stock, as determined by the Committee no less frequently
than annually.
(l) "Incentive Award" -- a Stock Option, Stock
Appreciation Right, Restricted Stock Award, Performance Unit,
Performance Share, or Phantom Stock Right granted under the Plan.
(m) "Incentive Stock Option" -- an incentive
stock option, as defined in section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-qualified Stock Option" -- a Stock
Option other than an Incentive Stock Option.
(o) "Participant" -- an Employee selected by the
Committee to be eligible to receive an Incentive Award under the Plan.
(p) "Performance Period" -- a period of one (1)
or more fiscal years of the Company, beginning with the fiscal year in
which Performance Units or Performance Shares are granted and over
which performance is measured, for the purpose of determining the
payment value of Performance Units or Performance Shares.
(q) "Performance Unit" or "Performance Share" --
an Incentive Award representing a contingent right to receive cash or
shares of Common Stock, which may be Restricted Stock, at the end of a
Performance Period and which, in the case of Performance
2
<PAGE> 7
Shares, is denominated in Common Stock, and in the case of Performance
Units, is denominated in cash values.
(r) "Phantom Stock Right" -- the right to receive
an amount equal to the Fair Market Value of the shares of Common Stock
to which such right relates, as determined on the date of conversion
of such right. Such rights may be subject to substantial risk of
forfeiture until specific vesting conditions are met, which conditions
may be based on continuing employment.
(s) "Plan" -- the Hollywood Theater Holding, Inc.
1996 Stock Option and Stock Award Plan, as set forth in this document,
and as it may be amended from time to time.
(t) "Restricted Stock" or "Restricted Stock
Award" -- the grant, or purchase at a price determined by the
Committee, of Common Stock, which is nontransferable (not subject to
Disposition) and subject to substantial risk of forfeiture until
specific conditions are met. Conditions may be based on continuing
employment or achievement of preestablished performance objectives.
(u) "Retirement" -- the separation of employment
on account of the Employee's retirement under any qualified plan
maintained by the Company or a Subsidiary in which the Employee is a
participant.
(v) "Securities Act" -- the Securities Exchange
Act of 1933.
(w) "Stock Appreciation Right" -- the right to
receive an amount equal to the excess of the Fair Market Value of a
share of Common Stock (as determined on the date of exercise) over the
Fair Market Value on the Date of Grant of the Stock Appreciation
Right, or such lesser amount related to such excess as shall be
determined by the Committee and described in the Agreement evidencing
the Stock Appreciation Right.
(x) "Stock Option" -- a Non-qualified Stock
Option or an Incentive Stock Option.
(y) "Subsidiary' - a 'subsidiary corporation", as
defined in Section 424(f) of the Code, that is subsidiary to the
Company.
2.2 Construction. The singular may include the plural,
unless the context clearly indicates to the contrary. The term "delivered to
the Committee," as used in this Plan shall include delivery to a person or
persons designated by the Committee for the disbursement and receipt of
administrative forms, elections or other communications. Delivery shall be
deemed to have occurred
3
<PAGE> 8
only when the form or other communication is actually received. Headings and
subheadings are for the purpose of reference only and are not to be considered
in the construction of the Plan. All of the provisions of this Plan shall be
construed according to the laws of the State of Texas.
ARTICLE 3
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 Maximum Amount of Shares. Subject to the provisions
of Section 3.2 and Article 12 of this Plan, the aggregate number of shares of
Common Stock that may be issued, transferred or exercised pursuant to Incentive
Awards under the Plan shall not exceed 37,000 shares. At the discretion of the
Board or the Committee, the shares to be delivered under the Plan shall be made
available either from (i) authorized but unissued shares of Common Stock, (ii)
Common Stock held in the treasury of the Company, or (iii) previously issued
shares of Common Stock reacquired by the Company, including shares purchased
on the open market, or through some combination thereof.
3.2 Limitation of Shares. For purposes of the limitation
specified in Section 3.1, the following principles shall apply:
(a) the following shall count against and
decrease the number of shares of Common Stock that may be issued for
purposes of Section 3.1: (i) shares of Common Stock subject to
outstanding Stock Options and Phantom Stock Rights, outstanding shares
of Restricted Stock, shares subject to outstanding Stock Appreciation
Rights granted independent of Stock Options (based on a good faith
estimate by the Company or the Committee of the maximum shares for
which the Stock Appreciation Right may be settled (assuming payment in
full in shares of Common Stock)), and shares issued upon settlement of
outstanding Performance Units and Performance Shares, and (ii) in the
case of Stock Options granted in tandem with Stock Appreciation Rights
the greater of the number of shares of Common Stock that would be
counted in one or the other alone was outstanding (determined as
described in subsection (i) above);
(b) the following shall be added back to the
number of shares of Common Stock that may be issued for purposes of
Section 3.1: (i) shares of Common Stock with respect to which Stock
Options, Stock Appreciation Rights granted independent of Stock
Options, Phantom Stock Rights, or Restricted Stock Awards expire, are
canceled, or otherwise terminate without being exercised, converted,
or vested, as applicable, and (ii) in the case of Stock Options
granted in tandem with Stock Appreciation Rights, shares of Common
Stock as to which a Stock Option has been surrendered in connection
with the exercise of a related ("tandem") Stock Appreciation Right, to
the extent the number surrendered exceeds the number issued upon
exercise of the Stock Appreciation Right; provided that, in any case,
the holder of such Incentive Awards did not receive any dividends
4
<PAGE> 9
or other benefits of ownership with respect to the shares being added
back, other than voting rights and the accumulation (but not payment)
of dividends, of the underlying Common Stock;
(c) shares of Common Stock subject to Stock
Appreciation Rights granted independent of Stock Options (calculated
as provided in Section 3.2(a) above) that are exercised and paid in
cash shall be added back to the number of shares of Common Stock that
may be issued for purposes of Section 3.1, provided that the holder of
such Stock Appreciation Right did not receive any dividends or other
benefits of ownership other than voting rights and the accumulation
(but not payment) of dividends, of the shares of Common Stock subject
to the Stock Appreciation Right;
(d) shares of Common Stock that are transferred
by a holder of an Incentive Award (or withheld by the Company) as full
or partial payment to the Company of the purchase price of shares of
Common Stock subject to a Stock Option or the Company's or any
Subsidiary's tax withholding obligations shall not be added back to
the number of shares of Common Stock that may be issued for purposes
of Section 3.1 and shall not again be subject to Incentive Awards; and
(e) if the number of shares of Common Stock
counted against the number of shares that may be issued for purposes
of Section 3.1 is based upon an estimate made by the Company or the
Committee as provided in Section 3.2(a) above and the actual number of
shares of Common Stock issued pursuant to the applicable Incentive
Award is greater or less than the estimated number, then, upon such
issuance, the number of shares of Common Stock that may be issued
pursuant to Section 3.1 shall be further reduced by the excess
issuance or increased by the shortfall, as applicable.
3.3 Incentive Award. Subject to the general limitations
set forth in Articles 6, 7, and 12, the Committee may make any adjustment in
the exercise price of, the number of shares subject to, or the terms of a Non-
qualified Stock Option or Stock Appreciation Right by canceling an outstanding
Non-qualified Stock Option or Stock Appreciation Right and re-granting a
Non-qualified Stock Option or Stock Appreciation Right. Such adjustment shall
be made by amending, substituting, or re-granting an outstanding Non-qualified
Stock Option or Stock Appreciation Right. Such amendment, substitution, or
regrant may result in terms and conditions that differ from the terms and
conditions of the original Non-qualified Stock Option or Stock Appreciation
Right. The Committee may not, however, impair the rights of any Participant to
previously granted Non-qualified Stock Options or Stock Appreciation Rights
without such Participant's consent. If such action is effected by amendment,
the effective date of such amendment shall be the date of the original grant.
5
<PAGE> 10
ARTICLE 4
ADMINISTRATION OF THE PLAN
4.1 The Committee. The Committee shall administer the
Plan. The Committee shall consist of two or more non-employee members of the
Board elected to the Committee by a majority of the Board. The members of the
Committee shall serve at the discretion of the Board, which shall have the
power, at any time and from time to time, to remove members from or add members
to the Committee. Any individual serving as a member of the Committee shall
have the right to resign from membership in the Committee by at least three
days' written notice to the Board. The Board, and not the remaining members of
the Committee, shall have the power and authority to fill vacancies on the
Committee, however caused. No member of the Board or the Committee shall be
liable for any action or determination made in good faith by the Board or the
Committee with respect to the Plan or any Incentive Award. The Committee may,
in its discretion, delegate its duties under the Plan to such agents as it may
appoint from time to time. In the event that the Plan becomes subject to the
Securities Act, the Committee shall not be able to delegate its duties with
respect to Participants subject to the Securities Act.
4.2 Powers. The Committee may exercise such powers and
authority as may be necessary for the Committee to carry out its functions as
described in the Plan. The Committee has discretionary authority to determine
the Employees to whom, and the time or times at which, Incentive Awards shall
be granted. The Committee also has authority to determine the number of shares
of Common Stock, Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Performance Units or Performance Shares, or Phantom Stock Rights that
shall be subject to each Incentive Award. The Committee shall have the
discretion to determine the terms and provisions of the Incentive Award
Agreements and to make all other determinations necessary for plan
administration. The Committee has authority to interpret the Plan and the
Agreements thereunder the to prescribe, amend, and rescind any rules relating
to the Plan. All Committee interpretations, determinations, and actions shall
be binding on all parties. A majority of the Committee shall constitute a
quorum. Acts of a majority of the members present at any meeting at which a
quorum is present or acts approved in writing by a majority of the Committee
shall deemed to be the acts of the Committee.
4.3 Agreements. Incentive Awards shall be evidenced by a
written instrument and may include any terms and conditions consistent with the
Plan, as the Committee may determine.
4.4 Registration and Listing of Shares. From time to
time, the Board of Directors and appropriate officers of the Company shall and
are authorized to take whatever actions are necessary to file required
documents with governmental authorities, and stock exchanges to make shares of
Common Stock available for issuance pursuant to Incentive Awards.
4.5 Payment of Taxes. The Committee may, in its
discretion, require a Participant to pay to the Company, or to a Subsidiary of
the Company if the Participant is an Employee of a
6
<PAGE> 11
Subsidiary, at the time of exercise of a Stock Option or Stock Appreciation
Right, the payment of a Performance Unit or Performance Share, the conversion
of a Phantom Stock Right, or in connection with a Restricted Stock Award, the
amount that the Committee deems necessary to satisfy the Company's or
Subsidiary's current or future obligation to withhold federal, state, or local
income or other taxes that the Participant incurs in connection with such
Incentive Award. The Participant may (i) direct the Company to withhold from
the shares of Common Stock (if any) to be issued to the Participant the number
of shares necessary to satisfy the Company's or Subsidiary's obligation to
withhold taxes, such determination to be based on the shares' Fair Market Value
as of the date on which tax withholding is to be made, (ii) deliver to the
Company sufficient shares of Common Stock (based upon the Fair Market Value at
the date of withholding) to satisfy the Company's or Subsidiary's withholding
obligations, or (iii) deliver to the Company or Subsidiary sufficient cash to
satisfy the Company's or Subsidiary's withholding obligation. Participants who
elect to use the stock withholding feature may make the election at the time
and in the manner prescribed by the Committee. The Committee may, in its sole
discretion, deny any Participant's request to satisfy withholding obligations
through Common Stock withholding instead of payment by cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Common Stock withheld as payment of any tax
withholding obligation is insufficient to discharge that tax withholding
obligation, then the Participant shall pay to the Company or Subsidiary the
amount of that deficiency immediately upon the Company's request.
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1 Participation. The Committee shall designate the
Employees who are eligible to participate in this Plan. Such designations may
be by individual or by class.
5.2 Incentive Stock Option Eligibility. No person shall
be eligible for the grant of an Incentive Stock Option who owns (within the
meaning of section 422 and 424 of the Code), or would own immediately after the
grant of such Incentive Stock Option, directly or indirectly, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary. This restriction shall not apply if, at the time
such Incentive Stock Option is granted, the Incentive Stock Option price is at
least 110% of Fair Market Value and the Incentive Stock Option is not, by its
terms exercisable after the expiration of five years from the Date of Grant.
5.3 Exercise of Options. Except to the extent that the
Committee or this Plan provides otherwise, an Incentive Award shall be
exercisable for a period that begins (i) for up to 34% of the rights granted by
the Incentive Award on and after the first anniversary of the Date of Grant;
(ii) for up to 67% of such rights on and after the second anniversary of the
Date of Grant; and (iii) with respect to any or all such rights on and after
the third anniversary of the Date of Grant. The
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Incentive Award shall cease to be exercisable on the first of (i) the date that
is 10 years from the Date of Grant, (ii) in the case of termination of
employment, the date specified in Section 11.1, (iii) in the event there is a
Change on Control, the date specified in Section 12.3, or (iv) such other date
as determined by the Committee and set forth in the Incentive Award. An
Incentive Award shall cease to be exercisable as to any share when the Employee
purchases the share or when the Option lapses.
5.4 No Board Participation. In no event may any member
of the Board who is not an officer or other Employee of the Company be granted
an Incentive Award under this Plan.
5.5 Incentive Award Eligibility. The forms of Incentive
Awards under the Plan are Stock Options, as described in Article 6, Stock
Appreciation Rights, as described in Article 7, Restricted Stock, as described
in Article 8, Performance Units or Performance Shares, as described in Article
9, and Phantom Stock Rights, as described in Article 10.
ARTICLE 6
STOCK OPTIONS
6.1 Exercise Price and Terms. The exercise price of
Common Stock, and the terms and conditions under each Stock Option, shall be
determined by the Committee at the time of grant. For Non-qualified Stock
Options, the purchase price shall be equal to at least the greater of (i) the
par value of the Common Stock, or (ii) 50% of the Fair Market Value of the
Common Stock on the Date of Grant. The purchase price of Common Stock under an
Incentive Stock Option shall be at least equal to the Fair Market Value of the
Common Stock on the Date of Grant.
6.2 Term of Option. Non-qualified Stock Options may be
exercised as determined by the Committee. Incentive Stock Options may be
exercised as determined by the Committee, but in no event later than 10 years
from the Date of Grant.
6.3 Method of Exercise. Upon the exercise of a Stock
Option the purchase price shall be payable in full in cash or an equivalent
acceptable to the Committee. At the discretion of the Committee, the purchase
price may be paid by assigning and delivering to the Company shares of Common
Stock or a combination of cash and shares equal in value to the exercise price.
No fractional shares shall be issued pursuant to the exercise of a Stock Option
and no payment shall be made in lieu of fractional shares. Any shares so
assigned and delivered to the Company in payment or partial payment of the
purchase price shall be valued at Fair Market Value on the exercise date.
6.4 Limitation on Incentive Options. The aggregate Fair
Market Value (determined at the time an Incentive Stock Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year (under all stock
option plans of the Company) shall not exceed with respect to such participant
$100,000, or such other amount as may be prescribed under section 422 of the
Code or applicable
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regulations or rulings from time to time. As used in this Section 6.4, Fair
Market Value shall be determined as of the Date of Grant. The Committee may
amend the terms of an Incentive Stock Option at any time to include provisions
that have the effect of changing the Incentive Stock Option to a Non-qualified
Stock Option, without the consent of the Participant granted the Incentive
Stock Option.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights. A Stock
Appreciation Right may be granted to a Participant (i) in connection with a
Stock Option, either at the time of grant or at any time during the term of the
Stock Option, or (ii) without relation to a Stock Option. A Stock Appreciation
Right granted pursuant to a Stock Option shall entitle the Participant, upon
exercise, to surrender such Stock Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to Section
7.2. Such Stock Option shall then cease to be exercisable to the extent
surrendered. Subject to Article 12, a Stock Appreciation Right granted in
connection with a Stock Option shall be exercisable at such time or times and
only to the extent that the related Stock Option is exercisable, and shall not
be subject to Disposition except to the extent that such related Stock Option
may be subject to Disposition.
7.2 Exercise. Upon the exercise of a Stock Appreciation
Right related to a Stock Option, the Participant shall be entitled to receive
payment of an amount determined by multiplying:
(a) The difference obtained by subtracting the
purchase price of a share of Common Stock specified in the related
Stock Option from the Fair Market Value of a share of Common Stock on
the date of exercise of such Stock Appreciation Right, by
(b) The number of shares as to which such Stock
Appreciation Right has been exercised.
A Stock Appreciation Right granted without relationship to a
Stock Option shall be exercisable as determined by the Committee. A Stock
Appreciation Right granted without relationship to a Stock Option shall entitle
the Participant, upon exercise of the Stock Appreciation Right, to receive
payment of an amount determined by multiplying:
(a) The difference obtained by subtracting the
Fair Market Value of a share of Common Stock on the Date of Grant from
the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right, by
(b) The number of shares as to which such Stock
Appreciation Right has been exercised.
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Notwithstanding anything to the contrary in this Section 7.2,
the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted in the Agreement evidencing the Participant's Stock
Appreciation Right.
7.3 Payment. Payment of the amount determined under
Section 7.2 may be made solely in whole shares of Common Stock valued at Fair
Market Value on the date of exercise of the Stock Appreciation Right or,
alternatively, in the discretion of the Committee, solely in cash or a
combination of cash and Common Stock. If the Committee decides to make full
payment in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
ARTICLE 8
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock All shares of
Restricted Stock granted or sold to the Plan shall be subject to the following
conditions:
(a) The shares of Common Stock may not be the
subject of any Disposition (other than by will or by the laws of
descent and distribution) until the restrictions are removed or
expire. Any attempted Disposition in violation of this Section 8.1
(a) shall be void and ineffective for all purposes.
(b) Each certificate representing Restricted
Stock Awards granted pursuant to the Plan may bear a legend making
appropriate reference to the restrictions imposed.
(c) The Company may issue such shares subject
only to the restrictive legend described in Section 8.1(b) or the
Committee may require, as a condition of any Incentive Award of
Restricted Stock, one or more of the following: (i) that the Company
retain physical custody of the certificates evidencing Restricted
Stock during the restriction period; (ii) that the Participant enter
into an escrow agreement providing that the certificates representing
Restricted Stock shares shall remain in the physical custody of an
escrow holder until all restrictions are removed or expire, or (iii)
that the Participant deliver a stock power endorsed in blank relating
to the Restricted Stock shares.
(d) The Committee may impose other conditions on
any shares of Common Stock granted or sold pursuant to this Section
8.1 as it may deem advisable.
The restrictions imposed under this Section 8.1 upon
Restricted Stock Awards shall lapse as determined by the Committee, subject to
the provisions of Article 12. Shares of Restricted
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Stock may remain subject to certain restrictions as set forth in the Restricted
Stock Agreement. Each Restricted Stock Award may have a different restriction
period, in the discretion of the Committee. The Committee may, in its
discretion, prospectively change the restriction period applicable to a
particular Restricted Stock Award.
Subject to the provisions of this Section 8.1 and Article 12,
the Committee may, in its discretion, determine what rights, if any, a
Participant shall have with respect to the Restricted Stock Awards granted or
sold to him or her, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
ARTICLE 9
PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 Grants of Performance Units or Performance Shares.
The Committee may make grants of Performance Units or Performance Shares in
such a manner that more than one Performance Period is in progress
simultaneously. For each Performance Period the Committee will establish the
contingent value of each Performance Unit, or Performance Share, which may vary
depending on the degree to which performance objective established by the
Committee are met. At the beginning of each Performance Period, the Committee
will: (i) establish for such Performance Period specific financial, production,
sales or cost performance objectives the Committee believes are relevant to the
Company's overall business objectives, (ii) determine the minimum and maximum
value of a Performance Unit or Performance Share and the value of a Performance
Unit or Performance Share based on the degree to which performance objectives
are achieved, exceeded or not achieved, (iii) determine a minimum performance
level below which Performance Units or Performance Share will not increase, and
(iv) notify each Participant in writing of the established performance
objectives and minimum, target, and maximum Performance Unit or Performance
Share value for such Performance Period.
If the Committee determines in its sole discretion that the
established performance measures or objectives are no longer suitable to
Company objectives because of a change in the Company's business, operations,
corporate structure, capital structure, or other conditions the Committee deems
to be material, the Committee may modify the performance measures and
objectives as it considers appropriate and equitable.
9.2 Payment. The basis for payment of Performance Units
or Performance Shares for a given Performance Period will be the achievement of
those financial, production, sales or cost performance objectives determined by
the Committee at the beginning of the Performance Period. If minimum
performance is not achieved or exceeded for a Performance Period, no payment
will be made and all contingent rights will cease. If minimum performance is
achieved or exceeded, the value of a Performance Unit or Performance Share will
be based on the degree to which actual performance exceeded the preestablished
minimum performance standards. The amount of payment
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will be determined by multiplying the number of Performance Units or
Performance Shares granted at the beginning of the Performance Period and the
final Performance Unit or Performance Share value. Payments will be made in
cash or Common Stock or in a combination of cash and Common Stock as soon as
administratively possible following the close of the applicable Performance
Period. Payment may be made, in the discretion of the Committee, solely in
whole shares of Common Stock valued at Fair Market Value as of the close of the
applicable Performance Period or, alternatively, solely in cash or a
combination of cash and Common Stock. If the Committee decides to make full
payment in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
Payment will be made as soon as possible following the close of the applicable
Performance Period.
ARTICLE 10
PHANTOM STOCK RIGHTS
10.1 Grant of Phantom Stock Rights. A Phantom Stock Right
granted to a Participant shall entitle the Participant, upon conversion, to
surrender such Phantom Stock Right or any portion thereof, to the extent not
then converted, and to receive payment of an amount computed pursuant to
Section 10.2. A Phantom Stock Right shall cease to be convertible to the extent
surrendered. Subject to Article 12, the Committee may, in its discretion (i)
impose restrictions upon the vesting of Phantom Stock Rights and (ii) determine
what rights, if any, the Participant shall have with respect to Phantom Stock
Rights granted to him or her, including the right to receive any or all
dividends and/or distributions paid or made with respect to the shares to which
such Participant's Phantom Stock Right relates.
10.2 Conversion. A Phantom Stock Right shall be deemed
converted upon receipt by the Company of the Agreement pursuant to which the
Phantom Stock Right was granted and written notice from the appropriate
Participant instructing the Company to convert all or any specified portion of
such Phantom Stock Right. Upon conversion of a Phantom Stock Right, the
Participant shall be entitled to receive payment of an amount determined by
multiplying:
(a) The Fair Market Value of a share of Common
Stock on the date of conversion, by
(b) The number of shares of Common Stock as to
which such Phantom Stock Right has been converted.
A Phantom Stock Right may be converted in whole or in part
with respect to whole shares of Common Stock, but may not be converted with
respect to any fractional share unless the Phantom Stock Right is being
converted in whole.
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To the extent a Phantom Stock Right is converted in part, an
appropriate notation will be made on the Agreement surrendered to the Company
and the Agreement will be returned to the appropriate Participant.
10.3 Payment. Payment of the amount determined under
Section 10.2 may be made solely in whole shares of Common Stock (which may be
Restricted Stock) valued at Fair Market Value on the date of conversion of the
Phantom Stock Right or, alternatively, in the discretion of the Committee,
solely in cash or a combination of cash and Common Stock (which may be
Restricted Stock). If the Committee decides to make full payment in shares of
Common Stock and the amount payable results in a fractional share, payment for
the fractional share shall be made in cash.
ARTICLE 11
FORFEITURE AND EXPIRATION OF INCENTIVE AWARDS
DUE TO EMPLOYMENT SEPARATION
11.1 Termination. Incentive Awards (whether or not
vested) held by a Participant shall expire immediately and/or be forfeited upon
termination of such Participant's employment with the Company or the Subsidiary
employing the Participant (without his immediate rehire by the Company or
another Subsidiary) except as follows:
(a) With respect to Stock Options, except to the
extent otherwise provided by the Committee, (i) in the event of
Retirement or permanent and total disability while the Participant is
employed by the Company, only those Stock Options exercisable at the
time of such termination of employment may thereafter be exercised;
provided that such Stock Options may be exercised only until the
earlier of 90 days following the date of Retirement or total and
permanent disability or the end of the remaining period during which
the Stock Option would otherwise be exercisable; and (ii) in the event
of death, Stock Options exercisable at the time of death may be
exercised by the estate or beneficiary of the Participant only until
the earlier of 90 days after the date of death or the end of the
remaining period during which the Stock Option would otherwise be
exercisable.
(b) With respect to Stock Appreciation Rights,
except to the extent otherwise provided by the Committee, (i) in the
event of Retirement or total and permanent disability while the
Participant is employed by the Company, only those Stock Appreciation
Rights exercisable at the time of such termination of employment may
thereafter be exercised; provided that such Stock Appreciation Rights
may be exercised only until the earlier of 90 days following the date
of Retirement or total and permanent disability or the end of the
remaining period during which the Stock Option would otherwise be
exercisable; and (ii) in the event of death, Stock Appreciation Rights
exercisable at the time of death may be exercised by the estate or
beneficiary of the Participant until the earlier of 90 days after
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the date of death or the end of the remaining period during which the
Stock Appreciation Rights would otherwise be exercisable.
(c) If a holder of Restricted Stock Awards ceases
to be an Employee because of Retirement, death, permanent and total
disability, or because of other reasons as the Committee deems
appropriate, the Committee may determine that restrictions on all or
some portion of the Restricted Stock Award subject to restrictions at
the time of such employment termination will be deemed to have lapsed.
(d) If a Participant ceases to be an Employee
because of Retirement, death, permanent and total disability, or other
reasons that the Committee deems appropriate, the Performance Units or
Performance Shares held by the Participant shall continue after the
date of the applicable event (e.g., Retirement, death, or disability)
for such period of time as is determined by the Committee, subject to
the terms of any applicable Agreement. During this extension period,
if any, such Incentive Awards may be exercised in accordance with
their terms, but only to the extent exercisable on the date of the
applicable event. Notwithstanding anything herein or in any
applicable Agreement to the contrary, if the Common Stock is not
publicly traded, any Performance Shares shall only be exercised for
cash, except as otherwise determined by the Committee.
(e) With respect to Phantom Stock Rights, except
to the extent otherwise provided by the Committee, (i) in the event of
Retirement or total and permanent disability while the Participant is
employed by the Company, only those Phantom Stock Rights that may be
converted at the time of such termination of employment may thereafter
by converted; provided that no Phantom Stock Rights may be converted
only until the earlier of 90 days following the date of Retirement or
total and permanent disability or the end of the remaining period
during which such Phantom Stock Rights would otherwise be convertible;
(ii) in the event of death, the Phantom Stock Rights may be converted
by the estate or beneficiary of the Participant until the earlier of
90 days after the date of death or the end of the remaining period
during which the Phantom Stock Rights would otherwise be convertible.
Notwithstanding anything herein or in any applicable Agreement to the
contrary, if the Common Stock is not publicly traded, any Phantom
Stock Right shall only be exercised for cash. except as otherwise
determined by the Committee.
11.2 Leave of Absence. With respect to an Incentive
Award, the Committee may, in its sole discretion, determine that any
Participant who is on leave of absence for any reason will be considered to
still be in the employ of the Company, provided that rights to such Incentive
Award during a leave of absence will be limited to the extent to which such
rights were earned or vested when such leave of absence began.
11.3 Repurchase of Unvested Restricted Stock. If an
Employee who has purchased shares of Restricted Stock under this Plan
terminates employment with the Company
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for any reason, then all shares of Restricted Stock that have not previously
vested in accordance with Paragraph 3 above shall be repurchased by the Company
at the cost paid by the Employee. Upon such repurchase, the Secretary of the
Company shall deliver to the Company (i) the certificates representing such
forfeited shares, which were previously deposited with the Secretary pursuant
to Paragraph 3, and (ii) the related stock power, unless vested shares of
Restricted Stock, if any, continue to be held in escrow pursuant to Section 8.1
11.4 Company's Right to Purchase Common Stock. Upon the
Employee's termination of employment with the Company and all Subsidiaries for
any reason (including by reason of death or disability), the Company shall have
the right (but not the obligation) to purchase from the Employee (or his
beneficiary or estate) all shares of Common Stock hereunder on the terms and
conditions set forth in the applicable Incentive Award.
