<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SILVER CINEMAS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 72-2656147
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN L. HOLMES
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BRYANT B. EDWARDS
LATHAM & WATKINS
633 WEST FIFTH STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
SILVER CINEMAS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 75-2672675
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN L. HOLMES
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BRYANT B. EDWARDS
LATHAM & WATKINS
633 WEST FIFTH STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
<PAGE> 2
SCI ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 75-2749958
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN L. HOLMES
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BRYANT B. EDWARDS
LATHAM & WATKINS
633 WEST FIFTH STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
LANDMARK THEATRE CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 75-2749959
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN L. HOLMES
4004 BELTLINE ROAD, SUITE 205
DALLAS, TEXAS 75244
(972) 503-9851
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BRYANT B. EDWARDS
LATHAM & WATKINS
633 WEST FIFTH STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of 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. [ ]
<PAGE> 3
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
=========================================================================================================================
TITLE OF EACH CLASS OF
SECURITIES TO BE AMOUNT TO PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PRICE PER NOTE OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
10 1/2% Senior
Subordinated Notes due
2005................... $100,000,000 100% $100,000,000 $29,500
- -------------------------------------------------------------------------------------------------------------------------
Guarantees of 10 1/2%
Senior Subordinated
Notes due 2005......... $100,000,000 * * --(1)
- -------------------------------------------------------------------------------------------------------------------------
Total............................................................................................ $29,500
=========================================================================================================================
</TABLE>
(1) Silver Cinemas, Inc., SCI Acquisition Corp., and Landmark Theatre Corp.,
will guarantee the payment of the 10 1/2% Senior Subordinated Notes due
2005. Pursuant to Rule 457(n), no filing fee is required.
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.
================================================================================
<PAGE> 4
PROSPECTUS
$100,000,000
OFFER TO EXCHANGE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005
FOR ALL OUTSTANDING 10 1/2% SENIOR SUBORDINATED NOTES DUE 2005
OF
SILVER CINEMAS INTERNATIONAL, INC.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998 UNLESS EXTENDED.
Silver Cinemas International, Inc., a Delaware corporation ("Silver
Cinemas" or the "Company"), hereby offers (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000
principal amount of its 10 1/2% Senior Subordinated Notes due 2005 (the
"Exchange Notes"), which exchange has 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 (the "Registration Statement"), for each
$1,000 principal amount of its outstanding 10 1/2% Senior Subordinated Notes due
2005 (the "Private Notes"), of which $100,000,000 in aggregate principal amount
was issued on April 16, 1998 (the "Private Offering") all of which are
outstanding as of the date hereof. The form and terms of the Exchange Notes are
the same as the form and terms of the Private Notes except that (i) the exchange
will have been registered under the Securities Act, and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) Holders of
the Exchange Notes will not be entitled to certain rights of Holders of the
Private Notes under the Registration Rights Agreement (as defined), which rights
will terminate upon the consummation of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Private Notes (which they replace) and will
be entitled to the benefits of an indenture dated as of April 15, 1998 governing
the Private Notes and the Exchange Notes (the "Indenture"). The Private Notes
and the Exchange Notes are sometimes referred to herein collectively as the
"Notes." See "The Exchange Offer" and "Description of Exchange Notes."
The Exchange Notes will bear interest at the same rate and on the same
terms as the Private Notes. Consequently, interest on the Exchange Notes will
accrue from the date of issuance of the Private Notes (April 16, 1998) and will
be payable semi-annually in arrears on April 15 and October 15 of each year,
commencing on October 15, 1998, at the rate of 10 1/2% per annum. The Exchange
Notes will be redeemable, in whole or in part, at the option of the Company on
or after April 15, 2001, at the redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. In addition, at any time prior to
April 15, 2001, the Company may, at its option, redeem up to 35% of the
aggregate principal amount of the Exchange Notes originally issued with the net
cash proceeds of one or more Equity Offerings (as defined), at a redemption
price equal to 110 1/2% of the aggregate principal amount of the Exchange Notes
to be redeemed plus accrued and unpaid interest to the date of redemption;
provided, however, that after giving effect to any such redemption, at least 65%
of the aggregate principal amount of the Exchange Notes originally issued under
the Indenture remains outstanding. Holders whose Private Notes are accepted for
exchange will be deemed to have waived the right to receive any interest accrued
on the Private Notes.
The Exchange Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to existing and future Senior Debt (as
defined) of the Company. The Exchange Notes will be unconditionally guaranteed
(the "Guarantees") by all of the Company's current and certain future
subsidiaries (the "Guarantors"). The Guarantees will be general unsecured
obligations of the Guarantors and will be subordinated in right of payment to
all existing and future Guarantor Senior Debt (as defined). The Exchange Notes
and the Guarantees will also be effectively subordinated to all secured
indebtedness of either the Company or any of its subsidiaries to the extent of
the assets secured by such indebtedness. As of March 31, 1998, on pro forma
basis, the Company and its subsidiaries would have had approximately $5.2
million of indebtedness outstanding which ranks senior to the Exchange Notes.
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offering is extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. Private Notes may be tendered only in
integral multiples of $1,000. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer -- Conditions."
SEE "RISK FACTORS," BEGINNING ON PAGE 16, FOR A DISCUSSION OF CERTAIN
FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND
AN INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE 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 , 1998
<PAGE> 5
Upon a Change of Control (as defined), each holder of the Exchange Notes
will have the right to require the Company to repurchase such holder's Exchange
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. In addition, the Company will
be obligated to offer to repurchase the Exchange Notes at 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase in the event of certain Asset Sales (as defined). See "Description of
Exchange Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a Holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person 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 the Holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private Notes
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have been met. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such 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 Company believes that none of the registered Holders of the Private
Notes is an affiliate (as such term is defined in Rule 405 under the Securities
Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Exchange Notes will not be listed on any securities exchange, but the
Private Notes are eligible for trading in the National Association of Securities
Dealers, Inc.'s Private Offerings, Resales and Trading through Automatic
Linkages (PORTAL) market. There can be no assurance that an active market for
the Exchange Notes will develop. To the extent that a market for the Exchange
Notes does develop, the market value of the Exchange Notes will depend on market
conditions (such as yields on alternative investments), general economic
conditions, the Company's financial condition and certain other factors. Such
conditions might cause the Exchange Notes, to the extent that they are traded,
to trade at a significant discount from face value. See "Risk Factors -- Absence
of Public Market."
Each 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
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 broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has indicated its intention
to make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 180
days after the Expiration Date. See "The Exchange Offer -- Resale of the
Exchange Notes" and "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer. See "The Exchange Offer -- Resale of the Exchange Notes."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR
2
<PAGE> 6
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL [ ], 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN
CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM. THE
COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER
WILL BE ISSUED IN THE FORM OF ONE OR MORE FULLY REGISTERED GLOBAL NOTES THAT
WILL BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC" OR
THE "DEPOSITARY") AND REGISTERED IN ITS NAME OR IN THE NAME OF CEDE & CO., AS
ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE
NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH,
RECORDS MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS. AFTER THE INITIAL
ISSUANCE OF SUCH GLOBAL NOTE, EXCHANGE NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY IN ACCORDANCE WITH THE TERMS AND CONDITIONS
SET FORTH IN THE INDENTURE. SEE "THE EXCHANGE OFFER -- BOOK-ENTRY TRANSFER" AND
"DESCRIPTION OF EXCHANGE NOTES -- BOOK ENTRY; DELIVERY AND FORM."
------------------------
3
<PAGE> 7
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus. Unless the context otherwise requires, all references to the
"Company" shall mean, collectively, Silver Cinemas International, Inc. and its
subsidiaries on a consolidated, pro forma basis after giving effect to the
Transactions (as defined). Unless otherwise specified, the pro forma income
statement data and summary pro forma balance sheet data presented herein reflect
adjustments to the historical consolidated financial statements of Silver
Cinemas to give effect to (i) the consummation of the Private Offering, (ii) the
acquisition of all of the assets of StarTime Cinema, Inc. subject to the
StarTime Asset Purchase Agreement (the "StarTime Acquisition"), (iii) the
acquisition of all of the assets of The Landmark Theatre Group subject to the
Landmark Asset Purchase Agreement (the "Landmark Acquisition,"), (iv) the
acquisition of three theaters from AMC Entertainment, Inc. (the "AMC
Acquisition," and, together with the StarTime Acquisition and the Landmark
Acquisition, the "Acquisitions"), (v) the Equity Contribution (as defined), and
(vi) the repayment of the Old Credit Facility (as defined) and execution of the
Revolving Credit Facility(as defined), (collectively, the "Transactions") in
each case as if such events had occurred on January 1, 1997 or as of March 31,
1998, respectively.
THE COMPANY
The Company is the largest exhibitor of specialty motion pictures and one
of the largest operators of second-run theaters in the United States. The
Company operates 106 theaters with 524 screens located in eighteen states. The
106 theaters are comprised of 49 specialty motion picture theaters, 49
second-run theaters and eight first-run theaters. The Company's strategy is to
acquire theaters in under-served markets, to upgrade and expand theaters to
provide a high-quality movie-going experience and to improve the profitability
of theaters by combining certain administrative functions, obtaining volume
discounts and implementing tighter operating controls. On a pro forma basis for
the year ended December 31, 1997 and the three months ended March 31, 1998, the
Company generated revenue of approximately, $106.3 million and $27.3 million,
respectively, and pro forma EBITDA (as defined) of $12.1 million and $3.3
million, respectively.
The Company's specialty-film theaters exhibit alternatives to commercial
first-run movies. The specialty-film niche is composed of art films, foreign
pictures and independent releases such as Good Will Hunting, The Full Monty, The
Apostle, Shine, Sling Blade and The English Patient which are generally released
in limited numbers to selected markets. Studios such as Disney, Universal, Sony,
Paramount, Twentieth Century Fox and New Line have begun to distribute
specialty-films through dedicated distribution subsidiaries (Miramax, October
Films, Sony Pictures Classics, Paramount's specialty-film division, Fox
Searchlight Pictures and Fine Line, respectively). Management believes that the
recent success of independent films in garnering Academy Award nominations and
Academy Awards will further drive independent film production, particularly from
these "independent" subsidiaries which seek the recognition of these
prestigious, high profile awards. According to Exhibitor Relations Company,
Inc., the number of new films released by independent producers and distributors
has increased from 158 in 1992 to 295 in 1997. In addition to the prestige of
the Academy Awards, the generally lower budgets and higher potential returns on
capital invested in specialty films makes the production of these films
financially appealing to the studios. Specialty films are also attractive to
exhibitors since the specialty-film niche tends to benefit from higher average
admission prices and lower film rental expense than first-run operators,
resulting in higher operating margins. Finally, the specialty-film niche, which
generally appeals to more mature and upscale audiences, is expected to continue
to benefit from favorable demographic trends as a result of the aging of the
"baby boom" generation.
The Company's second-run theaters offer major studio productions, generally
six to ten weeks after their initial release dates, at significantly lower
admission prices than commercial first-run theaters, making their revenues less
susceptible to economic recession. The Company enjoys more favorable film
booking arrangements and film buying terms at its second-run theaters than its
commercial first-run counterparts. With far fewer second-run screens than
first-run screens nationwide, there is typically little competition for prints
of commercial films, enabling the Company to screen its choice of successful
commercial films. First-run theaters, on the other hand, must aggressively
compete for films from distributors and generally screen only a
4
<PAGE> 8
subset of new releases. In addition to its film booking advantage, the Company's
second-run theaters also benefit from lower film rental expense and a larger
proportion of high-margin concession sales as a percentage of overall revenue.
Finally, the Company's lower admission prices for its second-run theaters appeal
especially to teen audiences and older patrons, segments of the population which
are expected to experience steady growth over the next decade.
Founded in May 1996, the Company completed seven acquisitions, representing
26 theaters with an aggregate total of 154 screens as of December 31, 1997. In
addition, the Company completed two construction projects, increasing its total
number of theaters and screens to 27 and 165, respectively. Management has
successfully integrated these theaters into its operations by implementing new
operating standards, management controls and information systems. In addition,
the Company has added new seating, improved sound and projection equipment, and
broadened concession offerings in many locations. The impact of these
improvements, which have helped increase profitability, are reflected in the
operating performance of the Company's first two acquisitions in November 1996,
Movie One and MI Theaters, consisting of 102 screens at 18 theaters. Based on
actual results for the nine months ended September 30, 1997, theater level cash
flow at these theaters increased 31.7% compared to the nine months ended
September 30, 1996, prior to the Company's ownership of the theaters.
BUSINESS STRATEGY
The Company's strategy is to increase revenue and cash flow by (i)
acquiring specialty motion picture and second-run theaters and first-run
theaters in non-competitive markets, (ii) improving operations at acquired
theaters, (iii) building new state-of-the-art multiplexes in selected markets,
and (iv) adding additional screens, seating capacity, state-of-the-art sound and
projection systems, and other exhibition or concession equipment at its existing
theaters.
Pursue Strategic Acquisitions. The Company has successfully pursued a
disciplined acquisition strategy and intends to continue to acquire and
integrate theaters in both the specialty-film and second-run niches. Management
believes that there are many attractive acquisition candidates in the
highly-fragmented exhibition industry. Management believes that the recent
consolidation trend in the exhibition industry is driving many major exhibitors
to dispose of non-core properties, many of which are specialty-film or second-
run theaters that do not fit those companies' commercial first-run strategies.
In addition, the growth of megaplexes (theaters with 16 or more screens) has
created another avenue of potential growth for the Company through the
conversion of existing commercial first-run theaters to theaters with a
specialty-film or second-run format at an attractive cost.
Leverage Existing Infrastructure and Control Operating Costs. The Company
has successfully integrated and improved the operations of its acquisitions.
Management believes significant opportunities exist to leverage its existing
infrastructure over future acquisitions and realize significant operating
improvements through the implementation of superior operating procedures,
management oversight and its state-of-the-art management information system.
Specific areas of improvement include (i) labor scheduling, (ii) film selection
and lineup, (iii) cash control, (iv) pricing policies, and (v) purchasing
discounts on concession contracts. Additionally, many of the smaller theater
chains lack the sophisticated information systems employed by the Company, which
the Company believes are necessary to effectively manage a geographically
diverse group of theaters. Examples of management's ability to acquire and
improve operations of theaters include the acquisitions of Movie One and MI
Theaters, both completed in November 1996. Based on actual results for the nine
months ended September 30, 1997, these two groups of theaters have shown theater
level cash flow increases of 31.7% compared to the same period in the previous
year, prior to the Company's ownership of the theaters.
Capitalize on Leading Position in Specialty-Film Segment. The Company,
through The Landmark Theatre Group ("Landmark"), is the largest exhibitor of
specialty motion pictures and the only specialty-film exhibitor with a national
presence. The Company has a leading presence in, among others, the following
major markets: Los Angeles, San Francisco, Boston, Dallas, Houston, Seattle,
Cleveland, Minneapolis, Denver, Milwaukee and New Orleans. The Company plans to
use its experience in the specialty-film niche to establish
5
<PAGE> 9
a presence in the following strategic new markets: Chicago, Detroit, St. Louis
and Washington D.C. Landmark achieved its leading presence by developing strong
relationships with specialty-film distributors, many of whom rely on the
Company's expertise in distributing and marketing specialty films. These
relationships enable the Company to secure film prints in limited release and
secure a period of exclusivity in exhibiting selected new films in many of its
markets. For example, for films such as The English Patient, Good Will Hunting
and Shine the Company had exclusive rights to the films for up to three weeks in
selected markets.
Expand Established Second-Run Operations. The Company believes it is the
leading operator of second-run theaters in its markets, operating 49 second-run
theaters with 336 screens in 15 states. By offering patrons a high-quality
alternative to commercial first-run exhibitors at a low price, the Company
avoids direct competition with commercial first-run theaters. In addition, the
second-run niche offers other attractive characteristics which include (i) lower
film costs as a percentage of admission revenue, (ii) greater percentage of
total revenue from high margin concessions, (iii) greater recession resistance
due to lower admission prices, and (iv) lower seasonal variability than
commercial first-run exhibitors due to a staggered film release schedule.
Provide a Superior Movie-Going Experience. The Company seeks to provide
audiences with a high quality viewing experience, comparable to that available
at new commercial first-run theaters. To enhance the movie-going experience, the
Company invests in high quality projection and stereo sound equipment,
comfortable chairs with wide seats and cupholder armrests, and appealing lobby
and concession areas. Since many competitors in the specialty-film and
second-run exhibition niches do not focus on these aspects of operations,
management believes that this strategy provides it with a distinct competitive
advantage.
Pursue Attractive Construction Opportunities. The Company continually
evaluates existing and new markets for new theater locations for specialty,
second-run, and, in selected situations, commercial first-run theaters. The
Company generally seeks to develop theaters in markets that are under-served as
a result of changing demographic trends or the aging or obsolescence of existing
theaters. Some of the factors management considers in determining whether to
develop a theater in a particular location are the market's population, average
household income, education levels, proximity to retail corridors, convenient
roadway access, proximity to competing theaters, and the effect on the Company's
existing theaters in the market, if any.
Leverage Experienced Management Team and Strong Sponsorship. The Company's
senior management team averages over 21 years of experience in the exhibition
industry, and members of senior management have been heavily involved in the
rapid growth of exhibition companies such as Cinemark USA, Inc. and The Landmark
Theatre Group. In addition, the Company enjoys the strong equity sponsorship of
Brentwood Associates Buyout Fund II, L.P. ("Brentwood") and certain members of
management. See "Principal Stockholders." On March 3, 1998, Brentwood made an
additional equity investment of $10.0 million in the Company, bringing its
aggregate equity investment to approximately $25.0 million.
RECENT AND PENDING ACQUISITIONS AND CONSTRUCTION
From its inception through December 31, 1997, the Company completed seven
acquisitions, representing 26 theaters with an aggregate of 154 screens.
In April 1998, the Company acquired the assets of Landmark for cash
consideration of approximately $62.2 million pursuant to an asset purchase
agreement (the "Landmark Asset Purchase Agreement") with Metromedia
International Group, Inc. ("Metromedia"). Landmark, with 140 screens at 49
locations, was the largest exhibitor of specialty motion pictures in the United
States, with theaters located in California, Colorado, Louisiana, Massachusetts,
Michigan, Minnesota, Ohio, Texas, Washington and Wisconsin.
In April 1998, the Company completed the acquisition of 202 screens at 27
locations operating predominately under the name Super Saver Cinemas pursuant to
an asset purchase agreement (the "StarTime Asset Purchase Agreement") with
StarTime Cinema, Inc. ("StarTime") for approximately $21.6 million.
6
<PAGE> 10
The theaters acquired from StarTime are second-run theaters located in Arizona,
California, Colorado, Florida, Nebraska, New York, Ohio, Oklahoma, Texas and
Wisconsin.
In April 1998, the Company completed the acquisition of 17 screens at three
theaters for approximately $1.7 million from AMC Entertainment, Inc. ("AMC").
These theaters include one specialty-film theater in Michigan and two second-run
theaters in Texas.
In addition to acquisitions, the Company completed the construction of its
first second-run multiplex theater with ten screens in Des Moines, Iowa in June
1997. The Company also completed the expansion of its existing facility in
LaPlace, Louisiana in September 1997, which increased the number of screens from
six to seven and the number of seats from 734 to 970. In addition, the Company
recently executed leases for the construction of four theaters in Illinois,
Massachusetts, Missouri and Michigan, representing 24 screens.
------------------------
The Company is a Delaware corporation with its principal executive offices
located at 4004 Beltline Road, Suite 205, Dallas, Texas 75244, and its telephone
number is (972) 503-9851.
7
<PAGE> 11
THE EXCHANGE OFFER
THE EXCHANGE OFFER.................. The Company is offering to exchange
$1,000 principal amount of Exchange
Notes for each $1,000 principal amount
of Private Notes that are properly
tendered and accepted. The Company will
issue Exchange Notes on or promptly
after the Expiration Date. There is
$100.0 million aggregate principal
amount of Private Notes outstanding.
See "The Exchange Offer -- Purpose of
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 the
Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private
Notes may be offered for resale, resold
and otherwise transferred by a Holder
thereof (other than (i) a broker-dealer
who purchases such Exchange Notes
directly from the Company to resell
pursuant to Rule 144A or any other
available exemption under the
Securities Act or (ii) a person 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 the Holder is
acquiring Exchange Notes in the
ordinary course of its business and is
not participating, and had no
arrangement or understanding with any
person to participate, in the
distribution of the Exchange Notes.
Each broker-dealer that receives
Exchange Notes for its own account in
exchange for Private Notes, where such
Private Notes were acquired by such
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 "The Exchange
Offer -- Resale of the Exchange Notes."
REGISTRATION RIGHTS AGREEMENT....... The Private Notes were sold by the
Company on April 16, 1998 to Donaldson,
Lufkin & Jenrette Securities
Corporation, BT Alex. Brown
Incorporated and Bear, Stearns & Co.,
Inc. (collectively, the "Initial
Purchasers") pursuant to a Purchase
Agreement, dated April 9, 1998, by and
among the Company and the Initial
Purchasers (the "Purchase Agreement").
Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers
entered into a Registration Rights
Agreement, dated as of April 16, 1998
(the "Registration Rights Agreement"),
which grants the Holders of the Private
Notes certain exchange and registration
rights. The Exchange Offer is intended
to satisfy such rights, which will
terminate upon the consummation of the
Exchange Offer. See "The Exchange
Offer -- Termination of Certain
Rights."
8
<PAGE> 12
EXPIRATION DATE..................... The Exchange Offer will expire at 5:00
p.m., New York City time, on
, 1998, unless the Exchange
Offer is extended by the Company in its
sole discretion, in which case the term
"Expiration Date" shall mean the latest
date and time to which the Exchange
Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
ACCRUED INTEREST ON THE EXCHANGE
NOTES AND THE PRIVATE NOTES......... The Exchange Notes will bear interest
from and including the date of issuance
of the Private Notes (April 16, 1998).
Holders whose Private Notes are
accepted for exchange will be deemed to
have waived the right to receive any
interest accrued on the Private Notes.
See "The Exchange Offer -- Interest on
the Exchange Notes."
CONDITIONS TO THE EXCHANGE OFFER.... The Exchange Offer is subject to
certain customary conditions that may
be waived by the Company. The Exchange
Offer is not conditioned upon any
minimum aggregate principal amount of
Private Notes being tendered for
exchange. See "The Exchange Offer --
Conditions."
PROCEDURES FOR TENDERING PRIVATE
NOTES............................... Each Holder of Private Notes wishing to
accept the Exchange Offer must
complete, sign and date the 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 such Private Notes and
any other required documentation to the
Exchange Agent, at the address set
forth herein. By executing the Letter
of Transmittal, the Holder will
represent to and agree with the Company
that, among other things, (i) the
Exchange Notes to be acquired by such
Holder of Private Notes in connection
with the Exchange Offer are being
acquired by such Holder in the ordinary
course of its business, (ii) if such
Holder is not a broker-dealer, such
Holder is not currently participating
in, does not intend to participate in,
and has no arrangement or understanding
with any person to participate in a
distribution of the Exchange Notes,
(iii) if such Holder is a broker-dealer
registered under the Exchange Act or is
participating in the Exchange Offer for
the purposes of distributing the
Exchange Notes, such Holder will comply
with the registration and prospectus
delivery requirements of the Securities
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 Commission set forth in
no-action letters (see "The Exchange
Offer -- Resale of Exchange Notes"),
(iv) such Holder under-
9
<PAGE> 13
stands that a secondary resale
transaction described in clause (iii)
above and any resales of Exchange Notes
obtained by such Holder in exchange for
Private Notes acquired by such Holder
directly from the Company should be
covered by an effective registration
statement containing the selling
securityholder information required by
Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and
(v) such Holder is not an "affiliate,"
as defined in Rule 405 under the
Securities Act, of the Company. If the
Holder is a broker-dealer that will
receive Exchange Notes for its own
account in exchange for Private Notes
that were acquired as a result of
market-making activities or other
trading activities, such Holder will be
required to acknowledge in the Letter
of Transmittal that such Holder will
deliver a prospectus in connection with
any resale of such Exchange Notes;
however, by so acknowledging and by
delivering a prospectus, such Holder
will not be deemed to admit that it is
an "underwriter" within the meaning of
the Securities Act. See "The Exchange
Offer -- Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL
OWNERS.............................. Any beneficial owner whose Private
Notes are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and who wishes
to tender such Private Notes in the
Exchange Offer 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 such owner's Private Notes,
either make appropriate arrangements to
register ownership of the Private 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 and may not be able
to be completed prior to the Expiration
Date. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES...... Holders of Private Notes who wish to
tender their Private Notes and whose
Private Notes are not immediately
available or who cannot deliver their
Private Notes, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal
to the Exchange Agent prior to the
Expiration Date must tender their
Private Notes according to the
guaranteed delivery procedures set
forth under "The Exchange
Offer -- Guaranteed Delivery
Procedures."
10
<PAGE> 14
ACCEPTANCE OF THE PRIVATE NOTES AND
DELIVERY OF THE EXCHANGE NOTES...... Subject to the satisfaction or waiver
of the conditions to the Exchange
Offer, the Company will accept for
exchange any and all Private Notes that
are properly tendered in the Exchange
Offer prior to the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the
earliest practicable date following the
Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
WITHDRAWAL RIGHTS................... Tenders of Private Notes may be
withdrawn at any time prior to the
Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
EXCHANGE AGENT...................... Norwest Bank Minnesota, National
Association, is serving as the Exchange
Agent in connection with the Exchange
Offer.
THE EXCHANGE NOTES
The Exchange Offer applies to $100.0 million aggregate principal amount of
the Private Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) Holders of the Exchange
Notes will not be entitled to certain rights of Holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Private Notes (which they replace) and will be issued under, and be
entitled to the benefits of, the Indenture. For further information and for
definitions of certain capitalized terms used below, see "Description of
Exchange Notes."
SECURITIES OFFERED.................. $100.0 million aggregate principal
amount of the Company's 10 1/2% Senior
Subordinated Notes due 2005.
COMPANY............................. Silver Cinemas International, Inc.
MATURITY DATE....................... April 15, 2005.
INTEREST PAYMENT DATES.............. Interest on the Notes will accrue from
the date of original issuance (the
"Issue Date") and will be payable
semi-annually in arrears on each April
15 and October 15, commencing October
15, 1998.
OPTIONAL REDEMPTION................. The Notes will be redeemable, in whole
or in part, at the option of the
Company on or after April 15, 2001, at
the redemption prices set forth herein,
plus accrued and unpaid interest to the
date of redemption. In addition, at any
time on or prior to April 15, 2001, the
Company may, at its option, redeem up
to 35% of the aggregate principal
amount of the Notes originally issued
with the net cash proceeds of one or
more Equity Offerings (as defined), at
a redemption price equal to 110 1/2% of
the aggregate principal amount of the
Notes to be redeemed plus accrued and
unpaid interest to the date of
redemption; provided, however, that,
after giving effect to any such
redemption, at least 65% of the
11
<PAGE> 15
aggregate principal amount of the Notes
originally issued under the Indenture
remains outstanding. See "Description
of Exchange Notes -- Redemption."
CHANGE OF CONTROL................... Upon the occurrence of a Change of
Control (as defined), each holder will
have the right, subject to certain
conditions, to require the Company to
repurchase all or any part of such
holder's Notes at a price equal to 101%
of the aggregate principal amount
thereof, plus accrued and unpaid
interest and Liquidated Damages, if
any, thereon to the date of repurchase.
See "Description of Exchange
Notes -- Change of Control." There can
be no assurance that, in the event of a
Change of Control, the Company would
have sufficient funds to repurchase all
Notes tendered. See "Risk
Factors -- Change of Control."
RANKING............................. The Notes will be general unsecured
senior subordinated obligations of the
Company and will be subordinated in
right of payment to existing and future
Senior Debt (as defined) of the
Company, including indebtedness as a
guarantor under the Revolving Credit
Facility (as defined). The Notes will
also be effectively subordinated to all
secured indebtedness of either the
Company or any of its subsidiaries to
the extent of the assets secured by
such indebtedness. The Notes will rank
pari passu in right of payment with any
future senior subordinated indebtedness
of the Company and senior in right of
payment to all existing and future
subordinated indebtedness of the
Company. As of March 31, 1998, on a pro
forma consolidated basis, the Company
would have had approximately $5.2
million of indebtedness outstanding
which is senior to the Notes. See "Risk
Factors -- Ranking."
GUARANTEES.......................... The Notes will be guaranteed on a
senior subordinated basis by the
Guarantors. The Guarantees will be
general unsecured obligations of the
Guarantors and will be subordinated in
right of payment to all existing and
future Guarantor Senior Debt (as
defined). As of March 31, 1998, on a
pro forma basis, the Guarantors
collectively would have had
approximately $5.1 million of Guarantor
Senior Debt outstanding. See
"Description of Exchange
Notes -- Guarantees."
CERTAIN COVENANTS................... The Indenture governing the Notes (the
"Indenture") will contain certain
covenants that limit the ability of the
Company and its subsidiaries to, among
other things, incur additional
indebtedness, pay dividends or make
investments and certain other
restricted payments, consummate certain
asset sales, enter into certain
transactions with affiliates, incur
liens, permit payment or dividend
restrictions to apply to subsidiaries
of the Company, merge or consolidate
with any other person or sell, assign,
transfer, lease, convey or other-
12
<PAGE> 16
wise dispose of all or substantially
all of the assets of the Company. In
addition, under certain circumstances,
the Company will be required to offer
to purchase the Notes, in whole or in
part, at a purchase price equal to 100%
of the principal amount thereof plus
accrued and unpaid interest, if any, to
the date of repurchase, with the
proceeds of certain Asset Sales (as
defined). All of such covenants are
subject to significant qualifications
and exceptions. See "Description of
Exchange Notes -- Certain Covenants."
RISK FACTORS
Prospective investors should carefully consider the information set forth
under the caption "Risk Factors" and all other information set forth in this
Prospectus in connection with the Exchange Offer before making an investment in
the Exchange Notes.
13
<PAGE> 17
SUMMARY PRO FORMA FINANCIAL DATA AND OPERATING DATA
The following summary pro forma financial data was derived in part from,
and should be read in conjunction with the Consolidated Financial Statements,
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Financial Data," including in
each case the notes thereto, included elsewhere in this Prospectus. The "Pro
Forma Financial Data" for the year ended December 31, 1997 and the three months
ended March 31, 1998 gives effect to: (i) the Acquisitions; (ii) the Private
Offering; (iii) the purchase on March 3, 1998, by Brentwood of an aggregate of
$10.0 million of additional equity of Silver Cinemas consisting of Series A
Preferred Stock and Common Stock and the purchase on April 16, 1998 by DLJ Fund
Investment Partners II, L.P. of $3.0 million of equity of Silver Cinemas
consisting of Series A Preferred Stock and Common Stock (together with the
Brentwood purchase, the "Equity Contribution"); and (iv) the repayment of the
Old Credit Facility and execution of the Revolving Credit Facility, as if each
transaction had occurred on January 1, 1997 for both statements of operations or
as of the balance sheet date.
The Pro Forma Financial Data does not purport to be indicative of the
Company's financial position or results of operations that would actually have
been obtained had the Transactions been completed at the date or as of the
beginning of the period presented, or to project the Company's financial
position or results of operations at any future date or for any future period.
(IN THOUSANDS, EXCEPT RATIOS AND THEATER DATA)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Admissions................................................ $72,872 $18,916
Concessions............................................... 30,965 7,839
Other..................................................... 2,451 556
------- -------
Total............................................. 106,288 27,311
Costs and Expenses:
Film rentals.............................................. 31,017 8,207
Concession supplies....................................... 4,993 1,175
Salaries and wages........................................ 18,282 4,645
Facilities................................................ 16,586 4,280
Advertising............................................... 4,482 700
Utilities and other....................................... 13,156 3,414
General and administrative expenses....................... 5,712 1,605
Depreciation and amortization............................. 9,226 2,421
------- -------
Total............................................. 103,454 26,447
------- -------
Operating income............................................ 2,834 864
Interest expense(1)......................................... 11,996 3,000
Interest (income) and other expense, net.................... (67) (22)
------- -------
Income (loss) before income taxes........................... (9,095) (2,114)
Income tax expense.......................................... 100 75
------- -------
Net income (loss)........................................... $(9,195) $(2,189)
======= =======
OTHER FINANCIAL DATA:
EBITDA(2)................................................... $12,060 $ 3,285
Cash interest expense(3).................................... 11,196 2,800
Deficiency of earnings to fixed charges(4).................. (9,095) (2,114)
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
PRO FORMA AS OF
MARCH 31, 1998
---------------
<S> <C>
THEATER DATA:
Theaters.................................................... 106
Screens..................................................... 524
BALANCE SHEET DATA:
Cash and cash equivalents................................... $14,867
Total assets................................................ 139,932
Total debt.................................................. 105,238
Stockholders' equity........................................ 26,139
</TABLE>
- ---------------
(1) Interest expense includes amortization of debt issuance costs of $800 and
$200 for the year ended December 31, 1997 and the three months ended March
31, 1998, respectively.
(2) The term EBITDA, as used herein, represents operating income plus
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, the Company has included information concerning EBITDA in this
Prospectus because it is used by certain investors and analysts as a measure
of a company's ability to service its debt obligations. EBITDA should not be
used as an alternative to, or be considered more meaningful than, operating
income, net income, or cash flow as an indicator of the Company's operating
performance.
(3) Cash interest expense excludes amortization of debt issuance costs of $800
and $200 for the year ended December 31, 1997 and the three months ended
March 31, 1998, respectively.
(4) Earnings consist of net loss before taxes, 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.
(5) The Pro Forma Financial Data reflect costs savings and revenue enhancements
resulting from the Acquisitions related to: (i) increased other revenues
from new screen advertising agreements; (ii) reduced concession supplies
costs associated with a new fountain drink contract negotiated by the
Company as a result of the higher combined drink sales; (iii) reduced
expenses associated with new insurance agreements negotiated by the Company
as a result of the higher combined attendance and a more diversified real
estate portfolio; and (iv) reduced general and administrative expenses as a
result of the absorption of such costs by the Company's post-Transactions
overhead structure.
15
<PAGE> 19
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider all of the information contained
in this Prospectus and, in particular, should evaluate the following risk
factors. Certain statements in this Prospectus that are not historical fact
constitute "forward-looking statements." Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results of the Company to be materially different from results expressed
or implied by such forward-looking statements. Such risks, uncertainties and
other factors include, but are not limited to, the following:
FAILURE TO EXCHANGE PRIVATE NOTES
The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, Holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Private
Notes for exchange. Private Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
Holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own accounts in exchange for Private Notes, where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. To
the extent that Private Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Private Notes
could be adversely affected due to the limited amount, or "float," of the
Private Notes that are expected to remain outstanding following the Exchange
Offer. Generally, a lower "float" of a security could result in less demand to
purchase such security and could, therefore, result in lower prices for such
security. For the same reason, to the extent that a large amount of Private
Notes are not tendered or are tendered and not accepted in the Exchange Offer,
the trading market for the Exchange Notes could be adversely affected. See "Plan
of Distribution" and "The Exchange Offer."
ABSENCE OF A PUBLIC MARKET
The Exchange Notes have no established trading market and will not be
listed on any securities exchange. The Initial Purchasers have advised the
Company that they intend to make a market in the Notes as permitted by
applicable laws and regulations; however, the Initial Purchasers are not
obligated to do so, and may discontinue any such market making activities at any
time without notice. In addition, such market making activity may be limited
during the Exchange Offer. Therefore, there can be no assurance that an active
market for the Notes will develop. If a trading market develops for the Exchange
Notes future trading prices of such securities will depend on many factors,
including, among other things, prevailing interest rates, the market for similar
securities, the performance of the Company and other factors. In addition, based
on such factors, the Notes may trade at a discount from their initial offering
price. See "The Exchange Offer" and "Plan of Distribution."
SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS
As a result of the Transactions, the Company is highly leveraged and has
substantial indebtedness and debt service obligations. At March 31, 1998, on a
pro forma basis after giving effect to the Transactions, the Company's total
indebtedness, on a consolidated basis, would have been approximately $105.2
million. In addition, subject to the restrictions of the Indenture and expected
to be imposed by the Revolving Credit Facility, the Company and its Restricted
Subsidiaries may incur additional indebtedness, including Senior Debt and
Guarantor Senior Debt, from time to time. See "Description of Exchange
Notes -- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness."
16
<PAGE> 20
The level of the Company's leverage may have important consequences for the
Company, including: (i) the ability of the Company to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes may be impaired or such financing may not be on terms favorable to the
Company; (ii) a substantial portion of the Company's cash flow will be used to
pay the Company's interest expense and under certain conditions to repay
indebtedness, which will reduce the funds that would otherwise be available to
the Company for its operations and future business opportunities; (iii) a
decrease in net operating cash flows or an increase in expenses of the Company
could make it difficult for the Company to meet its debt service requirements
and force it to modify its operations; (iv) the Company may be more highly
leveraged than its competitors, which may place it at a competitive
disadvantage; and (v) the Company's leverage may limit its flexibility to react
to changes in its operating environment or economic conditions, making it more
vulnerable to a downturn in its business or the economy generally. Any inability
of the Company to service its indebtedness or obtain additional financing, as
needed, would have a material adverse effect on the Company.
The Company's ability to pay principal of and interest and Liquidated
Damages, if any, on the Notes and to satisfy its other debt obligations will
depend upon its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. The Company's ability to service its
debt as it becomes due will require significant growth in its operating cash
flow. If the Company is unable to service its indebtedness, it will be forced to
take actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There can be no assurance that any of these remedies can be effected on
satisfactory terms, if at all, or that the Company will be successful in
improving its cash flow by a sufficient magnitude or in a timely manner.
HOLDING COMPANY STRUCTURE; UNSECURED STATUS OF NOTES
Silver Cinemas is a holding company with no direct operations and no
significant assets other than the stock of the Guarantors. The Notes will be
general unsecured obligations of the Company and will rank pari passu in right
of payment with all existing and future senior subordinated indebtedness of the
Company, if any, and junior in right of payment to all existing and future
senior indebtedness of Silver Cinemas, if any. Silver Cinemas does not currently
have any other existing debt other than its guarantee of the obligations of its
subsidiaries under the Revolving Credit Facility and the debt of its
subsidiaries. In addition, Silver Cinemas has granted liens on its assets,
including a pledge of the stock of the Guarantors to secure its guarantee of the
borrowings under the Revolving Credit Facility and the Guarantors have granted
liens on substantially all of their assets as security for the obligations under
the Revolving Credit Facility or the guarantees thereof. Because the Notes are
not secured by any assets, in the event of a dissolution, bankruptcy,
liquidation or reorganization of Silver Cinemas or the Guarantors, holders of
the Notes may receive less ratably than the secured creditors under the
Revolving Credit Facility.
Silver Cinemas is dependent on the cash flow of the Guarantors to meet its
obligations, including the payment of interest and principal obligations on the
Notes when due. Accordingly, Silver Cinemas' ability to make principal, interest
and other payments to holders of the Notes when due is dependent on the receipt
of sufficient funds from the Guarantors. Receipt of such funds will be
restricted by the terms of existing and future indebtedness of the Guarantors,
including the Revolving Credit Facility. See "Description of Revolving Credit
Facility."
RANKING
The Notes and Guarantees will be subordinated in right of payment to all
Senior Debt and Guarantor Senior Debt of the Company and its subsidiaries,
including the Revolving Credit Facility. As of March 31, 1998, on a pro forma
basis giving effect to the Transactions, the Company and its Guarantors would
have had approximately $5.2 million of Senior Debt and Guarantor Senior Debt,
all of which would effectively rank senior to the Notes and the Guarantees. In
the event of a bankruptcy, liquidation, dissolution, reorganization or other
winding up of the Company or any of the Guarantors, the assets of the Company or
the Guarantors, as the case may be, will be available to pay the Notes and the
Guarantees only after all Senior Debt and
17
<PAGE> 21
Guarantor Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on the Notes or Guarantees. Additional
Senior Debt and Guarantor Senior Debt may be incurred by the Company and the
Guarantors from time to time, subject to certain restrictions. See "Description
of Revolving Credit Facility" and "Description of Exchange
Notes -- Subordination."
BUSINESS RISKS ASSOCIATED WITH THE ACQUISITIONS
There can be no assurances that the Acquisitions will perform as expected
or that the returns from such properties will be sufficient to support the
indebtedness incurred to acquire, or the capital expenditures needed to develop,
such properties. In particular, there can be no assurance that certain theater
level payroll reductions reflected in the "Management's Discussion and Analysis
of Financial Conditions and Results of Operations -- Acquisition Synergies" will
be achieved. The Company developed such reductions based on a general analysis
of its operations and those of StarTime and Landmark. Those operations are not
directly comparable due to differences in, among other things, screens per
theater and markets served. In addition, such payroll reductions will need to be
implemented at each individual theater by the theater manager taking into
account the individual characteristics of the theater, including its employees,
number of screens, physical layout and customer base. The implementation of such
reduction at individual StarTime and Landmark theaters may not be achievable as
expected in the Company's overall plan.
LIMITED OPERATING HISTORY; ACQUISITION STRATEGY
The Company was formed in May 1996 and has limited experience in
implementing its operating policies and strategies on a broad, national basis.
In addition to the Acquisitions, the Company intends to acquire other theaters
or groups of theaters. The operation of the Company and any such acquisitions
may require additional personnel, assets and cash expenditures and there can be
no assurance that the Company will be able to successfully expand and operate
such acquisitions profitably. There can be no assurance that the Company will
anticipate and respond effectively to all of the changing demands that its
expanding operations will have on the Company's management, information and
operating systems and cash reserves and the failure of the Company to meet
challenges of any such expansion could have a material adverse effect on the
Company's results of operations and financial condition.
The growth of the Company has been dependent mainly on the Company's
ability to acquire theaters. There can be no assurance that the Company will be
able to identify additional theaters for acquisition in the future, or that such
theaters will be available for acquisition at prices the Company considers
reasonable. Failure to acquire additional theaters or the increased prices the
Company might be required to pay for additional acquisitions could have a
material adverse effect on the Company's growth prospects, as well as its
financial condition and results of operations.
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."
DEPENDENCE ON MOTION PICTURE PRODUCTION AND PERFORMANCE; RELATIONSHIP WITH FILM
DISTRIBUTORS
The Company's business is dependent upon a number of factors, including 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 studios or
independent producers could have a material adverse effect on the Company's
business and results of operations. In addition, the Company's business depends
to a significant degree on maintaining good relations with the film distributors
who are responsible for allocating films to the Company's theaters. If the
Company's relationship with one or more of such film distributors were to
deteriorate for any reason, the Company might experience difficulties in
scheduling the most commercially successful films in its theaters, thereby
adversely affecting the Company's results of operations. See "Business -- Film
Licensing."
18
<PAGE> 22
COMPETITION
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 its
markets, the Company competes with first-run, second-run and specialty-film
exhibitors. Many of the Company's current and potential competitors have
financial, personnel and other resources substantially greater than those of the
Company. See "Business -- Competition" for more detailed information on the
competitive environment faced by the Company.
CHANGE OF CONTROL
The Indenture will provide that, upon the occurrence of a Change of Control
(as defined), the Company will make an offer to purchase all or any part of the
Notes at a price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase. The Revolving
Credit Facility will prohibit the Company from repurchasing any Notes and will
require the Company to first repay outstanding borrowings and permanently reduce
the commitments thereunder. The Revolving Credit Facility will provide that
certain change of control events with respect to the Company would constitute a
default thereunder. Any future credit agreements or other agreements relating to
Senior Debt or Guarantor Senior Debt (as defined) to which the Company or its
subsidiaries becomes a party are likely to contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing the Notes, or if the Company is required to make
an Asset Sale Offer pursuant to the terms of the Notes, the Company could seek
the consent of its lenders to purchase the Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or refinance such borrowings, the Company would remain prohibited
from purchasing the Notes. In such case, the Company's failure to purchase
tendered Notes would constitute an Event of Default (as defined) under the
Indenture. If, as a result thereof, a default occurs with respect to any Senior
Debt or Guarantor Senior Debt, the subordination provisions of the Indenture
would likely restrict payments to the holders of Notes. See "Description of
Exchange Notes -- Change of Control."
RESTRICTIVE COVENANTS OF REVOLVING CREDIT FACILITY; INABILITY TO BORROW
ADDITIONAL AMOUNTS
The Revolving Credit Facility contains a number of covenants that
significantly restrict the operations of the Company. In addition, the Company
is required to comply with specified financial ratios and tests under the
Revolving Credit Facility, including the interest coverage ratio, the fixed
charge coverage ratio and the leverage ratio. If the Company does not meet such
ratios, one consequence will be that the Company will not be able to borrow
under the Revolving Credit Facility and may therefore lack the funds necessary
to pursue its acquisition strategy and fund its capital expenditure needs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Any future credit agreements or
other agreements relating to Senior Debt or Guarantor Senior Debt are likely to
contain similar covenants. There can be no assurance that the Company will be
able to comply with such restrictions or covenants in the future. The Company's
ability to comply with such covenants and other restrictions may be affected by
events beyond its control, including prevailing economic, financial and industry
conditions. The breach of any such covenants or restrictions would result in a
default under the Revolving Credit Facility that would permit the lenders
thereunder to declare all amounts outstanding thereunder to be immediately due
and payable, together with accrued and unpaid interest, and terminate their
commitments to make further extensions of credit thereunder. See "Description of
Revolving Credit Facility."
SEASONALITY
The Company's revenues have historically been seasonal, coinciding with the
timing of releases of films by distributors. The Company's quarterly results may
also be affected by the timing of the development or acquisition of theaters.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality."
19
<PAGE> 23
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the issuance of the Guarantees. To the extent that a court were to
find that (x) a Guarantee was incurred by a Guarantor with intent to hinder,
delay or defraud any present or future creditor or such Guarantor contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (y) such Guarantor did not receive fair
consideration or reasonably equivalent value for issuing its Guarantee and such
Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of the
issuance of its Guarantee, (iii) was engaged or about to engage in a business or
transaction for which the remaining assets of such Guarantor constituted
unreasonably small capital to carry on its business or (iv) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, the court could avoid or subordinate such Guarantee in favor of
the creditors of such Guarantor. Among other things, a legal challenge of any
Guarantee may focus on the benefits, if any, realized by such Guarantor as a
result of the Company's issuance of the Notes. The Indenture will contain a
savings clause, which generally will limit the obligations of any Guarantor
under its Guarantee to the maximum amount as will, after giving effect to all of
the liabilities of such Guarantor, result in such obligation not constituting a
fraudulent conveyance. To the extent a Guarantee was avoided or limited as a
fraudulent conveyance or held unenforceable for any other reason, holders of the
Notes would cease to have any claim against such Guarantor and would be
creditors solely of the Company. In such event, the claims of holders of the
Notes against such Guarantor would be subject to the prior payment of all
liabilities (including trade payables) of such Guarantor. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any avoided
portion of any Guarantee.
The measure of insolvency for the purposes of the foregoing considerations
will vary depending upon the law applied in any such proceeding. Generally,
however, a guarantor may be considered insolvent if the sum of its debts,
including contingent liabilities, is greater than the fair marketable value of
all of its assets at a fair valuation or if the present fair marketable value of
its assets is less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and mature. Based upon financial and other information, the
Company believes that the Guarantees are being incurred for proper purposes and
in good faith and that the Guarantors are solvent and will continue to be
solvent after issuing the Guarantees, will have sufficient capital for carrying
on their business after such issuance and will be able to pay their debts as
they mature. There can be no assurance, however, that a court passing on such
standards would agree with such beliefs. See "Description of Exchange Notes --
Guarantees."
20
<PAGE> 24
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on April 16, 1998 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently sold the Private Notes to "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A. As a condition to the sale of the Private
Notes, the Company and the Initial Purchasers entered into the Registration
Rights Agreement on April 16, 1998. Pursuant to the Registration Rights
Agreement, the Company agreed that, unless the Exchange Offer is not permitted
by applicable law or Commission policy, it would (i) file with the Commission a
Registration Statement under the Securities Act with respect to the Exchange
Notes within 60 days after the Closing Date, (ii) use its best efforts to cause
such Registration Statement to become effective under the Securities Act within
150 days after the Closing Date and (iii) commence the Exchange Offer and use
its best efforts to issue, on or prior to 30 days after the date on which the
Registration Statement was declared effective by the Commission, Exchange Notes
in exchange for all Private Notes tendered prior thereto in the Exchange Offer.
A copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement. The Registration Statement is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement and
the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a Holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such Holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges Private Notes for Exchange Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in a
distribution of the Exchange Notes, will be allowed to resell 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 the distribution of the Exchange Notes or is a broker-dealer,
such Holder cannot rely on the position of the staff of the Commission
enumerated in certain no-action letters issued to third parties 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 broker-dealer that receives Exchange Notes for its
own account in exchange for Private Notes, where such Private Notes were
acquired by such 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. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes where such Private Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
has agreed to make this Prospectus, as it may be amended or supplemented from
time to time, available to broker-dealers for use in connection with any resale
for a period of 180 days after the Expiration Date. See "Plan of Distribution."
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 Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000
21
<PAGE> 25
principal amount of outstanding Private Notes surrendered pursuant to the
Exchange Offer. Private 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 Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) Holders of the Exchange Notes will not
be entitled to any of the rights of Holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Private Notes (which they replace) and will be issued under, and be entitled
to the benefits of, the Indenture, which also authorized the issuance of the
Private Notes, such that both series of Notes will be treated as a single class
of debt securities under the Indenture.
As of the date of this Prospectus, $100.0 million in aggregate principal
amount of the Private Notes are outstanding. Only a registered Holder of the
Private Notes (or such Holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered Holders of the Private Notes entitled to participate in the Exchange
Offer.
Holders of the Private Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private 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
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private 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 Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, 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 City time on
, 1998, 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 (i) notify the
Exchange Agent of any extension by oral or written notice, and (ii) mail to the
registered Holders an announcement thereof which shall include disclosure of the
approximate number of Private Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "-- Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination 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. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
22
<PAGE> 26
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 10 1/2% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on each
April 15 and October 15, commencing October 15, 1998. Holders of Exchange Notes
will receive interest on October 15, 1998 from the date of initial issuance of
the Private Notes. Holders of Private Notes that are accepted for exchange will
be deemed to have waived the right to receive any interest accrued on the
Private Notes.
PROCEDURES FOR TENDERING
Only a registered Holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a Holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below.
The tender by a Holder that is not withdrawn prior to the Expiration Date
will constitute an 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 PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE 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(s) of the Private Notes whose Private 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. 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 such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private 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.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered Holder who has not completed
the box titled "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 made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
23
<PAGE> 27
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Private Notes listed therein, such Letter of
Transmittal 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 Private Notes.
If the Letter of Transmittal or any Private 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 Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private 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 Private
Notes not properly tendered or any Private Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Private 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 Private 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 Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "-- Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each Holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such Holder of
Private Notes in connection with the Exchange Offer are being acquired by such
Holder in the ordinary course of the respective business of such Holder, (ii)
such Holder has no arrangement or understanding with any person to participate
in the distribution of the Exchange Notes, (iii) if such Holder is a resident of
the State of California, it falls under the self-executing institutional
investor exemption set forth under Section 25102(i) of the Corporate Securities
Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky
Regulations, (iv) if such Holder is a resident of the Commonwealth of
Pennsylvania, it falls under the self-executing institutional investor exemption
set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities
Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an
interpretive opinion dated November 16, 1985, (v) such Holder acknowledges and
agrees that any person who is a broker-dealer registered under the Exchange Act
or is participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities 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 Commission set forth in certain no-action letters,
(vi) such Holder understands that a secondary resale transaction described in
clause (v) above and any resales of Exchange Notes obtained by such Holder in
exchange for Private Notes acquired by such Holder directly from the Company
should be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (vii) such Holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. If the Holder is a
broker-dealer that will
24
<PAGE> 28
receive Exchange Notes for such Holder's own account in exchange for Private
Notes that were acquired as a result of market-making activities or other
trading activities, such Holder will be required to acknowledge in the Letter of
Transmittal that such Holder will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, such Holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the Holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering Holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
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 substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Private Notes and
the principal amount of Private 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 a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, 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 executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Private
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within 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 Private Notes according to the
guaranteed delivery procedures set forth above.
25
<PAGE> 29
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to 5:00 p.m. on the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Private Notes) and (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, whose
determination shall be final and binding on all parties. Any Private 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 Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer -- 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 for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering Holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders to
withdraw such Private Notes (see "-- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders of the Private Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of Holders of the Private Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Company's continuing obligations (i) to indemnify such Holders (including
any broker-dealers) and certain parties related to such Holders against certain
liabilities (including liabilities under the Securities Act), (ii) to provide,
upon the request of any Holder of a transfer-restricted Private Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Private Notes pursuant to Rule 144A, (iii) to use its
best efforts to keep the Registration Statement effective to the extent
necessary to ensure that it is available for resales of transfer-restricted
Private Notes by broker-dealers for a period of up to one year from the
Expiration Date and (iv) to provide copies of the latest version of the
Prospectus to broker-dealers upon their request during such one year period.
LIQUIDATED DAMAGES
In the event of a Registration Default (as defined in the Registration
Rights Agreement), the Company will pay Liquidated Damages to each Holder of
Transfer Restricted Securities (as defined below), with respect to the first
90-day period immediately following the occurrence of such Registration Default
in an
26
<PAGE> 30
amount equal to $0.05 per week per $1,000 principal amount of Private Notes
constituting Transfer Restricted Securities held by such Holder. Transfer
Restricted Securities shall mean each Private Note until (i) the date on which
such Private Note has been exchanged for an Exchange Note in the Exchange Offer,
(ii) following the exchange by a broker-dealer in the Exchange Offer of such
Private Note for one or more Exchange Notes, the date on which such Exchange
Notes are sold to a purchaser who receives from such broker-dealer on or prior
to the date of such sale a copy of this Prospectus, (iii) the date on which such
Private Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement (as defined in
the Registration Rights Agreement) or (iv) the date on which such Private Note
is distributed to the public pursuant to Rule 144(k) under the Securities Act.
The amount of Liquidated Damages will increase by an additional $0.05 per week
per $1,000 principal amount of Private Notes constituting Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $0.50
per week per $1,000 principal amount of Private Notes constituting Transfer
Restricted Securities. Following the cure of all Registration Defaults, the
accrual of all Liquidated Damages will cease. The filing and effectiveness of
the Registration Statement of which this Prospectus is a part and the
consummation of the Exchange Offer will eliminate all rights of the Holders of
Private Notes eligible to participate in the Exchange Offer to receive damages
that would have been payable if such actions had not occurred.
Holders of Transfer Restricted Securities will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be required to
deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time periods set forth in the Registration Rights Agreement in order to have
their Transfer Restricted Securities included in the Shelf Registration
Agreement and benefit from the provisions regarding Liquidated Damages set forth
above.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association, has been appointed as
Exchange Agent of 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>
By Registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave. S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
By Overnight Delivery: By Facsimile:
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations
Norwest Center Confirm by Telephone
Sixth and Marquette (612) 667-9764
Minneapolis, MN 55480-0113
</TABLE>
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, 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.
27
<PAGE> 31
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to a person whom the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
28
<PAGE> 32
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Private Offering, which were approximately $96.0 million after
deducting discounts, commissions and estimated fees and expenses incurred in
connection therewith, were applied to repay approximately $2.6 million
outstanding under the Old Revolving Credit Facility and to finance the
Acquisitions. The remainder will be used to finance the construction of
identified new theaters and general corporate purposes. For a description of the
indebtedness repaid with the proceeds of the Private Offering, see "Description
of Certain Indebtedness."
The following table sets forth the estimated sources and uses of funds in
connection with the Acquisitions, the Private Offering, the Equity Contribution,
the repayment of the Old Credit Facility and execution of the Revolving Credit
Facility (collectively, the "Transactions"), pro forma as of March 31, 1998.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
TOTAL SOURCES:
Senior Subordinated Notes.................... $100,000
Equity Contribution.......................... 3,000
--------
Total Sources...................... $103,000
========
TOTAL USES:
Landmark Acquisition......................... $ 62,204
StarTime Acquisition......................... 17,135
AMC Acquisition.............................. 1,285
Repay Old Credit Facility.................... 2,625
Transaction fees and expenses(1)............. 5,000
Excess cash proceeds......................... 14,751
--------
Total Uses......................... $103,000
========
</TABLE>
- ---------------
(1) Includes fees of approximately $1.0 million related to the Revolving Credit
Facility.
(2) During the three months ended March 31, 1998, the Company received a $10.0
million equity investment. These proceeds were used to repay approximately
$3.9 million outstanding under the Old Revolving Credit Facility, acquire
certain theater assets from StarTime and AMC for approximately $4.5 and $.4
million, respectively, and general corporate purposes.
29
<PAGE> 33
CASH AND CASH EQUIVALENTS AND CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of Silver Cinemas as of March 31, 1998 on an actual basis and on
a pro forma basis to reflect the Transactions. See "Use of Proceeds." This table
should be read in conjunction with the consolidated financial statements of
Silver Cinemas, Landmark and StarTime, including the related notes thereto,
"Unaudited Pro Forma Financial Data" and "Selected Consolidated Financial and
Operating Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------
ACTUAL PRO FORMA
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 116 $ 14,867
======= ========
Debt (including current maturities):
Old Credit Facility(1).................................... $ 2,625 $ --
Revolving Credit Facility(2).............................. -- --
10 1/2% Senior Subordinated Notes due 2005................ -- 100,000
Capital leases............................................ -- 4,923
Other..................................................... 95 315
------- --------
Total debt........................................ 2,720 105,238
------- --------
Stockholders' equity(3)..................................... 23,139 26,139
------- --------
Total capitalization........................................ $25,859 $131,377
======= ========
</TABLE>
- ---------------
(1) Concurrently with the Private Offering, the Company paid all of the existing
indebtedness under the Old Credit Facility (approximately $20.1 million as
of April 9, 1998).
(2) DLJ Capital Funding, Inc. has committed to provide the Company with a five
year revolving credit facility with aggregate availability of $40.0 million.
See "Description of Revolving Credit Facility."
(3) On March 3, 1998, the Company issued an aggregate of $10.0 million of
additional equity consisting of Series A Preferred Stock and Common Stock to
Brentwood. Concurrently with the Private Offering, DLJ Fund Investment
Partners II, L.P. purchased $3.0 million of Silver Cinemas' equity
consisting of Series A Preferred Stock and Common Stock.
30
<PAGE> 34
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Pro Forma Financial
Data") has been derived by the application of pro forma adjustments to the
historical consolidated financial statements of Silver Cinemas which give effect
to the Transactions as if each such transaction had been completed at the date
or as of the beginning of the period presented.
The Pro Forma Financial Data assume that the Company acquired all of the
theaters subject to the StarTime Asset Purchase Agreement and the Landmark Asset
Purchase Agreement at the date or as of the beginning of the period presented.
The purchase prices of the Acquisitions were determined based upon arm's
length negotiations between Silver Cinemas and the respective sellers and have
been allocated primarily to theater properties and equipment and goodwill. These
preliminary purchase price allocations may change upon the final determination
of the fair market values of the net assets acquired.
The Pro Forma Financial Data does not give effect to any events occurring
after consummation of the Acquisitions, other than increased other revenues from
new screen advertising agreements, reduced concession supplies costs associated
with a new fountain drink contract and reduced expenses associated with new
insurance agreements, which were negotiated by the Company as a result of the
higher combined attendance and drink sales and a more diversified real estate
portfolio anticipated from the Acquisitions; and reduced general and
administrative expenses as a result of the absorption of such costs by the
Company's post-Transactions overhead structure.
Although management believes that additional revenue enhancements, cost
reductions, and operating expense synergies will be realized after the Company
has integrated the acquired businesses and has consolidated administrative
functions (which may take up to a year to achieve), including (i) increased
other revenues associated with an increase in vending machine sales and other
advertising revenue, (ii) reduced theater-level payroll at StarTime and Landmark
associated with a reduction in theater level employees, the reorganization of
employees' work schedules and the diversification of employees' functions at
Landmark theaters; (iii) reduced advertising expenses at StarTime as a result of
consolidated advertisements and utilizing free directory advertisements in a
local newspaper for the Company's three theaters located in Denver, Colorado;
and (iv) elimination of one-time items associated with outside consultants, such
adjustments are not provided for in the definition of "pro forma" pursuant to
Regulation S-X under the Securities Act and these items have not been reflected
in the Pro Forma Financial Data. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Acquisition Synergies," "Risk
Factors -- Business Risks Associated with the Acquisitions" and "Risk
Factors -- Risk of Failure to Obtain Landlord Consents."
The Pro Forma Financial Data is subject to numerous assumptions and
estimates that are subject to change and, in many cases, are beyond the control
of the Company. The Pro Forma Financial Data should be read in conjunction with
the historical financial statements of Silver Cinemas, Landmark and StarTime and
the notes thereto.
31
<PAGE> 35
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SILVER HISTORICAL PRO FORMA
CINEMAS STARTIME LANDMARK AMC(2) COMBINED ADJUSTMENTS PRO FORMA
------- -------- -------- ------ ---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Admissions.................. $10,368 $16,554 $45,903 $1,547 $74,372 $(1,500)(3) $72,872
Concessions................. 8,098 12,522 10,061 1,164 31,845 (880)(3) 30,965
Other....................... 296 756 990 61 2,103 348(3,4) 2,451
------- ------- ------- ------ ------- ------- -------
Total................ 18,762 29,832 56,954 2,772 108,320 (2,032) 106,288
Costs and expenses:
Costs of operations:
Film rentals.............. 4,484 5,710 20,734 627 31,555 (538)(3) 31,017
Concession supplies....... 1,462 2,027 2,096 193 5,778 (785)(3,4) 4,993
Salaries and wages........ 3,065 5,643 9,448 668 18,824 (542)(3) 18,282
Facility leases........... 3,312 7,529 6,067 381 17,289 (703)(3) 16,586
Advertising............... 755 1,280 2,478 161 4,674 (192)(3) 4,482
Utilities and other....... 3,024 5,249 4,999 542 13,814 (658)(3,4) 13,156
General and
administrative.......... 1,901 1,393 5,191 8,485 (2,773)(5) 5,712
Depreciation and
amortization............ 1,479 1,786 4,929 8,194 1,032(6,7) 9,226
------- ------- ------- ------ ------- ------- -------
Total................ 19,482 30,617 55,942 2,572 108,613 (5,159) 103,454
------- ------- ------- ------ ------- ------- -------
Operating income (loss)....... (720) (785) 1,012 200 (293) 3,127 2,834
Interest expense.............. (353) (941) (748) (2,042) (9,154)(8) (11,196)
Amortization of debt issue
costs....................... (55) (55) (745)(8) (800)
Interest income and other
(expense), net.............. (28) 95 67 67
------- ------- ------- ------ ------- ------- -------
Income (loss) before income
taxes....................... (1,156) (1,631) 264 200 (2,323) (6,772) (9,095)
Income tax expense
(benefit)................... 17 (618) 496 (105) 205(10) 100
------- ------- ------- ------ ------- ------- -------
Net income (loss)............. $(1,173) $(1,013) $ (232) $ 200 $(2,218) $(6,977) $(9,195)
======= ======= ======= ====== ======= ======= =======
EBITDA(1)..................... $ 759 $ 1,001 $ 5,941 $ 200 $ 7,901 $ 4,159 $12,060
======= ======= ======= ====== ======= ======= =======
</TABLE>
32
<PAGE> 36
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SILVER HISTORICAL PRO FORMA
CINEMAS STARTIME LANDMARK AMC(2) COMBINED ADJUSTMENTS PRO FORMA
------- -------- -------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Admissions........... $2,560 $ 3,582 $12,643 $325 $19,110 $ (194)(3) $18,916
Concessions.......... 2,129 2,799 2,813 244 7,985 (146)(3) 7,839
Other................ 113 128 204 15 460 96(3,4) 556
------ ------- ------- ---- ------- ------- -------
Total......... 4,802 6,509 15,660 584 27,555 (244) 27,311
COSTS AND EXPENSES:
Cost of Operations:
Film Rentals....... 986 1,203 5,924 145 8,258 (51)(3) 8,207
Concession
supplies......... 309 416 581 49 1,355 (180)(3,4) 1,175
Salaries and
wages............ 855 1,253 2,470 140 4,718 (73)(3) 4,645
Facility leases.... 780 1,939 1,646 81 4,446 (166)(3) 4,280
Advertising........ 144 280 278 31 733 (33)(3) 700
Utilities and
other............ 954 1,105 1,295 130 3,484 (70)(3,4) 3,414
General and
administrative..... 590 315 1,357 2,262 (657)(5) 1,605
Depreciation and
amortization....... 476 387 1,290 2,153 268(6,7) 2,421
------ ------- ------- ---- ------- ------- -------
Total......... 5,094 6,898 14,841 576 27,409 (962) 26,447
------ ------- ------- ---- ------- ------- -------
Operating income
(loss)............... (292) (389) 819 8 146 718 864
Interest expense....... (157) (163) (162) (482) (2,318)(8) (2,800)
Amortization of debt
issue costs.......... (34) (34) (166)(8) (200)
Interest income and
other (expense),
net.................. 10 (1,241) (1,231) 1,253(9) 22
------ ------- ------- ---- ------- ------- -------
Income (loss) before
income taxes......... (473) (1,793) 657 8 (1,601) (513) (2,114)
Income tax expense
(benefit)............ 23 (686) 392 (271) 346(10) 75
------ ------- ------- ---- ------- ------- -------
Net income (loss)...... $ (496) $(1,107) $ 265 $ 8 $(1,330) $ (859) $(2,189)
====== ======= ======= ==== ======= ======= =======
EBITDA(1).............. $ 184 $ (2) $ 2,109 $ 8 $ 2,229 $ 986 $ 3,285
====== ======= ======= ==== ======= ======= =======
</TABLE>
33
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER ATTENDEE DATA)
(1) The term EBITDA, as used herein, represents operating income plus
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, the Company has included information concerning EBITDA in this
Prospectus because it is used by certain investors and analysts as a
measure of a company's ability to service its debt obligations. EBITDA
should not be used as an alternative to, or be considered more meaningful
than, operating income, net income, or cash flow as an indicator of the
Company's operating performance.
(2) Derived from the unaudited combined theater-level historical 1997 operating
results of three theaters acquired through the AMC Acquisition.
(3) Reflects the elimination of revenues and costs of theaters not purchased in
the StarTime Acquisition and the Landmark Acquisition and reflects the
Acquisition of Landmark's Main Art Theater, which occurred in June 1997, as
if it had occurred on January 1, 1997.
(4) Reflects an increase in other revenues as a result of new on-screen
advertising agreements not previously in effect for Silver Cinemas and
Landmark. Concession supplies costs have been reduced to reflect cost
savings for Silver Cinemas, StarTime and Landmark associated with the
negotiation of a new fountain drink contract. Utilities and other costs
have been reduced to reflect cost savings associated with the negotiation
of new insurance agreements for Silver Cinemas' theaters. The Company was
able to negotiate these new agreements as a result of the Acquisitions and
the higher combined attendance and drink sales and the more diversified
real estate portfolio of the combined operations. These new agreements are
reflected in the following pro forma adjustments:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
<S> <C> <C>
Increase in other revenue...................... $ 94 $375
Decrease in concession supplies cost........... 163 650
Decrease in utilities and other costs.......... 7 125
</TABLE>
(5) Reflects the elimination of general and administrative costs of $1,143 and
$252 for the year ended December 31, 1997 and the three months ended March
31, 1998, respectively, for StarTime because such costs will be absorbed by
the Company's existing overhead structure after the consummation of the
Acquisitions. In addition, general and administrative expenses of $1,630
and $405 for the year ended December 31, 1997 and the three months ended
March 31, 1998, respectively, have been eliminated for Landmark officers
and administrative employees to be terminated and not replaced and for
employment contract adjustments upon the consummation of the Landmark
Acquisition.
(6) Reflects an increase in depreciation expense to reflect differences between
pro forma depreciation expense based on the fair values of acquired theater
properties and equipment over useful lives of ten to 20 years and
historical depreciation expense over useful lives primarily ranging from
three to 40 years.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
<S> <C> <C>
Pro forma depreciation expense................. $ 1,630 $ 6,081
Historical depreciation expense................ (1,570) (5,984)
------- -------
Pro forma adjustment........................... $ 60 $ 97
======= =======
</TABLE>
(7) Reflects an increase in amortization expense to reflect the difference
between historical amortization expense and amortization of the purchase
price amounts allocated to the fair values of (i) goodwill (over 20 years),
and (ii) other identifiable intangible assets, such as organization costs
and non-competition agreements, over the life of the related intangible
asset (generally four to five years).
34
<PAGE> 38
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
<S> <C> <C>
Pro forma amortization expense:
Goodwill..................................... $ 659 $ 2,610
Other intangible assets...................... 134 535
----- -------
793 3,145
Historical amortization expense:
Goodwill..................................... (447) (1,840)
Other intangible assets...................... (138) (370)
----- -------
Pro forma adjustment................. $ 208 $ 935
===== =======
</TABLE>
(8) Reflects interest expense on the Notes, amortization of debt issue costs
and the elimination of historical interest expense associated with
indebtedness repaid in connection with the Private Offering.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
<S> <C> <C>
Historical combined interest expense........... $ 482 $ 2,097
Less: Amounts in historical combined for
refinanced and extinguished debt............. (307) (1,401)
Add: Interest expense on Senior Subordinated
Notes........................................ 2,625 10,500
Amortization of debt issue costs............. 200 800
------ -------
Pro forma interest expense........... $3,000 $11,996
====== =======
</TABLE>
(9) Reflects the elimination of loss on sale of theater assets to the Company
of $1,253 for StarTime during the three months ended March 31, 1998.
(10) Reflects income tax provision for state income taxes. No federal income tax
provision has been provided due to the net loss in the Unaudited Pro Forma
Consolidated Statements of Operations.