ARTICLE 12
ADJUSTMENT PROVISIONS
12.1 Common Stock Adjustments. Subject to Section 3.1, if
the outstanding shares of Common Stock of the Company are increased, decreased
or exchanged for a different number or kind of shares or other securities, or
if additional, new or different shares or other securities are distributed with
respect to such shares of Common Stock or other securities through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Common Stock or other securities, an appropriate adjustment shall be made in
(i) the maximum number and kind of shares provided in Section 3.1, (ii) the
number and kind of shares or other securities subject to the outstanding
Incentive Awards, and (iii) the price for each share or other unit of any other
securities subject to then outstanding Incentive Awards, without changing the
aggregate purchase price or value as to which such Incentive Awards remain
exercisable or subject to restrictions. Adjustments under this Section 12.1
shall be made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding and conclusive.
No fractional interest shall be issued under the Plan on account of any such
adjustments.
12.2 Corporate Changes. Upon (i) the dissolution or
liquidation of the Company; (ii) a reorganization, merger, or consolidation
(other than a merger or consolidation effecting a reincorporation of the
Company in another state or any other merger or consolidation in which the
shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of the Company and their proportionate interests
therein immediately prior to the merger or consolidation) of the Company with
one or more corporations, following which the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation in a
transaction in which the shareholders of the parent of the Company and their
proportionate interests therein immediately after the transaction are
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substantially identical to the shareholders of the Company and their
proportionate interests therein immediately prior to the transaction); (iii)
the sale of all or substantially all of the assets of the Company; or (iv) the
occurrence of any event described in Section 12.3, subject to the terms of any
applicable Agreement, the Committee may, to the extent permitted in Article 3.1
of this Plan, in its discretion, without obtaining shareholder approval, take
any one or more of the following actions: (i) determine that all or some
Incentive Awards then outstanding under this Plan shall be fully vested and
exercisable or convertible, as applicable; (ii) determine that some or all
restrictions on Restricted Stock shall lapse immediately; or (iii) determine
that there shall be substitution of new Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Units or Performance Shares, or
Phantom Stock Rights by such successor employer corporation or a parent or
subsidiary company thereof, with appropriate adjustments as to the number and
kind of shares or units subject to such awards and prices.
12.3 Change in Control. In the event of a "Change in
Control" of the Company, the Committee may, in its discretion, without
obtaining shareholder approval, take any one or more of the following actions,
with respect to any Participant:
(a) Accelerate the exercise dates of any or all
outstanding Stock Appreciation Rights or Stock Options or make some or
all such Stock Appreciation Rights or Stock Options immediately fully
vested and exercisable;
(b) Accelerate the restriction (lapse of
forfeiture provision) period of any Restricted Stock Award subject to
restrictions;
(c) Grant Stock Appreciation Rights to holders of
outstanding Stock Options;
(d) Pay cash to any or all holders of Stock
Options in exchange for the cancellation of their outstanding Stock
Options;
(e) Make payment for any outstanding Performance
Units or Performance Shares based on such amounts as the Committee may
determine;
(f) Accelerate the conversion dates of any or all
outstanding Phantom Stock Rights or make some or all such Phantom
Stock Rights immediately fully vested and exercisable;
(g) Grant new Incentive Awards to any
Participants; or
(h) Make any other adjustments or amendments to
outstanding Incentive Awards and substitute new Incentive Awards for
outstanding Incentive Awards.
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The term "Change in Control" shall mean a change in ownership
or managerial control of the stock, assets or business of the Company resulting
from one or more of the following circumstances:
(a) In the event that the Company becomes subject
to reporting under the Securities Act, a change in control of a nature
that would be required to be reported in a response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Act,
or any successor regulation of similar import, whether or not the
Company is then subject to such reporting requirement;
(b) After the date of Board adoption of this
Plan, a change in ownership of the Company through a transaction or
series of transactions, such that any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities;
(c) A change in identity of a majority of the
members of the Board within any twelve (12) month period;
(d) The approval by the Board (or by the
shareholders if shareholder approval is required by applicable law or
under the terms of any relevant agreement) of an agreement for the
sale or disposition of all or substantially all of the Company's
assets or a sale/leaseback of all or substantially all of the
Company's assets (with or without a purchase option);
(e) A transfer of all or substantially all of the
Company's assets pursuant to a partnership or joint venture agreement
where the Company's resulting interest is or becomes 50% or less; or
(g) The execution or approval by the Board of any
agreement, the consummation of which would result in one of the
foregoing.
"Beneficial Owner" shall have the same meaning as that term is
given in Rule 13d-3 under the Securities Act, and "Person" shall have the same
meaning as that term is given in Sections 13(d) and 14(d) of such act, whether
or not the Company is then subject to such act.
ARTICLE 13
GENERAL PROVISIONS
13.1 No Right to Employment. Nothing in the Plan or in
any Agreement executed pursuant to the Plan shall confer upon any Participant
any right to continue in the employ of the
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Company or any Subsidiary or affect the Company's or Subsidiary's right to
terminate the employment of any Participant at any time with or without cause.
13.2 Securities Requirements. As determined by the
Committee, no shares of Common Stock shall be issued or transferred pursuant to
an Incentive Award unless all applicable requirements imposed by federal and
state securities laws, regulatory agencies, and stock exchanges upon which the
Common Stock may be listed, if any, have been fully met. As a condition
precedent to the issuance of shares pursuant to the grant or exercise of an
Incentive Award, the Company may require the Participant to take any reasonable
action the Committee determines necessary to meet such requirements.
13.3 No Right to Stock. No Participant and no beneficiary
or other person claiming under or through such Participant shall have any
right, title or interest in any shares of Common Stock allocated or reserved
under the Plan or subject to any Incentive Award except as to such shares of
Common Stock, if any, that have been issued or transferred to such Participant.
13.4 No Disposition. No Incentive Award and no right
under the Plan, contingent or otherwise, shall be subject to Disposition other
than by will or the laws of descent or distribution. If a beneficiary is the
executor or administrator of the estate of the Participant, any rights with
respect to such Incentive Award may be transferred to the person or persons or
entity (including a trust) entitled thereto under the will of the holder of
such Incentive Award. Notwithstanding the foregoing, no Incentive Stock Option
may be transferred except by will or by the laws of descent and distribution.
If no beneficiary is designated, the Participant's legal representative shall
be the beneficiary. Any attempted Disposition in violation of this Section
13.4 shall be void and ineffective for all purposes.
13.5 Company's Right to Purchase Common Stock: While and
so long as the Common Stock has not been publicly traded for at least 90 days,
any Common Stock obtained pursuant to an Incentive Award shall be subject to
the Company's right of first purchase. By virtue of that right,
(a) If a Participant intends to transfer shares
of Common Stock obtained pursuant to an Incentive Award, he or she
shall give written notice to the Company of his or her intention to
so transfer. The notice, in addition to stating the fact of the
intention to transfer shares, shall state (i) the number of shares to
be transferred; (ii) the name, business and residence address of the
proposed transferee; (iii) whether or not the transfer is for a
valuable consideration and (iv) if so, the amount of the consideration
and the other terms of the sale.
(b) Within 30 days of the Company's receipt of
the notice described in subsection 13.5(a), the Company may exercise
an option to purchase all or any portion of the shares of Common Stock
proposed to be transferred for the price and upon the other
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terms provided in the Agreement. The Company shall exercise this
option by providing the Participant with written notice of its intent
to do so.
(c) If the Company does not exercise its option
to purchase the shares of Common Stock proposed to be transferred,
such shares may be transferred by the Participant in accordance with
the notice provided in subsection 13.5(a) within 10 days after the
expiration of the 30 day option period granted by subsection 13.5(b).
Upon transfer, such shares shall continue to be bound by any terms
and provisions of this Incentive Award designated as continuing on
transfer.
(d) Upon the Participant's death, the Company
shall have the right to purchase all or some of such Common Stock at
its Fair Market Value within 9 months of the date of the Participant's
death. This right of first purchase shall not apply to shares of
Common Stock with respect to which the Company was offered but did not
exercise or waived its right of first purchase provided in this
Section.
ARTICLE 14
AMENDMENT AND TERMINATION
14.1 Amendments; Suspensions; Termination. Subject to
shareholder approval where expressly required by law, the Board shall have the
power to amend, suspend or terminate this Plan at any time. No amendment,
unless approved by the holders of a majority of the outstanding shares of
voting stock of the Company will:
(a) Change the class of persons eligible to
receive Incentive Awards under this Plan,
(b) Materially increase the benefits accruing to
Participants under this Plan;
(c) Increase by more than 10% the number of
shares of Common Stock subject to this Plan; except as provided in
Article 12;
(d) Transfer the administration of this Plan to
any person who is not a nonemployee director.
Except as otherwise provided in this Plan, the Committee may
not, without the Participant's consent, modify the terms and conditions of an
Incentive Award. No amendment, suspension, or termination of the Plan shall,
without the Participant's consent, alter, terminate or impair any right or
obligation under any Incentive Award previously granted under this Plan.
19
<PAGE> 24
ARTICLE 15
EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
15.1 Effective Date and Duration. This Plan and any
Incentive Award granted hereunder shall take effect not earlier than upon
adoption by the Board but be contingent upon approval of this Plan by the
majority vote of the outstanding shares of equity securities of the Company.
Unless previously terminated, the Plan shall terminate and no more Incentive
Awards may be granted on the expiration of ten (10) years after adoption of the
Plan by the Board. The Plan shall continue in effect with respect to Incentive
Awards granted before termination of the Plan and until such Incentive Awards
have been settled, terminated or forfeited.
20
<PAGE> 25
IN WITNESS WHEREOF, this Plan is hereby adopted as of this
15th day of December, 1996.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ James R. Featherstone
-------------------------------------
Its: Vice President
ATTEST:
/s/ Jackie McClure
- -------------------------------
Secretary
21
<PAGE> 26
FIRST AMENDMENT TO HOLLYWOOD THEATER HOLDINGS, INC.
1996 STOCK OPTION AND STOCK AWARD PLAN
This is the First Amendment to the Hollywood Theater Holdings,
Inc. 1996 Stock Option and Stock Award Plan (the "Plan"). Capitalized terms
used herein but not defined herein have the meanings assigned to them in the
Plan.
WHEREAS, the Plan provides that, subject to the
provisions of Section 3.2 and Article 12 of the Plan, the aggregate number of
shares of Common Stock that may be issued, transferred or exercised pursuant to
Incentive Awards under the Plan shall not exceed 37,000 shares, which number of
shares constituted approximately 15% of the fully diluted number of shares of
Common Stock outstanding at the time of the adoption of the Plan; and
WHEREAS, the Board of Directors of the Company believes that
it is in the best interests of the Company that the aggregate number of shares
of Common Stock that may be issued, transferred or exercised pursuant to
Incentive Awards under the Plan be maintained at 15% of the fully diluted
number of shares of Common Stock of the Company outstanding from time to time;
NOW, THEREFORE, the Company desires to amend the Plan as follows:
16 Amendment to Section 3.1 of the Plan. Section 3.1 of
the Plan is hereby amended to read in its entirety as follows:
"3.1 Maximum Amount of Shares. Subject to the provisions
of Section 3.2 and Article 12 of this Plan, the aggregate number of
shares of Common Stock that may be issued, transferred or exercised
pursuant to Incentive Awards under the Plan shall not exceed an amount
equal to 15% of the fully diluted number of shares of Common Stock
outstanding from time to time (including shares issuable pursuant to
the Plan and Incentive Awards). At the discretion of the Board or the
Committee, the shares to be delivered under the Plan shall be made
available either from (i) authorized but unissued shares of Common
Stock, (ii) Common Stock held in the treasury of the Company, or (iii)
previously issued shares of Common Stock reacquired by the Company,
including shares purchased on the open market, or through some
combination thereof."
17 No Other Amendment. Except as amended hereby, the
remaining provisions of the Plan shall remain in full force and effect
following the effectiveness hereof.
<PAGE> 27
18 Effective Date and Duration. This First Amendment to
the Plan and any Incentive Award granted pursuant hereto shall take effect not
earlier than upon adoption by the Board but shall be contingent upon approval
of this First Amendment to the Plan by the majority vote of the outstanding
shares of equity securities of the Company.
IN WITNESS WHEREOF, this First Amendment to the Plan is
hereby adopted as of this ____ day of June, 1997.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson. Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
President
ATTEST:
/s/ James R. Featherstone
- ---------------------------------
Secretary
2
<PAGE> 1
EXHIBIT 10.13
HOLLYWOOD THEATERS, INC,
401(k) SAVINGS PLAN
as amended and restated
effective July 10, 1995
<PAGE> 2
PREAMBLE
The purpose of this Plan and Trust is to provide, in accordance with its
provisions, a defined contribution plan providing retirement and other related
benefits for those Employees of the Employer who are eligible to participate
hereunder. This document is a complete amendment and restatement of the Trans
Texas Amusements, Inc. Retirement Savings Plan, which was originally effective
as of January 1, 1993.
It is intended that the Plan qualify for approval under Sections 401 and 410
through 417 of the Internal Revenue Code. It is intended that the Trust
qualify for approval under Section 501 of the Code. It is further intended
that the Plan comply with the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). In case of any ambiguity in the Plan's language,
it will be interpreted to accomplish the Plan's intent of qualifying under the
Code and complying with ERISA.
This Plan and Trust is exclusively for the benefit of the eligible Employees
and their Beneficiaries. Neither the Employer, the Plan Administrator nor the
Trustee will apply or interpret the terms of the Plan in any manner that
permits discrimination in favor of Highly Compensated Employees. All Employees
under similar circumstances will be treated alike.
The undersigned Employer and Trustee hereby adopt this restatement of the
Hollywood Theaters, Inc. 401(K) Savings Plan to be effective as of July 10,
1995.
<PAGE> 3
ARTICLE 1
DEFINITIONS
As used in this document, unless otherwise defined or required by the context,
the following terms have the meanings set forth in this Article 1. Some of the
terms used in this document are not defined in Article 1, but for convenience
are defined as they are introduced in the text.
1.01 Account
Account means a separate account maintained for each Participant
reflecting applicable contributions, applicable forfeitures, investment
income (loss) allocated to the account and distributions.
1.02 Accounting Date, Valuation Date
The term Accounting Date means the last day of each Accounting Period
and any other days within the Accounting Period upon which, consistent
with established methods and guidelines, the Plan Administrator applies
the accounting procedures specified in Section 4.02. The term Valuation
Date, unless otherwise specified, means any business day on which the
New York Stock Exchange is open.
1.03 Accounting Period
Accounting Period means each of the 3-month periods which end on March
31st, June 30th, September 30th and December 31st.
1.04 Accrued Benefit
A Participant's Accrued Benefit means the total value, as of a given
date, of his Accounts determined as of the Valuation Date immediately
preceding the date of determination. A Participant's Accrued Benefit
will not be reduced solely on account of any increase in the
Participant's age or service or on account of an amendment to the Plan.
A Participant's Vested Accrued Benefit is equal to his Vested Percentage
of that portion of his Accrued Benefit which is subject to the Vesting
Schedule plus 100% of the remaining portion of his Accrued Benefit.
1.05 Beneficiary
Beneficiary means the person, persons, trust or other entity who is
designated to receive any amount payable upon the death of a
Participant.
1.06 Cash-Out Distribution
Cash-Out Distribution means, as described in Article 5, a distribution
to a Participant upon termination of employment of his Vested Accrued
Benefit.
2
<PAGE> 4
1.07 Code and ERISA
Code means the Internal Revenue Code of 1986, as it may be amended from
time to time, and all regulations issued thereunder. Reference to a
section of the Code includes that section and any comparable section or
sections of any future legislation that amends, supplements or
supersedes such section and any regulations issued thereunder.
ERISA means Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as it may be amended from time to time, and all
regulations issued thereunder. Reference to a section of ERISA includes
that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes such section and any
regulations issued thereunder.
1.08 Compensation
Except where otherwise specifically provided in this Plan, Compensation
means Aggregate Compensation as defined in Section 7.03(a).
Compensation also includes any amounts contributed by the Employer or
any Related Employer on behalf of any Employee pursuant to a salary
reduction agreement which are not includable in the gross income of the
Employee due to Code Section 125, 401(k), 402(h) or 403(b).
Notwithstanding the foregoing, for all purposes under this Plan,
Compensation in excess of the Statutory Compensation Limit will be
disregarded. For purposes of applying this compensation limit, a Family
Member of a Highly Compensated Employee is subject to the single
aggregate compensation limit imposed on the Highly Compensated Employee
if the Family Member is either the Employee's spouse or is a lineal
descendant who has not attained the age of 19 by the end of the Plan
year.
Statutory Compensation Limit means $150,000 ($200,000 for Plan Years
beginning before 1994), as adjusted in accordance with Code Section
401(a)(17)(B).
With respect to a given period, a Participant's Excess Compensation is
that portion, if any, of his Compensation which is in excess of his
Integration Level.
For any given Plan Year, a Participant's annual Integration level is
equal to 100% of the Taxable Wage Base for the calendar year in which
the Plan Year begins.
Taxable Wage Base means the Social Security taxable wage base under Code
Section 3121(a)(1) which is in effect at the beginning of the Plan Year.
1.09 Effective Date
The Effective Date of the Plan is January 1, 1993.
3
<PAGE> 5
Except as specified elsewhere in this document, the effective date of
this restatement of the Plan is August 1, 1995.
Section 4.05 is effective January 1, 1993.
1.10 Eligible Employee Classification
An Eligible Employee Classification is a classification of Employees,
the members of which are eligible to participate in the Plan. The Plan
covers all employee classifications except Leased Employees.
1.11 Eligible Participant
An Eligible Participant is a Participant who is eligible to share in the
allocation of a given Employer contribution; Eligible Participant means
any Participant who:
o is actively employed on the last day of the Plan Year; or
o retires, dies or becomes disabled juring the Plan Year.
1.12 Employee
(a) In General
An Employee is any person who is employed by the Employer or a
Participating Employer.
(b) Leased Employee
A Leased Employee means any person who, pursuant to an agreement
between the Employer or any Related Employer ("Recipient
Employer") and any other person ("leasing organization"), has
performed services for the Recipient Employer on a substantially
full-time basis for a period of at least one year and such
services are of a type historically performed by employees in the
business field of the Recipient Employer.
Any Leased Employee will be treated as an Employee of the
Recipient Employer; however, contributions or benefits provided
by the leasing organization which are attributable to the
services performed for the Recipient Employer will be treated as
provided by the Recipient Employer. If all Leased Employees
constitute less than 20% of the Employer's non-highly-compensated
work force within the meaning of Code Section 414(n)(1)(C)(ii),
then the preceding sentence will not apply to any Leased Employee
if such Employee is covered by a money purchase pension plan
("Safe Harbor Plan") which provides: (1) a nonintegrated employer
contribution rate of at least 10% of compensation, (2) immediate
participation, and (3) full and immediate vesting.
4
<PAGE> 6
Years of Eligibility Service for purposes of eligibility to
participate in the Plan and Years of Vesting Service for purposes
of determining a Participant's Vested Percentage include service
by an Employee as a Leased Employee.
1.13 Employer
The Employer and Plan Sponsor is Hollywood Theaters, Inc. A
Participating Employer is any organization which has adopted this Plan
and Trust in accordance with Section 8.07.
Predecessor Employer means Trans Texas Amusements, Inc. Service with a
Predecessor Employer will be included as Service with the Employer for
all purposes under this Plan.
1.14 Employment Commencement Date
The date an Employee first performs an Hour of Service for the Employer
is his Employment Commencement Date.
1.15 Entry Date
Effective January 1, 1996, Entry Date means the January 1st, April 1st,
July 1st or October 1st which coincides with or next follows the date
upon which the eligibility requirements are met.
Prior to January 1, 1996, Entry Date means the January 1st or July 1st
which coincides with or next follows the date upon which the eligibility
requirements are met.
1.16 Fiscal Year
Fiscal Year means the taxable year of the Plan Sponsor. The Fiscal Year
of the Plan Sponsor is the 12 month period beginning January 1 and
ending December 31.
1.17 Forfeiture
The term Forfeiture refers to that portion, if any, of a Participant's
Accrued Benefit which is in excess of his Vested Accrued Benefit
following the termination of the Participant's employment.
A Forfeiture is considered to occur as of the earlier of (a) the date of
the occurrence of the fifth of 5 consecutive One Year Breaks-in-Service
or (b) the date a Cash-Out Distribution occurs in accordance with the
Provisions of Article 5.
1.18 Highly Compensated Definitions
(a) Compensation
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
5
<PAGE> 7
Employee under Code Section 125, 401(k), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation Limit will
be disregarded.
(b) Determination Year
Determination Year means the Plan Year for which the
determination of who is Highly Compensated is being made.
(c) Family Member
Family Member means an Employee who is the spouse, a lineal
ascendant or descendant, or the spouse of a lineal ascendant or
descendant of:
o a 5-percent owner (within the meaning of Code Section
416(i)) of the Employer or any Related Employer who is an
active or former Employee; or
o a Highly Compensated Employee who is one of the 10 most
highly compensated employees ranked on the basis of
Compensation paid by the Employer during the Determination
Year or the Lookback Year.
For purposes of this Section, the Family Member and the Highly
Compensated Employee will be considered one Employee. A Family
Member's Compensation and benefits will be aggregated with those
of the Highly Compensated Employee irrespective of whether the
Family Member would otherwise be treated as a Highly-Compensated
Employee or is in a category of Employees which may be excluded
in determining the number of Employees in the Top-Paid Group.
If an Employee is required to be aggregated as a member of more
than one family group, all eligible employees who are members of
those family groups which include that employee will be
aggregated as one family group.
For purposes of applying the compensation limit under Code
Section 401(a)(17), a Family Member is subject to the single
aggregate compensation limit imposed on the Highly Compensated
Employee if the Family Member is either the Employee's spouse or
is a lineal descendant who has not attained the age of 19 by the
end of the Plan Year.
(d) Highly Compensated Employee
Highly Compensated Employee means any individual who is a Highly
Compensated Active Employee or a Highly Compensated Former
Employee within the meaning of Code Section 414(q) and the
regulations thereunder.
(e) Highly Compensated Active Employee
Highly Compensated Active Employee means any individual who
during the Determination Year or the Lookback Year:
6
<PAGE> 8
(1) Was at any time a 5-percent Owner (within the meaning of
Code Section 416(i)) of the Employer or any Related
Employer;
(2) Received Compensation from the Employer and all Related
Employers in excess of $75,000 (or any greater amount
determined by regulations issued by the Secretary of the
Treasury under Code Section 415(d));
(3) Received Compensation from the Employer and all Related
Employers in excess of $50,000 (or any greater amount
determined by regulations issued by the Secretary of the
Treasury under Code Section 415(d) and was in the Top-Paid
Group of Employees; or
(4) Was an Officer of the Employer or any Related Employer (as
that term is defined in the regulations under Code Section
416(i)) and received Compensation greater than 50% of the
Defined Benefit Dollar Limit described in Section 7.03(f)
for the applicable year. For this purpose, if no Officer
received enough Compensation to be a Highly Compensated
Employee under the preceding sentence, the highest-paid
Officer will be treated as Highly Compensated Employee.
The maximum number of Officers who will be treated as
Highly Compensated Active Employees under this paragraph
is equal to 10% of all Employees determined without regard
to statutory or other exclusions, subject to a minimum of
3 Employees and a maximum of 50 Employees.
No individual described in subparagraphs (2), (3) or (4) above
will be treated as a Highly Compensated Active Employee for the
Determination Year unless he (i) was a Highly Compensated Active
Employee for the Lookback Year (or would have been except that he
was not among the 100 most highly compensated Employees of the
Employer and all Related Employers for the Lookback Year) or (ii)
was among the 100 most highly compensated Employees of the
Employer and all Related Employers for the Determination Year.
(f) Highly Compensated Former Employee
Highly Compensated Former Employee means any Former Employee who
had a Separation Year (within the meaning of Treasury Regulation
Section 1.414(q)-1T Q&A-5) and was a Highly Compensated Active
Employee for either the Separation Year or any Determination Year
ending on or after the Employee's 55th birthday.
(g) Highly Compensated Group
Highly Compensated Group means all Highly Compensated Employees.
(h) Lookback Year
7
<PAGE> 9
Lookback Year means the 12-month period immediately preceding the
Determination Year.
(i) Non-Highly Compensated Employee
Non-Highly Compensated Employee means an Employee who is neither
a Highly Compensated Employee nor a Family Member.
(j) Non-Highly Compensated Group
Top-Highly Compensated Group means all Non-Highly Compensated
Employees.
(k) Top-Paid Group
Top-Paid Group means those individuals who are among the top 20
percent of Employees of the Employer and all Related Employers
when ranked on the basis of Compensation received during the
year. In determining the number of individuals in the Top-Paid
Group (but not the identity of those individuals). The following
individuals may be excluded:
(1) Employees who have not completed 6 months of Service by
the end of the year. For this purpose, an Employee who
has completed One Hour of Service in any calendar month
will be credited with one month of Service;
(2) Employees who normally work fewer than 17 1/2 hours per
week;
(3) Employees who normally work fewer than 6 months during any
year. For this purpose, an Employee who has worked on one
day of a month is treated as having worked for the whole
month;
(4) Employees who have not reached age 21 by the end of the
year;
(5) Nonresident aliens who received no earned income (which
constitutes income from sources within the United States)
within the year from the Employer or any Related
Employers; and
(6) Employees covered by a collective bargaining agreement
negotiated in good faith between the employee
representatives and the Employer or a group of employers
of which the Employer is a member if (i) 90% or more of
all employees of the Employer and all Related Employers
are covered by collective bargaining agreements, and (ii)
this Plan covers only Employees who are not covered under
a collective bargaining agreement.
1.19 Hour of Service
8
<PAGE> 10
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours will
be credited to the Employee for the computation period in which
the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday. illness,
incapacity (including disability), layoff, jury duty, military
duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph for any 12-month period. Hours
under this paragraph will be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations which
are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service will not be credited both under paragraphs
(a) or (b), as the case may be, and under this paragraph (c).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or
payment is made.
Hours of Service for all Employees will be determined on the basis of
actual hours for which an Employee is paid or is entitled to payment.
Hours of Service will be credited for employment with any Related
Employer or any Predecessor Employer. Hours of Service will be credited
for any individual considered an employee under Code Section 414(n) or
414(o) and the regulations thereunder.
Solely for purposes of determining whether a One Year Break-in-Service
has occurred, a Participant who is absent from work on an authorized
Leave of Absence or by reason of the pregnancy, birth of the
Participant's child, placement of a child with the Participant in
connection with the adoption of such child, or for the purpose of caring
for such child for a period immediately following such birth or
placement, will receive credit for One Hours of Service which otherwise
would nave been credited to the Participant but for such absence. The
Hours of Service credited under this paragraph will be credited in the
Plan Year in which the absence begins if such crediting is necessary to
prevent a One Year Break-In Service in such Plan Year; otherwise, such
Hours of Service will be credited in the following Plan Year. The Hours
of Service credited under this paragraph are those which would normally
have been credited but for such absence; in any case in which the Plan
Administrator is unable to determine such hours normally credited, Hours
of Service per day will be credited. No more than 501 Hours of Service
will be credited under this paragraph for any 12-month period. The Date
of Severance is the is the second anniversary of the date on which the
absence begins. The period between the initial date of absence and the
first anniversary of the initial date of absence is deemed to be a
period of Service. The period between the first and second
9
<PAGE> 11
anniversaries of the initial date of absence is neither a period of
service nor a period of severance.
1.20 Reserved
1.21 Leave of Absence
An authorized Leave of Absence means a period of time of one year or
less granted to an Employee by the Employer due to illness, injury,
temporary reduction in work force, or other appropriate cause or due to
military service during which the Employee's reemployment rights are
protected by law, provided the Employee returns to the service of the
Employer on or before the expiration of such leave, or in the case of
military service, within the time his reemployment rights are so
protected or within 60 days of his discharge from military service if no
federal law is applicable. All authorized Leaves of Absence are granted
or denied by the Employer in a uniform and nondiscriminatory manner,
treating Employees in similar circumstances in a like manner.
If the Participant does not return to active service with the Employer
on or prior to the expiration of his authorized Leave of Absence he will
be considered to have had a Date of Severance as of the earlier of the
date on which his authorized Leave of Absence expired. the first
anniversary of the last date he worked at least one hour as an Active
Participant, or the date on which he resigned or was discharged.
1.22 Reserved
1.23 Normal Retirement Age
A Participant's Normal Retirement Age is his attained age on the date
which he satisfies the following requirements:
(a) Attainment of age 65, and
(b) Attainment of the fifth anniversary of the time the Participant
commenced participation in the Plan.
1.24 Normal Retirement Date
A Participant's Normal Retirement Date is the date on which the
Participant attains Normal Retirement Age.
1.25 One Year Break-in-Service
One Year Break-in-Service is defined in Section 1.42(a).
1.26 Participant
The Term Participant means an Employee or former Employee who is
eligible to participate in this Plan and who is or who may become
eligible to receive a benefit of any type from this Plan or whose
Beneficiary may be eligible to receive any such benefit.
10
<PAGE> 12
(a) Active Participant means a Participant who is currently an
Employee in an Eligible Employee Classification.
(b) Disabled Participant means a Participant who has terminated his
employment with the Employer due to his Disability and who is
receiving or is entitled to receive benefits from the Plan.
(c) Retired Participant means a participant who has terminated his
employment with the Employer after meeting the requirements for
his Normal Retirement Date and who is receiving or is entitled to
receive benefits from the Plan.
(d) Vested Terminated Participant means a Participant who has
terminated his employment with the Employer and who has a
nonforfeitable right to all or a portion of his or her Accrued
Benefit and who has not received a distribution of the value of
his or her Vested Accrued Benefit.
(e) Inactive Participant means a Participant who has (i) interrupted
his status as an Active Participant without becoming a Disabled,
Retired or Vested Terminated Participant and (ii) has a
non-forfeitable right to all or a portion of his Accrued Benefit
and has not received a complete distribution of his benefit.
(f) Former Participant means a Participant who has terminated his
employment with the Employer and who currently has no
nonforfeitable right to any portion of his or her Accrued
Benefit.
1.27 Payroll Withholding Agreement
If a written Payroll Withholding Agreement is required pursuant to the
provisions of Article 3, then each Participant who elects to participate
in the Plan will file such agreement on or before the first day of the
payroll period for which the agreement is applicable (or at some other
time as specified by the Plan Administrator). Such agreement will be
effective for each payroll period thereafter until modified or amended.
The terms of such agreement will provide that the Participant agrees to
have the Employer withhold, each payroll period, any whole percentage of
his Compensation (or such other amount as allowed by the Plan
Administrator under rules applied on a uniform and nondiscriminatory
basis), not to exceed the limitations of Article 7, In consideration of
such agreement, the Employer periodically will make a contribution to
the Participant's proper Account(s) in an amount equal to the total
amount by which the Participant's Compensation from the Employer was
reduced during applicable payroll periods pursuant to the Payroll
Withholding Agreement.
Notwithstanding the above, Payroll Withholding Agreements will be
governed by the following general guidelines:
11
<PAGE> 13
(a) A Payroll Withholding Agreement will apply to each payroll period
during which an effective agreement is on file with the Employer.
Upon termination of employment, such agreement will become void.
(b) The Plan Administrator will establish and apply guidelines
concerning the frequency and timing of amendments or changes to
Payroll Withholding Agreements. Notwithstanding the foregoing, a
Participant may revoke his Payroll Withholding Agreement at any
time and discontinue all future withholding.
(c) The Plan Administrator may amend or revoke its Payroll
Withholding Agreement with any Participant at any time, if the
Employer determines that such revocation or amendment is
necessary to insure that a Participant's Annual Additions for any
Plan Year will not exceed the limitations of Article 7 or to
insure that the requirements of Sections 401(k) and 401(m) of the
Code have been satisfied with respect to the amount which may be
withheld and contributed on behalf of the Highly Compensated
Group.
(d) Except as provided above, a Payroll Withholding Agreement may not
be revoked or amended by the Participant or the Employer.
1.28 Plan, Plan and Trust, Trust
The terms Plan, Plan and Trust and Trust mean Hollywood Theaters, Inc.
401(k) Savings Plan The Plan Identification Number is 001. The Plan is
a profit sharing plan.
The term Predecessor Plan means any qualified plan previously
established and maintained by the Employer and to which this Plan is the
successor.
1.29 Plan Administrator
The Plan Administrator is Hollywood Theaters, Inc.
1.30 Plan Year
The Plan Year is the 12 month period beginning January 1 and ending
December 31. The Limitation Year coincides with the Plan Year.
1.31 Reserved
1.32 Qualified Election
Qualified Election means the designation of a specific Beneficiary other
than the Participant's Surviving Spouse. Such Qualified Election must
be in writing and must be consented to by the Participant's spouse. The
spouse's written consent to a Qualified Election must be witnessed by a
representative of the Plan Administrator or a notary public. Such
consent will
12
<PAGE> 14
not be required if the Participant establishes to the satisfaction of
the Plan Administrator that such written consent may not be obtained
because there is no spouse, the spouse cannot be located or other
circumstances that may be prescribed by Treasury Regulations. Any
consent necessary under this provision will be valid only with respect
to the spouse who signs the consent (or in the event of a deemed
Qualified Election, the designated spouse). Additionally, a revocation
of a prior Qualified Election may be made by a Participant without the
consent of the spouse at any time before the commencement of benefits;
however, any Qualified Election which follows such revocation must be in
writing and must be consented to by the Participant's spouse. The
number of Qualified Elections or revocations of such Qualified Elections
will not be limited.
1.33 Related Employer
The terms Related Employer and Affiliated Employer are used
interchangeably and mean any other corporation, association, company or
entity on or after the Effective Date which is, along with the Employer,
a member of a controlled group of corporations (as defined in Code
Section 414(b)), a group of trades or businesses which are under common
control (as defined in Code Section 414(c)), an affiliated service group
(as defined in Code Section 414(m)), or any organization or arrangement
required to be aggregated with the Employer by Treasury Regulations
issued under Code Section 414(o).
1.34 Required Beginning Date
A Participant's Required Beginning Date for the commencement of benefit
payments from the Plan is the April 1 immediately following the calendar
year in which he attains age 70-1/2.
1.35 Surviving Spouse
Surviving Spouse means a deceased Participant's spouse who was married
to the Participant on the Participant's date of death. The Plan
Administrator and the Trustee may rely conclusively on a Participant's
written statement of his marital status. Neither the Plan Administrator
nor the Trustee is required at any time to inquire into the validity of
any marriage, the effectiveness of a common-law relationship or the
claim of any alleged spouse which is inconsistent with the Participant's
report of his marital status and the identity of his spouse.
1.36 Top-Heavy Definitions
(a) Aggregate Account
Aggregate Account means, with respect to each Participant, the
value of all accounts maintained on behalf of the Participant,
whether attributable to Employer or Employee contributions, used
to determine Top-Heavy Plan status under the provisions of a
defined contribution plan. A Participant's Aggregate Account as
of the Determination Date will be the sum of:
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o the balance of his Account(s) as of the most recent
valuation date occurring within a 12-month period ending
on the Determination Date (excluding any amounts
attributable to deductible voluntary employee
contributions); plus
o contributions that would be allocated as of a date not
later than the Determination Date, even though those
amounts are not yet made or required to be made; plus
o any Plan Distributions made within the Plan Year that
includes the Determination Date or within the four
preceding Plan Years.
(b) Aggregation Group
Aggregation Group means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group
Each plan of the Employer in which a Key Employee is a
Participant, and each other plan of the Employer which
enables any plan in which a Key Employee participates to
meet the requirements of Code Section 401(a)(4) or 410,
will be aggregated and the resulting group will be known
as a Required Aggregation Group.
Each plan in the Required Aggregation Group will be
considered a Top-Heavy Plan if the Required Aggregation
Group is a Top-Heavy Group. No plan in the Required
Aggregation Group will be considered a Top-Heavy Plan if
the Required Aggregation Group is not a Top-Heavy Group.
(2) Permissive Aggregation Group
The Employer may also include any other plan not required
to be included in the Required Aggregation Group, provided
the resulting group (to be known as a Permissive
Aggregation Group), taken as a whole, could continue to
satisfy the provisions of Code Sections 401(a)(4) and 410.
Only a plan that is part of the Required Aggregation Group
will be considered a Top-Heavy Plan if the Permissive
Aggregation Group is a Top-Heavy Group. No plan in the
Permissive Aggregation Group will be considered a
Top-Heavy Plan if the Permissive Aggregation Group is not
a Top-Heavy Group.
Only those plans of the Employer in which the
Determination Dates fall within the same calendar year
will be aggregated in order to determine whether the plans
are Top-Heavy plans.
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(c) Determination Date
Determination Date means the last day of the preceding Plan Year,
or, in the case of the first Plan Year, the last day of the first
Plan Year.
(d) Key Employee
Key Employee means any Employee or Former Employee (and his
Beneficiary) who, at any time during the Plan Year or any of the
preceding four Plan Years, was:
(1) A "Five Percent Owner" of the Employer. "Five Percent
Owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than
5% of the value of the outstanding stock of the Employer
or stock possessing more than 5% of the total combined
voting power of all stock of the Employer. If the
Employer is not a corporation, Five Percent Owner means
any person who owns more than 5% of the capital or profits
interest in the Employer. In determining percentage
ownership hereunder, Related Employers will be treated as
separate Employers; or
(2) A "One Percent Owner" of the Employer having Compensation
from the Employer of more than $150,000. "One Percent
Owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than
1% of the value of the outstanding stock of the Employer
or stock possessing more than 1% of the total combined
voting power of all stock of the Employer. If the
Employer is not a corporation, One Percent Owner means any
person who owns more than 1% of the capital or profits
interest in the Employer. In determining percentage
ownership hereunder, Related Employers will be treated as
separate Employers. However, in determining whether an
individual has Compensation of more than $150,000,
Compensation from each Related Employer will be taken into
account.
(3) One of the 10 Employees having Compensation not less than
the Defined Contribution Dollar Limit (as defined in
Section 7.03(j) for the Plan Year) who owns (or is
considered as owning within the meaning of Code Section
318) both greater than 1/2% interest and the largest
interests in all Employers required to be aggregated under
Code Sections 414(b), (c), (m) and (o);
(4) An officer (within the meaning of the regulations under
Code Section 416) of the Employer having Compensation
greater than 50% of the Defined Benefit Dollar Limit as
defined in Section 7.03(f) for the Plan Year;
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus any amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
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Employee under Code Section 125, 401(k), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation Limit is
disregarded.
(e) Non-Key Employee
Non-Key Employee means any Employee (and his Beneficiaries) who
is not a Key Employee.
(f) Plan Distributions
Plan distributions include distributions made before January 1,
1984, and distributions under a terminated plan which, if it had
not been terminated, would have been required to be included in
an aggregation group. However, distributions made after the
valuation date and before the Determination Date are not included
to the extent that they are already included in the Participant's
Single Sum Benefit as of the valuation date.
With respect to "unrelated" rollovers and plan-to-plan transfers
(those which are both initiated by an employee and made from a
plan maintained by one employer to a plan maintained by another
employer), if such a rollover or plan-to-plan transfer is made
from this Plan, it will be considered as a distribution for
purposes of this Section. If such a rollover or plan-to-plan
transfer is made to this Plan, it will not be considered as part
of the Participant's Single Sum Benefit. However, an unrelated
rollover or plan-to-plan transfer accepted before January 1,
1984, will be considered as part of the Participant's Single Sum
Benefit.
With respect to "related" rollovers and plan-to-plan transfers
(those which are either not initiated by an employee or are made
from one plan to another plan maintained by the same employer),
if such a rollover or plan-to-plan transfer is made from this
Plan, it will not be considered as a distribution for purposes of
this Section. If such a rollover or plan-to-plan transfer is
made to this Plan, it will be considered as part of the
Participant's Single Sum Benefit.
(g) Present Value of Accrued Benefit
In the case of the defined benefit plan, a Participant's Present
Value of Accrued Benefit, for Top-Heavy determination purposes,
will be determined using the following rules:
(1) The Present Value of Accrued Benefit will be determined as
of the most recent valuation date within a 12-month period
ending on the Determination Date.
(2) For the first Plan Year, the Present Value of Accrued
Benefit will be determined as if (A) the Participant
terminated service as of the Determination Date; or (B)
the Participant terminated service as of the
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<PAGE> 18
valuation date, but taking into account the estimated
Present Value of Accrued Benefits as of the Determination
Date.
(3) For any other Plan Year, the Present Value of Accrued
Benefit will be determined as if the Participant
terminated service as of the valuation date.
(4) The valuation date must be the same date used for
computing the defined benefit plan minimum funding costs,
regardless of whether a calculation is performed that plan
year.
(5) A Participant's Present Value of Accrued Benefit as of a
Determination Date will be the sum of:
o the present value of his Accrued Benefit determined
using the actuarial assumptions which are specified
below; plus
o any Plan Distributions made within the Plan Year
that includes the Determination Date or within the
four preceding Plan Years; plus
o any employee contributions, whether voluntary or
mandatory. However, amounts attributable to
qualified voluntary employee contributions, as
defined in Code Section 219(e)(2) will not be
considered to be a part of the Participant's
Present Value of Accrued Benefit.
For purposes of this Section, the present value of a
Participant's Accrued Benefit will be equal to the greater of the
present value determined using the actuarial assumptions which
are specified for Actuarial Equivalent purposes or the present
value determined using the "Applicable Interest Rate." The
Applicable Interest Rate is the rate or rates that would be used
by the Pension Benefit Guaranty Corporation for a trusteed
single-employer plan to value a Participant's or Beneficiary's
benefit on the date of distribution (the "PBGC Rate"). If the
present value using the PBGC Rate exceeds $25,000, the Applicable
Interest Rate is 120% of the PBGC Rate. However, the use of 120%
of the PBGC Rate will never result in a present value less than
$25,000.
(6) Solely for the purpose of determining this Plan (or any other
plan included in a Required Aggregation Group of which this Plan
is a part) is Top-Heavy, the Accrued Benefit of any Employee
other than a Key Employee will be determined under
(A) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer or any
Related Employer, or
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<PAGE> 19
(B) if there is no such method, as if the benefit accrued no
more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Code Section 411(b)(1)(C).
(h) Single Sum Benefit
The Single Sum Benefit for any Participant in a defined benefit
pension plan will be equal to his Present Value of Accrued
Benefit. The Single Sum Benefit for any Participant in a defined
contribution plan will be equal to his Aggregate Account.
(i) Top-Heavy Group
Top-Heavy Group means an Aggregation Group in which, as of the
Determination Date, the Single Sum Benefits of all Key Employees
under all plans included in the group exceeds 60% of a similar
sum determined for all Participants.
Super Top-Heavy Group means an Aggregation Group in which, as of
the Determination Date, the sum of (1) the Single Sum Benefits of
all Key Employees under all defined benefit plans included in the
group, plus (2) the Single Sum Benefit of all Key Employees under
all defined contribution plans included in the group exceeds 90%
of a similar sum determined for all Participants.
(j) Top-Heavy Plan
This Plan will be a Top-Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date,
the Single Sum Benefits of all Key Employees exceed 60% of the
Single Sum Benefits of all Participants under this Plan.
This Plan will be a Super Top-Heavy Plan for any Plan Year
beginning after December 31, 1983, in which, as of the
Determination Date, the Single Sum Benefits of all Key Employees
exceed 90% of the Single Sum Benefits of all Participants under
this Plan.
If any Participant is a Non-Key Employee for a given Plan Year,
but was a Key Employee for any prior Plan Year, the Participant's
Single Sum Benefit will not be taken into account for purposes of
determining whether this Plan is a Top-Heavy or Super Top-Heavy
Plan (or whether any Aggregation Group which includes this Plan
is a Top-Heavy or Super Top-Heavy Group).
If an individual has performed no services for the Employer at
any time during the 5-year period ending an the Determination
Date, any Single Sum Benefit of such individual will not be taken
into account for purposes of determining whether this Plan is a
Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation
Group which includes this Plan is a Top-Heavy Group or Super
Top-Heavy Group).
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1.37 Trust Fund, Trust
These terms mean the total cash, securities, real property, insurance
contracts and any other property held by the Trustee.
1.38 Trustee
The Trustee is Texas Commerce Bank, NA. Effective January 1, 1996, the
Trustee is Charles Schwab Trust Company or any successor Trustee.
1.39 Vested Percentage
A Participant's Vested Percentage as of a given date will be that
percentage determined in accordance with the Vesting Schedule.
Notwithstanding the preceding, a Participant will be 100% vested upon
reaching the earlier of (a) his normal Retirement Age or (b) the later
of the date upon which the Participant attains age 65 or reaches the 5th
anniversary of the date he commenced participation in the Plan.
1.40 Vesting Schedule
A Participant's Vested Percentage will be determined in accordance with
the following table:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C> <C>
Less than 3 Years 0%
3 Years 20%
4 Years 40%
5 Years 60%
6 Years 80%
7 Years or more 100%
</TABLE>
Notwithstanding the foregoing, in any Plan Year in which the Plan is
determined to be a Top-Heavy Plan, the following Vesting Schedule will
apply in lieu of the Vesting Schedule provided for above:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C> <C>
Less than 2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 80%
6 Years or more 100%
</TABLE>
If in any subsequent Plan Year the Plan ceases to be a Top-Heavy Plan,
the above Vesting Schedule will continue to apply unless the Employer
elects, by Written Resolution, to resume
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the Vesting Schedule specified at the beginning of this Section. Any
such resolution will be treated as a Plan Amendment and be subject to
the restrictions contained in Section 10.06.
1.41 Written Resolution
The terms Written Resolution and Written Consent are used
interchangeably and reflect decisions, authorizations, etc. by the
Employer. A Written Resolution will be evidenced by a resolution of the
Board of Directors of the Employer.
1.42 Year of Service
(a) Crediting Years of Service
______________Years of Service are determined using the Elapsed Time Method
and/or the Hours of Service Method as specified in this Section.
(1) Elapsed Time Method
Under the Elapsed Time Method, Years of Service are based
upon an Employee's Elapsed Time of employment irrespective
of the number of hours actually worked during such period;
a Year of Service (including a fraction thereof) will be
credited for each completed 365 days of Elapsed Time which
need not be consecutive. The following terms are used in
determining Years of Service under the Elapsed Time
Method:
(A) Date of Severance (Termination) - means the
earlier of (i) the actual date an Employee resigns,
is discharged, dies or retires, or (ii) the first
anniversary of the date an Employee is absent from
work (with or without pay) for any other reason,
e.g., disability, vacation, leave of absence,
layoff, etc.
(B) Elapsed Time - means the total period of service
which has elapsed between a Participant's
Employment Commencement Date and Date of
Termination including Periods of Severance where a
One Year Break-in-Service does not occur.
(C) Employment Commencement Date - means the date an
Employee first performs one Hour of Service for the
Employer.
(D) One Year Break-in-Service - means any 365-day
period following an Employee's Date of Termination
as defined above in which the Employee does not
complete at least one Hour of Service.
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(E) Period of Severance - is the time between the
actual Date of Severance as defined above and the
subsequent date, if any, on which the Employee
performs an Hour of Service.
All periods of employment will be aggregated including
Periods of Severance unless there is a One Year
Break-in-Service.
(2) Hours of Service Method
Under the Hours of Service Method, a Year of Service is
credited for each 12 consecutive month Computation Period
during which an Employee is credited with a specified
number of Hours of Service.
Under the Hours of Service Method, a One Year
Break-in-Service means any Computation Period during which
an Employee completes 500 or fewer Hours of Service.
Years of Eligibility Service for purposes of determining
eligibility to participate in the Plan and Years of Vesting
Service for purposes, of determining a Participant's Vested
Percentage include service with any organization which is a
Related Employer with respect to the Employer.
(b) For Eligibility Purposes
Years of Service for purposes of eligibility to participate in
the Plan are referred to as Years of Eligibility Service and are
determined using the Hours of Service Method.
A Year of Eligibility Service is credited for each Computation
Period during which an Employee is credited with at least 1,000
Hours of Service. The initial Computation Period is the 12
consecutive month period beginning with the Employee's Employment
Commencement Date. Thereafter, the Computation Period is the
Plan Year beginning with the Plan Year in which the initial
Computation Period ends.
All of in Employee's years of Eligibility Service are taken into
account in determining his eligibility to participate.
(c) For Vesting Purposes
Years of Service for purposes of computing a Participant's Vested
Percentage are referred to as Years of Vesting Service and are
determined using the Elapsed Time Method.
All of a Participant's Years of Vesting Service are taken into
account in determining his Vested Percentage.
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ARTICLE 2
PARTICIPATION
2.01 Participation
An Employee will become eligible to participate in the Plan on the Entry
Date which coincides with or next follows the attainment of age 21 and
the completion of one Year of Eligibility Service.
An Employee who is eligible to participate as of the Effective Date or
as of a given Entry Date will automatically become a Participant as of
such date. An Employee who is otherwise eligible to participate may
irrevocably elect not to participate in the Plan. Any election under
this paragraph must be in writing and according to guidelines
established by the Plan Administrator.
2.02 Participation After Reemployment
An Employee who has satisfied all of the eligibility requirements but
terminates employment prior to his Entry Date will Participate in the
Plan immediately upon returning to the employ of the Employer.
A Participant or Former Participant who has terminated employment will
participate as an Active Participant in the Plan immediately upon
returning to the employ of the Employer.
2.03 Change in Employment Classification
In the event a Participant becomes ineligible to participate because he
is no longer a member of an Eligible Employee Classification, the
Participant will participate immediately upon his return to an Eligible
Employee Classification.
In the event an Employee who is not a member of an Eligible Employee
Classification becomes a member of such a classification, such Employee
will begin to participate immediately if he has satisfied the
eligibility requirements which are specified in Section 2.01.
ARTICLE 3
PARTICIPANT ACCOUNTS
3.01 Salary Deferral Account
Salary Deferral Account means the Account of a Participant reflecting
applicable contributions, investment income or loss allocated thereto
and distributions. A Participant's Salary Deferral Account is 100%
vested at all times.
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(a) Salary Deferral Contributions
(1) Amount of Contribution
Each Participant may elect to make a Salary Deferral
Contribution each Contribution Period not to exceed 15% of
the Participant's Compensation. Such contribution will be
designated as a percentage of Compensation and will be
equal to an even multiple of 1% or such other amount as
allowed by the Plan Administrator.
(2) Payroll Withholding
All Salary Deferral Contributions will be made pursuant to
a Payroll Withholding Agreement in accordance with Section
11.27.
(3) Nondiscrimination Requirements
All Salary Deferral Contributions are Elective
Contributions within the meaning of Section 4.05(a) and
must satisfy the Nondiscrimination Requirements of Section
4.05.
(4) Excess Deferrals
The maximum amount of Salary Deferral Contribution which
can be made under the Plan on behalf of any Participant
during any calendar year will be limited to that amount
which would not constitute an Excess Deferral as defined
in Section 4.05. The Plan Administrator will distribute
any Excess Deferral, together with the income allocable to
it, to the Participant no later than April 15 of the
calendar year immediately following the year of the Excess
Deferral. If a Participant notifies the Plan
Administrator before March 1 of any calendar year that
Excess Deferrals have been made on his account for the
previous calendar year by reason of participation in a
Cash or Deferred Arrangement maintained by another
employer or employers, and if the Participant requests
that the Plan Administrator distribute a specific amount
to him on account of Excess Deferrals and certifies that
the requested amount is an Excess Deferral, the Plan
Administrator will designate the amount requested together
with the income allocable to it as a distribution of
Excess deferrals and distribute such amount no later than
April 15 of that calendar year. The amount of Excess
Deferrals to be distributed will be reduced by any Excess
Contributions previously distributed or recharacterized
with respect to the Plan Year Beginning with or within the
calendar year. The amount of income allocable to the
Excess Deferrals will be determined as described in
Section 4.05.
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(5) Timing of Deposits
The Employer will deposit all Salary Deferral
Contributions no later than 90 days after the date on
which the amounts withheld would otherwise have been paid
to the Participant in cash.
The Contribution Period for Salary Deferral Contributions
is each month.
(b) Financial Hardship Withdrawals
A Participant may file with the Plan Administrator a written
request to withdraw, in order to avoid or alleviate a Financial
Hardship, any amount not to exceed that portion of his Salary
Deferral Account which represents his total Salary Deferral
Contributions.
The Plan Administrator will allow Financial Hardship withdrawals
only if they are necessary to satisfy a Participant's immediate
and heavy financial need.
(1) Immediate and Heavy Financial Need
A withdrawal will be deemed to be made due to an immediate
and heavy financial need of the Participant if it is made
because of:
o Expenses for medical care described in Code Section
213(d) previously incurred by the Participant, his
spouse or any of his dependents (as defined in Code
Section 152) or necessary for those persons to
obtain medical care described in Code Section
213(d);
o Costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the
Participant;
o Payment of tuition or educational fees for the next
12 months of post-secondary education for the
Participant, his spouse, children or dependents (as
Defined in Code Section 152);
o Prevention of the eviction of the Participant from
his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(2) Necessary To Satisfy Financial Need
No withdrawal may exceed the amount necessary to satisfy
the Participant's immediate and heavy financial need.
However, the amount of an immediate and heavy financial
need may include any amounts necessary to pay any federal,
state or local income taxes or penalties reasonably
anticipated to result from the distribution. The Plan
Administrator will allow the withdrawal if it determines,
after a full review of the Participant's written
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request and evidence presented by the Participant showing
immediate and heavy financial need as well as the
Participant's lack of other reasonably available
resources, that the withdrawal is necessary to satisfy the
need. No withdrawal will be treated as necessary to the
extent it can be satisfied from other resources which are
reasonably available to the Participant, including those
of the Participant's spouse and minor children. A
withdrawal will be treated as necessary to the extent the
Participant demonstrates to the satisfaction of the Plan
Administrator that the need cannot be relieved by any of
the following:
o Reimbursement or compensation by insurance or
otherwise;
o Reasonable liquidation of assets to the extent the
liquidation would not itself cause an immediate and
heavy financial need;
o Cessation of Salary Deferral Contributions or
Employee Contributions (as defined in Section
4.05(a)) or both under any plan maintained by any
employer;
o Other distributions or nontaxable (at the time of
the loan) loans from plans maintained by any
employer;
o Borrowing from commercial sources on reasonable
commercial terms.
Unless the Plan administrator has evidence to the
contrary, it may rely upon the Participant's written
representation that the need cannot be relieved by any of
the foregoing.
(3) Safe Harbor
The Plan Administrator will not allow any withdrawal until
the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently
available to the Participant under all plans maintained by
the Employer. Upon the withdrawal of any portion of a
Participant's Salary Deferral Account, the Participant
will become ineligible for any Elective Contribution to
this Plan or any other plan maintained by the Employer, or
to make any contribution to this Plan or any other plan
maintained by the Employer until the first day of the
first payroll period which begins not less than 12 months
following the date of withdrawal. For this purpose the
phrase "any other Plan maintained by the Employer" means
all qualified and nonqualified Plans of deferred
compensation maintained by the Employer. The phrase
includes stock option, stock purchase, or similar plans,
or a cash or deferred arrangement that is part of a
cafeteria plan within
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<PAGE> 27
the meaning of Code Section 125. It does not include the
mandatory employee contribution portion of a defined
benefit plan, nor does it include a health or welfare
benefit plan (including one that is part of a cafeteria
plan within the meaning of Code Section 125).
Furthermore, the maximum amount of salary Deferral
Contributions which can be made under the Plan on behalf
of any Participant during the calendar year which follows
the calendar year in which the withdrawal was made will be
limited to the amount which would not be treated as an
Excess Deferral for that year reduced by the amount of
Salary Deferral Contributions made on behalf of the
Participant in the calendar year of withdrawal.
(c) Distributions
No distribution may be made from the Participant's Salary
Deferral Account or any account comprised of Matching
Contributions or Nonelective Contributions which are treated as
Elective Contributions in accordance with the provisions of
Section 4.05(h) except under one of the following circumstances:
o the Participant's retirement, death, disability or
termination of employment;
o the Participant's attaining of age 59 1/2;
o the avoidance or alleviation of a Financial Hardship;
o the termination of this Plan without the establishment of
a successor plan within the meaning of Treasury Regulation
Section 1.401(k)-l(d)(3);
o the sale or other disposition by the Employer of at least
85 percent of the assets used by the Employer in a trade
or business to an unrelated corporation which does not
maintain the plan, but only if the Participant continues
employment with the corporation acquiring the assets and
only if the Employer continues to maintain this Plan; or
o the sale or other Disposition by the Employer of its
interest in a subsidiary to an unrelated entity which does
not maintain the plan, but only if the Participant
continues employment with the subsidiary and only if the
Employer continues to maintain this Plan.