35
<PAGE> 39
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
SILVER ACQUISITION OFFERING
CINEMAS STARTIME LANDMARK ADJUSTMENTS TOTAL ADJUSTMENTS PRO FORMA
------- -------- -------- ----------- -------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 116 $ 319 $ 577 $ (896)(1) $ 116 $14,751(3) $ 14,867
Accounts receivable.................. 221 152 (221)(1) 152 152
Inventories.......................... 148 186 178 (14)(1) 498 498
Prepaid expenses and other........... 211 1,588 943 (2,088)(1) 654 654
------- -------- ------- -------- -------- ------- --------
Total current assets........ 475 2,314 1,850 (3,219) 1,420 14,751 16,171
Theater properties and equipment:
Land................................. 610 1,407 140(2) 2,157 2,157
Buildings............................ 3,880 6,054 320(2) 10,254 10,254
Leasehold interests and
improvements....................... 2,165 27,243 (1,595)(2) 27,813 27,813
Theater furniture and equipment...... 7,041 21,833 4,910 (13,451)(2) 20,333 20,333
Theaters under construction.......... 293 2,149 2,040 (2,150)(2) 2,332 2,332
Less accumulated depreciation and
amortization....................... (937) (11,193) (5,859) 17,052(2) (937) (937)
------- -------- ------- -------- -------- ------- --------
Net......................... 13,052 12,789 35,795 316 61,952 61,952
Goodwill, net........................ 10,711 2,204 21,714 18,074(2) 52,703 52,703
Other assets, net.................... 2,935 83 476 612(2) 4,106 5,000(3) 9,106
------- -------- ------- -------- -------- ------- --------
Total Assets................ $27,173 $ 17,390 $59,835 $ 15,783 $120,181 $19,751 $139,932
======= ======== ======= ======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 600 $ 1,100 $ 4,602 $ (1,932)(1) $ 4,370 $ $ 4,370
Accrued film rentals................. 260 (1) 260 260
Accrued payroll...................... 305 957 (1) 1,262 1,262
Accrued property taxes and other
liabilities........................ 149 501 239 (501)(1) 388 388
Payable to parent company............ 132 (132)(1)
Current portion of capital lease
obligation......................... 284 284 284
Current portion of long term debt.... 6 1,536 171 (1,707)(1) 6 6
------- -------- ------- -------- -------- ------- --------
Total current liabilities... 1,320 3,137 6,385 (4,272) 6,570 6,570
Long term debt:
Existing Credit Facility............. 2,625 2,625 (2,625)(3)
Note payable......................... 89 3,995 1,085 (4,860)(1) 309 309
Capital leases....................... 4,639 4,639 4,639
Senior Subordinated Notes............ 80,624(2) 80,624 19,376(2) 100,000
------- -------- ------- -------- -------- ------- --------
Total long term debt........ 2,714 3,995 5,724 75,764 88,197 16,751 104,948
Other long-term obligations.......... 3,043 6,152 (6,920)(1,2) 2,275 2,275
Redeemable preferred stock........... 3,000 (3,000)(1)
Stockholders' equity:
Preferred stock...................... 25,301 3,802 (3,802)(1) 25,301 2,988(3) 28,289
Common stock......................... 1 1 (1)(1) 1 1
Additional paid-in capital........... 101 1,814 41,046 (42,860)(1) 101 12(3) 113
Stockholder notes receivable......... (214) (214) (214)
Retained earnings (deficit).......... (2,050) (1,402) 528 874(1) (2,050) (2,050)
------- -------- ------- -------- -------- ------- --------
Total stockholders'
equity.................... 23,139 4,215 41,574 (45,789) 23,139 3,000 26,139
------- -------- ------- -------- -------- ------- --------
Total Liabilities and Stockholders'
Equity............................. $27,173 $ 17,390 $59,835 $ 15,783 $120,181 $19,751 $139,932
======= ======== ======= ======== ======== ======= ========
</TABLE>
36
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
(1) Represents the elimination of assets, liabilities, and stockholders' equity
of StarTime and Landmark that were not purchased or assumed in the
Acquisitions.
(2) Represents the allocation of the excess of the cash consideration for
StarTime, Landmark and AMC over the historical carrying value of the net
assets acquired after March 31, 1998 to the fair values of net assets
acquired, as follows:
<TABLE>
<CAPTION>
STARTIME LANDMARK AMC TOTAL
-------- -------- ------ --------
<S> <C> <C> <C> <C>
Cash consideration........................ $ 17,135 $ 62,204 $1,285 $ 80,624
Landmark commitments assumed:
Employment contracts.................... 875 875
Lease commitment........................ 1,400 1,400
Less historical carrying value of net
tangible assets acquired................ (10,827) (26,935) (100) (37,862)
-------- -------- ------ --------
Excess purchase prices.................... $ 6,308 $ 37,544 $1,185 $ 45,037
======== ======== ====== ========
Allocation of excess purchase prices:
Excess fair value of theater properties
and equipment........................ $ 250 $ 2,100 $ -- $ 2,350
Noncompete agreements................... 194 500 694
Goodwill................................ 5,864 34,944 1,185 41,993
-------- -------- ------ --------
Total........................... $ 6,308 $ 37,544 $1,185 $ 45,037
======== ======== ====== ========
</TABLE>
(3) Represents the sources of funds from the Private Offering and the Equity
Contribution, and the related use of the proceeds therefrom, as follows:
<TABLE>
<S> <C>
Sources of Funds:
Senior Subordinated Notes................................. $100,000
Equity Contribution....................................... 3,000
--------
Total sources..................................... $103,000
========
Uses of Funds:
Landmark Acquisition...................................... $ 62,204
StarTime Acquisition...................................... 17,135
AMC Acquisition........................................... 1,285
Repayment of Old Credit Facility.......................... 2,625
Transaction fees and expenses............................. 5,000
Excess cash proceeds...................................... 14,751
--------
Total uses........................................ $103,000
========
</TABLE>
37
<PAGE> 41
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
SILVER CINEMAS
The following table sets forth selected consolidated financial and
operating data for Silver Cinemas derived from the audited financial statements
for the periods ended and as of December 31, 1996 and 1997 and from unaudited
financial statements for the three months ended and as of March 31, 1997 and
1998. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Silver Cinemas' consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1996 THREE MONTHS ENDED
(DATE OF INCEPTION) YEAR ENDED MARCH 31,
TO DECEMBER 31, DECEMBER 31, ------------------
1996 1997 1997 1998
------------------- ------------ ------- -------
(IN THOUSANDS, EXCEPT
THEATER AND SCREEN DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................. $ 1,420 $18,762 $ 3,968 $ 4,802
Theater operating costs................... 1,219 16,102 3,407 4,028
General and administrative expenses....... 577 1,901 389 590
Depreciation and amortization............. 103 1,479 304 476
Operating loss............................ (479) (720) (132) (292)
Interest expense.......................... -- 353 28 157
Amortization of debt issue costs.......... -- 55 34
Net loss.................................. (382) (1,173) (163) (496)
CONSOLIDATED OTHER FINANCIAL DATA:
Theater level cash flow(1)................ $ 201 $ 2,660 $ 561 $ 774
Theater level cash flow margin(2)......... 14.2% 14.2% 14.1% 16.1%
EBITDA(3)................................. (376) 759 172 184
Net cash provided (used) by operating
activities............................. 733 757 (219) (314)
Net cash provided (used) by investing
activities............................. (13,180) (9,047) (3,985) (5,970)
Net cash provided (used) by financing
activities............................. 17,156 3,857 31 6,123
Capital expenditures(4)................... 182 4,556 776 386
Deficiency of earnings to fixed
charges(5)............................. (382) (1,156) (160) (472)
THEATER DATA:
Theaters.................................. 18 27 19 31
Screens................................... 102 165 109 191
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD
END):
Cash and cash equivalents................. $ 4,709 $ 276 $ 535 $ 116
Theater properties and equipment -- net... 3,361 8,688 5,294 13,052
Total assets.............................. 17,827 21,927 17,399 27,173
Total long-term debt, including current
portion................................ 2,000 6,597 2,000 2,720
Stockholders' equity...................... 14,774 13,633 14,642 23,138
</TABLE>
- ---------------
(1) Theater level cash flow represents operating income plus depreciation and
amortization plus general and administrative expenses. The Company believes
theater level cash flow provides useful information regarding the Company's
ability to generate cash flow at the theater level; however, theater level
cash
38
<PAGE> 42
flow does not represent cash flow from operations as defined by generally
accepted accounting principles and should not be considered as a substitute
for cash flow from operations as an indicator of operating performance or as
a measure of liquidity.
(2) Theater level cash flow margin represents theater level cash flow divided by
revenues.
(3) EBITDA represents operating income plus depreciation and amortization. The
Company believes that EBITDA provides useful information regarding the
Company's ability to service its debt; however, EBITDA does not represent
cash flow from operations as defined by generally accepted accounting
principles and should not be considered as a substitute for net income as an
indicator of the Company's operating performance, cash flow or as a measure
of liquidity.
(4) Capital expenditures includes only the amounts expended for purchase of
property and equipment.
(5) Earnings consist of net loss before taxes, 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.
39
<PAGE> 43
LANDMARK
The following table sets forth selected consolidated financial and
operating data for Landmark derived from the audited financial statements for
the periods ended and as of December 31, 1997, December 31, 1996, June 30, 1996
and March 31, 1996 and from unaudited financial statements for the three months
ended and as of March 31, 1997 and 1998. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Landmark's consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED ENDED MARCH 31,
MARCH 31, JUNE 30, DECEMBER 31, DECEMBER 31, -----------------
1996 1996 1996 1997 1997 1998
---------- ------------ ------------ ------------ ------- -------
(IN THOUSANDS, EXCEPT THEATER, SCREEN AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues......................... $51,143 $11,576 $29,581 $56,954 $17,023 $15,660
Theater operating costs.......... 42,105 10,244 23,305 45,822 13,070 12,194
General and administrative
expenses...................... 4,225 1,189 2,426 5,191 1,210 1,357
Depreciation and amortization.... 3,569 906 2,237 4,929 1,177 1,290
Operating income................. 1,244 (763) 1,613 1,012 1,566 819
Interest expense................. 716 237 458 748 215 162
Net income (loss)................ 207 (647) 495 (232) 651 265
CONSOLIDATED OTHER FINANCIAL DATA:
Theater level cash flow(1)....... $ 9,038 $ 1,332 $ 6,276 $11,132 $ 3,953 $ 3,466
Theater level cash flow
margin(2)..................... 17.7% 11.5% 21.2% 19.5% 23.2% 22.1%
EBITDA(3)........................ $ 4,813 $ 143 $ 3,850 $ 5,941 $ 2,742 $ 2,109
Ratio of earnings to fixed
charges(4).................... 1.18x 1.69x 1.09x 2.82x 1.93x
Deficiency of earnings available
to cover fixed charges(4)..... $(1,000)
THEATER DATA:
Theaters......................... 52 52 50 49 50 49
Screens.......................... 140 140 138 140 138 140
CONSOLIDATED BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash equivalents........ $ 1,192 $ 2,004 $ -- $ 577
Theater properties and
equipment -- net.............. 35,632 35,023 34,879 35,795
Total assets..................... 61,476 60,749 58,746 59,835
Total long-term debt and capital
leases, including current
portion....................... 8,583 6,371 8,197 6,179
Shareholder's equity............. 36,660 41,309 45,160 41,574
</TABLE>
- ---------------
(1) Theater level cash flow represents operating income plus depreciation and
amortization plus general and administrative expenses. The Company believes
theater level cash flow provides useful information regarding the Company's
ability to generate cash flow at the theater level; however, theater level
cash flow does not represent cash flow from operations as defined by
generally accepted accounting principles and should not be considered as a
substitute for cash flow from operations as an indicator of operating
performance or as a measure of liquidity.
(2) Theater level cash flow margin represents theater level cash flow divided by
revenues.
(3) EBITDA represents operating income plus depreciation and amortization. The
Company believes that EBITDA provides useful information regarding the
Company's ability to service its debt; however, EBITDA does not represent
cash flow from operations as defined by generally accepted accounting
principles and should not be considered as a substitute for net income as an
indicator of the Company's operating performance, cash flow or as a measure
of liquidity.
(4) Earnings consist of net income before taxes, plus fixed charges. Fixed
charges consist of interest expense, and one third of rent expense on
operating leases treated as representative of the interest factor
attributable to rent expense.
40
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Unaudited
Pro Forma Financial Data" and the consolidated financial statements, including
notes thereto, of Silver Cinemas and Landmark appearing elsewhere in this
Prospectus. Certain information in this section includes forward-looking
statements. Such forward-looking statements relate to the Company's financial
condition, results of operations, expansion plans and business. Actual results
could differ materially from the forward-looking statements due to, among other
things, the risks and uncertainties noted under the heading "Risk Factors" in
this Prospectus.
OVERVIEW
Silver Cinemas was formed by Steve Holmes, Tom Owens and Brentwood in May
1996 to effect a consolidation and build-up of specialty-film and second-run
theaters in the fragmented motion picture exhibition industry. Silver Cinemas'
strategy is to acquire theaters in underserved markets, to upgrade and expand
theaters to provide a high-quality movie-going experience and to improve
profitability by combining certain administrative functions, obtaining volume
purchasing discounts and executing tighter operating controls.
Since its inception, Silver Cinemas has experienced rapid revenue growth
through theater acquisition and the development of new theaters. During fiscal
year 1996, Silver Cinemas acquired 18 theaters with 102 screens. During fiscal
year 1997, Silver Cinemas acquired eight additional theaters with a total of 52
screens, constructed one theater with ten screens and added one screen to an
existing theater. By December 31, 1997, Silver Cinemas operated 27 theaters with
an aggregate of 165 screens in ten states. See "Business -- Recent and Pending
Acquisitions" and "Business -- Recent and Pending Theater Construction." Silver
Cinemas has been able to effect superior improvements in the operating
performance of the acquired theaters. For example, Silver Cinemas' first two
acquisitions, Movie One and MI Theaters, have shown theater level cash flow
increases of 31.7% for the nine months ended September 30, 1997 compared to the
same period during 1996, prior to Silver Cinemas' ownership of the theaters.
Silver Cinemas expects that its future revenue growth will be derived primarily
from the operation of its existing theaters, the acquisition and construction of
new theaters and the addition of screens and seating to existing theaters.
RESULTS OF OPERATIONS OF SILVER CINEMAS
The following table sets forth, for the periods indicated, Silver Cinemas'
operating results in thousands of dollars and as a percentage of total revenues:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1996
(DATE OF INCEPTION) THREE MONTHS ENDED MARCH 31,
TO DECEMBER 31, YEAR ENDED --------------------------------------
1996 DECEMBER 31, 1997 1997 1998
-------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Admissions............................. $ 787 55.4% $10,368 55.3% $2,220 56.0% $ 2,560 53.3%
Concessions............................ 610 43.0 8,098 43.2 1,704 42.9 2,129 44.3
Other.................................. 23 1.6 296 1.5 44 1.1 113 2.4
------ ----- ------- ----- ------ ----- ------- -----
Total............................ 1,420 100.0 18,762 100.0 3,968 100.0 4,802 100.0
Costs and expenses:
Cost of operations:
Film rentals......................... 378 26.6 4,484 23.9 951 24.0 986 20.5
Concession supplies.................. 111 7.8 1,462 7.8 311 7.8 309 6.5
Salaries and wages................... 276 19.4 3,065 16.3 621 15.7 855 17.8
Facility leases...................... 207 14.6 3,312 17.7 622 15.7 780 16.2
Advertising.......................... 46 3.2 755 4.0 135 3.4 144 3.0
Utilities and other.................. 201 14.2 3,024 16.1 767 19.3 953 19.9
------ ----- ------- ----- ------ ----- ------- -----
Total............................ 1,219 85.8 16,102 85.8 3,407 85.9 4,027 83.9
------ ----- ------- ----- ------ ----- ------- -----
General and administrative expenses...... 577 40.6 1,901 10.1 389 9.8 590 12.3
Depreciation and amortization............ 103 7.3 1,479 7.9 304 7.7 476 9.9
------ ----- ------- ----- ------ ----- ------- -----
Operating income (loss).................. $ (479) (33.7)% $ (720) (3.8)% $ (132) (3.3)% $ (291) (6.1)%
====== ===== ======= ===== ====== ===== ======= =====
</TABLE>
41
<PAGE> 45
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE PERIOD FROM MAY 10, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
Meaningful comparisons of the year ended December 31, 1997 and the period
from May 10, 1996 to December 31, 1996 are not possible given the short
operating history of those theaters purchased late in 1996. The significant
increases from 1996 to 1997 in revenue, expenses and depreciation and
amortization are the result of operating 18 theaters acquired in 1996 for a full
year, plus the additional nine theaters acquired throughout 1997. The following
presents the primary revenue and expense categories for Silver Cinemas.
Revenues. Silver Cinemas' revenues are generated primarily from box office
admission receipts and concession sales. For the year ended December 31, 1997
and the period from May 10, 1996 (date of inception) to December 31, 1996,
admissions revenues comprised approximately 55% of total revenues for both
periods and concessions revenues comprised approximately 43% of total revenue
for both periods. The remaining approximately 2% of revenue for those periods
was derived primarily from electronic video games located in theater lobbies.
Admissions Revenues. Box office admission receipts are based on the level
of theater attendance and the average ticket price. Attendance levels are
primarily affected by the commercial appeal of released films, and to a lesser
extent, by the comfort and quality of the theater, competition from other local
theaters and population growth in the geographic markets Silver Cinemas serves.
Silver Cinemas' ticket prices vary throughout the circuit depending upon such
things as type of theater (second-run or first-run), local competition and local
economies, as well as special discounts and pricing promotions. Admissions
revenue is recorded net of applicable sales taxes.
Concessions Revenues. Concessions revenues represent a significant portion
of a theater's overall profitability. Silver Cinemas' primary concession
products are soft drinks, popcorn, candy and certain other products on a
regional basis. The majority of concession products are generally offered in
three or four sizes. Retail prices are determined according to size as well as
local competition. Concessions revenues are recorded net of applicable sales
taxes.
In an effort to increase concession sales, Silver Cinemas is constantly
reviewing new products, adjusting pricing, creating convenience and
value-oriented combinations, and continually training concession personnel in
the techniques of up-selling and cross selling. In addition Silver Cinemas has
remodeled concession stands at certain theaters to make them more efficient and
attractive. Theater managers and assistant managers are motivated through
concession commission programs.
Film Rental Expenses. Film rental fees are paid directly to the film
distribution companies and are directly related to the popularity of a film and
the length of time since that film's release. Film rental costs are calculated
on a percentage of admission revenues and generally decline the longer the film
has been showing. Most terms of film licenses are finalized subsequent to
exhibition of the film in a process known as "settlement." The final terms of
the film licenses consider, among other things, the actual success of a film
relative to original expectations and the exhibitor's relationship with the film
distributor.
Concession Supplies Expenses. Concession supplies are regularly purchased
in bulk through Silver Cinemas' distributors and vendors. Concession product is
generally ordered weekly from the distributors in order to prevent the build-up
of inventory at the theaters. Concession costs also include the cost of spoiled
and wasted concession inventory.
Salaries and Wage Expenses. Salaries and wages include payroll taxes,
employee benefits, commissions on concession sales and bonuses for the theater
managers and all theater staff. Typically only the theater manager and the
assistant manager are paid a base salary. The wages paid to the remaining staff
are based on an hourly wage rate.
Silver Cinemas continually adjusts staffing levels based upon attendance
levels. In order to monitor payroll levels, management measures salary and wage
expense in relation to attendance through payroll per attendee. For the year
ended December 31, 1997, Silver Cinemas experienced payroll per attendee of
$0.49.
42
<PAGE> 46
Facility Lease Expenses. Facility lease expenses consist primarily of a
fixed monthly minimum rent payment. In addition, several theater leases contain
contingency rent that is based on a percentage of revenue after such revenue
reaches a certain dollar amount.
Advertising Expenses. The largest component of advertising costs consists
of daily movie directories placed in local newspapers to advertise Silver
Cinemas' theaters and showtimes. In select markets Silver Cinemas participates
in "co-op" arrangements whereby the exhibitors in those markets share the cost
of film advertisement in newspapers with the film distributors. The cost of
newspaper ads is generally based on the size of the directory. Silver Cinemas
anticipates lowering advertising costs in those cities which have multiple
theaters as a result of the Acquisitions. The savings will be realized through
consolidating directory ads and receiving greater purchasing discounts.
Utilities and Other Expenses. Utilities and other expenses consist
primarily of utilities, insurance, property taxes, repair and maintenance and
cleaning.
General and Administrative Expenses. General and administrative expenses
are comprised of various expenses related to the management and operation of its
theaters and consist primarily of management and office salaries, payroll taxes,
related employee benefit costs, professional fees, insurance costs and general
office expenses.
Depreciation and Amortization. Depreciation and amortization expense
includes the depreciation of theater equipment and buildings, the amortization
of theater lease costs, goodwill, and certain non-compete agreements.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenues. Silver Cinemas' revenues are generated primarily from box office
admission receipts and concession sales. For the three months ended March 31,
1997 and three months ended March 31, 1998, admissions revenues comprised 56.0%
and 53.3% of total revenues respectively and concession revenues comprised
approximately 42.9% and 44.3% of total revenues respectively. The remaining 1.1%
and 2.4% of total revenues was derived primarily from electronic video games
located in the theater lobbies.
Admissions Revenues. Admissions revenue increased $0.3 million or 15.3% to
$2.6 million during the three months ended March 31, 1998. The increased
admissions revenue was primarily the result of the addition of 12 newly acquired
theaters representing 82 screens. The average ticket price for the circuit
decreased slightly from $1.68 to $1.67.
Concessions Revenues. Concession revenue increased $0.4 million or 25.0% to
$2.1 million during the three months ended March 31, 1998. The increased
concession revenue was primarily the result of the newly acquired theaters and a
7.0% increase in the average concession sale per attendee from $1.29 to $1.38
due to upselling sales techniques and retail price adjustments.
Film Rental Expenses. Film rental expenses as a percentage of admissions
revenue decreased from 42.8% to 38.5% as a result of acquiring additional
discount theaters which have lower film rental expenses compared to first run
theaters.
Concession Supplies Expenses. Concession costs as a percentage of
concession revenue decreased in 1998 from 18.3% of concession sales to 14.5%
primarily as the result of negotiating lower wholesale prices, standardizing
menus, and the adjustment of retail prices to reflect local market conditions.
Salaries and Wage Expenses. Payroll expense increased from $0.6 million for
the three months ended March 31, 1997 to $0.9 million for the three months ended
March 31, 1998 due primarily to the addition of the newly acquired theatres.
Facility Lease Expenses. Facility Leases increased $0.2 million to $0.8
million for the three months ended March 31, 1998 from $0.6 million for the
three months ended March 31, 1997. The increase in facility lease expense is
primarily attributable to the additional theatres operated at March 31, 1998.
43
<PAGE> 47
Advertising Expenses. Advertising expenses were essentially flat from the
three months ended March 31, 1997. Advertising expenses comprised 3.4% and 3.0%
of total revenues for the three months ended March 31, 1997 and the three months
ended March 31, 1998 respectively.
Utilities and Other Expenses. Utilities and other expenses increased from
$0.8 million to $1.0 million for the three months ended March 31, 1998 compared
to the three months ended March 31, 1997. The increase was primarily the result
of the additional theaters operated at March 31, 1998.
General & Administrative Expenses. General & Administrative expenses
increased from $0.4 million to $0.6 million for the three months ended March 31,
1998 compared to the three months ended March 31, 1997. The increase was
primarily the result of increased payroll costs associated with the Company's
expansion.
Depreciation and Amortization. Depreciation and amortization increased $0.2
million to $0.5 million for the three months ended March 31, 1998 from $0.3
million for the three months ended March 31, 1997. The increase was primarily
the result of the additional theaters operated at March 31, 1998.
44
<PAGE> 48
RESULTS OF OPERATIONS OF LANDMARK
The following table sets forth the predecessor basis three month periods
ended March 31 and June 30, 1996 and the successor basis six month period ended
December 31, 1996 to arrive at a total for the 12 months ended December 31,
1996, which is compared to the year ended December 31, 1997 of Landmark.
Management of Silver Cinemas has arrived at the total for the 12 months ended
December 31, 1996 by combining, without adjustments, the three and six month
periods with the three month period. The three month period ended March 31, 1996
has not been derived from audited financial statements. This three month period
has been provided to Silver Cinemas by Landmark. This information is provided
herein for the purpose of constructing a period for comparison with the year
ended December 31, 1997; however, Silver Cinemas makes no representations as to
its usefulness for such purpose. The information for the three month periods
ended March 31, 1997 and 1998 was derived from unaudited interim financial
statements. The following discussion should be read in conjunction with
Landmark's consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
The following table sets forth, for the periods indicated, Landmark's
operating results in thousands of dollars and as a percentage of total revenues:
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR SUCCESSOR COMBINED SUCCESSOR
THREE MONTHS THREE MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1997
------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Admissions............. $12,374 $ 9,314 $23,960 $45,648 80.8% $45,903 80.6%
Concessions............ 2,660 2,060 5,044 9,764 17.3 10,061 17.7
Other.................. 309 202 577 1,088 1.9 990 1.7
------- ------- ------- ------- ----- ------- -----
Total........... 15,343 11,576 29,581 56,500 100.0 56,954 100.0
Cost of revenues:
Film rentals and
advertising........... $ 6,405 $ 5,078 $11,995 $23,478 41.6% $23,212 40.8%
Cost of concessions.... 509 456 1,039 2,004 3.6 2,096 3.7
Payroll and related
expenses.............. 2,260 2,128 4,610 8,998 15.9 9,448 16.6
Occupancy costs........ 1,730 1,708 3,689 7,127 12.6 7,071 12.4
Other theater operating
expenses.............. 959 874 1,972 3,805 6.7 3,995 7.0
------- ------- ------- ------- ----- ------- -----
Total........... 11,863 10,244 23,305 45,412 80.4 45,822 80.5
------- ------- ------- ------- ----- ------- -----
-- -- -- -- -- -- --
General and
administrative......... 1,357 1,189 2,426 4,972 8.8 5,191 9.1
Depreciation and
amortization........... 977 906 2,237 4,120 7.3 4,929 8.7
-- -- -- -- -- -- --
------- ------- ------- ------- ----- ------- -----
Operating income
(loss)................. $ 1,146 $ (763) $ 1,613 $ 1,996 3.5% $ 1,012 1.8%
======= ======= ======= ======= ===== ======= =====
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Admissions............. $13,648 80.2% $12,643 80.7%
Concessions............ 3,085 18.1 2,813 18.0
Other.................. 290 1.7 204 1.3
------- ----- ------- -----
Total........... 17,023 100.0 15,660 100.0
Cost of revenues:
Film rentals and
advertising........... 7,204 42.3 6,202 39.6
Cost of concessions.... 623 3.7 581 3.7
Payroll and related
expenses.............. 2,351 13.8 2,470 15.8
Occupancy costs........ 1,600 9.4 1,646 10.5
Other theater operating
expenses.............. 1,292 7.6 1,295 8.3
------- ----- ------- -----
Total........... 13,070 76.8 12,194 77.9
------- ----- ------- -----
-- -- -- --
General and
administrative......... 1,210 7.1 1,357 8.7
Depreciation and
amortization........... 1,177 6.9 1,290 8.2
-- -- -- --
------- ----- ------- -----
Operating income
(loss)................. $ 1,566 9.2% $ 819 5.2%
======= ===== ======= =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Admissions revenues. Admissions revenues increased $0.2 million or 0.5% to
$45.9 million during the year ended December 31, 1997. The increased admissions
revenue was primarily the result of a 4.0% increase in the average ticket price
from $5.72 to $5.95, partially offset by a 3.3% reduction in attendance from
7,974,962 to 7,712,422. Landmark benefits from having an average ticket price
that is substantially higher than the national average ticket price ($5.95 vs.
$4.59 for 1997 respectively) and strong customer loyalty due to their dedication
to the specialty-film market.
Concessions revenues. Concessions revenues increased $0.3 million or 3.0%
to $10.1 million during the year ended December 31, 1997. The increased
concession revenue was primarily the result of a 6.6% increase in the average
concession sale per attendee from $1.22 to $1.30, partially offset by a 3.3%
reduction in attendance from 7,974,962 to 7,712,422. In addition to offering the
traditional movie theater concessions of
45
<PAGE> 49
popcorn, soft drinks and candy, Landmark theaters work with local vendors to
provide specialty items that cater to their customers, such as fresh pastry,
specialty coffees, and desserts.
Film and advertising expenses. Film rental and advertising expenses as a
percentage of admissions revenue decreased from 51.4% to 50.6% as a result of
more aggressive film settlement as well as the ability to extend the run of
several successful releases during 1997. Landmark's film rental rates are
typically below film rental rates of first-run theaters, which average in the
low to mid 50% range. The low film rental expense combined with the above
average ticket price contributes to Landmark's overall profitability.
Cost of concessions. Concession costs as a percentage of concession revenue
increased slightly in 1997 from 20.5% to 20.8%. Concession costs for Landmark
are at the higher end of the range for theater circuits. Landmark's higher rate
is partially attributable to the lower-margined specialty concession items
offered (cookies, coffee, desserts), increased spoilage and fewer volume
discounts.
Payroll and related expense. Payroll expense increased from $9.0 million
for the twelve months ended December 31, 1996 to $9.4 million for the year ended
December 31, 1997. Payroll per attendee, a key measure for staff efficiency,
increased from $1.13 per attendee to $1.22 per attendee. The increase is
partially attributable to the addition of a dedicated ticket taker at the
majority of theaters, and the opening of two new theaters, which typically
require more staff prior to and shortly after opening.
Occupancy costs. Occupancy costs were flat from the prior year at $7.1
million.
General and administrative expenses. General and administrative expenses
increased from $5.0 million for the year ended December 31, 1996 to $5.2 million
for the year ended December 31, 1997. The increase was primarily the result of
management bonuses, travel associated with new site development and increased
corporate occupancy expenses. These increases were partially offset by a
reduction in legal expenses associated with the successful defense of litigation
relating to a theater lease in 1996.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenues. Landmark Theatres' revenues are generated primarily from box
office admission receipts and concession sales. For the three months ended March
31, 1997 and three months ended March 31, 1998, admissions revenues comprised
80.2% and 80.7% of total revenues respectively and concession revenues comprised
approximately 18.0% of total revenues for both periods. The remaining 1.7% and
1.3% of total revenues for the three months ended March 31, 1997 and the three
months ended March 31, 1998 respectively was derived primarily from film
screenings.
Admissions revenues. Admissions revenue decreased $1.0 million or 7.4% to
$12.6 million during the three months ended March 31, 1998. The decreased
admissions revenue was primarily the result of a decline in attendance of
approximately 9.3%. The decrease in attendance was partially offset by an
increase in the circuits' average ticket price from $5.88 for the three months
ended March 31, 1997 to $6.01 for the three months ended March 31, 1998.
Concessions revenues. Concession revenue decreased $0.3 million or 8.8% to
$2.8 million during the three months ended March 31, 1998. The decreased
concession revenue was primarily the result of the 9.3% drop in attendance. The
decrease in attendance was partially offset by a 1.0% increase in the average
concession sale per attendee.
Film and advertising expenses. Film rental expenses as a percentage of
admissions revenue decreased from 42.3% to 39.6% as a result of more aggressive
film settlement and newsprint advertising rebates.
Cost of Concessions. Concession costs declined slightly due to the decrease
in concession sales. As a percentage of total revenues, concession supplies
expenses remained flat at 3.7%.
Payroll and related. Payroll expense increased from $2.4 million for the
three months ended March 31, 1997 to $2.5 million for the three months ended
March 31, 1998. The increase is partially attributable to work schedules that
were not reduced as attendance levels declined.
46
<PAGE> 50
Occupancy costs. Occupancy costs were relatively flat at $1.6 million for
the three months ended March 31, 1998 compared to the three months ended March
31, 1997.
General and administrative expenses. General and Administrative expenses
increased from $1.2 million to $1.4 million for the three months ended March 31,
1998 compared to the three months ended March 31, 1997. The increase was
primarily the result of increased payroll and related expenses.
LIQUIDITY AND CAPITAL RESOURCES
Revenues are collected in cash, primarily through box office receipts and
the sale of concession items. Because revenues are received in cash prior to the
payment of related expenses, there are, in effect, no accounts receivable. This,
in combination with minimal inventory requirements, creates a negative working
capital position, which provides certain operating capital.
During 1996 and 1997 Silver Cinemas' capital requirements were the result
of theater acquisitions, renovation of existing theaters, and construction of a
new theater. Such capital expenditures were financed with equity financing, bank
borrowings, and internally generated cash. On April 7, 1997, Silver Cinemas
entered into the Old Credit Facility, which, subject to the restrictions
therein, provides Silver Cinemas through the Issue Date the ability to borrow up
to $25.0 million. In December 1997, Silver Cinemas did not comply with certain
coverage ratio provisions of the Old Credit Facility. Silver Cinemas' lender
amended these provisions and issued a waiver of default.
The Company repaid all of the indebtedness under the Old Credit Facility
with proceeds from the Private Offering. The Company intends to enter into the
Revolving Credit Facility. Until such time that the Company enters into the
Revolving Credit Facility, the Company will not be able to borrow under any
credit facility. The Company has obtained a commitment from DLJ Capital Funding,
Inc. for the Revolving Credit Facility. The Revolving Credit Facility is
expected to allow the Company to borrow up to $40.0 million subject to certain
restrictive covenants. See "Description of Revolving Credit Facility." The
Company expects to use the amounts available under the Revolving Credit Facility
to finance future capital expenditures and acquisitions. See "Risk
Factors -- Restrictive Covenants of Revolving Credit Facility; Inability to
Borrow Additional Amounts."
During 1998, the Company expects to spend approximately $6.5 million to
construct two six-screen specialty-film theaters in St. Louis, Missouri and
Waltham, Massachusetts, one six-screen second-run theater in Joliet, Illinois
and one six-screen first-run theater in Flint, Michigan. Also during 1998 the
Company plans to spend approximately $1.2 million to add three screens to an
existing second-run theater in Laredo, Texas and to convert a second-run theater
in Yukon, Oklahoma to stadium seating. The Company expects that the portion of
the proceeds of the Private Offering not used for the Acquisitions or to repay
bank borrowings, together with amounts available under the Revolving Credit
Facility and cash flow, should be sufficient to fund the Company's operations
and growth strategy for approximately 18 to 24 months.
INFLATION
Inflation has not had a significant impact on Silver Cinemas' operations to
date.
SEASONALITY
Silver Cinemas' quarterly results of operations tend to be affected by film
release patterns by producers and distributors, and the commercial success of
films. In the past, the year-end holiday season and the summer resulted in
higher-than-average quarterly revenues for Silver Cinemas.
Landmark's quarterly results of operations tend to be affected by film
release patterns by producers and distributors of independent films. In the
past, Landmark has experienced higher-than-average quarterly revenues during the
first three months of the year. During 1997 and 1996 approximately 35% and 31%,
respectively of Landmark's revenue was earned during the first quarter.
Combined, the seasonal fluctuations of Silver Cinemas and StarTime tend to
offset each other.
47
<PAGE> 51
ACQUISITION SYNERGIES
As a result of the Acquisitions, the Company expects to achieve cost
savings and incremental revenues not considered in the Pro Forma Consolidated
Statement of Operations described elsewhere in this Prospectus. The Company
expects to be able to achieve acquisition synergies within the first year
following the Issue Date, including (i) increased other revenues associated with
an increase in vending machine sales and other advertising revenue, (ii) reduced
theater level payroll, (iii) reduced advertising expenses and (iv) elimination
of one-time consulting fees. See Note 6 below.
The following table should not be viewed as indicative of actual historical
or future results and was not prepared with a view to public disclosure or
compliance with published guidelines of the Securities and Exchange Commission
or the guidelines established by the American Institute of Certified Public
Accountants with respect to prospective financial information and has not been
examined or compiled by any certified public accountant and, accordingly, no
certified public accountant assumes responsibility. The following table sets
forth in more detail the pro forma adjusted financial data which gives effect to
the adjustments described above as if each adjustment had occurred as of the
beginning of the periods presented.
The Pro Forma Adjusted Financial Data reflect acquisition synergies which
the Company believes would have been realized as a result of the Acquisitions if
the Acquisitions had been completed as of the beginning of the periods presented
and as if the full benefit of such synergies, which the Company expects may take
up to a year to achieve, were achieved as of such date. Such adjustments are not
provided for in the definition of "pro forma" pursuant to Regulation S-X under
the Securities Act and constitute forward-looking statements with the meaning of
the Private Securities Litigation Reform Act of 1995. Although management
believes such forward-looking statements are reasonable, there can be no
assurance that the acquisition synergies actually would have been obtained had
the Acquisitions been completed as of the beginning of the period presented or
that such acquisition synergies will occur or continue in the future. Actual
results may differ materially from those reflected in the Pro Forma Adjusted
Financial Data due to economic and competitive uncertainties and other
contingencies, including, without limitation, the possibility that theater
managers may not have sufficient managerial skills to properly implement
reorganization of employees work schedules and employees may not be able to
handle efficiently diversified functions. See "Disclosure Regarding
Forward-Looking Statements," "Risk Factors -- Business Risks Associated with the
Acquisitions," "Risk Factors -- Risks of Failure to Obtain Landlord Consents"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------- ----------------------------------------
OTHER PRO FORMA OTHER PRO FORMA
PRO FORMA ADJUSTMENTS ADJUSTED(6) PRO FORMA ADJUSTMENTS ADJUSTED(6)
--------- -------------- ----------- --------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Admissions............... $ 72,872 $ -- $ 72,872 $18,916 $18,916
Concessions.............. 30,965 -- 30,965 7,839 7,839
Other.................... 2,451 402(2) 2,853 556 $ 101(2) 657
-------- ------- -------- ------- ----- -------
Total............ 106,288 402 106,690 27,311 101 27,412
Costs and expenses:
Cost of operations:
Film rentals.......... 31,017 -- 31,017 8,207 8,207
Concession supplies... 4,993 -- 4,993 1,175 1,175
Salaries and wages.... 18,282 (2,655)(3) 15,627 4,645 (617)(3) 4,028
Facility leases....... 16,586 -- 16,586 4,280 4,280
Advertising........... 4,482 (36)(4) 4,446 700 (7)(4) 693
Utilities and other... 13,156 -- 13,156 3,414 3,414
General and
administrative........ 5,712 (91)(5) 5,621 1,605 0(5) 1,605
</TABLE>
48
<PAGE> 52
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------- ----------------------------------------
OTHER PRO FORMA OTHER PRO FORMA
PRO FORMA ADJUSTMENTS ADJUSTED(6) PRO FORMA ADJUSTMENTS ADJUSTED(6)
--------- -------------- ----------- --------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Depreciation and
amortization.......... 9,226 -- 9,226 2,421 2,421
-------- ------- -------- ------- ----- -------
Total............ 103,454 (2,782) 100,672 26,447 (624) 25,823
-------- ------- -------- ------- ----- -------
Operating income (loss).... $ 2,834 $ 3,184 $ 6,018 $ 864 $ 725 $ 1,589
======== ======= ======== ======= ===== =======
EBITDA(1).................. $ 12,060 $ 3,184 $ 15,244 $ 3,285 $ 725 $ 4,010
======== ======= ======== ======= ===== =======
</TABLE>
- ---------------
(1) The term EBITDA, as used herein, represents operating income plus
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, the Company has included information concerning EBITDA in this
Prospectus because it is used by certain investors and analysts as a measure
of a company's ability to service its debt obligations. EBITDA should not be
used as an alternative to, or be considered more meaningful than, operating
income, net income, or cash flow as an indicator of the Company's operating
performance.
(2) Reflects an increase in other revenue which is comprised of:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C> <C>
(i) New bulk candy vending machines at 27 $ 70 $ 18
theaters....................................
(ii) New audio advertising at all of the 332 83
Company's theaters..........................
---- --------------
Total....................................... $402 $ 101
==== ==============
</TABLE>
See Note 6 below.
(3) Reflects a decrease in salaries and wages (including payroll burden on
theater level reductions of $2,655 for the year ended December 31, 1997 and
$617 for the three months ended March 31, 1998) as a result of reducing the
number of theater-level employees at StarTime and Landmark, the
reorganization of employees' work schedules and the diversification of
employee functions at Landmark. The cost savings are based on management's
belief that it can reduce theater-level payroll expenses at StarTime
theaters to approximately $0.49 per attendee and at Landmark theaters to
approximately $1.01 per attendee. Management anticipates that these
reductions will be fully implemented within one year of closing the StarTime
Acquisition and the Landmark Acquisition. As a reference, Silver Cinemas
achieved a $0.49 payroll per attendee for the year ended December 31, 1997
and a $0.56 payroll per attendee for the three months ended March 31, 1998.
See Note 6 below.
<TABLE>
<CAPTION>
ADJUSTED
THEATER- THEATER- ADJUSTED
LEVEL THEATER- LEVEL THEATER- COST
PAYROLL/ LEVEL PAYROLL/ LEVEL SAVINGS PER COST
YEAR ENDED DECEMBER 31, 1997 ATTENDEE(A) PAYROLL(B) ATTENDEE(A) PAYROLL(B) ATTENDEE(A) SAVINGS
---------------------------- ----------- ---------- ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
StarTime...................... $0.61 $5,645 $0.49 $4,576 $0.12 $1,069
Landmark...................... 1.22 9,317 1.01 7,730 0.21 1,586
------
Total............... $2,655
======
THREE MONTHS ENDED MARCH 31,
1998
StarTime...................... $0.62 $1,264 $0.49 $1,001 $0.13 $ 263
Landmark...................... 1.17 2,470 1.01 2,116 0.16 354
------
Total............... $ 617
======
</TABLE>
- ---------------
(a) Based on attendance for the year ended December 31, 1997 of 9,281,347 at
StarTime and 7,632,964 at Landmark and attendance for the three months ended
March 31, 1998 of 2,034,380 at StarTime and 2,102,726 for Landmark.
(b) Excludes theater level payroll from those StarTime and Landmark theaters not
acquired.
49
<PAGE> 53
(4) Reflects the elimination of advertising expense as a result of consolidating
advertisements and utilizing free directory advertisements in a local
newspaper for the Company's three theaters located in Denver, Colorado. See
Note 6 below.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
(i) Advertising savings......................... $36 $7
</TABLE>
(5) Reflects the elimination of one-time consulting fees paid to a former
financial consultant retained by Landmark. See Note 6 below.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
(i) Consulting savings.......................... $91 $0
</TABLE>
(6) The Pro Forma Adjusted Financial Data reflect acquisition synergies which
the Company believes would have been realized as a result of the
Acquisitions if the Acquisitions had been completed as of the beginning of
the periods presented and as if the full benefit of such synergies, which
the Company expects may take up to a year to achieve, were achieved as of
such date. Such adjustments are not provided for in the definition of "pro
forma" pursuant to Regulation S-X under the Securities Act and constitute
forward-looking statements with the meaning of the Private Securities
Litigation Reform Act of 1995. Although management believes such
forward-looking statements are reasonable, there can be no assurance that
the acquisition synergies actually would have been obtained had the
Acquisitions been completed as of the beginning of the period presented or
that such acquisition synergies will occur or continue in the future. Actual
results may differ materially from those reflected in the Pro Forma Adjusted
Financial Data due to economic and competitive uncertainties and other
contingencies, including, without limitation, the possibility that theater
managers may not have sufficient managerial skills to properly implement
reorganization of employees work schedules and employees may not be able to
handle efficiently diversified functions. See "Disclosure Regarding
Forward-Looking Statements," "Risk Factors -- Business Risks Associated with
the Acquisitions," "Risk Factors -- Risks of Failure to Obtain Landlord
Consents" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
50
<PAGE> 54
BUSINESS
GENERAL
The Company is the largest exhibitor of specialty motion pictures and one
of the largest operators of second-run theaters in the United States. The
Company operates 106 theaters with 524 screens located in eighteen states. The
106 theaters are comprised of 49 specialty motion picture theaters, 49
second-run theaters and eight first-run theaters. The Company's strategy is to
acquire theaters in under-served markets, to upgrade and expand theaters to
provide a high-quality movie-going experience and to improve the profitability
of theaters by combining certain administrative functions, obtaining volume
discounts and implementing tighter operating controls. On a pro forma basis for
the year ended December 31, 1997 and the three months ended March 31, 1998, the
Company generated revenue of approximately, $106.3 million and $27.3 million,
respectively, and pro forma EBITDA (as defined) of $12.1 million and $3.3
million, respectively.
The Company's specialty-film theaters exhibit alternatives to commercial
first-run movies. The specialty-film niche is composed of art films, foreign
pictures and independent releases such as Good Will Hunting, The Full Monty, The
Apostle, Shine, Sling Blade and The English Patient which are generally released
in limited numbers to selected markets. Studios such as Disney, Universal, Sony,
Paramount, Twentieth Century Fox and New Line have begun to distribute
specialty-films through dedicated distribution subsidiaries (Miramax, October
Films, Sony Pictures Classics, Paramount's specialty-film division, Fox
Searchlight Pictures and Fine Line, respectively). Management believes that the
recent success of independent films in garnering Academy Award nominations and
Academy Awards will further drive independent film production, particularly from
these "independent" subsidiaries which seek the recognition of these
prestigious, high profile awards. According to Exhibitor Relation Company, Inc.,
the number of new films released by independent producers and distributors was
increased from 158 in 1992 to 295 in 1997. In addition to the prestige of the
Academy Awards, the generally lower budgets and higher potential returns on
capital invested in specialty films makes the production of these films
financially appealing to the studios. Specialty films are also attractive to
exhibitors since the specialty-film niche tends to benefit from higher average
admission prices and lower film rental expense than first-run operators,
resulting in higher operating margins. Finally, the specialty-film niche, which
generally appeals to more mature and upscale audiences, is expected to continue
to benefit from favorable demographic trends as a result of the aging of the
"baby boom" generation
The Company's second-run theaters offer major studio productions, generally
six to ten weeks after their initial release dates, at significantly lower
admission prices than commercial first-run theaters, ranging from $1.00 to
$2.00. The Company believes that these lower prices make the level of revenues
from second-run theaters less susceptible to economic recession. The Company
enjoys more favorable film booking arrangements and film buying terms at its
second-run theaters than its commercial first-run counterparts. With far fewer
second-run screens than first-run screens nationwide, there is typically little
competition for prints of commercial films, enabling the Company to screen its
choice of successful commercial films. First-run theaters, on the other hand,
must aggressively compete for films from distributors and generally screen only
a subset of new releases. In addition to its film booking advantage, the
Company's second-run theaters also benefit from lower film rental expense and a
larger proportion of high-margin concession sales as a percentage of overall
revenue. Finally, the Company's lower admission prices for its second-run
theaters appeal especially to teen audiences and older patrons, segments of the
population which are expected to experience steady growth over the next decade.
Founded in May 1996, the Company completed seven acquisitions, representing
26 theaters with an aggregate total of 154 screens as of December 31, 1997. In
addition, the Company completed two construction projects, increasing its total
number of theaters and screens to 27 and 165, respectively. Management has
successfully integrated these theaters into its operations by implementing new
operating standards, management controls and information systems. In addition,
the Company has added new seating, improved sound and projection equipment, and
broadened concession offerings in many locations. The impact of these
improvements, which have helped increase profitability, are reflected in the
operating performance of the Company's first two acquisitions in November 1996,
Movie One and MI Theaters, consisting of 102 screens at 18 theaters. Based on
actual results for the nine months ended September 30, 1997, theater level cash
flow at these
51
<PAGE> 55
theaters increased 31.7% compared to the nine months ended September 30, 1996,
prior to the Company's ownership of the theaters.
BUSINESS STRATEGY
The Company's strategy is to increase revenue and cash flow by (i)
acquiring specialty motion picture and second-run theaters and first-run
theaters in non-competitive markets, (ii) improving operations at acquired
theaters, (iii) building new state-of-the-art multiplexes in selected markets,
and (iv) adding additional screens, seating capacity, state-of-the-art sound and
projection systems, and other exhibition or concession equipment at its existing
theaters.
Pursue Strategic Acquisitions. The Company has successfully pursued a
disciplined acquisition strategy and intends to continue to acquire and
integrate theaters in both the specialty-film and second-run niches. Management
believes that there are many attractive acquisition candidates in the
highly-fragmented exhibition industry. Management believes that the recent
consolidation trend in the exhibition industry is driving many major exhibitors
to dispose of non-core properties, many of which are second-run or specialty-
film theaters that do not fit those companies' commercial first-run strategies.
In addition, the growth of megaplexes (theaters with 16 or more screens) has
created another avenue of potential growth for the Company through the
conversion of existing commercial first-run theaters to theaters with a
specialty-film or second-run format at an attractive cost.
Leverage Existing Infrastructure and Control Operating Cost. The Company
has successfully integrated and improved the operations of its acquisitions.
Management believes significant opportunities exist to leverage its existing
infrastructure over future acquisitions and realize significant operating
improvements through the implementation of superior operating procedures,
management oversight and its state-of-the-art management information system.
Specific areas of improvement include (i) labor scheduling, (ii) film selection
and lineup, (iii) cash control, (iv) pricing policies, and (v) purchasing
discounts on concession contracts. Additionally, many of the smaller chains lack
the sophisticated information systems employed by the Company, which the Company
believes are necessary to effectively manage a geographically diverse group of
theaters. Examples of management's ability to acquire and improve operations of
theaters include the acquisitions of Movie One and MI Theaters, both completed
in November 1996. Based on actual results for the nine months ended September
30, 1997, these two groups of theaters have shown theater level cash flow
increases of 31.7% compared to the same period in the previous year, prior to
the Company's ownership of the theaters.
Capitalize on Leading Position in Specialty-Film Segment. The Company,
through Landmark, is the largest exhibitor of specialty motion pictures and the
only specialty-film exhibitor with a national presence. The Company has a
leading presence in, among others, the following major markets: Los Angeles, San
Francisco, Boston, Dallas, Houston, Seattle, Cleveland, Minneapolis, Denver,
Milwaukee and New Orleans. The Company plans to use its experience in the
specialty-film niche to establish a presence in the following strategic new
markets: Chicago, Detroit, St. Louis and Washington D.C. Landmark achieved its
leading presence by developing strong relationships with specialty-film
distributors, many of whom rely on the Company's expertise in distributing and
marketing specialty films. These relationships enable the Company to secure film
prints in limited release and secure a period of exclusivity in exhibiting
selected new films in many of its markets. For example, for films such as The
English Patient, Good Will Hunting and Shine, the Company had exclusive rights
to the films for up to three weeks in selected markets.
Expand Established Second-Run Operations. The Company believes it is the
leading operator of second-run theaters in markets operating 49 second-run
theaters with 336 screens in 15 states. By offering patrons a high-quality
alternative to commercial first-run exhibitors at a low price, the Company
avoids direct competition with commercial first-run theaters. In addition, the
second-run niche offers other attractive characteristics which include (i) lower
film costs as a percentage of admission revenue, (ii) greater percentage of
total revenue from high margin concessions, (iii) greater recession resistance
due to lower admission prices, and (iv) lower seasonal variability than
commercial first-run exhibitors due to a staggered film release schedule.
52
<PAGE> 56
Provide a Superior Movie-Going Experience. The Company seeks to provide
audiences with a high quality viewing experience, comparable to that available
at new commercial first-run theaters. To enhance the movie-going experience, the
Company invests in high quality projection and stereo sound equipment,
comfortable chairs with wide seats and cup-holder armrests, and appealing lobby
and concession areas. Since many competitors in the specialty-film and
second-run exhibition niches do not focus on these aspects of operations,
management believes that this strategy provides it with a distinct competitive
advantage.
Pursue Attractive Construction Opportunities. The Company continually
evaluates existing and new markets for new theater locations for specialty,
second run, and, in selected situations, commercial first-run theaters. The
Company generally seeks to develop theaters in markets that are under-served as
a result of changing demographic trends or the aging or obsolescence of existing
theaters. Some of the factors management considers in determining whether to
develop a theater in a particular location are the market's population, average
household income, education levels, proximity to retail corridors, convenient
roadway access, proximity to competing theaters, and the effect on the Company's
existing theaters in the market, if any.
Leverage Experienced Management Team and Strong Sponsorship. The Company's
senior management team averages over 21 years of experience in the exhibition
industry, and members of senior management have been heavily involved in the
rapid growth of exhibition companies such as Cinemark USA, Inc. and The Landmark
Theatre Group, Inc. In addition, the Company enjoys the strong equity
sponsorship of Brentwood and certain members of management. See "Principal
Stockholders." On March 3, 1998, Brentwood made an additional equity
contribution of $10.0 million, bringing its aggregate equity investment to $25.0
million.
RECENT AND PENDING ACQUISITIONS
From its inception through December 31, 1997, the Company completed seven
acquisitions, representing 26 theaters with an aggregate of 154 screens.
In April 1998, the Company acquired the assets of Landmark for cash
consideration of approximately $62.2 million pursuant to an asset purchase
agreement (the "Landmark Asset Purchase Agreement") with Metromedia
International Group, Inc. ("Metromedia"). Landmark, with 140 screens at 49
locations, was the largest exhibitor of specialty motion pictures in the United
States, with theaters located in California, Colorado, Louisiana, Massachusetts,
Michigan, Minnesota, Ohio, Texas, Washington and Wisconsin.
In April 1998, the Company completed the acquisition of 202 screens at 27
locations operating predominately under the name Super Saver Cinemas pursuant to
an asset purchase agreement (the "StarTime Asset Purchase Agreement") with
StarTime Cinema, Inc. ("StarTime") for approximately $21.6 million. The theaters
acquired from StarTime are second-run theaters located in Arizona, California,
Colorado, Florida, Nebraska, New York, Ohio, Oklahoma, Texas and Wisconsin.
In April 1998, the Company completed the acquisition of 17 screens at three
theaters for approximately $1.7 million from AMC Entertainment, Inc. ("AMC").
These theaters include one specialty-film theater in Michigan and two second-run
theaters in Texas.
53
<PAGE> 57
The following table sets forth the Company's completed and pending
acquisitions since its inception in June 1996.
COMPLETED AND PENDING ACQUISITIONS
<TABLE>
<CAPTION>
DATE SELLER THEATERS SCREENS STATE
---- ------ -------- ------- -----
<S> <C> <C> <C> <C>
November 1996 Movie One 4 22 NM, TX
November 1996 MI Theaters 14 80 LA, FL, OK, TX
January 1997 Cinamerica 1 6 CA
January 1997 Wometco 2 19 FL
April 1997 Hoyts 2 12 NY, VT
May 1997 United Artists 1 4 TX
September 1997 Westminster(1) 2 11 CO
April 1998 AMC 3 17 MI, TX
April 1998 StarTime 27 202 AZ, CA, CO, FL, NE, NY, OH, OK, TX, WI
April 1998 Landmark 49 140 CA, CO, LA, MA, MI, MN, OH, TX, WA, WI
--- ---
105 513
Total
=== ===
</TABLE>
- ---------------
(1) Theaters operated pursuant to management agreement.
RECENT AND PENDING THEATER CONSTRUCTION
The Company continually evaluates existing and new markets for the
construction and expansion of specialty, second-run and, in selected situations,
commercial first-run theaters. The Company generally seeks to develop theaters
in markets that are under-served as a result of changing demographic trends or
the aging or obsolescence of existing theaters. Some of the factors management
considers in determining whether to develop a theater in a particular location
are the market's population, average household income, education levels,
proximity to retail corridors, convenient roadway access, proximity to competing
theaters, and the effect on the Company's existing theaters in the market, if
any.
The Company completed the construction of its first second-run multiplex
theater with ten screens in Des Moines, Iowa in June 1997. The Company also
completed the expansion of its existing facility in LaPlace, Louisiana in
September 1997, which increased the number of screens from six to seven and the
number of seats from 734 to 970. In addition, the Company recently executed
leases contingent upon the construction of four theaters with 24 screens in
Illinois, Massachusetts, Missouri and Michigan.
The following table summarizes the Company's completed and projected
expansions of existing theaters and constructions of new theaters since its
inception in June 1996.
COMPLETED AND PROJECTED THEATER CONSTRUCTION AND EXPANSION
<TABLE>
<CAPTION>
ADDITIONAL
DATE LOCATION FORMAT TYPE OF PROJECT SCREENS
---- -------- ------ --------------- ----------
<S> <C> <C> <C> <C>
June 1997 Des Moines, IA Second-run New theater 10
September 1997 LaPlace, LA Second-run Addition to existing theater 1
Second quarter 1998 St. Specialty New theater 6
Louis,MO(1)
Third quarter 1998 Waltham, MA(1) Specialty New theater 6
Fourth quarter 1998 Flint, MI(1) First-run New theater 6
Fourth quarter 1998 Yukon, OK Second-run Conversion to stadium seating --
First quarter 1999 Roseville, MI Second-run New theater 8
First quarter 1999 Joliet, IL(2) Second-run New theater 6
First quarter 1999 Laredo, TX Second-run Addition to existing theater 3
</TABLE>
- ---------------
(1) Lease executed, construction started.
(2) Lease executed.
In addition, the Company expects to commence construction of four
additional specialty-film theaters, representing approximately 34 screens, by
the fourth quarter of 1998.
54
<PAGE> 58
OVERVIEW OF THE EXHIBITION INDUSTRY
The domestic motion picture exhibition industry is comprised of
approximately 490 exhibitors, approximately 255 of which operate four or more
screens at one or more locations, according to the National Association of
Theater Owners ("NATO"). As of May 1997, the ten largest exhibitors (in terms of
number of screens) controlled approximately 51% of the total screens in the
United States, with no single exhibitor controlling more than 9% of the total
screens.
According to data released by the Motion Picture Association of America
(the "MPAA"), the total U.S. box office sales of approximately $6.4 billion in
1997 was a record for the exhibition industry. Attendance and domestic box
office revenue have grown since 1992 at compounded annual growth rates of
approximately 3.4% and 5.5%, respectively. The following table summarizes the
recent historical trends in U.S. theater attendance, average ticket price, and
box office sales since 1992.
U.S. EXHIBITION STATISTICS
<TABLE>
<CAPTION>
ATTENDANCE AVG. TICKET PRICE BOX OFFICE SALES
YEAR (MILLIONS) (DOLLARS) (MILLIONS)
- ---- ---------- ----------------- ----------------
<S> <C> <C> <C>
1992 1,173 $4.15 $4,871
1993 1,244 4.14 5,154
1994 1,292 4.18 5,396
1995 1,263 4.35 5,493
1996 1,339 4.41 5,911
1997 1,386 4.59 6,360
</TABLE>
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. Revenues from
all distribution channels grew by more than 250% over the past ten years to $20
billion in 1996. The increased revenue potential from film distribution in
recent years can be attributed to increased demand resulting from the domestic
and international growth of the motion picture exhibition industry and the home
video industry, and the significantly increased channel capacity created by
enhanced cable and satellite-based transmission systems.
Management believes that the recent critical and commercial success of
smaller budget, independent films will further drive independent film
production, particularly from the "independent" subsidiaries of major studios
which desire the recognition of these prestigious, high profile awards.
Independent producers and distributors such as (i) Gramercy Pictures
("Gramercy"), (ii) Turner Pictures, which includes New Line Distribution, Inc.
("New Line"), Fine Line Features ("Fine Line"), and Castle Rock Entertainment,
and (iii) Dreamworks SKG, the highly publicized partnership among Jeffrey
Katzenberg, Steven Spielberg and David Geffen, should help maintain film
production at a high level. These independent film producers, along with the
"independent" subsidiaries of the major distributors such as Miramax Films, Inc.
("Miramax") which is owned by Buena Vista Pictures Distribution, Inc. ("Buena
Vista"), October Films ("October") which is owned by Universal Pictures
("Universal"), the new specialty film division of Paramount Pictures, Sony
Pictures Classics ("Sony Classics") which is owned by Sony Pictures Releasing
("Sony"), and Fox Searchlight Pictures ("Fox Searchlight") which is owned by
Twentieth Century Fox ("Fox"), have found increasing success with Academy of
Motion Picture Arts and Sciences Awards ("the Academy Awards"). In addition, the
generally lower budgets and higher potential returns on capital invested in
specialty films make them financially appealing to the studios.
55
<PAGE> 59
The table summarizes recent nominations and awards for independent films at
the Academy Awards.
RECENT ACADEMY AWARDS AND NOMINATIONS FOR INDEPENDENT FILMS
<TABLE>
<CAPTION>
YEAR FILM DISTRIBUTOR NOMINATIONS AWARDS
- ---- ---- ----------- ----------- ------
<S> <C> <C> <C> <C>
1996 The English Patient Miramax 11 Best Picture Best Director
Best Supporting Actress Best
Art Direction Best
Cinematography Best Costume
Design Best Film Editing
Best Original Dramatic Score
Best Sound
1996 Fargo Gramercy 7 Best Actress Best Original
Screenplay
1996 Shine Fine Line 5 Best Actor
1996 Sling Blade Miramax 2 Best Adapted Screenplay
1996 Emma Miramax 2 Best Original Music or
Comedy Score
1996 Secrets & Lies October 5 --
1996 Trainspotting Miramax 1 --
1996 Marvin's Room Miramax 1 --
1996 Angels & Insects Samuel Goldwyn Co. 1 --
1995 Dead Man Walking Gramercy 4 Best Actress
1995 The Usual Suspects Gramercy 2 Best Supporting Actor Best
Original Screenplay
1995 The Postman (Il Miramax 5 Best Original Dramatic Score
Postino)
1995 Mighty Aphrodite Miramax 2 Best Supporting Actress
1995 Restoration Miramax 2 Best Art Direction Best
Costume Design
1995 Shanghai Triad Sony Classics 2 --
1995 Georgia Miramax 1 --
</TABLE>
Continuing this trend of independent film successes, independent films such
as The Full Monty, Good Will Hunting, Wings of the Dove, The Sweet Hereafter and
The Apostle received 31 Academy Award nominations for 1997. Management believes
that continued high levels of independent film production should complement the
Company's efforts to expand its presence in the specialty-film niche of the
exhibition industry.
In addition, management believes that certain demographic trends favor the
theater exhibition industry, and particularly the specialty-film and second-run
niches. Information obtained from the U.S. Bureau of Census indicates that the
number of 12 to 20 year-olds in the United States, the largest movie-going
segment of the population, is projected to grow an aggregate of 7.5% through the
year 2000. This segment of the movie-going population tends to favor second-run
films in particular due to their attractive price point. In addition, according
to the MPAA, the number of movie patrons over 40 years old as a percentage of
the total movie audience has more than doubled from approximately 14% in 1986 to
32% in 1996. This trend in theater attendance seems to be following the highly
publicized aging of the "baby boom" generation. Management believes that major
studios have recognized this trend and are producing an increasing number of
wide-release commercial films targeted to a more mature audience, including such
notable recent films as Mr. Holland's Opus (Buena Vista), Courage Under Fire
(Fox), Sense and Sensibility (Sony), Evita (Buena Vista), The Mirror Has Two
Faces (Sony), and Braveheart (Paramount). The wider appeal of more mature films
should also complement the Company's strategy of expanding its presence in the
specialty-film niche of the industry since this niche has traditionally appealed
to a slightly more mature audience demographic.
56
<PAGE> 60
OPERATIONS
SPECIALTY-FILM EXHIBITION
Through the acquisition of Landmark, the Company is the largest exhibitor
in the United States of specialty films both in terms of number of screens and
number of theaters dedicated to these films. The Company operates 49 theaters
and 139 screens dedicated to specialty-films in California, Colorado, Louisiana,
Massachusetts, Michigan, Minnesota, Ohio, Texas, Washington, and Wisconsin. The
Company holds the largest or second largest market share of the specialty-film
exhibition business in the following major markets: Los Angeles, San Francisco,
Seattle, Dallas, Houston, Denver, Minneapolis, Boston, Cleveland, Detroit, Palo
Alto, Berkeley, San Diego, Milwaukee, Sacramento and New Orleans.
The specialty-film exhibition business is the largest niche of the
exhibition industry outside of traditional commercial first-run exhibition in
terms of box office revenue generated. In 1996, according to Entertainment Data,
Inc., films released by independent distributors and "independent" subsidiaries
of major distributors such as Miramax, October Films, and Fine Line generated an
estimated $500 million of box office revenue. Based on the Company's 1996 box
office revenue from specialty-films, the Company maintains a market share of
approximately 9% of the total box office revenue generated by specialty-films.
The Company is responsible for a substantially higher percentage of certain
films' total domestic box office revenue due to the strategic location of
Landmark's theaters.
The following table presents a summary of selected recent films for which
Landmark has been responsible for a significant portion of the total domestic
gross box office, as of September 1997.
SELECTED INDEPENDENT FILM REVENUE GENERATED AT LANDMARK THEATERS
<TABLE>
<CAPTION>
LANDMARK
PERCENTAGE
GROSS BOX OFFICE OF
------------------------ NATIONAL
YEAR FILM DISTRIBUTOR NATIONAL LANDMARK GROSS
---- ---- ----------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997 Shall We Dance Miramax $6,479 $1,290 19.9%
1997 Kolya Miramax 5,731 1,060 18.5
1997 Waiting for Guffman Sony Classics 2,893 1,162 40.2
1996 Lone Star Sony Classics 12,409 2,331 18.8
1996 Secrets & Lies October 12,116 1,917 15.8
1995 The Postman Miramax 21,846 2,795 12.8
1994 The Last Seduction October 5,843 981 16.8
</TABLE>
SECOND-RUN EXHIBITION
The Company is one of the largest exhibitors of second-run films in the
United States in terms of number of screens and operated 49 theaters and 336
screens dedicated to the second-run format in Arizona, California, Colorado,
Florida, Nebraska, New York, Ohio, Oklahoma, Texas, Vermont, Washington and
Wisconsin.
Management estimates that the second-run niche of the theater exhibition
industry represents approximately 5% of theater and film revenues but as much as
10% of the nation's screens. Management further believes that most of the
estimated 125 companies which operate second-run theaters also operate first-run
theaters.
The Company's second-run theaters typically charge admission prices of
$1.00 to $2.00 but provide the same amenities to customers as first-run
theaters. The Company's second-run theaters typically offer wall-to-wall
screens, comfortable seating with cupholder armrests, stereo sound, attractive
concession stands, clean and inviting lobby areas, and video games or game
rooms. Management believes that offering this type of "first-run quality"
theatrical experience for a second-run price is the key to generating large
audiences at second-run theaters and subsequently increasing the profitability
of the theaters. The Company's second-run
57
<PAGE> 61
theaters benefit from lower film costs and a greater proportion of total revenue
from concession sales than at comparable first-run theaters.
Management believes that its second-run theaters appeal to many customer
groups, but in particular allow it to serve (i) families with children, (ii)
patrons who miss a film during its first-run exhibition, and (iii) customers who
may not be able to afford to attend first-run theaters on a frequent basis.
Management further believes that its second-run format allows the Company to
expand the number of potential customers beyond traditional first-run
moviegoers.
In addition to being able to draw customers from a wider group of potential
moviegoers, second-run theaters tend to enjoy better film booking arrangements
and film buying terms than their commercial first-run counterparts. Film rental
costs are generally significantly lower in the second-run format than in the
first-run format. Due to the smaller number of second-run screens in comparison
with the number of first-run screens in the country, there is typically very
little competition among second-run theaters for prints of commercially
successful films. In addition, each second-run theater typically comprises its
own film zone. As a result, the Company's second-run theaters generally benefit
from the ability to screen all successful commercial films, as opposed to the
average commercial first-run theater which receives only a subset of these
movies.
OTHER EXHIBITION
Occasionally, as has been the case with the MI Theaters and Movie One
acquisitions, the Company may acquire and continue to operate certain commercial
first-run theaters in conjunction with acquisitions of specialty-film and
second-run film theaters. In addition, the commercial first-run theaters that
have been acquired to date and those anticipated to be acquired in the future
have largely been and will continue to be in film zones with no other
competitors or in smaller cities with few first-run competitors.
The Company operates eight commercial first-run theaters comprised of 49
screens. As the Company continues to grow, management does not expect its
commercial first-run business to expand beyond the current proportion of
approximately 10% to 15% of the Company's total screens.
CONCESSIONS
Concession sales are the second largest source of revenue for the Company
after box office admissions, representing approximately 29.1% and 28.7% of total
combined pro forma revenues for the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively. The Company has devoted considerable
management effort to increasing concession sales and improving the income
margins from concession sales. These efforts include implementation of the
following strategies:
- Optimization of product mix. The Company's primary concession products
include popcorn, soft drinks and candy sold at each of the Company's
theaters. In addition, different varieties and brands of candy and other
concession items are offered at theaters based on preferences in a
particular geographic region. The Company has also implemented "combo
meals" and "movie meals" for children and senior citizens, both of which
offer a pre-selected assortment of concession products for a slightly
discounted price. Management believes that these concession packages tend
to increase overall concession revenue.
- Introduction of new products. The Company continues to evaluate and
introduce new concession products designed to attract additional
concession purchases. Management considers adding new products in many
locations, including bottled water, bulk candy, frozen yogurt and ice
cream.
- Staff training. Employees are continually trained in "cross-selling" and
"upselling" techniques. This training occurs through on-the-job training.
- Theater design. New theaters are designed to include multiple
point-of-sale terminals at the concession stand, making it easier to
serve large numbers of customers rapidly. Strategic placement of large
concession stands with fast-flow drink dispenser heads within theaters
heightens their visibility, aids in reducing the length of concession
lines and improves traffic flow around the concession stands.
58
<PAGE> 62
- Cost control. The Company negotiates prices for its concession supplies
with concession distributors on a bulk rate. The concession distributors
provide inventory and distribution services to the theaters, which place
volume orders directly with the concession distributors. The concession
distributors are paid a fee for such service equal to a percentage of the
Company's concession supply purchases. The Company believes that
utilization of concession distributors is more cost effective than
establishing a concession warehousing network owned by the Company.
FILM LICENSING
The Company licenses films from distributors on a film-by-film,
theater-by-theater basis. Film buyers negotiate directly with major distributors
and independent distributors on behalf of the Company. Successful licensing
depends in part upon the exhibitor's knowledge of trends and historical film
preferences of the residents in the market served by each theater, as well as on
the availability of commercially successful motion pictures. The Company's film
buyers have significant experience in the theater industry and have developed
long-standing relationships with distributors.
The Company's specialty-film theaters license films primarily from
independent film distributors, foreign film distributors, and "independent"
subsidiaries of major film distributors (collectively "independent
distributors"). Similar to the major film distributors, independent distributors
typically establish geographic film licensing zones and allocate each available
film to a single theater 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 approximately five
miles in metropolitan and suburban markets to up to 15 miles in smaller towns.
In general, the major distributors try to place a print of each wide-release
film in as many film zones as possible (often exceeding 3,000 prints), whereas
independent distributors typically exhibit their films in 300 or fewer zones.
The limited number of prints available of specialty films makes the runs of
these films generally more exclusive in any given market. Management believes,
however, that due to its significant presence in the specialty-film niche, the
Company has been able to and will continue to be able to secure an adequate
number of prints of films that it feels will be successful. Management also
believes that its large percentage of total national box office of specialty
films gives the Company the ability to negotiate more favorable film rental
agreements than most other specialty-film exhibitors. For example, for films
such as The English Patient, Good Will Hunting and Shine, the Company had
exclusive rights to the films for up to three weeks in selected markets.
The Company's second-run theaters generally enjoy better film booking
arrangements and film buying terms than comparable commercial first-run
theaters. Film rental costs are generally significantly lower in the second-run
format than in the first-run format, and the Company has had no difficulty to
date in securing the films that it believed would be most successful in its
respective markets. Due to the smaller number of second-run screens in
comparison with the number of first-run screens nationwide, there is typically
very little competition among second-run theaters for prints of commercially
successful films. In addition, each second-run theater typically comprises its
own film zone. As a result, the Company's second-run theaters generally benefit
from the ability to screen all successful commercial films, as opposed to the
average commercial first-run theater which receives only a subset of these
movies. Based on the different film release schedule in the second-run format,
management also has the benefit of knowing how successful each film was in its
first run prior to committing to that film for a second run.
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 corporate office receives daily reports
generated by the management information system with detailed admission and
concession revenue 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 films with higher
gross revenues and substituting films when gross revenues cease to meet goals.
Real-time
59
<PAGE> 63
seating and box office information is available in certain locations to box
office personnel, making it possible for theater management to avoid overselling
a particular film, to provide faster and more accurate responses to customer
inquiries regarding showings and available seating, as well as the ability to
make advanced ticket sales by telephone. The information system also tracks
concession sales and total deposits, leading to better inventory management and
control.
MARKETING
In order to attract customers, the Company relies principally on newspaper
display advertisements (substantially paid for by film distributors) and
newspaper directory film schedules (generally paid for by the Company) to inform
customers 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
of coming attractions and films presently playing on other screens 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.
EMPLOYEES
The Company has approximately 2,300 employees, of which approximately 85%
are part-time employees who are paid on an hourly basis. Film projectionists at
certain of the Company's theaters in California, Colorado, Ohio, Massachusetts,
Minnesota, Texas, and Washington are represented by the International Alliance
of Theatrical Stage Employees pursuant to collective bargaining agreements. In
addition, janitors at the Company's theater in Berkeley, California are
represented by the Theatrical Janitors Union. These collective bargaining
agreements, which cover an aggregate of 84 of the Company's employees, expire at
various periods through 2001. The Company believes its relations with its
employees are good. The Company's expansion into new markets may increase the
number of employees represented by unions.