This paragraph does not apply to distributions of Excess
Deferrals, Excess Contributions, or excess Annual Additions.
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3.02 Employer Matching Account
Employer Matching Account means the Account of a Participant reflecting
applicable contributions, forfeitures, investment income or loss
allocated thereto and distributions. A Participant's Employer Matching
Account is subject to the Vesting Schedule.
(a) Employer Matching Contributions
Each Plan Year, the Employer may, within the time prescribed by
law for making a deductible contribution, make an Employer
Matching Contribution to the Trust.
For a given Plan Year, the total Employer Matching Contribution,
if any, made by the Employer to Eligible Participants will be an
amount determined and authorized by the Employer for such Plan
Year; however, the Employer will not authorize Employer Matching
Contributions at such times or in such amounts that the Plan, in
operation, discriminates in favor of Highly Compensated
Employees.
The target Employer Matching Contribution to be made to an
Eligible Participant's Employer Matching Account is equal to 50%
of that portion of the Participant's Salary Deferral Contribution
which is not in excess of 4% of the Participant's Compensation.
If the sum of the target Employer Matching Contributions to be
made for all Participants is less than or greater than the total
Employer Matching Contribution made by the Employer in accordance
with the provisions of this Section, then the actual Employer
Matching Contribution allocated to each Eligible Participant's
Employer Matching Account will be adjusted proratably so that the
sum of the actual Employer Matching Contributions made for all
Participants is equal to the total Employer Matching Contribution
made by the Employer.
All Employer Matching Contributions are Matching Contributions
within the meaning of Section 4.05(a) and must satisfy the
Nondiscrimination Requirements of Section 4.05.
(b) Contribution Period
The Contribution Period for Employer Matching Contributions is
each calendar year.
(c) Application of Forfeitures
Forfeitures from a Participant's Employer Matching Account will
be used to reduce Employer Matching Contributions in the Plan
Year in which the Forfeitures are determined to occur.
(d) Withdrawals
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A Participant may not withdraw any portion of his Employer
Matching Account prior to the time when benefits otherwise become
payable in accordance with the provisions of Article 5.
3.03 Profit Sharing Account
Profit Sharing Account means the Account of a Participant reflecting
applicable contributions, forfeitures, investment income or loss
allocated thereto and distributions. A Participant's Profit Sharing
Account is subject to the Vesting Schedule.
(a) Each Plan Year, the Employer may, within the time prescribed by
law for making a deductible contribution, make a Profit Sharing
Contribution to the Trust.
For a given Plan Year, the total Profit Sharing Contribution, if
any, made by the Employer will be an amount determined and
authorized by the Employer for such Plan Year; however, the
Employer will not authorize Profit Sharing Contributions at such
times or in Such amounts that the Plan, in operation,
discriminates in favor of Highly Compensated Employees.
The total Profit Sharing Contribution made by the Employer to
Eligible Participants will first be allocated by the ratio which
each Eligible Participant's Compensation plus Excess Compensation
bears to the total Compensation plus Excess Compensation of all
Eligible Participants. The allocation for each Participant will
not exceed the product of (i) the Participant's Compensation plus
Excess Compensation multiplied by (ii) the rate of tax applicable
under Code Section 3111(a) attributable to old-age insurance as
in effect on the first day of the Plan Year (but not less than
5.7%).
Any remaining Profit Sharing Contributions will be allocated by
the ratio which each Eligible Participant's Compensation bears to
the total Compensation of all Eligible Participants.
With respect to Profit Sharing Contributions, if an Employee
enters the Plan on an Entry Date other than the first day of a
Plan Year, the Employee's Compensation which would otherwise be
considered will be limited to the Compensation actually paid to
the Employee while he is a Participant in the Plan and his
Integration Level will be equal to the annual Integration Level
multiplied by a fraction which is equal to the portion of the
Accounting Period during which the Employee was a participant in
the Plan.
(b) Contribution Period
The Contribution Period for Profit Sharing Contributions is each
calendar year.
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(c) Application of Forfeitures
Forfeitures from a Participant's Profit Sharing Account will be
added to and allocated along with Profit Sharing Contributions in
the Plan Year in which the Forfeitures are determined to occur.
(d) Minimum Allocation for Top-Heavy Plan
Notwithstanding anything contained herein to the contrary, for
any Plan Year in which this Plan is determined to be Top-Heavy, a
Participant (including any Employee who is excluded from the Plan
because his Compensation is less than a stated amount) will be
entitled to a minimum allocation of Profit Sharing Contributions
equal to 3% of the Participant's Aggregate Compensation received
during the Plan Year. This minimum allocation will be provided
to each Participant who is employed by the Employer on the last
day of the Plan Year whether or not he or she is an otherwise
Eligible Participant or fails to make any mandatory Employee
contribution to the Plan.
The percentage referred to in the preceding paragraph will not
exceed the percentage of Aggregate Compensation at which Profit
Sharing Contributions are made or allocated to the Key Employee
for whom such percentage is the largest; provided, however, this
sentence will not apply if the Plan is required to be included in
an Aggregation Group to meet the requirements of Code Sections
401(a)(4) or 410.
(e) Withdrawals
A Participant may not withdraw any portion of his Profit Sharing
Account prior to the time when benefits otherwise become payable
in accordance with the provisions of Article 5.
3.04 Rollover Account
Rollover Account means the Account of a Participant reflecting
applicable contributions, investment income or loss allocated thereto
and distributions. A Participant's Rollover Account is 100% vested at
all times.
(a) Rollover Contributions
Rollover Contribution means a contribution to the Plan by a
Participant where such contribution is the result of a prior
distribution from an Individual Retirement Account, an Individual
Retirement Annuity or another qualified plan. Such prior
contribution must be a rollover amount described in Section
402(c)(4) of the Code or a Contribution described in Section
408(d)(3) of the Code.
Each Employee who is a member of an Eligible Employee
Classification, regardless of whether he is a Participant in the
Plan, will have the right to make a Rollover Contribution of Cash
(or other property of a form acceptable to the Plan
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Administrator and the Trustee) into the Plan from another
qualified plan. If the Employee is not a Participant hereunder,
his Rollover Account will constitute his entire interest in the
Plan, in no event will the existence of a Rollover Account
entitle the Employee to participate in any other benefit provided
by the Plan.
If specifically provided for in a Written Resolution, Rollover
Contribution will also mean the amount of assets transferred,
pursuant to Section 10.05, to this Plan from another plan which
is qualified under Code Sections 401(a) and 501(a).
(b) Withdrawals
A Participant may withdraw all or any portion of his Rollover
Account at any time. However, if a Participant makes such a
withdrawal, he may not make another withdrawal from his Rollover
Account until three months have elapsed.
ARTICLE 4
ACCOUNTING AND VALUATION
4.01 General Powers of the Plan Administrator
The Plan Administrator will have the power to establish rules and
guidelines, which will be applied on a uniform and non-discriminatory
basis, as it deems necessary, desirable or appropriate with regard to
accounting procedures and to the timing and method of contributions to
and/or withdrawals from the Plan.
4.02 Valuation Procedure
As of each Valuation Date, the Plan Administrator will determine from
the Trustee the fair market value of Trust assets and will, subject to
the provisions of this Article, determine the allocation of such value
among the Accounts of the Participants; in doing so, the Plan
Administrator will in the following order:
(a) Credit or charge, as appropriate, to the proper Accounts all
contributions, payments, transfers, forfeitures, withdrawals or
other distributions made to or from such Accounts since the last
preceding Valuation Date and that have not been previously
credited or charged.
(b) Credit or charge, as applicable, each Account with its pro rata
portion of the appreciation or depreciation in the fair market
value of the Trust Fund since the prior Valuation Date. Such
appreciation or depreciation will reflect investment income,
realized and unrealized gains and losses, other investment
transactions and expenses paid from the Trust Fund.
4.03 Reserved
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4.04 Participant Direction of Investment
(a) Application of this Section
Subject to the provisions of this Section, each Participant will
have the right to direct the investment of all of his Accounts
among the Specific Investment Funds which are made available by
the Plan Administrator.
(b) General Powers of the Trustee
The Trustee will have the power to establish rules and guidelines
as it deems necessary, desirable or appropriate with regard to
the directed investment of contributions in accordance with this
Section. Such rules and guidelines are intended to comply with
Section 404(c) of ERISA and the regulations thereunder. Included
in such powers, but not by way of limitation, are the following
powers and rights.
(1) To temporarily invest those contributions which are
pending directed investment in a Specific Investment Fund,
in the General Investment Fund or in some other manner as
determined by the Trustee.
(2) To establish rules with regard to the transfer of all or
any part of the balance of an Account or Accounts of a
given Participant from one Investment Fund to another.
(3) To maintain any part of the assets of any Investment Fund
in cash, or in demand or short-term time deposits bearing
a reasonable rate of interest, or in a short-term
investment fund that provides for the collective
investment of cash balances or in other cash equivalents
having ready marketability, including, but not limited to,
U.S. Treasury Bills, commercial paper, certificates of
deposit, and similar types of short-term securities, as
may be deemed necessary by the Trustee in its sole
discretion.
The Trustee will not be liable for any loss that results from a
Participant's exercise of control over the investment of the
Participant's Accounts. If the Participant fails to provide
adequate directions, the Plan Administrator will direct the
investment of the Participant's Account. The Trustee will have
no duty to review or make recommendations regarding a
Participant's Investment directions.
(c) Accounting
The Plan Administrator will maintain a set of accounts for each
Investment Fund. The accounts of the Plan Administrator for each
Investment Fund will indicate separately the dollar amounts of
all contributions made to such Investment Fund by or on behalf of
each Participant from time to time. The Plan Administrator will
compute the net income from investments; net profits or losses
arising from the sale, exchange, redemption or other disposition
of assets, and the prorata share attributable
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to each Investment Fund of the expenses of the administration of
the Plan and Trust and will debit or credit, as the case may be,
such income profits or losses, and expenses to the unsegregated
balance in each Investment Fund from time to time. To the extent
that the expenses of the administration of the Plan and Trust are
not directly attributable to a given Investment Fund, such
expenses, as of a given Valuation Date, will be prorated among
each Investment Fund; such allocation of expenses will, in
general, be performed in accordance with the guidelines which are
specified in this Article.
(d) Future Contributions
Each Participant who chooses to participate in the Plan will
elect the percentage of those contributions which are subject to
Participant direction of investment which is to be deposited to
each available Investment Fund. Such election will be in effect
until modified. If any Participant fails to make an election by
the appropriate date, he will be deemed to have elected an
Investment Fund(s) as determined by the Plan Administrator.
Elections will be limited to multiples of one percent (or such
other reasonable increments as determined by the Plan
Administrator).
(e) Change in Investment of Past Contributions
A Participant may file an election with the Plan Administrator to
shift the aggregate amount or reasonable increments (as
determined by the Plan Administrator) of the balance of his
existing Account or Accounts which are subject to Participant
direction of investment among the various Investment Funds as of
the first day of each Accounting Period (or such other time or
times as determined by the Plan Administrator). Elections will
be limited to multiples of one percent (or such other reasonable
increments as Determined by the Plan Administrator).
(f) Changes in Investment Elections
Elections with respect to future Contributions and/or with
respect to changes in the investment of past contributions will
be in writing on a form provided by the Plan Administrator,
except that each Participant may authorize the Plan Administrator
in writing on an authorization form provided by the Plan
Administrator to accept such Directions as may be made by the
Participant by use of a telephone voice response system
maintained for such purpose.
The Plan Administrator may establish additional rates and
procedures with respect to investment election changes including,
for example, the number of allowed changes per specified period,
the amount of reasonable fee, if any, which will be charged to
the Participant for making a Change, specified dates or cutoff
dates for taking a change, etc.
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(g) Addition and Deletion of Specific Investment Funds
Specific Investment Funds may be made available from time to time
by the Trustee. Specific Investment Funds, as are from time to
time made available the Trustee, may be deleted or added from
time to time by the Plan Administrator. The Plan Administrator
will establish guidelines for the proper administration of
affected Accounts when a Specific Investment Fund is added or
deleted.
4.05 Nondiscrimination Requirements
(a) Definitions Applicable to the Nondiscrimination Requirements
The following definitions apply to this Section:
(1) Aggregate Limit
With respect to a given Plan Year, Aggregate Limit means
the greater of the sum of [(A) + (B)] or the sum of [(C) +
(D)] where:
(A) is equal to 125% of the greater of DP or CP;
(B) is equal to 2 percentage points plus the lesser of
DP or CP, not to exceed 2 times the lesser of DP or
CP;
(C) is equal to 125% of the lesser of DP or CP;
(D) is equal to 2 percentage points plus the greater of
DP or CP, not to exceed 2 times the greater of DP
or CP;
DP represents the Deferral Percentage for the
Non-highly Compensated Group eligible under the
Cash or Deferred Arrangement for the Plan Year; and
CP represents the Contribution Percentage for the
Non-highly Compensated Group eligible under the
plan providing for the Employee Contributions or
Employer Matching Contributions for the Plan Year
beginning with or within the Plan Year of the Cash
or Deferred Arrangement.
(2) Cash or Deferred Arrangement (CODA)
A Cash or Deferred Election is any election (or
modification of an earlier election) by in Employee to
have the Employer either:
o provide an amount to the Employee in the form of
cash or some other taxable benefit that is not
currently available, or
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o contribute an amount to the Plan (or provide an
accrual or other benefit) thereby deferring receipt
of Compensation.
A Cash or Deferred Election will only be made with respect
to an amount that is not currently available to the
Employee on the date of election. Further, a Cash or
Deferred Election will only be made with respect to
amounts that would have (but for the Cash or Deferred
Election) become currently available after the later of
the date on which the Employer adopts the Cash or Deferred
Arrangement or the date on which the arrangement first
becomes effective.
A Cash or Deferred Election does not include a one-time
irrevocable election upon the Employee's commencement of
employment or first becoming an Eligible Employee.
(3) Compensation
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the gross
income of the Employee under Code Section 125, 401(k),
402(h) or 403(b). Compensation in excess of the Statutory
Compensation Limit is disregarded.
The period used to determine an Employee's Compensation
for a Plan Year may be limited to that portion of the Plan
Year in which the Employee was an Eligible Employee,
provided that this method is applied uniformly to all
Eligible employees under the Plan for the Plan Year.
(4) Contribution Percentage
Contribution Percentage means, for any specified group,
the average of the ratios calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the amount of Employee
Contributions and Matching Contributions which are made by
or on behalf of each Participant for a Plan Year to each
Participant's Compensation for the Plan Year.
For purposes of determining the Contribution Percentage,
each Employee who is eligible under the terms of the Plan
to make or to have contributions made on his behalf is
treated as a Participant. The Contribution Percentage of
an eligible Employee who makes no Employee Contribution
and receives no Matching Contribution is zero.
For purposes of determining the Contribution Percentage of
a Participant who is a Highly Compensated Employee, the
Compensation of and all Employee Contributions and
Matching Contributions for the Participant include, in
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accordance with the provisions of Section 4.05(d), the
Compensation of and all Employee Contributions and
Matching Contributions for any Family Member of the
Participant.
The Contribution Percentage of a Participant who is a
Highly Compensated Employee for the Plan Year and who is
eligible to make Employee Contributions or receive an
allocation of Matching Contributions (including Elective
Contributions and Nonelective Contributions which are
treated as Employee or Matching Contributions for purposes
of the Contribution Percentage Test) allocated to his
accounts under two or more plans which are sponsored by
the Employer will be determined as if the Employee and
Matching Contributions were made under a single plan. For
purposes of this paragraph, if a Highly Compensated
Employee participates in two or more such plans which have
different Plan Years, all plans ending with or within the
same calendar year will be treated as a single plan.
(5) Contribution Percentage Test
The Contribution Percentage Test is a test applied on a
Plan Year basis to determine whether a plan meets the
requirements of Code Section 401(m). The Contribution
Percentage Test may be met by either satisfying the
General Contribution Percentage Test or the Alternative
Contribution Percentage Test.
The General Contribution Percentage Test is satisfied if
the Contribution Percentage for the Highly Compensated
Group does not exceed 125% of the Contribution Percentage
for the Non-highly Compensated Group.
The Alternative Contribution Percentage Test is satisfied
if the Contribution Percentage for the Highly Compensated
Group does not exceed the lesser of:
o The Contribution Percentage for the Non-highly
Compensated Group plus 2 percentage points, or
o the Contribution Percentage for the Non-highly
Compensated Group multiplied by 2.0.
If (i) one or more Highly Compensated Employees of the
Employer or any Related Employer are eligible to
participate in both a Cash or Deferred Arrangement and a
plan which provides for Employee Contributions or Matching
Contributions, (ii) the Deferral Percentage for the Highly
Compensated Group does not satisfy the General Deferral
Percentage Test, and (iii) the Contribution Percentage for
the Highly Compensated Group does not satisfy the General
Contribution Percentage Test, then the Contribution
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Percentage Test will be deemed to be satisfied only if the
sum of the Deferral Percentage and the Contribution
Percentage for the Highly Compensated Group does not
exceed the Aggregate Limit.
The Plan will not fail to satisfy the Contribution
Percentage test merely because all of the Eligible
Employees under the Plan for a Plan Year are Highly
Compensated Employees.
(6) Deferral Percentage
Deferral Percentage means, for any specified group, the
average of the ratios calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the amount of Elective
Contributions which are made on behalf of each Participant
for a Plan Year to each Participant's Compensation for the
Plan Year.
For purposes of determining the Deferral Percentage, each
Employee who is eligible under the terms of the Plan to
have contributions made on his behalf is treated as a
Participant. The Deferral Percentage of an eligible
Employee who makes no Elective Contribution is zero.
For purposes of determining the Deferral Percentage of a
Participant who is a Highly Compensated Employee, the
Compensation of and Elective Contributions for the
Participant include, in accordance with the provisions of
Section 4.05(d), the Compensation and all Elective
Contributions for any Family Member of the Participant.
The Deferral Percentage of a Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible
to have Elective Contributions (including Nonelective
Contributions or Matching Contributions which are treated
as Elective Contributions for purposes of the Deferral
Percentage Test) allocated to his accounts under two or
more Cash or Deferred Arrangements which are maintained by
the Employer will be determined as if the Elective
Contributions were made under a single Arrangement. For
purposes of this paragraph, if a Highly Compensated
Employee participates in two or more Cash or Deferred
Arrangements which have different Plan Years, all Cash or
Deferred Arrangements ending with or within the same
calendar year will be treated as a single Arrangement.
(7) Deferral Percentage Test
The Deferral Percentage Test is a test applied on a Plan
Year basis to determine whether a plan meets the
requirements of Code Section 401(k). The Deferral
Percentage Test may be met by either satisfying the
General Deferral Percentage Test or the Alternative
Deferral Percentage Test.
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The General Deferral Percentage Test is satisfied if the
Deferral Percentage for the Highly Compensated Group does
not exceed 125% of the Deferral Percentage for the
Non-highly Compensated Group.
The Alternative Deferral Percentage Test is satisfied if
the Deferral Percentage for the Highly Compensated Group
does not exceed the lesser of:
o the Deferral Percentage for the Non-highly
Compensated Group plus 2 percentage points, or
o the Deferral Percentage for the Non-highly
Compensated Group multiplied by 2.0.
If (i) one or more Highly Compensated Employees of the
Employer or any Related Employer are eligible to
participate in both a Cash or Deferred Arrangement and a
plan which provides for Employee Contributions or Matching
Contributions, (ii) the Deferral Percentage for the Highly
Compensated Group does not satisfy the General Deferral
Percentage Test, and (iii) the Contribution Percentage for
the Highly Compensated Group does not satisfy the General
Contribution Percentage Test, then the Deferral Percentage
Test will be deemed to be satisfied only if the sum of the
Deferral Percentage and the Contribution Percentage for
the Highly Compensated Group does not exceed the Aggregate
Limit.
The Plan will not fail to satisfy the Deferral Percentage
test merely because all of the Eligible Employees under
the Plan for a Plan Year are Highly Compensated Employees.
(8) Elective Contribution
Elective Contribution means any contribution made by the
Employer to a Cash or Deferred Arrangement on behalf of
and at the election of an Employee. An Elective
Contribution will be taken into account for a given Plan
Year only if:
o The Elective Contribution is allocated to the
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the
Employee's participation in the Plan or performance
of services on any date after the allocation date;
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o The Elective Contribution is actually paid to the
trust no later than 12 months after the end of the
Plan Year to which the Elective Contribution
relates; and
o The Elective Contribution relates to Compensation
which either (i) but for the Participant's election
to defer, would have been received by the
Participant in the Plan Year or (ii) is
attributable to services Performed by the
Participant in the Plan Year and, but for the
Participant's election to defer, would have been
received by the Participant within two and one-half
months after the close of the Plan Year.
Elective Contributions will be treated as Employer
Contributions for purposes of Code Sections 401(a),
401(k), 404, 409, 411, 412, 415, 416, and 417.
(9) Elective Deferral
Elective Deferral means the sum of the following:
o Any Elective Contribution to any Cash or Deferred
Arrangement to the extent it is not includable in
the Participant's gross income for the taxable year
of contribution;
o Any employer contribution to a simplified employee
pension as defined in Code Section 408(k) to the
extent not includable in the Participant's gross
income for the taxable year of contribution;
o Any employer contribution to an annuity contract
under Code Section 403(b) under a salary reduction
agreement to the extent not includable in the
Participant's gross income for the taxable year of
contribution; plus
o Any employee contribution designated as deductible
under a trust described in Code Section 501(c)(18)
for the taxable year of contribution.
(10) Eligible Employee
Eligible Employee means an Employee who is directly or
indirectly eligible to make a Cash or Deferred Election
under the Plan for all or a portion of the Plan Year. An
Employee who is unable to make a Cash or Deferred Election
because the Employee has not contributed to another plan
is also an Eligible Employee. An Employee who would be
eligible to make Elective Contributions but for a
suspension due to a distribution, a loan, or an election
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not to participate in the Plan, is treated as an Eligible
Employee for purposes of Code Section 401(k)(3) and 401(m)
for a Plan Year even though the Employee may not make a
Cash or Deferred Election due to the suspension. Also, an
Employee will not fail to be treated as an Eligible
Employee merely because the employee may receive no
additional Annual Additions because of Code Section
415(c)(1) or 415(e).
(11) Employee Contribution
Employee Contribution means any contribution made by an
Employee to any plan maintained by the Employer or any
Related Employer which is other than an Elective
Contribution and which is designated or treated at the
time of contribution as an after-tax contribution.
Employee Contributions include amounts attributable to
Excess Contributions which are recharacterized as Employee
Contributions.
(12) Excess Contribution
Excess Contribution means, for each member of the Highly
Compensated Group, the amount of Elective Contribution
(including any Qualified Nonelective Contributions and
Qualified Matching Contributions which are treated as
Elective Contributions) which exceeds the maximum
contribution which could be made if the Deferral
Percentage Test were to be satisfied.
(13) Excess Aggregate Contribution
Excess Aggregate Contribution means, for each member of
the Highly Compensated Group, the amount of Employee and
matching Contributions (including any Qualified
Nonelective Contributions and Elective Contributions which
are treated as Matching Contributions) which exceeds the
maximum contribution which could be made if the
Contribution Percentage Test were to be satisfied.
(14) Excess referral
Excess Referral means, for a given calendar year, that
amount by which each Participant's total Elective
Deferrals under all plans of all employers exceed the
dollar limit in effect under Code Section 402(g) for the
calendar year.
(15) Matching Contribution
Matching Contribution means any contribution made by the
Employer to any plan maintained by the Employer or any
Related Employer which is based on an Elective
Contribution or an Employee Contribution together with any
forfeiture allocated to the Participant's Account on the
basis of Elective Contributions, Employee Contributions or
Matching Contributions. A Matching Contribution will be
taken into account for a given Plan Year only if:
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o The Matching Contribution is allocated to a
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the
Employee's participation in the Plan or performance
of services on any date after the allocation date;
o The Matching Contribution is actually paid to the
Trust no later than 12 months after the end of the
Plan Year to which the Matching Contribution
relates; and
o The Matching Contribution is based on an Elective
or Employee Contribution for the Plan Year.
Any contribution or allocation, other than a Qualified
Nonelective Contribution, which is used to meet the
minimum contribution or benefit requirement of Code
Section 416 is not treated as being based on Elective
Contributions or Employee Contributions and therefore is
not treated as a Matching Contribution.
Qualified Matching Contribution means a Matching
Contribution which is 100% vested and may be withdrawn or
distributed only under the conditions described in
Treasury Regulation 1.401(k)-1(d).
(16) Nonelective Contribution
Nonelective Contribution means any Employer Contribution,
other than a Matching Contribution, which meets all of the
following requirements:
o The Nonelective Contribution is allocated to a
Participant's Account as of a date within the Plan
Year to which it relates;
o The allocation is not contingent upon the
Employee's participation in the Plan or performance
of services on any date after the allocation date;
o The Nonelective Contribution is actually paid to
the Trust no later than 12 months after the end of
the Plan Year to which the Nonelective Contribution
relates; and
o The Employee may not elect to have the Nonelective
Contribution paid in cash in lieu of being
contributed to the Plan.
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Qualified Nonelective Contribution means a
Nonelective Contribution which is 100% tested and
may be withdrawn or distributed only under the
conditions described in Treasury Regulation
1.401(k)-1(d).
(b) Application of Deferral Percentage Test
All Elective Contributions, including any Elective Contributions
which are treated as Employee or Matching Contributions with
respect to the Contribution Percentage Test, must satisfy the
Deferral Percentage Test. Furthermore, any Elective
Contributions which are not treated as Employee or Matching
Contributions with respect to the Contribution Percentage Test
must satisfy the Deferral Percentage Test. The Plan
Administrator will determine as soon as administratively feasible
after the end of the Plan Year whether the Deferral Percentage
Test has been satisfied. If the Deferral Percentage Test is not
satisfied, the Employer may elect to make an additional
contribution to the Plan on account of the Non-highly Compensated
Group. The additional contribution will be treated as a
Nonelective Contribution.
If the Deferral Percentage Test is not satisfied after any
Nonelective Contributions, the Plan Administrator may, in its
sole discretion, recharacterize all or any portion of the Excess
Contribution of each Highly Compensated Employee as an Employee
Contribution if Employee Contributions are otherwise allowed by
the Plan. If so, the Plan Administrator will notify all affected
Participants and the Internal Revenue Service of the amount
recharacterized no later than the 15th day of the third month
following the end of the Plan Year in which the Excess
Contribution was made. Excess Contributions will be includable
in the Participant's gross income on the earliest date any
Elective Contribution made on behalf of the Participant during
the Plan Year would have been received by the Participant had the
Participant elected to receive the amount in cash.
Recharacterized Excess Contributions will continue to be treated
as Employer Contributions that are Elective Contributions for all
other purposes under the Code, including Code Sections 401(a)
(other than 401(a)(4) and 401(m)), 404, 409, 411, 412, 415, 416,
417 and 401(k)(2). With respect to the Plan Year for which the
Excess Contribution was made, the Plan Administrator will treat
the recharacterized amount as an Employee Contribution for
purposes of the Deferral Percentage Test and the Contribution
Percentage Test and for purposes of determining whether the Plan
meets the requirements of Code Section 401(a)(4), but not for any
other purposes under this Plan. Therefore, recharacterized
amounts will remain subject to the nonforfeiture requirements and
distribution limitations which apply to Elective Contributions.
If the Deferral Percentage Test is still not satisfied, then
after the close of the Plan Year in which the Excess Contribution
arose but within 12 months after the close of that Plan Year, the
Plan Administrator will distribute the Excess Contributions,
together with allocable income, to the affected Participants of
the Highly Compensated Group to the extent necessary to satisfy
the Deferral Percentage Test.
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Failure to do so will cause the Plan to not satisfy the
requirements of Code Section 401(a)(4) for the Plan Year for
which the Excess Contribution was made and for all subsequent
Plan Years for which the Excess Contribution remains uncorrected.