PROPERTIES
Of the 106 theaters operated by the Company, 90 are leased, 11 are owned,
three buildings are owned by the Company on properties covered by ground leases,
and two are operated pursuant to a management agreement. The Company's leases
typically have remaining terms from one to 25 years, with options to extend the
leases 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 50 theater
leases (representing 200 screens) will expire, representing approximately 49% of
all the Company's theaters (38% of all screens). Of those coming due within the
next five years, leases at 42 theaters (representing 182 screens) will be
subject to renewal options. The Company leases office space in Dallas, Texas for
its corporate headquarters.
COMPETITION
The domestic motion picture exhibition industry is highly competitive,
particularly in licensing films, attracting patrons and finding new theater
sites. According to NATO, there are approximately 490 exhibitors, of which
approximately 255 operate four or more screens at one or more locations. As of
May 1997, the ten largest exhibitors (in terms of number of screens) controlled
approximately 51% of the total screens in the United States, with no single
exhibitor controlling more than 9% of the total screens. Industry participants
vary substantially in size, from small independent operators of single screen
theaters to large national chains of multi-screen theaters affiliated with large
entertainment conglomerates.
The Company is the largest exhibitor of specialty motion pictures in the
United States based on the number of screens dedicated to these films and in
terms of box office revenue generated from these films. In addition, the Company
is one of the largest second-run exhibitors in the United States based on the
number of screens. The Company competes against local, regional, and national
exhibitors, most of which have been in
60
<PAGE> 64
existence significantly longer than the Company and many of which have
substantially greater financial resources than the Company. Management believes
that the Company is the only exhibitor aggressively pursuing a growth strategy
in both specialty-film and second-run exhibition.
The Company competes for film based on the location of its theaters and
number of competitors within its film zones. In film zones where the Company has
little or no direct competition, management selects those pictures that it
believes will be most successful in its markets from those offered to it by
distributors. The Company faces little or no competition for films in any of its
second-run film zones. In addition, the Company is granted a period of
exclusivity in its area for selected specialty films at many of its
specialty-film theaters. In film zones in which the Company faces competition
for films, it generally licenses films based on an allocation process.
Management 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.
The Company competes for customers based on the availability of popular
films, the location of theaters, the comfort and quality of theaters, and ticket
prices. Management believes that its admission prices are competitive with
admission prices of respective competing theaters.
Management believes that the emergence of new motion picture distribution
channels has not adversely affected attendance at theaters and that these new
channels do not provide an experience comparable to the out-of-home experience
of viewing a motion picture in a theater. Management believes that the public
will continue to recognize the advantages of viewing a film on a large screen
with superior audio and visual quality, while enjoying a variety of concessions
and sharing the experience with a large audience. Theatrical exhibition is the
primary distribution channel for new motion picture releases. Successful
theatrical release of a film in international markets and in "downstream"
distribution channels, such as home video, pay-per-view, pay cable, network
television, and syndicated television, generally depends on successful
theatrical release in the United States.
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 is not a
party, have a material impact on the industry and the Company. These consent
decrees bind certain 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
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.
The Company is subject to various general regulations applicable to its
operations including the Americans with Disabilities Act (the "ADA"). Management
is not currently aware of any pending or threatened action in regard to the
Company's compliance with the ADA.
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.
YEAR 2000
The Company believes that the computer equipment and software used in its
operations will function properly with respect to dates in the Year 2000 and
thereafter. The Company is in the process of communicating with its significant
suppliers to determine the extent to which interfaces with such entities are
vulnerable to Year 2000 issues and the extent to which any products or services
purchased by or from such entities are vulnerable to Year 2000 issues. The
Company presently believes that the Year 2000 issues will not require the
Company to incur any material costs or pose significant operational problems for
the Company directly or as a result of any Year 2000 issues of suppliers.
61
<PAGE> 65
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following sets forth certain information, regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven L. Holmes.......... 39 Chief Executive Officer, Chief Financial Officer
and Director
John M. Sullivan.......... 62 Chairman of the Board of Directors
Thomas J. Owens........... 41 President and Director
Bert Manzari.............. 52 President of Landmark and Director
Ron Reid.................. 56 Executive Vice President, Operations
Paul Richardson........... 49 Executive Vice President
Stephen Kauzlaric......... 32 Vice President, Treasurer
David H. Wong............. 34 Director
Christopher A. Laurence... 30 Director
James Rosenthal........... 34 Director
Thomas E. Davin........... 40 Director
</TABLE>
Steven L. Holmes, Chief Executive Officer, Chief Financial Officer and
Director. Mr. Holmes is a co-founder of the Company, and has served as Chief
Executive Officer, Chief Financial Officer and Director since the Company's
inception. Prior to joining the Company, from 1993 to 1996, Mr. Holmes served as
Chief Financial Officer of Cobblestone Golf Group ("Cobblestone"). Prior to his
employment with Cobblestone, Mr. Holmes served as a Director and Chief Financial
Officer of Cinemark USA, Inc. ("Cinemark"). Prior to joining Cinemark, Mr.
Holmes was a manager at Deloitte & Touche LLP.
John M. Sullivan, Chairman of the Board of Directors. Mr. Sullivan has
served as a Chairman of the Board of Directors of the Company since its
inception in June 1996. He is presently a director of The Scotts Company,
Clinical Communications Group Inc., Cobblestone Golf Group, Inc. and Rental
Service Corporation. From October 1987 to January 1993, Mr. Sullivan was
Chairman of the Board and Chief Executive Officer of Prince Holdings, Inc.
Thomas J. Owens, President and Director. Mr. Owens is a co-founder of the
Company and has served as President and a Director since the Company's
inception. Prior to joining the Company, from 1987 to 1996 Mr. Owens served as
the Vice President of Real Estate Development of Cinemark. Prior to joining
Cinemark in 1987, Mr. Owens spent six years in commercial real estate in the
Austin, Texas area. In 1985, he formed a real estate company specializing in
anchor tenant representation, where he worked to acquire locations for Cinemark.
Bert Manzari, President of Landmark and Director. Mr. Manzari is President
of Landmark Theatre Corp., a subsidiary of the Company, and is a director of the
Company. Prior to joining the Company, Mr. Manzari was Senior Vice President,
Head Film Buyer of Landmark since 1982. Prior to that time, Mr. Manzari was
President and Head Film Buyer for Seven Gables Theaters, a northwestern theater
circuit located in Seattle, Washington. Prior to that time, Mr. Manzari opened
the Guild Theatre in Albuquerque in 1974, where Mr. Manzari and Paul Richardson
expanded this holding into Movie, Inc., a circuit of 13 repertory screens in the
south and southwestern parts of the United States.
Ron Reid, Executive Vice President, Operations. Mr. Reid has served as
Executive Vice President of Operations since December 1996. Prior to joining the
Company, Mr. Reid served as Vice President of Construction and Purchasing,
Worldwide for Cinemark from 1988 to 1996. Prior to that time, Mr. Reid served as
Cinemark's Western Region Operations Manager from 1987 to 1988. Prior to joining
Cinemark, Mr. Reid held the position of Director of Operations, overseeing
concessions, construction and personnel for Theatre Operators, Inc. for eight
years.
62
<PAGE> 66
Paul Richardson, Executive Vice President. Mr. Richardson will serve as
Executive Vice President of the Company upon the closing of Landmark
Acquisition. Mr. Richardson has served as Senior Vice President of Operations of
Landmark since 1982. Prior to joining Landmark, Mr. Richardson owned and
operated Movie, Inc., a circuit of 13 repertory screens in the south and
southwestern parts of the United States. Mr. Richardson is responsible for the
operation, renovation, acquisition and design of Landmark's theaters.
Stephen Kauzlaric, Vice President, Treasurer. Mr. Kauzlaric has served as
the Company's Vice President, Treasurer, since September 1997. Prior to joining
the Company, Mr. Kauzlaric held several positions with Cobblestone, including
Director of Strategic Planning and Director of Acquisitions. Prior to joining
Cobblestone, Mr. Kauzlaric was an Assistant Vice President at First Interstate
Bank in the real estate developer lending department.
David H. Wong, Director. Mr. Wong has served as a director of the Company
since its inception in June 1996. Mr. Wong joined Brentwood in July 1989 and is
presently a general partner of Brentwood Golf Partners, L.P., Brentwood,
Brentwood Buyout Management Partners, L.P. and Brentwood Buyout Partners, L.P.
and is a managing member of Brentwood Private Equity, L.L.C. and Brentwood
Private Equity Management, L.L.C. Mr. Wong is also a director of Clinical
Communications Group Inc., Aspen Marketing Group, Inc., Cobblestone Golf Group,
Inc. and Horizon Cellular Telephone Company, Inc.
Christopher A. Laurence, Director. Mr. Laurence has served as a director of
the Company since its inception in June 1996. Mr. Laurence joined Brentwood in
1991 and is presently a managing member of Brentwood Private Equity, L.L.C. and
Brentwood Private Equity Management, L.L.C. Mr. Laurence is also a director of
Rental Service Corporation and Aspen Marketing Group, Inc.
James Rosenthal, Director. Mr. Rosenthal has served as a Director of the
Company since its inception in June 1996. Mr. Rosenthal also serves as Executive
Vice President of Business Development for New Line Cinema Corporation, a
position he has held since 1992. In his capacity at New Line, Mr. Rosenthal
focuses on new business opportunities, mergers and acquisitions, finance, and
joint ventures. Prior to this time, Mr. Rosenthal was a Senior Associate with
the management consulting firm Booz, Allen & Hamilton.
Thomas E. Davin, Director. Thomas E. Davin has served as a director of the
Company since March 1998. In June 1997 he was appointed Chief Operating Officer
for Taco Bell Corp. Mr. Davin joined Taco Bell Corp. in November 1993 as Vice
President and General Manager for the South Central Region. In September 1996,
he was named Vice President of Operations. Prior to joining Taco Bell Corp. and
since October 1991, Mr. Davin served as Director, Mergers and Acquisitions for
PepsiCo. Inc. Mr. Davin is also a director of Cobblestone Golf Group, Inc.
EXECUTIVE COMPENSATION
The following table sets forth, with respect to the services rendered
during the 1997 fiscal year, the total compensation paid by the Company to its
five most highly-compensated officers.
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
TOTAL
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER
--------------------------- -------- ------- ------
<S> <C> <C> <C>
Steven L. Holmes.............................. $146,222 $42,635 $9,797
Chief Executive Officer, Chief Financial
Officer
Thomas J. Owens............................... $144,865 $39,792 $8,434
President
Ron Reid...................................... $142,770 $26,125 $7,368
Executive Vice President, Operations
John Ralston.................................. $ 72,849 $ 6,000 $1,368
Controller
Stephen Kauzlaric............................. $ 27,788 $ 0 $1,962
Vice President, Treasurer
</TABLE>
63
<PAGE> 67
EMPLOYMENT ARRANGEMENTS
In connection with the Landmark Acquisition, the Company assumed the
employment agreements of two senior executive officers of Landmark. Pursuant to
such agreements and the amendments thereto, these executives are entitled to
receive certain compensation and benefits through the term of their respective
agreement as well as upon the termination of their respective agreement prior to
the expiration of such term.
Bert Manzari, President of Landmark, receives a salary of $330,000 per year
and is eligible to receive a bonus based upon Landmark reaching certain
performance targets. In addition, he will be eligible to receive certain
payments under a long-term incentive plan based on the future value of the
Company. His employment agreement provides that his salary is subject to fixed
annual increases. The term of his agreement expires on March 31, 2001.
Paul Richardson, Executive Vice President, currently receives a salary of
$285,000 per year and is eligible to receive a bonus based upon Landmark
reaching certain performance targets. His employment agreement provides that his
salary is subject to increase based on the Consumer Price Index after March 31,
1999. In addition, he was given the opportunity to purchase 1000 shares of the
Company's common stock. The term of his agreement expires on March 31, 2001.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of the Company do not receive any
compensation for their services as directors. They do receive reimbursement for
travel and other expenses incurred in their capacity as directors.
64
<PAGE> 68
PRINCIPAL STOCKHOLDERS
The Company has two classes of voting securities, Common Stock and
preferred stock designated as voting Series A Preferred Stock ("Series A
Preferred Stock"). The Common Stock and Series A Preferred Stock vote together
as a single class. The following table sets forth, as of the date of the closing
of the Private Offering, the ownership of Common Stock and Series A Preferred
Stock of the Company by each stockholder who is known by the Company to own
beneficially more than five percent of the outstanding Common Stock or Series A
Preferred Stock, respectively, by each director, by each executive officer
listed in the table below, and by all directors and officers as a group.
<TABLE>
<CAPTION>
SERIES A
COMMON STOCK PREFERRED STOCK PERCENT OF
AMOUNT AND NATURE OF PERCENT AMOUNT AND NATURE OF PERCENT ALL VOTING
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS BENEFICIAL OWNERSHIP OF CLASS SECURITIES
---------------- -------------------- -------- -------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Brentwood Associates
Buyout Fund II, L.P.(1)....... 82,010 70.0% 249,180 87.7% 82.3%
DLJ Fund Investment Partners II,
L.P.(2)....................... 12,151 10.4 29,878 10.5 10.4
Steven L. Holmes(3)............. 6,400 5.5 936 0.3 1.8
Thomas J. Owens(3).............. 6,400 5.5 936 0.3 1.8
Ron Reid(3)..................... 3,164 2.7 468 0.2 0.9
John M. Sullivan(1)............. 1,328 1.1 987 0.3 0.6
Stephen Kauzlaric(3)............ 1,000 0.9 0 0 0.2
Paul Richardson(4).............. 1,000 0.9 0 0 0.2
James Rosenthal(1).............. 628 0.5 994 0.3 0.4
Tom Davin(1).................... 546 0.5 745 0.3 0.3
All Directors and Officers as a
group (eight individuals)..... 20,466 17.5% 5,066 1.8% 6.3%
</TABLE>
- ---------------
(1) The address for Brentwood Associates Buyout Fund II, L.P. and Messrs. Davin,
Sullivan and Rosenthal is c/o Brentwood Associates, 11150 Santa Monica
Boulevard, Suite 1200, Los Angeles, California 90025.
(2) The address for DLJ Fund Investment Partners II, L.P. is 277 Park Avenue,
New York, New York 10172.
(3) The address for Messrs. Holmes, Kauzlaric, Owens and Reid is c/o Silver
Cinemas International, Inc., 4004 Beltline Road, Suite 205, Dallas, Texas
75244.
(4) The address for Mr. Richardson is c/o Landmark Theatre Corp., 2222 S.
Barrington Avenue, Los Angeles, California 90064.
65
<PAGE> 69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH BRENTWOOD
Pursuant to a Corporate Development and Administrative Services Agreement,
dated as of July 2, 1996, between Brentwood Private Equity LLC ("BPE"), an
affiliate of Brentwood, and the Company, as amended (the "Services Agreement"),
BPE has agreed to assist in the corporate development activities of the Company
by providing services to the Company, including (i) assistance in analyzing,
structuring and negotiating the terms of investments and acquisitions, (ii)
researching, identifying, contacting, meeting and negotiating with prospective
sources of debt and equity financing, (iii) preparing, coordinating and
conducting presentations to prospective sources of debt and equity financing,
(iv) assistance in structuring and establishing the terms of debt and equity
financing and (v) assistance and advice in connection with the preparation of
the Company's financial and operating plans. Pursuant to the Services Agreement,
BPE is entitled to receive: (i) financial advisory fees equal to 1.5% of the
acquisition cost of the Company's completed acquisitions; (ii) upon the
occurrence of certain events, monitoring fees equal to 1% of the aggregate
amount of investment in Company by Brentwood; and (iii) reimbursement of its
reasonable fees and expenses incurred from time to time (a) in performing the
services rendered thereunder and (b) in connection with any investment in,
financing of, or sale, distribution or transfer of any interest in the Company
by BPE or any person or entity associated with BPE. For the year ended December
31, 1997, BPE was paid $81,505 (including reimbursement of fees and expenses)
pursuant to the Services Agreement. No amounts were paid to BPE during the three
months ended March 31, 1998.
STOCKHOLDERS AGREEMENT
The Company and its stockholders (the "Stockholders") have entered into a
stockholders agreement (the "Stockholders Agreement") which provides certain
restrictions and rights related to the transfer, sale or purchase of Common
Stock and Series A Preferred Stock (collectively, the "Company Stock"). Such
restrictions and rights include the following: (i) except as set forth below, a
Stockholder may not sell or transfer any shares of the Company Stock without
first giving the Company the right of first refusal to purchase such shares;
(ii) in the event that Brentwood agrees to sell or transfer any of its shares of
Common Stock, the other Stockholders shall have the right to sell or transfer a
proportionate number of shares of Company Stock as part of such sale or
transfer; and (iii) in the event that Brentwood agrees to sell or transfer all
of its shares of Company Stock, the other Stockholders shall be obligated to
sell or transfer all of their shares of Company Stock as part of such sale or
transfer. In connection with the Stockholders Agreement, the Company and the
Stockholders have entered into a registration rights agreement which provides
that the Stockholders would have certain piggyback rights upon the registration
for a public offering of the Company Stock by the Company.
66
<PAGE> 70
DESCRIPTION OF REVOLVING CREDIT FACILITY
The Company repaid all of the indebtedness under the Old Credit Facility
with proceeds from the Private Offering. Silver Cinemas, Inc. (the "Borrower"),
a subsidiary of the Company, intends to amend and restate such facility (as
amended and restated, the "Revolving Credit Facility"). Until the Borrower
amends and restates the facility, the Company will not be able to borrow under
any credit facility. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ
Securities") will act as arranger under the Revolving Credit Facility for a
syndicate of financial institutions (collectively, the "Lenders"). The following
is a summary description of the principal terms and conditions expected to be
contained in the Revolving Credit Facility. The description set forth below does
not purport to be complete and is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Revolving Credit Facility. The Company's obligations under the Revolving Credit
Facility will constitute Senior Debt and Guarantor Senior Debt with respect to
the Notes.
DLJ Capital Funding, Inc. has committed, subject to compliance with
customary conditions and satisfactory documents, to provide the Borrower with a
five year reducing revolving credit facility with aggregate availability of
$40.0 million. The Borrower, subject to execution of a credit agreement (the
"Credit Agreement"), may utilize borrowings to fund working capital
requirements, including issuance of stand-by and trade letters of credit, and
for other general corporate purposes, including the acquisition and construction
of theaters. Borrowings under the Revolving Credit Facility will be guaranteed
by Silver Cinemas International, Inc., the Company of the Notes, and each of the
Company's direct and indirect domestic subsidiaries. The Revolving Credit
Facility and the guarantees thereof will be secured by a perfected first
priority security interest in substantially all material assets of the Company
and its direct and indirect domestic subsidiaries including: (i) fee interests
and certain leasehold interests in real property; (ii) accounts receivable,
equipment, inventory and intangibles; and (iii) the capital stock of the Company
and its direct and indirect domestic subsidiaries.
Amounts borrowed under the Revolving Credit Facility will bear interest at
a rate per annum equal (at the Borrower's option) to: (i) the Administrative
Agent's reserve-adjusted LIBO rate ("LIBOR") plus an applicable margin or (ii)
an alternate base rate based on the Administrative Agent's prime rate, plus an
applicable margin. Initially, the applicable margin is expected to be 2.75% per
annum for LIBOR loans and 1.75% per annum for alternate base rate loans and will
be tied to a grid based on the Company's ratio of Funded Debt to Adjusted EBITDA
(as each will be defined in the Revolving Credit Facility). The Borrower will be
required to pay, on a quarterly basis, a commitment fee on the undrawn portion
of the Revolving Credit Facility at an initial rate equal to 0.50% and
thereafter at a rate equal to 0.50% or 0.375% per annum depending on the
Company's ratio of Funded Debt to Adjusted EBITDA.
The Lenders' obligations under the Revolving Credit Facility to advance
funds at any time during the five-year term will be subject to certain
conditions customary in secured credit facilities, including the absence of a
default under the Credit Agreement. Borrowings under the Revolving Credit
Facility will reduce quarterly, with an annual reduction of approximately $5.0
million, commencing fifteen months from the execution of the Credit Agreement.
In addition, the Revolving Credit Facility will provide for mandatory
prepayments of (i) certain net proceeds from the sale of assets, subject to
certain exceptions, (ii) all net proceeds from the issuance of debt securities,
and (iii) all of the net proceeds from certain equity issuances.
The Credit Agreement will contain a number of covenants that, among other
things, restrict the ability of the Borrower, the Company and its subsidiaries
to dispose of assets, incur additional indebtedness or guarantees, prepay other
indebtedness or amend certain debt instruments (including the Notes), pay
dividends, create liens on assets, enter into sale and leaseback transactions,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, change the business conducted by the
Company or its subsidiaries or engage in certain transactions with affiliates
and otherwise restrict certain corporate activities. Consent of the Lenders to
acquisitions will be required under certain circumstances. In addition, under
the Credit Agreement, the Company will be required to maintain specified
financial ratios and tests, including a ratio of Funded Debt to Adjusted EBITDA
below a specified maximum, and above minimum fixed charge coverage levels and
minimum interest coverage levels. The
67
<PAGE> 71
inability of the Borrower to meet such ratios and tests will result in the
Borrower being unable to borrow under the Revolving Credit Facility, in addition
to constituting a default under the Credit Agreement. In such circumstances, the
Company could be unable to effect its acquisition strategy or fund capital
expenditures. See "Risk Factors -- Restrictive Covenants of Revolving Credit
Facility; Inability to Borrow Additional Amounts."
The Credit Agreement will contain customary events of default, including
without limitation events of default relating to (i) failure to pay principal,
interest or fees, (ii) breach of covenants, representations or warranties, (iii)
cross default to other indebtedness (including the Notes) or material contracts,
(iv) bankruptcy, (v) change of control, (vi) the occurrence of a material
adverse effect and (vii) material judgments. The occurrence of any of such
events of default could result in acceleration of the Company's obligations
under the Credit Agreement and foreclosure on the collateral securing such
obligations, which would have a material adverse effect on the holders of the
Notes.
68
<PAGE> 72
DESCRIPTION OF EXCHANGE NOTES
The Notes were issued under an indenture (the "Indenture") dated April 15,
1998 by and among the Company, the Guarantors and Norwest Bank, Minnesota,
National Association, as Trustee (the "Trustee") in a private transaction not
subject to the Securities Act. The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939, as
amended (the "TIA"), and to all of the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture. A
copy of the Indenture and the Registration Rights Agreement may be obtained from
the Company or the Initial Purchasers as set forth below under "-- Additional
Information." The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions." For purposes of this
section, references to the "Company" include only the Company and not its
Subsidiaries.
The Notes are general unsecured obligations of the Company, limited to
$115,000,000 aggregate principal amount of which $100.0 million aggregate
principal amount was issued in the Private Offering. Additional amounts may be
issued in one or more series from time to time subject to the limitations set
forth under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness." The Notes are subordinated in right of payment to, all existing
and future Senior Debt of the Company. The Notes are guaranteed on a senior
subordinated basis by all of the Company's current Subsidiaries. See "--
Guarantees." The Guarantees are general unsecured obligations of the Guarantors
and are subordinated in right of payment to all existing and future Guarantor
Senior Debt. As of March 31, 1998, on a consolidated pro forma basis after
giving effect to the Transactions, the Company and its Subsidiaries would have
had $5.2 million of Senior Debt and Guarantor Senior Debt outstanding. All
Indebtedness incurred under the Revolving Credit Facility will be Senior Debt of
the Company and Guarantor Senior Debt of the Subsidiaries and will be secured by
substantially all of the assets of the Company and its Subsidiaries.
Except as described in "Change of Control," the Indenture does not contain
any provision that would provide protection to the holders of the Notes against
a sudden and dramatic decline in credit quality resulting from a takeover,
recapitalization or similar restructuring of the Company. If a Change of Control
were to occur, it could be the case that the Company would not have adequate
funds to repurchase the Notes as required by the Indenture and/or that the
Revolving Credit Facility will not permit such repurchase. See "-- Change of
Control."
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest and Liquidated Damages, if any, may be paid at the Trustee's corporate
trust office or by check mailed to the registered address of Holders. Any Notes
that remain outstanding after the completion of the Exchange Offer, together
with the Exchange Notes issued in connection with the Exchange Offer, will be
treated as a single class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $115.0 million, of
which an aggregate principal amount of $100.0 million issued in the Private
Offering, and will mature on April 15, 2005. Interest on the Notes will accrue
at the rate of 10 1/2% per annum and will be payable semiannually in cash on
each April 15 and October 15 commencing on October 15, 1998, to the persons who
are registered Holders at the close of business on the April 1 and October 1
immediately preceding the applicable interest payment date. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
69
<PAGE> 73
REDEMPTION
Optional Redemption. The Notes are redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after April 15, 2001,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on April 15 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon, if any, to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................................. 107.875%
2002.............................................. 105.250%
2003.............................................. 102.625%
2004 and thereafter............................... 100.000%
</TABLE>
Optional Redemption upon Equity Offerings. At any time, or from time to
time, on or prior to April 15, 2001, the Company may, at its option, use the net
cash proceeds of one or more Equity Offerings (as defined below) to redeem the
Notes at a redemption price equal to 110 1/2% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the date of redemption;
provided that at least 65% of the principal amount of Notes originally issued
under the Indenture remains outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 90 days after the
consummation of any such Equity Offering.
Mandatory Redemption. The Company is not required to make redemption or
sinking fund payments with respect to the Notes.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Equity
Offering, selection of the Notes or portions thereof for redemption shall be
made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations (including interest accruing after the commencement
date of any such proceeding whether or not allowable as a claim in any such
proceeding) due or to become due upon all Senior Debt shall first be paid in
full in cash or Cash Equivalents
70
<PAGE> 74
before any payment or distribution of any kind or character is made on account
of any Obligations on the Notes, or for the acquisition of any of the Notes for
cash or property or otherwise (except that Holders of Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
under "-- Legal Defeasance and Covenant Defeasance"). If any default occurs and
is continuing in the payment when due, whether at maturity, upon any redemption,
by declaration or otherwise, of any principal of, interest on, unpaid drawings
for letters of credit issued in respect of, or regularly accruing fees with
respect to, any Senior Debt, no payment of any kind or character shall be made
by or on behalf of the Company or any other Person on its or their behalf with
respect to any Obligations on the Notes or to acquire any of the Notes for cash
or property or otherwise (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under "--
Legal Defeasance and Covenant Defeasance").
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes (except in Permitted
Junior Securities or from the trust described under "-- Legal Defeasance and
Covenant Defeasance") or (y) acquire any of the Notes for cash or property or
otherwise (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance"). Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
After giving effect to the Transactions, on a consolidated pro forma basis,
at March 31, 1998, the aggregate amount of Senior Debt and Guarantor Senior Debt
would have been approximately $5.2 million.
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
payment of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The Guarantees
are subordinated to Guarantor Senior Debt on the same basis as the Notes are
subordinated to Senior Debt. The obligations of each Guarantor are limited to
the maximum amount which, after giving effect to all other contingent and fixed
liabilities 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 Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under the 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 an amount pro rata, based on the net assets of each
Guarantor, determined in accordance with GAAP.
71
<PAGE> 75
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company without limitation, or with other Persons upon the terms and conditions
set forth in the Indenture. See "Certain Covenants -- Merger, Consolidation and
Sale of Assets." In the event all of the Capital Stock of a Guarantor is sold by
the Company and the sale complies with the provisions set forth in "Certain
Covenants -- Limitation on Asset Sales," the Guarantor's Guarantee will be
released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company will be required to offer to purchase all of the Notes pursuant to the
offer described below (the "Change of Control Offer"), at a purchase price equal
to 101% of the principal amount thereof plus accrued interest to the date of
purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Revolving Credit Facility and all other Senior Debt or
Guarantor Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full and terminate all commitments under all
Indebtedness under the Revolving Credit Facility and all other such Senior Debt
or Guarantor Senior Debt and to repay the Indebtedness owed to each lender which
has accepted such offer or (ii) obtain the requisite consents under the
Revolving Credit Facility and all other Senior Debt to permit the repurchase of
the Notes as provided below. The Company shall first comply with the covenant in
the immediately preceding sentence before it shall be required to repurchase
Notes pursuant to the provisions described below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Restrictions in the Indenture described herein on the ability of the
Company and its Restricted Subsidiaries to incur additional Indebtedness, to
grant liens on its property, to make Restricted Payments and to make Asset Sales
may make more difficult or discourage a takeover of the Company, whether favored
or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require repurchase of the Notes, and
there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not afford
the Holders of Notes protection in all circumstances
72
<PAGE> 76
from the adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
Notwithstanding the foregoing, the Company will not be required to make a
Change of Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth in the Indenture applicable to a Change of
Control Offer made by the Company, including any requirements to repay in full
the Revolving Credit Facility, any such Senior Debt or Guarantor Senior Debt or
obtain the consents of such lenders to such Change of Control Offer as set forth
in the second paragraph of this Section, and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or any Preferred Stock of a Restricted
Subsidiary or (d) make any Investment (other than Permitted Investments) (each
of the foregoing actions set forth in clauses (a), (b) (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing or (ii) the Company is not able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant or (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash, being the fair
market value of such property as determined reasonably and in good faith by the
Board of Directors of the Company) shall exceed the sum of: (w) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned during the
period beginning on the first day of the fiscal quarter after the Issue Date and
ending on the last day of the fiscal quarter ending at least 30 days prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and
73
<PAGE> 77
sale subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company (excluding any such proceeds that have
been used to make Investments in Unrestricted Subsidiaries pursuant to clause
(vii) of the definition of Permitted Investments); plus (y) without duplication
of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any
net cash proceeds from a Equity Offering to the extent used to redeem the
Notes); plus (z) to the extent that any Investment (other than a Permitted
Investment) that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital with
respect to such Investment (less the cost of disposition, if any) and (B) the
initial amount of such Investment.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes or any Preferred Stock of a Restricted Subsidiary
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company
from employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees, in an aggregate amount not to exceed $500,000 in any calendar year or
$2.5 million in the aggregate; (5) so long as no Default or Event of Default has
occurred and is continuing, amounts paid by the Company or its Subsidiaries to
Brentwood in accordance with the Administrative Services Agreement. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii) and (4) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition; and (iii) upon the consummation of an Asset
Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof
either (A) to prepay any Senior Debt or Guarantor Senior Debt and, in the case
of any Senior Debt or Guarantor Senior Debt under any revolving credit facility,
effect a permanent reduction in the availability under such revolving credit
facility, (B) to make any investment in assets which constitute or are part of
businesses which are materially related to the business of the Company and its
Subsidiaries as of the Issue Date or in 100% of the issued and outstanding
Capital Stock of a Person the assets of which are principally comprised of such
assets ("Replacement Assets"), or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). On the 361st day after
an Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B)
and (iii)(C) of the preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash
74
<PAGE> 78
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to
the date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5,000,000, shall be applied as required pursuant
to this paragraph).
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided, that if the total consideration
with respect to such Asset Sale is greater than $10.0 million (as determined in
good faith by the Company's Board of Directors), the Company shall obtain a
fairness opinion from an Independent Financial Advisor; provided further, that
any consideration not constituting Replacement Assets received by the Company or
any of its Restricted Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph shall constitute Net Cash Proceeds
subject to the provisions of the immediately preceding paragraph.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) the Revolving Credit
Facility; (4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of the Company; (5)
any instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) restrictions arising by
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business and consistent with
75
<PAGE> 79
past practices; (8) restrictions contained in purchase money or capital lease
obligations for property acquired in the ordinary course of business; (9) any
customary restriction or encumbrance contained in contracts for sale of assets
or sales of Capital Stock of Restricted Subsidiaries permitted by the Indenture;
or (10) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (5) or (6) above; provided, however, that the provisions relating to
such encumbrance or restriction contained in any such Indebtedness, taken as a
whole, are no less favorable to the Company in any material respect than the
provisions relating to such encumbrance or restriction contained in agreements
whose Indebtedness is being refinanced.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Restricted Subsidiaries whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Notes and
the Guarantees; (D) Liens in favor of the Company or a Restricted Subsidiary of
the Company; (E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens (A) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such Liens
than the Liens in respect of the Indebtedness being Refinanced and (B) do not
extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will not
incur or suffer to exist Indebtedness that is senior in right of payment to the
Notes and subordinate in right of payment to any other Indebtedness of the
Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the surviving
or continuing corporation or (2) the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"-- Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall
76
<PAGE> 80
have occurred and be continuing; and (iv) the Company or the Surviving Entity
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "-- Limitation on Asset
Sales") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma basis,
the Company could satisfy the provisions of clause (ii) of the first paragraph
of this covenant. Any merger or consolidation of a Guarantor with and into the
Company (with the Company being the surviving entity) or another Guarantor that
is a Wholly Owned Restricted Subsidiary of the Company need only comply with
clause (iv) of the first paragraph of this covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the disinterested members of the Board of Directors of the Company
or such Restricted Subsidiary, as the case may be, such approval to be evidenced
by a Board Resolution filed with the Trustee stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $5.0 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
77
<PAGE> 81
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the Indenture; (iii) any agreement as in effect as of the Issue
Date or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) so long as no Default or Event of Default has occurred and
is continuing, amounts paid by the Company or its Subsidiaries to Brentwood in
accordance with the Administrative Services Agreement; and (v) Restricted
Payments permitted by the Indenture.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest in another Restricted Subsidiary
having total assets with a book value in excess of $500,000, then such
transferee or acquired or other Restricted Subsidiary shall (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of the Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
Reports to Holders. The Indenture will provide that the Company will
deliver to the Trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, which the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
Indenture further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA sec. 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect
78
<PAGE> 82
to the "Merger, Consolidation and Sale of Assets" covenant, which will
constitute an Event of Default with such notice requirement but without
such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Revolving Credit
Facility, shall become immediately due and payable upon the first to occur of an
acceleration under the Revolving Credit Facility or five Business Days after
receipt by the Company and the Representative under the Revolving Credit
Facility of such Acceleration Notice. If an Event of Default specified in clause
(vi) above occurs and is continuing, then all unpaid principal of, and premium,
if any, and accrued and unpaid interest on all of the outstanding Notes shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
In the event of a declaration of acceleration of the Notes because an Event
of Default has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (iv) of the first paragraph of this section,
the declaration of acceleration of the Notes shall be automatically annulled if
the holders of any Indebtedness described in clause (iv) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (i) the annulment of the acceleration of the
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction, and (ii) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived. The Indenture will provide
that, at any time after a declaration of acceleration with respect to the Notes
as described in the preceding paragraph, the Holders of a majority in principal
amount of the Notes may rescind and cancel such declaration and its consequences
(i) if the rescission would not conflict with any judgment or decree, (ii) if
all existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iv) if the Company has
paid the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or waiver
of an Event of Default of the type described in clause (vi) of the description
above of Events of Default, the Trustee shall have received an officers'
certificate and an opinion of counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
79
<PAGE> 83
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes 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.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (iii) the rights, powers, trust, duties and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
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 of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture, the Revolving Credit Facility or
80
<PAGE> 84
any other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the trust
funds will not be subject to any rights of holders of Senior Debt, including,
without limitation, those arising under the Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
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) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the Trustee, adversely affect the rights of any of
the Holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change or have the
effect of changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor; (iv) make any Notes payable in money other than
that stated in the Notes; (v) make any change in provisions of the Indenture
protecting the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default; or (vi) amend, change or modify in
any material respect the obligation of the Company to make and consummate a
Change of Control Offer after the occurrence of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated, in either such case, or modify any of the provisions or definitions
with respect thereto. Any modification or change of the provisions of the
Indenture or the related definitions affecting subordination in any manner which
adversely affects the holders of Designated Senior Debt or
81
<PAGE> 85
Designated Guarantor Senior Debt will also require the consent of the holders of
such Designated Senior Debt or Designated Guarantor Senior Debt.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
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 by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
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.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"Administrative Services Agreement" means that certain Corporate
Development and Administrative Services Agreement between the Company and
Brentwood dated as of July 2, 1996, as such agreement has been amended by that
certain First Amendment thereto dated on or about the Issue Date, as such
agreement is in effect on the Issue Date.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"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; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company
82
<PAGE> 86
or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company or any Restricted Subsidiary as
permitted under "Merger, Consolidation and Sale of Assets," and (iii) any
permitted Restricted Payment.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Brentwood" means Brentwood Private Equity LLP.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) (A)
prior to the initial public offering of the Common Stock of the Company, both
(x) the Permitted Holders shall own less than 50% of the aggregate ordinary
voting power ("Voting Power") represented by the issued and outstanding Capital
Stock of the Company and (y) any Person or Group (other than the Permitted
Holders(s)) shall become the owner, directly or indirectly, beneficially or of
record, of shares representing Voting Power greater than that owned by the
Permitted Holders or (B) subsequent to the initial public offering of the Common
Stock of the Company, both (x) the Permitted Holders shall own less than 35% of
the aggregate Voting Power represented by the issued and
83
<PAGE> 87
outstanding Capital Stock of the Company and (y) any other Person or Group
(other than Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing greater than 35% of the
aggregate Voting Power of the Company; or (iii) the replacement of a majority of
the Board of Directors of the Company over a two-year period from the directors
who constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect (i) on a
pro forma basis for the period of such calculation to the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) on a pro
forma basis (calculated in accordance with Article 11 of Regulation S-X under
the Securities Act) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income") attributable to the assets which
are the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the
84
<PAGE> 88
rate of interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person or of any Restricted Subsidiary of such Person
(other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP; but, (iii) excluding the
amortization of debt discount and amortization or write-off of deferred
financing costs.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
85
<PAGE> 89
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Revolving Credit Facility and (ii) any other Indebtedness constituting Senior
Debt or Guarantor Senior Debt which, at the time of determination, has an
aggregate principal amount or commitment of at least $25.0 million and is
specifically designated in the instrument evidencing such Senior Debt or
Guarantor Senior Debt as "Designated Senior Debt" or "Designated Guarantor
Senior Debt" by the Company or such Guarantor.
"Disqualified Capital Stock" means (i) that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes and (ii) Preferred
Stock of Subsidiaries of the Company.
"Equity Offering" means (i) an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act, (ii) a purchase of Qualified
Capital Stock or an additional common equity contribution by any of the
Permitted Holders, or (iii) a purchase of Qualified Capital Stock by any person
engaged in the movie theatre business which has a total equity market value (as
determined in good faith by the Company's Board of Directors) or total private
market value in excess of $100.0 million.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means (i) each Subsidiary of the Company on the Issue Date and
(ii) each Restricted Subsidiary that in the future executes a supplemental
indenture in which such Restricted Subsidiary agrees to be bound by the terms of
the Indenture as a Guarantor; provided that any Person constituting a Guarantor
as described above shall cease to constitute a Guarantor when its respective
Guarantee is released in accordance with the terms of the Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) and all other Obligations with respect to
any Indebtedness of such Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is
86
<PAGE> 90
an allowed claim under applicable law) on, and all other amounts and Obligations
owing in respect of, (x) all Obligations of every nature of such Guarantor under
the Revolving Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor
Senior Debt" shall not include (i) any Indebtedness of such Guarantor to a
Restricted Subsidiary of such Guarantor or any Affiliate of such Guarantor or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of such Guarantor or
any Restricted Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by such Guarantor, (vi)
Indebtedness incurred in violation of the Indenture provisions set forth under
"Limitation on Incurrence of Additional Indebtedness," (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to such Guarantor and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of such Guarantor.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company of such
Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any
87
<PAGE> 91
purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
Person. "Investment" shall exclude extensions of trade credit by the Company and
its Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Restricted Subsidiary, as the case
may be. For the purposes of the "Limitation on Restricted Payments" covenant,
(i) "Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holder(s)" means Brentwood, Steven L. Holmes and Thomas J.
Owens.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes issued in the Private Offering, and
the Guarantees thereof;
(ii) Indebtedness of Company and its Restricted Subsidiaries incurred
pursuant to the Revolving Credit Facility, not to exceed $75.0 million
reduced by any required permanent repayments as a result of Asset Sales
(which are accompanied by a corresponding permanent commitment reduction)
thereunder;
88
<PAGE> 92
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
(other than a lien in favor of lenders under the Revolving Credit Facility)
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien (other than a lien in
favor of lenders under the Revolving Credit Facility) in respect of such
Indebtedness, such date shall be deemed the date of the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company of such
Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien (other than a lien in favor of lenders under the Revolving Credit
Facility); provided that (a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien (other than a lien in favor of
lenders under the Revolving Credit Facility) in respect of such
Indebtedness, such date shall be deemed the date of the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness;
(xi) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15.0 million
at any one time outstanding;
(xii) 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 loan and advances made in settlement of such accounts
receivable, all in the ordinary course of business and;
89
<PAGE> 93
(xiii) purchase money Indebtedness to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business in an aggregate amount not to exceed $10.0
million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, (ii) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company in an amount not to exceed $5.0 million at any one time outstanding;
(iii) Investments in the Company by any Restricted Subsidiary of the Company;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (iv) investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $500,000 at any one time outstanding;
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Indenture; (vii) Investments in Unrestricted
Subsidiaries not to exceed $5.0 million at any one time outstanding plus the
proceeds from the sale Qualified Capital Stock after the Issue Date that are not
otherwise used to make a Restricted Payment; (viii) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; and (ix) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with the "Limitation on Asset Sales" covenant.
"Permitted Junior Securities" means equity interests in the Company or debt
securities of the Company, in each case as provided for in a plan of
reorganization, that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) and to all Guarantor Senior Debt
(and any debt securities issued in exchange for Guarantor Senior Debt) to the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to the Indenture that have a final maturity and a weighted
average life to maturity which is the same as or greater than that of the Notes
and that are not secured by any collateral.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
90
<PAGE> 94
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company;
(xiv) Liens in favor of sellers of theaters in respect of escrows or
other deposits made in the ordinary course of business, but in any event
not exceeding 15% of the total consideration; and
(xv) 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 business.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
91
<PAGE> 95
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (xi), (xii) or
(xiii) of the definition of Permitted Indebtedness), in each case that does not
(1) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Replacement Assets" has the meaning set forth under "-- Limitation on
Asset Sales" above.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Credit Agreement among the Company,
Silver Cinemas, Inc., as borrower, the lenders party thereto in their capacities
thereunder and DLJ Capital Funding, Inc., together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other Obligations with respect to, any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "Senior Debt" shall
also include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto,
92
<PAGE> 96
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts and Obligations owing in respect of, (x) all Obligations of
every nature of the Company under the Revolving Credit Facility, including,
without limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations and (z) all obligations under Currency Agreements, in
each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of
the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of the
Company or of any Subsidiary of the Company (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by the Company, (vi)
Indebtedness incurred in violation of the Indenture provisions set forth under
"Limitation on Incurrence of Additional Indebtedness," (vii) Indebtedness 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 and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w)
of Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors'
93
<PAGE> 97
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any Wholly
Owned Restricted Subsidiary of such Person.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes initially will be
represented by one or more permanent global certificates in definitive, fully
registered form (the "Global Notes"). The Global Notes will be deposited on the
Issue Date with, or on behalf of DTC and registered in the name of a nominee of
DTC.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Holders may hold their interests in the
Global Notes directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any), interest (including
Additional Interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent 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 Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global 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
the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
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) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants and
which will be legended as set forth under the heading "Notice to Investors."
94
<PAGE> 98
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 Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its 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 movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others 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").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes, which certificates will bear the legends
referred to under the heading "Notice to Investors."
PLAN OF DISTRIBUTION
Each 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. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resale of Exchange Notes received in
exchange for Private Notes where such Private Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of up to one year after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to 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 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 broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to 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 broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the Holders of Private Notes (including any broker-dealers), and
certain parties related to such Holders, against certain liabilities, including
liabilities under the Securities Act.
95
<PAGE> 99
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes offered hereby
will be passed upon for the Company by Latham & Watkins, Los Angeles,
California.
EXPERTS
The consolidated financial statements of Silver Cinemas as of December 31,
1997 and 1996, and for the year ended December 31, 1997 and the period May 10,
1996 (inception) to December 31, 1996; and the financial statements of Landmark
as of December 31, 1997 and for the year then ended appearing in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Landmark as of December 31, 1996
and for the six months ended December 31, 1996, the three months ended June 30,
1996 and the year ended March 31, 1996 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of StarTime as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995 have been
included herein and in the registration statement in reliance upon the report of
Coopers & Lybrand L.L.P., independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof. As a result of the Exchange Offer, the
Company will become subject to the informational requirements of the Exchange
Act. The Registration Statement (and the exhibits and schedules thereto), as
well as the periodic reports and other information filed by the Company with the
Commission, may be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Room 1400,
75 Park Place, New York, New York 10007 and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 6061-2511. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
its public reference facilities in New York, New York and Chicago, Illinois at
the prescribed rates. Additionally, the Commission maintains a Web site that
contains reports, proxy and information statements regarding registrants that
file electronically with the Commission and the address of this site is
http://www.sec.gov. Statements contained in this Prospectus as to the contents
of any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered Holders of the Notes, without cost to the Trustee or such
registered Holders, copies of all reports and other information that would be
required to be filed by the Company with the Commission under the Exchange Act,
whether or not the Company is then required to file reports with the Commission.
As a result of this Exchange Offer, the Company will become subject to the
periodic reporting and other informational requirements of the Exchange Act. In
the event that the Company ceases to be subject to the informational
requirements of the Exchange Act, the Company has agreed that, so long as any
Notes remain outstanding, it will file with the Commission
96
<PAGE> 100
(but only if the Commission at such time is accepting such voluntary filings)
and distribute to Holders of the Private Notes or the Exchange Notes, as
applicable, copies of the financial information that would have been contained
in such annual reports and quarterly reports, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," that
would have been required to be filed with the Commission pursuant to the
Exchange Act. The Company will also furnish such other reports as it may
determine or as may be required by law.
The principal address of the Company is 4004 Beltline Road, Suite 205,
Dallas, Texas 75244, and the Company's telephone number is (972) 503-9851.
97
<PAGE> 101
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SILVER CINEMAS INTERNATIONAL, INC.
Independent Auditors' Report -- Deloitte & Touche LLP..... F-3
Consolidated Balance Sheets at December 31, 1997 and
1996................................................... F-4
Consolidated Statements of Operations for Year ended
December 31, 1997, and the period from May 10, 1996
(inception) to December 31, 1996....................... F-5
Consolidated Statements of Stockholders' Equity for Year
ended December 31, 1997, and the period from May 10,
1996 (inception) to December 31, 1996.................. F-6
Consolidated Statements of Cash Flows for Year ended
December 31, 1997 and the period from May 10, 1996
(inception) to December 31, 1996....................... F-7
Notes to Consolidated Financial Statements................ F-8
Unaudited Condensed Consolidated Balance Sheet as of March
31, 1998............................................... F-13
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997..... F-14
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997..... F-15
Notes to Unaudited Interim Condensed Consolidated
Financial Statements................................... F-16
THE LANDMARK THEATRE GROUP
Independent Auditors' Report -- Deloitte & Touche LLP..... F-17
Consolidated Balance Sheet at December 31, 1997........... F-18
Consolidated Statement of Operations for Year ended
December 31, 1997...................................... F-19
Consolidated Statement of Changes in Shareholder's Equity
for Year ended December 31, 1997....................... F-20
Consolidated Statement of Cash Flows for Year ended
December 31, 1997...................................... F-21
Notes to Consolidated Financial Statements................ F-22
THE LANDMARK THEATRE GROUP
Independent Auditors' Report -- KPMG Peat Marwick LLP..... F-27
Consolidated Balance Sheets at December 31, 1996 and March
31, 1996............................................... F-28
Consolidated Statements of Operations for the six months
ended December 31, 1996, three months ended June 30,
1996 and Years ended March 31, 1996 and 1995........... F-29
Consolidated Statements of Changes in Shareholders' Equity
for the six months ended December 31, 1996, three
months ended June 30, 1996 and Years ended March 31,
1996 and 1995.......................................... F-30
Consolidated Statements of Cash Flows for the six months
ended December 31, 1996, three months ended June 30,
1996 and Years ended March 31, 1996 and 1995........... F-31
Notes to Consolidated Financial Statements................ F-32
Unaudited Condensed Consolidated Balance Sheet as of March
31, 1998............................................... F-39
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997..... F-40
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997..... F-41
Notes to Unaudited Interim Condensed Consolidated
Financial Statements................................... F-42
</TABLE>
F-1
<PAGE> 102
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STARTIME CINEMA, INC.
Independent Auditors' Report -- Coopers & Lybrand
L.L.P.................................................. F-43
Consolidated Balance Sheets at December 31, 1997 and
1996................................................... F-44
Consolidated Statements of Operations for Years ended
December 31, 1997, 1996 and 1995....................... F-45
Consolidated Statements of Stockholders' Equity for Years
ended December 31, 1997, 1996 and 1995................. F-46
Consolidated Statements of Cash Flows for Years ended
December 31, 1997, 1996 and 1995....................... F-47
Notes to Consolidated Financial Statements................ F-48
Unaudited Condensed Consolidated Balance Sheet as of March
31, 1998............................................... F-57
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997..... F-58
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997..... F-59
Notes to Unaudited Interim Condensed Consolidated
Financial Statements................................... F-60
</TABLE>
F-2
<PAGE> 103
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Silver Cinemas International, Inc.
We have audited the accompanying consolidated balance sheets of Silver
Cinemas International, Inc. and subsidiary as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1997 and for the period from May 10, 1996
(date of inception) to December 31, 1996. These financial statements are the
responsibility of the Company'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, such consolidated financial statements present fairly, in
all material respects, the financial position of Silver Cinemas International,
Inc. and subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the year ended December 31, 1997 and for the
period from May 10, 1996 (date of inception) to December 31, 1996, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 26, 1998
F-3
<PAGE> 104
SILVER CINEMAS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 276,497 $ 4,709,457
Inventories............................................... 147,792 100,512
Prepaid expenses and other................................ 264,601 40,588
----------- -----------
Total current assets.............................. 688,890 4,850,557
THEATER PROPERTIES AND EQUIPMENT:
Land...................................................... 50,000 50,000
Buildings................................................. 1,000,000 1,000,000
Leasehold interests and improvements...................... 2,103,055 1,350
Theater furniture and equipment........................... 6,138,930 2,280,630
Theaters under construction............................... 77,575 67,745
----------- -----------
Total............................................. 9,369,560 3,399,725
Less accumulated depreciation and amortization............ (681,136) (39,179)
----------- -----------
Theater properties and equipment -- net........... 8,688,424 3,360,546
GOODWILL -- NET (Note 2).................................... 10,023,423 8,029,875
OTHER ASSETS -- NET (Note 3)................................ 2,526,562 1,585,738
----------- -----------
TOTAL............................................. $21,927,299 $17,826,716
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4)................ $ 6,448 $ 2,000,000
Accounts payable.......................................... 42,599 203,222
Accrued film rentals...................................... 240,170 193,322
Accrued payrolls.......................................... 282,348 203,845
Accrued property taxes and other liabilities.............. 1,132,126 452,792
----------- -----------
Total current liabilities......................... 1,703,691 3,053,181
LONG-TERM DEBT, less current portion (Note 4)............... 6,590,561
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY (Note 5):
Series preferred stock, 100,000 shares authorized, no
shares issued
Series A preferred stock, $.01 par value, 400,000 shares
authorized, 152,038 and 151,739 shares issued and
outstanding at December 31, 1997 and 1996,
respectively........................................... 15,203,800 15,173,900
Common stock, $.01 par value; 200,000 shares authorized,
100,784 and 98,320 shares issued and outstanding at
December 31, 1997 and 1996, respectively............... 1,008 983
Additional paid-in capital................................ 99,712 97,295
Stockholder notes receivable.............................. (116,079) (116,436)
Accumulated deficit....................................... (1,555,394) (382,207)
----------- -----------
Total stockholders' equity........................ 13,633,047 14,773,535
----------- -----------
TOTAL............................................. $21,927,299 $17,826,716
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 105
SILVER CINEMAS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1996
YEAR ENDED (DATE OF INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1997 1996
------------ -------------------
<S> <C> <C>
REVENUES:
Admissions................................................ $10,367,555 $ 787,291
Concessions............................................... 8,097,921 609,634
Other..................................................... 296,102 23,005
----------- ----------
Total............................................. 18,761,578 1,419,930
COSTS AND EXPENSES:
Cost of operations:
Film rentals........................................... 4,483,842 378,199
Concession supplies.................................... 1,462,163 110,875
Salaries and wages..................................... 3,064,974 275,754
Facility leases........................................ 3,311,740 207,339
Advertising............................................ 755,337 46,155
Utilities and other.................................... 3,024,285 200,786
General and administrative expenses....................... 1,900,892 576,574
Depreciation and amortization............................. 1,479,090 102,896
----------- ----------
Total............................................. 19,482,323 1,898,578
----------- ----------
OPERATING LOSS.............................................. (720,745) (478,648)
OTHER INCOME (EXPENSE):
Interest expense.......................................... (352,509)
Amortization of debt issue costs.......................... (54,907)
Interest income and other expense, net (Note 4)........... (28,069) 96,441
----------- ----------
LOSS BEFORE INCOME TAX EXPENSE.............................. (1,156,230) (382,207)
INCOME TAX EXPENSE.......................................... 16,957
----------- ----------
NET LOSS.................................................... $(1,173,187) $ (382,207)
=========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 106
SILVER CINEMAS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM
MAY 10, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK
--------------------- ---------------- ADDITIONAL SHAREHOLDER
SHARES SHARES PAID-IN NOTES ACCUMULATED
ISSUED AMOUNT ISSUED AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
------- ----------- ------- ------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital stock issuance... 151,739 $15,173,900 98,320 $ 983 $97,295 $(151,210) $ -- $15,120,968
Net loss................. (382,207) (382,207)
Payment of stockholder
notes receivable....... 34,774 34,774
------- ----------- ------- ------ ------- --------- ----------- -----------
BALANCE,
DECEMBER 31, 1996...... 151,739 15,173,900 98,320 983 97,295 (116,436) (382,207) 14,773,535
Capital stock issuance... 299 29,900 2,464 25 2,417 32,342
Net loss................. (1,173,187) (1,173,187)
Payment of stockholder
notes receivable....... 357 357
------- ----------- ------- ------ ------- --------- ----------- -----------
BALANCE,
DECEMBER 31, 1997...... 152,038 $15,203,800 100,784 $1,008 $99,712 $(116,079) $(1,555,394) $13,633,047
======= =========== ======= ====== ======= ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 107
SILVER CINEMAS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1996
YEAR ENDED (DATE OF INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1997 1996
------------ -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $(1,173,187) $ (382,207)
Noncash items in net loss:
Depreciation........................................... 642,259 39,179
Amortization........................................... 891,738 63,717
Cash from (used for) working capital:
Inventories............................................ (23,705)
Prepaid expenses and other............................. (224,013) (40,588)
Accounts payable....................................... (160,623) 203,845
Accrued liabilities.................................... 804,685 849,336
----------- ------------
Net cash from operating activities................ 757,154 733,282
----------- ------------
INVESTING ACTIVITIES:
Acquisitions of theater properties and equipment.......... (4,212,426) (12,386,187)
Additions to theater properties and equipment............. (4,555,736) (181,707)
Increase in other assets.................................. (278,710) (611,673)
----------- ------------
Net cash used for investing activities............ (9,046,872) (13,179,567)
----------- ------------
FINANCING ACTIVITIES:
Proceeds from the issuance of debt........................ 6,600,000 2,000,000
Payments of debt.......................................... (2,002,991)
Increase in debt issue costs.............................. (772,950)
Proceeds from the issuance of stock....................... 32,342 15,120,968
Payments on stockholder notes receivable.................. 357 34,774
----------- ------------
Net cash from financing activities................ 3,856,758 17,155,742
----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (4,432,960) 4,709,457
CASH AND CASH EQUIVALENTS:
Beginning of period....................................... 4,709,457
----------- ------------
End of period............................................. $ 276,497 $ 4,709,457
=========== ============
SUPPLEMENTAL INFORMATION:
Stock issued for notes receivable......................... $ $ 151,210
=========== ============
Cash paid for interest.................................... $ 261,607 $
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 108
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of Silver Cinemas International, Inc. and its wholly-owned
subsidiary, Silver Cinemas, Inc. (collectively referred to as the "Company").
All intercompany accounts and transactions have been eliminated.
Business -- The Company owns or leases and operates 25 motion picture
theaters (154 screens) in 9 states and manages 2 theaters (11 screens) for
another party at December 31, 1997.
Management Estimates -- In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the financial statements and
revenues and expenses for the period. Actual results could differ significantly
from those estimates.
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.
Cash and Cash Equivalents consist of operating funds held in financial
institutions, petty cash held by the theaters and highly liquid investments with
original maturities of three months or less when purchased.
Inventories of concession products are stated at the lower of cost
(first-in, first-out method) or market.
Theater Properties and Equipment are stated at cost assigned as part of the
acquisitions (see Note 2) less accumulated depreciation and amortization.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows: buildings -- 20 years and theater
furniture and equipment -- 10 years. Leasehold interests and improvements are
amortized using the straight-line method over the lesser of the lease period or
the estimated useful lives of the leasehold improvements.
Goodwill is amortized on a straight-line basis over a 20-year period. In
the event that facts and circumstances indicated that goodwill may be impaired,
an evaluation of continuing value would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with this
asset would be compared to its carrying amount to determine if a write down to
market value or discounted cash flows value is required. No adjustments were
required at December 31, 1997 or 1996.
Other Assets, as applicable, are amortized using the straight-line method
over five years, and over the four to six year terms of the noncompete and debt
agreements.
Advertising costs are expensed when incurred.
Deferred Income Taxes are provided under the liability method for temporary
differences between revenue and expenses recognized for tax return and financial
reporting purposes.
Financial Instrument disclosure requirements include the estimated fair
value of these assets and liabilities. Cash and cash equivalents, accounts
receivable, 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 the Company's debt
obligations were determined to approximate their carrying values since (i) a
substantial amount of the December 31, 1997, debt obligations were issued at
fair market value during 1997 and (ii) long-term debt amounts are interest rate
variable in nature.
F-8
<PAGE> 109
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS
In separate transactions, the Company acquired certain assets and
businesses as follows:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER NUMBER
PURCHASE OF OF EFFECTIVE
SELLER PRICE THEATERS SCREENS DATE
------ ----------- -------- ------- -------------
<S> <C> <C> <C> <C>
1996
A.................... $ 580,693 4 22 November 1996
B.................... 11,805,494 14 80 November 1996
----------- -- ---
$12,386,187 18 102
=========== == ===
1997
C.................... $ 370,231 1 6 January 1997
D.................... 2,710,889 2 19 January 1997
E.................... 1,097,200 2 12 April 1997
F.................... 34,106 1 4 May 1997
----------- -- ---
$4,212,426 6 41
=========== == ===
</TABLE>
The Company's acquisitions have been accounted for under the purchase
method of accounting. Under the purchase method of accounting, the results of
operations of the acquired businesses are included in the accompanying
consolidated financial statements as of their respective acquisition dates. The
assets and liabilities of acquired businesses are included based on an
allocation of the purchase price as follows:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Inventories................................ $ 23,577 $ 100,512
Theater properties and equipment........... 1,414,099 3,218,017
Noncompete agreements...................... 250,000 1,000,000
Goodwill................................... 2,524,750 8,067,658
---------- -----------
$4,212,426 $12,386,187
========== ===========
</TABLE>
Goodwill has been recorded as an intangible asset. Pro forma financial
information for 1997 has been omitted as the effect is immaterial. The Company
paid $81,505 and $184,500 to a principal stockholder (the "Stockholder") for
advisory services for the year ended December 31, 1997 and the period from May
10, 1996 (date of inception) to December 31, 1996, respectively.
F-9
<PAGE> 110
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. OTHER ASSETS
Other assets at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Noncompete agreements....................... $1,250,000 $1,000,000
Debt issue costs............................ 772,949
Organization costs.......................... 52,431 49,153
---------- ----------
Total............................. 2,075,380 1,049,153
Less accumulated amortization............... (383,982) (25,935)
---------- ----------
Net......................................... 1,691,398 1,023,218
Employee notes receivable................... 186,911 261,435
Equipment, lease and other deposits......... 648,253 301,085
---------- ----------
Total............................. $2,526,562 $1,585,738
========== ==========
</TABLE>
4. DEBT
The following is a summary of debt at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Revolving loan facility.................... $6,500,000
Other...................................... 97,009
Note payable to stockholder (interest at
prime plus 2%, paid in April 1997)....... $ 2,000,000
---------- -----------
Total long-term debt............. 6,597,009 2,000,000
Less current portion....................... (6,448) (2,000,000)
---------- -----------
Long-term debt, less current portion....... $6,590,561 $ --
========== ===========
</TABLE>
Credit Agreement -- In April 1997, the Company entered into a Credit
Agreement with a group of lenders, which included a reducing, revolving loan
facility and a letter of credit facility. Under the reducing, revolving loan
facility, the initial commitment is $25 million, subject to certain
restrictions, with quarterly reductions of $1,250,000 scheduled June 30, 1999
through March 31, 2001 and $1,875,000 through March 31, 2003. There was no
unused available credit at December 31, 1997.
Amounts outstanding under the revolving loan facility bear quarterly
interest based on one of the following rates at the Company's option: (i) a
variable rate based on the higher of the administrative agent's established
commercial lending rate or the federal funds rate plus 0.5% or (ii) a variable
rate based on the Eurodollar rate, adjusted in accordance with certain financial
ratios. The weighted average interest rate and current interest rate at December
31, 1997, was 7.57% and 7.69%, respectively. The Company pays a commitment fee
to the lenders at the rate of 0.375 to 0.5% per annum on the average daily
unused portion of the commitment amounts for both the revolving loan and letter
of credit facilities.
The Credit Agreement contains financial and operating covenants requiring,
among other items, the maintenance of certain financial standards, as defined,
including interest coverage, leverage and EBITDA. In addition, the Credit
Agreement contains various covenants which, among other things, limit the
Company's ability to incur additional indebtedness, restrict the Company's
ability to invest in and divest of assets, and restrict the Company's ability to
pay dividends or redeem or purchase its stock.
F-10
<PAGE> 111
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1997, the Company did not comply with the leverage and
EBITDA provisions. These provisions of the Credit agreement were amended as of
January 16, 1998 and March 25, 1998, and the Company obtained a waiver for past
noncompliance.
At December 31, 1997, the scheduled maturities of debt were as follows:
<TABLE>
<S> <C>
1998............................................. $ 6,448
1999............................................. 7,122
2000............................................. 7,868
2001............................................. 8,692
2002............................................. 4,634,601
Thereafter....................................... 1,932,278
----------
$6,597,009
==========
</TABLE>
5. CAPITAL STOCK
Cumulative Preferred Stock -- The Company has 500,000 authorized shares of
$.01 par value preferred stock at December 31, 1997, with 400,000 shares
designated as voting Series A Preferred Stock ("Series A"). Each outstanding
Series A share bears a $6.00 cumulative annual dividend which is payable if
earned and declared, if the Series A preferred stock is redeemed or if the
Company is liquidated. The Company may redeem all Series A shares at any time
for $100 per share plus dividends in arrears. As of December 31, 1997 and 1996,
aggregate Series A preferred stock dividends of $1,213,131 and $301,803,
respectively, are in arrears.
At December 31, 1997, the Company has reserved 98,752 and 491 shares of
Series A Preferred Stock for potential issuances at $100 per share to the
Stockholder and certain officers, respectively.
Stockholders' Agreement -- The Company and its stockholders have entered
into a stockholders' agreement which provides certain restrictions and rights
related to the transfer, sale or purchase of capital shares.
6. LEASES AND OTHER COMMITMENTS
Leases -- The Company conducts a significant part of its theater operations
in leased premises under noncancelable operating leases with terms of 1 to 15
years. In addition to the minimum annual lease payment, most of these leases
provide for contingent rentals based on operating results and require the
payment of taxes, insurance and other costs applicable to the property.
Generally, these leases include renewal options for various periods at
stipulated rates. Rent expense for the year ended December 31, 1997 and for the
period from May 10, 1996 (date of inception) to December 31, 1996 (primarily
incurred in November and December 1996) totaled $3,177,013 and $234,293,
respectively.
Future minimum payments under noncancelable operating leases with initial
or remaining terms in excess of one year at December 31, 1997, are due as
follows:
<TABLE>
<S> <C>
1998............................................ $ 3,596,042
1999............................................ 3,351,775
2000............................................ 2,705,573
2001............................................ 2,366,104
2002............................................ 1,699,912
Thereafter...................................... 9,472,899
-----------
Total................................. $23,192,305
===========
</TABLE>
F-11
<PAGE> 112
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
After December 31, 1997, the Company entered into a lease agreement that is
contingent on the lessor's completing construction of a theater facility. Upon
satisfaction of the contingency, the lease agreement will require future minimum
lease payments estimated to be $5.5 million over 20 years.
Letters of Credit and Collateral -- At December 31, 1997 and 1996, the
Company has an outstanding letter of credit of $15,000 in connection with
requirements of a film distributor.
7. CONTINGENCIES
The Company, in the normal course of business, is party to various legal
actions. Management believes that the potential exposure, if any, from such
matters would not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
8. INCOME TAXES
The 1997 tax provision results from state income taxes. Deferred tax
liabilities (assets) at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Gross deferred tax assets:
Net operating loss carryforwards......... $(1,700,000) $(385,000)
Book accruals and reserves in excess of
cumulative tax deductions............. (50,000) (15,000)
----------- ---------
Total............................ (1,750,000) (400,000)
Gross deferred tax liabilities --
Tax depreciation and amortization in
excess of book........................ 400,000 50,000
Valuation allowance........................ 1,350,000 350,000
----------- ---------
$ -- $ --
=========== =========
</TABLE>
The Company has provided a full valuation allowance for net deferred tax
assets due to the lack of an earnings history. Gross deferred tax assets at
December 31, 1997, include net operating loss carryforwards of approximately
$1,700,000 for income tax purposes. These net operating loss carryforwards begin
to expire in 2011 and may be limited in use in the event of significant changes
in the Company's ownership.
9. SUBSEQUENT AND PENDING TRANSACTIONS
In March 1998, the Company issued $10 million of Series A preferred stock
and common stock to the Stockholder.
The Company has entered into definitive agreements to acquire substantially
all of the assets of The Landmark Theatre Group and StarTime Cinema, Inc. and
three theaters of AMC Entertainment, Inc. for a total purchase price of
approximately $85.7 million.
F-12
<PAGE> 113
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
-----------
<S> <C>
CURRENT ASSETS:
Cash and equivalents...................................... $ 115,905
Inventories............................................... 147,792
Prepaid expenses and other................................ 211,082
-----------
Total current assets.............................. 474,779
THEATER PROPERTIES AND EQUIPMENT:
Land...................................................... 610,000
Buildings................................................. 3,880,000
Leasehold interests and improvements...................... 2,165,228
Theater furniture and equipment........................... 7,041,080
Theater under construction................................ 292,333
-----------
Total............................................. 13,988,641
Less accumulated depreciation and amortization............ (936,753)
-----------
Theater properties and equipment, net..................... 13,051,888
GOODWILL -- NET............................................. 10,711,405
OTHER ASSETS -- NET......................................... 2,934,696
-----------
TOTAL............................................. $27,172,768
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt......................... $ 6,000
Accounts payable.......................................... 599,927
Accrued film rentals...................................... 259,671
Accrued payrolls.......................................... 304,887
Accrued property taxes and other liabilities.............. 149,667
-----------
Total current liabilities......................... 1,320,152
LONG-TERM DEBT, less current portion........................ 2,714,162
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series preferred stock, 10,000 shares authorized, no
shares issued.......................................... --
Series A preferred stock, $.01 par value, 400,000 shares
authorized, 253,013 shares issued and outstanding...... 25,301,322
Common stock, $.01 par value, 200,000 shares authorized,
101,862 shares issued and outstanding.................. 1,019
Additional paid-in capital................................ 100,843
Stockholder notes receivable.............................. (214,443)
Accumulated deficit....................................... (2,050,287)
-----------
Total stockholders' equity........................ 23,138,454
-----------
TOTAL............................................. $27,172,768
===========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-13
<PAGE> 114
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
UNAUDITED
------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES:
Admissions................................................ $2,560,296 $2,220,040
Concessions............................................... 2,129,201 1,703,857
Other..................................................... 113,230 44,098
---------- ----------
Total............................................. 4,802,727 3,967,995
COST OF REVENUES:
Film Rentals.............................................. 985,759 950,868
Concession supplies....................................... 309,394 310,742
Salaries and wages........................................ 855,060 621,000
Facility leases........................................... 779,830 621,850
Advertising............................................... 144,303 135,621
Utilities and other....................................... 953,242 767,000
General and administrative.................................. 590,160 388,400
Depreciation and amortization............................... 475,850 304,150
---------- ----------
Total............................................. 5,093,598 4,099,631
---------- ----------
OPERATING INCOME (LOSS)..................................... (290,871) (131,636)
OTHER INCOME (EXPENSE):
Interest expense............................................ (156,542) (28,404)
Amortization of debt issuance costs......................... (34,119)
Interest income and other expense, net...................... 9,802
---------- ----------
LOSS BEFORE INCOME TAX EXPENSE.............................. (471,730) (160,040)
INCOME TAX EXPENSE.......................................... 23,162 2,299
---------- ----------
NET INCOME (LOSS)........................................... $ (494,892) $ (162,339)
========== ==========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-14
<PAGE> 115
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
UNAUDITED
--------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)...................................... $ (494,892) $ (162,339)
----------- -----------
Noncash items in net income (loss):
Depreciation...................................... 255,617 103,346
Amortization...................................... 254,352 200,804
Cash from (used for) working capital:
Inventories....................................... (23,767)
Prepaid expenses and other........................ 53,519 (41,333)
Accounts payable.................................. 557,328 (15,096)
Accrued liabilities............................... (940,419) (281,073)
----------- -----------
Net cash used for operating activities....... (314,495) (219,458)
INVESTING ACTIVITIES:
Acquisitions of theater properties and equipment....... (5,134,613) (3,027,393)
Additions to theater properties and equipment.......... (386,472) (775,867)
Increase in other assets............................... (448,465) (181,802)
----------- -----------
Net cash used for investing activities....... (5,969,550) (3,985,062)
FINANCING ACTIVITIES:
Payments of debt....................................... (3,876,847)
Proceeds from the issuance of stock.................... 10,000,300 30,542
----------- -----------
Net cash from financing activities........... 6,123,453 30,542
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (160,592) (4,173,978)
CASH AND CASH EQUIVALENTS:
Beginning of period.................................... 276,497 4,709,457
----------- -----------
End of period.......................................... $ 115,905 $ 535,479
=========== ===========
SUPPLEMENTAL INFORMATION:
Stock issued for notes receivable...................... $ 98,364 $ --
=========== ===========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-15
<PAGE> 116
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Condensed Consolidated
Financial Statements of Silver Cinemas International, Inc. and subsidiaries (the
"Company") include all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the Company's financial position as of
March 31, 1998, and the results of its operations for the three months ended
March 31, 1998 and 1997. Due to seasonality of the Company's operations, the
results of its operations for the interim periods ended March 31, 1998 and 1997,
may not be indicative of the 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 Silver Cinemas International, Inc. and subsidiaries and
accompanying notes for the years ended December 31, 1997 and for the period from
May 10, 1996 (date of inception) to December 31, 1996.
2. EQUITY ISSUANCE
In March 1998, the Company issued 99,595 shares of its Series A preferred
stock and 40,500 shares of its common stock to Brentwood Associates Buyout Fund
II, L.P. for $10 million.
3. SUBSEQUENT EVENTS
In April 1998, the Company completed an offering of $100.0 million of
Senior Subordinated Notes due 2005. The Company used the net proceeds to fund
the acquisition of substantially all of the assets of The Landmark Theatre Group
and StarTime Cinema, Inc. and three theaters of AMC Entertainment, Inc., repay
borrowings under the credit agreement, and general corporate purposes.
In April 1998, the Company issued 29,878 shares of its Series A preferred
stock and 12,151 shares of its common stock to DLJ Fund Investment Partners II,
L.P. for $10 million.
F-16
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
The Landmark Theatre Group
We have audited the accompanying consolidated balance sheet of The Landmark
Theatre Group as of December 31, 1997, and the related consolidated statements
of operations, shareholder's equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Landmark Theatre Group as
of December 31, 1997, and the results of operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 27, 1998
F-17
<PAGE> 118
THE LANDMARK THEATRE GROUP
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Cash and cash equivalents................................... $ 2,004,000
Accounts receivable......................................... 355,000
Inventories................................................. 145,000
Prepaid expenses............................................ 293,000
Deferred tax assets......................................... 500,000
-----------
Total current assets.............................. 3,297,000
Property and equipment, net................................. 35,023,000
Goodwill, net of accumulated amortization of $1,401,000..... 21,948,000
Other assets................................................ 481,000
-----------
TOTAL............................................. $60,749,000
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses....................... $ 5,475,000
Current portion of notes payable............................ 170,000
Current portion of capital lease obligations................ 288,000
Payable to parent company................................... 1,800,000
-----------
Total current liabilities......................... 7,733,000
Notes payable, less current portion......................... 1,211,000
Deferred tax liabilities.................................... 5,760,000
Capital lease obligations, less current portion............. 4,702,000
Other long-term liabilities................................. 34,000
-----------
Total liabilities................................. 19,440,000
-----------
SHAREHOLDER'S EQUITY:
Common stock, no par value; authorized, issued and
outstanding 100 shares
Paid-in capital........................................... 41,046,000
Retained earnings......................................... 263,000
-----------
Total shareholder's equity........................ 41,309,000
-----------
TOTAL............................................. $60,749,000
===========
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE> 119
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
REVENUES:
Admissions................................................ $45,903,000
Concessions............................................... 10,061,000
Other..................................................... 990,000
-----------
Total revenues.................................... 56,954,000
-----------
COST OF REVENUES:
Film rentals and advertising.............................. 23,212,000
Cost of concessions....................................... 2,096,000
Payroll and related expenses.............................. 9,448,000
Occupancy costs........................................... 7,071,000
Other theatre operating expenses.......................... 3,995,000
-----------
Total cost of revenues............................ 45,822,000
General and administrative.................................. 5,191,000
Depreciation and amortization............................... 4,929,000
-----------
Total expenses.................................... 55,942,000
-----------
INCOME FROM OPERATIONS...................................... 1,012,000
INTEREST EXPENSE............................................ 748,000
-----------
INCOME BEFORE INCOME TAXES.................................. 264,000
INCOME TAX PROVISION........................................ 496,000
-----------
NET LOSS.................................................... $ (232,000)
===========
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE> 120
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ----------- --------- -----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996................. $ -- $36,165,000 $ 495,000 $36,660,000
Forgiveness of payable to parent company... -- 4,881,000 4,881,000
Net loss for the year ended December 31,
1997..................................... (232,000) (232,000)
---- ----------- --------- -----------
BALANCE, DECEMBER 31, 1997................. $ -- $41,046,000 $ 263,000 $41,309,000
==== =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
F-20
<PAGE> 121
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $ (232,000)
Noncash items in net loss
Depreciation and amortization............................. 4,929,000
Deferred income taxes..................................... (150,000)
Cash from (used for) working capital
Receivables............................................... (140,000)
Inventories............................................... (16,000)
Prepaid expenses.......................................... 132,000
Other assets.............................................. 15,000
Accounts payable and accrued expenses..................... (17,000)
Other liabilities......................................... (10,000)
-----------
Net cash provided by operating activities......... 4,511,000
-----------
INVESTING ACTIVITIES:
Additions to theatre property and equipment............... (1,005,000)
Acquisitions of theatre property and equipment............ (2,375,000)
-----------
Net cash (used in) investing activities........... (3,380,000)
-----------
FINANCING ACTIVITIES:
Increase in payable to parent company..................... 1,894,000
Repayment of notes payable and capital leases............. (2,543,000)
Proceeds from note payable................................ 330,000
-----------
Net cash (used in) financing activities........... (319,000)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 812,000
CASH AND CASH EQUIVALENTS:
Beginning of period....................................... 1,192,000
-----------
End of period............................................. $ 2,004,000
===========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest.................................................. $ 715,000
===========
Income taxes................................................ $ 62,000
===========
SUPPLEMENTAL DISCLOSURE OF NONCASH ITEM:
Forgiveness of payable to parent company.................. $ 4,881,000
===========
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE> 122
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Landmark Theatre Group (the "Company") is a wholly owned subsidiary of
Metromedia International Group ("Metromedia"). The principal subsidiaries of the
Company are Landmark Theatre Corporation and Seven Gables Corporation, which
operate first-run art and specialty motion picture theatres in ten states, with
a significant portion of revenues derived from California. At December 31, 1997,
the Company operated 140 screens in 49 theatres.
Film Exhibition Revenues -- Theatre admission revenues and related film
rental expense are recognized as films are exhibited. Film rental expense
represents the distributors' shares of gross box office receipts.
Cash Equivalents -- Cash equivalents consist of highly liquid investments
with original maturities of three months or less.
Inventory -- Inventory consists of concession products on hand at the
theatres. Inventory is valued at the lower of cost (using the first-in,
first-out method) or market.
Property and Equipment -- Property and equipment are carried at cost. The
depreciable lives of buildings and equipment are 25 years and 3 to 7 years,
respectively. Leasehold improvements are amortized over the lesser of the terms
of the respective leases or the estimated useful lives of the improvements. The
Company uses the straight-line method to depreciate all depreciable assets.
Maintenance and repairs are expensed as incurred.
Long-Lived Assets -- The Company reviews long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future undiscounted cash
flows without interest costs expected to be generated by the asset. If the
carrying value of the assets exceeds the expected future cash flows, an
impairment exists and is measured by the amount by which the carrying amount of
the assets exceeds the estimated fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount of fair value less costs to
sell.
Goodwill -- Goodwill has been recognized for the excess of the purchase
price over the value of the identifiable net assets acquired. Goodwill is being
amortized over 25 years using the straight-line method.
Management continuously monitors and evaluates the realizability of
recorded intangibles to determine whether their carrying values have been
impaired. In evaluating the value and future benefits of the goodwill, their
carrying value would be reduced by the excess, if any, of their carrying value
over management's best estimate of undiscounted future cash flows over the
remaining amortization period. The Company believes that the carrying value of
goodwill is not impaired.
Income Taxes -- The Company accounts for its income taxes in accordance
with the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109
requires the asset and liability method of accounting for deferred income taxes.
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.
Financial Instruments -- The Company's financial instruments under SFAS No.
107, "Disclosures About Fair Value of Financial Instruments," include cash and
cash equivalents, accounts receivable, accounts payable and long-term debt. The
Company believes that the carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable and long-term debt are a reasonable
estimate of their fair value.
F-22
<PAGE> 123
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Land............................................ $ 1,407,000
Building and improvements....................... 6,054,000
Leasehold interest.............................. 18,806,000
Leasehold improvements.......................... 8,355,000
Theatre and office equipment.................... 4,729,000
Construction in progress........................ 476,000
-----------
39,827,000
Less accumulated depreciation and
amortization.................................. (4,804,000)
-----------
$35,023,000
===========
</TABLE>
Depreciation expense for the year ended December 31, 1997, was $3,990,000.
The assets acquired through capitalized theatre leases at December 31,
1997, amount to $4,633,000, and the assets acquired through capitalized
equipment leases amount to $1,150,000 for this same period. Accumulated
amortization of assets under capitalized leases was $1,295,000 at December 31,
1997. The related depreciation expense for the year ended December 31, 1997 was
$414,000.
3. NOTES PAYABLE
Notes payable represent obligations incurred in connection with the
acquisition of theatres. These notes are collateralized by certain property and
equipment.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Cormorant Associates (monthly payments of $12,700
through October 2003 with the final payment of
$611,000; interest rate of 9%)...................... $1,051,000
C. T. Ting (annual payments of $110,000 through
January 2000, interest rate of 10%)................. 330,000
----------
1,381,000
Less current portion of long-term notes payable....... (170,000)
----------
$1,211,000
==========
</TABLE>
A summary of the future annual maturities is as follows:
<TABLE>
<S> <C>
1998............................................. $ 170,000
1999............................................. 176,000
2000............................................. 182,000
2001............................................. 79,000
2002............................................. 86,000
Thereafter....................................... 688,000
----------
$1,381,000
==========
</TABLE>
F-23
<PAGE> 124
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
The Company's taxable income for the year ended December 31, 1997, was
included in a federal income tax return filed by a consolidated group of which
Metromedia International Group, Inc. was the parent.
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Current................................................. $ 646,000
Deferred................................................ (150,000)
---------
Total income tax expense...................... $ 496,000
=========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Statutory federal income tax rate....................... 34%
State income tax, net of federal tax benefit............ 6
Nondeductible amortization -- goodwill.................. 142
Other nondeductible expenses............................ 6
---
188%
===
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Deferred tax assets:
Accrued expenses...................................... $ 110,000
State taxes........................................... 350,000
Miscellaneous......................................... 40,000
----------
Total gross deferred tax assets............... 500,000
Valuation allowance
----------
Net deferred tax assets....................... $ 500,000
==========
Deferred tax liabilities -- depreciation................ $5,760,000
==========
</TABLE>
5. LEASES
The Company has long-term operating and capital leases, primarily involving
theatre facilities and equipment. The leases have varying terms and a portion
contains renewal options. Future minimum lease payments under noncancelable
operating leases consisted of the following:
<TABLE>
<S> <C>
1998.................................................... $ 4,860,000
1999.................................................... 4,471,000
2000.................................................... 3,777,000
2001.................................................... 3,609,000
2002.................................................... 3,545,000
Thereafter.............................................. 28,857,000
-----------
$49,119,000
===========
</TABLE>
F-24
<PAGE> 125
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The terms of an operating lease obligate the Company to incur costs to
bring one of its theatres into compliance with seismic requirements. The Company
estimates that related costs will approximate $1,250,000.
Certain theatres are leased under operating lease agreements which are
subject to rent adjustments based on the consumer price index and expire at
various dates through February 2015. Total rent expense (including contingent
rentals of $536,000) was $5,786,000 for the year ended December 31, 1997.
Future minimum lease payments under capital leases together with the
present value of minimum lease payments consisted of the following:
<TABLE>
<S> <C>
1998.................................................... $ 799,000
1999.................................................... 798,000
2000.................................................... 834,000
2001.................................................... 538,000
2002.................................................... 538,000
Thereafter.............................................. 8,223,000
-----------
11,730,000
Less amount representing interest....................... 6,740,000
-----------
Present value of future minimum lease payments.......... 4,990,000
Less current portion.................................... 288,000
-----------
$ 4,702,000
===========
</TABLE>
The Company has entered into lease agreements that are contingent on the
lessors' completing construction of two theatre facilities. Upon satisfaction of
this contingency, the lease agreements will require future minimum lease
payments estimated to be approximately $13,000,000 over 15 to 25 years.
6. COMMITMENTS AND CONTINGENCIES
As of December 31, 1997, the Company has employment agreements with certain
principal officers providing for total minimum future annual payments as
follows:
<TABLE>
<S> <C>
1998..................................................... $1,061,000
1999..................................................... 1,088,000
2000..................................................... 1,013,000
2001..................................................... 246,000
----------
$3,408,000
==========
</TABLE>
The employment contracts also provide for additional payments upon the
occurrence of defined events including a sale of the Company's assets (see Note
10).
The Company is involved in various lawsuits, claims and inquiries incurred
in the normal course of business. Management, based in part upon the advice of
its legal counsel, believes that resolution of these matters will not have a
material adverse effect on the financial position of the Company or on the
results of its operations.
7. RELATED PARTIES
On July 10, 1997, Metromedia and Metro-Goldwyn ("MGM"), through its holding
company, P&K Acquisition Corp., sold certain entertainment assets of Metromedia
(excluding the Landmark Theatre Group) to MGM. The sale was for an aggregate
cash consideration of $573 million. Under the terms of the agreement,
F-25
<PAGE> 126
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Metromedia sold its film and television library and the production and
distribution activities which include Orion Pictures Corporation ("Orion").
The Company licenses films from Orion for exhibition in its theatres. Terms
for film licensing agreements between the parties are comparable to those the
Company enters into with independent third-party distributors. Orion was paid
$426,000 for film rental expense for the six months ended June 30, 1997.
8. 401(K) PLAN
The Company has a 401(k) plan covering substantially all employees meeting
certain eligibility requirements. Participants may make contributions to the
plan from 1% to 15% of their gross salary and are fully vested. Employer
contributions to the plan, which are made at the discretion of the Company, are
made up to 50% of participant contributions to a maximum of 6% of compensation.
The 401(k) contributions expense charged to operations for the year ended
December 31, 1997, was $120,000.
9. ACQUISITIONS
Effective January 6, 1997, the Company exercised its option to purchase a
theatre which was previously classified as a capital lease. The acquisition
price was $530,000 payable in three equal annual installments of $110,000 plus a
$200,000 down payment.
The Company acquired two theatres in June and August 1997 for total cash
consideration of $2,375,000. These acquisitions have been accounted for under
the purchase method of accounting. Under the purchase method of accounting, the
results of operations of the acquired businesses are included in the
accompanying consolidated financial statements as of their respective
acquisition dates. The assets of the acquired theaters are included based on an
allocation of the purchase price as follows:
<TABLE>
<S> <C>
Theater equipment........................................ $ 260,000
Leasehold interests and improvements..................... 2,115,000
----------
$2,375,000
==========
</TABLE>
Pro forma financial information for 1997 has been omitted as the effect is
immaterial.
10. SALE AGREEMENT
On December 18, 1997, Metromedia entered into an agreement to sell the
assets including the assumption of certain liabilities of the Company to Silver
Cinemas, Inc. for approximately $62.0 million.
F-26
<PAGE> 127
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder of
The Landmark Theatre Group:
We have audited the accompanying consolidated balance sheets of The
Landmark Theatre Group (the Company) as of December 31 and March 31, 1996, and
the related consolidated statements of operations, changes in shareholder's
equity and cash flows for the six months ended December 31, 1996, three months
ended June 30, 1996 and the year ended March 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Landmark
Theatre Group as of December 31 and March 31, 1996, and the results of its
operations and its cash flows for the six months ended December 31, 1996, three
months ended June 30, 1996 and the year ended March 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, effective
July 2, 1996, Metromedia International Group, Inc. acquired all of the
outstanding stock of The Samuel Goldwyn Company including the Company in a
business combination accounted for as a purchase. As a result of the
acquisition, the consolidated financial information for the periods after the
acquisition is presented on a different cost basis than for the periods before
the acquisition and, therefore, is not comparable.
KPMG PEAT MARWICK LLP
Los Angeles, California
December 19, 1997
F-27
<PAGE> 128
THE LANDMARK THEATRE GROUP
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
------------ -------------
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Cash and cash equivalents................................... $ 1,192,000 $ 1,115,000
Accounts receivable......................................... 215,000 203,000
Inventories................................................. 129,000 161,000
Prepaid expenses............................................ 425,000 136,000
Deferred tax assets......................................... 500,000 518,000
----------- -----------
Total current assets.............................. 2,461,000 2,133,000
Property and equipment, net................................. 35,632,000 31,995,000
Goodwill, net of accumulated amortization of $462,000 and
$974,000 as of December 31, 1996 and March 31, 1996,
respectively.............................................. 22,887,000 3,619,000
Other assets................................................ 496,000 488,000
----------- -----------
Total assets...................................... $61,476,000 $38,235,000
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses....................... $ 5,492,000 $ 4,178,000
Current portion of notes payable............................ 1,760,000 494,000
Current portion of capital lease obligations................ 256,000 240,000
Payable to parent company................................... 4,787,000 5,534,000
----------- -----------
Total current liabilities......................... 12,295,000 10,446,000
Notes payable, less current portion......................... 1,050,000 2,685,000
Deferred tax liabilities.................................... 5,910,000 5,904,000
Capital lease obligations, less current portion............. 5,517,000 5,711,000
Other long-term liabilities................................. 44,000 --
----------- -----------
Total liabilities................................. 24,816,000 24,746,000
----------- -----------
Shareholder's equity:
Common stock, no par value. Authorized, issued and
outstanding 100 shares................................. -- --
Paid-in capital........................................... 36,165,000 11,567,000
Retained earnings......................................... 495,000 1,922,000
----------- -----------
36,660,000 13,489,000
----------- -----------
Total liabilities and shareholder's equity........ $61,476,000 $38,235,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 129
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996
------------ ------------- -------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C>
Revenues:
Admissions........................................ $23,960,000 $ 9,314,000 $41,452,000
Concessions....................................... 5,044,000 2,060,000 8,771,000
Other............................................. 577,000 202,000 920,000
----------- ----------- -----------
Total revenues............................ 29,581,000 11,576,000 51,143,000
----------- ----------- -----------
Cost of revenues:
Film rentals and advertising...................... 11,995,000 5,078,000 21,543,000
Cost of concessions............................... 1,039,000 456,000 1,877,000
Payroll and related expenses...................... 4,610,000 2,128,000 8,349,000
Occupancy costs................................... 3,689,000 1,708,000 6,783,000
Other theatre operating expenses.................. 1,972,000 874,000 3,553,000
----------- ----------- -----------
Total cost of revenues.................... 23,305,000 10,244,000 42,105,000
General and administrative.......................... 2,426,000 1,189,000 4,225,000
Depreciation and amortization....................... 2,237,000 906,000 3,569,000
----------- ----------- -----------
Total expenses............................ 27,968,000 12,339,000 49,899,000
----------- ----------- -----------
Income (loss) from operations....................... 1,613,000 (763,000) 1,244,000
Interest expense.................................... 458,000 237,000 716,000
----------- ----------- -----------
Income (loss) before income taxes................... 1,155,000 (1,000,000) 528,000
Provision (benefit) for income taxes................ 660,000 (353,000) 321,000
----------- ----------- -----------
Net income (loss)......................... $ 495,000 $ (647,000) $ 207,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 130
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
PAID-IN- RETAINED
COMMON STOCK CAPITAL EARNINGS TOTAL
------------ --------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at March 31, 1995........... $ -- $11,567,000 $ 1,715,000 $13,282,000
Net income.......................... -- -- 207,000 207,000
---- ----------- ----------- -----------
Balance at March 31, 1996........... -- 11,567,000 1,922,000 13,489,000
Net loss for the three months ended
June 30, 1996..................... -- -- (647,000) (647,000)
---- ----------- ----------- -----------
Balance at June 30, 1996............ -- 11,567,000 1,275,000 12,842,000
Push-down accounting from the
acquisition by Orion Pictures
Corporation....................... -- 24,598,000 (1,275,000) 23,323,000
---- ----------- ----------- -----------
Balance at July 1, 1996............. -- 36,165,000 -- 36,165,000
Net income for the six months ended
December 31, 1996................. -- -- 495,000 495,000
---- ----------- ----------- -----------
Balance at December 31, 1996........ $ -- $36,165,000 $ 495,000 $36,660,000
==== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 131
THE LANDMARK THEATRE GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE
SIX MONTHS MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996
------------ ------------- -------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ 495,000 $ (647,000) $ 207,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 2,237,000 906,000 3,569,000
(Increase) decrease in receivables................. (109,000) 97,000 79,000
(Increase) decrease in inventories................. 56,000 (24,000) 36,000
(Increase) decrease in prepaid expenses............ (136,000) (153,000) 169,000
(Increase) decrease in other assets................ (8,000) -- 14,000
Increase (decrease) in accounts payable and accrued
expenses......................................... 1,107,000 207,000 (995,000)
Increase (decrease) in deferred income taxes....... 658,000 (352,000) 318,000
Increase in other liabilities...................... 44,000 -- --
----------- ---------- -----------
Net cash provided by operating activities..... 4,344,000 34,000 3,397,000
----------- ---------- -----------
Cash flows from investing activities -- additions to
property and equipment................................ (2,572,000) (153,000) (2,838,000)
----------- ---------- -----------
Cash flows from financing activities:
(Repayments) borrowings from parent company........... (1,029,000) -- 900,000
Repayment of notes payable and capital leases......... (370,000) (177,000) (849,000)
Proceeds from note payable............................ -- -- --
----------- ---------- -----------
Net cash (used in) provided by financing
activities.................................. (1,399,000) (177,000) 51,000
----------- ---------- -----------
Net (decrease) increase in cash and cash
equivalents................................. 373,000 (296,000) 610,000
Cash and cash equivalents, beginning of period.......... 819,000 1,115,000 505,000
----------- ---------- -----------
Cash and cash equivalents, end of period................ $ 1,192,000 $ 819,000 $ 1,115,000
=========== ========== ===========
Supplemental disclosure of cash paid for:
Interest.............................................. $ 458,000 237,000 716,000
Income taxes.......................................... 2,000 -- --
=========== ========== ===========
Supplemental disclosure of noncash item -- acquisitions
under capital lease................................... $ -- $ -- $ 4,769,000
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-31
<PAGE> 132
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31 AND MARCH 31, 1996
(1) DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Landmark Theatre Group (the Company) was a subsidiary of Heritage
Entertainment until December 1991, when both Companies were acquired by the
Samuel Goldwyn Company (Goldwyn). The Company was then acquired by Orion
Pictures Corporation (Orion), a wholly owned subsidiary of Metromedia
International Group (Metromedia), in July 1996. The principal subsidiaries of
the Company are Landmark Theatre Corporation and Seven Gables Corporation, which
operate first-run art and specialty motion picture theaters in nine states, with
a significant portion of revenues derived from California. At March 31, 1996 and
December 31, 1996, the Company operated 140 screens in 52 theaters and 138
screens in 50 theaters, respectively.
Basis of Presentation
Effective July 2, 1996, Metromedia, a publicly traded company and parent
corporation of Orion, acquired Goldwyn and the Company in an exchange of stock.
The acquisition was accounted for using the purchase method of accounting. The
Company has applied push-down accounting reflecting the acquisition and
resulting equity in the accompanying consolidated financial statements
subsequent to the acquisition date. As a result of the acquisition, the
consolidated financial information for periods after the acquisition (Successor)
is presented on a different cost basis than for the periods before the
acquisition (Predecessor) and, therefore, is not comparable. The purchase price
for the Company (excluding Goldwyn) of $36,165,000 has been allocated to the net
assets of the Company based on their estimated fair market value at the
acquisition date. The balance of the purchase price after allocation to
identifiable net assets, $23,349,000, was allocated to goodwill.
The consolidated financial statements are presented as if the acquisition
occurred on July 1, 1996, rather than the actual purchase date of July 2, 1996.
There are no material adjustments or modifications required as a result of this
change in presentation.
The following pro forma financial information presents the results of
operations of the Company as if it had been acquired as of April 1, 1995, after
giving effect to amortization of goodwill. The pro forma financial information
does not necessarily reflect the results of operations that would have occurred
had Metromedia and the Company constituted a single entity during such periods.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1996 1996
------------ ----------
<S> <C> <C>
Revenues................................... $41,157,000 51,143,000
Net loss................................... (314,000) (441,000)
=========== ==========
</TABLE>
Film Exhibition Revenues
Theatre admission revenues and related film rental expense are recognized
as films are exhibited. Film rental expense represents the distributors' shares
of gross box office receipts.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less.
Inventory
Inventory consists of concession products on hand at the theatres.
Inventory is valued at the lower of cost (using the first-in, first-out method)
or market.
F-32
<PAGE> 133
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property and Equipment
Property and equipment are carried at cost. The depreciable lives of
buildings and equipment are 25 years and 3 to 7 years, respectively. Leasehold
improvements are amortized over the lesser of the terms of the respective leases
or the estimated useful lives of the improvements. The Company uses the
straight-line method to depreciate all depreciable assets. Maintenance and
repairs are expensed as incurred.
Long-Lived Assets
Effective March 31, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121). This
statement requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to the future undiscounted cash flows without interest costs expected
to be generated by the asset. If the carrying value of the assets exceeds the
expected future cash flows, an impairment exists and is measured by the amount
by which the carrying amount of the assets exceeds the estimated fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement did not have
a material impact on the Company's financial position, results of operations or
liquidity.
Goodwill
Goodwill has been recognized for the excess of the purchase price over the
value of the identifiable net assets acquired. The goodwill as of March 31, 1996
resulted from the acquisition of the Company by Goldwyn in 1991. This balance
was being amortized over 20 years using the straight-line method. The goodwill
at December 31, 1996 resulting from the Orion acquisition is being amortized
over 25 years using the straight-line method.
Management continuously monitors and evaluates the realizability of
recorded intangibles to determine whether their carrying values have been
impaired. In evaluating the value and future benefits of the goodwill, their
carrying value would be reduced by the excess, if any, of their carrying value
over management's best estimate of undiscounted future cash flows over the
remaining amortization period. The Company believes that the carrying value of
goodwill is not impaired.
Payable to Parent Company
Intercompany activity relates to the financing of theatre acquisitions,
advances and repayments occurring among the Company, Orion, Goldwyn and
Metromedia in the normal course of business. Activity also relates to the tax
sharing agreement between the Company and Goldwyn.
Income Taxes
The Company accounts for its income taxes in accordance with the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Statement 109 requires the asset and
liability method of accounting for deferred income taxes.
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
F-33
<PAGE> 134
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
------------ -------------
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Land............................................. $ 1,407,000 $ 1,407,000
Building and improvements........................ 6,054,000 6,576,000
Leasehold interest............................... 18,633,000 21,420,000
Leasehold improvements........................... 7,402,000 8,052,000
Theatre and office equipment..................... 3,513,000 5,523,000
Construction in progress......................... 125,000 84,000
----------- ------------
37,134,000 43,062,000
Less accumulated depreciation and amortization... (1,502,000) (11,067,000)
----------- ------------
$35,632,000 $ 31,995,000
=========== ============
</TABLE>
Depreciation expense for the six months ended December 31, 1996, the three
months ended June 30, 1996 and the year ended March 31, 1996 was $1,775,000,
$849,000, and $3,339,000, respectively.
The assets acquired through capitalized theatre leases at December 31 and
March 31, 1996 amount to $5,182,000, and the assets acquired through capitalized
equipment leases amount to $1,150,000 for these same periods. Accumulated
amortization of assets under capitalized leases was $1,119,000 and $756,000 at
December 31 and March 31, 1996, respectively. The related depreciation expense
for the six months ended December 31, 1996, the three months ended June 30, 1996
and for the year ended March 31, 1996 was $242,000, $121,000, and $276,000,
respectively.
(3) NOTES PAYABLE
Notes payable represents obligations incurred in connection with the
acquisition of theatres. These notes are collateralized by certain property and
equipment.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
------------ -------------
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Cinerama Theatres, Inc. (monthly payments of $50,000 through
April 1997 with the final payment of $1,561,000 on April
15, 1997; interest rate of prime plus 2%; interest rate at
March 31, 1996 and December 31, 1996 of 10.75% and 10.25%,
respectively)............................................. $ 1,698,000 $1,998,000
Cormorant Associates (monthly payments of $12,700 through
October 2003 with the final payment of $611,000; interest
rate of 9%)............................................... 1,105,000 1,143,000
Other....................................................... 7,000 38,000
----------- ----------
2,810,000 3,179,000
Less current portion of long-term notes payable............. (1,760,000) (494,000)
----------- ----------
$ 1,050,000 $2,685,000
=========== ==========
</TABLE>
F-34
<PAGE> 135
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the future annual maturities is as follows:
<TABLE>
<S> <C>
1997............................................. $1,760,000
1998............................................. 60,000
1999............................................. 66,000
2000............................................. 72,000
2001............................................. 78,000
Thereafter....................................... 774,000
----------
$2,810,000
==========
</TABLE>
(4) INCOME TAXES
The Company's taxable income for the six months ended December 31, 1996 was
included in a Federal income tax return filed by a consolidated group of which
Metromedia International Group, Inc. was the parent.
Prior to that period, the Company and Goldwyn filed consolidated Federal
and certain state income tax returns and had a formal tax sharing agreement. The
provisions for income tax in these statements have been provided on a
separate-company basis. The current amount provided has been recorded as a
payable to Goldwyn, although no repayment terms are specified.
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996
------------ ------------- -------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C>
Current:
Federal.................................... $ 713,000 $(211,000) $ 624,000
State...................................... 234,000 4,000 196,000
Deferred:
Federal.................................... (206,000) (80,000) (377,000)
State...................................... (81,000) (66,000) (122,000)
--------- --------- ---------
Total income tax expense
(benefit)........................ $ 660,000 $(353,000) $ 321,000
========= ========= =========
</TABLE>
A reconciliation of the statutory Federal income tax rate to the Company's
effective rate is presented below:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996
------------ ------------- -------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C>
Statutory Federal income tax rate............ 34% 34% 34%
State income tax, net of Federal tax
benefit.................................... 9 3 9
Nondeductible amortization -- goodwill....... 14 (2) 14
Other nondeductible expenses................. -- -- 4
-- -- --
57% 35% 61%
== == ==
</TABLE>
F-35
<PAGE> 136
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1996 and March 31, 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
------------ -------------
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Deferred tax assets:
Accrued expenses................................. $ 97,000 $ 99,000
State taxes...................................... 378,000 415,000
Miscellaneous.................................... 25,000 4,000
---------- ----------
Total gross deferred tax assets.......... 500,000 518,000
Valuation allowance................................ -- --
---------- ----------
Net deferred tax assets.................. $ 500,000 518,000
========== ==========
Deferred tax liabilities -- depreciation........... $5,910,000 $5,904,000
========== ==========
</TABLE>
(5) LEASES
The Company has long-term operating and capital leases, primarily involving
theatre facilities and equipment. The leases have varying terms and a portion
contains renewal options. Future minimum lease payments under noncancelable
operating leases consisted of the following:
<TABLE>
<S> <C>
1997............................................ $ 4,860,000
1998............................................ 3,991,000
1999............................................ 3,385,000
2000............................................ 2,881,000
2001............................................ 2,772,000
Thereafter...................................... 20,011,000
-----------
$37,900,000
===========
</TABLE>
The Company is contractually obligated to incur costs of approximately
$750,000 to bring one of its theaters into compliance with seismic requirements.
Certain theatres are leased under operating lease agreements which are
subject to rent adjustments based on the consumer price index and expire at
various dates through February 2015.
Future minimum lease payments under capital leases together with the
present value of minimum lease payments consisted of the following:
<TABLE>
<S> <C>
1997............................................ $ 868,000
1998............................................ 867,000
1999............................................ 1,382,000
2000............................................ 833,000
2001............................................ 538,000
Thereafter...................................... 8,761,000
-----------
13,249,000
Less amount representing interest............... (7,476,000)
-----------
Present value of future minimum lease
payments...................................... 5,773,000
Less current portion............................ (256,000)
-----------
$ 5,517,000
===========
</TABLE>
F-36
<PAGE> 137
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table represents rent expense for the periods:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996
------------ ------------- -------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C>
Total rent expense (including contingent
rentals)................................... $2,663,000 $1,304,000 $5,512,000
Contingent rental expense.................... 265,000 74,000 441,000
========== ========== ==========
</TABLE>
(6) COMMITMENT AND CONTINGENCIES
The Company is involved in various lawsuits, claims and inquiries incurred
in the normal course of business. Management, based in part upon the advice of
its legal counsel, believes that resolution of these matters will not have a
material adverse effect on the financial position of the Company or on the
results of its operations.
(7) RELATED PARTIES
From December 1991 to June 1996, the Company was a wholly owned subsidiary
of Goldwyn, a publicly held motion picture and television production and
distribution company. The Company became a wholly owned subsidiary of Metromedia
as of July 1996.
The Company licenses films from Orion and Goldwyn for exhibition in its
theatres. Terms for film licensing agreements between the parties are comparable
to those the Company enters into with independent third-party distributors. For
the nine months ended December 31, 1996 and year ended March 31, 1996, the
Company paid Goldwyn $576,000, and $986,000, respectively, for film rental
expenses. Orion was paid $2,013,000 for film rental expense for the six months
ended December 31, 1996.
(8) 401(K) PLAN
Effective January 1, 1995, Goldwyn established a 401(k) plan covering
substantially all employees meeting certain eligibility requirements.
Participants may make contributions to the plan from 1% to 15% of their gross
salary and are fully vested. Employer contributions to the plan, which are made
at the discretion of the Company, are made up to 3% of a participant's salary
and are fully vested at the time of contribution. The 401(k) contributions
expense charged to operations for the nine months ended December 31, 1996 and
year ended March 31, 1996 was $64,000 and $63,000, respectively.
Effective January 1, 1997, the Goldwyn 401(k) plan was merged into the
Orion 401(k) plan. The Orion plan has similar provisions and eligibility
requirements; however, effective March 1, 1997, discretionary employer
contributions will be made up to 50% of participant contributions to a maximum
of 6% of compensation.
(9) SUBSEQUENT EVENT
Effective January 6, 1997, the Company exercised its option to purchase a
theatre which was previously classified as a capital lease. The acquisition
price was $530,000 payable in three equal annual installments of $110,000 plus a
$200,000 down payment. Interest is to be paid annually on the unpaid balance at
an interest rate of 10%.
On July 10, 1997, Metromedia and Metro-Goldwyn-Mayer (MGM), through its
holding company, P&F Acquisition Corp., sold certain entertainment assets of
Metromedia (excluding the Landmark Theatre Group) to MGM. The sale was for an
aggregate cash consideration of $573 million. Under the terms of the agreement,
F-37
<PAGE> 138
THE LANDMARK THEATRE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Metromedia sold its film and television library and the production and
distribution activities which include Orion, Goldwyn and Motion Picture
Corporation of America (MPCA).
The Company acquired two theaters in June and August 1997 for total cash
consideration of $2.4 million.
On December 18, 1997, Metromedia entered into an agreement to sell the
assets and certain liabilities of the Company to Silver Cinemas Inc. for
approximately $62 million.
F-38
<PAGE> 139
THE LANDMARK THEATRE GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
-----------
<S> <C>
CURRENT ASSETS:
Cash and equivalents...................................... $ 577,000
Accounts receivable....................................... 152,000
Inventories............................................... 178,000
Prepaid expenses and other................................ 943,000
-----------
Total current assets................................. 1,850,000
THEATER PROPERTIES AND EQUIPMENT:
Land...................................................... 1,407,000
Buildings................................................. 6,054,000
Leasehold interests and improvements...................... 27,243,000
Theater furniture and equipment........................... 4,910,000
Theaters under construction............................... 2,040,000
-----------
Total................................................ 41,654,000
Less accumulated depreciation and amortization............ (5,859,000)
-----------
Theater properties and equipment net................... 35,795,000
GOODWILL -- NET............................................. 21,714,000
OTHER ASSETS -- NET......................................... 476,000
-----------
TOTAL................................................ $59,835,000
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long term debt......................... $ 171,000
Accounts payable.......................................... 4,602,000
Accrued payrolls.......................................... 957,000
Accrued property taxes and other liabilities.............. 239,000
Payable to parent......................................... 132,000
Current portion of capital lease obligation............... 284,000
-----------
Total current liabilities............................ 6,385,000
LONG-TERM DEBT, less current portion........................ 1,085,000
CAPITAL LEASES, less current portion........................ 4,639,000
DEFERRED TAX LIABILITIES.................................... 6,152,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, no par value, 100 shares authorized, issued
and outstanding
Paid-in capital........................................... 41,046,000
Retained earnings......................................... 528,000
-----------
Total shareholder's equity........................... 41,574,000
-----------
TOTAL................................................ $59,835,000
===========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-39
<PAGE> 140
THE LANDMARK THEATRE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES:
Admissions................................................ $12,643,000 $13,648,000
Concessions............................................... 2,813,000 3,085,000
Other..................................................... 204,000 290,000
----------- -----------
Total............................................. 15,660,000 17,023,000
COST OF REVENUES:
Film rentals.............................................. 5,924,000 6,462,000
Concession supplies....................................... 581,000 623,000
Salaries and wages........................................ 2,470,000 2,351,000
Facility leases........................................... 1,646,000 1,600,000
Advertising............................................... 278,000 742,000
Utilities and other....................................... 1,295,000 1,292,000
General and administrative.................................. 1,357,000 1,210,000
Depreciation and amortization............................... 1,290,000 1,177,000
----------- -----------
Total............................................. 14,841,000 15,457,000
----------- -----------
OPERATING INCOME (LOSS)..................................... 819,000 1,566,000
OTHER INCOME (EXPENSE):
Interest expense............................................ (162,000) (215,000)
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE.............................. 657,000 1,351,000
INCOME TAX EXPENSE.......................................... 392,000 700,000
----------- -----------
NET INCOME (LOSS)........................................... $ 265,000 $ 651,000
=========== ===========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-40
<PAGE> 141
THE LANDMARK THEATRE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
UNAUDITED
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 265,000 $ 651,000
Noncash items in net income:
Depreciation and amortization.......................... 1,290,000 1,177,000
Deferred income taxes.................................. 392,000 160,000
Cash from (used for) working capital:
Inventories............................................ (33,000) 2,000
Accounts receivable.................................... 203,000 (31,000)
Prepaid expenses and other............................. (150,000) 315,000
Accounts payable and accrued liabilities............... 323,000 (134,000)
------------ ------------
Net cash from operating activities................ 2,290,000 2,140,000
INVESTING ACTIVITIES:
Additions to theater properties and equipment............. (1,828,000) (193,000)
Increase in other assets.................................. 5,000
------------ ------------
Net cash used for investing activities............ (1,823,000) (193,000)
FINANCING ACTIVITIES:.......................................
Decrease in payable to parent............................. (1,668,000) (2,753,000)
Payments of debt.......................................... (226,000) (386,000)
------------ ------------
Net cash (used for) financing activities.......... (1,894,000) (3,139,000)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (1,427,000) (1,192,000)
CASH AND CASH EQUIVALENTS:
Beginning of period....................................... 2,004,000 1,192,000
------------ ------------
End of period............................................. $ 577,000 $ --
============ ============
</TABLE>
See notes to interim condensed consolidated financial statements.
F-41
<PAGE> 142
THE LANDMARK THEATRE GROUP
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Condensed Consolidated
Financial Statements of The Landmark Theatre Group and subsidiaries (the
"Company") include all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the Company's financial position as of
March 31, 1998, and the result of its operations for the three months ended
March 31, 1998 and 1997. Due to seasonality of the Company's operations, the
results of its operations for the interim periods ended March 31, 1998 and 1997,
may not be indicative of the 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 unaudited
Consolidated Financial Statements of The Landmark Theatre Group and subsidiaries
and accompanying notes for the year ended December 31, 1997, the six months
ended December 31, 1996, three months ended June 30, 1996 and the year ended
March 31, 1996.
2. SUBSEQUENT EVENT
On April 16, 1998, the Company completed the sale of the operating assets
used in 47 of its theaters.
F-42
<PAGE> 143
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
StarTime Cinema, Inc.
We have audited the accompanying consolidated balance sheets of StarTime
Cinema, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
StarTime Cinema, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
As more fully discussed in Note 13 to the consolidated financial
statements, the Company has entered into agreements to sell the majority of its
operating assets during 1998.
COOPERS & LYBRAND L.L.P.
El Paso, Texas
March 15, 1998
F-43
<PAGE> 144
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 670,923 $ 3,530,625
Short-term investments.................................... 26,801 119,749
Inventories............................................... 223,940 217,607
Prepaid expenses.......................................... 241,157 236,520
Deferred income taxes..................................... 533,000 106,000
Receivable from vendor and other.......................... 166,885 224,297
Assets held for sale...................................... 4,416,211 --
----------- -----------
Total current assets.............................. 6,278,917 4,434,798
Property, theater equipment and improvements at cost, net of
accumulated depreciation and amortization of $10,899,418
and $9,911,038 for 1997 and 1996.......................... 12,093,959 16,044,116
Deferred income taxes....................................... 261,000 70,000
Excess of cost over fair value of net assets acquired, net
of accumulated amortization of $1,371,230 and $1,030,990
for 1997 and 1996......................................... 3,473,465 3,803,705
Other assets, net of accumulated amortization of $197,080
and $134,411 for 1997 and 1996............................ 243,587 316,256
----------- -----------
Total assets...................................... $22,350,928 $24,668,875
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 4,786,600 $ 1,276,400
Subordinated notes payable................................ 1,312,100 --
Accounts payable.......................................... 392,249 346,584
Accrued film rentals...................................... 456,412 443,611
Other accrued liabilities................................. 966,076 1,094,226
Income taxes payable...................................... -- 19,684
----------- -----------
Total current liabilities......................... 7,913,437 3,180,505
----------- -----------
Long-term debt, less current maturities..................... 3,076,712 7,863,312
----------- -----------
Subordinated notes payable.................................. -- 1,312,100
----------- -----------
Deferred lease payments..................................... 3,038,211 2,917,695
----------- -----------
Mandatorily redeemable preferred stock, Series B, $10 par,
2% cumulative convertible, 88,235 shares authorized,
88,235 shares issued and outstanding...................... 3,000,000 3,290,000
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, Series A, $10 par, 6% cumulative
convertible, 417,553 shares authorized, 380,263 shares
issued and outstanding................................. 3,802,630 3,802,630
Common stock, $.01 par, 1,000,000 shares authorized,
87,500 shares issued and outstanding................... 875 875
Additional paid-in capital................................ 1,814,045 1,814,045
(Accumulated deficit) retained earnings................... (294,982) 487,713
----------- -----------
Total stockholders' equity........................ 5,322,568 6,105,263
----------- -----------
Total liabilities and stockholders' equity........ $22,350,928 $24,668,875
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
<PAGE> 145
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Box office receipts................................... $16,553,625 $18,306,082 $17,630,259
Concessions........................................... 12,522,307 13,666,783 13,037,620
Other................................................. 755,891 619,534 588,688
----------- ----------- -----------
Total revenues................................ 29,831,823 32,592,399 31,256,567
----------- ----------- -----------
Costs and expenses:
Film rentals.......................................... 5,709,965 6,354,443 6,063,669
Concession supplies................................... 2,027,354 2,166,037 2,117,659
----------- ----------- -----------
7,737,319 8,520,480 8,181,328
Facility leases....................................... 7,529,262 7,367,246 7,019,107
Salaries and wages.................................... 5,642,893 5,538,700 5,055,653
Advertising........................................... 1,280,336 1,420,507 1,170,618
Utilities............................................. 1,431,606 1,431,170 1,372,154
Other theater......................................... 3,817,035 4,109,741 3,915,349
Depreciation and amortization......................... 1,785,510 1,740,108 1,484,743
General and administrative............................ 1,392,773 1,654,262 1,668,501
----------- ----------- -----------
Total costs and expenses...................... 30,616,734 31,782,214 29,867,453
----------- ----------- -----------
Operating (loss) income....................... (784,911) 810,185 1,389,114
----------- ----------- -----------
Other income (expense):
Interest.............................................. (940,952) (810,093) (783,912)
Other................................................. 95,168 90,201 140,467
----------- ----------- -----------
Total other income (expense).................. (845,784) (719,892) (643,445)
----------- ----------- -----------
(Loss) income before income taxes............. (1,630,695) 90,293 745,669
Income tax benefit (expense)............................ 618,000 (42,000) (297,612)
----------- ----------- -----------
Net (loss) income............................. $(1,012,695) $ 48,293 $ 448,057
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE> 146
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
RETAINED
PREFERRED ADDITIONAL EARNINGS
STOCK COMMON PAID-IN (ACCUMULATED
SERIES A STOCK CAPITAL DEFICIT) TOTAL
---------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994........... $3,716,330 $875 $1,684,595 $ 831,446 $ 6,233,246
Adjustment of mandatorily redeemable
preferred stock, Series B........... -- -- -- (170,000) (170,000)
Payment of cash dividends:
Preferred stock, Series A; $0.60 per
share............................ -- -- -- (222,980) (222,980)
Preferred stock, Series B; $0.68 per
share............................ -- -- -- (60,123) (60,123)
Net income............................ -- -- -- 448,057 448,057
---------- ---- ---------- ----------- -----------
Balances, December 31, 1995........... 3,716,330 875 1,684,595 826,400 6,228,200
Adjustment of mandatorily redeemable
preferred stock, Series B........... -- -- -- (89,000) (89,000)
Issuance of preferred stock, Series
A................................... 86,300 -- 129,450 -- 215,750
Payment of cash dividends:
Preferred stock, Series A; $0.60 per
share............................ -- -- -- (222,980) (222,980)
Preferred stock, Series B; $0.68 per
share............................ -- -- -- (75,000) (75,000)
Net income............................ -- -- -- 48,293 48,293
---------- ---- ---------- ----------- -----------
Balances, December 31, 1996........... 3,802,630 875 1,814,045 487,713 6,105,263
Adjustment of mandatorily redeemable
preferred stock, Series B........... -- -- -- 290,000 290,000
Payment of cash dividends, preferred
stock, Series B; $0.68 per share.... -- -- -- (60,000) (60,000)
Net loss.............................. -- -- -- (1,012,695) (1,012,695)
---------- ---- ---------- ----------- -----------
Balances, December 31, 1997........... $3,802,630 $875 $1,814,045 $ (294,982) $ 5,322,568
========== ==== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE> 147
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income..................................... $(1,012,695) $ 48,293 $ 448,057
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization...................... 1,785,510 1,740,108 1,484,743
Deferred income taxes.............................. (618,000) (118,684) (149,588)
Deferred lease expense............................. 120,516 156,998 296,310
Increase (decrease) from changes in:
Inventories........................................ (6,333) 27,984 (34,942)
Prepaid expenses................................... (4,637) (220,876) 8,324
Income tax refund receivable....................... -- -- 86,940
Receivable from vendor and other................... 57,412 (4,724) (202,525)
Accounts payable................................... 45,665 (181,584) 105,210
Accrued liabilities and film rentals............... (115,349) 44,529 589,551
Income taxes payable............................... (19,684) 4,945 14,739
----------- ----------- -----------
Net cash provided by operating activities..... 232,405 1,496,989 2,646,819
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, theater equipment and
improvements....................................... (1,848,655) (1,044,520) (453,376)
Purchase of short-term investments.................... -- -- (3,326,977)
Proceeds on sale of short-term investments............ 92,948 32,672 6,195,204
Purchase of theaters.................................. -- -- (7,400,000)
----------- ----------- -----------
Net cash used in investing activities......... (1,755,707) (1,011,848) (4,985,149)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt.......................... -- 2,275,712 6,010,000
Payments on long-term debt............................ (1,276,400) (929,470) (2,521,428)
Proceeds from issuance of preferred stock, Series A... -- 134,850 --
Debt and stock issuance costs......................... -- -- (4,417)
Payment of dividends.................................. (60,000) (297,980) (283,103)
----------- ----------- -----------
Net cash (used in) provided by financing
activities.................................. (1,336,400) 1,183,112 3,201,052
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents.... (2,859,702) 1,668,253 862,722
Cash and cash equivalents:
Beginning of year..................................... 3,530,625 1,862,372 999,650
----------- ----------- -----------
End of year........................................... $ 670,923 $ 3,530,625 $ 1,862,372
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................... $ 945,628 $ 837,814 $ 738,912
=========== =========== ===========
Income taxes....................................... $ 18,672 $ 361,146 $ 355,901
=========== =========== ===========
Noncash investing and financing activities:
Adjustment of mandatorily redeemable preferred stock,
Series B to estimated redemption value............. $ (290,000) $ 89,000 $ 170,000
=========== =========== ===========
Exchange of subordinated notes payable for preferred
stock, Series A.................................... $ -- $ 80,900 $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-47
<PAGE> 148
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
StarTime Cinema, Inc. ("StarTime") and its wholly-owned subsidiaries
(F.S.A. Super Saver Cinema No. 1 Ltd. and StarTime Properties, Inc.),
collectively the "Company", owns and operates 29 discount movie theaters located
throughout the United States. The Company does not have a significant market
concentration in a specific geographic region as no single market represents
more than 8% of revenues (see Note 13).
Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company.
All significant intercompany accounts and transactions are eliminated in
consolidation.
Certain amounts have been reclassified in 1996 and 1995 to conform to the
current presentation.
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.
Property, Theater Equipment and Improvements
Property, theater equipment and improvements are stated at cost less
accumulated depreciation and amortization. Costs assigned to property, theater
equipment and improvements of acquired businesses are based on estimated fair
value at the date of acquisition. Depreciation for property and theater
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Theater 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. When assets are sold or retired, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in income. Interest incurred during construction is
capitalized as theater equipment and leasehold improvements.
Theater Leases
The Company accounts for its theater leases in accordance with Financial
Accounting Standards Board Technical Bulletin No. 85-3, "Accounting for
Operating Leases with Scheduled Rent Increases". Accordingly, scheduled rent
increases, which are included in minimum lease payments, are recognized on a
straight-line basis over the lease term and amounts recognized as lease expense
prior to the date that such amounts are actually payable are recorded as
deferred lease payments.
Inventories
Inventories consist of concession products and certain supplies and are
stated at the lower of cost (determined by the first-in, first-out method) or
market.
Excess of Cost Over Fair Value of Net Assets Acquired
Excess of cost over fair value of net assets acquired consists of goodwill
related to the 1991 purchase of partnership interests of one of StarTime's
subsidiaries and the 1995 acquisition of certain theaters. The 1995 acquisition
was accounted for using the purchase method. The purchase included, at fair
value, property and theater equipment of $4,659,000. The remaining purchase
price of $2,541,000 was allocated to goodwill.
F-48
<PAGE> 149
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Excess of cost over fair value of net assets acquired is being amortized on a
straight-line basis over the estimated future periods to be benefited, generally
seven to twenty years.
The Company periodically evaluates whether events and circumstances have
occurred that indicate the remaining useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable. An
impairment of goodwill is recognized when estimated undiscounted future cash
flows generated by acquired businesses are determined to not be sufficient to
recover goodwill. The amount of goodwill impairment, if any, is measured based
on projected discounted cash flows using a discount rate commensurate with the
risks involved.
Other Assets
Other assets include organization costs, issuance costs for debt and a
non-compete agreement which are amortized using the straight-line method over
five to ten years. The Company paid $200,000 for the non-compete agreement in
connection with the 1995 acquisition of certain theaters discussed above.
Cash and Cash Equivalents
The Company considers cash on hand, cash in banks, certificates of deposit,
time deposits and U.S. government and other short-term securities with
maturities of three months or less when purchased as cash and cash equivalents.
Investments in Debt and Equity Securities
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Short-term investments at December 31,
1997 and 1996 consisted primarily of mortgage-backed securities which are
classified as available for sale. Market values are determined based on quoted
market prices. The cost of short-term investments held at December 31, 1997 and
1996 approximates their respective market values. Accordingly, no valuation or
offsetting adjustment to stockholders' equity for unrealized holding gains and
losses has been made at December 31, 1997 and 1996. Contractual maturities range
from seven to twenty-one years.
Financial Instruments and Risk Concentration
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash and cash equivalents and
short-term investments. Cash equivalents consist primarily of highly liquid
temporary investments and other interest bearing and demand accounts maintained
at banks and other financial institutions located in El Paso, Texas as well as
the cities where the Company's theaters are located.
Financial instruments of the Company for which fair value approximates
carrying value include cash and cash equivalents, short-term investments,
accounts receivable and accounts payable. The carrying value of the Company's
notes payable approximate fair value as they are subject to interest rates which
increase and decrease with changes in market rates. It is not practicable to
estimate the fair value of the subordinated debt because it is not traded. The
fair value of the mandatorily redeemable preferred stock, Series B approximates
its carrying value. Fair value is based on the estimated redemption value at
each balance sheet date (see Note 7).
Income Taxes
The Company is a "C" Corporation and files a consolidated Federal income
tax return which includes 100% of the income of its subsidiaries. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the
F-49
<PAGE> 150
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. The Company's income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and liabilities.
Advertising
The Company expenses the cost of advertising as it is incurred or the first
time the advertising takes place. Advertising expense was approximately
$1,280,000, $1,421,000 and $1,171,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
2. PROPERTY, THEATER EQUIPMENT AND IMPROVEMENTS
Property, theater equipment and improvements at December 31, 1997 and 1996,
consisted of the following:
<TABLE>
<CAPTION>
DEPRECIABLE
LIVES
(YEARS) 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Theater leasehold improvements, furniture and
equipment....................................... 5 -- 20 $21,884,370 $20,981,024
Buildings......................................... 40 -- 3,600,000
Office equipment.................................. 5 161,635 156,928
------ ----------- -----------
22,046,005 24,737,952
Less accumulated depreciation..................... (10,899,418) (9,911,038)
------ ----------- -----------
11,146,587 14,826,914
Land.............................................. -- -- 700,000
Construction in progress.......................... -- 947,372 517,202
------ ----------- -----------
$12,093,959 $16,044,116
====== =========== ===========
</TABLE>
Fully depreciated assets with an original cost basis of approximately
$2,464,000 are still in use and are included in property, theater equipment and
improvements at December 31, 1997.
Construction in progress at December 31, 1997 included costs related to
construction costs of an entertainment plaza, which consists of multiple
screens, restaurants and other entertainment related facilities. The Company has
planned capital expenditures related to this project of approximately $3.0
million. It is anticipated that the project will be completed during 1998.
3. ASSETS HELD FOR SALE
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards Board No. 121 ("FAS 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The statement
requires the recognition of an impairment loss for an asset held for use when
the estimate of undiscounted future cash flows expected to be generated by the
asset is less than its carrying amount. The Company assesses impairment of its
theaters primarily on a geographic and advertising market approach. The
statement also requires recognition of an impairment loss for assets to be
disposed of, whether by sale or abandonment, when the carrying amount exceeds
the asset's fair value less selling costs. Measurement of the impairment loss is
based on fair value of the asset which is generally determined based on the
present value of expected future cash flows. No charges to current year
operations resulted from adoption of FAS 121.
Assets held for sale represents buildings, land and theater equipment of
two theaters owned by the Company. The assets are reported at historical cost
net of accumulated depreciation recognized through
F-50
<PAGE> 151
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997. Combined theater level operating income for these two
facilities amounted to approximately $200,000 in 1997. These assets were sold
subsequent to December 31, 1997 (see Note 13).
4. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following at December 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- ----------
<S> <C> <C>
Accrued taxes and commissions.......................... $256,459 $ 304,606
Accrued interest....................................... 40,520 45,196
Group health........................................... 26,449 52,914
Salary taxes payable................................... 65,275 55,519
Accrued wages.......................................... 309,601 264,848
Accrued sales taxes.................................... 77,224 108,070
Deferred gift book income.............................. 60,129 202,778
Other.................................................. 130,419 60,295
-------- ----------
$966,076 $1,094,226
======== ==========
</TABLE>
5. SUBORDINATED NOTES PAYABLE
Subordinated notes payable of $1,312,000 were outstanding as of December
31, 1997 and 1996. The notes are subordinated in payment to the bank debt and
bear interest at 10% payable semiannually, with principal due in November 1998.
Prior to expiration of associated warrants on November 1, 1996, each $1,000
of subordinated notes payable entitled the holder to purchase eight shares of
the Company's Series A Preferred Stock at a price of $25.00 per share. During
1996, certain holders of subordinated notes payable exercised their warrants and
purchased 8,630 shares of the Company's Series A Preferred Stock.
6. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable to bank due in monthly installments of $56,000
plus interest at THE WALL STREET JOURNAL interest rate
(8.25% at December 31, 1997) plus 1% through January 1,
2001.
Collateralized by substantially all assets of the Company
and limited personal guarantee of the sole common
stockholder............................................... $2,467,712 $3,139,712
Note payable to bank due in monthly installments of $72,050
plus interest at THE WALL STREET JOURNAL interest rate
plus 1% through April 2004. Collateralized by
substantially all assets of the Company and limited
personal guarantee of the sole common stockholder......... 5,395,600 6,000,000
---------- ----------
7,863,312 9,139,712
Less current maturities of long-term debt................... 4,786,600 1,276,400
---------- ----------
$3,076,712 $7,863,312
========== ==========
</TABLE>
The loan agreement with the bank contains, among other provisions,
requirements for maintaining defined levels of debt service coverage and net
worth. Under the terms of the loan agreement with the bank, the Company must
obtain authorization before issuing dividends. At December 31, 1997, $3,250,000
of long-
F-51
<PAGE> 152
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
term debt has been classified as current due to repayment from the proceeds from
sale of assets classified as assets held for sale at December 31, 1997 (see Note
13).
The scheduled maturities of long-term debt at December 31, 1997 after
adjustment for repayments made in January 1998, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998............................................. $4,786,600
1999............................................. 1,536,600
2000............................................. 1,540,112
----------
$7,863,312
==========
</TABLE>
7. REDEEMABLE PREFERRED STOCK
On August 15, 1994, StarTime issued 88,235 shares of Mandatorily Redeemable
Series B Preferred Stock, 2% cumulative convertible, $10 par value ("Series B
Preferred Stock") for $3 million. In preference to shares of Series A Preferred
Stock, 6% cumulative convertible, $10 par value ("Series A Preferred Stock") and
common stock, each share is entitled to 2% cumulative cash dividends per year.
Each share of Series B Preferred Stock is convertible into one share of
StarTime's common stock at the option of the shareholder and shall automatically
be converted into shares of common stock upon the effectiveness of a Qualified
Public Offering, as defined in the stock purchase agreement. The Series B
Preferred Stock has a liquidation preference of $34 per share over StarTime's
Series A Preferred Stock and Common Stock. The holder of the Series B Preferred
Stock is entitled to one vote per share held.
The Series B Preferred Stock is redeemable at the option of the stockholder
in whole or in part at the earlier of 1) the fifth anniversary of the date of
issuance; 2) the effective date of any public offering of Common Stock which is
not a Qualified Public Offering; 3) the date preceding the closing date of the
consolidation or merger of the Company into any other business entity; or 4) the
date upon which any shareholder gives the Company written notice that it is in
violation of the related stock purchase agreement. However, in connection with
the transactions discussed in Note 13, the holder of all outstanding shares of
Series B Preferred Stock has agreed to a settlement price of $3 million plus
accrued but unpaid dividends.
The Series B Preferred Stock was initially recorded at its fair value at
the issuance date ($34 per share). The carrying amount is periodically increased
or decreased for amounts which are estimated to be payable upon redemption as
defined in the stock purchase agreement. The adjustment to the carrying amount
is based upon the estimated redemption value at each balance sheet date. These
adjustments resulted in a direct increase to retained earnings of $290,000 in
1997 and decreases of $89,000 and $170,000 in 1996 and 1995, respectively.
The stock purchase agreement entered into by the Company in conjunction
with the issuance of the Series B Preferred Stock contains various covenants,
one of which limits the Company's ability to issue dividends to that which is
regularly scheduled on the Series A and B Preferred Stock. If in non-compliance,
the stockholders have the right to sell the stock back to the Company as
discussed above.
8. CAPITAL STOCK
The authorized capital stock of StarTime consists of common stock and two
classes of preferred stock. The holder of all classes of stock is entitled to
one vote per share.
StarTime has 380,263 outstanding shares of Series A Preferred Stock. The
Series A Preferred Stock has a liquidation preference of $10 per share over
StarTime's common stock. Each share of Series A Preferred Stock is convertible
into one share of StarTime's common stock upon the effectiveness of a Qualified
Public
F-52
<PAGE> 153
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Offering. As of December 31, 1997, cumulative unpaid dividends totaled
approximately $228,000 and have not been accrued by the Company.
9. STOCK OPTIONS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of its stock option
plans. All outstanding stock options were issued prior to January 1, 1995,
therefore the cost recognition provisions of SFAS 123 are not applicable.
At December 31, 1997 and 1996, there were non-qualified stock option plans
that provide for the purchase of up to 8,500 and 3,500 shares of StarTime's
common and Series A Preferred Stock, respectively. The exercise prices for the
common stock options range from $25.00 to $37.00 per share. The exercise price
for the Series A Preferred Stock is $22.86 per share. All options were
immediately exercisable from the date of grant during 1994 and expire five years
after the date of grant.
At December 31, 1997 and 1996, there were also 3,062 common stock options
outstanding at $1.00 which expire in 2002.
No options had been exercised as of December 31, 1997. Subsequent to
December 31, 1997, common stock options for 3,062 shares were exercised for
$1.00.
10. COMMITMENTS AND CONTINGENCIES
Commitments
The Company conducts its theater operations primarily in leased premises
under noncancelable operating leases with initial terms of 15 to 20 years with
renewal options. A majority of the Company's operating leases contain purchase
options at the termination of the lease term. Most of these leases provide for
additional rental payments based on a percentage of box office and concession
revenues and require the payment of real estate taxes, insurance, and other
costs applicable to the property. No contingent rental payments were made in
1997, 1996 or 1995.
Deferred lease payments of approximately $3,038,000 and $2,918,000 have
been accrued as of December 31, 1997 and 1996, respectively, to recognize lease
expense on a straight-line basis for those leases with deferred or escalating
payments.
Future minimum lease payments and the effect of recognizing lease expense
on leases with escalating or deferred payments on a straight-line basis are as
follows:
<TABLE>
<CAPTION>
FUTURE CHANGE IN FUTURE
MINIMUM DEFERRED MINIMUM
LEASE LEASE LEASE
YEAR ENDING DECEMBER 31, EXPENSE PAYMENTS PAYMENTS
------------------------ ----------- ---------- -----------
<S> <C> <C> <C>
1998.................................... $ 6,100,433 $ (19,106) $ 6,081,327
1999.................................... 6,215,433 50,282 6,265,715
2000.................................... 6,215,433 113,838 6,329,271
2001.................................... 6,215,433 194,989 6,410,422
2002.................................... 5,862,152 170,232 6,032,384
Thereafter.............................. 39,654,891 2,527,976 42,182,867
----------- ---------- -----------
$70,263,775 $3,038,211 $73,301,986
=========== ========== ===========
</TABLE>
F-53
<PAGE> 154
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Rent expense on the theater leases for the three years ended December 31,
1997 was approximately $5,868,000, $5,877,000 and $5,980,000, respectively.
Contingencies
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the resolution of
the matters will not materially affect the consolidated financial position,
results of operations or cash flows of the Company.
11. RELATED PARTY TRANSACTIONS
The Company engages in various transactions with related parties, including
the common stockholder, preferred stockholders, officers and affiliates. Costs
and expenses in 1997, 1996 and 1995 include the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Legal fees.................................. $17,490 $ 69,135 $ 71,375
Consulting fees............................. $24,378 $143,137 $147,933
</TABLE>
12. INCOME TAXES
The components of deferred tax assets and liabilities at December 31, 1997
and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred lease payments........................... $1,172,000 $1,126,000
Income tax operating loss carryforward............ 493,000 --
Deferred income................................... 23,000 78,000
Group medical expense............................. 17,000 20,000
Other............................................. 1,000 8,000
---------- ----------
Total deferred tax assets................. 1,706,000 1,232,000
---------- ----------
Deferred tax liabilities:
Theater equipment and improvements................ (627,000) (743,000)
Intangible assets................................. (285,000) (313,000)
---------- ----------
Total deferred tax liabilities............ (912,000) (1,056,000)
---------- ----------
Net deferred tax assets................... $ 794,000 $ 176,000
========== ==========
</TABLE>
The components of income tax benefit (expense) in the consolidated
statements of operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Federal:
Current................................ $ -- $(141,000) $(366,562)
Deferred............................... 545,000 105,000 132,136
State:
Current................................ -- (20,000) (80,638)
Deferred............................... 73,000 14,000 17,452
-------- --------- ---------
$618,000 $ (42,000) $(297,612)
======== ========= =========
</TABLE>
F-54
<PAGE> 155
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The consolidated effective tax rate differs from the statutory U.S. federal
tax rate for the following reasons and by the following percentages:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------- -------
<S> <C> <C> <C>
Statutory U.S. federal (tax) benefit rate...... 34.0% (34.0)% (34.0)%
Increases:
State and local income taxes................. 2.9% (4.4)% (2.4)%
Permanent differences........................ 1.0% (8.3)% (1.1)%
Other........................................ -- -- (2.4)%
----- ------- -------
37.9% (46.7)% (39.9)%
===== ======= =======
</TABLE>
At December 31, 1997, the Company had an income tax net operating loss
carryforward generated by current year income tax losses of approximately
$1,279,000. This carryforward will expire in 2012.
13. SUBSEQUENT EVENTS
During January 1998, the Company entered into a Property Purchase Agreement
(the "Property Agreement") whereby it sold two theaters to include all real and
personal property and assignment of all continuing contracts related to ongoing
operation of the theaters. The cash selling price was $4,500,000, subject to
sales price adjustments as specified by the Property Agreement. Proceeds of
$3,250,000 from the sale were used to repay existing debt to the bank.
During March 1998, by a majority vote of the stockholders, the Company
entered into an Asset Purchase Agreement (the "Asset Agreement") whereby it has
agreed to sell the operating assets used in 26 of its theaters and assignment of
related leasing agreements and other continuing contracts related to the
continuing operation of these theaters. The cash selling price is $16,306,000,
subject to adjustment as specified by the Asset Agreement. It is management's
intention to use a portion of the proceeds from the sale of these assets to
repay approximately $3,600,000 of the remaining balance of debt to the bank.
For a period of one year after the closing of the transactions contemplated
by the Asset Agreement, the Company may exercise its rights under a put option
(the "Put Option") to sell and assign property and leases related to one theater
and a management contract for a third party theater that the Company manages.
The selling price is $170,000 plus the product of 6.5 times the Theater Level
Cash Flow of the Company owned theater for the twelve month period ending as of
the last day of the month immediately preceding the date the Put Option is
exercised, subject to adjustment as specified in the Put Option.
If the sales of operating assets included in the Property and Asset
Agreements, other than assets subject to the Put Option, had been consummated as
of December 31, 1997 at a combined sales price of $20,806,000, net property,
theater equipment and improvements, assets held for sale and net intangible
assets included in the accompanying 1997 consolidated balance sheet would have
been reduced by approximately $18,500,000, deferred lease payments would have
been reduced by approximately $3,000,000, and a pre-tax gain of approximately
$5,300,000 would have been recorded for financial reporting purposes. It is
anticipated that certain of the proceeds from the Asset Agreement will be used
to repay bank debt and subordinated notes payable.
In connection with the Asset Agreement, the holder of the 88,235 shares of
Series B Preferred Stock has agreed to accept $3 million in exchange for all
outstanding shares. This represents the original face value of $3 million.
F-55
<PAGE> 156
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). Adoption is required for interim and annual periods beginning after
December 15, 1997. SFAS No. 130 requires that comprehensive income and its
components, as defined in the Statement, be reported in a company's financial
statements. Management does not believe that the adoption of this statement will
have a significant impact on the Company.
F-56
<PAGE> 157
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
-----------
<S> <C>
CURRENT ASSETS:
Cash and equivalents...................................... $ 318,907
Accounts receivable....................................... 220,755
Inventories............................................... 186,698
Prepaid expenses and other................................ 107,786
Deferred income taxes..................................... 1,480,230
-----------
Total current assets.............................. 2,314,376
THEATER PROPERTIES AND EQUIPMENT:
Theater furniture and equipment........................... 21,832,791
Theaters under construction............................... 2,149,479
-----------
Total............................................. 23,982,270
Less accumulated depreciation and amortization............ (11,192,910)
-----------
Theater properties and equipment, net.................. 12,789,360
GOODWILL-NET................................................ 2,203,418
OTHER ASSETS-NET............................................ 82,920
-----------
TOTAL............................................. $17,390,074
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt......................... $ 1,536,000
Subordinated notes payable................................ 1,312,100
Accounts payable.......................................... 1,100,440
Accrued property taxes and other liabilities.............. 500,466
-----------
Total current liabilities......................... 4,449,006
LONG-TERM DEBT, less current portion........................ 2,682,662
DEFERRED LEASE PAYMENTS..................................... 3,042,990
MANDATORILY REDEEMABLE PREFERRED STOCK, Series B, $10 par,
2% cumulative convertible, 88,235 shares authorized,
issued and outstanding.................................... 3,000,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $10 par, 6% cumulative
convertible, 417,553 shares authorized, 380,263 issued
and outstanding........................................ 3,802,630
Common stock, $.01 par value, 1,000,000 shares authorized,
87,500 shares issued and outstanding................... 875
Additional paid-in capital................................ 1,814,045
Accumulated deficit....................................... (1,402,134)
-----------
Total stockholders' equity........................ 4,215,416
-----------
TOTAL............................................. $17,390,074
===========
</TABLE>
See notes to interim condensed consolidated financial statements.
F-57
<PAGE> 158
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
UNAUDITED
<S> <C> <C>
REVENUES:
Admission................................................. $ 3,581,782 $4,041,344
Concessions............................................... 2,798,812 3,012,011
Other..................................................... 128,044 165,257
----------- ----------
Total............................................. 6,508,638 7,218,612
COST OF REVENUES:
Film rentals.............................................. 1,202,809 1,353,801
Concession supplies....................................... 416,148 473,442
Salaries and wages........................................ 1,253,344 1,311,588
Facility leases........................................... 1,938,531 1,837,009
Advertising............................................... 279,750 364,772
Utilities and other....................................... 1,105,051 1,376,867
General and administrative.................................. 314,900 365,223
Depreciation and amortization............................... 387,354 440,526
----------- ----------
Total............................................. 6,897,887 7,523,228
----------- ----------
OPERATING INCOME (LOSS)..................................... (389,249) (304,616)
OTHER INCOME (EXPENSE):
Interest expense............................................ (162,889) (244,353)
Interest income and other (expense), net (Note 2)........... (1,241,244) 33,714
----------- ----------
LOSS BEFORE INCOME TAX EXPENSE.............................. (1,793,382) (515,255)
INCOME TAX EXPENSE (BENEFIT)................................ (686,230) (195,797)
----------- ----------
NET INCOME (LOSS)........................................... $(1,107,152) $ (319,458)
----------- ----------
</TABLE>
See notes to interim condensed consolidated financial statements.
F-58
<PAGE> 159
STARTIME CINEMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
UNAUDITED
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $ (1,107,152) $ (319,458)
Noncash items in net income (loss):
Depreciation and amortization.......................... 387,354 440,526
Deferred income taxes.................................. (686,230) (195,797)
Loss on sale of theater assets......................... 1,253,000
Deferred lease expense................................. 4,779 30,129
Cash from (used for) working capital:
Accounts receivable.................................... (53,870) 110,590
Inventories............................................ 37,242 (22,536)
Prepaid expenses and other............................. 133,371 157,934
Accounts payable and accrued liabilities............... (213,831) (168,493)
------------ ------------
Net cash from (used for) operating activities..... (245,337) 32,895
INVESTING ACTIVITIES:
Proceeds from disposal of theater assets.................. 4,500,000
Additions to theater properties and equipment............. (988,893) (990,833)
Increase (decrease) in other assets....................... 26,864 490,494
------------ ------------
Net cash from (used for) investing activities..... 3,537,971 (500,339)
FINANCING ACTIVITIES:.......................................
Payments of debt.......................................... (3,644,650) (168,000)
------------ ------------
Net cash (used for) financing activities.......... (3,644,650) (168,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (352,016) (635,444)
CASH AND CASH EQUIVALENTS:
Beginning of period....................................... 670,923 3,530,625
------------ ------------
End of period............................................. $ 318,907 $ 2,895,181
============ ============
</TABLE>
See notes to interim condensed consolidated financial statements.
F-59
<PAGE> 160
STARTIME CINEMA, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Condensed Consolidated
Financial Statements of StarTime Cinema, Inc. and subsidiaries (the "Company")
include all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the Company's financial position as of March 31,
1998, and the results of its operations for the three months ended March 31,
1998 and 1997. Due to seasonality of the Company's operations, the results of
its operations for the interim period ended March 31, 1998 and 1997, may not be
indicative of the total results for the full year. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principals 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 StarTime Cinema, Inc. and subsidiaries and accompanying notes for
the years ended December 31, 1997, 1996 and 1995.
2. SUBSEQUENT EVENT
On April 2, 1998, the Company completed the sale of the operating assets
used in 25 of its theaters.