The amount of Excess Contribution to be distributed to a Highly
Compensated Employee for a Plan Year will be reduced by any
Excess Deferrals previously distributed to the Participant for
the calendar year ending with or within the Plan Year in
accordance with Code Section 402(g)(2).
Excess Contributions will be treated as Employer Contributions
for purposes of Code Sections 404 and 415 even if distributed
from the Plan.
(c) Application of Contribution Percentage Test
Employee Contributions and Matching Contributions, disregarding
any Matching Contributions which are treated as Elective
Contributions with respect to the Deferral Percentage Test, must
satisfy the Contribution Percentage Test. The Plan Administrator
will determine as soon as administratively feasible after the end
of the Plan Year whether the Contribution Test has been
satisfied. If the Contribution Percentage Test is not satisfied,
the Employer may elect to make an additional contribution to the
Plan for the benefit of the Non-Highly Compensated Group. The
additional contribution will be treated as a Nonelective
Contribution.
If the Contribution Percentage Test is still not satisfied, then
after the close of the Plan Year in which the Excess Aggregate
Contribution arose but within 12 months after the close of that
Plan Year, the Plan Administrator will distribute (or forfeit, to
the extent not vested) the Excess Aggregate Contributions,
together with allocable income, to the affected Participants of
the Highly Compensated Group to the extent necessary to satisfy
the Contribution Percentage Test. Failure to do so will cause
the Plan to not satisfy the requirements of Code Section
401(a)(4) for the Plan Year for which the Excess Aggregate
Contribution was made and for all subsequent Plan Years for which
the Excess Aggregate Contribution remains uncorrected.
The determination of any Excess Aggregate Contributions will be
made after the recharacterization of any Excess Contributions as
Employee Contributions.
Excess Aggregate Contributions, including forfeited Matching
Contributions, will be treated as Employer Contributions for
purposes of Code Sections 404 and 415 even if they are
distributed from the Plan.
Forfeited Matching Contributions that are reallocated to the
Accounts of other Participants are treated as Annual Additions
under Code Section 415 for the Participant whose Accounts they
are reallocated to and for the Participants from whose Accounts
they are forfeited.
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(d) Family Aggregation
The Deferral Percentage or the Contribution Percentage (the
"Relevant Percentage") for any Highly Compensated Employee who is
subject to the family aggregation rules of Section 1.18(c) will
be determined by combining the Elective Contributions, Employee
Contributions, Matching Contribution, amounts treated as Elective
or Matching Contributions and Compensation of all the eligible
Family Members.
The determination and correction of Excess Contributions and
Excess Aggregate Contributions of a Highly Compensated Employee
whose Relevant Percentage is determined under the family
aggregation rules is accomplished by reducing the Relevant
Percentage as provided for in Sections 4.05(b) and 4.05(c) and
Excess Contributions or Excess Aggregate Contributions for the
Family group are allocated among the Family Members whose
contributions were combined to determine the Relevant Percentage
in proportion to the Elective Contributions or Nonelective and
Matching Contributions of each Family Member.
For all purposes under this Section, the contributions and
compensation of eligible Family Members who are not Highly
Compensated Employees without regard to family aggregation are
disregarded when determining the Relevant Percentage for the
Non-highly Compensated Group.
(e) Reduction of Excess Amounts
The total Excess Contribution or total Excess Aggregate
Contribution will be reduced in a manner so that the Deferral
Percentage or the Contribution Percentage (Relevant Percentage)
of the affected Participant(s) with the highest Relevant
Percentage will first be lowered to a point not less than the
level of the affected Participant(s) with the next highest
Relevant Percentage. If further overall reductions are required
to satisfy the relevant test, each of the above Participants' (or
groups of Participants') Relevant Percentage will be lowered to a
point not less than the level of the affected Participant(s) with
the next highest Relevant Percentage, and so on continuing until
sufficient total reductions have occurred to achieve satisfaction
of the relevant test.
(f) Priority of Reductions
The Plan Administrator will determine the method and order of
correcting Excess Contributions and Excess Aggregate
Contributions. The method of correcting Excess Contributions and
Excess Aggregate Contributions must meet the requirements of Code
Section 401(a)(4). The determination of whether a rate of
Matching Contribution discriminates under Code Section 401(a)(4)
will be made after making any corrective distributions of Excess
Deferrals, Excess Contributions and Excess Aggregate
Contributions.
Excess Aggregate Contributions (and any attributable income) will
be corrected first, by distributing any excess Employee
Contributions (and any attributable income);
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then by distributing vested excess Matching Contributions (and
any attributable income); and finally, by forfeiting or
distributing non-vested Matching Contributions (and any
attributable income). The Plan will not distribute Employee
Contributions while the Matching Contributions based upon those
Employee Contributions remain allocated.
(g) Income
The income allocable to any Excess Contribution made to a given
Account for a given Plan Year will be equal to the total income
allocated to the Account for the Plan Year, multiplied by a
fraction, the numerator of which is the amount of the Excess
Contribution and the denominator of which is equal to the sum of
the balance of the Account at the beginning of the Plan Year plus
the Participant's Elective Contributions and amounts treated as
Elective Contributions for the Plan Year.
The income allocable to any Excess Aggregate Contribution made to
a given Account for a given Plan Year will be equal to the total
income allocated to the Account for the Plan Year, multiplied by
a fraction, the numerator of which is the amount of the Excess
Aggregate Contribution and the denominator of which is equal to
the sum of the balance of the Account at the beginning of the
Plan Year plus the Participant's Employee and Matching
Contributions and amounts treated as Employee and Matching
Contributions for the Plan Year.
Notwithstanding the foregoing, the Plan may use any reasonable
method for computing the income allocable to any Excess
Contribution or Excess Aggregate Contribution provided the method
does not violate Code Section 401(a)(4), is used consistently for
all corrective distributions under the Plan for the Plan Year,
and is used by the Plan for allocating income to the
Participants' Accounts.
Income includes all earnings and appreciation, including
interest, dividends, rents, royalties, gains from the sale of
property, and appreciation in the value of stocks, bonds, annuity
and life insurance contracts and other property, regardless of
whether the appreciation has been realized.
(h) Treatment as Elective Contributions
The Plan Administrator may, in its discretion, treat all or any
portion of Qualified Nonelective Contributions or Qualified
Matching Contributions or both, whether to this Plan or to any
other qualified plan which has the same Plan Year and is
maintained by the Employer or a Related Employer, as Elective
Contributions for purposes of satisfying the Deferral Percentage
Test if they meet all of the following requirements:
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o All Nonelective Contributions, including the Qualified
Nonelective Contributions treated as Elective
Contributions for purposes of the Deferral Percentage
Test, satisfy the requirements of Code Section 401(a)(4);
o Any Nonelective Contributions which are not treated as
Elective Contributions for purposes of the Deferral
Percentage Test or as Matching Contributions for purposes
of the Contribution Percentage Test satisfy the
requirements of Code Section 401(a)(4);
o The Qualified Matching Contributions which are treated as
Elective Contributions for purposes of the Deferral
Percentage Test are not taken into account in determining
whether any Employee Contributions or other Matching
Contributions satisfy the Contribution Percentage Test;
o Any Matching Contributions which are not treated as
Elective Contributions for purposes of the Deferral
Percentage Test satisfy the requirements of Code Section
401(m); and
o The plan which includes the Cash or Deferred Arrangement
and the plan or plans to which the Qualified Nonelective
Contributions and Qualified Matching Contributions are
made could be aggregated for purposes of Code Section
410(b).
(i) Treatment as Matching Contributions
The Plan Administrator may, in its discretion, treat all or any
portion of Qualified Nonelective Contributions or
Elective Contributions or both, whether to this Plan or to any
other qualified plan which has the same Plan Year and is
maintained by the Employer or a Related Employer, as Matching
Contributions for purposes of satisfying the Contribution
Percentage Test if they meet all of the following requirements:
o All Nonelective Contributions, including the Qualified
Nonelective Contributions treated as Matching
Contributions for purposes of the Contribution Percentage
Test, satisfy the requirements of Code Section 401(a)(4);
o Any Nonelective Contributions which are not treated as
Elective Contributions for purposes of the Deferral
Percentage Test or as Matching Contributions for purposes
of the Contribution Percentage Test satisfy the
requirements of Code Section 401(a)(4);
o The Elective Contributions which are treated as Matching
Contributions for purposes of the Contribution Percentage
Test are not taken into account in
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determining whether any other Elective Contributions
satisfy the Deferral Percentage Test;
o The Qualified Nonelective Contributions and Elective
Contributions which are treated as Matching Contributions
for purposes of the Contribution Percentage Test are not
taken into account in determining whether any other
contributions or benefits satisfy Code Section 401(a); and
o All Elective Contributions, including those treated as
Matching Contributions for purposes of the Contribution
Percentage Test, satisfy the requirements of Code Section
401(k)(3); and
o The plan that takes Qualified Nonelective Contributions
and Elective Contributions into account in determining
whether Employee and Matching Contributions satisfy the
requirements of Code Section 401(m)(2)(A) and the plan or
plans to which the Qualified Nonelective Contributions and
Elective Contributions are made could be aggregated for
purposes of Code Section 410(b).
(j) Aggregation of Plans
If the Employer or a Related Employer sponsors one or more other
plans which include a Cash or Deferred Arrangement, the Employer
may elect to treat any two or more of such plans as an aggregated
single plan for purposes of satisfying Code Sections 401(a)(4),
401(k) and 410(b). The Cash of Deferred Arrangements included in
such aggregated plans will be treated as a single Arrangement for
purposes of this Section. However, only those plans that have
the same plan year may be so aggregated.
If the Employer or a Related Employer sponsors one or more other
plans to which Employee Contributions or Matching Contributions
are made, the Employer may elect to treat any two or more of such
plans as an aggregated single plan for purposes of satisfying
Code Sections 401(a)(4), 401(m) and 410(b). However, only those
plans that have the same plan year may be so aggregated.
Any such aggregation must be made in accordance with Treasury
Regulation 1.401(k)-1(b)(3). For example, contributions and
allocations under the portion of a plan described in Code Section
4975(e)(7) (an ESOP) may not be aggregated with the portion of a
plan not described in Code Section 4975(e)(7) (a non-ESOP) for
purposes of determining whether the ESOP or non-ESOP satisfies
the requirements of Code Sections 401(a)(4), 401(k), 401(m) and
410(b).
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Plans that could be aggregated under Code Section 410(b) but that
are not actually aggregated for a Plan Year for purposes of Code
Section 410(b) may not be aggregated for purposes of Code
Sections 401(k) and 401(m).
ARTICLE 5
RETIREMENT BENEFITS
5.01 Valuation of Accounts
For purposes of this Article, the value of a Participant's Accrued
Benefit will be determined as of the Valuation Date immediately
preceding the date that benefits are to be distributed.
5.02 Normal Retirement
After an Active Participant reaches his Normal Retirement Date, he may
elect to retire. Upon such retirement he will become a Retired
Participant and his Accrued Benefit will become distributable to him. A
Participant's Accrued Benefit will become nonforfeitable no later than
the date upon which he attains his Normal Retirement Age. The form and
timing of benefit payment will be governed by the provisions of Section
5.05.
5.03 Disability Retirement
In the event of a Participant's termination due to Disability, he will
be entitled to begin to receive a distribution of his Accrued Benefit
which will become nonforfeitable as of his date of termination. The
form and timing of benefit payment will be governed by the provisions of
Section 5.05.
Disability means the determination by the Plan Administrator that a
Participant is unable by reason of any medically determinable physical
or mental impairment to perform the usual duties of his employment or of
any other employment for which he is reasonably qualified based upon his
education, training and experience.
5.04 Termination of Employment
(a) In General
If a Participant's employment terminates for any reason other
than retirement, death, or disability, his Accrued Benefit will
become distributable to him as of the last day of the month which
coincides with or next follows the last date upon which any
contributions on the Participant's behalf are made to the Trust
following the Participant's date of termination of employment (or
as of such earlier date as determined by the Plan Administrator
in a uniform and nondiscriminatory manner). The form and timing
of benefit payment will be governed by the provisions of Section
5.05.
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(b) Cash-Out Distribution
If a Participant terminates employment and receives a
distribution equal to the Vested Percentage of his Accounts which
are subject to the Vesting Schedule (such Accounts are
hereinafter referred to as Employer Contribution Accounts), a
Cash-Out Distribution will be deemed to have occurred if the
following conditions are met:
(1) The Participant was less than 100% vested in his Employer
Contribution Accounts; and
(2) The entire distribution is made before the last day of the
second Plan Year following the Plan Year in which the
Participant terminated employment.
(c) Restoration of Employer Contribution Accounts
If, following the date of a Cash-Out Distribution, a Participant
returns to an Eligible Employee Classification prior to incurring
5 consecutive One Year Breaks-in-Service, then the Participant
will have the right to repay to the Trustee, within 5 years after
his return date, the portion of the Cash-Out Distribution which
was attributable to his Employer Contribution Accounts which were
less than 100% vested in order to restore such Accounts to their
value as of the date of the Cash-Out Distribution.
The Plan Administrator will restore an eligible Participant's
Employer Contribution Accounts as of the Accounting Date
coincident with or immediately following the complete repayment
of the Cash-Out Distribution. To restore the Participant's
Employer Contribution Accounts, the Plan Administrator, to the
extent necessary, will, under rules and guidelines applied in a
uniform and nondiscriminatory manner, first allocate to the
Participant's Employer Contribution Accounts the amount, if any,
of Forfeitures which would otherwise be allocated under Article
3. To the extent such Forfeitures for a particular Accounting
Period are insufficient to enable the Plan Administrator to make
the required restoration, the Employer will contribute such
additional amount as is necessary to enable the Plan
Administrator to make the required restoration. The Plan
Administrator will not take into account the allocation under
this Section in applying the limitation on allocations under
Article 7.
(d) Non-Vested Participant
If a Participant who is zero percent vested in his Employer
Contribution Accounts terminates employment, a Cash-Out
Distribution will be deemed to have occurred as of the
Participant's date of termination of employment.
If the Participant subsequently returns to an Eligible Employee
Classification prior to incurring five consecutive One Year
Breaks-in-Service, then the Participant will immediately become
entitled to a complete restoration of his Employer Contribution
Accounts as of the Accounting Date coincident with or next
following his date of
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re-employment. Such restoration will be made in accordance with
the provisions of Section 5.04(c).
5.05 Form of Benefit Payment
Subject to the provisions of Section 5.06, the Plan Administrator will
direct the Trustee to make the payment of any benefit provided under
this Plan upon the event giving rise to such benefit within 60 days
following the receipt of a Participant's written request for the payment
of benefits on a form provided by the Plan Administrator. The Plan
Administrator may temporarily suspend such processing in the event of
unusual or extraordinary circumstances such as the conversion of Plan
records from one recordkeeper to another.
The form of benefit will be a lump sum payment, unless the Participant
elects a direct transfer pursuant to Section 5.07.
If a Participant's Vested Accrued Benefit is in excess of $3,500, any
payment of benefits prior to the Participant's Normal Retirement Date
will be subject to the Participant's written consent. If the value of
his Vested Accrued Benefit at the time of any distribution exceeds
$3,500, the value of his Vested Accrued Benefit at any later time will
be deemed to also exceed $3,500.
5.06 Commencement of Benefit
Subject to the provisions of this Article, commencement of a benefit
will, unless the Participant elects otherwise in writing, begin not
later than the 60th day after the later of the close of the Plan Year in
which the Participant attains Normal Retirement Age or the close of the
Plan Year which contains the date the Participant terminates his service
with the Employer.
Payment of a Participant's benefits must begin no later than his
Required Beginning Date.
All distributions required under this Section will be determined and
made in accordance with the regulations issued under Code Section
401(a)(9), including those dealing with minimum Distribution
requirements. Notwithstanding the provisions of Section 5.05. An
Active Participant who has reached his Required Beginning Date will
receive an annual distribution of his Accrued Benefit equal to the
minimum required distribution determined under Code Section 401(a)(9).
For purposes of this Section, life expectancy and joint and last
survivor expectancy are to be computed by the use of the return
multiples contained in Section 1.72-9 of the Income Tax Regulations.
If the Participant dies after distribution of his interest has begun,
the remaining portion of the interest will continue to be distributed at
least as rapidly as under the method of distribution being used before
the Participant's death.
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5.07 Directed Transfer of Eligible Rollover Distributions
(a) General
This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct
Rollover.
(b) Eligible Rollover Distribution
An Eligible Rollover Distribution is any distribution of all or
any portion of the balance to the credit of the Distributee,
except that an Eligible Rollover Distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(c) Eligible Retirement Plan
An Eligible Retirement Plan is an individual retirement account
described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, or a qualified
trust described in section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(d) Distributee
A Distributee includes an Employee or Former Employee. In
addition, the Employee's or Former Employee's surviving spouse
and the Employee's or Former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are Distributees
with regard to the interest of the spouse or former spouse.
(e) Direct Rollover
A Direct Rollover is a payment by the Plan to t he Eligible
Retirement Plan specified by the Distributee.
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(f) Waiver of 30-Day Notice
If a distribution is one to which Code Sections 401(a)(11), and
417 do not apply, such distribution may commence less than 30
days after the notice required under Section 1.411(a)-1l(c) of
the Income Tax Regulations is given, provided that:
o the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least
30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option); and
o the Participant, after receiving the notice, affirmatively
elects to receive a distribution.
ARTICLE 6
DEATH BENEFIT
6.01 Valuation of Accounts
For purposes of this Article, the value of a Participant's Accrued
Benefit will be determined as of the Valuation Date immediately
preceding the date that benefits are to be distributed.
6.02 Death Benefit
In the event of the death of a Participant prior to the date on which he
receives a complete distribution of his benefit under the Plan, the
Participant's Beneficiary will be entitled to receive the value of the
Participant's Accrued Benefit.
6.03 Designation of Beneficiary
Each Participant will be given the opportunity to designate a
Beneficiary or Beneficiaries, and from time to time the Participant may
file with the Plan Administrator a new or revised designation on the
form provided by the Plan Administrator. If a Participant is married,
any designation of a Beneficiary other than the Participant's spouse
must be consented to by the Participant's spouse pursuant to a Qualified
Election.
If a Participant dies without designating a Beneficiary, or if the
Participant is predeceased by all designated Beneficiaries and
contingent Beneficiaries, the Plan Administrator will distribute all
benefits which are payable in the event of the Participant's death in
the following manner and to the first of the following (who are listed
in order of priority) who survive the Participant by at least 30 days:
o All to the Participant's Surviving Spouse;
o Equally among the then living children of the Participant (by
birth or adoption);
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o Among the Participant's then living lineal descendants, by right
of representation; or
o The Participant's estate.
ARTICLE 7
LIMITATIONS ON BENEFITS
7.01 Limitation on Annual Additions
The amount of the Annual Addition which may be allocated under this Plan
to any Participant's Account as of any Allocation Date will not exceed
the Defined Contribution Limit (based upon his Aggregate Compensation up
to such Valuation Date) reduced by the sum of any allocations of annual
additions made to Participant's Accounts under this Plan as of any
preceding Allocation Date within the Limitation Year.
If the Annual Addition under this Plan on behalf of a Participant is to
be reduced as of any Allocation Date as a result of the next preceding
paragraph, the reduction will be, to the extent required, effected by
first reducing Participant contributions (which increase the annual
addition), then Forfeitures (if any), and then Employer contributions to
be allocated under this Plan on behalf of the Participant as of the
Allocation Date.
Any necessary reduction will be made as follows:
(a) The amount of the reduction consisting of nondeductible
Participant contributions will be paid to the Participant as soon
as administratively feasible.
(b) The amount of the reduction consisting of any other Participant
contributions will be paid to the Participant as soon as
administratively feasible.
(c) The amount of the reduction consisting of Forfeitures will be
allocated and reallocated to other Accounts in accordance with
the Plan formula for allocating Forfeitures to the extent that
such allocations do not cause the additions to any other
Participant's Accounts to exceed the lesser of the Defined
Contribution Limit or any other limitation provided in the Plan.
(d) The amount of the reduction consisting of Employer contributions
will be allocated and reallocated to other Accounts in accordance
with the Plan formula for Employer Contributions to the extent
that such allocations do not cause the additions to any other
Participant's Accounts to exceed the lesser of the Defined
Contribution Limit or any other limitation provided in the Plan.
(e) To the extent that the reductions described in paragraph (d)
cannot be allocated to other Participant's Accounts, the
reductions will be allocated to a suspense account
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as Forfeitures and held therein until the next succeeding
Allocation Date on which Forfeitures could be applied under the
provisions of the Plan. All amounts held in a suspense account
must be applied as Forfeitures before any additional
contributions, which would constitute annual additions, may be
made to the Plan. If the Plan terminates, the suspense account
will revert to the Employer to the extent it may not be allocated
to any Participant's Accounts.
(f) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not participate
in the allocation of the Trust Fund's investment gains and
losses.
7.02 Where Employer Maintains Another Qualified Plan
(a) Where Employer Maintains Another Qualified Defined Contribution
Plan
If the Employer maintains this Plan and one or more other
qualified defined contribution plans, one or more welfare benefit
funds (as defined in Code Section 419(e)), or one or more
individual medical accounts (as defined in Code Section
415(l)(2)), all of which are referred to in this Article 7 as
"qualified defined contribution plans", the annual additions
allocated under this Plan to any Participant's Accounts will be
limited in accordance with the allocation provisions of this
Section 7.02(a).
The amount of the Annual Additions which may be allocated under
this Plan to any Participant's Accounts as of any Allocation Date
will not exceed the Defined Contribution Limit (based upon
Aggregate Compensation up to the allocation date) reduced by the
sum of any allocations of Annual Additions made to the
Participant's Accounts under this Plan and any other qualified
defined contribution plans maintained by the Employer as of any
earlier Allocation Date within the Limitation Year.
If a Allocation Date of this Plan coincides with a Allocation
Date of any other plan described in the above paragraph, the
amount of Annual Additions to be allocated on behalf of a
Participant under this Plan as of such date will be an amount
equal to the product of the amount described in the next
preceding paragraph multiplied by a fraction (not to exceed 1.0),
the numerator of which is the amount to be allocated under this
Plan without regard to this Article during the Limitation Year
and the denominator of which is the amount that would otherwise
be allocated on this Allocation Date under all plans without
regard to this Article 7.
If the Annual Addition under this Plan on behalf of a Participant
is to be reduced as of any Allocation Date as a result of the
next preceding two paragraphs, the reduction will be, to the
extent required, effected by first reducing Participant
contributions (which increase the annual addition), then
Forfeitures (if any), and then any Employer
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contributions, to be allocated under this Plan on behalf of the
Participant as of the Allocation Date.
If as a result of the first four paragraphs of this Section 7.02
the allocation of additions is reduced, the reduction will be
treated in the manner described in the third paragraph of Section
7.01.
(b) Where Employer Maintains a Qualified Defined Benefit Plan
(1) In General
If the Employer maintains (or has ever maintained), in
addition to this Plan, one or more qualified defined
benefit plans, then for any Limitation Year, the sum of
the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction will not exceed 1.0. If, in any
Limitation Year, the sum of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction for a
Participant would exceed 1.0) without adjustment to the
amount of the annual benefit that can be paid to the
Participant under the defined benefit plan, then the
amount of annual benefit that would otherwise be paid to
the Participant under the defined benefit plan will be
reduced to the extent necessary to reduce the sum of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction for the Participant to 1.0.
(2) Transition Rule under TRA Rule '86
If a plan was in existence on May 6, 1986, the numerator
of the Defined Contribution Plan Fraction will be reduced
(to not less than zero) as prescribed by the Secretary of
the Treasury by subtracting the amount required to
decrease the sum of the Defined Contribution Plan Fraction
plus the Defined Benefit Plan Fraction to 1.0. Such
amount is determined (as of the first day of the first
Limitation Year beginning on or after January 1, 1987) as
the product of:
(A) The amount by which, without this adjustment, the
sum of the Defined Contribution Plan Fraction plus
the Defined Benefit Plan Fraction exceeds 1.0.
multiplied by
(B) The denominator of the Defined Contribution Plan
Fraction, as computed through the last Limitation
Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan
after May 5, 1986.
This subparagraph applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Code Section 415 for all Limitation Years beginning before
January 1, 1987.
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(3) Transition Rule under TEFRA
In the case of a plan which met the limitation of Section 415 of
the Code for the last Limitation Year beginning before January 1,
1983, the numerator of the Defined Contribution Plan Fraction
will be reduced (to not less than zero) as prescribed by the
Secretary of the Treasury by subtracting the amount required to
decrease the sum of the Defined Contribution Plan Fraction plus
the Defined Benefit Plan Fraction to 1.0. Such amount is
determined (as of the first day of the first Limitation Year
beginning on or after January 1, 1983) as the product of:
(A) The amount by which, without this adjustment, the sum of
the Defined Contribution Plan Fraction plus the Defined
Benefit Plan Fraction exceeds 1.0, multiplied by
(B) The denominator of the Defined Contribution Plan Fraction,
as computed through the last Limitation Year beginning
before January 1, 1983.
7.03 Definitions Applicable to Article 7
(a) Aggregate Compensation
Aggregate Compensation means a Participant's earned income,
wages, salaries, and fees for professional services, and other
amounts received for personal services actually rendered in the
course of employment with the employer maintaining the plan
(including, but not limited to, commissions paid to salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses),
and excluding the following:
o Employer contributions to a plan of deferred compensation which
are not included in the employee's gross income for the taxable
year in which contributed or employer contributions under a
simplified employee pension plan to the extent the contributions
are deductible by the employee, or any distributions from a plan
of deferred compensation;
o Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
o Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
o Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) toward the purchase of an annuity described
in Code Section 403(b) (whether or not the amounts are actually
excludable from the gross income of the employee).
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Aggregate Compensation excludes any amounts contributed by the Employer
or any Related Employer on behalf of any Employee pursuant to a salary
reduction agreement which are not includable in the gross income of the
Employee due to Code Section 125, 401(k), 402(h) or 403(b).
Aggregate Compensation in excess of the Statutory Compensation Limit is
disregarded.
Aggregate Compensation for any Limitation Year is the Aggregate
Compensation actually paid or includable in gross income in such year.
(b) Allocation Date
Allocation Date means the date with respect to which all or a
portion of employer contributions, employee contributions or
forfeitures or both are allocated to participant accounts under a
defined contribution plan.
(c) Annual Additions
For Plan Years beginning after December 31, 1986, Annual
Additions are the sum of the following amounts allocated to any
defined contribution plan maintained by the Employer (including
voluntary contributions to any defined benefit plan maintained by
the Employer) on behalf of a Participant for a Limitation Year:
o All Employee and Employer contributions;
o All reallocated forfeitures;
o Amounts allocated after March 31, 1984, to an individual medical
account, as defined in Code Section 415(l)(2) which is part of a
pension or annuity plan maintained by the Employer, and amounts
derived from contributions paid or accrued after December 31,
1985, in taxable years ending after that date, which are
attributable to post-retirement medical benefits required by Code
Section 401(h)(6) to be allocated to the separate account of a
Key Employee under a welfare benefit plan (as defined in Code
Section 419(e)) maintained by the Employer.
Contributions or forfeitures will be treated as Annual Additions
regardless of whether they constitute Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions within the meaning of
the regulations under Code Section 401(k) or 401(m) and regardless of
whether they are corrected through distribution or recharacterization.
Excess deferrals distributed in accordance with Treasury Regulation
1.402(g)-1(e)(2) or (3) are not Annual Additions. The Annual Addition
for any Limitation Year beginning before January 1, 1987, will not be
recomputed to treat all Employee contributions as Annual Additions.
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(d) Annual Benefit
Annual Benefit means a benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan
to which employees do not contribute and under which no rollover
contributions are made.
(e) Defined Benefit Compensation Limit
The Defined Benefit Compensation Limit is equal to 100% of the
Participant's average Aggregate Compensation for the three
consecutive calendar years (or other twelve consecutive month
periods adopted by the Employer pursuant to a Written Resolution
and applied on a uniform and consistent basis) of service during
which the Participant had the greatest Aggregate Compensation.
Where the annual benefit is payable to a Participant in a form
other than a straight life annuity or a Qualified Joint and
Survivor Annuity, the Defined Benefit Compensation Limit will be
the Actuarial Equivalent of a straight life annuity beginning at
the same age. No adjustment is required for the following:
pre-retirement disability benefits, pre-retirement death benefits
and post-retirement medical benefits. For purposes of this
paragraph, the interest rate used in adjusting the Defined
Benefit Compensation Limit will be the greater of (1) 5%, or (2)
the post-retirement interest rate specified in the plan for
Actuarial Equivalent purposes.
Where the annual benefit is payable to a Participant who has
fewer than 10 years of service with the Employer or any Related
or Predecessor Employer, the Defined Benefit Compensation Limit
will be multiplied by a fraction, the numerator of which is the
Participant's number of years of service with the Employer or
Related or Predecessor Employer, and the denominator of which is
10.
With regard to a Participant who has separated from service with
a nonforfeitable right to an Accrued Benefit, the Defined Benefit
Compensation Limit will be adjusted effective January 1 of each
Calendar year. For any Limitation Year beginning after the
separation occurs, the Defined Benefit Compensation Limit will be
equal to the Defined Benefit Compensation Limit which was
applicable to the Participant in the Limitation Year in which he
separated from service multiplied by a fraction, the numerator of
which is the Defined Benefit Dollar Limit for the Limitation Year
in which the Defined Benefit Compensation Limit is being adjusted
and the denominator of which is the Defined Benefit Dollar Limit
for the Limitation Year in which the Participant separated from
service.
(f) Defined Benefit Dollar Limit
The Defined Benefit Dollar Limit is equal to $90,000 for calendar
years 1984 through 1987. As of January 1, 1988 and as of January
1 of each subsequent calendar year, the dollar limitation
(described in Code Section 415(b)(1)(A)) as determined by the
Secretary of the Treasury for that calendar year will become
effective as the Defined
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Benefit Dollar Limit for the calendar year. For calendar years
between 1976 and 1983, the Defined Benefit Dollar Limit is
$75,000 as adjusted by the Secretary of the Treasury under Code
Section 415(d) for that calendar year. The Defined Benefit Dollar
Limit for a calendar year applies to Limitation Years ending with
or within that calendar year.
Where the annual benefit is payable to a Participant in a form
other than a straight life annuity or a Qualified Joint and
Survivor Annuity, the Defined Benefit Dollar Limit will be the
Actuarial Equivalent of a straight life annuity beginning at the
same age. No adjustment is required for the following:
pre-retirement disability benefits, pre-retirement death
benefits, and post-retirement medical benefits. For purposes of
this paragraph, the interest rate used for adjusting the Defined
Benefit Dollar Limit will be the greater of (1) 5%, or (2) the
post-retirement interest rate specified for Actuarial Equivalent
purposes.
Where the annual benefit is payable to a Participant who has
fewer than 10 years of participation in the Plan, the Defined
Benefit Dollar Limit will be multiplied by a fraction, the
numerator of which is the Participant's number of years (or part
thereof) of participation in the Plan, and the denominator of
which is 10. To the extent provided by the Secretary of the
Treasury, this paragraph will be applied to each change in the
benefit structure of the Plan.
For a benefit commencing before a Participant's Social Security
Retirement Age but at or after age 62, the Defined Benefit Dollar
Limit will be adjusted in a manner which is consistent with the
reduction for old-age insurance benefits commencing before Social
Security Retirement Age under the Social Security Act. The
reduction will be 5/9 of 1% for each of the first 36 months and
5/12 of 1% for each additional month (up to 24 months) by which
benefits commence before the month of the Participant's Social
Security Retirement Age. The Defined Benefit Dollar Limit for a
benefit commencing before age 62 will be adjusted to the
Actuarial Equivalent of the Defined Benefit Dollar Limit for a
benefit commencing at age 62 based on an interest rate equal to
the greater of (1) 5%, or (2) the interest rate specified in the
plan for determining actuarial equivalence for early retirement.
For a benefit commencing after a Participant's Social Security
Retirement Age, the Defined Benefit Dollar Limit will be adjusted
to the actuarial equivalent of the Defined Benefit Dollar Limit
for a benefit commencing at the Participant's Social Security
Retirement Age. For purposes of this paragraph, the interest
rate used for adjusting the Defined Benefit Dollar Limit will be
the lesser of (1) 5%, or (2) the interest rate specified in the
plan for determining actuarial equivalence for early retirement.
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(g) Defined Benefit Limit
The Defined Benefit Limit is the lesser of the Defined Benefit
Dollar Limit or the Defined Benefit Compensation Limit.
(h) Defined Benefit Plan Fraction Denominator
The Defined Benefit Plan Fraction Denominator with respect to any
Participant is the lesser of (1) the product of the Defined
Benefit Dollar Limit multiplied by 1.25, or (2) the product of
the Defined Benefit Compensation Limit multiplied by 1.4.
However, for purposes of determining the Defined Benefit Plan
Fraction Denominator, "years of service with the Employer or any
Related or Predecessor Employer will be substituted for years of
participation in the Plan" wherever it appears in Section
7.03(f).
(i) Defined Benefit Plan Fraction
The Defined Benefit Plan Fraction is a fraction determined as of
the close of a Limitation Year, the numerator of which is the
Projected Annual Benefit payable to a Participant under this Plan
and the denominator of which is the Defined Benefit Fraction
Denominator. If a Participant has participated in more than one
defined benefit plan maintained by the Employer, the numerator of
the Defined Benefit Plan Fraction is the sum of the projected
annual benefits payable to the Participant under all of the
defined benefit plans, whether or not terminated.
(j) Defined Contribution Limit
The Defined Contribution Limit for a given Limitation Year is
equal to the lesser of (1) the Defined Contribution Compensation
Limit, which is 25% of Aggregate Compensation applicable to the
Limitation Year, or (2) the Defined Contribution Dollar Limit,
which, for calendar years after 1983 is the greater of $30,000 or
one-fourth of the Defined Benefit Dollar Limit for the Limitation
Year, and for calendar years between 1976 and 1983 is one-third
of the Defined Benefit Dollar Limit. If a short Limitation Year
is created because of an amendment changing the Limitation Year
to a different 12 consecutive month period, the Defined
Contribution Dollar Limit is Multiplied by a fraction, the
numerator of which is equal to the number of months in the Short
Limitation Year and the denominator of which is 12.
(k) Defined Contribution Plan Fraction
The Defined Contribution Plan Fraction is a fraction determined
as of the close of a Limitation Year, the numerator of which is
the sum of the Annual Additions to the Participant's Accounts
under all defined contribution plans of the Employer for the
current and all prior Limitation Years and the denominator of
which is the sum of the Annual Additions which would have been
made for the Participant for the current and all prior Limitation
Years (for all prior years of service with the Employer or any
predecessor Employer) if in each Limitation year the Annual
Additions equaled the lesser of (1) the product of the Defined
Contribution Compensation Limit for the
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Limitation Year multiplied by 1.4, or (2) the product of the
Defined Contribution Dollar Limit for the Limitation Year
multiplied by 1.25. The aggregate amount in the numerator of this
fraction due to years beginning before January 1, 1976 may not
exceed the aggregate amount in the denominator of this fraction
for all such years.
For purposes of this Section 7.03(k), the Annual Addition for any
Limitation Year beginning before January 1, 1987 will not be
recomputed to treat all Employee contributions as Annual
Additions.
(l) Employer
The Employer is the Employer that adopts this Plan together with
all Related Employers. For this purpose, the definition of
Related Employer in Section 1.33 of this Plan is modified by Code
Section 415(h).
(m) Limitation Year
The Limitation Year will be the 12 consecutive month period which
is specified in Article 1 of this Plan and which is adopted for
all qualified plans maintained by the Employer pursuant to a
Written Resolution adopted by the Employer. In the event of a
change in the Limitation Year, the additional limitations of
Treasury Regulation Section 1.415-2(b)(4)(iii) will also apply.
(n) Projected Annual Benefit
For purposes of this Section, a Participant's Projected Annual
Benefit is equal to the annual benefit to which a Participant in
a defined benefit Plan would be entitled under the terms of the
plan based on the following assumptions:
o The Participant will continue employment until reaching normal
retirement age as determined under the terms of the plan (or
current age, if that is later);
o The Participant's compensation for the Limitation Year under
consideration will remain the same for all future years;
o All other relevant factors used to determine benefits under the
plan for the Limitation Year under consideration will remain
constant for all future Limitation Years; and
o The benefits resulting from any Participant Contributions or
Rollover Contributions are disregarded.
(o) Social Security Retirement Age
Social Security Retirement Age means age 65 for a Participant
born before January 1, 1938; age 66 for a Participant born after
December 31, 1937. but before January 1, 1955; and age 67 for a
Participant born after December 31, 1954.
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7.04 Effect of Top-Heavy Status
(a) General
Notwithstanding the provisions of Section 7.03, "1.0" will be
substituted for "1.25" wherever it appears in Sections 7.03(h)
and 7.03(k) for any Limitation Year in which the Plan is found to
be Top-Heavy for the Plan Year which coincides with or ends
within such Limitation Year.
(b) Non-application
Section 7.04(a) will not apply for any Limitation Year in which,
for the Plan Year which coincides with or ends within such
Limitation Year, (1) the Plan is not determined to be Super
Top-Heavy and (2) for any Non-Key Employee who is a Participant
in both this Plan and a defined benefit plan maintained by the
Employer or a Related Employer, the annual allocation of Employer
contributions plus Forfeitures under this Plan is not less than
7.5% of the Non-Key Employee's Aggregate Compensation.
ARTICLE 8
MISCELLANEOUS
8.01 Employment Rights of Parties Not Restricted
The adoption and maintenance of this Plan will not be deemed a contract
between the Employer and any Employee. Nothing in this Plan will give
any Employee or Participant the right to be retained in the employ of
the Employer or to interfere with the right of the Employer to discharge
any Employee or Participant at any time, nor will it give the Employer
the right to require any Employee or Participant to remain in its
employ, or to interfere with any Employee's or Participant's right to
terminate his employment at any time.
8.02 Alienation
(a) General
No person entitled to any benefit under this Plan will have any
right to sell, assign, transfer, hypothecate, encumber, commute,
pledge, anticipate or otherwise dispose of his interest in the
benefit, and any attempt to do so will be void. No benefit under
this Plan will be subject to any legal process, levy, execution,
attachment or garnishment for the payment of any claim against
such person.
(b) Exceptions
Section 8.02(a) will not apply to the extent a Participant or
Beneficiary is indebted to the Plan under the provisions of the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, the portion of the amount
distributed which equals the indebtedness will be withheld by the
Trustee to apply against or
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discharge the indebtedness. Before making a payment, however,
the Participant or Beneficiary must be given written notice by
the Plan Administrator that the indebtedness is to be so paid in
whole or part from his Participant's Accrued Benefit. If the
Participant or Beneficiary does not agree that the indebtedness
is a valid claim against his Vested Accrued Benefit, he will be
entitled to a review of the validity of the claim in accordance
with procedures established by the Plan Administrator.
Section 8.02(a) will not apply to a qualified domestic relations
order (QDRO) as defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Plan
Administrator under the provisions of the Retirement Equity Act
of 1984. The Plan Administrator will establish a written
procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified
orders. Further, to the extent provided under a QDRO, a former
spouse of a Participant will be treated as the spouse or
Surviving Spouse for all purposes under the Plan. Where,
however, because of a QDRO, more than one individual is to be
treated as a Surviving Spouse, the total amount to be paid in the
form of a Qualified Survivor Annuity or the survivor portion of a
Qualified Joint and Survivor Annuity may not exceed the amount
that would be paid if there were only one Surviving Spouse. All
rights and benefits, including elections, provided to a
Participant under this Plan will be subject to the rights
afforded to any alternate payee as such term is defined in Code
Section 414(p).
This Plan specifically permits distribution to an alternate payee
under a QDRO (without regard to whether the Participant has
attained his or her earliest retirement age as that term is
defined under Code Section 414(p)) in the same manner that is
provided for a Vested Terminated Participant.
8.03 Qualification of Plan
The Employer will have the sole responsibility for obtaining and
retaining qualification of the Plan under the Code with respect to the
Employer's individual circumstances.
8.04 Construction
To the extent not preempted by ERISA, this Plan will be construed
according to the laws of the state in which the Employer's principal
place of business is located. Words used in the singular will include
the plural, the masculine gender will include the feminine, and vice
versa, whenever appropriate.
8.05 Named Fiduciaries
(a) Allocation of Functions
The authority to control and manage the operation and
administration of the Plan and Trust created by this instrument
will be allocated between the Plan Sponsor, the Trustee, and the
Plan Administrator, all of whom are designated as Named
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Fiduciaries with respect to the Plan and Trust as provided for by
Section 402(a)(2) of ERISA. The Plan Sponsor reserves the right
to allocate the various responsibilities for the present
execution of the functions of the Plan, other than the Trustees'
responsibilities, among its Named Fiduciaries. Any person or
group of persons may serve in more than one fiduciary capacity
with regard to the Plan.
(b) Responsibilities of the Plan Sponsor
The Plan Sponsor, in its capacity as a Named Fiduciary, will have
only the following authority and responsibility:
o To appoint or remove the Plan Administrator and furnish the
Trustee with certified copies of any resolutions of the Plan
Sponsor with regard thereto;
o To appoint and remove the Trustee;
o To appoint a successor Trustee or additional Trustees;
o To communicate information to the Plan Administrator and the
Trustee as needed for the proper performance of the duties of
each;
o To appoint an investment manager (or to refrain from such
appointment), to monitor the performance of the investment
manager so appointed, and to terminate such appointment (more
than one investment manger may be appointed and in office at any
time); and
o To establish and communicate to the Trustee a funding policy for
the Plan.
(c) Limitation on Obligations of Named Fiduciaries
No Named Fiduciary will have authority or responsibility to deal
with matters other than as delegated to it under this Plan or by
operation of law. A Named Fiduciary will not in any event be
liable for breach of fiduciary responsibility or obligation by
another fiduciary (including Named Fiduciaries) if the
responsibility or authority of the act or omission deemed to be a
breach was not within the scope of the Named Fiduciary's
authority or delegated responsibility.
(d) Standard of Care and Skill
The duties of each fiduciary will be performed with the care,
skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of like character and with like objectives.
8.06 Status of Insurer
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The term Insurer refers to any legal reserve life insurance company
licensed to do business in the state within which the Employer maintains
its principal office. The Insurer will file such returns, keep such
records, make such reports and supply such information as required by
applicable law or regulation.
8.07 Adoption and Withdrawal by Other Organizations
(a) Procedure for Adoption
Subject to the provisions of this Section 8.07, any organization
now in existence or hereafter formed or acquired, which is not
already a Participating Employer under this Plan and which is
otherwise legally eligible may, in the future, with the consent
and approval of the Plan Sponsor, by formal Written Resolution
(referred to in this Section as an Adoption Resolution), adopt
the Plan and Trust hereby created for all or any classification
of persons in its employment and thereby, from and after the
specified effective date, become a Participating Employer under
this Plan. Such consent will be effected by and evidenced by a
formal Written Resolution of the Plan Sponsor. The Adoption
Resolution may contain such specific changes and variations in
Plan terms and provisions applicable to the adopting
Participating Employer and its Employees as may be acceptable to
the Plan Sponsor and the Trustee. However, the sole, exclusive
right of any other amendment of whatever kind or extent to the
Plan is reserved to the Plan Sponsor. The Adoption Resolution
will become, as to the adopting organization and its Employees, a
part of this Plan as then amended or thereafter amended. It will
not be necessary for the adopting organization to sign or execute
the original or then amended Plan and Trust Agreement or any
future amendment to the Plan and Trust Agreement. The effective
date of the Plan for the adopting organization will be that
stated in the Adoption Resolution and from and after such
effective date the adopting organization will assume all the
rights, obligations and liabilities as a Participating Employer
under this Plan. The administrative powers of and control
by the Plan Sponsor as provided in the Plan, including the
sole right of amendment or termination of the Plan, of
appointment and removal of the Plan Administrator and the
Trustee, and of appointment and removal of an investment manager
will not be diminished by reason of the participation of the
adopting organization in the Plan.
(b) Withdrawal
Any Participating Employer may withdraw from the Plan at any
time, without affecting the Plan Sponsor or other Participating
Employers not withdrawing, by complying with the provisions of
the Plan. A withdrawing Participating Employer may arrange for
the continuation by itself or its successor of this Plan in
separate forms for its own employees, with such amendments, if
any, as it may deem proper, and may arrange for continuation of
the Plan by merger with an existing plan and transfer of plan
assets. The Plan Sponsor may, it its absolute discretion,
terminate a Participating Employer's participation at any time
when in its judgment the Participating Employer fails or refuses
to discharge its obligations under the Plan.
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(c) Adoption Contingent Upon Initial and Continued Qualifications
The adoption of this Plan by an organization as provided is
hereby made contingent and subject to the condition precedent
that said adopting organization meets all the statutory
requirements for qualified plans, including, but not limited to,
Sections 401(a) and 501(a) of the Internal Revenue Code for its
Employees. If the Plan or the-Trust, in its operation, becomes
disqualified, for any reason, as to the adopting organization and
its Employees, the portion of the Plan assets allocable to them
will be segregated as soon as is administratively feasible,
pending either the prompt (1) requalification of the Plan as to
the organization and its employees to the satisfaction of the
Internal Revenue Service so as not to affect the continued
qualified status thereof as to other Employers, (2) withdrawal of
the organization from this Plan and a continuation by itself or
its successor of its plan separately from this Plan, or by merger
with another existing plan, with a transfer of its said
segregated portion of Plan assets, or (3) termination of the Plan
as to itself and its Employees.
8.08 Employer Contributions
Employer contributions made to the Plan and Trust are made and will be
held for the sole purpose of providing benefits to Participants and
their Beneficiaries.
In no event will any contribution made by the Employer to the Plan and
Trust or income therefrom revert to the Employer except as provided in
Section 7.01(e) or as provided below.
(a) Any contribution made to the Plan and Trust by the Employer
because of a mistake of fact may be returned to the Employer
within one year of such contribution.
(b) Notwithstanding any other provision of the Plan and Trust, if the
Internal Revenue Service determines initially that the Plan, as
adopted by the Employer, does not qualify under applicable
sections of the Code and applicable Treasury Department
Regulations, and the Employer does not wish to amend this Plan
and Trust so that it does qualify, the value of all assets will
be distributed by the Trustee to the Employer within one year
after the date such initial qualification is denied. Thereafter,
the Employer's participation in this Plan and Trust will be
considered rescinded and of no force or effect.
(c) Any contribution made by the Employer will be conditioned on the
deductibility of such contribution and may be refunded to the
Employer, to the extent the contribution is determined not to be
deductible, within one year after such determination is made.
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ARTICLE 9
ADMINISTRATION
9.01 Plan Administrator
The Plan Administrator will have the responsibility for the general
supervision and administration of the Plan and will be a fiduciary
of the Plan. The Employer may, by Written Resolution, appoint one or
more individuals to serve as Plan Administrator. If the Employer does
not appoint an individual or individuals as Plan Administrator, the
Employer will function as Plan Administrator. The Employer may at any
time, with or without cause, remove an individual as Plan Administrator
or substitute another individual therefor.
9.02 Powers and Duties of the Plan Administrator
The Plan Administrator will be charged with and will have delegated to
it the power, duty, authority and discretion to interpret and construe
the provisions of this Plan, to determine its meaning and intent and to
make application thereof to the facts of any individual case; to
determine in its discretion the rights and benefits of Participants or
the eligibility of Employees; to give necessary instructions and
directions to the Trustee and the Insurer as herein provided or as may
be requested by the Trustee and the Insurer from time to time; to
resolve all questions of fact relating to any of the foregoing; and to
generally direct the administration of the Plan according to its terms.
All decisions of the Plan Administrator in matters properly coming
before it according to the terms of this Plan, and all actions taken by
the Plan Administrator in the proper exercise of its administrative
powers, duties and responsibilities, will be final and binding upon all
Employees, Participants and Beneficiaries and upon any person having or
claiming any rights or interest in this Plan. The Employer and the Plan
Administrator will make and receive any reports and information, and
retain any records necessary or appropriate to the administration of
this Plan or to the performance of duties hereunder or to satisfy any
requirements imposed by law. In the performance of its duties, the Plan
Administrator will be entitled to rely on information duly furnished by
any Employee, Participant or Beneficiary or by the Employer or Trustee.
9.03 Actions of the Plan Administrator
The Plan Administrator may adopt such rules as it deems necessary,
desirable or appropriate with respect to the conduct of its affairs and
the administration of the Plan. Whenever any action to be taken in
accordance with the terms of the Plan requires the consent or approval
of the Plan Administrator, or whenever an interpretation is to be made
of the terms of the Plan, the Plan Administrator will act in a uniform
and non-discriminatory manner, treating all Employees and Participants
in similar circumstances in a like manner. If the Plan Administrator is
a group of individuals, all of its decisions will be made by a majority
vote. The Plan Administrator will have the authority to employ one or
more persons to render advice or services with regard to the
responsibilities of the Plan Administrator, including but not limited to
attorneys, actuaries, and accountants. Any persons employed to render
advice
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or services will have no fiduciary responsibility for any ministerial
functions performed with respect to this Plan.
9.04 Reliance on Plan Administrator and Employer
Until the Employer gives notice to the contrary, the Trustee and any
persons employed to render advice or services will be entitled to rely
on the designation of Plan Administrator that has been furnished to
them. In addition, the Trustee and any persons employed to render
advice or services will be fully protected in acting upon the written
directions and instructions of the Plan Administrator made in accordance
with the terms of this Plan. If the Plan Administrator is a group of
individuals, unless otherwise specified, any one of such individuals
will be authorized to sign documents on behalf of the Plan Administrator
and such authorized signatures will be recognized by all person dealing
with the Plan Administrator.
The Trustee and any persons employed to render advice or services may
take cognizance of any rules established by the Plan Administrator and
rely upon them until notified to the contrary. The Trustee and any
persons employed to render advice or services will be fully protected in
taking any action upon any paper or document believed to be genuine and
to have been properly signed and presented by the Plan Administrator,
Employer or any agent of the Plan Administrator acting on behalf of the
Plan Administrator.
9.05 Reports to Participants
The Plan Administrator will report in writing to a Participant his
Accrued Benefit under the Plan and the Vested Percentage of such benefit
when the Participant terminates his employment or requests such a report
in writing from the Plan Administrator. To the extent required by law
or regulation, the Plan Administrator will annually furnish to each
Participant, and to each Beneficiary receiving benefits, a report which
fairly summarizes the Plan's most recent report.
9.06 Bond
The Plan Administrator and other fiduciaries of the Plan will be bonded
to the extent required by ERISA or other applicable law. No additional
bond or other security for the faithful performance of any duties under
this Plan will be required.
9.07 Compensation of Plan Administrator
The Compensation of the Plan Administrator will be left to the
discretion of the Plan Sponsor; no person who is receiving full pay from
the Employer will receive compensation for services as Plan
Administrator. All reasonable and necessary expenses incurred by the
Plan Administrator in supervising and administering the Plan will be
paid from the Plan assets by the Trustee at the direction of the Plan
Administrator to the extent not paid by the Plan Sponsor.
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9.08 Claims Procedure
The Plan Administrator will make all determinations as to the rights of
any Employee, Participant, Beneficiary or other person under the terms
of this Plan. Any Employee, Participant or Beneficiary, or person
claiming under them, may make claim for benefit under this Plan by
filing written notice with the Plan Administrator setting forth the
substance of the claim. If a claim is wholly or partially denied, the
claimant will have the opportunity to appeal the denial upon filing
with the Plan Administrator a written request for review within 60 days
after receipt of notice of denial. In making an appeal the claimant may
examine pertinent Plan documents and may submit issues and comments in
writing. Denial of a claim or a decision on review will be made in
writing by the Plan Administrator delivered to the claimant within 60
days after receipt of the claim or request for review, unless special
circumstances require an extension of time for processing the claim or
review, in which event the Plan Administrator's decision must be made as
soon as possible thereafter but not beyond an additional 60 days. If no
action on an initial claim is taken within 120 days, the claims will be
deemed denied for purposes of permitting the claimant to proceed to the
review stage. The denial of a claim or the decision on review will
specify the reasons for the denial or decision and will make reference
to the pertinent Plan provisions upon which the denial or decision is
based. The denial of a claim will also include a description of any
additional material or information necessary for the claimant to perfect
the claim and an explanation of the claim review procedure herein
described. The Plan Administrator will serve as an agent for service of
legal process with respect to the Plan unless the Employer, through
written resolution, appoints another agent.
If a Participant or Beneficiary is entitled to a distribution from the
Plan, the Participant or Beneficiary will be responsible for
providing the Plan Administrator with his current address. If the Plan
Administrator notifies the Participant or Beneficiary by registered mail
(return receipt requested) at his last known address that he is entitled
to a distribution and also notifies him of the provisions of this
paragraph, and the Participant or Beneficiary fails to claim his
benefits under the Plan or provide his current address to the Plan
Administrator within one year after such notification, the distributable
amount will be forfeited and used to reduce the cost of the Plan. If
the Participant or Beneficiary is subsequently located, such benefit
will be restored.
9.09 Liability of Fiduciaries
Except for a breach of fiduciary responsibility due to gross negligence
or willful misconduct, the Plan Administrator will not incur any
individual liability for any decision, act, or failure to act hereunder.
The Plan Administrator may engage agents to assist it and may engage
legal counsel who may be counsel for the Employer. The Plan
Administrator will not be responsible for any action taken or omitted to
be taken on the advice of counsel.
If there is more than one person serving as a fiduciary in any capacity
(for example, co-Trustees), each will use reasonable care to prevent the
other or others from committing a breach of this Plan. Nothing
contained in this Section will preclude any agreement
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allocating specific responsibilities or obligations among the
co-fiduciaries provided that the agreement does not violate any of the
terms and provisions of this Plan. In those instances where any duties
have been allocated between co-fiduciaries, a fiduciary will not be
liable for any loss resulting to the Plan arising from any act or
omission on the part of another co-fiduciary to whom responsibilities or
obligations have been allocated except under the following
circumstances:
o If he participates knowingly in, or knowingly undertakes to
conceal, an act or omission of a co-fiduciary knowing the act or
omission is a breach; or
o If by his failure to comply with his specific responsibilities
which give rise to his status as a fiduciary, he has enabled the
other fiduciary to commit a breach; or
o If he has knowledge of a breach by a co-fiduciary, unless he
makes reasonable efforts under the circumstances to remedy the
breach.
9.10 Expenses of Administration
The Employer does not and will not guarantee the Plan assets against
loss. The Employer may in its sole discretion, but will not be
obligated to, pay the ordinary expenses of establishing the Plan,
including the fees of consultants, accountants and attorneys in
connection therewith. The Employer may, in its sole discretion (but
will not be obligated to), pay other costs and expenses of administering
the Plan, the taxes imposed upon the Plan, if any, and the fees, charges
or commissions with respect to the purchase and sale of Plan assets.
Unless paid by the Employer, such costs and expenses, taxes (if any),
and fees, charges and commissions will be a charge upon Plan assets and
deducted by the Trustee.
9.11 Distribution Authority
If any person entitled to receive payment under this Plan is a minor,
declared incompetent or is under other legal disability, the Plan
Administrator may, in its sole discretion, direct the Trustee to:
o Distribute directly to the person entitled to the payment;
o Distribute to the legal guardian or, if none, to a parent of the
person entitled to payment or to a responsible adult with whom
the person entitled to payment maintains his residence;
o Distribute to a custodian for the person entitled to payment
under the Uniform Gifts to Minors Act if permitted by the laws of
the state in which the person entitled to payment resides; or
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o Withhold distribution of the amount payable until a court of
competent jurisdiction determines the rights of the parties
thereto or appoints a guardian of the estate of the person
entitled to payment.
If there is any dispute, controversy or disagreement between any
Beneficiary or person and any other person as to who is entitled to
receive the benefits payable under this Plan, or if the Plan
Administrator is uncertain as to who is entitled to receive benefits, or
if the Plan Administrator is unable to locate the person who is entitled
to benefits, the Plan Administrator may with acquittance interplead the
funds into a court of competent jurisdiction in the judicial district in
which the Employer maintains its principal place of business and, upon
depositing the funds with the clerk of the court, be released from any
further responsibility for the payment of the benefits. If it is
necessary for the Plan Administrator to retain legal counsel or incur
any expense in determining who is entitled to receive the benefits,
whether or not it is necessary to institute court action, the Plan
Administrator will be entitled to reimbursement from the benefits for
the amount of its reasonable costs, expenses and attorneys' fees
incurred.