F-60
<PAGE> 161
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS EXCHANGE
OFFER NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE INITIAL PURCHASERS. THIS CONFIDENTIAL PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NOTES BY
ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION
IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 4
Risk Factors.......................... 16
Use of Proceeds....................... 29
Capitalization........................ 30
Unaudited Pro Forma Financial Data.... 31
Selected Consolidated Financial and
Operating Data...................... 38
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 41
Business.............................. 51
Management............................ 62
Principal Stockholders................ 65
Certain Relationships and Related
Transactions........................ 66
Description of Revolving Credit
Facility............................ 67
Description of Exchange Notes......... 69
Plan of Distribution.................. 95
Legal Matters......................... 96
Experts............................... 96
Available Information................. 96
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$100,000,000
[LOGO]
SILVER CINEMAS
INTERNATIONAL, INC.
10 1/2% SENIOR SUBORDINATED
NOTES DUE 2005
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 162
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation and its Bylaws and Certificate of
Incorporation provide for indemnification of its directors, officers, employees
and agents to the fullest extent permitted by the Delaware General Corporation
Law (the "DGCL"), as the same exists or may hereafter be amended. Section 145 of
the DGCL provides in relevant part 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 such person 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 such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person 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 such person's conduct was
unlawful.
In addition, Section 145 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 such
person 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 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 such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person 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. Delaware law further provides that nothing in the above-described
provisions shall be deemed exclusive of any other rights to indemnification or
advancement of expenses to which any person may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the DGCL eliminates the liability of a corporation's
directors to a corporation or its stockholders, except for liabilities related
to a breach of duty of loyalty, actions not in good faith, and certain other
liabilities.
II-1
<PAGE> 163
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
1.1 Purchase Agreement, dated April 9, 1998, between Silver
Cinemas International, Inc., the Guarantors (as defined
therein), Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown Incorporated and Bear, Stearns &
Co. Inc. relating to the 10 1/2% Senior Subordinated Notes
of Silver Cinemas International, Inc. due 2005.
2.1 Asset Purchase Agreement, dated as of December 17, 1997,
between Silver Cinemas, Inc. Landmark Theatre Corporation,
Seven Gables Corporation, Parallax Theatre Systems, Inc.,
San Francisco Landmark Theatre Corporation, and Wisconsin
Repertory Cinemas, Inc., The Landmark Theater Group, and
Metromedia International Group, Inc.
2.2 Asset Purchase Agreement, dated as of January 22, 1998,
between Silver Cinemas, Inc., SCI Acquisition Corp.,
StarTime Cinema, Inc., F.S.A. Super Saver Cinemas No. 1,
Ltd., StarTime Properties, Inc., the Trust formed by that
certain Irrevocable Declaration of Trust under deed dated
May 14, 1994 for the benefit of StarTime Cinema, Inc., Lloyd
Curley, and NationsBanc Capital Corporation.
2.3 Property Purchase Agreement, dated as of January 22, 1998,
between Silver Cinemas, Inc., StarTime Properties, Inc.,
StarTime Cinema, Inc., F.S.A. Super Saver Cinemas No. 1,
Ltd., the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the
benefit of StarTime Cinema, Inc., and Lloyd Curley.
3.1 Certificate of Incorporation, as amended, of Silver Cinemas
International, Inc.
3.2 By-Laws of Silver Cinemas International, Inc.
3.3 Certificate of Incorporation of Silver Cinemas, Inc.
3.4 By-Laws of Silver Cinemas, Inc.
3.5 Certificate of Incorporation of SCI Acquisition Corp.
3.6 By-Laws of SCI Acquisition Corp.
3.7 Certificate of Incorporation of Landmark Theatre Corp.
3.8 By-Laws of Landmark Theatre Corp.
4.1 Indenture, dated as of April 15, 1998, between Silver
Cinemas International, Inc., the Guarantors (as defined
therein) and Norwest Bank Minnesota, National Association,
as trustee, relating to $100,000,000 aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2005.
4.2 A/B Exchange Registration Rights Agreement, dated as of
April 16, 1998, between Silver Cinemas International, Inc.,
the Guarantors (as defined therein), Donaldson, Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated
and Bear, Stearns & Co. Inc.
4.3 Specimen Certificate of 10 1/2% Senior Subordinated Notes
due 2005 (the "Private Notes") (included in Exhibit 4.1
hereto).
4.4 Specimen Certificate of 10 1/2% Senior Subordinated Notes
due 2005 (the "Exchange Notes") (included in Exhibit 4.1
hereto).
5.1 Opinion of Latham & Watkins regarding the validity of the
Exchange Notes.
10.1 Stockholders' Agreement, dated as of August 1, 1996, between
Silver Cinemas International, Inc. and the stockholders set
forth therein.
10.2 Employment Agreement dated April 16, 1998 between Landmark
Theatre Corp. and Bert Manzari.
</TABLE>
II-2
<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.3 Employment Agreement dated April 16, 1998 between Landmark
Theatre Corp. and Paul Richardson.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of Silver Cinemas International, Inc.
23.1 Consent of Latham & Watkins (included in their opinion filed
as Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Coopers & Lybrand, L.L.P.
24.1 Power of Attorney of Silver Cinemas International, Inc.
(included on signature page to this Registration Statement
on Form S-4).
25.1 Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association (bound separately).
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal and related documents to be
used in conjunction with the Exchange Offer.
99.2 Forms of Notices of Guaranteed Delivery.
</TABLE>
(b) Financial Statement Schedules:
None
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or the registrant in the successful defense of any action, suit 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 Act and will be governed by the final adjudication of such
issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this 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.
II-3
<PAGE> 165
(c) The undersigned registrant hereby undertakes 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.
(d)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-4
<PAGE> 166
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
June 15, 1998.
SILVER CINEMAS INTERNATIONAL, INC.
SILVER CINEMAS, INC.,
SCI ACQUISITIONS CORP., AND
LANDMARK THEATRE CORP.
By /s/ STEVEN L. HOLMES
------------------------------------
Steven L. Holmes
Chief Executive Officer and Chief
Financial Officer of Silver Cinemas
International, Inc., Silver
Cinemas, Inc., SCI Acquisitions
Corp., and Landmark Theatre Corp.
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Steven
L. Holmes, with full power to act, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) to any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and him, full power and authority to do and
perform each and every act and thing necessary or desirable 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
agents, or him, 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 in the capacity
and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ STEVEN L. HOLMES Chief Executive Officer, Chief June 15, 1998
- ----------------------------------------------------- Financial Officer and Director
Steven L. Holmes
/s/ JOHN M. SULLIVAN Chairman of the Board of June 15, 1998
- ----------------------------------------------------- Directors
John M. Sullivan
/s/ THOMAS J. OWENS President of Silver Cinemas June 15, 1998
- ----------------------------------------------------- International, Inc., Silver
Thomas J. Owens Cinemas, Inc., and SCI
Acquisition Corp., and Director
/s/ E.L. MANZARI President of Landmark Theatre June 15, 1998
- ----------------------------------------------------- Corp. and Director
E.L. Manzari
</TABLE>
II-5
<PAGE> 167
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ DAVID H. WONG Director June 15, 1998
- -----------------------------------------------------
David H. Wong
/s/ CHRISTOPHER A. LAURENCE Director June 15, 1998
- -----------------------------------------------------
Christopher A. Laurence
/s/ JAMES ROSENTHAL Director June 15, 1998
- -----------------------------------------------------
James Rosenthal
/s/ THOMAS E. DAVIN Director June 15, 1998
- -----------------------------------------------------
Thomas E. Davin
</TABLE>
II-6
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C> <C>
1.1 Purchase Agreement, dated April 9, 1998, between Silver
Cinemas International, Inc., the Guarantors (as defined
therein), Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown Incorporated and Bear, Stearns &
Co. Inc. relating to the 10 1/2% Senior Subordinated Notes
of Silver Cinemas International, Inc. due 2005.
2.1 Asset Purchase Agreement, dated as of December 17, 1997,
between Silver Cinemas, Inc. Landmark Theatre Corporation,
Seven Gables Corporation, Parallax Theatre Systems, Inc.,
San Francisco Landmark Theatre Corporation, and Wisconsin
Repertory Cinemas, Inc., The Landmark Theater Group, and
Metromedia International Group, Inc.
2.2 Asset Purchase Agreement, dated as of January 22, 1998,
between Silver Cinemas, Inc., SCI Acquisition Corp.,
StarTime Cinema, Inc., F.S.A. Super Saver Cinemas No. 1,
Ltd., StarTime Properties, Inc., the Trust formed by that
certain Irrevocable Declaration of Trust under deed dated
May 14, 1994 for the benefit of StarTime Cinema, Inc., Lloyd
Curley, and NationsBanc Capital Corporation.
2.3 Property Purchase Agreement, dated as of January 22, 1998,
between Silver Cinemas, Inc., StarTime Properties, Inc.,
StarTime Cinema, Inc., F.S.A. Super Saver Cinemas No. 1,
Ltd., the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the
benefit of StarTime Cinema, Inc., and Lloyd Curley.
3.1 Certificate of Incorporation, as amended, of Silver Cinemas
International, Inc.
3.2 By-Laws of Silver Cinemas International, Inc.
3.3 Certificate of Incorporation of Silver Cinemas, Inc.
3.4 By-Laws of Silver Cinemas, Inc.
3.5 Certificate of Incorporation of SCI Acquisition Corp.
3.6 By-Laws of SCI Acquisition Corp.
3.7 Certificate of Incorporation of Landmark Theatre Corp.
3.8 By-Laws of Landmark Theatre Corp.
4.1 Indenture, dated as of April 15, 1998, between Silver
Cinemas International, Inc., the Guarantors (as defined
therein) and Norwest Bank Minnesota, National Association,
as trustee, relating to $100,000,000 aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2005.
4.2 A/B Exchange Registration Rights Agreement, dated as of
April 16, 1998, between Silver Cinemas International, Inc.,
the Guarantors (as defined therein), Donaldson, Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated
and Bear, Stearns & Co. Inc.
4.3 Specimen Certificate of 10 1/2% Senior Subordinated Notes
due 2005 (the "Private Notes") (included in Exhibit 4.1
hereto).
4.4 Specimen Certificate of 10 1/2% Senior Subordinated Notes
due 2005 (the "Exchange Notes") (included in Exhibit 4.1
hereto).
5.1 Opinion of Latham & Watkins regarding the validity of the
Exchange Notes.
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C> <C>
10.1 Stockholders' Agreement, dated as of August 1, 1996, between
Silver Cinemas International, Inc. and the stockholders set
forth therein.
10.2 Employment Agreement dated April 16, 1998 between Landmark
Theatre Corp. and Bert Manzari.
10.3 Employment Agreement dated April 16, 1998 between Landmark
Theatre Corp. and Paul Richardson.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of Silver Cinemas International, Inc.
23.1 Consent of Latham & Watkins (included in their opinion filed
as Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Coopers & Lybrand, L.L.P.
24.1 Power of Attorney of Silver Cinemas International, Inc.
(included on signature page to this Registration Statement
on Form S-4).
25.1 Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association (bound separately).
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal and related documents to be
used in conjunction with the Exchange Offer.
99.2 Forms of Notices of Guaranteed Delivery.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
SILVER CINEMAS INTERNATIONAL, INC.
SILVER CINEMAS, INC.
SCI ACQUISITION CORP.
LANDMARK THEATRE CORP.
$100,000,000
10 1/2% Series A Senior Subordinated Notes due 2005
Purchase Agreement
April 9, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
BEAR, STEARNS & CO. INC.
<PAGE> 2
SILVER CINEMAS INTERNATIONAL, INC.
$100,000,000
10 1/2% Senior Subordinated Notes due 2005, Series A
PURCHASE AGREEMENT
April 9, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT Alex. Brown Incorporated
Bear, Stearns & Co. Inc.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
SILVER CINEMAS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), BT Alex. Brown Incorporated and Bear, Stearns &
Co. Inc. (each an "Initial Purchaser" and, collectively, the "Initial
Purchasers") an aggregate of $100,000,000 in principal amount of its 10 1/2%
Senior Subordinated Notes due 2005, Series A (the "Series A Notes"), subject to
the terms and conditions set forth herein. The Series A Notes are to be issued
pursuant to the provisions of an indenture (the "Indenture"), to be dated as of
the Closing Date (as defined below), among the Company, the Guarantors (as
defined below) and Norwest Bank, Minnesota, N.A., as trustee (the "Trustee").
The Series A Notes and the Series B Notes (as defined below) issuable in
exchange therefor are collectively referred to herein as the "Notes." The Notes
will be guaranteed (the "Subsidiary Guarantees") by each of the entities listed
on Schedule A, hereto (each, a "Guarantor" and collectively the "Guarantors").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
On December 17, 1997, Silver Cinemas, Inc., a Delaware
corporation and a subsidiary of the Company ("Silver"), Landmark Theatre
Corporation, a California corporation ("Landmark"), Seven Gables Corporation, a
California corporation ("Gables"), Parallax Theatre Systems, Inc., a California
corporation ("Parallax"), San Francisco Landmark Theatre Corporation, a
California corporation ("SFLTC"), and Wisconsin Repertory Cinemas, Inc., a
California corporation ("Wisconsin"), The Landmark Theatre Group, a California
corporation ("Group"), (Landmark, Group, Gables, Parallax, SFLTC and Wisconsin
are collectively and
<PAGE> 3
-3-
individually called "Landmark Seller") and Metromedia International Group, Inc.,
a Delaware corporation ("Metromedia"), entered into an Agreement for the
Purchase and Sale of Assets and a Letter Agreement relating to "Critical
Theaters and Employment Indemnifications" (together, and including all related
documents and schedules, the "Landmark Asset Purchase Agreement"). The Landmark
Asset Purchase Agreement provides, among other things, for the purchase by
Silver of certain of the assets of the Landmark Seller listed in the Asset
Purchase Agreement (the "Landmark Acquisition").
On January 22, 1998, Silver, StarTime Cinema, Inc. a Nevada
corporation ("StarTime"), F.S.A. Super Saver Cinemas No. 1, Ltd., a Texas
limited partnership ("Super Saver"), StarTime Properties, Inc., a Nevada
corporation ("SPI" and, together with StarTime and Super Saver, the "StarTime
Seller"), the other persons party thereto, and SCI Acquisition Corp., a Delaware
corporation and a subsidiary of the Company ("SCI") entered into an Asset
Purchase Agreement (together with all related documents and schedules, including
the assignment of SCI's rights and obligations to Silver, the "StarTime Asset
Purchase Agreement"). The StarTime Asset Purchase Agreement provides, among
other things, for the purchase by SCI of certain of the assets of the StarTime
Seller listed in the Asset Purchase Agreement (the "StarTime Acquisition" and,
together with the Landmark Acquisition, the "Acquisitions"). The Company will
use the net proceeds from the issuance and sale of the Series A Notes to finance
the purchase price for the Acquisitions, to repay certain indebtedness, finance
theater construction and general corporate purposes.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Securities Act" or the "Act"). The Company and the Guarantors have prepared a
preliminary offering memorandum, dated March 27, 1998 (the "Preliminary Offering
Memorandum") and a final offering memorandum, dated April 9, 1998 (the "Offering
Memorandum"), relating to the Series A Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same
is no longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (the "ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE NEXT SENTENCE.
<PAGE> 4
-4-
BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:
(1) REPRESENTS THAT (i) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(as defined in Rule 144A under the Act)(a "QIB"), (ii) IT HAS
ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE ACT OR (iii) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (as defined in Rule 501(A)(1), (2), (3) OR
(7) of Regulation D under the Act (an "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (iii) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904
OF THE ACT, (iv) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE ACT, (v) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER
OF THIS NOTE (the form of which can be obtained from the Trustee)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE ACT, (vi) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (vii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE
<PAGE> 5
-5-
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Notes set forth opposite the name of such Initial Purchaser on
Schedule B hereto at a purchase price equal to 97.0% of the principal amount
thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) persons permitted to purchase the
Series A Notes in offshore transactions in reliance upon Regulation S under the
Act (each, a "Regulation S Purchaser") (such persons specified in clauses (i)
and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the Company's 10 1/2% Senior Subordinated Notes due
2005, Series B (the "Series B Notes" and, together with the Series A Notes, the
"Notes"), to be offered in exchange for the Series A Notes (such offer to
exchange being referred to as the "Exchange Offer") and the Subsidiary
Guarantees thereof and (ii) a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Notes and to use its best
efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Subsidiary Guarantees and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "Operative Documents."
<PAGE> 6
-6-
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Cahill Gordon & Reindel or such
other location as may be mutually acceptable. Such delivery and payment shall be
made at 9:00 a.m. New York City time, on April 16, 1998 or at such other time on
the same date or such other date as shall be agreed upon by the Initial
Purchasers and the Company in writing. The time and date of such delivery and
the payment for the Series A Notes are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Series A Notes (collectively, the "Global Note"), shall
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct) in each case with any transfer taxes thereon duly paid by the
Company against payment by the Initial Purchasers of the Purchase Price thereof
by wire transfer in same day funds to the order of the Company. The Global Note
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the
Company and the Guarantors hereby agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested
by the Initial Purchasers, confirm such advice in writing, (i) of the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for offering
or sale in any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. The Company
and the Guarantors shall use their best efforts to prevent the issuance of any
stop order or order suspending the qualification or exemption of any Series A
Notes under any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Of-
<PAGE> 7
-7-
fering Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request for the time period specified in Section 5(c).
Subject to the Initial Purchasers' compliance with its representations and
warranties and agreements set forth in Section 7 hereof, the Company and the
Guarantors consent to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchasers
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that neither the Company nor any Guarantor shall be required in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to mat-
<PAGE> 8
-8-
ters and transactions relating to the Preliminary Offering Memorandum, the
Offering Memorandum or Exempt Resales, in any jurisdiction in which it is not
now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchasers as soon as available copies of all reports or other
communications furnished by the Company or any of the Guarantors to its security
holders or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company or any of the
Guarantors is listed and such other publicly available information concerning
the Company and/or its subsidiaries as the Initial Purchasers may reasonably
request.
(h) So long as any of the Series A Notes remain outstanding and
during any period in which the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder of Series A Notes in connection
with any sale thereof and any prospective purchaser of such Series A Notes from
such holder, the information ("Rule 144A Information") required by Rule
144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
and the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to
<PAGE> 9
-9-
the Initial Purchasers and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary
Guarantees for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Series A Notes
and the Subsidiary Guarantees, (vi) all expenses and listing fees in connection
with the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Indenture, the Notes and the Subsidiary
Guarantees, (viii) the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (ix) any fees charged by rating agencies for the
rating of the Notes, (x) all costs and expenses of the Exchange Offer and any
Registration Statement, as set forth in the Registration Rights Agreement, (xi)
fifty percent of the air travel expenses related the roadshow presentations and
marketing efforts, and (xii) and all other costs and expenses incident to the
performance of the obligations of the Company and the Guarantors hereunder for
which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the Series
A Notes in PORTAL and to maintain the listing of the Series A Notes on PORTAL
for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing
to and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
Guarantor or any warrants, rights or options to purchase or otherwise acquire
debt securities of the Company or any Guarantor substantially similar to the
Notes and the Subsidiary Guarantees (other than (i) the Notes and the Subsidiary
Guarantees and (ii) commercial paper issued in the ordinary course of business),
without the prior written consent of DLJ.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A
<PAGE> 10
-10-
Notes to the Initial Purchasers or pursuant to Exempt Resales in a manner that
would require the registration of any such sale of the Series A Notes under the
Act.
(n) Not to voluntarily claim, and to actively resist any attempts
to claim, the benefit of any usury laws against the holders of any Notes and the
related Subsidiary Guarantees.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit Series B Notes and guarantees thereof by the Guarantors
registered pursuant to the Act to be offered in exchange for the Series A Notes
and the Subsidiary Guarantees and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes and the Subsidiary Guarantees.
(r) To use its best efforts and to take all actions reasonably
required to consummate the Acquisitions on or prior to the Closing Date.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND
THE GUARANTORS. As of the date hereof, each of the Company and each of the
Guarantors represents and warrants to, and agrees with, the Initial Purchasers
that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any 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, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties,
<PAGE> 11
-11-
and each is, and after the consummation of the Acquisitions will be, duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not, either before or after the consummation of
the Acquisitions, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien") except for Liens pursuant to the Existing Credit
Facility (as defined in the Offering Memorandum) as described in the Offering
Memorandum.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and
each of the Guarantors and, on the Closing Date, will have been validly executed
and delivered by the Company and each of the Guarantors. When the Indenture has
been duly executed and delivered by the Company and each of the Guarantors, the
Indenture will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in accordance with
its terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), and the
rules and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the Series A
Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance with their terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles
<PAGE> 12
-12-
of general applicability. On the Closing Date, the Series A Notes will conform
as to legal matters to the description thereof contained in the Offering
Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(i) The Subsidiary Guarantee to be endorsed on the Series A Notes
by each Guarantor has been duly authorized by such Guarantor and, on the Closing
Date, will have been duly executed and delivered by each such Guarantor. When
the Series A Notes have been issued, executed and authenticated in accordance
with the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Subsidiary Guarantee of each
Guarantor endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of such Guarantor, enforceable against
such Guarantor in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Subsidiary Guarantees to be endorsed on
the Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the Series B Notes
by each Guarantor has been duly authorized by such Guarantor and, when issued,
will have been duly executed and delivered by each such Guarantor. When the
Series B Notes have been issued, executed and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee of
each Guarantor endorsed thereon will be entitled to the benefits of the
Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability. When the Series B Notes are issued, authenticated and
delivered, the Subsidiary Guarantees to be endorsed on the Series B Notes will
conform as to legal matters to the description thereof in the Offering
Memorandum.
(k) The Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantors and, on the Closing Date, will have been
duly executed and delivered by the Company and each of the Guarantors. When the
Registration Rights Agreement has
<PAGE> 13
-13-
been duly executed and delivered, the Registration Rights Agreement will be a
valid and binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each Guarantor in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(l) The Landmark Asset Purchase Agreement has been duly
authorized, executed and delivered by Silver, and is a valid and binding
agreement of Silver, enforceable against Silver in accordance with its terms
except as (i) the enforceability thereof may be limited by the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally, (ii) rights of acceleration, if applicable, and the availability of
equitable or other remedies may be limited by equitable principles of general
applicability and (iii) the effect of general principles of equity, whether
enforcement is considered in equity or at law, and the discretion of the court
before which any proceeding therefor is brought.
(m) The StarTime Asset Purchase Agreement has been duly
authorized, executed and delivered by each of Silver and SCI, and is a valid and
binding agreement of each of Silver and SCI, enforceable against each of Silver
and SCI in accordance with its terms except as (i) the enforceability thereof
may be limited by the effect of applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally, (ii) rights of acceleration, if
applicable, and the availability of equitable or other remedies may be limited
by equitable principles of general applicability and (iii) the effect of general
principles of equity, whether enforcement is considered in equity or at law, and
the discretion of the court before which any proceeding therefor is brought.
(n) Neither the Company nor any of its subsidiaries is, and
immediately after the Acquisitions will not be, in violation of its respective
charter or by-laws or in default in the performance of any obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the Company
and its subsidiaries, taken as a whole, (i) to which the Company or any of its
subsidiaries is a party or (ii) by which the Company or any of its subsidiaries
or their respective property is bound.
(o) Except as otherwise disclosed in the Offering Memorandum, the
execution, delivery and performance of this Agreement, the Landmark Asset
Purchase Agreement, the StarTime Asset Purchase Agreement and the other
Operative Documents by the Company and each of the Guarantors, compliance by the
Company and each of the Guarantors with all provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby will not
(i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws
<PAGE> 14
-14-
of the various states), (ii) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, (x) to which the Company or any of its
subsidiaries is a party or (y) by which the Company or any of its subsidiaries
or their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the Company, any of
its subsidiaries or their respective property, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien under, any agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property is
bound, or (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of its subsidiaries or
result in any other impairment of the rights of the holder of any such
Authorization.
(p) The Company and its subsidiaries have, and immediately after
the consummation of the Acquisitions will have, good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all Liens and defects, except such
as are described in the Offering Memorandum or such as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its subsidiaries are,
and immediately after the consummation of the Acquisitions will be, held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each case except
as described in the Offering Memorandum.
(q) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is, and immediately
after the consummation of the Acquisitions will be, or could be a party or to
which any of their respective property is or could be subject, which might
result, singly or in the aggregate, in a Material Adverse Effect.
(r) All material tax returns required to be filed by the Company
and each of its subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(s) All indebtedness of the Company and the Guarantors that will
be repaid with the proceeds of the issuance and sale of the Series A Notes was
incurred, and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good
<PAGE> 15
-15-
faith and each of the Company and the Guarantors was, at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of the
issuance and sale of the Series A Notes, and will be on the Closing Date (after
giving effect to the application of the proceeds from the issuance of the Series
A Notes) solvent, and had at the time of the incurrence of such indebtedness
that will be repaid with the proceeds of the issuance and sale of the Series A
Notes and will have on the Closing Date (after giving effect to the application
of the proceeds from the issuance of the Series A Notes) sufficient capital for
carrying on their respective business and were, at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance and sale
of the Series A Notes, and will be on the Closing Date (after giving effect to
the application of the proceeds from the issuance of the Series A Notes) able to
pay their respective debts as they mature.
(t) Neither the Company nor any of its subsidiaries has, and
immediately after the consummation of the Acquisitions will have, violated any
foreign, federal, state or local law or regulation relating to the protection of
human health, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(u) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(v) Each of the Company and its subsidiaries has, and immediately
after the consummation of the Acquisitions will have, such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is, and immediately after the consummation of the Acquisitions
will be, valid and in full force and effect and each of the Company and its
subsidiaries is, and immediately after the consummation of the Acquisitions will
be, in compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both,
<PAGE> 16
-16-
would result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction would not, singly or
in the aggregate, have a Material Adverse Effect.
(w) The accountants, Deloitte & Touche LLP, Coopers & Lybrand
L.L.P. and KPMG Peat Marwick LLP, that have certified the financial statements
and supporting schedules included in the Preliminary Offering Memorandum and the
Offering Memorandum are independent public accountants with respect to the
Company and the Guarantors, as required by the Act and the Exchange Act. The
historical financial statements, together with related schedules and notes, set
forth in the Preliminary Offering Memorandum and the Offering Memorandum comply
as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(x) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the (i) Company and
its subsidiaries, (ii) the Landmark Theatre Group and (iii) StarTime Cinema,
Inc. and subsidiaries, as the case may be, on the basis stated in the Offering
Memorandum at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of (i) the Company, (ii) the
Landmark Theatre Group and (iii) StarTime Cinema, Inc. and subsidiaries, as the
case may be.
(y) The pro forma financial statements (including the notes
thereto) (which shall exclude the adjusted pro forma financial information
discussed below) included in the Preliminary Offering Memorandum and the
Offering Memorandum have been prepared on a basis consistent with the historical
financial statements of the Company and its subsidiaries and give effect to
assumptions used in the preparation thereof on a reasonable basis and in good
faith and present fairly the historical and proposed transactions contemplated
by the Preliminary Offering Memorandum and the Offering Memorandum; and such pro
forma financial statements (i) comply as to form in all material respects with
the applicable requirements of Regulation S-X promulgated under the Exchange
Act, (ii) have been prepared in all material respects in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
included in registration statements on Form S-1 under the Act, and (iii) have
been properly computed on the bases described therein. The other pro forma
financial and statistical information and data included in the
<PAGE> 17
-17-
Offering Memorandum, including, without limitation, the adjusted pro forma
financial information (including the notes thereto), are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements. The pro forma financial statements and other pro
forma financial information, including without limitation the adjusted pro forma
financial information (including the notes thereto), included in the Preliminary
Offering Memorandum and the Offering Memorandum give effect to assumptions used
in the preparation thereof on a reasonable basis and in good faith and are
appropriate to give effect to the transactions or circumstances referred to
therein.
(z) The Company is not and, after giving effect to the offering
and sale of the Series A Notes and the application of the net proceeds thereof
as described in the Offering Memorandum, will not be, an "investment company,"
as such term is defined in the Investment Company Act of 1940, as amended.
(aa) Except as described in the Offering Memorandum, there are no
contracts, agreements or understandings between the Company or any Guarantor and
any person granting such person the right to require the Company or such
Guarantor to file a registration statement under the Act with respect to any
securities of the Company or such Guarantor or to require the Company or such
Guarantor to include such securities with the Notes and Subsidiary Guarantees
registered pursuant to any Registration Statement.
(bb) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
(cc) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company or any Guarantor that it is considering
imposing) any condition (financial or otherwise) on the Company's or any
Guarantor's retaining any rating assigned to the Company or any Guarantor, any
securities of the Company or any Guarantor or (ii) has indicated to the Company
or any Guarantor that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company, any Guarantor or any securities of
the Company or any Guarantor.
(dd) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
and both before and after giving effect to the Acquisitions (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the
<PAGE> 18
-18-
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its subsidiaries
and (iii) neither the Company nor any of its subsidiaries has incurred any
material liability or obligation, direct or contingent.
(ee) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ff) When the Series A Notes and the Subsidiary Guarantees are
issued and delivered pursuant to this Agreement, neither the Series A Notes nor
the Subsidiary Guarantees will be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company or the Guarantors that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(gg) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, the Guarantors
or any of their respective representatives (other than the Initial Purchasers,
as to whom the Company and the Guarantors make no representation) in connection
with the offer and sale of the Series A Notes contemplated hereby, including,
but not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as the
Series A Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(hh) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(ii) None of the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with respect
to the Series A Notes or the Subsidiary Guarantees.
(jj) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(kk) The sale of the Series A Notes pursuant to Regulation S is
not part of a plan or scheme to evade the registration provisions of the Act.
<PAGE> 19
-19-
(ll) The Company, its affiliates and all persons acting on its
behalf (other than the Initial Purchasers, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Series A Notes outside the United States and, in connection therewith, the
Offering Memorandum will contain the disclosure required by Rule 902(h).
(mm) The Series A Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S. persons
or U.S. persons who purchased such Series A Notes in transactions that were
exempt from the registration requirements of the Act.
(nn) No registration under the Act of the Series A Notes or the
Subsidiary Guarantees is required for the sale of the Series A Notes and the
Subsidiary Guarantees to the Initial Purchasers as contemplated hereby or for
the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof.
(oo) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company or any of
its subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, which would be required by Item 404 of Regulation S-K under the Act to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement filed by the Company on Form S-1
filed with the Commission.
(pp) To the knowledge of the Company, no action has been taken
and no law, statute, rule or regulation or order has been enacted, adopted or
issued by any governmental agency or body which prevents the execution, delivery
and performance of any of the Operative Documents or the issuance of the Series
A Notes or suspends the sale of the Series A Notes in any jurisdiction referred
to in Section 5(e); and no injunction, restraining order or other order or
relief of any nature by a federal or state court or other tribunal of competent
jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the Series A
Notes in any jurisdiction referred to in Section 5(e).
(qq) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company or
such Guarantor to the Initial Purchasers as to the matters covered thereby.
<PAGE> 20
-20-
(rr) The Company has delivered to the Initial Purchasers true and
complete copies of the Landmark Asset Purchase Agreement and the StarTime Asset
Purchase Agreement, including all schedules and exhibits thereto, and there have
been no amendments, supplements, alterations, modifications or waivers thereto
or in the exhibits or schedules thereto, except as have been delivered to the
Initial Purchasers and as are reasonably acceptable to the Initial Purchasers.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the Company and the Guarantors and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represents and warrants to
the Company and the Guarantors, and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (i) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (ii) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from (i) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs, and (ii) Regulation S Purchasers, in each case, that agree that (x) the
Series A Notes purchased by them may be resold,
<PAGE> 21
-21-
pledged or otherwise transferred within the time period referred to under Rule
144(k) (taking into account the provisions of Rule 144(d) under the Act, if
applicable) under the Act, as in effect on the date of the transfer of such
Series A Notes, only (A) to the Company or any of its subsidiaries, (B) to a
person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Act, (C) in an offshore transaction (as defined in Rule 902
under the Act) meeting the requirements of Rule 904 of the Act, (D) in a
transaction meeting the requirements of Rule 144 under the Act, (E) in
accordance with another exemption from the registration requirements of the Act
(and based upon an opinion of counsel acceptable to the Company) or (F) pursuant
to an effective registration statement and, in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (y) they will deliver to each person to whom such
Series A Notes or an interest therein is transferred a notice substantially to
the effect of the foregoing.
(e) None of such Initial Purchaser or any of its affiliates or
any person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold
and will not offer or sell the Series A Notes in the United States or to, or for
the benefit or account of, a U.S. Person (other than a distributor), in each
case, as defined in Rule 902 under the Act (i) as part of its distribution at
any time and (ii) otherwise until 40 days after the later of the commencement of
the offering of the Series A Notes pursuant hereto and the Closing Date, other
than in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day restricted period, it will not cause any advertisement with respect
to the Series A Notes (including any "tombstone" advertisement) to be published
in any newspaper or periodical or posted in any public place and will not issue
any circular relating to the Series A Notes, except such advertisements as
permitted by and include the statements required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during the
40-day restricted period referred to in Rule 903(c)(3) under the Act, it will
send to such distributor, dealer or person receiving a selling concession, fee
or other remuneration a confirmation or notice to substantially the following
effect:
<PAGE> 22
-22-
"The Series A Notes covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (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 your 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 under the Securities Act (or Rule 144A), and in connection with
any subsequent sale by you of the Series A Notes covered hereby
in reliance on Regulation S during the period referred to above
to any distributor, dealer or person receiving a selling
concession, fee or other remuneration, you must deliver a notice
to substantially the foregoing effect. Terms used above have the
meanings assigned to them in Regulation S."
(j) Such Initial Purchaser agrees that the Series A Notes offered
and sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the
Act and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
(k) Such Initial Purchaser further represents and agrees that (i)
it has not offered or sold and will not offer or sell any Series A Notes to
persons in the United Kingdom prior to the expiration of the period of six
months from the issue date of the Series A Notes, 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 business 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, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Series A Notes in, from or otherwise
involving the United Kingdom and (iii) 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 Series A Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(l) Such Initial Purchaser agrees that it will not offer, sell or
deliver any of the Series A Notes 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 Series A Notes in such
jurisdictions. Such Initial Purchaser understands that no action has been taken
to permit a
<PAGE> 23
-23-
public offering in any jurisdiction outside the United States where action would
be required for such purpose.
Each Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and such Initial Purchaser hereby
consents to such reliance.
8. INDEMNIFICATION.
(a) The Company and each Guarantor agree, jointly and severally,
to indemnify and hold harmless the Initial Purchasers, its directors, its
officers and each person, if any, who controls such Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchasers furnished in
writing to the Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum (as then amended or supplemented, provided
by the Company to the several Initial Purchasers in the requisite quantity and
on a timely basis to permit proper delivery on or prior to the Closing Date) to
the person asserting any losses, claims, damages and liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Final Offering Memorandum.
(b) Each of the Initial Purchasers, severally and not jointly,
agrees to indemnify and hold harmless the Company and the Guarantors, and their
respective directors and officers and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the
<PAGE> 24
-24-
Exchange Act) the Company or the Guarantors, to the same extent as the foregoing
indemnity from the Company and the Guarantors to the Initial Purchasers but only
with reference to information relating to the Initial Purchasers furnished in
writing to the Company by the Initial Purchasers expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchasers). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of the parties indemnified pursuant to Section 8(a), and by the Company, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which
<PAGE> 25
-25-
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action 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 the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers on the
other hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (after underwriting discounts and commissions,
but before deducting expenses) received by the Company, and the total discounts
and commissions received by the Initial Purchasers bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
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 Initial Purchasers, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the Guarantors, and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation (even if the Initial 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 in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Sec-
<PAGE> 26
-26-
tion 8, the Initial Purchasers shall not be required to contribute any amount in
excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which the Initial
Purchasers have 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
of the Initial Purchasers to purchase the Series A Notes under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any Guarantor or any securities of the Company or any
Guarantor (including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act, (ii) there shall not have occurred any change, nor shall any notice have
been given of any potential or intended change, in the outlook for any rating of
the Company or any Guarantor or any securities of the Company or any Guarantor
by any such rating organization and (iii) no such rating organization shall have
given notice that it has assigned (or is considering assigning) a lower rating
to the Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change or any
development involving a prospec-
<PAGE> 27
-27-
tive change in the capital stock or in the long-term debt of the Company or any
of its subsidiaries and (iii) neither the Company nor any of its subsidiaries
shall have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in clause 9(c)(i), 9(c)(ii) or
9(c)(iii), in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the Series A Notes on the terms and in the
manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by the President and the Chief Financial Officer
(or if there is no Chief Financial Officer, the Treasurer) of the Company and
each of the Guarantors, confirming the matters set forth in Sections 6(dd), 9(a)
and 9(b) and stating that each of the Company and the Guarantors has complied
with all the agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchasers), dated the Closing
Date, of Latham & Watkins, counsel for the Company and the Guarantors, to the
effect that:
(i) each of the Company and each Guarantor has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and
has the corporate power and authority to carry on its business
as described in the Offering Memorandum and to own, lease and
operate its properties;
(ii) except as described in the Offering Memorandum, and
except for the security interests granted pursuant to the
Existing Credit Facility, all of the outstanding shares of
capital stock of each of the Company's subsidiaries are owned
directly or indirectly by the Company, free and clear of all
perfected first priority security interests and, to the best of
such counsel's knowledge, free and clear of all other liens,
encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Securities Act
and the securities or "Blue Sky" laws of certain jurisdictions)
or voting;
(iii) the Series A Notes have been duly authorized and,
when executed and authenticated in accordance with the terms of
the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will
be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in
accordance with their terms except as the enforceability thereof
may be limited by (i) the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors, including without limitation
the effect on the Subsidiary Guarantees of Section 548 of the
Federal
<PAGE> 28
-28-
Bankruptcy Code and comparable provisions of state law; (ii) the
effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or law, and the discretion
of the court before which any proceeding therefor may be
brought, (iii) the unenforceability under certain circumstances
under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary
to public policy ((i), (ii), and (iii) are collectively referred
to as the "Enforceability Limitations");
(iv) the Subsidiary Guarantees have been duly authorized
and, when the Series A Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered to
and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, the Subsidiary Guarantees endorsed
thereon will be entitled to the benefits of the Indenture and
will be valid and binding obligations of the Guarantors,
enforceable in accordance with their terms except as the
enforceability thereof may be limited by the Enforceability
Limitations;
(v) the Indenture has been duly authorized, executed and
delivered by the Company and each Guarantor and is a valid and
binding agreement of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance with its
terms except as the enforceability thereof may be limited by the
Enforceability Limitations;
(vi) this Agreement has been duly authorized, executed
and delivered by the Company and the Guarantors;
(vii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the
Guarantors and is a valid and binding agreement of the Company
and each Guarantor, enforceable against the Company and each
Guarantor in accordance with its terms, except as the
enforceability thereof may be limited by the Enforceability
Limitations;
(viii) the Series B Senior Subordinated Notes have been
duly authorized;
(ix) the statements under the captions "Risk Factors -
Restrictive Covenants of Revolving Credit Facility; Inability to
Borrow," "Description of Revolving Credit Facility,"
"Description of Notes," and "Exchange Offer; Registration
Rights" in the Offering Memorandum, insofar as such statements
constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present in all material
respects such legal matters, documents and proceedings;
<PAGE> 29
-29-
(x) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and
each of the Guarantors, the compliance by the Company and each
of the Guarantors with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby
will not (i) to the knowledge of such counsel, require any
consent, approval, authorization or order of, or filing with,
any federal or New York court or governmental agency or body
(except such as may be required under the securities or Blue Sky
laws of the various states in connection with the purchase and
distribution of the Series A Notes by the Initial Purchases (as
to which such counsel need express no opinion), as may be
required in connection with the performance of the Registration
Rights Agreement and except as have previously been obtained),
(ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or
their respective property is bound, (iii) violate or conflict
with or any federal or New York statute, judgment, decree,
order, rule or regulation known to such counsel to be applicable
to such entity or any of its respective properties or assets
except for such violations or conflicts which could not
reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, or (v)
result in the termination, suspension or revocation of any
Authorization (as defined above) of the Company or any of its
subsidiaries or result in any other impairment of the rights of
the holder of any such Authorization;
(xi) to the best of such counsel's knowledge, such
counsel does not know of any legal or governmental proceedings
pending or threatened to which the Company or any of its
subsidiaries is or could be a party or to which any of their
respective property is or could be subject, which might result,
singly or in the aggregate, in a Material Adverse Effect;
(xii) none of the Company or the Guarantors is, or
immediately after the sale of the Series A Notes to be sold
hereunder and the application of the proceeds from such sale (as
described in the Offering Memorandum under the caption "Use of
Proceeds") will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
<PAGE> 30
-30-
(xiii) except as set forth in the Offering Memorandum,
to the best of such counsel's knowledge, no holder of securities
(other than Notes) of the Company or any Guarantor is entitled
to have such securities registered under a registration
statement filed by the Company and the Guarantors pursuant to
the Registration Rights Agreement;
(xiv) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which
is qualified thereunder. It is not necessary in connection with
the offer, sale and delivery of the Series A Notes to the
Initial Purchaser in the manner contemplated by this Agreement
or in connection with the Exempt Resales to qualify the
Indenture under the TIA;
(xv) no registration under the Act of the Series A Notes
is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming that (i) each Initial Purchaser is a QIB, or a
Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements
contained in Section 7 of this Agreement, (iii) the accuracy of
the representations of the Company and the Guarantors set forth
in Sections 5(h) and 6(gg), (ii), (jj), (kk) and (ll) of this
Agreement; and
(xvi) no facts have come to such counsel's attention
that caused such counsel to believe that the Offering
Memorandum, as of the date of the Offering Memorandum and as of
the Closing Date, contained an untrue statement of material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; it
being understood that such counsel need express no belief with
respect to the financial statements, schedules or other
financial or statistical data included in the Offering
Memorandum.
The opinion of Latham & Watkins described in Section 9(e) above
shall be rendered to you at the request of the Company and the Guarantors and
shall so state therein. In giving such opinion with respect to the matters
covered by Section 9(e)(xvi),Latham & Watkins may state that their opinion and
belief are based upon their participation in the preparation of the Offering
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of Cahill Gordon & Reindel, counsel for
the Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers.
<PAGE> 31
-31-
(g) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from Deloitte & Touche LLP, Coopers & Lybrand L.L.P. and KPMG
Peat Marwick, LLP, independent public accountants, containing the information
and statements of the type ordinarily included in accountants' "comfort letters"
to the Initial Purchasers with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(h) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(i) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company, the Guarantors and the Trustee.
(j) The Company and the Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company and the Guarantors.
(k) Neither the Company nor the Guarantors shall have failed at
or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Company or
the Guarantors, as the case may be, at or prior to the Closing Date.
(l) Each condition to the closing of the Acquisitions
contemplated by the Landmark Asset Purchase Agreement and the StarTime Asset
Purchase Agreement shall have been satisfied or waived. There shall exist at and
as of the Closing Date no conditions that would constitute a default (or an
event that with notice or the lapse of time, or both, would constitute a
default) under either the Landmark Asset Purchase Agreement or the StarTime
Asset Purchase Agreement. On the Closing Date, the Acquisitions shall have been
consummated on terms that conform in all material respects to the description
thereof in the Offering Memorandum and the Initial Purchasers shall have
received evidence satisfactory to the Initial Purchasers of the consummation
thereof other than the payment for the assets with the net proceeds from the
issuance and sale of the Series A Notes.
(m) The net proceeds from the issuance and sale of the Series A
Notes shall have been applied as set forth under the caption "Use of Proceeds"
in the Offering Memorandum.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
<PAGE> 32
-32-
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by written notice to the Company if any
of the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchasers' judgment, is material and adverse and, in the Initial
Purchasers judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers
shall fail or refuse to purchase the Series A Notes which it or they have agreed
to purchase hereunder on such date and the aggregate principal amount of the
Series A Notes which such defaulting Initial Purchaser or Initial Purchasers, as
the case may be, agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of the Series A Notes to be
purchased on such date by all Initial Purchasers, each non-defaulting Initial
Purchaser shall be obligated severally, in the proportion which the principal
amount of the Series A Notes set forth opposite its name in Schedule B bears to
the aggregate principal amount of the Series A Notes which all the
non-defaulting Initial Purchasers, as the case may be, have agreed to purchase,
or in such other proportion as you may specify, to purchase the Series A Notes
which such defaulting Initial Purchaser or Initial Purchasers, as the case may
be, agreed but failed or refused to purchase on such date; provided that in no
event shall the aggregate principal amount of the Series A Notes which any
Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of the Series A Notes without the written consent of such
Initial Purchaser. If on the Closing Date any Initial Purchaser or Initial
Purchasers shall fail or refuse to purchase the Series A Notes and the aggregate
principal amount of the Series A Notes with respect to which such default occurs
is more than one-tenth of the aggregate principal amount of the Series A Notes
to be purchased by all Initial Purchasers and arrangements satisfactory to the
Initial Purchasers and the Company for purchase of such the Series A Notes are
not made within
<PAGE> 33
-33-
48 hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Initial Purchaser and the Company. In any such
case which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of any such Initial Purchaser
under this Agreement.
11. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company or any
Guarantor, to 4004 Beltline Road, Suite 205, Lockbox 18, Dallas, Texas 75244,
Attention: Steve Holmes and (ii) if to the Initial Purchasers, c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantors
and the Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, any Guarantor, the officers or
directors of the Company or any Guarantor, or any person controlling the Company
or any Guarantor, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and each
Guarantor, jointly and severally, agree to reimburse the Initial Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the Company
shall be liable for all expenses which it has agreed to pay pursuant to Section
5(i) hereof. The Company and each Guarantor also agree, jointly and severally,
to reimburse the Initial Purchasers and its officers, directors and each person,
if any, who controls such Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by them
in connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Guarantors,
the Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the di-
<PAGE> 34
-34-
rectors of the Company and the Guarantors and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Series
A Notes from the Initial Purchaser merely because of such purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
<PAGE> 35
-35-
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
SILVER CINEMAS INTERNATIONAL, INC.
By:_____________________________
Name: Steven Holmes
Title: Chief Executive Officer
SILVER CINEMAS, INC.
By:_____________________________
Name: Steven Holmes
Title: Chief Executive Officer
SCI ACQUISITION CORP.
By:_____________________________
Name: Steven Holmes
Title: Chief Executive Officer
LANDMARK THEATRE CORP.
By:_____________________________
Name: Steven Holmes
Title: Chief Executive Officer
<PAGE> 36
-36-
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_____________________________
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:_____________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By:_____________________________
Name:
Title:
<PAGE> 37
SCHEDULE A
GUARANTORS
Silver Cinemas, Inc. (Delaware)
SCI Acquisition Corp. (Delaware)
Landmark Theatre Corp. (Delaware)
<PAGE> 38
SCHEDULE B
<TABLE>
<CAPTION>
Initial Purchaser
----------------- Principal Amount
of Notes
---------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation..................................... $ 50,000,000
BT Alex. Brown Incorporated.................................. $ 40,000,000
Bear Stearns & Co. Inc....................................... $ 10,000,000
Total........................................................ $100,000,000
============
</TABLE>
<PAGE> 39
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 2.1
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT, dated as of December 17, 1997, is made by and among
Landmark Theatre Corporation, a California corporation ("LTC") , Seven Gables
Corporation, a California corporation ("Gables"), Parallax Theatre Systems,
Inc., a California corporation ("Parallax"), San Francisco Landmark Theatre
Corporation, a California corporation ("SFLTC"), and Wisconsin Repertory
Cinemas, Inc., a California corporation ("Wisconsin") The Landmark Theater
Group, a California corporation ("Group"), (LTC, Group, Gables, Parallax, SFLTC
and Wisconsin are collectively and individually called "Seller"), Metromedia
International Group, Inc., a Delaware corporation ("Metromedia"), and Silver
Cinemas, Inc., a Delaware corporation ("Buyer").
RECITALS
A. Seller is engaged in the ownership and operation of movie exhibition
theaters. Seller's operation of the Theaters (as defined below) is referred to
as the "Business".
B. Seller desires to sell to Buyer, and Buyer desires to purchase,
certain of Seller's assets upon the terms and conditions set forth herein.
AGREEMENTS
ACCORDINGLY, in consideration of the premises and the mutual agreements,
covenants, representations and warranties hereafter set forth, the parties
hereto agree as follows:
SECTION 1. PURCHASE OF ASSETS BY BUYER.
1.1 Agreement to Sell. At the Closing, upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties of Buyer in this Agreement, Seller hereby agrees to sell, grant,
convey, transfer, assign and deliver unto Buyer the following assets (the
"Assets"), free and clear of all liens, encumbrances, mortgages, pledges,
claims, charges, security interests, restrictions and rights of others
("Liens"), with the exception of those liens, encumbrances, mortgages, pledges,
claims, charges, security interests, restrictions and rights of others listed on
Schedule 1.1 attached hereto (the "Permitted Liens"), such sale and transfer to
be evidenced by documents reasonably satisfactory to Buyer in form and
substance:
(a) All owned furniture, fixtures, machinery, equipment,
computers (including both hardware and software) and other assets used
in connection with the operation of the theaters as listed in Schedule
1.1(a) attached hereto (the "Theaters").
(b) All inventory of Seller related to the Theaters on the
Closing Date;
(c) All inventory in the hands of suppliers for which Seller is
committed with respect to the Theaters as of the date hereof or the
Closing Date, as listed on Schedule 1.1(c) attached hereto;
<PAGE> 2
(d) Leaseholds (including without limitation, to the extent
leased by Seller, land, buildings, structures, fixtures, appurtenances
and improvements) relating to the Theaters, including without limitation
the leases relating to real property listed on Schedule 1.1(d) (the
"Leases") and the fee property (including without limitation buildings,
structures, fixtures, appurtenances and improvements) relating to the
Theaters listed on Schedule 1.1(d)(i) (the "Fee Property");
(e) Certain contracts, trade names and equipment leases to which
Seller is a party listed on Schedule 1.1(e) attached hereto;
(f) The current assets of Seller as set forth on the balance
sheet attached hereto as Schedule 1.1(f), including without limitation,
any security deposits transferred to Buyer under the Leases; and
(g) The name "Landmark Theatre Corporation" and the tradename
"Landmark".
1.2 All Assets Relating to the Theaters. The Assets are intended to and
shall constitute all of the business assets of Seller used in connection with
the operation of the Theaters, with the exception of those assets of Seller
listed on Schedule 1.2 attached hereto (the "Excluded Assets").
1.3 Agreement to Purchase. At the Closing, the Buyer hereby agrees to
purchase from the Seller, upon the terms and subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of the
Seller in this Agreement, the Assets. As consideration therefor, the Buyer shall
pay to the Seller the Purchase Price for the Assets.
SECTION 2. PRICE AND TERMS.
2.1 Purchase Price. (a) Buyer shall deliver to Seller, as and for the
purchase price of the Assets, consideration of Sixty Two Million Four Hundred
Seventy Two Thousand Dollars ($62,472,000), as adjusted pursuant to Section
2.1.(b) below and elsewhere herein (the "Purchase Price"), payable by a wire
transfer of immediately available funds to an account designated in writing by
Seller at least two days prior to the Closing Date.
(b) As promptly as possible after the Closing Date, Buyer shall
prepare a Closing Date balance sheet mutually agreeable to Buyer and Metromedia
(the "Final Balance Sheet") reflecting the combined Assets and Assumed
Liabilities (and accruing pro rata amounts including employment obligations). In
the event that Metromedia and Buyer are unable to agree upon a Final Balance
Sheet within thirty (30) days following delivery of a balance sheet, Buyer and
Metromedia shall employ a "Big Six" accounting firm, selected mutually by
Metromedia and Buyer, to resolve such dispute. If the Final Balance Sheet
indicates that current assets, excluding cash, less current liabilities exceeds
the corresponding number set forth in Schedule 1.1(f), then Buyer shall pay to
Metromedia the difference between such numbers within five (5) working days of
receipt of the Final Balance Sheet. If the Final Balance Sheet indicates that
current assets,
2
<PAGE> 3
including without limitation any security deposits transferred to Buyer under
the Leases, less current liabilities are less than the corresponding number set
forth in Schedule 1.1(f), then Metromedia shall pay to Buyer the difference
between such numbers within five (5) working days of receipt of the Final
Balance Sheet. The Final Balance Sheet will not reflect as a liability any
liability for wages, overtime, severance pay, pay in lieu of notice, or vacation
time with respect to employees of Seller not hired by Buyer since Seller will
pay all such costs at or prior to Closing. In order to prepare the Final Balance
Sheet, Buyer shall engage certain employees of Seller listed on Schedule 2.1(b)
(the "Transition Employees") from the Closing Date for a period of up to six
weeks from the Closing Date (or for a longer time period, if deemed necessary by
Buyer to complete the Final Balance Sheet) (the "Transition Period"). Seller and
Metromedia agree that they shall cooperate with Buyer and the Transition
Employees in making all books and records available to Buyer and the Transition
Employees as necessary to prepare the Final Balance Sheet.
2.2 Liabilities Assumed. (a) Except for the Assumed Liabilities
expressly specified in Section 2.2(b), Buyer has not agreed to pay, shall not be
required to assume and shall have no liability or obligation with respect to,
any liability or obligation, direct or indirect, absolute or contingent, known
or unknown, matured or unmatured, of Seller, any subsidiary or affiliate of
Seller or any other person, whether arising out of occurrence prior to, at or
after the date hereof (the "Excluded Liabilities"). Excluded Liabilities shall
include, without limitation, (i) all fees and expenses incurred by Seller or any
of its affiliates or subsidiaries, in connection with this Agreement; (ii) any
liability or obligation to or in respect of any employees or former employees of
Seller related to their employment or accruing prior to the Closing or as a
result of their termination by Seller including without limitation (w) wages,
overtime, severance pay, pay in lieu of notice, accrued vacation time earned or
accrued prior to the Closing or as a result thereof, other than any accrued paid
vacation days and sick pay for any employees of Seller whom Buyer agrees to
employ ("Employee Costs"), (x) any employment agreement, whether or not written,
between Seller and any person, (y) any liability under any Employee Plan
(defined to include any employee benefit plan, ?Employee Benefit Plan,? as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, ?ERISA,? and all other benefit arrangements that are not Employee
Benefit Plans, including, but not limited to any employment or consulting
agreement, any arrangement providing insurance benefits, any incentive bonus or
deferred bonus arrangement, any arrangement providing termination allowance,
severance or similar benefits, any equity compensation plan, any deferred
compensation plan, and any compensation policy or practice, ?Benefit
Arrangement,? (i) which are maintained, contributed to or required to be
contributed to by Seller or any entity that, together with Seller as of the
relevant measuring date under ERISA, is or was required to be treated as a
single employer under Section 414 of the Code, ?ERISA Affiliate,? or under which
Seller or any ERISA Affiliate may incur any liability, and (ii) which cover the
employees, former employees, directors or former directors of Seller or any
ERISA Affiliate) at any time maintained, contributed to or required to be
contributed to by or with respect to Seller or under which Seller may incur
liability, or any contributions, benefits or liabilities therefor, or any
3
<PAGE> 4
liability with respect to Seller's withdrawal or partial withdrawal from or
termination of any Employee Plan and (z) any claim of an unfair labor practice,
or any claim under any state unemployment compensation or worker's compensation
law or regulation or under any federal or state employment discrimination law or
regulation, which shall have been asserted on or prior to the Closing Date or is
based on acts or omissions which occurred on or prior to the Closing Date; (iii)
any liability or obligation of Parent or Seller in respect of any Tax; or (iv)
any liability arising out of occurrences or omissions prior to the Closing. For
purposes of this Agreement "Tax" means any of the Taxes, and "Taxes" means all
federal, state, local and foreign income, capital gains, gross receipts, sales,
use, ad valorem, franchise, capital, profits, license, withholding, employment,
payroll, transfer, conveyance, documentary, stamp, property, excise, value
added, customs duties, minimum taxes, and any other taxes, levies or assessments
of any kind whatsoever, together with additions to tax or additional amounts,
interest and penalties relating thereto that may be imposed by any federal,
state, local or foreign governments.
(b) The "Assumed Liabilities" are the following, which Buyer will assume
at Closing:
(i) Capital leases listed on Schedule 2.2.1;
(ii) Operating leases related to Theaters and Theater equipment
listed on Schedule 2.2.2;
(iii) All liabilities of the Seller under contracts listed on
Schedule 2.2.3 with respect to events occurring after the
Closing Date;
(iv) All current liabilities set forth on the balance sheet
attached as Schedule 1.1(f);
(v) All accrued paid vacation days and sick pay set forth on
the Schedule delivered pursuant to Section 5.14 hereof for
any employees of Seller who become employees of Buyer;
(vi) That certain promissory note dated December 30, 1996 in
the original principal amount of $330,000 made by Gables
in favor of Chao Tsan Ting and Mei-Hwa Ting, which note is
secured by a deed of trust dated as of the same date;
provided that Gables shall make the payment due under such
note on January 6, 1998 and Buyer shall have no liability
or responsibility for such payment.
(c) Except as otherwise provided herein, to the extent that Buyer hires
any employees of Seller, Buyer will thereafter be responsible for any
termination and severance obligations it may have with respect to such employees
including without limitation (a) any and all claims against Seller asserted by
or on behalf of former employees of Seller who commence employment with Buyer on
the Closing Date to the extent such claims are based upon or arise from terms
and conditions of employment after the Closing Date or the termination of such
post-Closing employment; (b) any and all claims asserted by or on behalf of any
former employee of Seller who does not commence employment with Buyer on the
Closing Date but who is employed by Buyer at any time following the Closing Date
relating to such employee's terms and conditions of employment after the Closing
Date or the termination of such post-Closing employment and (c) any and all
liability for the obligation to provide notice under the Worker Adjustment and
Retraining
4
<PAGE> 5
Notification Act of 1988 (?WARN?) with respect to any ?plant closing? or ?mass
layoff,? as those terms are defined in WARN, for employment losses occurring on
the Closing Date caused by Buyer?s failure to offer employment to any employee
of the Seller; and
(d) Buyer and Seller may supplement the list of Assumed Liabilities to
include any liability of Seller incurred at Buyer's direction, so long as such
direction is in writing specifically indicating that it is delivered pursuant to
this Section 2.2(e)
2.3 Documents of Sale and Conveyance. The sale, conveyance, assignment,
transfer and delivery of the Assets shall be effected by delivery by Seller to
Buyer of (i) a duly executed bill of sale in substantially the form of Exhibit
"A" attached hereto (the "Bill of Sale"), (ii) Lease Assignments in recordable
form in substantially the form of Exhibit "B" attached hereto with respect to
Leases already of record (collectively, the "Lease Assignments"), (iii) grant
deeds in recordable form with respect to the Fee Property (collectively, the
"Grant Deeds"), and (iv) such other good and sufficient instruments of
conveyance and transfer listed on Schedule 2.3 attached hereto as shall be
reasonably necessary to vest in Buyer good, valid and indefeasible title to the
Assets (collectively, the "Other Instruments"). In addition, in the event that
Buyer prepares the assignments of trademarks and tradenames in form suitable for
recording in the Patent and Trademark Office with respect to registered
trademarks and tradenames, Seller shall execute such documents.
2.4 Bulk Sales; Sales and Transfer Taxes. Buyer and Seller have agreed
not to comply with the bulk transfer provisions of the bulk sales law of any
state (collectively the "Bulk Transfer Law"). Seller agrees to indemnify Buyer
for any damages, costs, expenses or liabilities asserted against, imposed upon
or resulting from any failure to comply with the Bulk Transfer Law. Buyer shall
have no liability for any federal, state or local tax liabilities of Seller,
including any sales tax or title transfer fee attributable to the sale of Assets
contemplated herein. Any sales, use or similar transfer taxes, and any transfer,
recording or similar fees and charges arising in connection with the transfer of
the Assets from Seller to Buyer shall be borne by the Seller.
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with the allocations set forth in Schedule 2.5 to
be agreed upon by Buyer and Seller at Closing. Such allocations shall be
conclusive and binding on both Buyer and Seller for purposes of their federal
and, where applicable, state and local income and transfer tax returns. Buyer
and Seller hereby agree not to take positions on any tax return inconsistent
with such allocation. Buyer and Seller shall prepare and timely file all such
reports and returns as may be required by Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code") to report such allocation.
2.6 Real Estate Taxes. To the extent payable by tenant, real estate
taxes and assessments relating to the real estate subject to the Leases for the
calendar year of closing shall be prorated between Seller and Buyer as of the
Closing Date. If the amount of such taxes for the year of closing are not yet
available, the proration shall be based upon the amount of such taxes for the
previous year. Upon issuance of the actual tax bills for the year of closing,
the parties agree to recompute the proration based upon the actual tax bills,
and any amount determined to be owing by one party to the other shall be paid by
such party to the other, which obligation shall survive the Closing hereunder.
2.7 Proration of Lease Payments, Taxes, Utility Charges, Film Rental and
Other
5
<PAGE> 6
Payments. To the extent not reflected on Schedule 1.1(f), in any case where the
Closing Date shall fall on a date other than the date on which payments are due
with respect to (i) any Leases or (ii) utility or similar regular periodic
charges respecting the Assets for which a final billing has not been received by
Seller, any installment of rental payments and any such utility or similar
charge payable with respect to the current period in which the Closing Date
occurs shall be prorated between Seller and Buyer on the basis of the actual
number of days elapsed from the first day of such period to the Closing Date. In
the event that actual common area maintenance or similar charges in connection
with any Leases for the year of Closing are not available at the Closing Date,
an estimated provisional proration of such charges shall be made using figures
for common area maintenance or similar charges from the preceding year. When
actual figures for such charges become available, a corrected and definitive
proration of such charges shall be promptly made. In the event that such charges
for the year of Closing exceed the amount estimated in such provisional
proration, Seller shall pay Buyer its pro rata share of the amount by which the
actual charges exceeded the estimated charges. Similarly, in the event that such
charges from the year of Closing are less than the amount estimated in such
provisional proration, Buyer shall pay Seller its pro rata share of the amount
by which the estimated charges exceeded the actual charges. Film rental payments
made to the licensors of the films shall be prorated by Sellers and Buyers as of
the Closing Date as soon as the amount of the actual film rental settlement
amounts are paid by the Seller or Buyer, as the case may be, to the licensors;
provided, however, that such settlement shall occur within 60 days after the
Closing Date.
2.8 "Phase I" Environmental Surveys. Seller will reimburse Buyer for
fifty percent (50%) of the cost of obtaining a written "Phase I" environmental
survey conducted with respect to the Fee Property. Such Property together with
the property underlying any Lease is individually and collectively referred to
herein as the "Land".
2.9 ADA Survey. Seller has furnished Buyer with complete copies of all
written reports or accessibility surveys in its possession concerning compliance
with the Americans with Disabilities Act of 1990, as amended ("ADA").
2.10 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 Buyer 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
Seller. The parties shall cooperate in the reporting and settlement of such
taxes.
2.11 Title Policies. At or prior to Closing, Seller shall deliver to
Buyer ALTA owner's title policies covering up to ten (10) Theaters, subject only
to those exceptions acceptable to Buyer (the "Title Policies") and Buyer shall
reimburse Seller fifty percent (50%) of the costs of the Title Policies.
2.12 Closing Date. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Latham &
Watkins, New York Office as promptly as possible after all conditions to Closing
have been satisfied (the "Closing Date") or at such other location or date as
the parties may agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date".
(a) Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer (unless delivered previously), the following (the "Closing
Documents"):
6
<PAGE> 7
1. the Bill of Sale;
2. the Lease Assignments;
3. the Grant Deeds;
4. the Other Instruments;
5. the officers' certificates referred to in Sections 6.1,
6.2 and 6.3 hereof;
6. the opinion of counsel referred to in Section 6.4
hereof;
7. any consents referred to in Section 5.3 hereof;
8. all warranty records, sales literature, licensing
records, service and parts records, and including all other
existing records relating to Seller's business at the Theaters;
9. the documents referred to in Section 6.8 hereof;
10. the documents referred to in Section 6.10 hereof;
11. the Title Policies; and
12. all other previously undelivered documents,
instruments and writings required to be delivered by Seller to
Buyer at or prior to the Closing pursuant to this Agreement.
(b) Deliveries by Buyer. At the Closing, Buyer shall deliver
to Seller the following:
1. the wire transfer of an amount equal to the Purchase
Price;
2. the officer's certificates referred to in Sections 7.1,
7.2 and 7.3 hereof; and
3. all other previously undelivered documents, instruments
and writings required to be delivered by Buyer to Seller at or
prior to the Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES BY SELLER.
Seller represents and warrants the following:
3.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite corporate power to carry on its business as
now conducted by it and to own and operate its assets as now owned and operated
by it. Seller has no subsidiaries or equity interests in other entities except
7
<PAGE> 8
as set forth on Schedule 3.1. Seller is qualified to do business and is in good
standing in each jurisdiction where such qualification is necessary, except for
such failures to be so qualified as would not, in the aggregate, have a material
adverse effect on Seller's business or financial condition, the Business, any
Theater or on Seller's ability to consummate the transactions contemplated by
this Agreement ( each a "Seller Material Adverse Effect"). Seller has delivered
to Buyer true and complete copies of the Seller's Articles of Incorporation and
all amendments thereto, certified by the Secretary of State of California, and
the bylaws of Seller as presently in effect, certified as true and correct by
Seller's Secretary. Each Seller is a wholly-owned subsidiary of Landmark Theatre
Group, a California corporation ("Landmark").
3.2 Authority. Seller has all requisite corporate power and authority to
execute and deliver this Agreement and any instruments and agreements
contemplated herein required to be executed and delivered by it pursuant to this
Agreement, including, without limitation, the Bill of Sale, the Grant Deeds, the
Lease Assignments and the Other Instruments (collectively, the "Related
Instruments") and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly authorized, executed and delivered by
Seller, and no other corporate act or proceeding on the part of the Seller is
necessary to authorize the execution and delivery of this Agreement or the
Related Instruments or to consummate the transactions contemplated hereby or
thereby. This Agreement is, and each of the Related Instruments, when executed
and delivered by Seller at the Closing, will be, a legally valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors and to
general principles of equity, whether considered in a proceeding in equity or at
law.
3.3 No Violation. Subject to receipt of the consents and approvals
listed on Schedule 3.20 and described in Sections 6.7, 6.8 and 5.3 and except as
set forth in Schedule 3.3, neither the execution and delivery by Seller of this
Agreement nor any of the Related Instruments, nor the consummation by Seller of
the transactions contemplated hereby or thereby, will violate any provision of
Seller's (i) Articles of Incorporation or Bylaws, (ii)(a) violate, conflict with
or constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or (b) result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of, any liability or obligation pursuant to, under
any note, bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, understanding, arrangement, agreement or restriction to which Seller
is a party or to which any of the Assets may be subject, (iii) violate any
statute or law or any judgment, decree, order, writ, injunction, regulation or
rule of any court or governmental authority applicable to Seller, or (iv) result
in the creation or imposition of any Lien upon any of the Assets except, in the
case of clauses (ii) and (iii), for violations, conflicts, defaults,
terminations and accelerations which would not, in the aggregate, have a Seller
Material Adverse Effect.
3.4 No Brokerage Commission. Seller has not employed any broker, agent
or finder in connection with any transaction contemplated by this Agreement and
hereby indemnifies Buyer against any liability for a brokerage commission or
finders fee or any description incurred by Seller with respect to any
transaction contemplated by this Agreement.
3.5 No Undisclosed Liabilities. There are no liabilities or obligations
of Seller relating to the Theaters or any of the Assets, whether accrued,
absolute, contingent or otherwise, except those specifically described in the
exhibits and schedules attached hereto and those incurred in the ordinary course
of business consistent with past practices since the Balance Sheet Date. Since
January 1, 1997, there has been no event or occurrence which has had or could
reasonably be
8
<PAGE> 9
expected to have a Seller Material Adverse Effect.
3.6 Title to Property; Encumbrances. Seller has good and marketable
title to all the Assets. All Assets are free and clear of all Liens except
Permitted Liens. The Assets are in operating condition and repair, subject to
ordinary wear and tear, and are fit and usable for the purposes for which they
are being put. Except as set forth on Schedule 3.6, there are no material
repairs or maintenance required in connection with any Theater.
3.7 Contracts. Attached hereto as Schedule 3.7 is a listing of the
following contracts, understandings, commitments and agreement to which Seller
is a party or is bound related to the Business or the Theaters (the
"Contracts"), copies of which have been provided through due diligence:
(a) All oral or written contracts, understandings or commitments
which are listed on Schedule 1.1(e), whether in the ordinary course of
business or not, involving a present or future obligation of any party
in an amount or value in excess of Fifteen Thousand Dollars ($15,000.00)
each;
(b) All Employee Benefit Plans and Benefit Arrangements;
(c) All collective bargaining agreements or other contracts or
commitments (whether written or oral) to or with any labor union,
employee representative or group of employees; and
(d) All employment contracts, and all other contracts, agreements
or commitments (whether written or oral) to or with individual employees
for a period in excess of thirty (30) days or for a renumeration which
exceeds or will exceed in accordance with present commitments,
$20,000.00 per annum, identifying the individual and his or her
position.
There has not been any default in any obligation to be performed by Seller under
any Contract which default has had or could reasonably be expected to have a
Seller Material Adverse Effect, and Seller has not waived any right under any
such contract, commitment or agreement, so as to have a Seller Material Adverse
Effect. Copies of all such written contracts and written summaries of all such
oral contracts will be furnished or made available to Buyer within at least
fifteen (15) days of the date hereof.
3.8 Assets Necessary to Business. The Assets constitute all of the
assets, properties, licenses, real and personal property leases, permits,
consents and other agreements which are presently being used or are reasonably
related to the business and operations of the Business as presently conducted,
except for the Excluded Assets.
3.9 Litigation. Except as set forth on Schedule 3.9 and Schedule 3.16,
there is no pending or, to Seller's knowledge, threatened litigation,
arbitration, proceeding or governmental investigation or inquiry, nor, to
Seller's knowledge, is there any basis therefor, affecting the Theaters, the
Assets or the transactions contemplated hereby in any court or before any
arbitration panel of any kind or before any governmental body. Except as set
forth in Schedule 3.9, there is no outstanding order, judgment or award of which
Seller has received notice by any court, arbitrator or governmental body against
or affecting the Theaters, the Business or the Assets.
9
<PAGE> 10
3.10 Insurance. Seller now has and has had in full force and effect
since the opening of the Theaters fire, liability, workers' compensation,
personal injury, property damage to third parties and other insurance covering
operations at the Theaters as set forth in Schedule 3.10 attached hereto, in
amounts and against such losses and risks as are therein set out, and valid
policies for such insurance as is shown to be in effect on the date of this
Agreement will be outstanding and duly in force on the Closing Date. Such
policies are sufficient for compliance in all material respects with all
requirements of law and all agreements with respect to the operation of Seller's
business at the Theaters; are valid, outstanding and enforceable policies;
provide adequate insurance coverage for the Assets and the operations of
Seller's business at the Theaters; and the coverage provided thereby, with
respect to any act or event occurring on or prior to the Closing Date, will not
in any way be affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement. True and complete copies of all policies of
insurance now in effect have been furnished to or made available to Buyer except
for umbrella policies of Metromedia.
3.11 Inventory. The inventory of Seller on the Closing Date will consist
of items substantially all of which were and will be of the usual quality and
quantity used in the ordinary course of business at the Theaters and reasonably
expected to be usable or saleable within a reasonable period of time in the
ordinary course of business, except items of inventory which have been written
down to realizable market value or written off completely, and damaged, broken
or spoiled items in an amount which does not materially affect the value of the
inventory as a whole. With respect to inventory in the hands of suppliers for
which Seller is committed as of the date hereof or the Closing Date, such
inventory is described in Schedule 1.1(c) and is reasonably expected to be
usable in the ordinary course of business as presently being conducted.
3.12 Improvements, Furniture, Fixtures, Machinery and Equipment. Set
forth on Schedule 1.1(a) are lists as of the date hereof and as of the Closing
Date of each item of improvements (excluding the Theater building itself),
machinery, furniture, fixtures and equipment owned by Seller or the applicable
landlord located at the Theaters.
3.13 Equipment Leased by Seller. Schedule 1.1(e) attached hereto
contains a complete and accurate list of all equipment leases to which Seller is
a lessee, including a description of the equipment, the name and address of each
lessor, the expiration date of each lease, the monthly rent and any additional
rent payable under such lease and whether the consent of the lessor is required
for the consummation of the transaction contemplated. Unless otherwise indicated
on Schedule 1.1(e), each such lease may be cancelled on not more than ninety
(90) days notice. Copies of all such leases have been furnished to or made
available to Buyer. Seller is not in default under any such lease, and there is
not, under any such lease, any event of default or event which, with notice
and/or lapse of time, would constitute a default by Seller or, to its knowledge,
any party to such lease, in each case which could have a Seller Material Adverse
Effect.
3.14 Real Property.
(a) Schedule 1.1(d) includes a complete and accurate list of all
real property leases related to the Theaters, including the address of each
property, together with the name and address of each landlord, the expiration
date of each lease, the monthly rent, common area maintenance costs, real estate
tax charges and any other amounts due under the Leases (as adjusted from time to
time pursuant to the terms of the Leases) and whether the consent of any other
party is
10
<PAGE> 11
required to consummate the transactions contemplated hereby. True and correct
copies of such leases and any amendments thereto have been made available to
Buyer. The Leases are valid and binding obligations of the parties thereto and
are in full force and effect. Seller has not received written notice nor to its
knowledge is Seller or any other party in default under any such Lease, and
there is not, under any such Lease, any event of default or event which, with
notice and/or lapse of time, would constitute a default by Seller or, to its
knowledge, any other party to such Lease, except as set forth on Schedule 3.14.
Seller has no knowledge of any pending or threatened action or proceeding which
could result in a modification or termination of the zoning applicable to the
real property subject to the Leases. Seller has not received written notice that
any of the real property is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without compensation therefor, nor to Seller's knowledge has
any such condemnation, expiration or taking been proposed.
(b) Schedule 1.1(d)(i) includes a complete and accurate list of
all real property related to the Theaters owned in fee by Seller, including the
address of each property. Seller has no knowledge of any pending or threatened
action or proceeding which could result in a modification or termination of the
zoning applicable to the Fee Property. Seller transfers the Fee Property to
Buyer free and clear of any restrictions which would materially affect the use
for which they are held by Seller. Seller has not received written notice that
any of the Fee Property is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without compensation therefor, nor to Seller's knowledge has
any such condemnation, expiration or taking been proposed.
3.15 Employees. Schedule 3.15 contains a list of all employees of Seller
at the Theaters, together with their job titles, amount of compensation, fringe
benefits and date of employment.
3.16 Compliance with Laws; Environmental Matters.
(a) For the purposes of this Agreement, the term "Environmental
Laws" shall mean all applicable federal, state and local environmental
protection, or other similar laws, ordinances, licenses, rules, regulations and
permit conditions, including but not limited to the Federal Water Pollution
Control Act, Resource Conservation & Recovery Act, Safe Drinking Water Act,
Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community Right
to Know or other applicable U.S. or Canadian federal, state, province, or local
laws of similar effect, each as amended as of the Closing Date, and the term
"Hazardous Materials" shall mean any hazardous or toxic substances, wastes or
materials, including without limitation petroleum or petroleum products, defined
as such or governed by any applicable Environmental Law.
(b) Except as set forth on Schedule 3.16, (i) Seller is in, and
to Seller's knowledge, the Theaters have been maintained in, material compliance
with the terms and conditions of all Environmental Laws and all other laws,
ordinances, rules and regulations and has obtained all material permits required
to be obtained pursuant to all Environmental Laws; (ii) no asbestos in a friable
condition or equipment containing polychlorinated biphenyls or leaking
underground or above-ground storage tanks is contained in or located at any
Theater as of the Closing Date; (iii) Seller has fully disclosed all known
material past and present non-compliance with Environmental Laws, and all known
past discharges, emissions, leaking or releases of Hazardous Substances known to
Seller; and (iv) Seller has not received written notice of any past or present
events, conditions, circumstances, activities, practices, incidents, actions or
plans that are
11
<PAGE> 12
alleged to form the basis of any claim, action, suit, proceeding, hearing or
investigation under any Environmental Laws; provided, however, that clauses (i)
through (iv) only address those matters that would have a Seller Material
Adverse Effect.
3.17 Taxes.
(a) All (i) material tax returns required to be filed by or on
behalf of Seller have been filed with respect to all taxes of any kind, (ii)
taxes shown to have been due pursuant to such returns have been paid and (iii)
all other taxes for which a notice of assessment or demand for payment has been
received have been paid.
(b) All tax returns filed by or on behalf of Seller have been
prepared in accordance with all applicable laws and requirements, are correct
and complete and accurately reflect the taxable income (or other measure of tax)
of the entity filing the return in all material respects.
(c) Except as set forth on Schedule 3.17, there are no tax Liens
upon any of the Assets, except Liens with respect to real and personal property
taxes not yet delinquent, and Seller is not aware of any audit or other
proceeding or investigation, or of any position taken on a tax return of Seller
which could give rise to a Lien upon any Assets.
(d) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any tax or
deficiency against Seller, nor are there any actions, suits, proceedings,
investigations or claims now pending against Seller regarding any tax or
assessment or any matter under audit by or discussion with any federal, state,
local or foreign authority relating to any taxes or assessments, or any claims
for additional taxes or assessments asserted by any such authority.
3.18 Employee Benefit Plans - ERISA. Except as set forth on Schedule 3.18:
(a) With respect to any Employee Benefit Plan that is subject to
regulation under Title IV of ERISA ( other than a multiemployer plan, as defined
in ERISA Section 3(37), ?Multiemployer Plan?), no Pension Plan has been
terminated so as to subject, directly or indirectly, any assets of Seller or its
ERISA Affiliates to any liability, contingent or otherwise, or the imposition of
any liens under Title IV of ERISA.
(b) With respect to any Multiemployer Plan maintained,
contributed to or with respect to which Seller or any ERISA Affiliate has or had
an obligation to contribute:
(A) Neither Seller nor any ERISA Affiliate has withdrawn
from a Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively,
so as to result in a liability to Seller or any ERISA Affiliate which
has not been fully paid.
(B) To Seller's knowledge, with respect to each
Multiemployer Plan: no such plan has been terminated or has been in
reorganization under ERISA so as to result in any material liability to
Seller or any ERISA Affiliate under Title IV of ERISA and no proceeding
has been initiated by any person (including the PBGC) to terminate any
such plan.
12
<PAGE> 13
(c) Neither Seller nor any ERISA Affiliate has any liability for
unpaid contributions under Section 515 of ERISA with respect to any Pension Plan
or Multiemployer Plan.
(d) With respect to all group health plans, within the meaning of
Section 5000(b)(1) of the Code, maintained by Seller and its ERISA Affiliates
for the benefit of the employees, former employees and beneficiaries of such
employees and former employees, Seller and its ERISA Affiliates have complied in
all material respects with the provisions of Section 4980B of the Code and Part
6 of Title I of ERISA.
3.19 Books and Records and Financial Statements. Seller maintains its
books, records and accounts, including without limitation, those kept for
financial reporting purposes and tax purposes, with respect to the Theaters in
sufficient detail to reflect accurately and fairly the transactions and
dispositions of its assets and liabilities at the Theaters. All financial
statements delivered to Buyer present fairly the financial condition of the
Seller and the results of their operation at the Theaters. Such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved.
3.20 Consents. Except as set forth on Schedule 3.20, other than the
consent of the lessors under the Leases or any personal property lease and other
than filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), no consent, approval, license, permit or authorization
or order of or with any court, governmental body or other person or entity is
required in connection with the execution and delivery of this Agreement by
Seller or the consummation of the transaction contemplated herein.
3.21 Full Disclosure. No representation or warranty of Seller made in
this Agreement (including the schedules, exhibits and other documents delivered
pursuant to this Agreement), or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact which
affects the Assets of Seller, or Seller's title to the Assets or omits or will
omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances when
made. Each of the schedules attached hereto is a true, complete and accurate
list or description, as appropriate, of the items purported to be listed or
described thereon.
3.22 Financial Statements. Seller has delivered to Buyer the
consolidated balance sheet, statement of income and statements of cash flows of
Landmark, at and for the fiscal years ended March 31, 1995 and 1996, the nine
months ended December 31, 1996 and the nine months ended September 30, 1997 (the
"Unaudited Financials"). Such Unaudited Financials are in accordance with the
books and records of Landmark and Seller, fairly present the consolidated
financial position, results of operations and cash flows of Landmark in
accordance with generally accepted accounting principles ("GAAP") on a
consistent basis, except for the absence of footnotes and subject to year-end
adjustments not material in effect and consistent with prior years' adjustments.
3.23 Intellectual Property. Schedule 3.23 sets forth a list of all
registered and unregistered trademarks, copyrights, tradenames, service marks,
and all applications for any of the foregoing, used in the operation of the
Business ("Intellectual Property"). Except as set forth on Schedule 3.23, Seller
owns or is licensed to or otherwise has the right to use all such Intellectual
Property, free and clear of all Liens. Seller has not received any written
notice of any claim of infringement with respect to such Intellectual Property,
and to Seller's knowledge there is no basis
13
<PAGE> 14
for any such claim.
3.24 No Material Changes. Since March 31, 1997, the Theaters and the
Business have been operated in the ordinary course, consistent with past
practices, and there has not been any event which has had or could reasonably be
expected to have a Seller Material Adverse Effect. In particular, except in the
ordinary course of business, consistent with past practices, there has not been
any sale or other disposition of material Assets or amendment, cancellation or
termination of any material contract or agreement related to the Assets or the
Business.
SECTION 4. REPRESENTATIONS AND WARRANTIES BY BUYER.
Buyer represents and warrants the following;
4.1 Organization and Good Standing. 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 to carry on its business as now
conducted by it and to own and operate its assets as now owned and operated by
it. Buyer is qualified to do business and is in good standing in each
jurisdiction where such qualification is necessary, except for such failures to
be so qualified as would not, in the aggregate, have a material adverse effect
on Buyer's business or financial condition, the Business or on Buyer's ability
to consummate the transactions contemplated by this Agreement (a "Buyer Material
Adverse Effect"). Buyer has delivered to Seller true and complete copies of the
Buyer's Certificate of Incorporation and all amendments thereto, certified by
the Secretary of State of Delaware, and the bylaws of Buyer as presently in
effect, certified as true and correct by Buyer's Secretary.
4.2 Authority. Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and any instruments and agreements
contemplated herein required to be executed and delivered by it pursuant to this
Agreement, including, without limitation, the Lease Assignments and the Other
Instruments (collectively, the "Related Instruments") and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
authorized, executed and delivered by Buyer, and no other corporate act or
proceeding on the part of the Buyer is necessary to authorize the execution and
delivery of this Agreement or the Related Instruments or to consummate the
transactions contemplated hereby or thereby. This Agreement is, and each of the
Related Instruments, when executed and delivered by Seller at the Closing, will
be, a legally valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms.
4.3 No Violation. Neither the execution and delivery by Buyer of this
Agreement nor any of the Related Instruments, nor the consummation by Buyer of
the transactions contemplated hereby or thereby, will violate any provision of
Buyer's (i) Articles of Incorporation or Bylaws, (ii)(a) violate, conflict with
or constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or (b) result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of, any liability or obligation pursuant to, under
any note, bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, understanding, arrangement, agreement or restriction to which Buyer
is a party or to which any of the Assets may be subject, (iii) violate any
statute or law or any judgment, decree, order, writ, injunction, regulation or
rule of any court or governmental authority applicable to Buyer, or (iv) result
in the creation or imposition of any Lien upon any of the Assets except, in
14
<PAGE> 15
the case of clauses (ii) and (iii) for violations, conflicts, defaults,
terminations and accelerations which would not, in the aggregate, have a Buyer
Material Adverse Effect.
4.4 No Brokerage Commission. Buyer has not employed any broker, agent or
finder in connection with any transaction contemplated by this Agreement and
hereby indemnifies Seller against any liability for a brokerage commission or
finders fee or any description incurred by Buyer with respect to any transaction
contemplated by this Agreement.
SECTION 5. AGREEMENTS BY SELLER AND BUYER.
5.1 Except to the extent waived or consented to in writing by Buyer,
Seller agrees that pending the Closing:
(a) Seller will operate the Business in the ordinary course,
consistent with past practice, and use reasonable commercial
efforts to keep the business of Seller at the Theaters intact
(including without limitation (i) by proceeding with customary
advertising and inventory purchases and (ii) by maintaining its
relationships with film distributors consistent with past
practice), to maintain, preserve and protect the property used
to conduct the business at the Theaters, and to preserve the
good will of suppliers and customers and others having business
relations with it;
(b) Seller will promptly notify Buyer of any lawsuits, proceedings,
or to Seller's knowledge, governmental investigations which are
threatened in writing or commenced against Seller, or the
officers or directors of Seller between the date of this
Agreement and the Closing Date which may adversely affect the
Business or the transactions contemplated hereby, except routine
personal injury litigation covered by Seller's insurance.
(c) Seller shall not incur any liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise and
whether due or to become due) with respect to the Theaters for
which Buyer may be liable after the Closing, except for trade
payables and other obligations incurred in the ordinary course
of business consistent with past practices;
(d) Seller shall not permit, allow or cause any of its properties or
assets (tangible or intangible) at the Theaters to be subjected
to any Lien other than Permitted Liens;
(e) Seller shall not sell, transfer or otherwise dispose of any of
its assets related to the Theaters (tangible or intangible)
except in the ordinary course of business and consistent with
past practices;
(f) Seller shall not terminate or amend in any respect any material
contract, lease, license or other agreement related to the
Business or the Assets to which it is a party;
(g) Seller shall maintain all insurance policies and coverage
relating to the Assets; and
(h) Except as a result of the Closing, which shall trigger a
complete withdrawal as provided in Sections 3 and 4 of ERISA,
Seller shall not agree, whether in writing or
15
<PAGE> 16
otherwise, to do any of the foregoing.
5.2 Supplying of Information. Prior to Closing, Seller shall furnish to
Buyer or its representatives complete and accurate information and access to
facilities and personnel as Buyer may reasonably request in connection with any
audit, review, investigation or examination of the books and records, accounts,
contracts, properties, assets, operations and facilities of Seller.
5.3 Notices and Consents. Subject to Section 6.8 hereof, Seller shall
give all notices to third parties and obtain prior to the Closing all consents
listed on Schedule 3.20 and the consents of the landlords under the Leases
attached hereto or otherwise mutually agreed by Buyer and Seller to be required
in connection with the consummation of the transactions contemplated hereby,
including without limitation, the consent of each lessor of real or personal
property leased by Seller included in the Assets to the assignment of Seller's
interest under such lease to Buyer at the Closing to the extent required. All
such consents shall be in writing and in form and substance reasonably
satisfactory to Buyer and Buyer's counsel and executed counterparts thereof
shall be delivered to Buyer promptly after receipt thereof by Seller but in no
event later than the Closing. Buyer agrees to cooperate with Seller in obtaining
such consents, including without limitation, by way of furnishing financial and
other information as may reasonably be requested by any lessor or third party
whose consent is needed. Buyer and Seller agree to prepare and file within ten
(10) days after the execution of this agreement the premerger notification
required by the HSR Act and to provide such further information as may be
requested by the Department of Justice or Federal Trade Commission in connection
therewith.
5.4 Employees.
(a) On or prior to the Closing Date, Buyer shall advise Seller of
those employees of Seller which Buyer intends to employ. Seller will do nothing
to dissuade any of its employees from remaining in the employ of Buyer after the
Closing Date, and Seller will be responsible for all severance and termination
costs, with the exception of the Employee Costs.
(b) Seller shall be solely responsible for all of the Employee
Plans and all obligations and liabilities thereunder. Buyer shall not assume any
of the Employee Plans or any obligation or liability thereunder.
5.5 Other Transactions. Prior to the Closing, Seller shall not, nor
shall Seller permit any of its officers, directors, stockholders or other
representatives to, (i) directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information or
assistance to, any corporation, partnership, person, or other entity or group
(other than Buyer and its representatives) concerning any merger, issuance or
sale of securities, sale of substantial assets or similar transaction involving
the Assets or the Business, or (ii) entertain or discuss any acquisition or
proposals with respect to a substantial portion of the Assets arising either
from parties who previously expressed an interest in the Assets or from any
unsolicited sources.
5.6 Casualty Loss. All risk of loss to the Assets shall remain upon the
Seller prior to the Closing Date.
(a) If prior to the Closing Date, the Assets located in those
Theaters listed in Schedule 5.6 attached hereto (the "Critical Theaters") are
damaged (excluding immaterial damage which does not interfere with the operation
of the Theater) or destroyed by fire or other casualty and cannot be repaired to
Buyer's reasonable satisfaction within 90 days, Buyer may (i) terminate
16
<PAGE> 17
this Agreement by written notice to the Seller or (ii) close. If Buyer elects to
close despite said damage or destruction to the Critical Theaters, then Buyer
may (i) postpone the Closing Date until such time as the Critical Theaters are
repaired to Buyer's reasonable satisfaction or (ii) elect to close partially by
buying all Assets except the Theater in question and closing on such Theater
when it has been repaired to Buyer's reasonable satisfaction. In the event of a
partial closing, the parties will follow the same provisions as set forth in
Section 5.6(b) below with regard to payment of a portion of the Purchase Price
at Closing and escrow of a portion of the Purchase Price with respect to the
Theater not purchased at the initial Closing.
(b) If prior to the Closing Date, the Assets located in any
Theaters other than the Critical Theaters are damaged or destroyed by fire or
other casualty, Buyer shall withhold from the Purchase Price and deposit into
escrow an amount equal to the twelve months cash flow prior to September 30,
1997 generated for such Theater multiplied by six ("Casualty Payment"). Unless
and until Seller has repaired the damage to such Theater so that such Theater
could be opened to the public, as reasonably acceptable to Buyer, the Casualty
Payment shall remain escrowed; provided that the Casualty Payment shall be
released to Buyer in the event that Seller is unable to satisfactorily repair
such Theater within six (6) months from the date of such casualty.
5.7 Discharge of Liens. Seller shall cause all Liens on any of the
Assets (other than Permitted Liens or Liens not caused by Seller on the Land
underlying a Leased Property) to be terminated or otherwise discharged at or
prior to the Closing.
5.8 No Proceeding or Litigation. Except as set forth on Schedule 3.9,
There shall not be threatened, instituted or pending any suit, action,
investigation, inquiry, injunction, writ or preliminary restraining order or
other proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree which (a) seeks to restrain or prohibits the consummation of
the transactions contemplated hereby or (b) could reasonably be expected to have
a Seller Material Adverse Effect.
5.9 Earthquake Reinforcements. Prior to Closing, Seller shall construct,
to the reasonable satisfaction of Buyer, any improvements in connection with the
Theaters known as the California Theater and the UC Berkeley Theater necessary
to ensure that such Theaters comply with (a) all statutes, rules and regulations
governing earthquake and seismic reinforcement and (b) all applicable
requirements of the leases governing such Theaters. Alternatively, Seller may
elect to reduce the Purchase Price by One Million Four Hundred Thousand Dollars
($1,400,000).
5.10 [Intentionally Omitted]
5.11 Parking Issues. From the Closing and through the third anniversary
thereof, Buyer and Seller shall share equally the actual costs in connection
with providing parking for the Theater known as the Metro Ten and Seller agrees
to promptly reimburse Buyer for its share of such costs. Buyer acknowledges that
Seller is currently involved in pending and/or threatened litigation concerning
parking for the Metro Ten Theater. Seller acknowledges that, notwithstanding the
next sentence, Seller will remain liable for all claims, costs, attorneys fees,
expenses, judgments, settlements and damages relating to such litigation in
connection with parking issues at the Metro Ten Theater. Buyer shall have the
right to control such litigation and to defend, settle or take to trial any
claims raised therein, all at Seller's expense. Buyer agrees to provide to
Seller in writing a status report on the litigation (a) on a quarterly basis and
(b) upon the occurrence of any major development
17
<PAGE> 18
5.12 Construction of Theaters. Buyer and Seller agree that Buyer shall
have the right, upon written notice to Seller, from and after the date of this
Agreement through the Closing to supervise and take over the construction of the
Theaters located in Waltham Massachusetts and St. Louis Missouri to ensure such
construction complies (and Seller agrees to cause such Theaters to comply) in
all material respects with all governmental requirements including, without
limitation, zoning rules and regulations, building codes and the ADA. Buyer will
pay for all changes it requires in excess of Seller's present construction
budget which has been provided to Buyer, including any incidental costs related
to Buyer's requests for changes.
5.13 Home Office Lease. Seller agrees to complete the build-out of the
improvements set forth on Schedule 5.13 in connection with Seller's corporate
offices located at 2230 Barrington Avenue, Los Angeles, California (the
"Corporate Offices"), in exchange for which, Buyer will assume the obligations
under the leases governing the Corporate Offices; provided that Seller will not
be required to complete the screening rooms at the Corporate Offices and that
Seller will not be required to spend more than $50,000 from the date of this
Agreement to complete such build-out.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE.
The obligation of Buyer to close shall be subject to the
following conditions precedent:
6.1 Fulfillment of Covenants. Seller shall have performed and complied
in all material respects with all covenants, obligations and agreements as set
forth in this Agreement to be so performed or complied with by it at or prior to
the Closing, and Seller shall deliver to Buyer a certificate dated as of the
Closing Date executed by an executive officer of Seller so stating.
6.2 Representation and Warranties. The representations and warranties of
Seller contained in this Agreement shall be complete and accurate in all
material respects on the date when made and shall also be accurate on the
Closing Date to the same extent as if made on such date. Seller shall deliver to
Buyer a certificate dated the Closing Date and executed by an executive officer
of Seller stating that said representations and warranties are true, correct and
accurate in all material respects on the date hereof and as of the Closing Date
and that all covenants, agreements and conditions required by this Agreement to
be performed by Seller prior to Closing have been performed on or prior to the
Closing Date.
6.3 Corporate Approval. Buyer shall have received a copy of the
resolution of the Board of Directors of Seller, certified by its Secretary or an
Assistant Secretary, authorizing the execution of this Agreement and the
consummation of the transactions contemplated hereby.
6.4 Opinion of Seller's Counsel. At the Closing Date there shall have
been delivered to Buyer an opinion from counsel for Seller, dated as of the
Closing Date, acceptable to counsel for Buyer, to the effect that:
(a) Seller is a corporation duly incorporated and validly
existing in good standing under the laws of the State of California.
Seller has corporate power and authority to own its properties and to
conduct its business. Seller is qualified to do business and in
18
<PAGE> 19
good standing in each jurisdiction in which a Theater is located;
(b) The execution of this Agreement and the Other Instruments by
Seller, the delivery to Buyer, and the performance of their respective
terms have been duly authorized by Seller;
(c) No authorization, approval, consent or license of any
regulatory body or authority is required for the sale and delivery of
the Assets, which has not been obtained;
(d) The consummation of this Agreement will not and does not
violate (i) the Articles of Incorporation or Bylaws of Seller, (ii)
breach or cause a default under any term or provision of any material
contract identified to such counsel by Seller as one to which Seller is
a party or by which any of Seller's assets are bound; or (iii) violate
any judgment, decree, injunction, writ or order identified to such
counsel by Seller as applicable to Seller; or (iv) breach or violate any
law, rule or regulation applicable to Seller; and
(e) Each of this Agreement and the Other Instruments to which
Seller is a party is a legally valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms; subject to the
effect of bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors and other
customary exceptions reasonably acceptable to Buyer's counsel.
6.5 No Material Adverse Changes. No occurrence constituting or having a
Seller Material Adverse Effect shall have occurred.
6.6 Documents. All documents required by this Agreement to be delivered
by Seller to Buyer at the Closing shall be in substance reasonably satisfactory
to Buyer and shall have been executed and delivered to Buyer.
6.7 Consents and Approvals. The waiting period under the HSR Act shall
have expired. All licenses, permits, consents, approvals and authorizations of
all third parties and governmental bodies and agencies required by this
Agreement shall have been obtained and provided to Buyer.
6.8 Certain Real Estate Documents. Seller shall use its reasonable good
faith efforts to have delivered to Buyer the consents referred to in Section 5.3
(the "Consents"), Estoppel Certificates, Non-Disturbance Agreements and
Memoranda of Lease in the forms of Exhibit "D", Exhibit "E" and Exhibit "F"
hereto, respectively, from lessors and mortgagees, respectively, with respect to
each of the real property leases listed on Schedule 1.1(d) with such changes
requested by such lessors and mortgagees, respectively, agreed to in the
reasonable discretion of Buyer.
6.9 No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry, injunction, writ
or preliminary restraining order or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree which (a) seeks to
restrain or prohibits the consummation of the transactions contemplated hereby
or (b) might have a Seller Material Adverse Effect.
6.10 Non-Compete. Buyer and Metromedia shall have executed and delivered
a
19
<PAGE> 20
mutually satisfactory non-compete agreement.
6.11 Audited Financial Statements. Seller shall have delivered to Buyer
by December 31, 1997 the consolidated balance sheet, statement of income and
statements of cash flows of Landmark, at and for the fiscal years ended March
31, 1995 and 1996 and for the nine month period ending December 31, 1996,
accompanied by the unqualified audit opinion of a "Big Six" accounting firm (the
"Audited Financials"). Such Audited Financials will be the same in all material
respects as the Unaudited Financials, fairly present the consolidated financial
position, results of operations and cash flows of Landmark in accordance with
generally accepted accounting principles ("GAAP") on a consistent basis. Buyer
shall reimburse Seller fifty percent (50%) of all costs incurred by Seller
solely in connection with the preparation of such Audited Financials in
connection with the transaction contemplated by this Agreement.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND METROMEDIA TO
CLOSE.
The obligation of Seller to close shall be subject to the
following conditions precedent:
7.1 Fulfillment of Covenants. Buyer shall have performed and complied in
all material respects with all of its covenants, obligations and agreements
required by this Agreement to be so complied with by it at or prior to the
Closing, and Buyer shall deliver to Seller a certificate executed by an
executive officer of Buyer so stating.
7.2 Representations and Warranties. The representations and warranties
of Buyer contained in this Agreement shall be accurate in all material respects
on the Closing Date to the same extent as if made on such date, and Buyer shall
deliver to Seller a certificate dated on the Closing Date executed by its
President or Vice President and its Secretary or an Assistant Secretary or its
Treasurer stating that said representations and warranties are accurate in all
respects as of the Closing Date and that all conditions precedent to Closing to
be performed by Buyer shall have been performed.
7.3 Corporate Approval. Seller shall have received a certified copy of
the resolutions of the Board of Directors of Buyer, certified by its Secretary
or an Assistant Secretary, authorizing the execution of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 8. TERMINATION.
In addition to any other provision in this Agreement, this Agreement may
be terminated at any time (i) by mutual consent of all parties, (ii) by either
Buyer or Seller at any time in the event of a breach of the other which remains
uncured for thirty (30) days after notice in writing of such breach, (iii) by
Buyer pursuant to Section 5.6, or (iv) by either Buyer or Seller at any time
after March 31, 1998.
20
<PAGE> 21
SECTION 9. INDEMNIFICATION.
9.1 Survival of Representations and Agreements. The representations and
warranties and agreements made herein are true and binding as of the date hereof
and shall continue in full force and effect for two (2) years after the Closing
Date notwithstanding any investigations which may have been made by any of the
parties prior thereto. Any Claim Notice (as defined in Section 9.5) must be
given within said 2 years.
9.2 Seller's and Metromedia's Agreement to Indemnify. Each of Seller and
Metromedia, jointly and severally, shall indemnify, defend, save and hold
harmless Buyer and its affiliates from any liability, damage, deficiency, loss,
cost or expense, including reasonable attorney fees and any costs of
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty made by Seller in
or pursuant to this Agreement; (ii) any breach of any covenant or agreement made
by Seller in or pursuant to this Agreement; (iii) any liability arising from the
operation of the Theaters on or prior to the Closing Date; (iv) any liability
arising from a written claim, action, notice of investigation, notice of intent
to bring an action or written threat to bring an action in connection with any
alleged ADA violation at any Theater (excluding the Waltham and/or St. Louis
Theaters if Buyer has exercised its rights under Section 5.12 with respect
thereto); (v) any liability imposed upon or resulting from any claims against
Buyer by the Transition Employees for severance or other termination
compensation in connection with their termination by Buyer; or (vi) any Excluded
Liabilities.
9.3 By Buyer. Buyer shall indemnify and save and hold harmless Seller
and its affiliates from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (i) any breach of any
representation or warranty made by Buyer in or pursuant to this Agreement, (ii)
any breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement, or (iii) any liability arising from the operation of the Theaters on
or after the Closing Date.
9.4 Cooperation. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
9.5 Defense of Claims. If a claim for Damages (a "Claim") is to be made
by a party entitled to indemnification hereunder against the indemnifying party,
the party claiming such indemnification shall, give written notice (a "Claim
Notice") to the indemnifying party as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under this
Article 9; provided that such notice must be given within two (2) years after
the Closing Date. If any lawsuit or enforcement action is filed against any
party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in any
event within fifteen (15) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except to the extent that
the indemnifying party demonstrates actual damage caused by such failure. After
such notice, if the indemnifying party shall acknowledge in
21
<PAGE> 22
writing to the indemnified party that the indemnifying party shall be obligated
under the terms of its indemnity hereunder in connection with such lawsuit or
action, then the indemnifying party shall be entitled, if it so elects, (i) to
assume the defense and investigation of such lawsuit or action, (ii) to employ
and engage attorneys of its own choice (which shall be reasonably acceptable to
the indemnified party) to handle and defend the same, at the indemnifying
party's cost, risk and expense unless the named parties to such action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, and (iii) to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such consent not to be
unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Theater or is reasonably expected to have
a material adverse effect on the indemnified party's business operations, then,
notwithstanding the foregoing, the indemnified party shall have the right to
control such remediation or resolution, including without limitation to assume
the defense and investigation of such lawsuit or action, to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle such Claim. If the
indemnifying party fails to assume the defense of such claim within fifteen (15)
calendar days after receipt of the Claim Notice, the indemnified party against
which such claim has been asserted will (upon delivering notice to such effect
to the indemnifying party) have the right to undertake, at the indemnifying
party's cost and expense, the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party. In the event
the indemnified party assumes the defense of the claim, the indemnified party
will keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Article 9 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
9.6 Limitations. Neither Buyer nor Seller shall be liable to the other
under this Article 9 for any Damages until the amount otherwise due the party
being indemnified exceeds one percent (1%) of the Purchase Price in the
aggregate, in which case such indemnifying party will be liable to the
indemnified party for all such amounts, in excess of the first one percent (1%)
of the Purchase Price; provided, however, that this limitation shall not apply
with respect to Damages or Claims arising out of a breach of a representation or
warranty contained in Sections 3.16, 3.17 or 3.18; provided, further that this
limitation shall not apply with respect to any damages set forth in Sections
9.2(iv) or (v). In addition, except for Damages or Claims arising out of a
breach of a representation or warranty contained in Section 3.16, 3.17 or 3.18,
Seller shall have no liability for indemnification in excess of one half of the
Purchase Price. In connection with Damages or Claims arising out of a breach of
a representation or warranty contained in Section 3.16, 3.17 or 3.18, Seller
shall have no liability for indemnification in excess of the Purchase Price.
9.7 Liability and Remedies, etc. No individual representative of any
party shall be personally liable for any Damages under the provisions contained
in this Article 9. Nothing herein shall relieve either party of any liability to
make any payment expressly required to be made by such party pursuant to this
Agreement. The term "Damages" as used in this Article 9 is not limited to
matters asserted by third parties against Seller or Buyer, but includes Damages
incurred or sustained by Seller or Buyer in the absence of third party claims.
Payments by Buyer of amounts for which Buyer is indemnified hereunder, and
payments by Seller of amounts for which Seller is
22
<PAGE> 23
indemnified, shall not be a condition precedent to recovery. Seller's obligation
to indemnify Buyer, and Buyer's obligation to indemnify Seller, shall not limit
any other rights, including without limitation rights of contribution which
either party may have under statute or common law.
SECTION 10. MISCELLANEOUS.
10.1 Reformation and Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, the legality, validity and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.
10.2 Relief. Seller acknowledges and agrees that in view of the
uniqueness of Seller's business at the Theaters, damages at law would be
insufficient for breach of any of Seller's covenants to sell the Assets to
Buyer. Accordingly, Seller agrees that in the event of a breach or threatened
breach by Seller of such provisions, Buyer shall be entitled to seek equitable
relief in the form of an injunction to prevent irreparable injury. Nothing
herein shall be construed as prohibiting Buyer from pursuing any remedies,
including damages, for breach or threatened breach of this Agreement.
10.3 Further Assurances. Each party hereto shall, from time to time
after the Closing, at the request of any other party hereto and without further
consideration, execute and deliver such other instruments of conveyance,
assignments, transfer and assumption, and take such other actions, as such other
party may reasonably request to more effectively consummate the transactions
contemplated by this Agreement. Seller acknowledges that prior to and/or after
the Closing Date, Buyer may be required by securities and accounting
regulations, or may elect for other business reasons, to engage an independent
public accounting firm to audit the financial statements of the Business for
periods prior to or including the Closing Date. Seller agrees to cooperate with
Buyer in the preparation of such financial statements and the conduct of such
audit, including without limitation, by providing access to all relevant books,
records, files and other data (whether in written or computer-readable form) of
Seller (or, at Buyer's request and at Buyer's expense, by providing copies of
such books, records, files and other date.)
10.4 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be sent by certified mail,
return receipt requested (or by the most nearly comparable method if mailed from
or to a location outside of the United States), or by cable, telex, telegram or
facsimile transmission (receipt confirmed), or delivered by hand or by overnight
or similar delivery service, fees prepaid, to the party to whom it is to be
given at the address of such party set forth below or to such other address for
notice as such party shall provide in accordance with the terms of this section.
Except as otherwise specifically provided in this Agreement, notice so given
shall, in the case of notice given by certified mail (or by such comparable
method) be deemed to be given and received three business days after the time of
certification thereof (or comparable act), in the case of notice so given by
overnight delivery service, on the date of actual delivery, and, in the case of
notice so given by cable, telegram, facsimile transmission, telex or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery. Any party hereto may change the address designated for notice by
written notice to the other party.
23
<PAGE> 24
To: Seller
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: General Counsel
Telecopy: (201) 531-2803
To: Buyer
Silver Cinemas, Inc.
4004 Beltline Road, Suite 205
Dallas, Texas 75244
Attention: Steven L. Holmes and Thomas J. Owens
Telecopy: (972) 503-9864
10.5 Expenses. Except as set forth in this Section 10.5, each party
hereto shall bear its or his own costs and expenses incurred pursuant to this
Agreement and the transactions contemplated hereby and all investigations and
proceedings in connection therewith, including without limitation, fees and
expenses of their respective counsel and accountants ("Expenses"). If the
Closing does not occur due to a violation of Section 5.5 of this Agreement, (i)
Seller will, in addition to bearing its own Expenses, the Seller will promptly
reimburse Buyer for its Expenses, and (ii) Buyer will be free to seek additional
damages for breach of this Agreement.
10.6 Entire Agreement. This Agreement, together with the Schedules
referred to herein which are incorporated herein by this reference, and the
other documents, instruments, certificates and agreements referred to herein,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior negotiations and understandings
and agreements.
10.7 Governing Law. The parties hereto agree that this Agreement shall
be governed by, construed and enforced in accordance with the laws of the State
of New York without giving effect to the conflict of laws rules or choice of
laws rules thereof.
10.8 Number and Gender of Words. When the context so requires in this
Agreement, words or gender shall include either or both of the other genders and
the singular number shall include the plural. Whenever the term "Seller's
knowledge" or a similar term is used in this Agreement it shall include the
actual knowledge of Steve Gilula, Bert Manzari, Paul Richardson, Janet Grumer
and Gary Cann and the knowledge that reasonably could have been obtained by such
persons through a diligent inquiry of their personnel and files.
10.9 Assignability and Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their respective successors
and permitted assigns. Unless specifically provided otherwise in this Agreement,
this Agreement and the rights and obligations hereunder are not assignable
without the express written consent of all parties hereto.
10.10 Amendments. This Agreement may not be modified, amended or
supplemented except by a written agreement executed by all of the parties
hereto.
24
<PAGE> 25
10.11 Counterparts. This Agreement may be executed in several
counterparts, all of which taken together shall be deemed to constitute one and
the same instrument.
10.12 Headings. The headings of sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
10.13 Waiver. The failure of any party to insist, in any one or more
instances, upon performance of any of the terms, covenants or conditions of this
Agreement shall not be construed as a waiver or a relinquishment of any right or
claim granted or arising hereunder or of the future performance of any such
term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations of the parties hereto.
10.14 Third Parties. Except with respect to indemnification under
Section 9, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person other than the parties hereto and their
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement.
10.15 Public Announcements. Except as required by law, no press release
or other public disclosure of the transactions contemplated by this Agreement
will be made unless mutually agreed to by Buyer and Seller, which approval will
not be unreasonably withheld. If Seller believes public disclosure is necessary
as a result of Seller or its parent company being a public entity, Seller will
provide Buyer with at least twenty-four hours prior opportunity to review and
comment on the proposed disclosure.
10.16 Purchase Agreement to Control. The terms and conditions of this
Agreement shall control any conflicting terms and conditions set forth in any
Exhibit to this Agreement.
[SIGNATURE PAGE TO FOLLOW]
25
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have caused this Agreement to be executed on the day and year first above
written.
METROMEDIA INTERNATIONAL GROUP, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
LANDMARK THEATRE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
SEVEN GABLES CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
PARALLAX THEATRE SYSTEMS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
[signatures continued on next page]
26
<PAGE> 27
SAN FRANCISCO LANDMARK THEATRE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
WISCONSIN REPERTORY CINEMAS, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
THE LANDMARK THEATRE GROUP
By:____________________________________
Name:__________________________________
Title:_________________________________
SILVER CINEMAS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
27
<PAGE> 28
EXHIBIT A
BILL OF SALE
For good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, [SELLER] a __________ corporation ("Seller"),
does hereby grant, bargain, transfer, sell, assign, convey and deliver to Silver
Cinemas, Inc., a Delaware corporation ("Buyer"), all right, title and interest
in and to the Assets (as such term is defined in the Agreement for the Purchase
and Sale of Assets dated as of December ___, 1997, by and between Buyer and
Seller (the "Agreement"). Buyer hereby acknowledges that Seller is making no
representation or warranty with respect to the assets being conveyed hereby
except as specifically set forth in the Agreement. Seller for itself, its
successors and assigns hereby covenants and agrees that, at any time and from
time to time forthwith upon the written request of Buyer, Seller will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, each and all of such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may reasonably be required by
Buyer in order to assign, transfer, set over, convey, assure and confirm unto
and vest in Buyer, its successors and assigns, title to the assets sold,
conveyed, transferred and delivered by this Bill of Sale.
This Bill of Sale is executed and delivered by Seller pursuant to
the Agreement.
Executed at _________________, this ______ day of ________, 1998.
[SELLER'S NAME]
By __________________________
Its__________________________
STATE OF _____________________ )
COUNTY OF ____________________ ) ss.
On _______________________, before me, ___________________, personally appeared
____________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________ [SEAL]
Notary Public in and for said
County and State
<PAGE> 1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
AMONG
STARTIME CINEMA, INC.,
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.,
STARTIME PROPERTIES, INC.,
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST
UNDER DEED DATED MAY 14, 1994
FOR THE BENEFIT OF STARTIME CINEMA, INC.,
LLOYD CURLEY,
SCI ACQUISITION CORP.,
SILVER CINEMAS, INC.
AND
NATIONSBANC CAPITAL CORPORATION
DATED JANUARY 22, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS
1.1 Defined Terms................................................................................ 1
ARTICLE II - PURCHASE AND SALE OF PROPERTY
2.1 Agreement to Sell and Purchase............................................................... 8
2.2 Purchase Price............................................................................... 8
2.3 Purchase Price Allocation.................................................................... 9
2.4 Purchase Price Adjustments................................................................... 9
2.5 Escrow Agreement............................................................................. 12
2.6 Offsets Against the Escrow Amount and Future Payments........................................ 12
2.7 Sellers' Performance At and After Closing.................................................... 12
2.8 Purchaser Does Not Assume Any of Sellers'
Liabilities or Obligations Except for the Assumed Liabilities................................ 13
2.9 Noncompetition Agreement..................................................................... 13
2.10 Closing...................................................................................... 13
2.11 Subsequent Closings.......................................................................... 14
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Joint and Several Representations and
Warranties of the Sellers and the Indemnitors................................................ 15
3.1.1 Corporate Existence and Authority.............................................. 15
3.1.2 Subsidiaries................................................................... 15
3.1.3 Execution of Agreement......................................................... 15
3.1.4 Financial Statements........................................................... 16
3.1.5 Absence of Certain Liabilities................................................. 16
3.1.6 Absence of Changes............................................................. 16
3.1.7 Taxes.......................................................................... 18
3.1.8 Disputes and Litigation........................................................ 19
3.1.9 Compliance with Laws........................................................... 20
3.1.10 Insurance...................................................................... 20
3.1.11 Title to Properties............................................................ 20
3.1.12 Real Property and Real Property Leases......................................... 21
3.1.13 Equipment...................................................................... 21
3.1.14 Condition of Tangible Property................................................. 22
3.1.15 Inventory...................................................................... 22
3.1.16 Intangible Personal Property................................................... 22
3.1.17 Agreements..................................................................... 23
3.1.18 Indebtedness and Guaranties.................................................... 24
3.1.19 Books and Records.............................................................. 24
3.1.20 ERISA.......................................................................... 24
3.1.21 Employees...................................................................... 24
3.1.22 Governmental and Other Consents................................................ 26
3.1.23 Environmental Matters.......................................................... 26
3.1.24 Discounts and Gift Certificates................................................ 26
3.1.25 Full Disclosure................................................................ 26
3.1.26 Organization of the Trust...................................................... 27
3.1.27 Authority of Curley............................................................ 27
3.1.28 Authority of Indemnitors....................................................... 27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.1.29 Validity and Enforceability.................................................... 27
3.1.30 Insolvency..................................................................... 27
3.1.31 Cash Flow Figures.............................................................. 27
3.2 Representations and Warranties of Purchaser.................................................. 28
3.2.1 Organization and Good Standing................................................. 28
3.2.2 Authority...................................................................... 28
3.2.3 Validity and Enforceability.................................................... 28
ARTICLE IV - COVENANTS
4.1 The Sellers' and the Indemnitors' Covenants.................................................. 28
4.1.1 Access and Information......................................................... 28
4.1.2 Notices and Approvals.......................................................... 29
4.1.3 Information for Purchaser's Statements and Applications........................ 30
4.1.4 Termination of Employees....................................................... 30
4.1.5 Conduct of Business............................................................ 30
4.1.6 Preservation of Business....................................................... 31
4.1.7 Insurance...................................................................... 31
4.1.8 Contracts and Commitments...................................................... 31
4.1.9 Actions, Etc................................................................... 31
4.1.10 Repairs........................................................................ 31
4.1.11 Reports and Returns............................................................ 32
4.1.12 Indemnification of Purchaser................................................... 32
4.1.13 Compliance with Agreement...................................................... 35
4.1.14 Landlord Estoppel Certificates................................................. 36
4.1.15 Title Information.............................................................. 36
4.1.16 Additional Lender Requirements................................................. 36
4.1.17 Payment of Indebtedness........................................................ 36
4.1.18 Vote in Favor of Asset Sale.................................................... 37
4.1.19 Exclusive Dealing.............................................................. 37
4.1.20 Actions in the Event of a Noncompliance Circumstance........................... 37
4.2 Purchaser's Covenants........................................................................ 37
4.2.1 Nondisclosure of Information................................................... 37
4.2.2 Compliance with Agreement; Cooperation......................................... 37
4.2.3 Disclosure to the Corporation.................................................. 38
4.2.4 Indemnification by Purchaser................................................... 38
4.2.5 NCC Not Liable................................................................. 40
ARTICLE V - CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of Purchaser............................................. 40
5.1.1 Representations and Warranties................................................. 40
5.1.2 Performance by the Indemnitors................................................. 40
5.1.3 Regulatory Approvals and Consents.............................................. 40
5.1.4 Opinion of the Seller's Counsel................................................ 40
5.1.5 Certificate of the Indemnitors................................................. 41
5.1.6 Absence of Regulation Changes.................................................. 41
5.1.7 Satisfaction with Review of Purchaser.......................................... 41
5.1.8 Approval of Instruments........................................................ 41
5.1.9 Good Standing.................................................................. 41
5.1.10 No Actions..................................................................... 42
5.1.11 No Court Orders................................................................ 42
5.1.12 Officers' Certificate.......................................................... 42
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
5.1.13 Loan Agreements................................................................ 42
5.1.14 Deeds and Leases............................................................... 42
5.1.15 Releases....................................................................... 42
5.1.16 Stockholder Approval of Sale of Assets......................................... 43
5.1.17 Due Diligence.................................................................. 43
5.1.18 Estoppel Certificates.......................................................... 43
5.1.19 Phase I Environmental Reports and Surveys...................................... 43
5.1.20 Closing of Fee Owned Theaters.................................................. 43
5.1.21 Norwest Release................................................................ 43
5.2 Conditions Precedent to Obligations of the Indemnitors....................................... 43
5.2.1 Representations and Warranties................................................. 43
5.2.2 Performance by Purchaser....................................................... 43
5.2.3 Regulatory Approvals and Consents.............................................. 44
5.2.4 No Court Orders................................................................ 44
5.2.5 Opinion of Purchaser's Counsel................................................. 44
5.2.6 Certificate of Purchaser....................................................... 44
5.2.7 Stockholder Approval of Sale of Assets......................................... 44
5.2.8 Closing of Fee Owned Theaters.................................................. 44
5.2.9 Releases....................................................................... 44
ARTICLE VI - CLOSING AND DELIVERY OF DOCUMENTS
6.1 Closing...................................................................................... 45
6.1.1 Delivery by the Sellers........................................................ 45
6.1.2 Delivery by Purchaser.......................................................... 46
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.................................................................................. 47
7.2 Waiver and Amendment......................................................................... 48
ARTICLE VIII - MISCELLANEOUS
8.1 Expenses..................................................................................... 48
8.2 Notices...................................................................................... 48
8.3 Entire Agreement............................................................................. 49
8.4 Survival of Representations.................................................................. 50
8.5 Incorporated by Reference.................................................................... 50
8.6 Number and Gender of Words................................................................... 50
8.7 Specific Performance......................................................................... 50
8.8 Remedies Exclusive........................................................................... 50
8.9 Execution of Additional Documents............................................................ 50
8.10 Finders' and Related Fees.................................................................... 51
8.11 Titles....................................................................................... 51
8.12 No Third Party Beneficiary, Etc.............................................................. 51
8.13 Reformation; Severability.................................................................... 51
8.14 Binding Effect and Assignment................................................................ 51
8.15 Counterparts................................................................................. 51
8.16 Governing Law; Attorneys' Fees............................................................... 51
8.17 Dispute Resolution........................................................................... 52
8.18 Confidentiality.............................................................................. 53
8.19 Bulk Transfer................................................................................ 54
</TABLE>
<PAGE> 5
INDEX TO EXHIBITS AND SCHEDULE
EXHIBITS
Fee Owned Theaters EXHIBIT A
Leased Theaters, Market Breakdown, Cash Flow and
Purchase Price Determination EXHIBIT B
Continuing Contracts EXHIBIT C
Escrow Agreement EXHIBIT D
Leases EXHIBIT E
Put Agreement EXHIBIT F
Allocation of Purchase Price EXHIBIT G
Memorandum of Approved Improvements and Betterments EXHIBIT H
Noncompetition Agreements EXHIBIT I
Financial Statements of the Corporation and Subsidiaries EXHIBIT J
List of Documents Delivered to Purchaser EXHIBIT K
Form of Estoppel Certificate EXHIBIT L
Legal Opinion of the Sellers' Counsel EXHIBIT M
Legal Opinion of Purchaser's Counsel EXHIBIT N
Assignment and Assumption Agreement (Leases) EXHIBIT O-1
Assignment and Assumption Agreement (Continuing Contracts) EXHIBIT O-2
Bill of Sale EXHIBIT P
Mutual Release EXHIBIT Q
[INTENTIONALLY OMITTED]
Cash Flow Figures EXHIBIT S
<PAGE> 6
DISCLOSURE SCHEDULE
<TABLE>
<S> <C> <C>
Part 1 -- States in which the Corporation is qualified to do business
Part 2 -- Information concerning Subsidiaries of the Corporation
Part 3 -- Effects of execution of Agreement
Part 4 -- Liabilities not reflected on Balance Sheet
Part 5 -- Changes affecting the Corporation and Subsidiaries between the Balance Sheet Date and the Closing
Part 6 -- Certain information concerning the taxes of the Corporation and Subsidiaries
Part 7 -- Disputes and litigation pending against the Corporation and Subsidiaries
Part 8 -- Insurance of the Corporation and Subsidiaries
Part 9(a) -- Exceptions to good title to the properties of the Corporation and Subsidiaries
Part 9(b) -- Liens and financing statements filed on the properties of the Corporation and Subsidiaries
Part 10(a) -- List of real property and real property leases of the Corporation and Subsidiaries
Part 10(b) -- Violations by the Corporation and Subsidiaries with respect to their real properties
Part 11(a) -- List of equipment and equipment leases of the Corporation and Subsidiaries
Part 11(b) -- List of Property in need of repair
Part 12(a) -- List of intangible personal property of the Corporation and Subsidiaries
Part 12(b) -- Exceptions to exclusive ownership of the intangible personal property of the Corporation and Subsidiaries
Part 12(c) -- List of claims or demands against intangible personal property, including intellectual property,
of the Corporation and Subsidiaries
Part 13 -- List of agreements of the Corporation and Subsidiaries
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
Part 14(a) -- List of indebtedness of the Corporation and Subsidiaries
Part 14(b) -- List of guarantees of or by the Corporation and Subsidiaries
Part 15 -- Books and Records
Part 16 -- List of "employee benefit plans"
Part 17 -- Employee agreements of the Corporation and Subsidiaries
Part 18 -- Consents required in connection with this Agreement
Part 19 -- Environmental Matters
Part 20 -- Changes in the financial condition of the Corporation and Subsidiaries
Part 21 -- Prepayment penalties and charges on loan agreements
</TABLE>
<PAGE> 8
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of January
22, 1998, is entered into by and among StarTime Cinema, Inc., a Nevada
corporation (the "CORPORATION"), F.S.A. Super Saver Cinemas No. 1, Ltd., a Texas
limited partnership ("SUPER SAVER"), StarTime Properties, Inc., a Nevada
corporation ("SPI"), the Trust formed by that certain Irrevocable Declaration of
Trust under deed dated May 14, 1994 for the benefit of StarTime Cinema, Inc.
(the "TRUST"), Lloyd Curley, an individual residing in Texas ("CURLEY"), SCI
Acquisition Corp., a Delaware corporation ("PURCHASER") and, for certain limited
purposes, Silver Cinemas, Inc., a Delaware corporation ("SILVER CINEMAS") and
NationsBanc Capital Corporation, a Texas corporation ("NCC"). The Corporation,
Super Saver and SPI are collectively referred to herein as "SELLERS."
R E C I T A L S:
WHEREAS, Sellers own and operate two theaters described in Exhibit A
attached hereto (the "FEE OWNED THEATERS") and operate certain other theaters
described in Exhibit B attached hereto (the "LEASED THEATERS"), for the
exhibition of motion pictures;
WHEREAS, Sellers desire to sell and transfer, and Purchaser desires to
purchase, certain of each Sellers' assets and liabilities related to the Fee
Owned Theaters pursuant to the terms and subject to the conditions set forth in
the Property Purchase Agreement (as hereinafter defined);
WHEREAS, Sellers desire to sell and transfer, and Purchaser desires to
purchase, certain of each Sellers' assets and liabilities related to the Leased
Theaters pursuant to the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, Purchaser desires to obtain from each of the Corporation and
Curley, and each of the Corporation and Curley is willing to deliver to
Purchaser, an agreement not to compete with Purchaser.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. - DEFINITIONS
1.1. Defined Terms. The following terms used herein, unless the context
otherwise requires, shall be defined as follows:
1.1.1. "AAA" means the American Arbitration Association.
1.1.2. "Act" means the United States Securities Act of 1933, as
amended.
<PAGE> 9
1.1.3. "Affiliate" means, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified.
1.1.4. "after due inquiry" means, with respect to any Person, that
such Person has the obligation to affirmatively seek out information on the
relevant subject matter from Curley, Bill Busby, Lois Hufnagel, Lynn Hunt, and
all the District and City Managers of Super Saver and, whether or not such
affirmative inquiry is made, such Person is deemed to have actual knowledge of
all information that could have been reasonably obtained from the people listed
above and the knowledge the people listed above is imputed to and deemed to be
the actual knowledge of such Person.
1.1.5. "Agreement" means this Asset Purchase Agreement, including
the Schedule and any exhibits hereto.
1.1.6. "Assignment and Assumption Agreements" has the meaning
ascribed thereto in Section 6.1.1(g).
1.1.7. "Assumed Liabilities" has the meaning ascribed thereto in
Section 2.8.
1.1.8. "Balance Sheet" means in the case of the Corporation and any
consolidated Subsidiary the audited consolidated balance sheet of the
Corporation dated as of December 31, 1996 prepared and certified by the
Corporation's Accountant.
1.1.9. "Balance Sheet Date" means in the case of the Corporation
and any consolidated Subsidiary, December 31, 1996.
1.1.10. "Cash Flow Figures" has the meaning ascribed thereto in
Section 3.1.31.
1.1.11. "Certificate" has the meaning ascribed thereto in Section
5.1.5.
1.1.12. "Class B Shares" means the 88,235 shares of Series B
Convertible Preferred Stock, $10.00 par value, of the Corporation.
1.1.13. "Closing" has the meaning ascribed thereto in Section 2.10.
1.1.14. "Closing Acceleration Conditions" means the conditions
precedent to the modification of the definition of Theaters as set forth in
clauses (i) and (ii) of Section 1.1.72 and all of
<PAGE> 10
the conditions precedent set forth in Article V (other than deliveries of
instruments to be made at Closing).
1.1.15. "Closing Date" has the meaning ascribed thereto in Section
2.10.
1.1.16. "Commitments and Surveys" mean all title insurance
commitments and all surveys requested by Purchaser with respect to any of the
Theaters.
1.1.17. "Continuing Contracts" means the oral agreement with
Sweetheart Cups to produce printed cups for use in the Theaters and agreements
relating to the operation and maintenance of the Property (excluding any film
exhibition agreements), which are described on Exhibit C; provided that, on the
Transfer Date, "Continuing Contracts" shall mean, and consist only of, those
Continuing Contracts set forth on Exhibit C related to the Theaters and Property
to be transferred on the Closing Date. Notwithstanding the foregoing, for the
purposes of Section 3.1, "Continuing Contracts" shall mean the oral agreement
with Sweetheart Cups to produce printed cups for use in the Theaters and
agreements relating to the operation and maintenance of the Property (excluding
any film exhibition agreements), which are described on Exhibit C.
1.1.18. "Corporation" means StarTime Cinema, Inc., a Nevada
corporation.
1.1.19. "Corporation's Accountant" means Coopers & Lybrand LLP, the
independent public accountants of the Corporation.
1.1.20. "Curley" means Lloyd Curley.
1.1.21. "Discount Tickets" means reduced admission tickets, group
tickets or so-called other "discount tickets" useable for admission into any
Theater, excluding free tickets issued in the ordinary course of business.
1.1.22. "employee benefit plan" has the meaning ascribed to it in
Section 3.1.20.
1.1.23. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.1.24. "Escrow Agent" means the escrow agent under the Escrow
Agreement.
<PAGE> 11
1.1.25. "Escrow Agreement" means the escrow agreement to be entered
into by and among the Indemnitors and Purchaser, pursuant to Section 2.5 and
attached hereto as Exhibit D.
1.1.26. "Escrow Agreements" mean the Escrow Agreement and the Term
Sheet Escrow Agreement.
1.1.27. "Escrow Amount" has the meaning ascribed thereto in Section
2.5.
1.1.28. "Estoppel Certificates" has the meaning ascribed thereto in
Section 4.1.14.
1.1.29. "Fee Owned Theaters" has the meaning ascribed thereto in
the Recitals.
1.1.30. "GAAP" means those accounting principles and practices
which are used in the United States and recognized as such by the American
Institute of Certified Public Accountants or any successor institute, acting
through its Accounting Principles Board or through the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
applicable as of the date on which such principles are applied and which are
applied on a consistent basis throughout the periods involved so as to fairly
reflect the financial position, results of operations and operating cash flow on
a consolidated basis of the Corporation and the Subsidiaries.
1.1.31. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder.
1.1.32. "Impositions" means all real estate taxes, special and
benefit assessments, sewer rents, water rates, personal property taxes, and all
other taxes, assessments and charges of every kind, which may affect the
Property or any part thereof by virtue of any present or future law of any
governmental authority.
1.1.33. "Indemnitors" means the Sellers and the Trust.
1.1.34. "Insolvent" means (a) with reference to an entity other
than a partnership, a financial condition such that the sum of such entity's
debts is greater than all of such entity's property, at a fair valuation,
exclusive of property transferred, concealed, or removed with intent to hinder,
delay, or defraud such entity's creditors; and (b) with reference to a
partnership, a financial condition such that the sum of such partnership's debts
is greater than the aggregate of, at a fair valuation (i) all of such
partnership's property, exclusive of property of the kind excluded in
subparagraph (a) of this paragraph; and (ii) the sum of the excess of the value
of each general partner's nonpartnership property, exclusive of property of the
kind excluded in subparagraph (a) of this paragraph, over such partner's
nonpartnership debts.
<PAGE> 12
1.1.35. "Intangible Property" means all intangible property now
or on the Closing Date owned by any Seller which pertains solely to the
Property, and specifically including all assignable business licenses,
assignable warranties, choses in action (including claims against Seating
Concepts, Inc. and/or its Affiliates), the Continuing Contracts (to the extent
such are assignable), telephone exchange numbers (to the extent such are
assignable), plans and specifications, blueprints, engineering information and
reports, theater names, the tradenames "Super Saver Cinema" and "Budget Cinema"
and governmental approvals.
1.1.36. "knowledge" means, with respect to any Person (other than
the Indemnitors), such Person's actual knowledge, and with respect to any one or
more of the Indemnitors, the actual knowledge of Curley "after due inquiry" (as
defined herein).
1.1.37. "Leased Premises" means the premises leased pursuant to the
Leases.
1.1.38. "Leased Theaters" has the meaning ascribed thereto in the
Recitals; provided that, on the Transfer Date, "Leased Theaters" shall mean, and
consist only of, those theaters set forth on Exhibit B for which assignments of
the related leases and any other consents or approvals have been obtained to
transfer such assets to Purchaser if, and only if: (i) with respect to each such
theater, 100% of the assignments of the related leases and any other consents or
approvals have been obtained for the other theaters owned by Sellers in the same
market as identified on Exhibit B in which such theater is located and (ii) the
aggregate "Purchase Price Determination" as set forth on Exhibit B from all
theaters described in clause (i) exceeds $12,229,500. Notwithstanding the
foregoing, for the purposes of Section 3.1, "Leased Theaters" shall mean all the
theaters set forth on Exhibit B.
1.1.39. "Leasehold Improvements" means all right, title and
interest of any Seller in and to the Leasehold Interests, and improvements
thereto of any kind and description now, or on the Closing Date, located on or
which are a part of the Leased Premises.
1.1.40. "Leasehold Interests" means all the interests, estates,
rights, privileges, titles, easements, options and appurtenances owned and in
any way pertaining to any Seller as tenant under the Leases.
1.1.41. "Leases" means the leases for the Leased Theaters and all
amendments and modifications thereof, all of which are described on Exhibit E
attached hereto; provided that, on the Transfer Date, "Leases" shall mean, and
consist only of, those Leases set forth on Exhibit E for which assignments of
the leases and any other consents or approvals have been obtained to transfer
such assets to Purchaser if, and only if, with respect to each such lease, 100%
of the assignments of the leases and any other consents or approvals have been
obtained for the other theaters owned by Sellers in the same market as
identified on Exhibit B in which the theater related to such lease is located
and (ii) the aggregate "Purchase Price Determination" as set forth on Exhibit B
from all theaters related to the leases described in clause (i) exceeds
$12,229,500. Notwithstanding the foregoing, for the purposes of Section 3.1 (and
the definitions of "Leased Premises," "Leasehold Improvements," "Leasehold
Interests," "Personal Property" and "Intangible Property" as such terms are used
in
<PAGE> 13
Section 3.1) shall mean all the leases for the Leased Theaters and all
amendments and modifications thereof, set forth on Exhibit E.
1.1.42. "Lien" means any mortgage, deed of trust, lien, pledge,
charge, adverse claim, security interest or encumbrance of any nature
whatsoever.
1.1.43. "Loss" has the meaning ascribed thereto in Section
4.1.12(b).
1.1.44. "Lyco" means Lyco Financial, Inc., a Texas corporation.
1.1.45. "NCC" means NationsBanc Capital Corporation, a Texas
corporation.
1.1.46. "Noncompetition Agreement" has the meaning ascribed thereto
in Section 2.9.
1.1.47. "Noncompetition Fees" has the meaning ascribed thereto in
Section 2.9.
1.1.48. "Noncompliance Circumstance" has the meaning ascribed
thereto in Section 4.2.3.
1.1.49. "Owner-Operated Theater" means those theaters listed on
Exhibit B the leases for which are not being transferred and assigned to
Purchaser on the Closing Date.
1.1.50. "Permitted Liens" means (a) liens, taxes and Impositions
due and payable after the Closing Date which are prorated pursuant to Section
2.4 and (b) the Permitted Title Exceptions.
1.1.51. "Permitted Title Exceptions" means (a) all matters
reflected in the Commitments and Surveys and (b) landlord liens; and taxes and
assessments which are to be prorated between Purchaser and Sellers pursuant to
Section 2.4 of this Agreement.
1.1.52. "Person" means an individual, corporation, association,
partnership, proprietorship, joint venture or other entity.
1.1.53. "Personal Property" means all tangible personal property
now or on the Closing Date owned (but excluding tangible personal property
disposed of in the ordinary course of business) by any Seller or located at or
used in the operation of the Leased Premises, including, but not limited to, any
supplies, service and concession equipment, heating, ventilating and cooling
equipment, fixtures, inventory, cleaning equipment and supplies, alarm systems,
screens, projection
<PAGE> 14
equipment, theater seats, cash registers, display cases, acoustical wall panels,
sound systems, speakers, office equipment and desks, popcorn poppers and storage
bins, linoleum, carpets, drapes, laundry tubs and trays, washers, dryers, ice
boxes, refrigerators, heating units, stoves, ovens, water heaters, incinerators,
furniture and furnishings, signs, poster boxes, soda dispensers, Theater
stationery and items with Theater logos and communication systems, now or on the
Closing Date affixed or attached to or placed upon or used in connection with
the operation of any of the Theaters; provided, however, that Personal Property
shall not include (a) accounts receivable, (b) cash (other than petty cash
located at the Theaters at Closing) and cash equivalents (including certificates
of deposit, commercial paper, and investments in securities) on hand or in
banks, (c) the projection television located in the Green Bay, Wisconsin Theater
and (d) office equipment currently used in El Paso, Texas.
1.1.54. "Property" means the rights of the Sellers under the Leases
and the Continuing Contracts, the Leasehold Interests, the Leasehold
Improvements, the Personal Property and Intangible Property and all other
properties, assets and rights, tangible and intangible, owned by Sellers and not
otherwise included as Property that are necessary to perform, enforce or realize
the full benefits of the rights of the Sellers under the Leases and Continuing
Contracts, the Leasehold Interests, the Leasehold Improvements, the Personal
Property and the Intangible Property.
1.1.55. "Property Purchase Agreement" means that certain Property
Purchase Agreement by and among certain parties hereto and certain other parties
that are signatories thereto and dated as of the date hereof related to the
purchase of the Fee Owned Theaters.
1.1.56. "Proration Period" means the tax fiscal year in which the
Closing Date occurs.
1.1.57. "Purchase Price" means the difference between (i) the sum
of (y) $16,206,000 plus (z) any increase in the Purchase Price as a result of
the adjustments provided for in Section 2.4, less (ii) the sum of: (A) the
Escrow Amount and (B) any decrease in the Purchase Price as a result of the
adjustments provided for in Section 2.4.
1.1.58. "Purchaser" means SCI Acquisition Corp., a Delaware
corporation.
1.1.59. "Purchaser Indemnitees" has the meaning ascribed thereto in
Section 4.1.12(b).
1.1.60. "Put Agreement" means that certain Put Agreement as of the
date hereof between Purchaser and Super Saver a form of which is attached hereto
as Exhibit F related to an option of Super Saver to assign the lease relating to
the Forest Fair theater and the rights of Super Saver under that certain
management contract relating to the Eastgate (Cincinnati, Ohio) theater to
Purchaser at a price to be calculated pursuant to the terms of such Put
Agreement.
<PAGE> 15
1.1.61. "Related Parties" means, with respect to a Person, such
Person's officers, directors, assignees designated as a Related Party in writing
by such Person and controlled Affiliates.
1.1.62. "Schedule" means the Disclosure Schedule executed and
delivered by the Indemnitors to Purchaser at or prior to the date of this
Agreement and made a part hereof.
1.1.63. "Sellers" has the meaning ascribed thereto in the preamble.
1.1.64. "Silver Cinemas" means Silver Cinemas, Inc., a Delaware
corporation.
1.1.65. "SPI" means StarTime Properties, Inc., a Nevada
corporation.
1.1.66. "StarTime Indemnitees" has the meaning ascribed thereto in
Section 4.2.4(a).
1.1.67. "Stock Purchase Agreement" means the Stock Purchase
Agreement between the Corporation and NCC dated August 15, 1994.
1.1.68. "Subsequent Closing Date" has the meaning ascribed thereto
in Section 2.11.
1.1.69. "Subsidiary" or "Subsidiaries" means all corporations
(including SPI), partnerships (including Super Saver), associations, joint
ventures or other Persons (including the Trust) of which the Corporation or any
other Subsidiary owns not less than twenty percent (20%) of the voting
securities or other equity, but specifically excludes StarTime Entertainment -
Georgia L.L.C. and any other entity that (i) relates solely to the Roswell,
Georgia operations and (ii) neither owns nor has owned any of the Property or
any of the Property (as defined in the Property Purchase Agreement).
1.1.70. "Super Saver" means F.S.A. Super Saver Cinemas No. 1, Ltd.,
a Texas limited partnership.
1.1.71. "Tax Returns" has the meaning ascribed thereto in Section
3.1.7(a).
1.1.72. "Term Sheet Escrow Agreement" means that certain escrow
agreement dated July 31, 1997 by and among the Corporation, Silver Cinemas and
Norwest Bank El Paso, a national banking association, as escrow agent.
1.1.73. "Theaters" means a collective reference to the 26 locations
consisting of 196 screens for the exhibition of motion pictures as specially set
forth on Exhibit B; provided that, on the
<PAGE> 16
Transfer Date, "Theaters" shall mean, and consist only of, those theaters set
forth on Exhibit B for which assignments of the related leases and any other
consents or approvals have been obtained to transfer such assets to Purchaser
if, and only if: (i) with respect to each such theater, 100% of the assignments
of the related leases and any other consents or approvals have been obtained for
the other theaters owned by Sellers in the same market as identified on Exhibit
B in which such theater is located and (ii) the aggregate "Purchase Price
Determination" as set forth on Exhibit B from all theaters described in clause
(i) exceeds $12,229,500. Notwithstanding the foregoing, for the purposes of
Section 3.1, "Theaters" shall mean all the theaters set forth on Exhibit B.
1.1.74. "Title Insurance Fees" has the meaning ascribed thereto in
Section 2.4(a)(i).
1.1.75. "Transaction Documents" means this Agreement, the Property
Purchase Agreement, the Assignment and Assumption Agreements, the Estoppel
Certificates, the Bill of Sale, the Escrow Agreements, the Noncompetition
Agreements, the Put Agreement, the Mutual Release and any exhibits or schedules
related thereto.
1.1.76. "Transfer Date" means a date (a) upon which the Closing
Acceleration Conditions are satisfied and fulfilled or, if permissible, waived
by the relevant party and (b) which is the earlier of: (i) February 26, 1998 or
(ii) such date not later than March 27, 1998 as Purchaser may determine.
1.1.77. "Trust" means the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the benefit of StarTime
Cinema, Inc.
ARTICLE 2. - PURCHASE AND SALE OF PROPERTY
2.1. Agreement to Sell and Purchase. On the terms and subject to the
conditions of this Agreement, on the Closing Date, the Sellers agree to sell,
convey, transfer, assign and deliver to Purchaser, and Purchaser agrees to
purchase from Sellers, all of the Property.
2.2. Purchase Price. At Closing, Purchaser shall pay and deliver in
immediately available funds by wire transfer, pursuant to wiring instructions
delivered by Sellers at least two days prior to the Closing, the Purchase Price
as follows:
NCC $3,000,000 plus accrued but unpaid dividends on the
Class B Shares
<PAGE> 17
Norwest Bank An amount equal to the product of (i) the indebtedness
El Paso, N.A. outstanding at Closing multiplied by (ii) a fraction, the
numerator of which is the total Purchase Price payable on
the Closing Date and the denominator of which is the total
Purchase Price payable on the Closing Date if 100% of the
Theaters listed on Exhibit B and their related assets were
transferred at Closing to Purchaser (exclusive of prorations
and adjustments described in Section 2.4(a)(v) - (vii) and
Section 2.4(b) - (h))
Super Saver As allocated on Exhibit G with respect to the Theaters and
their related assets being transferred at Closing
Corporation The remainder of the Purchase Price
The payment to NCC pursuant to this Section 2.2 shall be against
delivery of the Class B Shares together with the certificates representing the
same and duly executed stock powers transferring such Class B Shares to the
Corporation.
2.3. Purchase Price Allocation. The Purchase Price will be allocated to
the Property as shown on Exhibit G, and each of the parties hereto shall report
this transaction for federal and, to the extent applicable, state and local
income tax purposes in accordance with the allocation shown on Exhibit G.
Purchaser and Sellers shall not take any position on any tax return inconsistent
with such allocation. Purchaser and Sellers shall prepare and timely file all
such reports and returns as may be required by Section 1060 of the Code to
report such allocation. The obligations set forth in this Section 2.3 shall
survive the Closing.
2.4. Purchase Price Adjustments.
(a) The Purchase Price payable at Closing shall be adjusted as
follows:
(i) downward by the amount of 50% of title insurance fees,
premiums and expenses incurred in connection with the procurement of
title insurance policies pursuant to Section 4.1.15 hereof up to the
difference between (A) $32,500 minus (B) actual adjustments to the
purchase price(s) previously paid pursuant to the Property Purchase
Agreement and the Put Agreement in respect of title insurance fees,
premiums and expenses (the "TITLE INSURANCE FEES");
(ii) upward in accordance with Section 4.2.3 up to a maximum of
$25,000;
(iii) upward by the sum of the amounts noted in the memorandums
listing the costs of certain improvements and betterments signed by both
the Corporation and Purchaser at or prior to Closing, a form of which is
attached hereto as Exhibit H;
(iv) downward, in the event that all the theaters listed on
Exhibit B are not being transferred on the Closing Date, by the sum of
the amounts set forth in Exhibit B under the column heading "Purchase
Price Determination" for each theater and its related assets in such
Exhibit that is not being transferred on the Closing Date;
(v) upward for any security deposits held by lessors under the
Leases and the Sellers' petty cash at each Theater;
(vi) upward by a cash amount equal to Sellers' cost for all
inventory; and
<PAGE> 18
(vii) downward by the sum of the cash values of accrued vacations
assumed by Purchaser, if any, of employees hired at Closing by
Purchaser, which values will be set forth on an exhibit to be attached
hereto mutually agreed upon by the Corporation and Purchaser.