ARTICLE 10
AMENDMENT OR TERMINATION OF PLAN
10.01 Right of Plan Sponsor to Amend or Terminate
The Plan Sponsor reserves the right to alter, amend, revoke or terminate
this Plan. No amendment will deprive any Participant or Beneficiary of
any vested right nor will it reduce the present value (determined upon
an actuarial equivalent basis) of any Accrued Benefit to which he is
then entitled with respect to Employer contributions previously made,
except as may be required to maintain the Plan as a qualified plan under
the Code. No amendment will change the duties or responsibilities of
the Trustee without its express written consent thereto.
A plan amendment which has the effect of (a) eliminating or reducing an
early retirement benefit or a retirement-type subsidy, or (b)
eliminating an optional benefit form, will, with respect to benefits
attributable to service before the amendment be treated as reducing
Accrued Benefits. In the case of a retirement-type subsidy, the
preceding sentence will apply only with respect to a Participant who
satisfies (either before or after the amendment) the pre-amendment
conditions for the subsidy. In general, a retirement-type subsidy is a
subsidy that continues after retirement but does not include a
disability retirement benefit, a medical benefit, a social security
supplement, a pre-retirement death benefit, or a plant shutdown benefit
(that does not continue after retirement).
A minimum Accrued Benefit value will apply if this Plan is or becomes a
successor to a profit sharing plan, a defined contribution pension plan,
a target benefit plan, or a defined benefit pension plan which was fully
insured, or any plan under which the accrued benefit
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of a Participant was determined as a lump sum or account balance. The
actuarial equivalent value of a Participant's Accrued Benefit will not
be less than the actuarial equivalent value of his Accrued Benefit on
the Effective Date of the Plan.
10.02 Allocation of Assets Upon Termination of Plan
If this Plan is revoked or terminated (in whole or in part) or if
contributions are completely discontinued the Accounts of all affected
Participants will become non-forfeitable. The Employer will then
arrange for allocation of all assets among Participants so affected by
the total or partial termination in accordance with the requirements of
all applicable law and the regulations and requirements of the Internal
Revenue Service. All allocated amounts will be retained in the Plan to
the credit of the individual Participants until distribution as directed
by the Employer. Distribution to Participants may be in the form of
cash or other Plan assets or partly in each.
10.03 Exclusive Benefit
At no time will any part of the principal or income of the Plan assets
be used or diverted for purposes other than the exclusive benefit of
Participants in the Plan and their Beneficiaries, nor may any portion of
the Plan assets revert to the Employer except as provided in Sections
7.01(e) and 8.08.
10.04 Failure to Qualify
Notwithstanding any of the foregoing provisions, if this Plan, upon
adoption by the Employer, is submitted to the Internal Revenue Service
which then determines that the Plan as initially adopted by the Employer
is not a qualified plan under the Code, the Employer may elect to
terminate this Plan by giving written notice thereof. Such termination
will have the same effect as if the Plan were never adopted, all
policies and contracts will be cancelled, and all contributions, to the
extent recoverable from the Trustee, will be returned to their source,
if any amendment to this Plan is submitted to the Internal Revenue
Service within the period allowed under Code Section 401(b) which then
determines that the Plan as amended is not a qualified plan under the
Code, the Employer may cancel or modify any or all provisions of the
amendment retroactive to the effective date of the amendment in order to
maintain the qualified status of the Plan, whereupon written notice
thereof will be furnished to all affected Employees, Participants and
Beneficiaries.
10.05 Mergers, Consolidations or Transfers of Plan Assets
In the event this Plan is merged or consolidated with another plan which
is qualified under Code Sections 401(a) (and 501(a) if applicable), or
in the event of a transfer of the assets or liabilities of this Plan to
another plan which is qualified under Code Sections 401(a) (and 501(a)
if applicable), the benefit which each Participant would be entitled to
receive under the successor plan or other plan if it were terminated
immediately after the merger, consolidation or transfer will be equal to
or greater than the benefit which the Participant would have received
immediately before the merger, consolidation or transfer if this Plan
had then terminated.
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Any transfer of assets and/or liabilities to (or from) this Plan from
(or to) another plan qualified under Code Sections 401(a) (and 501(a) if
applicable) will be evidenced by a Written Resolution by the Plan
Sponsor of each affected plan which specifically authorizes such
transfer of assets and/or liabilities.
Any transfer of assets to this Plan will be allowed under the provisions
of this Section if such transferred assets are not required to be paid
in the form of a qualified joint & survivor annuity or a qualified
survivor annuity in accordance with Code Section 401(a)(11).
10.06 Effect of Plan Amendment on Vesting Schedule
No amendment to the Vesting Schedule will deprive a Participant of his
nonforfeitable right to his Vested Accrued Benefit as of the date of the
amendment. Further, if the Vesting Schedule of the Plan is amended, or
if the Plan is amended in any way that directly or indirectly affects
the computation of a Participant's non-forfeitable percentage, each
Participant with at least 3 Years of Vesting Service as of the last day
of the election period described below may elect, within a reasonable
period after the adoption of the amendment, to have his Vested
Percentage computed under the Plan without regard to such amendment.
The period during which such election may be made will commence with the
date the amendment is adopted and will end 60 days after the latest of:
(a) the date the amendment is adopted;
(b) the date the amendment becomes effective; or
(c) the date the Participant is issued written notice of the
amendment by the Employer.
ARTICLE 11
TRUSTEE AND TRUST FUND
11.01 Acceptance of Trust
The Trustee, by signing this Agreement, accepts this Trust and agrees to
perform the duties of the Trustee in accordance with the terms and
conditions set forth herein.
11.02 Trust Fund
(a) Purpose and Nature
The Trustee will establish and maintain a Trust Fund for purposes
of providing a means of accumulating the assets necessary to
provide the benefits which become payable under the Plan. The
Trustee will receive, hold and invest all contributions made by
the Employer, any Participating Employers, and the Participants,
including the investment earnings thereon. The Trust Fund
arising from such contributions and
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earnings will consist of all assets held by the Trustee under the
Plan and Trust. All benefits payable under the Plan will be
paid by the Trustee from the Trust Fund.
Any person having any claim under the Plan will look solely to
the assets of the Trust Fund for satisfaction. In no event will
the Plan Administrator, the Employer, any Employees, any officer
of the Employer or any agents of the Employer or the Plan
Administrator be liable in their individual capacities to any
person whomsoever, under the provisions of this Plan and Trust,
except as provided by law.
The Trust Fund will be used and applied only in accordance with
the provisions of the Plan and Trust, to provide the benefits
thereof, and no part of the corpus or income of the Trust Fund
will be used for, or diverted to, purposes other than for the
exclusive benefit of the Participants or their Beneficiaries
entitled to benefits under the Plan, except to the extent
specifically provided elsewhere herein.
(b) Investments
The Trustee will invest the Trust Fund in accordance with the
investment policy for the Trust Fund considering the fiduciary
requirements of law, the objectives of the Plan, and the
liquidity needs of the Plan.
(c) Investment Policy
The Plan Sponsor (or the Plan Administrator or an Investment
Committee appointed by the Plan Sponsor) will have the right to
periodically provide the Trustee with a written investment policy
which, in consideration of the needs of the Plan, sets forth the
investment objectives, policies, and guidelines which the Plan
Sponsor judges to be appropriate and prudent.
If a written investment policy is not so provided, then the
Trustee will set forth the investment policy for the Plan. In
doing so, the Trustee may consult with the Plan Sponsor (or the
Plan Administrator or an Investment Committee appointed by the
Plan Sponsor) to secure information with regard to Plan Sponsor
investment objectives and general investment policy.
(d) Operation of Trust Fund
The Trust Fund will be maintained in accordance with the
accounting requirements of the Plan. No Participant will have
any right to any specific asset or any specific portion of the
Trust Fund prior to distribution of benefits. Withdrawals from
the Trust Fund will be made to provide benefits to Participants
and Beneficiaries in the amounts specified by the Plan, and to
pay expenses authorized by the Plan Administrator.
(e) Plan Sponsor Direction of Investment
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The Plan Sponsor will have the right to direct the Trustee with
respect to the investment and reinvestment of assets comprising
the Trust Fund. The Trustee and the Plan Sponsor (or the Plan
Administrator or an Investment Committee appointed by the Plan
Sponsor) will execute a letter of agreement as a part of this
Plan containing such conditions, limitations and other provisions
they deem appropriate before the Trustee will follow any Plan
Sponsor direction with respect to the investment or reinvestment
of any part of the Trust Fund.
11.03 Receipt of Contributions
The Trustee will be accountable to the Employer for the funds
contributed to it, but will have no duty to see that the contributions
received comply with the provisions of the Plan. The Trustee will not
be obligated to collect any contributions from the Employer or the
Participants.
11.04 Powers of the Trustee
Subject to the provisions and limitations contained elsewhere in this
Plan, the Trustee will have full discretion and authority with regard to
the investment of the Trust Fund. The Trustee is authorized and
empowered, but not by way of limitation, with the following powers,
rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, United
States retirement plan bonds, corporate bonds, debentures,
convertible debentures, commercial paper, U.S. Treasury bills,
book entry deposits with the United States Federal Reserve Bank
or System, Master Notes or similar arrangements sponsored by the
Trustee or any other financial institution as permitted by law,
improved or unimproved real estate situated in the United States,
mortgages, notes or other property of any kind, real or personal,
as a prudent man would so invest under like circumstances with
due regard for the purposes of this Plan;
(b) To maintain any part of the assets of the Trust Fund in cash, or
in demand or short-term time deposits bearing a reasonable rate
of interest (including demand or short-term time deposits of or
with the Trustee), or in a short-term investment fund or in other
cash equivalents having ready marketability, including, but not
limited to, U.S. Treasury Bills, commercial paper, certificates
of deposit (including such certificates of deposit of or with the
Trustee), and similar types of short-term securities, as may be
deemed necessary by the Trustee in its sole discretion;
(c) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure,
lease for any term even though commencing in the future or
extending beyond the term of the Trust, and otherwise deal with
all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Trustee
will decide;
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(d) To credit and distribute the Trust as directed by the Plan
Administrator or any agent of the Plan Administrator. The
Trustee will not be obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the
distribution is proper or within the terms of the Plan, or as to
the manner of making any payment or distribution. The Trustee
will be accountable only to the Plan Administrator for any
payment or distribution made by it in good faith on the order or
direction of the Plan Administrator or any agent of the Plan
Administrator;
(e) To borrow money, assume indebtedness, extend mortgages and
encumber by mortgage or pledge;
(f) To compromise, contest, arbitrate, or abandon claims and demands,
in its discretion;
(g) To have with respect to the Trust all of the rights of an
individual owner, including the power to give proxies, to
participate in any voting trusts, mergers, consolidations or
liquidations, and to exercise or sell stock subscriptions or
conversion rights;
(h) To hold any securities or other property in the name of the
Trustee or its nominee, or in another form as it may deem best,
with or without disclosing the trust relationship;
(i) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management,
investment and distribution of the Trust;
(j) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until final
adjudication is made by a court of competent jurisdiction;
(k) To file all tax forms or returns required of the Trustee;
(l) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the
Trustee will not be obligated to or required to do so unless
indemnified to its satisfaction; and
(m) To keep any or all of the Trust property at any place or places
within the United States or abroad, or with a depository or
custodian at such place or places; provided, however, that the
Trustee may not maintain the indicia of ownership of outside the
jurisdiction of the District Courts of the United expressly
authorized in U.S. Treasury or U.S. Department of Labor
regulations.
11.05 Investment in Common or Collective Trust Funds
Notwithstanding the provisions of Section 11.04, the Plan Sponsor
specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund in any common or collective trust fund
which at the time of the investment provides for the pooling
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of the assets of plans qualified under Code Section 401(a). The
authorization applies only if such common or collective trust fund: (a)
is exempt from taxation under Code Section 584 or 501(a); (b) if exempt
under Code Section 501(a), expressly limits participation to pension and
profit sharing trusts which are exempt under Code Section 501(a) by
reason of qualifying under Code Section 401(a); (c) prohibits that part
of its corpus or income which equitably belongs to any participating
trust from being used for or diverted to any purposes other than for the
exclusive benefit of the Employees or their Beneficiaries who are
entitled to benefits under such participating trust; (d) prohibits
assignment by participating trust of any part of its equity or interest
in the group trust; and (e) the sponsor of the group trust created or
organized the group trust in the United States and maintains the group
trust at all times as a domestic trust in the United States. The
provisions of the common or collective trust fund agreement, as amended
by the Trustee from time to time, are by this reference incorporated
within this Plan and Trust. The provisions of the common or collective
trust fund will govern any investment of Plan assets in that fund. This
provision constitutes the express permission required by Section
408(b)(8) of ERISA.
11.06 Investment in Insurance Company Contracts
The Trustee may invest any portion of the Trust Fund in a deposit
administration, guaranteed investment or similar type of investment
contract (hereinafter referred to as Contract); provided, however, that
no such Contract may provide for an optional form of benefit which would
not be provided for under the provisions hereof. The Trustee will be
the complete and absolute owner of Contracts held in the Trust Fund.
The Trustee may convert from one form to another any Contract held in
the Trust Fund; designate any mode of settlement; sell or assign any
Contract held in the Trust Fund; surrender for cash any Contract held in
the Trust Fund; agree with the insurance company issuing any Contract to
any release, reduction, modification or amendment thereof; and, without
limitation of any of the foregoing, exercise any and all of the rights,
options and privileges that belong to the absolute owner of any Contract
held in the Trust Fund that are granted by the terms of any such
Contract or by the terms of this Agreement.
The Trustee will hold in the Trust Fund the proceeds of any sale,
assignment or surrender of any Contract held in the Trust Fund and any
and all dividends and other payments of any kind received in respect to
any Contract held in the Trust Fund.
No insurance company which may issue any Contract based upon the
application of the Trustee will be responsible for the validity of this
Plan, be required to look into the terms of this Plan, be required to
question any act of the Plan Administrator or the Trustee hereunder or
be required to verify that any action of the Trustee is authorized by
this Plan. If a conflict should arise between the terms of the Plan and
any such Contract, the terms of the Plan will govern.
11.07 Fees and Expenses from Fund
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The Trustee will be entitled to receive reasonable annual compensation
as may be mutually agreed upon from time to time between the Plan
Sponsor and the Trustee. The Trustee will pay all expenses reasonably
incurred by it in its administration and investment of the Trust Fund
from the Trust Fund unless the Plan Sponsor pays the expenses. No
person who is receiving full pay from the Plan Sponsor will receive
compensation for services as Trustee.
11.08 Records and Accounting
The Trustee will keep full and complete records of the administration of
the Trust Fund which the Employer and the Plan Administrator may examine
at any reasonable time. As soon as practical after the end of each Plan
Year and at such other reasonable times as the Employer may direct, the
Trustee will prepare and deliver to the Employer and the Plan
Administrator an accounting of the administration of the Trust,
including a report on the fair market value of all assets of the Trust
Fund.
11.09 Distribution Directions
If no one claims a payment or distribution made from the Trust, the
Trustee will notify the Plan Administrator and will dispose of the
payment in accordance with the subsequent direction of the Plan
Administrator.
11.10 Third Party
No person dealing with the Trustee will be obliged to see to the proper
application of any money paid or property delivered to the Trustee, or
to inquire whether the Trustee has acted pursuant to any of the terms of
the Plan. Each person dealing with the Trustee may act upon any notice,
request or representation in writing by the Trustee, or by the Trustee's
duly authorized agent, and will not be liable to any person whomsoever
in so doing. The certification of the Trustee that it is acting in
accordance with the Plan will be conclusive in favor of any person
relying on the certification.
11.11 Professional Agents, Affiliates and Arbitration
(a) Professional Agents
The Trustee may employ and pay from the Trust Fund reasonable
compensation to agents, attorneys, accountants and other persons
to advise the Trustee as in its opinion may be necessary. The
Trustee may delegate to any agent, attorney, accountant or other
person selected by it any non-Trustee power or duty vested in it
by the Plan; the Trustee may act or refrain from acting on the
advice or opinion of any agent, attorney, accountant or other
person so selected.
(b) Use of Affiliates
(1) Charles Schwab Trust Company (CSTC) is authorized to
contract or make other arrangements with The Charles
Schwab Corporation, Charles Schwab & Co., Inc., their
affiliates and subsidiaries, successors and assigns
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(collectively referred to as Schwab), and any other
organizations affiliated with or subsidiaries of CSTC or
related entities, for the provision of services to the
Trust Fund or Plan, except where such arrangements are
prohibited by law or regulation.
(2) CSTC is authorized to place securities orders, settle
securities trades, hold securities in custody and other
related activities on behalf of the Trust Fund through or
by Schwab whenever possible unless the Authorized Person
specifically instructs the use of another Broker. Trades
and related activities conducted through the Broker will
be subject to fees and commissions established by the
Broker, which may be paid from the Trust Fund or netted
form the proceeds of trades.
(3) Trades will not be executed through Schwab unless the Plan
Administrator and the Authorized Person have received
disclosure concerning the relationship of Schwab to CSTC,
and the fees and commissions which may be paid to Schwab,
CSTC and any affiliate or subsidiary of any of them as a
result of using Schwab to execute trades or for other
services.
(4) CSTC is authorized to disclose such information as is
necessary to the operation and administration of the Trust
Fund to Schwab and to such other persons or organizations
that CSTC determines have a legitimate business purpose
for obtaining such information.
(5) At the direction of the Authorized Person, CSTC may
purchase shares of regulated investment companies (or
other investment vehicles) advised by Schwab or CSTC
("Schwab Funds"), except to the extent that such
investment is prohibited by law or regulation. Schwab
Fund shares may not be purchased for or held by the Trust
Fund unless the Plan Administrator has received disclosure
concerning the relationship of Schwab or CSTC to the
Schwab Funds, and any fees which may be paid to such
entities.
(6) To the extent permitted under applicable laws, CSTC may
invest in deposits, long and short term debt instruments,
stocks and other securities, including those of CSTC or
Schwab.
(7) CSTC and Schwab are authorized to tape record
conversations between CSTC or Schwab and persons acting on
behalf of the Plan or a Participant in order to verify
data on transactions.
(c) Arbitration
Any dispute under this agreement will be resolved by submission
of the issue to a member of the American Arbitration Association
who is chosen by the Employer and
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the Trustee. If the Employer and the Trustee cannot agree on
such a choice, each will nominate a member of the American
Arbitration Association, and the two nominees will then select an
arbitrator. Expenses of the arbitration will be paid as decided
by the arbitrator.
11.12 Valuation of Trust
The Trustee will value the Trust Fund as of the last day of each Plan
Year to determine the fair market value of the Trust, and the Trustee
will value the Trust Fund on such other date(s) as may be necessary to
carry out the provisions of the Plan.
11.13 Liability of Trustee
The Trustee will be liable only for the safeguarding and administration
of the assets of this Trust Fund in accordance with the provisions
hereof and any amendments hereto and no other duties or responsibilities
will be implied. The Trustee will not be required to pay any interest
on funds paid to or deposited with it or to its credit under the
provisions of this Trust, unless pursuant to a written agreement between
the Employer and the Trustee. The Trustee will not be responsible for
the adequacy of the Trust Fund to meet and discharge any liabilities
under the Plan and will not be required to make any payment of any
nature except from funds actually received as Trustee. The Trustee may
consult with legal counsel (who may be legal counsel for the Employer)
selected by the Trustee and will be fully protected for any action
taken, suffered or omitted in good faith in accordance with the opinion
of said legal counsel. It will not be the duty of the Trustee to
determine the identity or mailing address of any Participant or any
other person entitled to benefits hereunder, such identity and mailing
addresses to be furnished by the Employer, the Plan Administrator or an
agent of the Plan Administrator. The Trustee will be under no liability
in making payments in accordance with the terms of this Plan and the
certification of the Plan Administrator or an agent of the Plan
Administrator who has been granted such powers by the Plan
Administrator.
Except to the extent required by any applicable law, no bond or other
security for the faithful performance of duty hereunder will be required
of the Trustee.
11.14 Removal or Resignation and Successor Trustee
A Trustee may resign at any time upon giving 30 days prior written
notice to the Plan Sponsor or, with the consent of the Plan Sponsor, a
Trustee may resign with less than 30 days prior written notice.
The Plan Sponsor may remove a Trustee by giving at least 30 days prior
written notice to the Trustee.
Upon the removal or resignation of a Trustee, the Plan Sponsor will
appoint and designate a successor Trustee which will be one or more
individual successor Trustees or a corporate Trustee organized under the
laws of the United States or of any state thereof with authority
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to accept and execute trusts. Any successor Trustee must accept and
acknowledge in writing its appointment as a successor Trustee before it
can act in such capacity.
Title to all property and records or true copies of such records
necessary to the current operation of the Trust Fund held by the Trustee
hereunder will vest in any successor Trustee acting pursuant to the
provisions hereof, without the execution or filing of any further
instrument. Any resigning or removed Trustee will execute all
instruments and do all acts necessary to vest such title in any
successor Trustee of record. Each successor Trustee will have,
exercise and enjoy all the powers, both discretionary and ministerial,
herein conferred upon his predecessor. No successor Trustee will be
obligated to examine the accounts, records and acts of any previous
Trustee or Trustees, and each successor Trustee in no way or manner will
be responsible for any action or omission to act on the part of any
previous Trustee.
Any corporation which results from any merger, consolidation or purchase
to which the Trustee may be a party, or which succeeds to the trust
business of the Trustee, or to which substantially all the trust assets
of the Trustee may be transferred, will be the successor to the Trustee
hereunder without any further act or formality with like effect as if
the successor Trustee had originally been named Trustee herein; and in
any such event it will not be necessary for the Trustee or any successor
Trustee to give notice thereof to any person, and any requirement,
statutory or otherwise, that notice will be given is hereby waived.
11.15 Appointment of Investment Manager
One or more Investment Managers may be appointed by the Plan Sponsor (or
the Plan Administrator) to exercise full investment management authority
with respect to all or a portion of the Trust assets. Authorized
payment of the fees and expenses of the Investment Manager(s) may be
made from the Trust assets. For purposes of this agreement, any
Investment Manager so appointed will, during the period of his
appointment, possess fully and absolutely those powers, rights and
duties of the Trustee (to the extent delegated by the Plan Sponsor or
the Plan Administrator) with respect to the investment or reinvestment
of that portion of the Trust assets over which the Investment Manager
has investment management authority. The Investment Manager must be one
of the following:
(a) Registered as an investment advisor under the Investment Advisors
Act of 1940;
(b) A bank, as defined in the Investment Advisors Act of 1940; or
(b) An insurance company qualified to manage, acquire, or dispose of
such Plan assets under the laws of more than one state. Any
Investment Manager will acknowledge in writing to the Plan
Sponsor or the Plan Administrator and to the Trustee that he or
it is a fiduciary with respect to the Plan. During any period of
time when the Investment Manager is so appointed and serving, and
with
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respect to those assets in the Plan over which the Investment
Manager exercises investment management authority, the Trustee's
responsibility will be limited to holding such assets as a
custodian, providing accounting services, disbursing benefits as
authorized, and executing such investment instructions only as
directed by the Investment Manager. The Trustee will not be
responsible for any acts or omissions of the Investment Manager.
Any certificates or other instruments duly signed by the
Investment Manager (or the authorized representative of the
Investment Manager), purporting to evidence any instruction,
direction or order of the Investment Manager with respect to the
investment of those assets of the Plan over which the Investment
Manager has investment management authority, will be accepted by
the Trustee as conclusive proof thereof. The Trustee will also
be fully protected in acting in good faith upon any notice,
instruction, direction, order, certificate, opinion, letter,
telegram or other document believed by the Trustee to be genuine
and from the Investment Manager (or the authorized representative
of the Investment Manager). The Trustee will not be liable for
any action taken or omitted by the Investment Manager or for any
mistakes of judgment or other action made, taken or omitted by
the Trustee in good faith upon direction of the Investment
Manager.
11.16 Loans to Participants
The Plan Administrator may authorize the Trustee to lend on a
nondiscriminatory basis to a Participant an amount from the Plan as
specified herein; provided, a reasonable rate of interest will be
charged on the loan, the loan will be secured by 50% of the
Participant's Vested Accrued Benefit in the Plan, and Provision for
repayment will be made. All loans will be subject to the approval of
the Plan Administrator which will investigate each application for a
loan. The Plan Administrator will prescribe such rules as may be
necessary to provide guidelines as to under which circumstances and for
what purpose loans will be permitted.
The Plan Administrator will prescribe guidelines as to which Account or
Accounts loans may be made from. Each loan made to a Participant will
be made from the Participant's allowable Account or Accounts. All
interest and principal repayments will be credited to the Participant's
Account from which the loan was made.
In addition to any additional rules and regulations as the Plan
Administrator may adopt all loans will comply with the following terms
and conditions:
(a) Only Active and Inactive Participants will be eligible to apply
for a loan. Each application for a loan will be made in writing
to the Plan Administrator, whose action thereon will be final.
(b) Each loan will be made against collateral being the
assignment of 50% of the borrower's entire right, title and
interest in and to the Trust Fund, supported by the borrower's
promissory note for the amount of the loan, including interest
payable to the order to the Trustee, and any additional security
deemed necessary to adequately
81
<PAGE> 83
secure the Loan. If a person fails to make a required payment
within 90 days of the due date set forth in the loan agreement,
the loan will be in default. There will be no foreclosure
against a Participant's Accrued Benefit prior to his becoming
entitled to a distribution of benefits in accordance with the
terms of this Plan. All loans will become due and payable in
full upon the termination of a Participant's employment. If a
Participant with an outstanding loan terminates employment and
becomes entitled to a distribution of benefits from the Plan,
then the outstanding balance of the unpaid loan plus any accrued
interest thereon will be deducted from the amount of otherwise
distributable benefits and the Participant's promissory note will
be distributed to the Participant.
(c) The principal repayment will be amortized over the fixed life of
a loan with installments of principal and interest to be paid not
less often than quarterly. The period of repayment for each loan
will be arrived at by mutual agreement between the Plan
Administrator and the borrower, but in no event will such period
exceed a reasonable period of time. The period of repayment will
in no event exceed 5 years unless the loan is to be used to
acquire, construct, reconstruct or substantially rehabilitate any
dwelling unit which, within a reasonable period of time, is to be
used as a principal residence of the Participant or a member of
the family (spouse, brother, sister, ancestor, or lineal
descendants) of the Participant.
(d) The minimum amount of any loan is equal to $1,000.
(e) The maximum amount of any loan is such that when the amount of
the loan is added to the outstanding balance of all other loans
made to the Participant from the Plan (and any other plans
maintained by the Employer or any Related Employer) the total
does not exceed the lesser of:
(1) 50% of the Participant's Vested Accrued Benefit; or
(2) $50,000, reduced by the amount, if any, of the highest
balance of all outstanding loans to the Participant during
the one-year period ending on the day prior to the day on
which the loan in question is made.
(f) Each loan will bear interest at a rate equal to the prime rate
which is published in the Wall Street Journal as being
representative of the base rate on corporate loans at large U.S.
money center commercial banks on the last day of the month prior
to the date on which the loan is made, plus 1 percentage point.
(g) A Participant may have no more than two loans outstanding at any
time.
(h) Each loan will require the Participant (and, if the Participant
is married, the Participant's spouse) to consent to the loan and
the possible reduction in the
82
<PAGE> 84
Participant's Accrued Benefit. Such consent must be made in
writing within the 90-day period before the making of the loan.
(i) No loan will be permitted to a Participant in a year in which he
is either an Owner-Employee or Shareholder-Employee as defined in
Code Section 4975(d).
IN WITNESS WHEREOF this instrument has been executed by the duly authorized
and empowered officers of the Employer, this 28th day of December, 1995.
HOLLYWOOD THEATERS, INC.
By: /s/ Jeffrey L. Lightfoot
-----------------------------------
Jeffrey L. Lightfoot
Chief Financial Officer
The Trustee agrees to continue to serve as Trustee under the terms of this
instrument.