(b) The following items affecting the Property shall be
apportioned, adjusted or otherwise accounted for as provided below
between the Sellers and Purchaser as of the Closing Date on the basis of
the actual number of days elapsed (except as expressly provided below)
from the first day of any applicable period to the Closing Date:
(i) subject to paragraph (e) of this Section 2.4, rent,
additional rent, common area maintenance, taxes and insurance and any
other charges payable by the tenant under the Leases as follows:
(1) any charges payable on a monthly basis (whether or not
subject to year end adjustment) shall be prorated for the month in
which the Closing Date shall occur and any year end adjustment
thereof shall be paid by, or the refund from the lessor paid to,
Sellers and Purchaser in proportion to the aggregate amount of
their respective payments thereof made by Sellers prior to the
Closing Date and by Purchaser after the Closing Date, and
(2) Impositions under the Leases not payable monthly but
payable in full after the Closing at the end of a lease year or tax
fiscal year, as provided in the respective Leases, shall be
prorated as of the Closing Date, and each Seller will pay Purchaser
such Seller's share thereof within 15 days after Purchaser
furnishes such Seller the billing and substantiation thereof
received from each respective lessor or Purchaser will pay to each
Seller such Seller's share of a refund or reduction thereof within
15 days after Purchaser receives the payment or credit thereof from
each respective lessor; provided, however, that Purchaser will
obtain the Corporation's consent, not to be unreasonably withheld,
if Purchaser will obtain benefits which are not prorated between
the Sellers and Purchaser in connection with settling disputes
regarding charges that will be so prorated; and
(ii) payments owing or paid by the Sellers under the Leases to
merchants' associations or similar promotional organizations.
(c) general real property taxes and other Impositions imposed
upon or assessed against the Property (and not otherwise payable by any
Seller as tenant under the Leases directly to the lessors thereunder or
payable by such lessors without any obligation of payment on the part of
such Seller) shall be remitted to the collecting authorities by such
Seller if the same are due and payable on or before the Closing Date,
and by Purchaser if due and payable thereafter; provided, however, that
such real property taxes and other Impositions imposed upon or assessed
against the Property for the Proration Period shall be apportioned and
prorated between the Sellers and Purchaser on and as of the Closing Date
with Purchaser bearing the expense of that proportion of such
Impositions that the number of days in the Proration Period following,
and including the Closing Date bears to 365 and, to the extent not
theretofore paid by a Seller, each Seller will pay Purchaser such
Seller's share thereof within 15 days after Purchaser furnishes such
Seller the billing and substantiation thereof received from the
collecting authorities and provided further, that such Seller shall be
entitled to likewise participate on a prorata basis in any refund,
credit or reduction of such taxes or other Impositions.
<PAGE> 19
(d) Sellers shall pay all utility costs in respect of the Leased
Premises (except to the extent the lessors are liable therefor under the
Leases or such costs are a part of a lease charge to be prorated
pursuant to clause (i) of paragraph (b) of this Section 2.4) incurred
prior to the Closing Date, and those incurred thereafter shall be paid
by Purchaser. If the utility charges for the last utility period cannot
be ascertained on the Closing Date, then at such subsequent date as all
utility bills for such utility period have been obtained, the parties
shall promptly pay their respective prorated amounts. Any deposits of
any Seller held by utility companies shall be paid to such Seller at
Closing by Purchaser, and Purchaser shall be responsible for making its
own deposits with the utility companies. Sellers shall cooperate with
Purchaser to make an orderly transition of utilities to Purchaser
without interruption of utility service; provided however, that nothing
herein shall obligate Sellers to incur utility costs after the Closing
Date or maintain utility deposits after the Closing Date.
(e) With respect to any percentage rent (as defined in the
respective Leases) or similar form of rent payment based upon gross
receipts payable under the Leases for the applicable period thereunder
during which the Lease assignments occur, the percentage rent (taking
into account any and all applicable credits or adjustments) shall be
prorated between the Purchaser and each Seller such that each party
shall pay when due that percent of the total percentage rent payable
which equals such party's respective gross receipts (as defined in the
respective Leases) divided by the total gross receipts for such period.
(f) Each Seller and Purchaser also shall make such other
adjustments or apportionments with respect to the Property as may be
necessary to carry out the intention of the parties hereto so that
Purchaser shall not be liable for matters accruing or occurring prior to
the Closing Date and that none of the Sellers shall be liable for
matters accruing or occurring from and after the Closing Date and that
Sellers shall bear all of the expenses and burdens, and shall be
entitled to all of the benefits and income (including any tax refunds or
adjustments), of and from ownership of the Property or operation of the
Theaters prior to the Closing Date and Purchaser shall bear all such
expenses and burdens and shall be entitled to all such benefits and
income of and from ownership of the Property and operation of the
Theaters from and after the Closing Date.
(g) The foregoing prorations shall be determined and payment
made from Purchaser to a Seller or from a Seller to Purchaser, as the
case may be, on the Closing Date using figures for such charges
currently being paid or charges from the preceding year if actual
figures are not available. Any adjustments to such prorations shall be
determined as soon as reasonably practicable after the Closing Date.
When actual figures for such charges become available, Purchaser shall
provide each Seller with all year end reports from the applicable
landlord and a corrected and definitive proration of such charges shall
be promptly made. In the event that such net charges for the year of
Closing exceed the amount estimated in such provisional proration, each
Seller shall pay Purchaser such Seller's prorata net shares of the
amount by which the actual charges exceed the estimated charges.
Similarly, in the event that such net charges from the year of Closing
are less than the amount estimated in such provisional proration,
Purchaser shall pay each Seller such Seller's prorata net share of the
amount by which the estimated charges exceeded the actual charges. Such
payments by a Seller or Purchaser, as the case may be, shall be made
within thirty (30) days of receipt of such actual figures for such
charges and substantiation thereof received from each charging party.
<PAGE> 20
(h) Discount Tickets and gift certificates issued by any Seller
prior to the Closing Date and presented by customers for admission to
the Theaters on or after the Closing Date shall be honored by Purchaser.
Purchaser shall (and hereby covenants and agrees to) be bound by all
free admission passes distributed prior to the Closing Date by any
Seller or such Seller's authorized agents to third parties. Sellers
shall be required to promptly reimburse Purchaser for any Discount
Tickets or gift certificates on a quarterly basis upon presentation of
such Discount Tickets or gift certificates; provided that in no event
shall Seller be required to reimburse Purchaser for Discount Tickets or
gift certificates presented to Seller after January 31, 1999.
2.5. Escrow Agreement. At Closing, Purchaser shall deposit Five Hundred
Thousand Dollars ($500,000) in immediately available funds in escrow (the
"Escrow Amount") to be released to the Sellers pursuant to the terms of the
Escrow Agreement, subject to the right of Purchaser to offset against the Escrow
Amount pursuant to Section 2.6 and to the provisions of the Escrow Agreement.
2.6. Offsets Against the Escrow Amount and Future Payments. Purchaser
shall be entitled to offset against the Escrow Amount or any amounts payable
pursuant to Section 2.11 for any liability of the Indemnitors to Purchaser
pursuant to the provisions of Section 2.4 or "finally determined" under Section
4.1.12 hereof. Any amounts offset pursuant to the provisions of this Section 2.6
shall be deducted from the Escrow Amount or the amounts payable pursuant to
Section 2.11. Any amounts required to be paid pursuant to the Escrow Agreement
or Section 2.11 may be withheld from the date of notification of any claim by
Purchaser for indemnification pursuant to Section 4.1.12 hereof until resolution
of such claim. Amounts in excess of Purchaser's claims for offset on the date of
any payment pursuant to the Escrow Agreement or Section 2.11 shall be paid to
Sellers. Any amount released from the Escrow Agreement whether to the Sellers,
or to Purchaser as an offset, shall include the interest accrued thereon.
2.7. Sellers' Performance At and After Closing. Each Seller hereby
covenants and agrees that at or after the Closing, as required, such Seller
shall:
(a) at the request of Purchaser, take all action reasonably
necessary to put Purchaser in actual possession of the Property, and execute and
deliver such further instruments of conveyance, sale, transfer and assignment,
and take such other action (including the filing of any UCC-3s) as may be
reasonably necessary to transfer to Purchaser any of the Property and confirm
the title of Purchaser to the Property subject to Permitted Title Exceptions.
Further, after Closing, should such Seller be a necessary party in order for
Purchaser to exercise its rights with respect to the Property, such Seller will
take reasonable efforts, at Purchaser's expense, to assist Purchaser therein;
(b) for a period of four years following the Closing Date, provide
Purchaser access to any operating records, accounting records, correspondence,
memoranda, and other records and data relating to the ownership or operation of
the Property, which are in such Seller's possession;
(c) subject to Section 4.1.12, indemnify and hold Purchaser
harmless from all charges or liabilities, other than the Assumed Liabilities,
incurred by such Seller prior to the Closing Date relating to the Property; and
<PAGE> 21
(d) transfer or deliver to Purchaser any and all cash remittances
or property such Seller receives in respect of the Property to the extent that
such receipts are in respect of a period after the Closing.
2.8. Purchaser Does Not Assume Any of Sellers' Liabilities or
Obligations Except for the Assumed Liabilities. Each Seller, at Closing, will
transfer all of the Property to Purchaser free and clear of any and all Liens
except for (each of the following items collectively referred to as the "Assumed
Liabilities"):
(a) obligations and liabilities of such Seller initially arising,
and related solely to the period, after the Closing Date under and relating to
the Leases and the Continuing Contracts which are assigned to Purchaser and
included in the Property;
(b) Permitted Title Exceptions;
(c) Permitted Liens; and
(d) That portion of the prorated items arising post-Closing for
which the Purchaser has agreed to pay in Section 2.4 hereof.
Except as expressly set forth herein, Purchaser shall not assume any
other obligations or liabilities of any Seller or of such Sellers' businesses or
any liabilities (including contingent liabilities) attendant to, or arising from
or relating to the ownership of, any of the Property which may have occurred
prior to the Closing or any liabilities arising from or related to actions taken
or omitted under the Property and subject to Section 4.1.12 each Seller shall
indemnify Purchaser with respect to such Seller's liabilities.
2.9. Noncompetition Agreement. Subject to the terms and conditions set
forth herein, each of the Corporation and Curley shall execute and deliver at
Closing a noncompetition agreement substantially in the form attached hereto as
Exhibit I (each a "Noncompetition Agreement"). In consideration for the
Noncompetition Agreements to be executed and delivered by the Corporation and
Curley to the Purchaser, Purchaser shall pay fees (the "Noncompetition Fees") on
the Closing Date in immediately available funds to the Corporation and Curley in
the amount of $50,000 and $144,000, respectively.
2.10. Closing. Unless this Agreement is terminated and the transactions
contemplated herein abandoned pursuant to Section 7.1 and subject to the
satisfaction or, if permissible, waiver of the conditions set forth in Article
V, the consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place (i) at the offices of C. Michael Ginnings, El Paso,
Texas, at 11:00 A.M. local time on a date to be specified by Purchaser and
Sellers, but the Closing shall take place on, excluding March 6, 1998, the first
Friday (and be effective as of the close of business on the previous day) four
business days after the Transfer Date or (ii) at such other time and place as
Purchaser and the Corporation shall agree upon in writing. The date on which the
Closing occurs is referred to herein as the "Closing Date."
<PAGE> 22
2.11. Subsequent Closings. Subject to Closing, Purchaser shall purchase,
and Sellers shall sell, the rights of Sellers under the applicable lease for
each Owner-Operated Theater on a date (each a "Subsequent Closing Date") within
five business days of the date when, with respect to each such Owner-Operated
Theater, 100% of the assignments of the leases and any other consents or
approvals (including a Memorandum of Lease) have been obtained for such
Owner-Operated Theater and the other Owner-Operated Theaters owned by Sellers in
the same market as identified on Exhibit B in which such Owner-Operated Theater
is located at a purchase price equal to the aggregate "Purchase Price
Determination" as set forth on Exhibit B for all the Owner-Operated Theaters
being transferred on each such Subsequent Closing Date (less applicable
adjustments, if any, as provided for in Section 2.4 or any offsets as provided
in Section 2.6); provided however, Purchaser shall not have any obligation to
purchase, and Sellers shall not have any obligation to sell, any Owner-Operated
Theaters after December 31, 1998. As of the date hereof, each Subsequent Closing
Date and any relevant subsequent dates, the Owner-Operated Theaters being
transferred on such Subsequent Closing Date shall be deemed to be included
within the definitions of "Theaters" and "Leased Theaters" and the leases
related to such Owner-Operated Theaters shall be deemed to be included within
the definition of "Leases" for all applicable purposes hereunder including, but
not limited to, Indemnitors' covenants contained in Section 4.1 (including, but
not limited to, indemnification under Section 4.1.12). In addition, each
Subsequent Closing Date shall be deemed to be a "Closing Date" for all purposes
hereunder. Purchaser shall grant to Seller at the Closing a perpetual (except as
provided herein) license to use the tradenames "Super Saver Cinema" and "Budget
Cinema" (i) at the Owner-Operated Theaters until the Subsequent Closing Date; if
ever, related to such Owner-Operated Theater and (ii) at the theaters subject to
the Put Agreement until the date, if ever, such theaters are transferred to
Purchaser.
Notwithstanding anything in this Agreement to the contrary, conditions
precedent to the obligations of the Purchaser to consummate the purchase of any
Owner-Operated Theater on any Subsequent Closing Date shall include (i)
Indemnitors' representations and warranties being true and correct as of the
date hereof and as of the Closing Date, (ii) Indemnitors' representations and
warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.6(d), 3.1.6(h),
3.1.6(i), 3.1.6(j), 3.1.6(p), 3.1.6(q), 3.1.10, 3.1.11, 3.1.12, 3.1.23, 3.1.25
and 3.1.30 being true and correct as of the date as of the date of such
Subsequent Closing Date with respect to the Owner-Operated Theaters and their
related assets being transferred on such Subsequent Closing Date, (iii) the
Owner-Operated Theaters and their related assets being transferred on such
Subsequent Closing Date being in as good of operating condition as of such
Subsequent Closing Date as on the Closing Date, (iv) delivery of the items
required by Section 6.1.1(a), (b), (c), (d) except clause (ii), (g), (h), (j),
(k), (m) and (n) and (v) delivery of the purchase price described in this
Section 2.11 less any adjustments or offsets.
ARTICLE 3. - REPRESENTATIONS AND WARRANTIES
3.1. Joint and Several Representations and Warranties of the Sellers and
the Indemnitors. To induce Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Sellers and the
Indemnitors, jointly and severally, represent and warrant, as of the date
hereof, as follows:
3.1.1. Corporate Existence and Authority. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. It has all requisite corporate power, franchises,
licenses, permits and authority to own its properties and assets
<PAGE> 23
and to carry on its business as it has been and is being conducted. The
Corporation is qualified to do business as a foreign corporation and is in good
standing in each state, nation or other jurisdiction listed on Part 1 of the
Schedule, being each state, nation or other jurisdiction wherein the character
of the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary.
3.1.2. Subsidiaries. Part 2 of the Schedule lists each and every
Subsidiary and the Subsidiary's form of business organization, state of
incorporation or other organization, number of shares or nature and extent of
interests outstanding, and the number of shares or extent of interests
outstanding owned by the Corporation or each Subsidiary. Each Subsidiary, other
than Super Saver and the Trust, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power, franchises, licenses,
permits and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. Super Saver is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Texas and has all requisite partnership power, franchises,
licenses, permits and authority to own its properties and assets and to carry on
its business as it has been and is being conducted. The Trust is a trust duly
formed and validly existing under the laws of the State of Texas and has all
requisite trust power, franchises, licenses, permits and authority to own its
properties and assets and to carry on its business as it has been and is being
conducted. Each Subsidiary is qualified to do business in the respective states,
nations and other jurisdictions listed on Part 2 of the Schedule, being each
state, nation or other jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business conducted by it
makes such qualification necessary. Except as indicated on Part 2 of the
Schedule, each Subsidiary is a consolidated Subsidiary for the purposes of the
Balance Sheet and the financial statements referred to in Section 3.1.4 hereof.
3.1.3. Execution of Agreement. Except as disclosed in Part 3 of the
Schedule, the execution and delivery of this Agreement and the other Transaction
Documents by the each of the Indemnitors does not, and the consummation by each
of the Indemnitors of the transactions contemplated hereby and thereby will not:
(a) violate, conflict with, modify or cause any default under or acceleration of
(or give any party any right to declare any default or acceleration upon notice
or passage of time or both), in whole or in part, any charter, article of
incorporation, certificate of incorporation, bylaw, Lien, indenture, lease,
agreement, instrument, order, injunction, decree, judgment, law, rule,
regulation or any other restriction of any kind or character to which any of the
Indemnitors is a party or by which any of them or any of their properties is
bound (including the Stock Purchase Agreement); (b) result in the creation of
any Lien on any property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of the Indemnitors; (c)
violate any law, rule or regulation applicable to the Indemnitors or the
Indemnitors or (d) permit any federal or state regulatory agency to impose any
restrictions or limitations of any nature on the Indemnitors or any of their
respective activities.
3.1.4. Financial Statements. Attached as Exhibit J hereto are the
following financial statements: (a) the consolidated financial statements of the
Corporation and the Subsidiaries (including, without limitation, statements of
earnings, balance sheets as of the Balance Sheet Date and statements of changes
in financial position, statements of stockholders' equity, and all notes
relating thereto for the fiscal year then ended), which financial statements
have been audited and certified by the Corporation's Accountants; (b) the
consolidated financial statements of the Corporation and the Subsidiaries, for
the ten (10) months ended October 31, 1997, which financial statements shall
<PAGE> 24
have been certified by the chief financial officer of the Corporation and are in
the form normally prepared by such officer for presentation to the board of
directors of the Corporation; and (c) the Balance Sheet. To the Indemnitors'
knowledge, all of the financial statements referred to in this Section 3.1.4
present fairly the financial condition of the Corporation and the Subsidiaries
and the results of their operations at the dates and for the periods covered
thereby. Such financial statements have been prepared in conformity with GAAP,
except as otherwise expressly disclosed in such financial statements. For the
periods covered by the financial statements referred to in subsections (a), (b)
and (c) of this Section 3.1.4, neither the Corporation nor any Subsidiary had
any material nonrecurring items of income.
3.1.5. Absence of Certain Liabilities. To the Indemnitors'
knowledge, as of the Balance Sheet Date, the Corporation and the Subsidiaries
had no liabilities or obligations of any nature (whether absolute, accrued,
contingent, due or to become due) except as and to the extent reflected and
fully reserved against in the Balance Sheet other than those liabilities and
obligations set forth on Part 4 of the Schedule and, except as disclosed in Part
4 of the Schedule, since the Balance Sheet Date, the Corporation and
Subsidiaries have incurred no liabilities or obligations of any nature other
than in the ordinary course of business and consistent with past practice.
3.1.6. Absence of Changes. Except as expressly provided in this
Agreement or as set forth on Part 5 of the Schedule in alphabetical order
corresponding to the following subsections, since the Balance Sheet Date there
has not been:
(a) Any change or aggregate of changes known to the Indemnitors
in the condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or prospects of
the Corporation and Subsidiaries resulting in a reduction of five
percent (5%) of the net worth of the Corporation;
(b) Any merger, consolidation or statutory share exchange or
agreement to merge, consolidate or enter into a statutory share exchange
by the Corporation or any Subsidiary with another Person, or any
purchase of or investment in or agreement to purchase or invest by the
Corporation or any Subsidiary in the business of another Person;
(c) Any amendment to the Articles of Incorporation, Certificate
of Incorporation, partnership agreement or Bylaws of the Corporation or
any Subsidiary;
(d) Any General Increase in the compensation or rate of
compensation payable or to become payable to any of their hourly
employees or salaried employees ("GENERAL INCREASE" for purposes hereof
shall mean any increase applicable to a class or group of employees and
does not include increases granted to individual employees for merit,
length of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group
thereof);
(e) Any mortgage, pledge or other subjection to any Lien or
option of any property, asset, right or business of the Corporation or
any Subsidiary, other than (i) Liens for taxes not yet due and payable,
(ii) any continuing statutory landlord's Lien for rent not yet due and
payable, (iii) those incurred in the ordinary course of business and
(iv) those identified on Part 5 of the Schedule;
<PAGE> 25
(f) Any incurrence of any indebtedness, obligations or
liabilities (whether absolute, accrued, contingent, known or unknown,
due or to become due) by the Corporation or any Subsidiary except (i)
those arising in the ordinary course of business and consistent with
past practice outstanding when all such indebtedness, obligations and
liabilities are aggregated or (ii) those to be paid in full on or before
Closing;
(g) Any assumptions, guarantees or endorsements by the
Corporation or any Subsidiary of the obligations of any Person, except
(i) in the ordinary course of business and consistent with past practice
or (ii) those to be paid in full on or before Closing;
(h) Any actions taken or transactions entered into by the
Corporation or any Subsidiary involving the Theaters and more than
$12,500 per Theater, other than in the ordinary course of business and
consistent with past practice, or any capital expenditures or
commitments therefor in excess of $12,500 per Theater; in each case,
other than indebtedness, obligations or liabilities allowed for in
paragraph (f) above;
(i) Any creations, renewals, changes or terminations, or any
notice of any proposed renewal, change or termination of any Continuing
Contract or any contract by which the Property is bound;
(j) To the Indemnitors' knowledge, any action or inaction which
has caused or will cause a breach or default in any contract, agreement,
obligation, lease or license to which the Corporation or any Subsidiary
is a party or by which the Corporation or any Subsidiary or their
property is bound and which is being assumed by Purchaser pursuant
hereto;
(k) Any sale, assignment, lease, abandonment or other disposition
by the Corporation or any Subsidiary of any real property, or any sale,
assignment, transfer, license, lapse, or other disposition by the
Corporation or any Subsidiary of any trademark, trade name, copyright
(or pending application for any trademark or copyright), or other
intangible asset;
(l) Any sale, assignment or transfer of any contract, agreement,
lease, or asset by the Corporation or any Subsidiary, except in the
ordinary course of business and consistent with past practice;
(m) To the Indemnitors' knowledge, any violation by the
Corporation or any Subsidiary of, or any charge against the Corporation
or any Subsidiary for alleged violations of, any governmental laws,
rules, regulations or standards, including, without limitation, unlawful
employment practices, occupational health and safety standards, and
environmental control standards;
(n) To the Indemnitors' knowledge, any labor dispute, or threat
of a labor dispute, or any attempt or threat of any attempt by a union
to organize any employees of the Corporation or any Subsidiary who are
not now covered under an existing union or collective bargaining
agreement;
(o) Any material failure by the Corporation or any Subsidiary to
replenish inventories and supplies in a normal and customary manner
consistent with prior practice; any purchase commitment by the
Corporation or any Subsidiary in excess of the normal, ordinary and
usual requirements of business or at any price in excess of the then
current market price or upon terms and conditions more onerous than
those usual and customary in the Corporation's or any Subsidiary's
business;
<PAGE> 26
(p) Any arrangement for Discount Tickets or other similar
arrangements (excluding free passes in the ordinary course of business);
or
(q) Any significant action taken or transaction entered into by
the Corporation or any Subsidiary other than in the ordinary course of
business, which do or could result in material indebtedness or material
liability (including contingent liability) after Closing.
3.1.7. Taxes. Except as set forth on Part 6 of the Schedule in
alphabetical order corresponding to the following subsections:
(a) The Corporation and Subsidiaries have duly filed all required
federal, state, local and other tax returns, notices and reports
(including, without limitation, income, property, sales, use, franchise,
capital stock, excise, value added, employees' income withholding,
social security and unemployment tax returns, notices and reports)
heretofore due (collectively the "TAX RETURNS"), and all such Tax
Returns are correct, accurate and complete in all material respects;
(b) All deposits required to be made by the Corporation and
Subsidiaries with respect to any tax (including, without limitation,
estimated income, franchise and employee withholding taxes) have been
duly made;
(c) No audits of the Tax Returns of the Corporation and
Subsidiaries are currently being conducted or are currently pending by
the United States Internal Revenue Service or any other taxing
authority;
(d) All taxes, assessments, fees, penalties, interest and other
governmental charges with respect to each of the Corporation and
Subsidiaries which have become due and payable by the Balance Sheet Date
have been paid in full or adequately reserved against on the Balance
Sheet, and all taxes, assessments, fees, penalties, interest and other
governmental charges which have become due and payable subsequent to the
Balance Sheet Date have been paid in full or adequately reserved against
on its books of account and the amounts reflected on the Balance Sheet
and such books are sufficient for the payment of all unpaid federal,
state, local, foreign and other taxes, fees and assessments (including,
without limitation, income, property, sales, use, franchise, capital
stock, excise, value added, employees' income withholding, social
security and unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods prior
thereto;
(e) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any
tax or deficiency against the Corporation or any Subsidiary, nor are
there any actions, suits, proceedings, investigations or claims now
pending against the Corporation or any Subsidiary in respect of any tax
or assessment, or any matters under discussion with any federal, state,
local or foreign authority relating to any taxes or assessments, or any
claims for additional taxes or assessments asserted by any such
authority, and, to the Indemnitors' knowledge, there is no basis for the
assertion of any additional taxes or assessments against the Corporation
or any Subsidiary; and
(f) Neither the Corporation nor any Subsidiary has ever filed a
consent pursuant to Section 341(f) of the United States Internal Revenue
Code.
<PAGE> 27
3.1.8. Disputes and Litigation. Except as noted on Part 7 of the
Schedule: (a) there is no suit, action, litigation, proceeding, investigation,
claim, complaint or accusation pending or, to the Indemnitors' knowledge,
threatened against or affecting the Corporation or any Subsidiary or any of
their properties, assets or business or to which the Corporation or any
Subsidiary is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and no facts are known by the
Corporation or any Subsidiary which are reasonably likely to give rise to any
such suit, action, litigation, proceeding, investigation, claim, complaint or
accusation; (b) there is no pending or, to the Indemnitors' knowledge,
threatened change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect the Corporation or any Subsidiary or any
of their properties, assets or businesses, and the Indemnitors or the
Corporation do not know, and have no reasonable grounds to know, of any basis
for any such change; and (c) there is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitrator or governmental body against
or affecting the Corporation or any Subsidiary or any of their properties,
assets or business. Except as set forth on Part 7 of the Schedule, none of the
items nor aggregate of items listed on Part 7 of the Schedule would, if
adversely determined, materially and adversely affect the business, operations,
properties or financial position of the Corporation or any of the Subsidiaries.
To the Indemnitors' knowledge, there is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of the Corporation or any Subsidiary or
any such person's heirs, executors or administrators as against the Corporation
or any Subsidiary.
3.1.9. Compliance with Laws. To the Indemnitors' knowledge, the
Corporation and Subsidiaries have at all times been, and presently are, in full
compliance with any applicable federal, state, local, foreign and other laws,
rules and regulations other than those where noncompliance would not have a
material adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have not received notice of any claimed
violation of any such law, rule or regulation. The Corporation and Subsidiaries
have filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and information are
true and complete in all respects. To the Indemnitors' knowledge, all permits,
licenses, orders, franchises and approvals of all federal, state, local and
foreign governmental or regulatory bodies required of the Corporation and
Subsidiaries for the conduct of their businesses have been obtained, no
violations are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or informal,
pending or threatened, which may revoke, limit, or question the validity,
sufficiency or continuance of any such permit, license, order, franchise or
approval. Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by the Corporation and
Subsidiaries.
3.1.10. Insurance. Part 8 of the Schedule sets forth a true and
complete list of all insurance policies (including the policy number, the name
of the insurer, the amounts of coverage, the premium rate, the cash value, if
any, the expiration date and the risks and losses insured against) maintained by
the Corporation and Subsidiaries on the Property, and copies of all such
policies, agreements, studies and analyses previously have been delivered to
Purchaser. All of the foregoing insurance policies are in full force and effect
and are fully paid as to all premiums heretofore due. Neither the Corporation
nor any Subsidiary has, to the Indemnitors' knowledge, failed to give any
<PAGE> 28
notice or present any claim under such insurance policies in a timely fashion,
nor has the Corporation or any Subsidiary received any notification of the
cancellation of any of such policies or that any of them will not be renewed. To
the Indemnitors' knowledge and except as set forth on Part 8 of the Schedule,
there is no claim, demand or offset, or any state of facts or occurrence of
events which might form the basis of any claim, demand or offset, which may
increase the premiums or impair the full value of said insurance policies.
3.1.11. Title to Properties. The Property consists of (i) all of
the properties and assets reflected on the Balance Sheet, and (ii) all other
properties and assets presently carried on the Corporation's and the
Subsidiaries' books or used in their businesses at any time since the Balance
Sheet Date, except, in each case, properties and assets subsequently disposed of
in the ordinary course of business. Except as set forth in Part 9(a) of the
Schedule, the Corporation and Subsidiaries have title (good and marketable with
respect to real property) to the Property, free and clear of all Liens,
conditions and covenants, other than (x) Liens for taxes not yet due and
payable, (y) minor imperfections of title, if any, which do not interfere with
the present or proposed use of such Property or otherwise adversely affect the
Corporation or the Subsidiaries in the conduct of their respective businesses,
and (z) such other Liens, charges or encumbrances that may arise or be created
after the date of this Agreement that are incidental to the conduct of the
business of the Corporation and the Subsidiaries and are in the ordinary course
of such business or are contemplated by the terms of this Agreement as set forth
on Part 9(a) to the Schedule. Except as set forth in Part 9(b) of the Schedule
or otherwise specifically disclosed in this Agreement, there have not been filed
any Liens or financing statements under the applicable state Uniform Commercial
Code or other similar statute on the properties or assets, whether real,
personal or mixed, of the Corporation or any Subsidiary, nor has the Corporation
or any Subsidiary signed any security agreement or similar agreement authorizing
any secured party thereunder to file any such Lien or financing statement.
3.1.12. Real Property and Real Property Leases. Part 10(a) of the
Schedule contains a true and complete list of (i) all real property owned by the
Corporation and the Subsidiaries together with a summary description of the
buildings and improvements thereon and the method by which such real property is
depreciated for tax and book purposes, (ii) all real estate leases to which the
Corporation or any Subsidiary is a party together with a summary description of
the buildings and improvements thereon, the address of each property, the name
of each landlord and tenant and the expiration date of each lease, and (iii) all
other interests, if any, in real property owned or claimed by the Corporation or
any Subsidiary. To the Indemnitors' knowledge, the Corporation and Subsidiaries
have all easements and rights, including parking rights and easements for power
lines, water lines, roadways and other access, necessary to conduct the
businesses they now conduct and enjoy peaceful and undisturbed possession of all
properties occupied by them. Neither the whole nor any portion of any real
property owned, occupied or leased to or by the Corporation or any Subsidiary
has been rezoned or condemned or otherwise taken by any public authority and, to
the Indemnitors' knowledge, no such rezoning, condemnation or other taking is
threatened or contemplated. To the Indemnitors' knowledge, none of the real
properties owned, occupied or leased to or by the Corporation or any Subsidiary,
or the occupancy or operation thereof, constitutes a nuisance or violation of
any law or any building, zoning or other ordinance, code or regulation or any
private or public covenant or restriction, and no notice from any governmental
body or other Person has been served upon the Corporation or any Subsidiary
claiming any violation of any such law, ordinance, code, regulation, covenant or
restriction, or requiring or calling attention to the need for any work,
repairs, construction, alterations or installations on or in connection with any
of such properties which has not been complied with except to the extent set
forth in Part 10(b) of the Schedule. All leases of real
<PAGE> 29
property to which the Corporation or any Subsidiary is a party are valid,
binding and in full force and effect, and, to the Indemnitors' knowledge, there
exists no default thereunder by any party thereto, nor any events which, with
notice or lapse of time, or both, would constitute a default, and all amounts
heretofore payable under such leases have been paid in full. True, correct and
complete copies of all deeds to the real property listed on Part 10(a) of the
Schedule and true, correct and complete copies of all real estate leases listed
on Part 10(a) of the Schedule, including all amendments, modifications, letter
agreements and assignments relating thereto have been previously delivered to
Purchaser.
3.1.13. Equipment. Part 11(a) of the Schedule contains a true and
complete list of (i) all equipment of the Corporation and the Subsidiaries
(having a cost basis in excess of $5,000 each) presently owned and used by the
Corporation and the Subsidiaries in their businesses; and (ii) all equipment
(including, but not limited to, trade fixtures and motor vehicles) leased by the
Corporation and the Subsidiaries, including the name and address of each lessor
and lessee, the expiration date of each lease, the monthly rent and any
additional rent payable under each such lease. To the Indemnitors' knowledge, no
party to any such lease is in default, each such lease is valid, binding, in
full force and effect, and enforceable in accordance with its terms. True,
correct and complete copies of all such leases, including all amendments,
modifications, letter agreements and assignments relating thereto have
previously been delivered to Purchaser.
3.1.14. Condition of Tangible Property. Except as set forth on
Part 11(b) of the Schedule, to the Indemnitors' knowledge, with the exception of
inventory, all tangible properties owned or used by the Corporation and
Subsidiaries, including, without limitation, all buildings, offices, theaters
and other structures owned or occupied by the Corporation and Subsidiaries and
all machinery, equipment, tools, fixtures and motor vehicles owned or used by
them, are in good operating condition, reasonable wear and tear excepted,
reasonably suitable for the purposes for which they are being utilized, and
sufficient for all current operations of the Corporation and the Subsidiaries.
3.1.15. Inventory. The inventories of each of the Corporation and
Subsidiaries shown on the Balance Sheet and inventories acquired by it
subsequent to the Balance Sheet Date consist solely of items of a quality and
quantity usable and salable in the normal course of its business.
3.1.16. Intangible Personal Property. Part 12(a) of the Schedule
contains a true and complete list and summary description of all trademarks,
service marks, trade names, and copyrights and applications for the foregoing,
all franchises, permits and other authorizations owned or used by the
Corporation and Subsidiaries, all licenses to which the Corporation or any
Subsidiary is a licensor or licensee, all non-competition covenants, and all
other intangible personal property owned or used by the Corporation and
Subsidiaries. Each of the Corporation and Subsidiaries validly owns or is
validly licensed under all intangible properties which are required or necessary
for the conduct of its business as now conducted, and except as set forth on
Part 12(b) of the Schedule, is the sole and exclusive owner of said properties,
free and clear of all Liens and has the unrestricted right to use said
properties, having not granted or entered into any agreement, covenant, license
or sublicense with respect thereto.
Except as set forth on Part 12(c) of the Schedule, no claims or
demands have been asserted against the Corporation or any Subsidiary with
respect to any such items of intangible property, and no proceedings have been
instituted, are pending or, to the Indemnitors' knowledge,
<PAGE> 30
have been threatened which challenge the rights of the Corporation or any
Subsidiary with respect to any of such assets. To the Indemnitors' knowledge and
except as set forth on Part 12(c) of the Schedule, the businesses and operations
of the Corporation and Subsidiaries, and the use or publication by them of their
trademarks, trade names, and advertising literature and other intangible
personal properties do not involve infringement or claimed infringement of any
United States trademark, trade name, or copyright.
No director, officer, stockholder, employee, consultant,
distributor, representative, advisor, salesman or agent of the Corporation or
any Subsidiary owns, directly or indirectly, in whole or in part, any
trademarks, trade names, or copyrights, or applications for the foregoing, or
tangible personal property which the Corporation or any Subsidiary is presently
using or the use of which is necessary for the business of the Corporation or
any Subsidiary as now conducted. To the Indemnitors' knowledge, none of the
directors, officers, stockholders, employees, consultants, distributors, agents,
representatives, advisors or salesmen of the Corporation or any Subsidiary has
entered into any agreement regarding know-how, trade secrets, or prohibition or
restriction of competition, or solicitation of customers or any other similar
restrictive agreement or covenant, whether written or oral, with any Persons
other than the Corporation and Subsidiaries.
3.1.17. Agreements. Part 13 of the Schedule contains a true and
complete list of all oral and written contracts, agreements, commitments,
understandings and obligations to which the Corporation or any Subsidiary is a
party or by which any of them or their properties may be bound which are not
otherwise listed in the Schedule and which (a) involve obligations by any party
thereto in excess of $50,000; (b) extend beyond six months from the date of this
Agreement and are not terminable on thirty (30) days' notice or less without any
liability or continuing obligation on the part of the Corporation or any
Subsidiary (including any management, consulting or retainer agreement); (c)
contain any escalator, renegotiation or redetermination clause; (d) require the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (e) contain covenants limiting the freedom of the
Corporation or any Subsidiary to compete in any line of business or with any
Person or in any geographical area; (f) contain any provision or option relating
to the acquisition by the Corporation or any Subsidiary of any business or
relating to the sale by the Corporation or any Subsidiary of any business; (g)
contain an agreement or commitment by the Corporation or any Subsidiary for a
material capital expenditure; (h) are contracts or agreements to which the
United States government is a party; or (i) contain any other agreement,
commitment, understanding or obligation which materially affects the business,
properties or assets of the Corporation or any Subsidiary. All of the aforesaid
agreements and all of the Continuing Contracts were entered into in the ordinary
course of business, are valid and binding agreements, in full force and effect
and enforceable in accordance with their respective terms, and, to the
Indemnitors' knowledge, there exists no breach or default, or any event which,
with notice or lapse of time or both, would constitute a breach or default, by
any party thereto. True and complete copies, including all amendments,
modifications, letter agreements and assignments relating thereto, of all of the
aforesaid written agreements and true and correct summaries of all such oral
agreements have previously been delivered to Purchaser.
To the Indemnitors' knowledge, neither the Corporation nor any
Subsidiary presently has, nor during the last five (5) years has had, directly
or indirectly, any type of contract, agreement, commitment, understanding or
obligation, whether written or oral, (i) with its customers or suppliers for the
sharing of fees, the rebating of the Corporation's or any Subsidiary's charges
to customers, kickbacks from customers or suppliers, or other similar
arrangements, or (ii) with any competitor regarding bidding for movie product or
product splitting; provided, the Corporation and the Subsidiaries have entered
into written video game rental agreements with the suppliers thereof that
<PAGE> 31
provide for shared revenues from their operation and specific written and oral
rebate agreements with concession item suppliers that have been previously
disclosed to Purchaser. To the Indemnitors' knowledge, neither the Corporation
nor any Subsidiary is a party to or otherwise bound by any contract, obligation
or commitment to purchase above the current market price or to sell below its
current list price supplies, equipment, capital assets, inventories or services,
or any contract, obligation or commitment which upon completion will result in a
net loss to the Corporation or Subsidiary of more than $50,000.
3.1.18. Indebtedness and Guaranties. Part 14(a) of the Schedule
sets forth a true and complete list, including the names of the parties thereto
and summary description of the terms thereof, of all debt instruments, loan
agreements, indentures or other obligations, whether written or oral, relating
to indebtedness for borrowed money or money loaned to others to which the
Corporation or any Subsidiary is a party or obligor. Except as set forth on Part
14(b) of the Schedule, the Corporation has not guaranteed any dividend,
obligation or indebtedness of any Subsidiary or any other Person; nor has any
Subsidiary guaranteed any dividend, obligation or indebtedness of the
Corporation, any other Subsidiary or any other Person. All of the aforesaid
items were entered into in the ordinary course of business, are valid and
binding, in full force and effect and enforceable in accordance with their
respective terms and, to the Indemnitors' knowledge, there exists no breach or
default, or any event which with notice or lapse of time or both, would
constitute a breach or default by any party thereto.
3.1.19. Books and Records. Except as set forth on Part 15 of the
Schedule, each of the Corporation and Subsidiaries keeps its books, records and
accounts (including, without limitation, those kept for financial reporting
purposes and for tax purposes) in sufficient detail to accurately and fairly
reflect the transactions and dispositions of its assets, liabilities and
equities. The minute books of each of the Corporation and incorporated
Subsidiaries contain complete and accurate records of all of its stockholders'
and directors' meetings and of all action, with respect to the Corporation and
the Subsidiaries, taken by such stockholders and directors. The meetings of
directors and stockholders referred to in such minute books were duly called and
held, and the resolutions appearing in such minute books were duly adopted. The
signatures appearing on all documents contained in such minute books are the
true signatures of the persons purporting to have signed the same.
<PAGE> 32
3.1.20. ERISA. Neither the Corporation nor any Subsidiary has any
"qualified" plans within the meaning of Section 401(a) of the Internal Revenue
Code of 1986 and, except as set forth in Part 16 of the Schedule, does not
maintain, administer or otherwise contribute to any "EMPLOYEE BENEFIT PLAN", as
defined in Section 3(3) of ERISA, which is subject to any provisions of ERISA
and covers any employee, whether active or retired, of the Corporation or any
Subsidiary.
3.1.21. Employees.
(a) Part 17 of the Schedule sets forth a true and complete list
of: (1) all collective bargaining agreements and other labor agreements
to which the Corporation or any Subsidiary is a party or by which any of
them may be bound; (2) all employment, profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consultant, retirement, welfare and incentive plans, agreements or
contracts, whether written or oral, to which the Corporation or any
Subsidiary is a party or by which any of them may be bound; (3) all
agreements and plans, whether written or oral, to which the Corporation
or any Subsidiary is a party and which constitute "fringe benefits" to
their employees or salesmen, including, without limitation, group life
and health insurance, vacation plans or programs, sick leave plans or
programs, termination or severance pay programs and employee discounts;
and (4) the name and current annual compensation of each director and
each officer of the Corporation and the Subsidiaries, and of each
employee or salesman thereof whose current annual salary and/or
estimated current annual commission is $25,000 or more, together with
such person's job title and amounts and forms of compensation and fringe
benefits. True and complete copies of all written, and correct summaries
of all oral, contracts, agreements, plans and programs set forth on Part
17 of the Schedule have previously been delivered to Purchaser.
(b) To the Indemnitors' knowledge, all of the aforesaid
contracts, agreements, plans and programs are in full compliance with
all applicable federal, state and local laws, and the Corporation and
Subsidiaries are in full compliance with all federal, state and local
laws respecting employment, wages and hours. Neither the Corporation nor
any Subsidiary is engaged in any unfair labor practice or discriminatory
employment practice and no complaint of any such practice against the
Corporation or any Subsidiary is filed or, to the Indemnitors'
knowledge, threatened to be filed with or by the National Labor
Relations Board or the Equal Employment Opportunity Commission, nor is
any grievance filed or, to the Indemnitors' knowledge, threatened to be
filed against the Corporation or any Subsidiary by any employee pursuant
to any collective bargaining or other employment agreement to which the
Corporation or any Subsidiary is a party. To the Indemnitors' knowledge,
the Corporation and the Subsidiaries are in full compliance with all
applicable federal and state laws and regulations respecting
occupational safety and health standards other than those where
noncompliance would not have a material adverse effect on the
Corporation, the Subsidiaries or their business, and the Corporation and
Subsidiaries have received no complaints from any federal or state
agency or regulatory body alleging violations of any such laws and
regulations.
(c) To the Indemnitors' knowledge, the Corporation and
Subsidiaries are in full compliance with the terms of all contracts,
agreements, plans and programs set forth on Part 17 of the Schedule.
Except as noted in Part 17 of the Schedule, the employment of all
persons and officers employed by the Corporation and the Subsidiaries is
terminable at will, without any penalty or severance obligation of any
kind on the part of the employer, and the consummation of the
transactions contemplated by this Agreement will not trigger any
payments to any officers, directors or employees of the Corporation or
any Subsidiary. All
<PAGE> 33
sums due for employee compensation and benefits and all vacation time
owing to any employees have been duly and adequately accrued on the
books of the Corporation and Subsidiaries. To the Indemnitors'
knowledge, all employees of the Corporation and Subsidiaries are either
United States citizens or resident aliens specifically authorized to
engage in employment in the United States in accordance with all
applicable laws. The Indemnitors do not know, and have not been
informed, that any employee, consultant, distributor, representative,
advisor, salesman, agent, customer or supplier of the Corporation or any
Subsidiary will terminate his employment or cease to do business with
the Corporation or any Subsidiary after the Closing.
(d) To the Indemnitors' knowledge, neither the Corporation nor
any Subsidiary has experienced since the Balance Sheet Date, any labor
troubles or strife, work stoppages, slowdowns, or other interference
with or impairment of the businesses of the Corporation and Subsidiaries
by their employees. To the Indemnitors' knowledge, neither the
Corporation nor any Subsidiary has experienced since the Balance Sheet
Date, any union or collective bargaining organization efforts or
negotiations, or requests for negotiations, for any representation or
any labor contract relating to any employees of the Corporation or the
Subsidiaries not covered by a union or collective bargaining agreement
as of the Balance Sheet Date, except to the extent disclosed in Part 17
of the Schedule.
3.1.22. Governmental and Other Consents. Except as set forth on
Part 18 of the Schedule, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or other
Person is required on the part of the Corporation or any Subsidiary, the
stockholders of the Corporation, the Trust, SPI, or the partners of Super Saver
in connection with the execution or delivery of the Transaction Documents or the
consummation of the transactions contemplated hereby.
3.1.23. Environmental Matters. Except as set forth in Part 19 of
the Schedule and to the Indemnitors' knowledge, with respect to the real estate
owned or leased by the Corporation or any of the Subsidiaries, (i) all permits,
licenses, filings and approvals necessary for the lawful construction, occupancy
and operation of such real estate required by any federal, state, county,
regional or local authorities whose jurisdiction includes, in whole or in part,
environmental protection or matters pertaining to health, safety and welfare
have been obtained; (ii) none of such real estate contains any (a) asbestos in
any form, (b) urea formaldehyde foam insulation, (c) transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs) in excess of fifty parts per million, or (d) other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any federal, state, county, regional or local authority, except in compliance
with applicable law; and (iii) none of such real estate has been used at any
time in the past for any activities involving, directly or indirectly, the use,
generation, treatment, storage, spill or disposal of any hazardous or toxic
chemical, material, substance or waste, except in compliance with applicable
law.
3.1.24. Discounts and Gift Certificates. Any outstanding discount
or promotional tickets, gift certificates, prepaid tickets or admission passes
or any other arrangements allowing the holder thereof to reduced or free
admission to any of the Theaters will expire on or before December 31, 1998,
other than (i) those issued prior to December 1, 1997 and (ii) free passes
issued in the ordinary course of business.
<PAGE> 34
3.1.25. Full Disclosure. As of the date of this Agreement, the
Indemnitors have, and at the Closing will have, disclosed in writing to
Purchaser all events, conditions or facts which, to the Indemnitors' knowledge,
materially affect the condition (financial or otherwise), business or prospects
of the Theaters. The Indemnitors have not now, and will not have at the Closing,
withheld from Purchaser knowledge of any events, conditions or facts which the
Indemnitors know may materially affect the condition (financial or otherwise),
business or prospects of the Theaters. No representation or warranty by the
Indemnitors in this Agreement, and no information contained in the Schedule, the
exhibits, lists, certificates and other instruments and documents furnished or
to be furnished to Purchaser pursuant hereto, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements and information contained herein or
therein not misleading. The Indemnitors shall execute and deliver to Purchaser
at Closing the Certificate described in Section 5.1.5. For the purposes of this
Section 3.1.25, events, conditions and facts which have effects aggregating less
than 5% of the transaction value is deemed not material.
3.1.26. Organization of the Trust. The Trust is a duly formed and
validly existing trust under the laws of the State of Texas.
3.1.27. Authority of Curley. Curley, in his individual capacity,
has full right, power and authority to enter into this Agreement and the other
Transaction Documents to which he is a party and to consummate the transactions
contemplated hereby and thereby.
3.1.28. Authority of Indemnitors. Each of the Indemnitors has
full right and power to enter into this Agreement and the other Transaction
Documents to which each is a party and to consummate the transactions
contemplated hereby and thereby. The execution by each of the Indemnitors of
this Agreement and the other Transaction Documents to which each is a party,
their delivery to Purchaser and the performance of their respective terms have
been fully authorized by the Board of Directors of the Corporation, the
stockholders and the Board of Directors of SPI, the partners of Super Saver and
the trustee of the Trust, as required, and no further corporate, partnership or
trust action will be necessary on their part to make this Agreement and the
other Transaction Documents to which each is a party valid and binding upon each
of the Indemnitors in accordance with their respective terms, other than the
stockholder approval required pursuant to Section 5.2.7. The execution and
delivery of this Agreement and the other Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby will not,
result in a violation or breach of any term or provision of, nor constitute a
default under, the Corporation's or SPI's articles of incorporation or bylaws,
Super Saver's partnership agreement, the Trust's formation documents, or other
constituent documents, or any indenture, mortgage, deed of trust or other
material contract or agreement to which the Corporation, SPI, Super Saver or the
Trust is a party.
3.1.29. Validity and Enforceability. This Agreement and the other
Transaction Documents are valid and binding agreements, enforceable against the
Indemnitors, the Subsidiaries and Curley to the extent each is ostensibly a
party in accordance with their respective terms by Purchaser, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws and principles of equity affecting the
rights of creditors generally from time to time in effect.
<PAGE> 35
3.1.30. Insolvency. No Seller or Indemnitor is now Insolvent, nor
will any Seller or Indemnitor be rendered Insolvent by the occurrence of the
transactions contemplated hereby.
3.1.31. Cash Flow Figures.
(a) Sellers have provided cash flow figures (the "CASH FLOW
FIGURES") indicating gross revenues less direct operating expenses for
the Theaters operated by such Seller from November 1, 1996 through
October 31, 1997 in Exhibit S attached hereto.
(b) Each Seller's Cash Flow Figures are in accordance in all
material respects with the books and records of such Seller and, except
as stated therein, fairly represent said Cash Flow Figures for said
Theaters.
3.2. Representations and Warranties of Purchaser. To induce the Sellers
and the Indemnitors to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents, warrants and agrees as
of the date hereof as follows:
3.2.1. Organization and Good Standing. Silver Cinemas is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware. Purchaser is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware.
3.2.2. Authority. The execution by each of Silver Cinemas and
Purchaser of this Agreement and the other Transaction Documents to which each is
a party, their delivery to the Indemnitors and the performance of their
respective terms have been fully authorized by the Board of Directors of each of
Silver Cinemas and Purchaser and each of Silver Cinemas' and Purchaser's
stockholders, if required, and no further corporate action will be necessary on
their part to make this Agreement and the other Transaction Documents to which
each is a party valid and binding upon each of Silver Cinemas and Purchaser in
accordance with their respective terms. The execution and delivery of this
Agreement and the other Transaction Documents do not, and the consummation of
the transactions contemplated hereby and thereby will not, result in a violation
or breach of any term or provision of, nor constitute a default under, each of
Silver Cinemas' and Purchaser's respective articles or certificates of
incorporation or bylaws, or any indenture, mortgage, deed of trust or other
material contract or agreement to which either Silver Cinemas or Purchaser is a
party.
<PAGE> 36
3.2.3. Validity and Enforceability. This Agreement and the other
Transaction Documents are valid and binding agreements, enforceable against each
of Silver Cinemas and Purchaser to the extent each is ostensibly a party in
accordance with their respective terms by the Sellers, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws and principles of equity affecting the rights of
creditors generally from time to time in effect. The execution and performance
by each of Silver Cinemas and Purchaser of this Agreement and the other
Transaction Documents to which each is a party and the consummation of the
transactions contemplated hereby or thereby do not violate any statutory or
common law or rule or regulation or give rise to a cause of action of any type
in any Person (other than the parties to such agreements, upon a violation
hereof or thereof), which will result in any liability to the Sellers or the
stockholders of the Corporation.
ARTICLE 4. - COVENANTS
4.1. The Sellers' and the Indemnitors' Covenants. To induce Purchaser to
enter into this Agreement and to consummate the transactions contemplated
hereby, and without limiting any covenant, agreement, representation or warranty
made elsewhere in this Agreement, the Sellers and the Indemnitors covenant and
agree as follows:
4.1.1. Access and Information. Between the date of this Agreement
and the Closing Date, each of the Corporation and Subsidiaries will: (i) provide
to Purchaser and its officers, attorneys, accountants and other representatives,
during normal business hours, or otherwise if Purchaser deems necessary, free
and full access to all of the properties, assets, agreements, commitments,
books, records, accounts, tax returns and documents of the Corporation and
Subsidiaries and permit them to make copies thereof; (ii) furnish Purchaser and
its representatives with all information concerning the business, properties and
affairs of the Corporation and Subsidiaries as Purchaser requests and certified
by the officers of the Corporation, if requested; (iii) use their best efforts
to cause the Corporation's Accountants to make available to Purchaser and its
representatives all financial information relating to the Corporation and the
Subsidiaries requested, including all working papers pertaining to audits and
reviews made heretofore by such auditors; (iv) furnish Purchaser true and
complete copies of all financial and operating statements of the Corporation and
Subsidiaries; (v) permit access to customers and suppliers for consultation or
verification of any information obtained by Purchaser and use their best efforts
to cause such customers and suppliers to cooperate with Purchaser in such
consultation and in verifying such information; and (vi) cause their employees,
accountants and attorneys to make disclosure of all material facts known to them
affecting the financial condition and business operations of the Corporation and
Subsidiaries and to cooperate fully with any audit, review, investigation or
examination made by Purchaser and its representatives, including, without
limitation, with respect to:
(a) The books and records of the Corporation and Subsidiaries;
(b) The reports of state and federal regulatory examinations;
(c) Leases, contracts and commitments between the Corporation or
any Subsidiary and any other Person;
(d) Physical examination of any real properties owned by, or
leased to or by the Corporation or any Subsidiary;
<PAGE> 37
(e) Physical examination of any real property upon which the
Corporation or any Subsidiary has a Lien; and
(f) Physical examination of any furniture, fixtures, equipment or
other personal property owned by or leased to or by the Corporation or
any Subsidiary.
4.1.2. Notices and Approvals. Each of the Sellers and Indemnitors
agrees: (a) to give, and to cause the Subsidiaries to give, all notices to third
parties (including their respective stockholders and limited and general
partners) which may be necessary or deemed desirable by Purchaser in connection
with this Agreement and the consummation of the transactions contemplated
hereby, (b) to use its best efforts to obtain, and to cause the Subsidiaries to
obtain, all federal and state governmental regulatory agency approvals,
consents, permits, authorizations, and orders necessary or deemed desirable by
Purchaser in connection with this Agreement and the consummation of the
transaction contemplated hereby and (c) to use its best efforts to obtain, and
to cause Subsidiaries to obtain, all consents and authorizations of any
governmental authorities or other third parties (including their respective
stockholders and limited and general partners) and lenders (including Norwest
Bank El Paso, N.A. and Frost National Bank, N.A.) necessary or deemed desirable
by Purchaser in connection with this Agreement and the consummation of the
transactions contemplated hereby. At least ten (10) business days prior to the
submission of any application with respect to any of the foregoing approvals,
consents, permits, authorizations and orders, the Corporation shall, and shall
cause any Subsidiary to, deliver a copy thereof to Purchaser. In the event
Purchaser shall request any modification in the form or content of any such
application, the Corporation shall, or shall cause any Subsidiary to, make such
change or modification and submit the application as modified or changed.
4.1.3. Information for Purchaser's Statements and Applications.
The Sellers shall, and shall cause the Subsidiaries and their employees,
accountants and attorneys to, cooperate fully with Purchaser in the preparation
of any statements or applications made by Purchaser to any federal or state
governmental regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish Purchaser with all information
concerning the Corporation and Subsidiaries necessary or deemed desirable by
Purchaser for inclusion in such statements and applications, including, without
limitation, all requisite financial statements and schedules. At the time any
such statement or application is filed and at such other times as Purchaser may
request, the Sellers shall provide Purchaser with a certificate executed by the
respective Corporation's or Subsidiary's executive officers confirming in such
detail as Purchaser may request the information concerning the Corporation or
Subsidiary which is contained in such statement or application.
4.1.4. Termination of Employees. On the Closing Date, each Seller
shall terminate all of its Theater level employees; provided, Purchaser may
elect to hire any of such employees. Each Seller will pay on or before the
Closing Date any accrued vacation pay earned prior to the Closing by any
employees of such Seller, other than those employees set forth on the Exhibit
described in Section 2.4(a)(vii).
<PAGE> 38
4.1.5. Conduct of Business.
(a) Except as otherwise specifically contemplated by this
Agreement and disclosed on the Schedule, from the date of this Agreement
and through the Closing, unless Purchaser has given its prior written
consent otherwise, each of the Sellers shall, and shall cause each
Subsidiary to, conduct its business and affairs only in the ordinary and
usual course and in the same manner in which they have heretofore been
conducted. Any purchases of equipment or fixtures from the date of this
Agreement through the Closing, shall be of equipment and fixtures of
comparable quality and standards as such items purchased prior to the
date of this Agreement. Without limiting the generality of the
foregoing, absent Purchaser's prior written consent, the Sellers shall
not, and shall not permit any Subsidiary to, take any action or omit to
take any action where such action or omission would by the terms of this
Agreement require an item to be listed on Part 5 of the Schedule in
order to make the representations herein true as of the date of such
action or omission.
(b) From and after the date hereof until the Closing or
termination of this Agreement pursuant to the terms hereof, each Seller,
without the prior written consent of Purchaser, shall not:
(i) encumber or permit the encumbrance by such Seller of the
Property owned or leased thereby, except for encumbrances that are
discharged on or before Closing;
(ii) dispose of or contract to dispose of any of the Property
owned or leased thereby, except for replacements or substitutes in the
ordinary course of business (but will not sell any of the Theaters
operated thereby); and
(iii) amend or terminate any of the Leases or Continuing
Contracts to which such Seller is a party.
4.1.6. Preservation of Business. From the date of this Agreement
and through the Closing, the Sellers shall use commercially reasonable efforts,
and shall cause the Subsidiaries to use commercially reasonable efforts, to
preserve and keep intact the respective business organizations of the
Corporation and Subsidiaries, to retain their respective officers, and to
preserve the goodwill of their respective employees, customers, suppliers and
all other persons having business relations with the Corporation or any
Subsidiary.
4.1.7. Insurance. From the date of this Agreement and through the
Closing, the Sellers shall, and shall cause the Subsidiaries to, continue in
force all existing insurance now carried by the Corporation and Subsidiaries.
<PAGE> 39
4.1.8. Contracts and Commitments. From the date of this Agreement
and through the Closing, unless Purchaser has given its prior written approval,
the Sellers shall not, and shall not permit any Subsidiary to, enter into any
contract or commitment by which any of the Property is bound except contracts or
commitments in the ordinary and usual course of business not involving (i) an
expenditure in any one transaction in excess of $2,000; and (ii) the purchase of
a quantity of materials not reasonably anticipated (based on current operations)
to be consumed in less than six (6) months; and the Sellers shall not, and shall
not permit any Subsidiary to, make or incur any capital expenditures in an
aggregate amount in excess of $3,000, except for items of equipment on order on
the date hereof and set forth on Part 13 of the Schedule.
4.1.9. Actions, Etc. The Sellers shall promptly notify Purchaser
of any lawsuits, claims, proceedings or investigations which are threatened or
commenced against the Corporation or any Subsidiary or against any of their
employees, consultants, officers or directors, or, to the Indemnitors'
knowledge, their employees or consultants between the date of this Agreement and
the Closing Date and which may relate to, or affect, the business or assets of
the Corporation or any Subsidiary or the transactions contemplated hereby. From
the date of this Agreement and through the Closing, the Sellers shall, and shall
cause the Subsidiaries to, duly comply with all laws, regulations, ordinances,
orders, injunctions and decrees applicable to them, their properties, and the
conduct of their respective businesses, and with all covenants, terms and
conditions upon or under which any of their properties are held.
4.1.10. Repairs. From the date of this Agreement and through the
Closing, the Sellers shall, and shall cause the Subsidiaries to, maintain,
preserve and protect the property used in the conduct of the business of the
Corporation and Subsidiaries and, except as set forth on Part 11(b) to the
Schedule, keep the same in good repair, working order and condition and, from
time to time make, or cause to be made, all needful and proper repairs, renewals
and replacements thereto, subject to the limitation contained in Section 4.1.8
hereof, so that the business carried on in connection therewith may be
advantageously conducted at all times.
<PAGE> 40
4.1.11. Reports and Returns. The Sellers shall, and shall cause
the Subsidiaries to, duly and timely file all reports and returns required to be
filed with federal, state, local and other authorities prior to Closing,
including, without limitation, any federal income tax returns, which returns
shall be prepared in accordance with all regulatory requirements. The Sellers
shall, and shall cause the Subsidiaries to, promptly pay all federal, state,
foreign and local tax assessments and governmental charges levied or assessed
upon the Corporation and Subsidiaries or their properties prior to the date on
which penalties attach thereto and all lawful claims which, if unpaid when due
and payable, might become a Lien upon property of the Corporation or any
Subsidiary, except taxes, charges and claims being contested in good faith by
appropriate proceedings by the Corporation or a Subsidiary and for which
adequate reserves have been made on the books of the Corporation or the
Subsidiaries. The Sellers shall, and shall cause the Subsidiaries to, duly and
timely make all deposits required of the Corporation and Subsidiaries with
respect to any taxes (including, without limitation, employee withholding
taxes).
4.1.12. Indemnification of Purchaser.
(a) The sole remedy of Purchaser, its officers, directors,
representatives, shareholders, stockholders, lenders, assignees and
Affiliates against the Indemnitors and their Related Parties for any
Loss arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by Purchaser or such other Persons under the (i) Property Purchase
Agreement shall be made, if at all, pursuant to Section 4.1.12 thereof
and (ii) Put Agreement shall be made, if at all, pursuant to Section
4.1.12 thereof) shall be a claim for indemnity made and enforced in
accordance with this Section 4.1.12. Each and every provision in this
Agreement has been independently bargained for and relied upon by
Purchaser.
(b) The Indemnitors jointly and severally agree to defend and
indemnify, reimburse and hold harmless Purchaser and its Related Parties
(collectively, the "PURCHASER INDEMNITEES") against and in respect of
any and all liability, damage, deficiency, loss, cost or expense
(including attorney's fees and costs of investigation), or diminution of
value, whether or not involving a third party claim (collectively, a
"LOSS") arising from (i) all third party claims to the extent that they
relate to (A) transactions contemplated herein to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries, (B) the business currently or ever
conducted by the Sellers and the Subsidiaries to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries and (C) the Property prior to
Closing to the extent that they arise out of or relate to actions or
omissions of Curley, Lyco, the Indemnitors and/or the Subsidiaries and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein or in any document, certificate or
instrument delivered to Purchaser hereunder made by the Indemnitors,
even though any such representation, warranty or covenant may have been
made by the Indemnitors in good faith and to their knowledge; provided,
however, that solely with respect to those representations and
warranties contained herein which have been specifically limited to the
Indemnitors' knowledge there shall be no indemnification obligations
under this Section 4.1.12(b) absent such knowledge. Without limiting the
foregoing, the Indemnitors agree to defend, indemnify, reimburse and
hold harmless each Purchaser Indemnitee against and in respect of any
Loss arising out of or related to:
<PAGE> 41
(1) any claim for a finder's fee or brokerage or other
commission arising by reason of any services rendered or alleged to
have been rendered to or at the instance of any of the Indemnitors
or any Subsidiary with respect to this Agreement or any of the
transactions contemplated hereby;
(2) any liability to any federal, state or local taxing
authority for income taxes, excise taxes, sales taxes, franchise
taxes or other taxes or penalties incurred by the Corporation or
any Subsidiary on or prior to the Closing Date; and
(3) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, and Losses incident to any of the
foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this
indemnity.
(c) Notwithstanding the preceding provisions concerning
indemnification of the Purchaser Indemnitees by the Indemnitors,
Purchaser hereby expressly agrees that the liabilities and obligations
of the Indemnitors under this Section 4.1.12 shall be expressly limited
as follows:
(1) the amount of any damages asserted by any Purchaser
Indemnitee pursuant to any indemnification claim made pursuant to
this Section 4.1.12 shall include the amount of tax liability, if
any, incurred by any Purchaser Indemnitee upon receipt of such
indemnification and be limited in each case to the total amount of
actual damages incurred by any Purchaser Indemnitee net of the then
present value (calculated at 6% per annum) of any related tax
benefit to the Purchaser Indemnitee, if any, resulting from such
claim;
(2) the Indemnitors shall not be liable for any increase in
any tax liability of the Purchaser Indemnitees (including, without
limitation, income, property, sales, use, franchise, capital stock,
excise, value added, employees' income withholding, social
security, unemployment taxes and all interest and penalties related
to any of such taxes) to the extent such increase in tax liability
to the Purchaser Indemnitees shall result from an audit or
enforcement action that in either case was voluntarily initiated by
Purchaser or its Affiliates;
(3) the Indemnitors shall not be required to defend,
indemnify or hold any Purchaser Indemnitee harmless from any claim
pursuant to Section 4.1.12(b)(ii) based upon any facts or
circumstances which were specifically disclosed by the Indemnitors
to Purchaser in this Agreement or in the Schedule or any exhibit
attached hereto or in any document delivered to Purchaser which is
specifically identified on Exhibit K attached hereto;
(4) the Indemnitors shall not be required to defend,
indemnify or reimburse or hold any Purchaser Indemnitee harmless
from any claim except to the extent that the total of all such
claims established pursuant to this Section 4.1.12, Section 4.1.12
of the Property Purchase Agreement and Section 4.1.12 of the Put
Agreement exceeds an aggregate amount of $25,000, subject to
reduction in accordance with Section 4.2.3; and
(5) Indemnitors shall not be liable for any breach of
representation, warranty, covenant or any other matter to the
extent that it resulted in an adjustment in the Purchase Price.
<PAGE> 42
(d) In the event the income or other tax returns of the Purchaser
Indemnitee are audited after Closing by any taxing authority, the
Indemnitors shall have the right to participate at their own expense in
such audit and to contest in good faith and on behalf of the
taxpayer/entity any assessments for additional tax, interest or penalty
proposed or imposed by such taxing authority for which the Indemnitors
may be liable or responsible under this Section 4.1.12, providing the
Indemnitors post bond for any liability resulting from such contest.
(e) Each of the Indemnitors shall be so obligated under this
Section 4.1.12 and Section 4.1.12 of the Property Purchase Agreement and
Section 4.1.12 of the Put Agreement to the extent of an aggregate
maximum of an additional $3,200,000 over and above any and all offsets
against the Escrow Amount; provided, that the maximum aggregate amount
to be recovered by all Purchaser Indemnitees from the Indemnitors
collectively shall not exceed an additional $3,200,000 over and above
any and all offsets against the Escrow Amount and, provided further,
that any amounts paid by the Indemnitors (whether directly or by offset
of other payments due Indemnitors) pursuant to Section 4.1.12 of the
Property Purchase Agreement or Section 4.1.12 of the Put Agreement that
are not offset against the Escrow Amount shall be applied towards such
$3,200,000 limitation. Notwithstanding the foregoing, this paragraph (e)
shall not apply to any breach of Sections 3.1.11, 3.1.12 and 8.19
hereof.
(f) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.1.12, then after prompt written notice by
any Purchaser Indemnitee to the Indemnitors of such demand, claim or
lawsuit, the Indemnitors shall retain counsel reasonably satisfactory to
Purchaser to defend such claim or action. Thereafter, any Purchaser
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event the Indemnitors fail to respond to the prompt
written notice of any such demand, claim or lawsuit, or fail to retain
reasonably satisfactory counsel, then any Purchaser Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of the
Indemnitors. The above agreement of the Indemnitors to defend, indemnify
and hold harmless the Purchaser Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any Purchaser
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.1.12, "prompt written notice" shall mean that any Purchaser
Indemnitee, shall give written notice to counsel for the Indemnitors
designated in Section 8.2 of a demand, claim or lawsuit within thirty
(30) days after such demand, claim or lawsuit is brought to the
attention of a Purchaser Indemnitee, and in any event 15 days before any
pleading is due in any litigation.
(g) The Indemnitors agree that their agreement under this Section
4.1.12 to defend, indemnify, reimburse and hold harmless the Purchaser
Indemnitees will first be accomplished by an offset against the Escrow
Amount as provided in Section 2.6 hereof. For any and all amounts in
excess of the Escrow Amount, the Indemnitors agree to indemnify,
reimburse and hold harmless Purchaser Indemnitees from any Loss within
thirty (30) days after any such Loss shall be finally determined. Any
Loss under this Section 4.1.12 shall be deemed "finally determined" on
the earlier of (i) the date upon which the Indemnitors shall acknowledge
in writing to Purchaser that any claim for indemnity under this Section
4.1.12 has been properly made and is in the correct amount, or (ii) in
the event the Indemnitors shall contest any claim made by a Purchaser
Indemnitee or by any third party on the date any final judgment,
decision or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction, or a settlement
shall have been consummated,
<PAGE> 43
or the parties shall have arrived at a mutually binding agreement with
respect to such claim, as applicable. The indemnity hereunder shall
include any and all costs and expenses incurred by a Purchaser
Indemnitee pending any such final determination.
(h) These indemnification obligations of the Indemnitors shall
survive until, but only until, the first anniversary of the Closing;
provided, that the obligations of the Indemnitors for any claim made by
a Purchaser Indemnitee under this Section 4.1.12 prior to such first
anniversary, shall survive such first anniversary.
4.1.13. Compliance with Agreement. The Sellers shall not, and
shall not allow the Subsidiaries to, undertake any course of action inconsistent
with satisfaction of the conditions applicable to them set forth in this
Agreement, and the Sellers shall, and shall cause the Subsidiaries to, do all
such acts and take all such measures as may be reasonably appropriate as early
as practicable to comply with and satisfy (as applicable) the representations,
agreements, conditions and other provisions of this Agreement. The Sellers shall
give Purchaser prompt written notice of any change in any information contained
in the representations and warranties made in Section 3.1 hereof and on the
Schedule referred to therein and of any condition or event which constitutes a
default of any covenant or agreement of the Sellers made in Section 4.1 or in
any other section hereof and the Sellers shall have a continuing obligation to
promptly supplement or amend the Schedule with respect to any matter thereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedule; provided,
however, that for the purposes of the rights and obligations of the parties
hereunder, any such supplemental or amended disclosure shall not be deemed to
have been disclosed as of the date of this Agreement unless so agreed to in
writing by Purchaser. For the purposes of this Section 4.1.13, "prompt written
notice" shall mean notice given to Purchaser within five (5) days after the
occurrence of the event which by the terms of this Agreement requires such
change in information or constitutes such a default, or if such event occurs
within five (5) days prior to the Closing, then "prompt written notice" shall
mean written notice given prior to the Closing.
4.1.14. Landlord Estoppel Certificates. The Sellers shall deliver
to Purchaser not less than two (2) days prior to the Closing Date estoppel
certificates from the landlords of the Leased Premises and the acknowledgment
and consent from such landlords that Bankers Trust (or any substitute proposed
lender) is to be a lienholder secured by the Leased Premises (the "ESTOPPEL
CERTIFICATES") in the form attached hereto as Exhibit L.