Charles Schwab Trust Company
By: /s/ Charles Schwab Trust Company
-------------------------------------
83
<PAGE> 85
RESOLUTION AUTHORIZING RESTATEMENT OF THE
HOLLYWOOD THEATERS, INC.
401(k) SAVINGS PLAN
RESOLVED, that the Trans Texas Amusements, Inc. Retirement Savings Plan and
Trust (the "Plan") be restated effective July 10, 1995 by Hollywood Theaters,
Inc., to continue to provide benefits for its permanent employees to the extent
and in the manner set out in the Plan, as restated; and
RESOLVED FURTHER, that the Plan be renamed to be the Hollywood Theaters, Inc.
401(k) Savings Plan; and
RESOLVED FURTHER, that pursuant to the terms of the Hollywood Theaters, Inc.
401(k) Savings Plan, Hollywood Theaters, Inc. is hereby appointed to direct the
administration of the Plan according to its terms; and
RESOLVED FURTHER, that the officers of Hollywood Theaters, Inc. be authorized
on its behalf to execute said amendment, together with any and all other
instruments of any kind or character required and to take such further action
as may be necessary to maintain said Plan.
********************
I, Jeffrey L. Lightfoot, Secretary of Hollywood Theaters, Inc., do hereby
certify that the above and foregoing is a true and correct copy of an original
resolution unanimously adopted by the Directors of Hollywood Theaters, Inc. at
their meeting held on the 24th day of January, 1996.
/s/ Jeffrey L. Lightfoot
------------------------------------
Secretary
84
<PAGE> 86
FIRST AMENDMENT TO THE
HOLLYWOOD THEATERS, INC. 401(k) SAVINGS PLAN
This Amendment, effective October 31, 1996, is made by Hollywood Theaters,
Inc., (hereinafter referred to as the "Employer").
WHEREAS, the Employer has previously established the Hollywood Theaters, Inc.
401(k) Savings Plan for the benefit of eligible employees and their
beneficiaries; and
WHEREAS, the Employer desires to enhance the benefits of the Plan provided to
employees who are part of a business acquired by the Employer, and to provide
for earlier participation in the Plan on the part of salaried employees;
NOW, THEREFORE, pursuant to Plan Section 10.01, the following amendment is
hereby made and shall be effective October 31, 1996:
The second paragraph of Section 1.13 is amended to read:
Effective October 31, 1996, Predecessor Employer means any business
entity, the stock, assets or business of which is acquired by the
Employer, whether by merger, consolidation, purchase of assets or
otherwise. Up to one Year of Service with a Predecessor Employer will
be included as a Year of Eligibility Service with the Employer.
Notwithstanding the foregoing, all Service with Trans Texas Amusements,
Inc. will be included as Service with the Employer for all purposes
under this Plan.
The last paragraph of Section 1.42(b) is amended to read as follows:
All of an Employee's Years of Eligibility Service are taken into account
in determining his eligibility to participate, including any Years of
Eligibility Service taken into account pursuant to Section 1.13.
The first paragraph of Section 2.01 is replaces with the following:
An Employee who is classified by the Employer as a "Salaried" Employee
(i.e., an Employee who is compensated by his Employer in fixed amounts
at regular intervals without regard to the number of hours worked or
other than on an hourly-rated basis) will become eligible to participate
in the Plan on the Entry Date which coincides with or next follows the
attainment of age 21 and the completion of 90 days of employment.
Notwithstanding the foregoing, a Salaried Employee who has completed 90
days of employment with a Predecessor Employer will become eligible to
participate in the Plan immediately upon his commencement of employment
with the Employer.
85
<PAGE> 87
An Employee who is classified by the Employer as an "Hourly" Employee
(i.e., all Employees other than those classified as Salaried Employees)
will become eligible to participate in the Plan on the Entry Date which
coincides with or next follows the attainment of age 21 and the
completion of one Year of Eligibility Service. Notwithstanding the
foregoing, an Hourly Employee who has completed one Year of Eligibility
Service with a Predecessor Employer will become eligible to participate
in the Plan immediately upon his commencement of employment with the
Employer.
IN WITNESS WHEREOF, the Employer, Hollywood Theaters, Inc., has caused this
instrument to be executed as of the date specified below.
Employer:
Hollywood Theaters, Inc.
Dated: October 31, 1996 By: /s/ James R. Featherstone
---------------------- --------------------------------
86
<PAGE> 88
SECOND AMENDMENT TO THE
HOLLYWOOD THEATERS, INC. 401(k) SAVINGS PLAN
This Amendment, effective, is made by Hollywood Theaters, Inc., (hereinafter
referred to as the "Employer").
WHEREAS, the Employer has previously established the Hollywood Theaters, Inc.
401(k) Savings Plan for the benefit of eligible employees and their
beneficiaries; and
WHEREAS, the Employer wishes to enhance the benefit provided by the Plan to
long term Employees who have attained age 59 1/2;
NOW, THEREFORE, pursuant to Plan Section 10.01, the following amendment is
hereby made and shall be effective January 1, 1997:
Plan Section 3.02(d), pertaining to the Employer Matching Account, is amended
in its entirety to read:
Withdrawals
A Participant who is 100% vested in his Employer Matching Account and
has attained age 59 1/2 may withdraw all or any portion of his Employer
Matching Account subject to the limitations of this Section. A
Participant who is less than 100% vested in his Employer Matching
Account or has not attained age 59 1/2 may not withdraw any portion of
his Employer Matching Account prior to the time when benefits otherwise
become payable in accordance with the provisions of Article 5.
Plan Section 3.03(e), pertaining to the Profit Sharing Account is amended in
its entirety to read:
Withdrawals
A Participant who is 100% vested in his Profit Sharing Account and has
attained age 59 1/2 may withdraw all or any portion of his Profit
Sharing Account subject to the limitations of this Section. A
Participant who is less than 100% vested in his Profit Sharing Account
or has not attained age 59 1/2 may not withdraw any portion of his
Profit Sharing Account prior to the time when benefits otherwise become
payable in accordance with the provisions of Article 5.
87
<PAGE> 89
IN WITNESS WHEREOF, the Employer, Hollywood Theaters, Inc., has caused
this instrument to be executed as of the date specified below.
EMPLOYER:
Hollywood Theaters, Inc.
Dated: January 1, 1997 By: /s/ James R. Featherstone
--------------------------- ---------------------------------
88
<PAGE> 1
EXHIBIT 10.14
INDEMNIFICATION AGREEMENT
This AGREEMENT is made and entered into this 15th day of May
1996, by and between Hollywood Theaters, Inc., a Delaware corporation (the
"Company"), Hollywood Theater Holdings, Inc., a Delaware corporation ("HTI")
and Thomas W. Stephenson, Jr., an individual resident of Dallas County, Texas
("Stephenson").
WHEREAS, Stephenson has personally guaranteed the obligations
of the Company under certain agreements, including, but not limited to theater
leases and film rental agreements, and may in the future be required to
guarantee other obligations of the Company or HTI (the "Guarantees");
WHEREAS, the Company, HIT and Stephenson desire to enter into
this Agreement to provide for the indemnification of Stephenson (the
"Indemnitee") for any amounts the Indemnitee may be required to pay under the
Guarantees, on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and Indemnitee entering into the
Guarantees for the benefit of the Company and HTI:
1. Indemnification Agreements. (a) The Company and HTI
agree to jointly and severally indemnify and hold the Indemnitee harmless from
and against (i) any and all payments, liabilities, obligations, deficiencies,
claims, losses, damages, commitments, costs, and expenses paid or incurred by
the Indemnitee under any Guarantee, including, but not limited to rent,
percentage rent, utility, maintenance or repair charges, and property taxes
(the "Indemnified Payments") and (ii) any and all reasonable attorney's fees,
costs, expenses, liabilities, and obligations paid or incurred in connection
with or as a result of the Indemnified Payments ("Indemnified Expenses").
2. Request by Indemnitee. To obtain indemnification
under this Agreement, Indemnitee shall submit to the Company and HTI a written
request for payment of an Indemnified Payment or Indemnified Expense, including
reasonable documentation and information relating to such Indemnified Payment
or Indemnified Expenses (an "Indemnification Notice"). The Company and HTI
shall pay Indemnitee the Indemnified Payments or Indemnified Expenses
identified in an Indemnification Notice within 30 days of receipt of such
Indemnification Notice.
3. Amendments; Waiver. No supplement, modification,
waiver or amendment of this Agreement shall be binding unless executed in
writing by all of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed nor shall any waiver constitute a waiver of any
other provisions hereof (whether or not similar) or constitute a continuing
waiver.
<PAGE> 2
4. Notices. All notices and other communications
hereunder shall be given by delivery in person, by registered or certified mail
(return receipt requested with postage prepaid thereon) or by facsimile
transmission to the respective parties at the following addresses (or at such
other address as either party shall have furnished to the other in accordance
with the terms of this Section 4.
If to Indemnitee:
Thomas W. Stephenson, Jr.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Facsimile: (214) 520-2323
If to the Company or HTI:
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Attention: Chief Financial Officer
Facsimile: (214) 520-2323
All notices and other communications hereunder that are addressed as provided
in or pursuant to this Section 4 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail, 72 hours after being placed in a depository of the United States mails or
(c) if delivered by facsimile transmission, upon transmission thereof and
receipt of the appropriate answer back.
5. Assignment. Except by (i) operation of law upon the
death of Indemnitee, and (ii) upon the purchase, merger, consolidation or
otherwise of all or substantially all of the business, assets or stock of the
Company or HTI, this Agreement shall not be assigned by any of the parties
hereto without the prior written consent of the other parties.
6. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business,
assets or stock of the Company or HTI), permitted assigns, spouses, heirs,
devisees, executors, administrators, and personal and legal representatives.
7. Severability. The provisions of this Agreement shall
be severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, illegal, void or otherwise unenforceable
in any respect, and the validity and enforceability of any such provision in
every other
-2-
<PAGE> 3
respect and of the remaining provisions hereof shall not be in any way impaired
and shall remain enforceable and in full force and effect to the fullest extent
permitted by law.
8. Effective Date; Termination. This Agreement shall be
effective as of the date hereof (the "Effective Date") and shall apply to any
claim for indemnification hereunder by the Indemnitee for Indemnified Payments
or Indemnified Expenses, whether or not the event giving rise to the
Indemnified Payment or Indemnified Expense, as the case may be, occurred prior
to the Effective Date. This Agreement terminates upon the full and complete
release of Indemnitee from each Guarantee.
9. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Texas
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
10. Specific Performance. The parties hereto agree that
the Indemnitee may enforce this Agreement by seeking specific performance
hereof, without any necessity of showing irreparable harm or posting a bond,
which requirements are hereby waived, and that by seeking specific performance,
Indemnitee shall not be precluded from seeking or obtaining any other relief to
which they may be entitled.
11. Entire Agreement. This Agreement and the Guarantees
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior oral or written agreements and
understandings with respect thereto.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
COMPANY:
HOLLYWOOD THEATERS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
President
HTI:
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
President
STEPHENSON:
/s/ Thomas W. Stephenson, Jr.
-------------------------------------
Thomas W. Stephenson, Jr.
-4-
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF COVERAGE DEFICIENCY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
1995 1996 1996 1997
----------------------- ------------------------
<S> <C> <C> <C> <C>
Net Income (Loss) Before Taxes, Discounted
Operations, Extraordinary Items and
Cumulative Effect of a Change in Accounting $(907) $(2,793) $(1,283) $(4,193)
Principle . . . . . . . . . . . . . . . . .
Interest Expense . . . . . . . . . . . . . . . 463 2,121 437 2,247
Portion of Rents Representative of the
Interest Factor . . . . . . . . . . . . . . 322 988 334 1,417
----- ------- ------- -------
Income (Loss) Before Taxes as Adjusted . . . . (122) 316 (512) (529)
Fixed Charges:
Interest Expense . . . . . . . . . . . . . 463 2,121 437 2,247
Interest Capitalized . . . . . . . . . . . 0 0 0 0
Portion of Rents Represented of the
Interest Factor . . . . . . . . . . . . 322 988 334 1,417
----- ------- ------- -------
Total Fixed Charges . . . . . . . . . . . . $ 785 $ 3,109 $ 771 $ 3,664
----- ------- ------- -------
Deficiency of Earnings to Fixed Charges . . . . $(907) $(2,793) $(1,283) $(4,193)
===== ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF HOLLYWOOD THEATERS, INC.
1. Crown Theater Corporation, a Missouri corporation.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm, included in or made a part of this
Form S-4.
/s/ Arthur Andersen LLP
Dallas, Texas
September 30, 1997
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Ave, Suite 2700 75201
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Ave, Suite 2700
Dallas, Texas 75201
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Hollywood Theaters, Inc.
(Exact name of obligor as specified in its charter)
Delaware 75-2598844
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2911 Turtle Creek Blvd. , Suite 1150
Dallas, Texas 75219
(Address of principal executive offices) (Zip Code)
---------------
10 5/8% Senior Subordinated Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District),
Dallas, Texas
(Board of Governors of the Federal Reserve
System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency,
Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the Trustee:
As of September 15,1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Col A. Col B.
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
<S> <C>
Capital Stock - par value $100 per share 5,000 shares
</TABLE>
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its
Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company
of Texas, N.A.; incorporated herein by reference to Exhibit
T-1.1 filed with Form T-1 Statement, Registration No. 22-
21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference
to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of September 15,1997 the Trustee had 5,000 shares of Capital Stock
outstanding, all of which are owned by U.S. T.L.P.O. Corp. As of September
15,1997 U.S. T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of
which are owned by U.S. Trust Corporation. U.S. Trust Corporation had
outstanding 19,185,828 shares of $5 par value Common Stock as of September
12,1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.
---------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
15th day of September, 1997.
U.S. Trust Company
of Texas, N.A., Trustee
By: /s/ BILL BARBER
----------------------------
Bill Barber
Vice President
<PAGE> 6
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Hollywood Theaters,
Inc. 10 5/8% Senior Subordinated Notes due 2007, we hereby consent that reports
of examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ BILL BARBER
----------------------------
Bill Barber
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,878
<SECURITIES> 0
<RECEIVABLES> 1,048
<ALLOWANCES> 0
<INVENTORY> 734
<CURRENT-ASSETS> 10,701
<PP&E> 76,999
<DEPRECIATION> (4,135)
<TOTAL-ASSETS> 129,946
<CURRENT-LIABILITIES> 11,563
<BONDS> 0
45,496
0
<COMMON> 17,762
<OTHER-SE> (10,328)
<TOTAL-LIABILITY-AND-EQUITY> 129,946
<SALES> 31,983
<TOTAL-REVENUES> 32,243
<CGS> 13,202
<TOTAL-COSTS> 34,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,247
<INCOME-PRETAX> (4,194)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,194)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,194)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
HOLLYWOOD THEATERS, INC.
PURSUANT TO THE PROSPECTUS DATED __________, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P. M., NEW YORK
CITY TIME, ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<CAPTION>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
<S> <C> <C>
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor- Corporate Trust Lower Level Cooper Station
Operations New York, New York 10006-1906 New York, New York 10276-0841
New York, New York 10003-9598 Attn: Corporate Trust Services Attn: Corporate Trust Services
Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
800-225-2398.
The undersigned hereby acknowledges receipt of the Prospectus dated
__________, 1997 (the "Prospectus") of Hollywood Theaters, Inc., a Delaware
corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
offer") to exchange $1,000 in principal amount of its 10 5/8% Senior
Subordinated Notes due 2007 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement, for each $1,000 in principal amount of its
outstanding 10 5/8% Senior Subordinated Notes due 2007 (the "Old Notes"), of
which $110,000,000 aggregate principal amount is outstanding. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
The undersigned hereby tenders the Old Notes described in Box 1 below
(the "Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the
Tendered Notes, the undersigned hereby exchanges, assigns, and transfers to, or
upon the order of, the Issuer, all right, title, and interest in, to, and under
the Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions" below (Box 3), please send or cause to be sent
the certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Old Notes and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Issuer upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which
the undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer," in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial Owner(s),
and every obligation of the undersigned or any Beneficial Owners hereunder
shall be binding upon the heirs, representatives, successors, and assigns of
the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Issuer as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuer or the
Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer,
(ii) the undersigned and each Beneficial Owner are not participating, do not
intend to participate, and have no arrangement or understanding with any person
to participate, in the distribution of the Exchange Notes, (iii) the Exchange
Notes to be acquired by the undersigned and any Beneficial Owner(s) in
connection with the Exchange Offer are being acquired by the undersigned and
any Beneficial Owner(s) in the ordinary course of business of the undersigned
and any Beneficial Owner(s) and (iv) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), in connection with a secondary resale of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission (the "Commission") set forth in
the no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer." In addition, by accepting the Exchange Offer,
the undersigned hereby (i) represents and warrants that, if the undersigned or
any Beneficial Owner of the Old Notes is a Participating Broker-Dealer, such
Participating Broker-Dealer acquired the Old Notes for its own account as a
result of market-making activities or other trading activities and has not
entered into any arrangement or understanding with the Company or any affiliate
of the Company (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Notes to be received
2
<PAGE> 3
in the Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired as a result of market-making activities or other trading activities,
such Participating Broker-Dealer will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes (provided that, by so acknowledging and by delivering a
prospectus such Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act).
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last date to which interest has ben paid or duly provided for on such Old Notes
prior to the original issue date of the Exchange Notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such Old Notes, and the undersigned waives the right to receive any interest on
such Old Notes accrued from and after the last date to which interest has been
paid or duly provided for on such Old Notes or, if no such interest has been
paid or duly provided for, from and after August 7, 1997.
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (BOX 4).
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (BOX 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF OLD NOTES TENDERED (Attach additional signed
pages, if necessary)
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AGGREGATE
NAME(S) AND ADDRESS(ES) OF REGISTERED OLD CERTIFICATE AMOUNT PRINCIPAL
NOTE HOLDER(S), EXACTLY AS NAME(S) APPEAR(S) NUMBER(S) OF REPRESENTED BY AMOUNT
ON NOTE CERTIFICATE(S) OLD NOTES* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of
Old Notes. All other tenders must be in integral multiples of
$1,000 of principal amount. Unless otherwise indicated in this
column, the principal amount of all Old Note Certificates
identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
3
<PAGE> 4
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
<CAPTION>
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES HELD FOR
BENEFICIAL OWNER OF TENDERED NOTES ACCOUNT OF BENEFICIAL OWNER
<S> <C>
- ---------------------------------------------------- ------------------------------------------------------
- ---------------------------------------------------- ------------------------------------------------------
- ---------------------------------------------------- ------------------------------------------------------
- ---------------------------------------------------- ------------------------------------------------------
- ---------------------------------------------------- ------------------------------------------------------
- ---------------------------------------------------- ------------------------------------------------------
</TABLE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR OLD NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Old Notes to:
Name(s):
- -------------------------------------------------------------------------------
(please print)
- -------------------------------------------------------------------------------
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or Social Security No.:
4
<PAGE> 5
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------------------
Date Of Execution of Notice of Guaranteed Delivery:
----------------------------
Name of Institution which Guaranteed Delivery:
---------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering
Institution:
--------------------------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code
Number:
-------------------------------------------------------------------------
5
<PAGE> 6
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
<TABLE>
<S> <C>
X Signature Guarantee
------------------------------------------------
X (If required by Instruction 5)
------------------------------------------------
(Signature of Registered Authorized Signature
Holder(s) or Authorized Signatory)
X
---------------------------------------------------
Note: The above lines must be signed by the
registered holder(s) of Old Notes as their name(s) Name:
-----------------------------------------------
appear(s) on the Old Notes or by persons(s) (please print)
authorized to become registered holder(s) (evidence
of which authorization must be transmitted with this Title:
----------------------------------------------
Letter of Transmittal). If signature is by a
trustee, executor, administrator, guardian, Name of Firm:
---------------------------------------
attorney-in-fact, officer, or other person acting in
a fiduciary or representative capacity, such person (Must be an Eligible Institution as
must set forth his or her full title below. See defined in Instruction 2)
Instruction 5.
Address:
--------------------------------------------
Name(s):
-------------------------------------------- ----------------------------------------------
----------------------------------------------
Capacity: (include Zip Code)
---------------------------------------------
Street Address:
---------------------------------------
Area Code and Telephone Number:
----------------------------------------------
---------------------------------------------- ----------------------------------------------
(include Zip Code)
Dated:
----------------------------------------------
Area Code and Telephone Number:
----------------------------------
Tax Identification or Social
Security Number:
----------------------------------
</TABLE>
BOX 7
BROKER-DEALER STATUS
- -------------------------------------------------------------------------------
[__] Check this box if the Beneficial Owner of the Old Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of
market-making activities or other trading activities. In such case,
you will be sent extra copies of the Prospectus.
6
<PAGE> 7
PAYOR'S NAME: HOLLYWOOD THEATERS, INC.
- -------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the
person or entity whose number you enter in Part 1 below. See
instructions if your name has changed.)
----------------------------------------------------------------
Address
----------------------------------------------------------------
City, State and ZIP Code
SUBSTITUTE
----------------------------------------------------------------
FORM W-9
Department List account number(s) here (optional)
of the Treasury
----------------------------------------------------------------
Internal Revenue Service
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
IDENTIFICATION NUMBER ("TIN") IN THE BOX Security
AT RIGHT AND CERTIFY BY SIGNING AND Number or
DATING BELOW TIN
- -------------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a result
of failure to report all interest or dividends or (2) the
Internal Revenue Service has notified you that you are no
longer subject to backup withholding. [__]
- ------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION PART 3--
PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
Awaiting
SIGNATURE ____________ DATE ____________ TIN [__]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
7
<PAGE> 8
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. A
properly completed and duly executed copy of this Letter of Transmittal,
including Substitute Form W-9, and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein or such Tendered Notes must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "Exchange Offer -- Procedures for Tendering" (and
a confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 p.m., New York time, on the Expiration Date. The method of
delivery of certificates for Tendered Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the Holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Old Notes should be sent to the
Company. Neither the Issuer nor the registrar is under any obligation to
notify any tendering holder of the Issuer's acceptance of Tendered Notes prior
to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender
their Old Notes but whose Old Notes are not immediately available, and who
cannot deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
must tender their Old Notes according to the guaranteed delivery procedures set
forth below, including completion of Box 4. Pursuant to such procedures: (i)
such tender must be made by or through a firm which is a member of a recognized
Medallion Program approved by the Securities Transfer Association Inc. (an
"Eligible Institution") and the Notice of Guaranteed Delivery must be signed by
the holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Notes and the principal amount of Tendered Notes, stating that the
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal
together with the certificates representing the Old Notes and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all Tendered Notes in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date. Any holder who wishes
to tender Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery relating to such Old Notes prior to 5:00 p.m., New York time, on the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an
Eligible Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a
holder in whose name Tendered Notes are registered on the books of the
registrar (or the legal representative or attorney-in-fact of such registered
holder) may execute and deliver this Letter of Transmittal. Any Beneficial
Owner of Tendered Notes who is not the registered holder must arrange promptly
with the registered holder to execute and deliver this Letter of Transmittal on
his or her behalf through the execution and delivery to the registered holder
of the Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of Old
Notes Tendered" (Box 1) above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes held by
the holder is not tendered, then Old Notes for the principal amount of Old
Notes not
8
<PAGE> 9
tendered and Exchange Notes issued in exchange for any Old Notes tendered and
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Tendered Notes, the signature must
correspond with the name(s) as written on the face of the Tendered Notes
without alteration, enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as the
name(s) of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Issuer, evidence satisfactory to the Issuer of their authority to so act
must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Tendered Notes are tendered (i) by a registered
holder who has not completed the box set forth herein entitled "Special
Delivery Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box (Box 3), the name and address to which the
Exchange Notes and/or substitute Old Notes for principal amounts not tendered
or not accepted for exchange are to be sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if
any, applicable to the exchange of Tendered Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of Tendered Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
9
<PAGE> 10
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires
that the holder(s) of any Tendered Notes which are accepted for exchange must
provide the Issuer (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Issuer is not provided with the correct TIN,
the Holder may be subject to backup withholding and a $50 penalty imposed by
the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN), and that (i) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no longer subject
to backup withholding. If the Tendered Notes are registered in more than one
name or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes the Issuer's
acceptance of which would, in the opinion of the Issuer or their counsel, be
unlawful. The Issuer also reserves the right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders of Old Notes as to any
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer. The interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) by the
Issuer shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes must be cured within
such time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right
to amend, waive or modify any of the conditions in the Exchange Offer in the
case of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular,
or contingent tender of Old Notes or transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF OLD NOTES. Subject to the terms and conditions of the Exchange
Offer, the Issuer will accept for exchange all validly tendered Old Notes as
soon as practicable after the Expiration Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange
Offer, the Issuer shall be deemed to have accepted tendered Old
10
<PAGE> 11
Notes when, as and if the Issuer has given written or oral notice (immediately
followed in writing) thereof to the Exchange Agent. If any Tendered Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Old Notes will be returned, without expense, to the undersigned at the address
shown in Box 1 or at a different address as may be indicated herein under
"Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange Offer."
11
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
HOLLYWOOD THEATERS, INC.
PURSUANT TO THE PROSPECTUS DATED __________, 1997
This form must be used by a holder of 10 5/8% Senior Subordinated
Notes due 2007 (the "Old Notes") of Hollywood Theaters, Inc., a Delaware
corporation (the "Company"), who wishes to tender Old Notes to the Exchange
Agent pursuant to the guaranteed delivery procedures described in "The Exchange
Offer - Guaranteed Delivery Procedures" of the Company's Prospectus, dated
__________, 1997 (the "Prospectus") and in Instruction 2 to the related Letter
of Transmittal. Any holder who wishes to tender Old Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
TIME, ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
U.S. TRUST COMPANY OF TEXAS, N.A.
(the "Exchange Agent")
<TABLE>
<CAPTION>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
<S> <C> <C>
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor- Corporate Trust Lower Level Cooper Station
Operations New York, New York 10006-1906 New York, New York 10276-0841
New York, New York 10003-9598 Attn: Corporate Trust Services Attn: Corporate Trust Services
Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
This form is not to be used to guarantee signatures. If a signature
on a Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN)
OF OLD NOTES OR ACCOUNT NUMBER AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------------------
Signature of Registered Holder(s)
or Authorized Signatory:
Date: , 1997
- --------------------------------------------------- ----------------------------
Address:
- --------------------------------------------------- -----------------------------------------------------
Names(s) of Registered Holder(s):
----------------- -------------------------------------------------------------
Area Code and Telephone No.
- --------------------------------------------------- ---------------------------------
- ---------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
----------------------------------------------------------------------
- ------------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------
Address(es):
-----------------------------------------------------------------
- ------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Old Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the prospectus under the caption "The Exchange Offer - Guaranteed
Delivery Procedures" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York time, on the fifth New York Stock
Exchange trading day following the Expiration Date.
<TABLE>
<S> <C> <C> <C> <C>
Name of Firm
------------------------------------- ---------------------------------------------------------------
(Authorized Signature)
Address:
------------------------------------------
Name
------------------------------------------ ----------------------------------------------------------
(Include Zip Code) (Please Print)
Area Code and Tel. No. Title
---------------------------- ---------------------------------------------------------
Dated , 1997
------------------------------
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this
Notice of Guaranteed Delivery is signed by the registered holder(s) of the Old
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Old Notes without alteration, enlargement, or any
change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Old Notes, the signature must
correspond with the name shown on the security position listing as the owner of
the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
HOLLYWOOD THEATERS, INC.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
__________, 1997 (the "Prospectus") of Hollywood Theaters, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to action to be taken by you relating to the
Exchange Offer with respect to the 10 5/8% Senior Subordinated Notes due 2007
(the "Old Notes") held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT) :
$ ___________________ of the 10 5/8% Senior Subordinated Notes due
2007
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $
[ ] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that (i) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company, (ii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iii)
the undersigned is acquiring the Exchange Notes in the ordinary course of
business of the undersigned and (iv) the undersigned acknowledges that any
person participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Act"), in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the Staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer," (b) to agree, on
behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Old Notes.
<PAGE> 2
SIGN HERE
Name of Beneficial Owner(s):
------------------------------------------------
Signature(s):
----------------------------------------------------------------
Names (please print):
--------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone Number:
-------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
------------------------------------------------------------------------
2