4.1.15. Title Information. Purchaser, at the Sellers' cost and
expense to the extent that the Purchase Price is adjusted as set forth in
Section 2.4, shall cause a title company satisfactory to Purchaser and its
lender to deliver to Purchaser not less than fifteen (15) days prior to the
Closing Date a commitment for owner's and mortgagee's title insurance policies,
naming Purchaser as the insured party in amounts and with exceptions to title
acceptable to Purchaser, for each tract of real property constituting Property
owned or leased by any Seller, together with legible copies of all title
exceptions listed therein. Purchaser and its lender shall have ten (10) days
from receipt thereof to review and approve the status of title to such real
property. If Purchaser or its lender object to the status of title to such real
property, they shall so notify the Sellers in writing on or before the
expiration of such ten (10) day period, and the Sellers shall have the right but
not the obligation to cure such title objections prior to the Closing Date.
Purchaser shall have the right to terminate this Agreement in the event the
Sellers fail to cure on or before the Closing Date any title objection which (i)
materially interferes or
<PAGE> 44
reasonably could materially interfere with the present use of the properties
subject thereto or (ii) its lender does not waive.
4.1.16. Additional Lender Requirements. Sellers shall deliver to
Purchaser not less than ten (10) days prior to the Closing Date the following
documents, in form and substance satisfactory to Purchaser and its lender, from
each lessor, and if appropriate each sublessor and mortgagee, if appropriate, of
property constituting Property being leased or subleased by the Sellers: (i)
landlord's agreement, (ii) memorandum of lease, (iii) subordination,
nondisturbance and attornment agreement, (iv) consent to assignment of lease and
(v) owner's/lessee's affidavit. The Corporation shall additionally deliver to
Purchaser not less than fifteen (15) days prior to the Closing Date full legal
descriptions and site plans for each tract of real property constituting
Property owned or leased by the Sellers, in form and substance satisfactory to
Purchaser and its lender.
4.1.17. Payment of Indebtedness. The Sellers shall deliver to
Purchaser not less than five (5) days prior to Closing, pay-off letters from
each note holder or other creditor in connection with any and all items of
indebtedness or other obligations of the Sellers as of the Closing Date the
payment or performance of which are secured by Liens, guaranties, pledges or
other encumbrances on tangible or intangible property of the Sellers and
specifically including Norwest Bank El Paso, N.A. and Frost National Bank, N.A.
Such pay-off letters shall set forth the exact pay-off amount for such items of
indebtedness through the Closing Date and indicate that payment of such amounts
shall be payment in full of the indebtedness and shall release the obligor of
any and all liability with respect to such items. The Sellers shall further
cause to be delivered into escrow at the Closing, fully executed releases of
such indebtedness and any and all Liens, guaranties, pledges or other
encumbrances associated therewith to be delivered upon payment in full by the
Sellers of such obligations.
4.1.18. Vote in Favor of Asset Sale. The Indemnitors will vote
all of the Shares owned by them in favor of approving the transactions
contemplated by this Agreement.
4.1.19. Exclusive Dealing. Indemnitors shall not, directly or
indirectly, through any agents, representatives or otherwise, solicit, accept,
or entertain offers from, negotiate with or in any manner encourage, accept or
consider any proposal of, or enter into any agreement with any Person other than
Purchaser relating to, the sale of the Property (or any material portion
thereof), whether through purchase, merger, consolidation or other business
combination.
4.1.20. Actions in the Event of a Noncompliance Circumstance. The
Indemnitors shall have until the earlier to occur of the Closing Date or fifteen
(15) days following delivery of notice of a Noncompliance Circumstance to cure
and correct any Noncompliance Circumstance prior to Closing and shall use their
reasonable efforts to effect such a cure or correction up to an aggregate of
$100,000 pursuant to Section 4.1.20 of this Agreement less amounts previously so
expended pursuant to Section 4.1.20 of the Property Purchase Agreement and the
Put Agreement.
4.2. Purchaser's Covenants. To induce the Indemnitors to enter into this
Agreement and to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement,
<PAGE> 45
representation or warranty made elsewhere in this Agreement, Purchaser covenants
and agrees as follows:
4.2.1. Nondisclosure of Information. Unless and until the
transactions contemplated by this Agreement are fully consummated, Purchaser
shall hold all data and information obtained with respect to the Corporation and
Subsidiaries in such degree of confidence as the Corporation and Subsidiaries
maintain such information and further agrees not to use such data or information
or disclose the same to others (i) except to Purchaser's accountants, attorneys,
lenders, agents and representatives, (ii) except as permitted by the
Corporation, (iii) except to the extent such information is published or is a
matter of public knowledge or used in connection with any securities statement
or offering circular prepared by Purchaser or any Affiliate thereof or (iv)
except as required by law. In the event this Agreement is terminated pursuant to
Section 7.1 hereof for any reason, Purchaser shall, within ten (10) days
following the date of such termination, deliver to the Corporation all written
information and copies thereof obtained by Purchaser or any of its
representatives referenced in (i) above at any time from the beginning of the
discussions between the Corporation and Purchaser of the transactions
contemplated herein.
4.2.2. Compliance with Agreement; Cooperation. Purchaser shall
not undertake any course of action inconsistent with satisfaction of the
conditions applicable to Purchaser set forth in this Agreement, and shall
cooperate and assist the Corporation, without expense to Purchaser, in all its
efforts and undertakings as early as practicable to comply with and satisfy (as
applicable) the representations, agreements, conditions and other provisions of
this Agreement applicable to the Purchaser, including, without limitation,
providing the Corporation with such financial and other information relating to
Purchaser as the Corporation may be required to deliver to the lenders, lessors
and sublessors of the Corporation or any Subsidiary in order to obtain the
releases, estoppel certificates and other consents contemplated by this
Agreement.
<PAGE> 46
4.2.3. Disclosure to the Corporation. Purchaser shall give the
Corporation prompt written notice of any information or other knowledge obtained
by Purchaser prior to Closing pursuant to its due diligence investigation or
otherwise that Purchaser considers to be either (a) inconsistent with or in
violation of any of the representations and warranties made by the Indemnitors
in Section 3.1 of this Agreement, or inconsistent with any information disclosed
on the Schedule, or (b) a condition or event which may constitute a default by
the Indemnitors or failure to comply with or fully perform any covenant or
agreement of the Indemnitors made in Section 4.1 or any other section of this
Agreement (hereafter referred to as a "NONCOMPLIANCE CIRCUMSTANCE"). Any amounts
previously spent pursuant to Section 4.1.20 of this Agreement, the Property
Purchase Agreement and the Put Agreement up to an aggregate of $25,000 to effect
such cure or correction (less any other amounts which have reduced the $25,000
deductible referred to in Section 4.1.12(c)(4) of this Agreement, the Property
Purchase Agreement and the Put Agreement) will (i) increase the Purchase Price
by such amounts (unless the purchase price under the Property Purchase Agreement
or Put Agreement was previously so increased by such amount) and (ii) further
reduce the $25,000 deductible referred to in Section 4.1.12(c)(4) of this
Agreement, the Property Purchase Agreement and the Put Agreement by such
amounts. In the event the Indemnitors fail to cure or correct such Noncompliance
Circumstance, Purchaser shall have the right to terminate this Agreement in
accordance with the provisions of Section 7.1. In the event Purchaser elects to
proceed to Closing, any such breach or failure to perform by the Indemnitors
shall be deemed to be waived by Purchaser and shall not constitute the basis for
any claim of indemnification or offset by Purchaser against the Indemnitors or
the Escrow Amount after Closing.
4.2.4. Indemnification by Purchaser.
(a) The sole remedy of the Indemnitors and Curley and their
Related Parties (collectively, the "STARTIME INDEMNITEES") and any of
their officers, directors, representatives, stockholders, lenders,
assignees and Affiliates against Purchaser, Silver Cinemas and their
Related Parties for any Loss arising out of or related to this Agreement
or the transactions contemplated hereby (it being understood that claims
for indemnification by the StarTime Indemnitees or such other Persons
under the (i) Property Purchase Agreement shall be made, if at all,
pursuant to Section 4.2.4 thereof and (ii) Put Agreement shall be made,
if at all, pursuant to Section 4.2.4 thereof) shall be a claim for
indemnity made and enforced in accordance with this Section 4.2.4.
(b) Purchaser shall defend, indemnify, reimburse, and hold
harmless, the StarTime Indemnitees from: (i) all third party claims
relating to the business conducted by Purchaser arising out of, or
relating to, actions or omissions of Purchaser after the Closing; and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein, in each case of Purchaser contained in
this Agreement, even though any such representation, warranty or
covenant may have been made by the Purchaser in good faith.
(c) Notwithstanding the preceding provisions concerning
indemnification by Purchaser, the StarTime Indemnitees hereby expressly
agree that the liabilities and obligations of Purchaser under this
Section 4.2.4 shall be expressly limited as follows:
(1) the amount of any damages asserted by the StarTime
Indemnitees pursuant to any indemnification claim made pursuant to
this Section 4.2.4 shall include the amount of tax liability, if
any, incurred by the StarTime Indemnitees upon receipt of such
indemnification and be limited in each case to the total amount of
actual damages incurred by the StarTime Indemnitees net of the then
present value (calculated
<PAGE> 47
at 6% per annum) of any related tax benefit to the StarTime
Indemnitees, if any, resulting from such claim; and
(2) Purchaser shall not be required to defend, indemnify,
reimburse or hold the StarTime Indemnitees harmless from any claim
except to the extent that the total of all such claims established
pursuant to this Section 4.2.4, Section 4.2.4 of the Property
Purchase Agreement and Section 4.2.4 of the Put Agreement exceeds
an aggregate amount of $25,000.
(d) Purchaser shall be so obligated under this Section 4.2.4 and
Section 4.2.4 of the Property Purchase Agreement and Section 4.2.4 of
the Put Agreement to the extent of an aggregate maximum of $3,700,000;
provided, that the maximum aggregate amount to be recovered by all
StarTime Indemnitees from Purchaser and Silver Cinemas collectively
shall not exceed $3,700,000 and, provided further, that any amounts paid
by Purchaser or Silver Cinemas pursuant to Section 4.2.4 of the Property
Purchase Agreement or Section 4.2.4 of the Put Agreement shall be
applied towards such $3,700,000 limitation.
(e) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.2.4, then after prompt written notice by any
StarTime Indemnitee to Purchaser of such demand, claim or lawsuit, the
Purchaser shall retain counsel reasonably satisfactory to the StarTime
Indemnitees to defend such claim or action. Thereafter, any StarTime
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event Purchaser fails to respond to the prompt
written notice of any such demand, claim or lawsuit, or fails to retain
reasonably satisfactory counsel, then any StarTime Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of
Purchaser. The above agreement of Purchaser to defend, indemnify and
hold harmless the StarTime Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any StarTime
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.2.4, "prompt written notice" shall mean that any StarTime
Indemnitee, shall give written notice to Purchaser of a demand, claim or
lawsuit within thirty (30) days after such demand, claim or lawsuit is
brought to the attention of a StarTime Indemnitee, and in any event 15
days before any pleading is due in any litigation.
(f) These indemnification obligations of Purchaser shall survive
until, but only until, the first anniversary of the Closing; provided,
that the obligations of Purchaser for any claim made by the Corporation
under this Section 4.2.4 prior to such first anniversary shall survive
such first anniversary.
(g) Notwithstanding the foregoing, this Section 4.2.4 shall not
apply to Purchaser's failure to deliver the Purchase Price in accordance
with the terms of this Agreement.
<PAGE> 48
4.2.5. NCC Not Liable. Notwithstanding anything in this Agreement
or any other document or instrument executed in connection herewith to the
contrary, NCC shall have no liability whatsoever (other than as expressly
provided in the paragraph immediately preceding its signature hereto) under this
Agreement, including, but not limited to, no liability to Purchaser by virtue of
the redemption at Closing of the Class B Shares held by NCC.
ARTICLE 5. - CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement shall be subject to the fulfillment of each
and all of the following conditions at or before the Closing (unless an earlier
time is specified in this Agreement, in which case on or before such earlier
time), each of which is individually hereby deemed material, and any one or more
of which may be waived in writing by Purchaser:
5.1.1. Representations and Warranties. Each of the
representations, warranties and statements made by the Indemnitors contained in
this Agreement or in any certificate, schedule, exhibit or other document
delivered to Purchaser pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects as of the date when made and shall be true and correct on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing.
5.1.2. Performance by the Indemnitors. The Indemnitors shall have
fully performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them in all
material respects on or before the Closing (unless an earlier time is specified
in this Agreement, in which case on or before such earlier time), including,
without limitation, the execution and delivery by them of all documents and
instruments required under the terms of Section 6.1.1 of this Agreement.
5.1.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal, state and other governmental regulatory agencies and
other Persons required in connection with this Agreement and the consummation of
the transactions contemplated hereby (including under the HSR Act), and all such
consents, approvals, authorizations, permits and orders shall be in full force
and effect as of the Closing.
5.1.4. Opinion of the Seller's Counsel. The Sellers shall have
delivered to Purchaser at the Closing the opinion of the Sellers' counsel,
Timothy Gideon, which opinion shall be dated the Closing Date and addressed to
Purchaser. Such opinion shall be in substantially the form attached hereto as
Exhibit M.
5.1.5. Certificate of the Indemnitors. The Indemnitors shall have
provided to Purchaser a certificate (the "CERTIFICATE"), dated the Closing Date,
executed by each of the Indemnitors, and confirming, representing and warranting
to the reasonable satisfaction of Purchaser:
<PAGE> 49
(i) the accuracy as of such date of the Indemnitors' representations and
warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.1 of this Agreement have been satisfied or waived, and (iii)
that the Indemnitors have fully performed all covenants and agreements to be
performed by them in all material respects on or prior to the Closing. The sole
remedy of Purchaser, its officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Indemnitors and their Related
Parties for any Loss arising out of or related to this Certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.1.12.
5.1.6. Absence of Regulation Changes. There shall not have been
any material adverse change in any federal, state or other laws, rules or
regulations relating to the taxation, business, activities or operations of the
Corporation and the Subsidiaries, and no such change shall be threatened.
5.1.7. Satisfaction with Review of Purchaser. Since September 30,
1997, there shall have been no change or changes in the Corporation's or any
Subsidiary's business, labor relations, financial condition, prospects,
properties, assets, liabilities or results of operations (or the occurrence of
any events which might reasonably be expected to result in any such change or
changes), other than seasonal changes historically experienced by the indoor
theater industry, which in the judgment of Purchaser or its lender, made in good
faith, has been or may be materially adverse to the Corporation or the
Subsidiary.
5.1.8. Approval of Instruments. Purchaser and its lender shall
have approved all lists, financial statements, certificates and other documents
to be delivered by the Indemnitors, the Subsidiaries, the stockholders of the
Corporation or SPI, the partners of Super Saver or their representatives
pursuant to the provisions of this Agreement and such approval by Purchaser
shall not be unreasonably withheld. Furthermore, without limiting the foregoing,
all other instruments and documents delivered to Purchaser pursuant to the
provisions of this Agreement, or incidental to the transactions contemplated
hereby, shall be satisfactory to Purchaser and its lender as to form, scope,
substance and execution and such approval by Purchaser shall not be unreasonably
withheld.
5.1.9. Good Standing. The Corporation shall have furnished to
Purchaser at the Closing certificates of the appropriate governmental officials,
dated within fifteen (15) days of the Closing Date, confirming that the
Corporation is in good standing, owes no taxes and is duly qualified to transact
business in the State of Nevada and in each jurisdiction listed on Part 1 of the
Schedule, and that each Subsidiary is in good standing, owes no taxes and is
duly qualified to transact business in each of its respective jurisdictions
listed on Part 2 of the Schedule, and such certificates shall be accompanied by
a certificate executed by the Secretary of the Corporation, dated the Closing
Date, stating that such certificates are true and correct.
5.1.10. No Actions. At and as of the Closing Date, no action,
suit, proceeding or investigation shall have been instituted and be continuing,
or have been threatened and be unresolved, before a court or before or by a
governmental body or agency with respect to the transactions
<PAGE> 50
contemplated by this Agreement or which might have a materially adverse effect
on the assets, properties or businesses of the Corporation and Subsidiaries.
5.1.11. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by any court or governmental regulatory agency directing that the
transactions contemplated herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person with respect to
any of the transactions contemplated hereby.
5.1.12. Officers' Certificate. Purchaser shall have received a
certificate dated the Closing Date and signed by Curley and the Secretary of the
Corporation to the effect that except as noted on Part 20 of the Schedule, none
of the events described in Section 3.1.6 shall have occurred and to the further
effect that any liabilities or obligations of the Corporation and Subsidiaries
at the Closing Date, which were not reflected on the Balance Sheet, are set
forth on Part 20 of the Schedule and are liabilities or obligations incurred
only in the ordinary course of business subsequent to the Balance Sheet Date or
are liabilities contemplated by this Agreement.
5.1.13. Loan Agreements. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all loan agreements,
notes, mortgages, deeds of trust, security agreements and other evidences of
indebtedness of the Corporation and Subsidiaries, together with a certificate of
each lender, mortgagee or creditor under such instruments to the effect that the
Corporation or Subsidiary, as the case may be, is in good standing with regard
thereto, that no default exists thereunder, and that none are subject to any
prepayment penalties or charges other than as disclosed in Part 21 of the
Schedule.
5.1.14. Deeds and Leases. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all deeds and leases to
the real property used by the Corporation and Subsidiaries in the operation of
their businesses, copies of all equipment leases of which the Corporation or any
Subsidiary is a lessee and copies of all licenses of which the Corporation or
any Subsidiary is a licensee, along with certificates of each lessor or licensor
or other party to such agreement that such leases and licenses as of the Closing
Date are in effect, that the Corporation or Subsidiary, as the case may be, is
not in default under such lease or license.
5.1.15. Releases. The Sellers shall have delivered into escrow
fully executed releases of any and all items of indebtedness described in
Section 4.1.17 of this Agreement and all other items of indebtedness of the
Corporation and the Subsidiaries arising prior to the Closing and any and all
Liens or guaranties associated therewith. Further, the Indemnitors, Curley, Bill
Busby, Lynn Hunt and Lyco shall have delivered a release which releases any and
all claims (other than those pursuant to the Transaction Documents) held or to
be held by the Indemnitors, Curley, Bill Busby, Lynn Hunt and/or Lyco against
Purchaser and/or Silver Cinemas and their respective successors, assigns,
officers, directors, employees and agents in the form of Exhibit Q.
5.1.16. Stockholder Approval of Sale of Assets. On or before the
Closing, Sellers shall have obtained stockholder approval (or partner approval
in the case of Super Saver) of the
<PAGE> 51
transactions contemplated hereby by their respective stockholders (or partners
in the case of Super Saver) in accordance with their articles of incorporation
and bylaws (or limited partnership agreement in the case of Super Saver) and the
laws of Nevada or Texas, as applicable.
5.1.17. Due Diligence. Satisfactory completion of Purchaser's due
diligence investigation.
5.1.18. Estoppel Certificates. The receipt by Purchaser of the
Estoppel Certificates.
5.1.19. Phase I Environmental Reports and Surveys. Purchaser
shall, at its sole cost and expense, receive, at least five business days prior
to Closing, Phase I Environmental Reports and surveys for each tract of real
property owned or leased by the Corporation or any Subsidiary, in form and
substance satisfactory to Purchaser and its lender.
5.1.20. Closing of Fee Owned Theaters. The closing of the sale of
the Fee Owned Theaters shall have occurred pursuant to the Property Purchase
Agreement.
5.1.21. Norwest Release. Purchaser shall have received from
Norwest Bank El Paso, N.A. a release of all of its claims against Purchaser
related to this Agreement and the transactions contemplated hereby in a form
satisfactory to Purchaser in its sole discretion.
5.2. Conditions Precedent to Obligations of the Indemnitors. The
obligations of the Indemnitors under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time), each of which is individually hereby deemed
material, and any one or more of which may be waived in writing by the
Corporation:
5.2.1. Representations and Warranties. Each of the representations,
warranties and statements made by Purchaser contained in this Agreement and in
all other documents furnished by Purchaser or its representatives pursuant to
the provisions hereof, or in connection with the transactions contemplated
hereby, shall be true and correct in all material respects on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing Date.
5.2.2. Performance by Purchaser. Purchaser shall have fully
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it in all material respects on or
before the Closing (unless an earlier time is specified in this Agreement, in
which case on or before such earlier time), including, without limitation, the
execution and delivery by it of all documents and instruments required under the
terms of Section 6.1.2 of this Agreement.
<PAGE> 52
5.2.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal and state governmental regulatory agencies and other
Persons required in connection with this Agreement and the consummation of the
transactions contemplated hereby, and all such consents, approvals,
authorizations, permits and orders shall be in full force and effect as of the
Closing.
5.2.4. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental body or authority directing that the
transactions provided for herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person in connection
with any of the transactions contemplated herein.
5.2.5. Opinion of Purchaser's Counsel. Purchasers shall have
delivered to the Sellers at the Closing the opinion of Purchaser's counsel,
which opinion shall be dated the Closing Date and addressed to the Corporation.
Such opinion shall be in substantially the form attached hereto as Exhibit N.
5.2.6. Certificate of Purchaser. Purchaser shall have provided to
the Corporation a certificate, dated the Closing Date, executed by Purchaser,
and confirming, representing and warranting to the reasonable satisfaction of
the Corporation: (i) the accuracy as of such date of Purchaser's representations
and warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.2 of this Agreement have been satisfied or waived, and (iii)
that Purchaser has fully performed all covenants and agreements to be performed
by it in all material respects on or prior to the Closing. The sole remedy of
the Indemnitors, their officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Purchaser and their Related
Parties for any Loss arising out of or related to such certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.2.4.
5.2.7. Stockholder Approval of Sale of Assets. On or before the
Closing, Sellers shall have obtained stockholder approval (or partner approval
in the case of Super Saver) of the transactions contemplated hereby by their
respective stockholders (or partners in the case of Super Saver) in accordance
with their articles of incorporation and bylaws (or limited partnership
agreement in the case of Super Saver) and the laws of Nevada or Texas, as
applicable.
5.2.8. Closing of Fee Owned Theaters. The closing of the sale of
the Fee Owned Theaters shall have occurred pursuant to the Property Purchase
Agreement.
<PAGE> 53
5.2.9. Releases. Purchaser and Silver Cinemas shall have delivered
a release which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by Purchaser and/or Silver Cinemas
against the Indemnitors, Curley, Bill Busby, Lynn Hunt and/or Lyco and their
respective successors, assigns, officers, directors, employees and agents in the
form of Exhibit Q.
ARTICLE 6. - CLOSING AND DELIVERY OF DOCUMENTS
6.1. Closing. At the Closing, the following shall occur as a single
integrated transaction:
6.1.1. Delivery by the Sellers. The Sellers shall deliver, or
cause to be delivered, to Purchaser the following:
(a) all deeds, bills of sale, assignments of licenses, UCC-3s and
permits (to the extent such are assignable), executory contracts,
leases, easements and rights of way, as applicable, in order to
effectively vest in Purchaser good and indefeasible title to the
Property free and clear of all liabilities and Liens, except for the
Permitted Title Exceptions, Permitted Liens and Assumed Liabilities.
(b) actual possession and operating control of the Property.
(c) (i) the consents of third parties necessary for the transfer
and assignment of the Property, including any required landlord's
consents to the assignment of all Leases with no adverse changes in the
terms and conditions thereof that existed on that date of execution of
this Agreement other than the release of Sellers from all obligations
and liabilities with respect to the Property as have been obtained by
Sellers and (ii) the Estoppel Certificates.
(d) evidence of the payment of (i) any and all government taxes
or other governmental charges with arise out of or relate to the
transfer of the Property, including any transfer, documentary stamp tax,
surtax, gross receipts, excise and title taxes and (ii) the subordinated
debt of the Corporation aggregating approximately $1.312 million. The
parties agree to cooperate in taking such steps as may be necessary or
appropriate in order to take advantage of any exceptions from any such
governmental taxes, or other charges which may be available with respect
to the transfer of the Property.
(e) The opinion of Sellers' counsel described in Section 5.1.4.
(f) The executed Escrow Agreements, the executed Noncompetition
Agreement and the executed Put Agreement.
(g) assignment and assumption agreements (the "ASSIGNMENT AND
ASSUMPTION AGREEMENTS") in the form of Exhibit O-1 and O-2, as
applicable, duly executed by Sellers.
(h) The Certificate identified in Section 5.1.5 hereof.
(i) The good standing certificates identified in Section 5.1.9
hereof.
<PAGE> 54
(j) Copies, certified or otherwise identified to Purchaser's
satisfaction, of all corporate or partnership documents that Purchaser
shall reasonably request, including resolutions of the board of
directors of the Corporation and the Subsidiaries and the general
partner of Super Saver and resolutions of the stockholders of the
Corporation and the Subsidiaries, dated on or before the date hereof to
authorize this Agreement, the related agreements and the transactions
and other acts contemplated either by this Agreement or the related
agreements.
(k) Bill of Sale from each Seller in the form of Exhibit P.
(l) The Indemnitors, Curley, Bill Busby, Lynn Hunt and Lyco shall
execute and deliver a mutual release in the form of Exhibit Q which
releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by the Indemnitors, Curley,
Bill Busby, Lynn Hunt and Lyco against Purchaser and Silver Cinemas and
their respective successors, assigns, officers, directors, employees and
agents.
(m) All such instruments, documents, certificates and other
Transaction Documents as are required to be delivered by the Indemnitors
or their representatives pursuant to the provisions of this Agreement.
(n) Such other instruments, documents or information that
Purchaser reasonably requests in connection herewith and the
transactions contemplated hereby, in form and substance reasonably
satisfactory to Purchaser.
6.1.2. Delivery by Purchaser.
(a) Purchaser shall deliver (i) the Purchase Price as adjusted
pursuant to Section 2.4 and less the amount deposited with the Escrow
Agent pursuant to Section 2.5 and (ii) the Noncompetition Fees as
provided in Section 2.9 of this Agreement.
(b) Purchaser shall deliver, or cause to be delivered, to the
Corporation such instruments, documents, certificates and other
Transaction Documents as are required to be delivered by Purchaser or
its representatives pursuant to the provisions of this Agreement.
(c) Purchaser shall deliver, or cause to be delivered, to the
Corporation the opinion of Purchaser's counsel described in Section
5.2.5.
(d) Purchaser shall deliver the executed Escrow Agreements, the
executed Noncompetition Agreement and the executed Put Agreement.
(e) Assignment and Assumption Agreements in the applicable form
duly executed by Purchaser.
(f) Purchaser shall deliver, or cause to be delivered, such other
instruments, documents or information that the Corporation reasonably
requests in connection herewith and the transactions contemplated
hereby, in form and substance reasonably satisfactory to the
Corporation.
(g) Purchaser and Silver Cinemas shall execute and deliver a
mutual release in the form of Exhibit Q which releases any and all
claims (other than those pursuant to the
<PAGE> 55
Transaction Documents) held or to be held by Purchaser and Silver
Cinemas against the Indemnitors, Curley, Bill Busby, Lynn Hunt and Lyco
and their respective successors, assigns, officers, directors, employees
and agents.
ARTICLE 7. - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time prior to the Closing Date by the mutual written
consent of all of the parties;
(b) by Purchaser at any time in the event of a breach or default
by the Indemnitors or any one of them in the observance or in the timely
performance of any of their obligations or representations and
warranties hereunder which is not waived by Purchaser and which remains
uncured upon the earlier to occur of (i) fifteen (15) days following
delivery of written notice of such breach or default or (ii) the Closing
Date;
(c) by the Corporation at any time in the event of a breach or
default by Purchaser in the observance or in the timely performance of
any of its obligations or representations and warranties hereunder which
is not waived by the Corporation and remains uncured upon the earlier to
occur of (i) fifteen (15) days following delivery of written notice of
such breach or default or (ii) the Closing Date;
(d) by Purchaser if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if Purchaser is not on said date
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(e) by the Corporation if the Closing shall not have occurred by
5:00 P.M., Dallas time, on March 27, 1998, if the Corporation on said
date is not in default in the observance or in the due and timely
performance of any of its obligations hereunder;
(f) by Purchaser if any of the conditions precedent to
obligations of Purchaser to consummate the transactions provided for
herein shall have become impossible to satisfy (a wilful material breach
of this Agreement by any Seller shall be deemed to be one determination
that such conditions are impossible to satisfy for purposes of this
paragraph); or
(g) by Sellers if any of the conditions precedent to obligations
of the Indemnitors to consummate the transactions provided for herein
shall have become impossible to satisfy (a wilful material breach of
this Agreement by Purchaser shall be deemed to be one determination that
such conditions are impossible to satisfy for purposes of this
paragraph); or
No termination under this Section 7.1 shall be effective unless and
until the terminating party gives written notice of such termination to the
other party. Notwithstanding the foregoing, termination of this Agreement shall
not relieve any party from its liability for the breach hereunder (subject to
all the limitations on liability set forth herein), prior to termination, of its
covenants or agreements or any of its representations or warranties being untrue
prior to termination.
<PAGE> 56
7.2. Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty. No modification or amendment of
this Agreement shall be valid and binding unless it be in writing and signed by
all the parties hereto.
ARTICLE 8. - MISCELLANEOUS
8.1. Expenses. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
It is specifically understood and agreed that all fees for legal services
rendered by legal counsel for the Corporation, the Subsidiaries, Curley, the
stockholders of the Corporation and SPI and the partners of Super Saver shall be
paid or accrued prior to the Closing Date by the Corporation.
8.2. Notices. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telex or telecopy or delivered or mailed by certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
If to the Sellers Lloyd Curley
or the Indemnitors: StarTime Cinema, Inc.
109 North Oregon
Suite 1000
El Paso, Texas 79901
Telecopy: 915.542.2945
With a copy to Timothy R. Gideon
Counsel to the 1010 MoPac Circle
Indemnitors: Suite 200
Austin, Texas 78746
<PAGE> 57
Telecopy: 512.347.0394
If to Curley: Lloyd Curley
5712 Mira Sierra
El Paso, Texas 79912
Telecopy: 915.585.9571
With a copy to C. Michael Ginnings
Counsel for Curley: 303 Texas Avenue
Suite 902
El Paso, Texas 79901
Telecopy: 915.532.7073
If to Purchaser: Thomas J. Owens
President
Silver Cinemas, Inc.
4004 Beltline Road
Suite 205, LB 18
Dallas, Texas 75244
Telecopy: 972.503.9013
With a copy to Greg R. Samuel, Esq.
Counsel for Purchaser: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Telecopy: 214.651.5940
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section 8.2, said notice shall be conclusively
deemed given at the time of such delivery. If notice is given by mail in
accordance with the provisions of this Section 8.2, such notice shall be
conclusively deemed given upon the third business day following deposit thereof
in the United States mail. If notice is given by telex or telecopy in accordance
with the provisions of this Section 8.2, such notice shall be conclusively
deemed given upon receipt with a confirming fax response.
8.3. Entire Agreement. This Agreement, together with the Schedule and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof except for Section 8 of that certain Term Sheet among
Silver Cinemas, the Trust, Curley, the Corporation, Lyco, Super Saver, Bill
Busby and Lynn Hunt dated as of July 31, 1997, the Term Sheet Escrow Agreement
and the other Transaction Documents. Except as provided in the preceding
sentence, no understanding, promise, inducement, statement of intention,
representation, warranty, covenant or condition, written or oral, express or
implied, whether by statute or otherwise, has been made by any party hereto
which is not embodied in this Agreement, or in the Schedule or exhibits hereto
or the written statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby, and no party
hereto shall be bound by or liable for any alleged understanding, promise,
inducement, statement, representation, warranty, covenant or condition not so
set forth.
<PAGE> 58
8.4. Survival of Representations. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representations, warranties, agreements and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto. The sole effect of the survival of such representations and
warranties shall be to support a claim for indemnity under Sections 4.1.12 or
4.2.4 for untrue representations or breach of warranty, subject to the
limitations set forth in Sections 4.1.12 and 4.2.4.
8.5. Incorporated by Reference. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
8.6. Number and Gender of Words. When the context so requires in this
Agreement, words of any gender shall include either or both of the other genders
and the singular number shall include the plural.
8.7. Specific Performance. The Indemnitors acknowledge that a breach of
this Agreement by the Indemnitors will cause irreparable harm to Purchaser for
which there may be no adequate remedy at law, and the Indemnitors agree that
Purchaser shall be entitled, in addition to its other remedies specifically
described in this Agreement, to specific performance by the Indemnitors of this
Agreement.
8.8. Remedies Exclusive. The remedies provided in this Agreement are the
sole and exclusive remedies available to Purchaser and the Indemnitors arising
out of or in any way connected with this Agreement.
8.9. Execution of Additional Documents. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
8.10. Finders' and Related Fees. Each of the parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
8.11. Titles. The titles of the articles, sections and subsections of
this Agreement are for convenience of reference only and shall not be considered
a part of or affect the construction or
<PAGE> 59
interpretation of any provisions of this Agreement. References to "Sections"
herein are references to sections of this Agreement. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
8.12. No Third Party Beneficiary, Etc. There shall be no third party
beneficiary of this Agreement, other than as provided in Sections 4.1.12 and
4.2.4. Neither the availability of, nor any limit on, any remedy hereunder shall
limit the remedies of any party hereto against third parties.
8.13. Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.14. Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns. This Agreement,
and the rights and obligations created hereunder, may not be transferred or
assigned by the Indemnitors without the prior consent of Purchaser or by
Purchaser without the prior consent of the Corporation except that Purchaser may
assign its rights under this Agreement to a wholly-owned subsidiary; however, no
assignment shall serve to relieve or release the assigning party from liability
under this Agreement. Notwithstanding anything to the contrary set forth herein,
nothing shall prohibit Purchaser granting a Lien at or after Closing to its
lender in and to Purchaser's rights pursuant to this Agreement and such lender
shall have the right to exercise any and all of Purchaser's rights and remedies
hereunder.
8.15. 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. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
8.16. Governing Law; Attorneys' Fees. This Agreement and any related
agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 8.17, each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court for the Southern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Harris County, for the purposes of any action arising
out of this Agreement or any related agreements, or the subject matter hereof or
thereof, brought by any other party.
Subject to Section 8.17, to the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise in any such action, any claim
<PAGE> 60
(i) that it is not subject to the jurisdiction of the above-named courts, (ii)
that the action is brought in an inconvenient forum, (iii) that it is immune
from any legal process with respect to itself or its property, (iv) that the
venue of the suit, action or proceeding is improper or (v) that this Agreement
or any related agreement, or the subject matter hereof or thereof, may not be
enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any related agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
8.17. Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind and
nature between the parties hereto arising out of or in connection with
this Agreement (including without limitation this Article VIII) or any
related agreements (except the Noncompetition Agreements) as to the
construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, or breach, shall be submitted
to arbitration pursuant to the following procedures:
(i) Except as modified hereby, the arbitration shall be
governed by the Commercial Arbitration Rules the AAA including
the Supplementary Procedures for Large Complex Disputes. After a
dispute or controversy arises, any party may, in a written notice
delivered to the other party, demand such arbitration. Such
notice shall designate the name of the arbitrator (who shall be
an impartial person who is an attorney with at least 15 years of
experience in business law) appointed by such party demanding
arbitration, together with a statement of the matter in
controversy in reasonable detail.
(ii) Within 30 days after receipt of such demand, the other
party shall, in a written notice delivered to the other party,
name such party's arbitrator (who shall be an impartial person
who is an attorney with at least 15 years of experience in
business law). If such party fails to name an arbitrator, then
the second arbitrator shall be named by the AAA. The two
arbitrators so selected shall name a third arbitrator (who shall
be an impartial person who is an attorney with at least 15 years
of experience in business law) within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA. If
any arbitrator appointed hereunder shall die, resign, refuse, or
become unable to act before an arbitration decision is rendered,
then the vacancy shall be filled by the methods set forth in this
Section for the original appointment of such arbitrator.
(iii) Each party shall bear its own arbitration costs and
expenses. The arbitration hearing shall be held in Houston, Texas
at a location designated by a majority of the arbitrators. The
substantive laws of the State of Texas (excluding conflict of
laws provisions) and the Federal Arbitration Act shall apply.
(iv) The arbitration hearing shall be concluded within ten
(10) days unless otherwise ordered by the arbitrators and the
written award thereon shall be made within fifteen (15) days
after the close of submission of evidence. An award rendered by a
majority of the arbitrators appointed pursuant hereto shall be
final and binding on all parties to the proceeding, shall resolve
the question of costs of the arbitrators, legal
<PAGE> 61
fees and expenses and all related matters, and judgment on such
award may be entered and enforced by any party in any court of
competent jurisdiction.
(v) Except as set forth in Section 8.17(b), the parties
stipulate that the provisions of this Section shall be a complete
defense to any suit, action or proceeding instituted in any
federal, state or local court or before any administrative
tribunal with respect to any controversy or dispute arising out
of this Agreement or any related agreements. The arbitration
provisions hereof shall, with respect to such controversy or
dispute, survive the termination or expiration of this Agreement
or any related agreements.
Except as required by law, the parties hereto and the arbitrators
may not disclose the existence or results of any arbitration hereunder
without the prior written consent of the other party; nor will any party
hereto disclose to any third party any confidential information
disclosed by any other party hereto in the course of an arbitration
hereunder without the prior written consent of such other party.
(b) Emergency Relief. Notwithstanding anything in this Section
8.17 to the contrary and subject to the provisions of Section 8.16, any
party may seek from a court any provisional remedy or injunctive relief
that may be necessary to protect any rights or property of such party
pending the establishment of the arbitral tribunal or its determination
of the merits of the controversy. The prevailing party in any proceeding
based upon this Agreement shall be entitled to reasonable attorney's
fees and arbitral and court costs, in addition to any other recoveries
allowed by law.
8.18. Confidentiality. Commencing on the date of this Agreement and
until: (i) the end of the five (5) year period following termination of this
Agreement pursuant to Article VII or (ii) Closing, Purchaser and the Indemnitors
will maintain in confidence, and will cause their respective directors,
officers, employees, agents, and advisors (the "Representatives") to maintain in
confidence, any written, oral, electronic, or other information of every kind
(including all analyses, compilations, forecasts, studies or other documents
prepared by a receiving party that contain or in any way reflect Confidential
Information) that has been or may be furnished by either party or its
Representatives obtained in confidence (the "Confidential Information") from
another party to this Agreement (the "Disclosing Party"), and will not use, and
will cause their respective Representatives not to use, any such information
except for the purpose of this Agreement or in connection with any legal
proceedings between any of the parties, unless (a) such information is already
known to such party and such party is not bound by a duty of confidentiality or
such information becomes publicly available through no fault of such party, (b)
the use of such information is necessary in making any release, report, filing
(including filings with the SEC) or obtaining any consent or approval required
for the consummation of the transactions contemplated by the Agreement, (c) the
furnishing or use of such information is required by any legal proceedings or
(d) the furnishing or use of such information is required in connection with a
public offering or private placement of securities. Each party shall only reveal
Confidential Information of the Disclosing Party to the receiving party's
Representatives (a) who reasonably need to have the Confidential Information for
purposes of evaluating the transactions contemplated hereby and (b) who are
aware of the confidential nature of the Confidential Information and of this
Section 8.18. Each party shall cause its Representatives to observe the
restrictions of this Section 8.18 and shall be responsible for any breach of
this Section 8.18 by its Representatives. If this Agreement is terminated for
any reason, each party must promptly return to the Disclosing Party all
Confidential Information obtained from the Disclosing
<PAGE> 62
Party that is by nature returnable, and each receiving party will thereafter
continue to comply with its obligations under this Section 8.18.
8.19. Bulk Transfer. The parties hereby waive the applicable provisions,
if any, of the Uniform Commercial Code relating to Bulk Transfers in the states
in which the Theaters are located, and the Indemnitors hereby indemnify
Purchaser from the Sellers' failure to comply with such provisions with respect
to the Sellers.
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
STARTIME CINEMA, INC.
By:
Name:
Title:
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.
By:
Name:
Title:
STARTIME PROPERTIES, INC.
By:
Name:
Title:
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST UNDER
DEED DATED MAY 14, 1994, FOR THE BENEFIT
OF STARTIME CINEMA, INC.
By its Trustee:
Lloyd Curley
LLOYD CURLEY
SCI ACQUISITION CORP.
By:
Name:
Title:
<PAGE> 64
Silver Cinemas, Inc., a Delaware corporation, hereby executes this
Agreement solely for the purpose of unconditionally guaranteeing the performance
of this Agreement by SCI Acquisition Corp., a Delaware corporation. Silver
Cinemas represents and warrants that the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action on the part
of Silver Cinemas and is valid, binding and enforceable against Silver Cinemas,
Inc. in accordance with its terms.
SILVER CINEMAS, INC.
By:
Name:
Title:
NCC hereby irrevocably (except as expressly set forth below): (i)
consents to the negotiation, execution, undertaking and delivery (including all
actions in furtherance thereof) by all parties to this Agreement and the
transactions contemplated hereby, (ii) agrees to accept $3 million, plus any
accrued and unpaid dividends on the Class B Shares, in immediately available
funds at the Closing as the total consideration for the purchase or redemption
of all of its Class B Shares, and all right, title and interest that it may have
to the Corporation and its Subsidiaries or their respective assets and (iii)
waives any right that it may have to any other sum or amount pursuant to the
Stock Purchase Agreement and the related agreements and instruments or otherwise
(including, but not limited to, its Put (as such term is defined in the Stock
Purchase Agreement)). NCC represents and warrants that the execution and
delivery of this Agreement has been duly authorized by all necessary corporate
action on the part of NCC and is valid, binding and enforceable against NCC in
accordance with its terms. Notwithstanding anything contained in this paragraph,
the consent and waiver of NCC contained herein is revocable at the option of NCC
by written notice to the other parties to this Agreement at any time prior to
the Closing if one of the following events occurs: (i) a petition for relief
under the United States Bankruptcy Code is filed by one of the Sellers, or is
filed against one of the Sellers by a party other than NCC or its Affiliates and
such petition is not dismissed within ninety (90) days; or (ii) the Closing does
not occur by March 27, 1998. In the event that NCC revokes its consent and
waiver pursuant to the terms of this paragraph, the rights of NCC under the
Stock Purchase Agreement shall continue in effect, although the parties shall be
returned to the status quo ante and the Put shall neither be exercisable by
reason of this Agreement nor the transactions contemplated hereby.
NATIONSBANC CAPITAL CORPORATION
By:
Name:
Title:
<PAGE> 65
SCHEDULE
Part 1 States of Business Qualification
Part 2 Subsidiaries
Part 3 Effects of Execution of Agreement
Part 4 Liabilities Not Reflected on Balance Sheet
Part 5 Changes
Part 6 Taxes
Part 7 Disputes and Litigation
Part 8 Insurance
Part 9(a) Title to Properties
Part 9(b) Liens & Financing Statements
Part 10(a) Real Property & Real Property Leases
Part 10(b) Violations
Part 11(a) Equipment & Equipment Leases
Part 11(b) List of Property in need of repair
Part 12(a) Intangible Personal Property
Part 12(b) Exceptions to Exclusive Ownership
Part 12(c) Adverse Claims
Part 13 Agreements
Part 14(a) Indebtedness
Part 14(b) Guarantees
Part 15 Books and Records
Part 16 Employee Benefit Plans
Part 17 Employee Agreements
Part 18 Consents Required
Part 19 Environmental Matters
Part 20 Changes in Financial Condition
Part 21 Prepayment Penalties and Charges on Loan Agreements
<PAGE> 1
EXHIBIT 2.3
PROPERTY PURCHASE AGREEMENT
AMONG
STARTIME CINEMA, INC.,
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.,
STARTIME PROPERTIES, INC.,
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST
UNDER DEED DATED MAY 14, 1994
FOR THE BENEFIT OF STARTIME CINEMA, INC.,
LLOYD CURLEY
AND
SILVER CINEMAS, INC.
DATED AS OF JANUARY 22, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS
1.1 Defined Terms. 1
ARTICLE II - PURCHASE AND SALE OF PROPERTY
2.1 Agreement to Sell and Purchase. 6
2.2 Purchase Price. 6
2.3 Purchase Price Allocation 6
2.4 Purchase Price Adjustments 7
2.5 Escrow Agreement 8
2.6 Offsets Against the Escrow Amount 9
2.7 Seller's Performance At and After Closing 9
2.8 Purchaser Does Not Assume Any of Seller's
Liabilities or Obligations Except for the Assumed Liabilities 9
2.9 Closing. 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Joint and Several Representations and
Warranties of the Seller and the Indemnitors. 10
3.1.1 Corporate Existence and Authority 10
3.1.2 Subsidiaries 11
3.1.3 Execution of Agreement 11
3.1.4 Financial Statements 11
3.1.5 Absence of Certain Liabilities 12
3.1.6 Absence of Changes 12
3.1.7 Taxes 14
3.1.8 Disputes and Litigation 15
3.1.9 Compliance with Laws 15
3.1.10 Insurance 16
3.1.11 Title to Properties 16
3.1.12 Real Property and Real Property Leases 16
3.1.13 Equipment 17
3.1.14 Condition of Tangible Property 17
3.1.15 Inventory 17
3.1.16 Intangible Personal Property 18
3.1.17 Agreements 18
3.1.18 Indebtedness and Guaranties 19
3.1.19 Books and Records 19
3.1.20 ERISA 20
3.1.21 Employees 20
3.1.22 Governmental and Other Consents 21
3.1.23 Environmental Matters 21
3.1.24 Discounts and Gift Certificates 22
3.1.25 Full Disclosure 22
3.1.26 Organization of the Trust 22
3.1.27 Authority of Curley 22
3.1.28 Authority of Indemnitors 22
3.1.29 Validity and Enforceability 23
3.1.30 Insolvency 23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.1.31 Cash Flow Figures 23
3.2 Representations and Warranties of Purchaser 23
3.2.1 Organization and Good Standing 23
3.2.2 Authority 23
3.2.3 Validity and Enforceability 24
ARTICLE IV - COVENANTS
4.1 The Seller's and the Indemnitors' Covenants 24
4.1.1 Access and Information 24
4.1.2 Notices and Approvals 25
4.1.3 Information for Purchaser's Statements and
Applications 25
4.1.4 Termination of Employees. 25
4.1.5 Conduct of Business 26
4.1.6 Preservation of Business 26
4.1.7 Insurance 26
4.1.8 Contracts and Commitments 26
4.1.9 Actions, Etc. 27
4.1.10 Repairs 27
4.1.11 Reports and Returns 27
4.1.12 Indemnification of Purchaser 27
4.1.13 Compliance with Agreement 31
4.1.14 Title Information 31
4.1.15 [INTENTIONALLY OMITTED.] 31
4.1.16 Actions in the Event of a Noncompliance
Circumstance. 31
4.1.17 Exclusive Dealing 32
4.2 Purchaser's Covenants 32
4.2.1 Nondisclosure of Information 32
4.2.2 Compliance with Agreement; Cooperation 32
4.2.3 Disclosure to the Corporation 32
4.2.4 Indemnification by Purchaser 33
ARTICLE V - CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of Purchaser 35
5.1.1 Representations and Warranties 35
5.1.2 Performance by the Indemnitors 35
5.1.3 Regulatory Approvals and Consents 35
5.1.4 [INTENTIONALLY OMITTED.] 35
5.1.5 Certificate of the Indemnitors 35
5.1.6 Absence of Regulation Changes 36
5.1.7 Satisfaction with Review of Purchaser 36
5.1.8 Approval of Instruments 36
5.1.9 Good Standing 36
5.1.10 No Actions 36
5.1.11 No Court Orders 36
5.1.12 Officers' Certificate 36
5.1.13 Loan Agreements 37
5.1.14 Deeds and Leases 37
5.1.15 Releases 37
5.1.16 Due Diligence 37
5.1.17 Phase I Environmental Reports and Surveys 37
5.2 Conditions Precedent to Obligations of the Indemnitors 37
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
5.2.1 Representations and Warranties 37
5.2.2 Performance by Purchaser 38
5.2.3 Regulatory Approvals and Consents 38
5.2.4 No Court Orders 38
5.2.5 [INTENTIONALLY OMITTED] 38
5.2.6 Certificate of Purchaser 38
5.2.7 Releases 38
ARTICLE VI - CLOSING AND DELIVERY OF DOCUMENTS
6.1 Closing 39
6.1.1 Delivery by the Seller 39
6.1.2 Delivery by Purchaser 40
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination 40
7.2 Waiver and Amendment 41
ARTICLE VIII - MISCELLANEOUS
8.1 Expenses 42
8.2 Notices 42
8.3 Entire Agreement 43
8.4 Survival of Representations 43
8.5 Incorporated by Reference 44
8.6 Number and Gender of Words 44
8.7 Specific Performance 44
8.8 Remedies Exclusive 44
8.9 Execution of Additional Documents 44
8.10 Finders' and Related Fees 44
8.11 Titles 44
8.12 No Third Party Beneficiary, Etc. 44
8.13 Reformation; Severability 45
8.14 Binding Effect and Assignment 45
8.15 Counterparts 45
8.16 Governing Law; Attorneys' Fees 45
8.17 Dispute Resolution 46
8.18 Confidentiality. 47
8.19 Bulk Transfer 48
INDEX TO EXHIBITS AND SCHEDULE
</TABLE>
EXHIBITS
Fee Owned Theaters EXHIBIT A
Leased Theaters, Market Breakdown, Cash Flow
and Purchase Price Determination EXHIBIT B
Continuing Contracts EXHIBIT C
Escrow Agreement EXHIBIT D
[INTENTIONALLY OMITTED] EXHIBIT E
<PAGE> 5
[INTENTIONALLY OMITTED] EXHIBIT F
Allocation of Purchase Price EXHIBIT G
[INTENTIONALLY OMITTED] EXHIBIT H
Memorandum of Approved Improvements and Betterments EXHIBIT I
Financial Statements of the Corporation and
Subsidiaries EXHIBIT J
List of Documents Delivered to Purchaser EXHIBIT K
[INTENTIONALLY OMITTED] EXHIBIT M
Assignment and Assumption Agreement
(Continuing Contracts) EXHIBIT O
Bill of Sale EXHIBIT P
Mutual Release EXHIBIT Q
[INTENTIONALLY OMITTED] EXHIBIT R
Cash Flow Figures EXHIBIT S
<PAGE> 6
DISCLOSURE SCHEDULE
Part 1 -- States in which the Corporation is
qualified to do business
Part 2 -- Information concerning Subsidiaries of
the Corporation
Part 3 -- Effects of execution of Agreement
Part 4 -- Liabilities not reflected on Balance Sheet
Part 5 -- Changes affecting the Corporation and Subsidiaries
between the Balance Sheet Date and the Closing
Part 6 -- Certain information concerning the taxes
of the Corporation and Subsidiaries
Part 7 -- Disputes and litigation pending against
the Corporation and Subsidiaries
Part 8 -- Insurance of the Corporation and
Subsidiaries
Part 9(a) -- Exceptions to good title to the properties
of the Corporation and Subsidiaries
Part 9(b) -- Liens and financing statements filed on
the properties of the Corporation and Subsidiaries
Part 10(a) -- List of real property of the Corporation
and Subsidiaries
Part 10(b) -- Violations by the Corporation and
Subsidiaries with respect to their real properties
Part 11(a) -- List of equipment and equipment leases
of the Corporation and Subsidiaries
Part 11(b) -- List of Property in need of repair
Part 12(a) -- List of intangible personal property of the
Corporation and Subsidiaries
Part 12(b) -- Exceptions to exclusive ownership of the
intangible personal property of the Corporation and
Subsidiaries
Part 12(c) -- List of claims or demands against intangible
personal property, including intellectual property,
of the Corporation and Subsidiaries
Part 13 -- List of agreements of the Corporation and
Subsidiaries
<PAGE> 7
Part 14(a) -- List of indebtedness of the Corporation and
Subsidiaries
Part 14(b) -- List of guarantees of or by the Corporation and
Subsidiaries
Part 16 -- List of "employee benefit plans"
Part 17 -- Employee agreements of the Corporation and
Subsidiaries
Part 18 -- Consents required in connection with this
Agreement
Part 19 -- Environmental Matters
Part 20 -- Changes in the financial condition of the
Corporation and Subsidiaries
Part 21 -- Prepayment penalties and charges on loan agreements
<PAGE> 8
PROPERTY PURCHASE AGREEMENT
THIS PROPERTY PURCHASE AGREEMENT (this "AGREEMENT"), dated as of January
22, 1998, is entered into by and among StarTime Properties, Inc., a Nevada
corporation ("SELLER"), StarTime Cinema, Inc., a Nevada corporation (the
"CORPORATION"), F.S.A. Super Saver Cinemas No. 1, Ltd., a Texas limited
partnership ("SUPER SAVER"), the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the benefit of StarTime
Cinema, Inc. (the "TRUST"), Lloyd Curley, an individual residing in Texas
("CURLEY") and Silver Cinemas, Inc., a Delaware corporation ("PURCHASER").
R E C I T A L S:
WHEREAS, Seller, the Corporation and Super Saver own and operate two
theaters described in Exhibit A attached hereto (the "FEE OWNED THEATERS") and
operate certain other theaters described in Exhibit B attached hereto (the
"LEASED THEATERS"), for the exhibition of motion pictures;
WHEREAS, Seller, the Corporation and Super Saver desire to sell and
transfer, and Purchaser desires to purchase, certain of their assets and
liabilities related to the Leased Theaters pursuant to the terms and subject to
the conditions set forth in the Asset Purchase Agreement (as hereinafter
defined); and
WHEREAS, Seller desires to sell and transfer, and Purchaser desires to
purchase, the Seller's assets and liabilities related to the Fee Owned Theaters
pursuant to the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. - DEFINITIONS
1.1. DEFINED TERMS. THE FOLLOWING TERMS USED HEREIN, UNLESS THE CONTEXT
OTHERWISE REQUIRES, SHALL BE DEFINED AS FOLLOWS:
1.1.1. "AAA" means the American Arbitration Association.
1.1.2. "Act" means the United States Securities Act of 1933, as
amended.
1.1.3. "Affiliate" means, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified.
<PAGE> 9
1.1.4. "after due inquiry" means, with respect to any Person,
that such Person has the obligation to affirmatively seek out information on the
relevant subject matter from Curley, Bill Busby, Lois Hufnagel, Lynn Hunt, and
all the District and City Managers of Super Saver and, whether or not such
affirmative inquiry is made, such Person is deemed to have actual knowledge of
all information that could have been reasonably obtained from the people listed
above and the knowledge the people listed above is imputed to and deemed to be
the actual knowledge of such Person.
1.1.5. "Agreement" means this Property Purchase Agreement,
including the Schedule and any exhibits hereto.
1.1.6. "Asset Purchase Agreement" means that certain Asset
Purchase Agreement by and among the parties hereto and certain other parties
that are signatories thereto and dated as of the date hereof related to the
purchase of the Leased Theaters.
1.1.7. "Assignment and Assumption Agreements" has the meaning
ascribed thereto in Section 6.1.11(g).
1.1.8. "Assumed Liabilities" has the meaning ascribed thereto
in Section 2.8.
1.1.9. "Balance Sheet" means in the case of the Corporation and
any consolidated Subsidiary the audited consolidated balance sheet of the
Corporation dated as of December 31, 1996 prepared and certified by the
Corporation's Accountant.
1.1.10. "Balance Sheet Date" means in the case of the
Corporation and any consolidated Subsidiary, December 31, 1996.
1.1.11. "Cash Flow Figures" has the meaning ascribed thereto in
Section 3.1.31.
1.1.12. "Certificate" has the meaning ascribed thereto in
Section 5.1.5.
1.1.13. "Closing" has the meaning ascribed thereto in Section
2.9.
1.1.14. "Closing Date" has the meaning ascribed thereto in
Section 2.9.
1.1.15. "Commitments and Surveys" mean all title insurance
commitments and all surveys requested by Purchaser with respect to any of the
Theaters.
<PAGE> 10
1.1.16. "Continuing Contracts" means the agreements relating to
the operation and maintenance of the Property (excluding any film exhibition
agreements), which are described on Exhibit C.
1.1.17. [INTENTIONALLY OMITTED].
1.1.18. "Corporation" means StarTime Cinema, Inc., a Nevada
corporation.
1.1.19. "Corporation's Accountant" means Coopers & Lybrand LLP,
the independent public accountants of the Corporation.
1.1.20. "Curley" means Lloyd Curley.
1.1.21. "Discount Tickets" means reduced admission tickets,
group tickets or so-called other "discount tickets" useable for admission into
any Theater, excluding free tickets issued in the ordinary course of business.
1.1.22. "employee benefit plan" has the meaning ascribed to it
in Section 3.1.20.
1.1.23. [INTENTIONALLY OMITTED].
1.1.24. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.25. "Escrow Agent" means the escrow agent under the Escrow
Agreement.
1.1.26. "Escrow Agreement" means the escrow agreement to be
entered into by and among the Indemnitors and Purchaser, pursuant to Section 2.5
and attached hereto as Exhibit D.
1.1.27. "Escrow Agreements" mean the Escrow Agreement and the
Term Sheet Escrow Agreement.
1.1.28. "Escrow Amount" has the meaning ascribed thereto in
Section 2.5.
1.1.29. "Fee Owned Theaters" has the meaning ascribed thereto in
the Recitals.
<PAGE> 11
1.1.30. "GAAP" means those accounting principles and practices
which are used in the United States and recognized as such by the American
Institute of Certified Public Accountants or any successor institute, acting
through its Accounting Principles Board or through the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
applicable as of the date on which such principles are applied and which are
applied on a consistent basis throughout the periods involved so as to fairly
reflect the financial position, results of operations and operating cash flow on
a consolidated basis of the Corporation and the Subsidiaries.
1.1.31. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder.
1.1.32. "Impositions" means all real estate taxes, special and
benefit assessments, sewer rents, water rates, personal property taxes, and all
other taxes, assessments and charges of every kind, which may affect the
Property or any part thereof by virtue of any present or future law of any
governmental authority.
1.1.33. "Indemnitors" means Seller, the Corporation, Super Saver
and the Trust.
1.1.34. "Insolvent" means (a) with reference to an entity other
than a partnership, a financial condition such that the sum of such entity's
debts is greater than all of such entity's property, at a fair valuation,
exclusive of property transferred, concealed, or removed with intent to hinder,
delay, or defraud such entity's creditors; and (b) with reference to a
partnership, financial condition such that the sum of such partnership's debts
is greater than the aggregate of, at a fair valuation (i) all of such
partnership's property, exclusive of property of the kind excluded in
subparagraph (a) of this paragraph; and (ii) the sum of the excess of the value
of each general partner's nonpartnership property, exclusive of property of the
kind excluded in subparagraph (a) of this paragraph, over such partner's
nonpartnership debts.
1.1.35. "Intangible Property" means all intangible property now
or on the Closing Date owned by Seller which pertains solely to the Property,
and specifically including all assignable business licenses, assignable
warranties, choses in action (including claims against Seating Concepts, Inc.
and/or its Affiliates), the Continuing Contracts (to the extent such are
assignable), telephone exchange numbers (to the extent such are assignable),
plans and specifications, blueprints, engineering information and reports,
theater names, a perpetual license to use the tradenames "Super Saver Cinema"
and "Budget Cinema" at the Theaters and governmental approvals.
1.1.36. "knowledge" means, with respect to any Person (other
than the Indemnitors), such Person's actual knowledge, and with respect to any
one or more of the Indemnitors, the actual knowledge of Curley "after due
inquiry" (as defined herein).
<PAGE> 12
1.1.37. "Lien" means any mortgage, deed of trust, lien, pledge,
charge, adverse claim, security interest or encumbrance of any nature
whatsoever.
1.1.38. "Loss" has the meaning ascribed thereto in Section
4.1.12(b).
1.1.39. "Lyco" means Lyco Financial, Inc., a Texas corporation.
1.1.40. "Noncompliance Circumstance" has the meaning ascribed
thereto in Section 4.2.3.
1.1.41. "Permitted Liens" means (a) liens, taxes and Impositions
due and payable after the Closing Date which are prorated pursuant to Section
2.4 and (b) the Permitted Title Exceptions.
1.1.42. "Permitted Title Exceptions" means: (a) all matters
reflected in the Commitments and Surveys; and (b) landlord liens, easements,
rights of way and prescriptive rights, in each case, of record; all present
recorded restrictions, reservations, covenants, conditions, oil and gas leases,
mineral severances and other instruments; rights of adjoining owners of any
walls and fences situated on a common boundary; taxes and assessments which are
to be prorated between Purchaser and Seller pursuant to Section 2.4 of this
Agreement; all items of record which affect title; and all items which would be
disclosed by an on the ground survey (ALTA or TLTA, as applicable) not created
by, through or under Seller.
1.1.43. "Person" means an individual, corporation, association,
partnership, proprietorship, joint venture or other entity.
1.1.44. "Personal Property" means all tangible personal property
now or on the Closing Date owned (but excluding tangible personal property
disposed of in the ordinary course of business) by Seller or located at or used
in the operation of the Theaters, including, but not limited to, any supplies,
service and concession equipment, heating, ventilating and cooling equipment,
fixtures, inventory, cleaning equipment and supplies, alarm systems, screens,
projection equipment, theater seats, cash registers, display cases, acoustical
wall panels, sound systems, speakers, office equipment and desks, popcorn
poppers and storage bins, linoleum, carpets, drapes, laundry tubs and trays,
washers, dryers, ice boxes, refrigerators, heating units, stoves, ovens, water
heaters, incinerators, furniture and furnishings, signs, poster boxes, soda
dispensers, Theater stationery and items with Theater logos and communication
systems, now or on the Closing Date affixed or attached to or placed upon or
used in connection with the operation of any of the Theaters; provided, however,
that Personal Property shall not include (a) accounts receivable, (b) cash
(other than petty cash located at the Theaters at Closing) and cash equivalents
(including certificates of deposit, commercial paper, and investments in
securities) on hand or in banks, (c) the projection television located in the
Green Bay, Wisconsin Theater and (d) office equipment currently used in El Paso,
Texas.
1.1.45. "Property" means the real property described on Exhibit
A, including the Theaters, the Continuing Contracts, the Personal Property and
Intangible Property and all other
<PAGE> 13
properties, assets and rights, tangible and intangible, owned by Seller and not
otherwise included as Property that are necessary to perform, enforce or realize
the full benefits of the Theaters, rights of the Seller under the Continuing
Contracts, the Personal Property and the Intangible Property.
1.1.46. "Proration Period" means the tax fiscal year in which
the Closing Date occurs.
1.1.47. "Purchase Price" means the difference between (i) the
sum of (y) $4,500,000 plus (z) any increase in the Purchase Price as a result of
the adjustments provided for in Section 2.4, less any decrease in the Purchase
Price as a result of the adjustments provided for in Section 2.4.
1.1.48. "Purchaser" means Silver Cinemas, Inc., a Delaware
corporation.
1.1.49. "Purchaser Indemnitees" has the meaning ascribed thereto
in Section 4.1.12(b).
1.1.50. "Put Agreement" means that certain Put Agreement as of
the date hereof between Purchaser and Super Saver a form of which is attached as
Exhibit F to the Asset Purchase Agreement related to an option of Super Saver to
assign the lease relating to the Forest Fair theater and the rights of Super
Saver under that certain management contract relating to the Eastgate
(Cincinnati, Ohio) theater to Purchaser at a price to be calculated pursuant to
the terms of such Put Agreement.
1.1.51. "Related Parties" means, with respect to a Person, such
Person's officers, directors, assignees designated as a Related Party in writing
by such Person and controlled Affiliates.
1.1.52. "Schedule" means the Disclosure Schedule executed and
delivered by the Indemnitors to Purchaser at or prior to the date of this
Agreement and made a part hereof.
1.1.53. "SCI" means SCI Acquisition Corp., a Delaware
corporation.
1.1.54. "Seller" has the meaning ascribed thereto in the
preamble.
1.1.55. "StarTime Indemnitees" has the meaning ascribed thereto
in Section 4.2.4.
<PAGE> 14
1.1.56. "Subsidiary" or "Subsidiaries" means all corporations
(including the Seller), partnerships (including Super Saver), associations,
joint ventures or other Persons (including the Trust) of which the Corporation
or any other Subsidiary owns not less than twenty percent (20%) of the voting
securities or other equity but specifically excludes Star Time Entertainment -
Georgia, L.L.C. and any other entity that (i) relates solely to the Roswell,
Georgia operations and (ii) neither owns nor has owned any of the Property or
any of the Property (as defined in the Asset Purchase Agreement).
1.1.57. "Super Saver" means F.S.A. Super Saver Cinemas No. 1,
Ltd., a Texas limited partnership.
1.1.58. "Tax Returns" has the meaning ascribed thereto in
Section 3.1.7(a).
1.1.59. "Term Sheet Escrow Agreement" means that certain escrow
agreement dated July 31, 1997 by and among the Corporation, Purchaser and
Norwest Bank El Paso, a national banking association, as escrow agent.
1.1.60. "Theaters" means a collective reference to the two
locations consisting of 12 screens for the exhibition of motion pictures as
specially set forth on Exhibit A.
1.1.61. "Title Insurance Fees" has the meaning ascribed thereto
in Section 2.4(a).
1.1.62. "Trust" means the trust formed by that certain
Irrevocable Declaration of Trust under deed dated May 14, 1994 for the benefit
of StarTime Cinema, Inc.
ARTICLE 2. - PURCHASE AND SALE OF PROPERTY
2.1. AGREEMENT TO SELL AND PURCHASE. ON THE TERMS AND SUBJECT TO THE
CONDITIONS OF THIS AGREEMENT, ON THE CLOSING DATE, THE SELLER AGREES TO SELL,
CONVEY, TRANSFER, ASSIGN AND DELIVER TO PURCHASER, AND PURCHASER AGREES TO
PURCHASE FROM SELLER, ALL OF THE PROPERTY.
2.2. PURCHASE PRICE. AT CLOSING, PURCHASER SHALL PAY AND DELIVER IN
IMMEDIATELY AVAILABLE FUNDS BY WIRE TRANSFER, PURSUANT TO WIRING INSTRUCTIONS
DELIVERED BY SELLER AT LEAST TWO DAYS PRIOR TO THE CLOSING, THE PURCHASE PRICE
AS FOLLOWS:
<TABLE>
<S> <C>
----------------------------------------------------------
to Norwest Bank El Paso, N.A. $3,250,000
----------------------------------------------------------
to Corporation $1,250,000
----------------------------------------------------------
</TABLE>
<PAGE> 15
2.3. PURCHASE PRICE ALLOCATION. THE PURCHASE PRICE WILL BE ALLOCATED TO
THE PROPERTY AS SHOWN ON EXHIBIT G, AND EACH OF THE PARTIES HERETO SHALL REPORT
THIS TRANSACTION FOR FEDERAL AND, TO THE EXTENT APPLICABLE, STATE AND LOCAL
INCOME TAX PURPOSES IN ACCORDANCE WITH THE ALLOCATION SHOWN ON EXHIBIT G.
PURCHASER AND SELLER SHALL NOT TAKE ANY POSITION ON ANY TAX RETURN INCONSISTENT
WITH SUCH ALLOCATION. PURCHASER AND SELLER SHALL PREPARE AND TIMELY FILE ALL
SUCH REPORTS AND RETURNS AS MAY BE REQUIRED BY SECTION 1060 OF THE CODE TO
REPORT SUCH ALLOCATION. THE OBLIGATIONS SET FORTH IN THIS SECTION 2.3 SHALL
SURVIVE THE CLOSING.
2.4. PURCHASE PRICE ADJUSTMENTS.
(a) The Purchase Price payable at Closing shall be adjusted as
follows:
(i) downward by the amount of $12,087, representing 50% of title
insurance fees, premiums and expenses incurred in connection with the
procurement of title insurance policies pursuant to Section 4.1.15
hereof up to $32,500 when aggregated with such title insurance fees,
premiums and expenses incurred pursuant to Section 4.1.15 of the Asset
Purchase Agreement and the Put Agreement (the "TITLE INSURANCE FEES");
(ii) upward in accordance with Section 4.2.3 up to a maximum of
$25,000;
(iii) upward by the sum of the amounts noted in the memorandums
listing the costs of certain improvements and betterments signed by both
the Corporation and Purchaser at or prior to Closing, a form of which is
attached hereto as Exhibit H;
(iv) upward for the Seller's petty cash at each Theater;
(v) upward by a cash amount equal to Seller's cost for all
inventory; and
(vi) downward by the sum of the cash values of accrued vacations
assumed by Purchaser, if any, of employees hired at Closing by
Purchaser, which values will be set forth on an exhibit to be attached
hereto mutually agreed upon by the Corporation and Purchaser.
(b) general real property taxes and other Impositions imposed
upon or assessed against the Property shall be remitted to the
collecting authorities by Seller if the same are due and payable on or
before the Closing Date, and by Purchaser if due and payable thereafter;
provided, however, that such real property taxes and other Impositions
imposed upon or assessed against the Property for the Proration Period
shall be apportioned and prorated between the Seller and Purchaser on
and as of the Closing Date with Purchaser bearing the expense of that
proportion of such Impositions that the number of days in the Proration
Period following, and including the Closing Date bears to 365 and, to
the extent not theretofore paid by Seller, Seller will pay Purchaser
Seller's share thereof within 15 days after Purchaser furnishes Seller
the billing and substantiation thereof received from the collecting
authorities and provided further, that Seller shall be entitled to
likewise participate on a prorata basis in any refund, credit or
reduction of such taxes or other Impositions.
(c) Seller shall pay all utility costs in respect of the
Theaters, and those incurred thereafter shall be paid by Purchaser. If
the utility charges for the last utility period cannot be ascertained on
the Closing Date, then at such subsequent date as all utility bills for
such utility period have been obtained, the parties shall promptly pay
their respective prorated amounts.
<PAGE> 16
Any deposits of Seller held by utility companies shall be paid to Seller
at Closing by Purchaser, and Purchaser shall be responsible for making
its own deposits with the utility companies. Seller shall cooperate with
Purchaser to make an orderly transition of utilities to Purchaser
without interruption of utility service; provided however, that nothing
herein shall obligate Seller to incur utility costs after the Closing
Date or maintain utility deposits after the Closing Date.
(d) Seller and Purchaser also shall make such other adjustments
or apportionments with respect to the Property as may be necessary to
carry out the intention of the parties hereto so that Purchaser shall
not be liable for matters accruing or occurring prior to the Closing
Date and that Seller shall not be liable for matters accruing or
occurring from and after the Closing Date and that Seller shall bear all
of the expenses and burdens, and shall be entitled to all of the
benefits and income (including any tax refunds or adjustments), of and
from ownership of the Property or operation of the Theaters prior to the
Closing Date and Purchaser shall bear all such expenses and burdens and
shall be entitled to all such benefits and income of and from ownership
of the Property and operation of the Theaters from and after the Closing
Date.
(e) The foregoing prorations shall be determined and payment
made from Purchaser to Seller or from Seller to Purchaser, as the case
may be, on the Closing Date using figures for such charges currently
being paid or charges from the preceding year if actual figures are not
available. Any adjustments to such prorations shall be determined as
soon as reasonably practicable after the Closing Date. When actual
figures for such charges become available, Purchaser shall provide
Seller with all year end reports from the applicable Person and a
corrected and definitive proration of such charges shall be promptly
made. In the event that such net charges for the year of Closing exceed
the amount estimated in such provisional proration, Seller shall pay
Purchaser Seller's prorata net shares of the amount by which the actual
charges exceed the estimated charges. Similarly, in the event that such
net charges from the year of Closing are less than the amount estimated
in such provisional proration, Purchaser shall pay Seller Seller's
prorata net share of the amount by which the estimated charges exceeded
the actual charges. Such payments by Seller or Purchaser, as the case
may be, shall be made within thirty (30) days of receipt of such actual
figures for such charges and substantiation thereof received from each
charging party.
(f) Discount Tickets and gift certificates issued by Seller
prior to the Closing Date and presented by customers for admission to
the Theaters on or after the Closing Date shall be honored by Purchaser.
Purchaser shall (and hereby covenants and agrees to) be bound by all
free admission passes distributed prior to the Closing Date by Seller or
Seller's authorized agents to third parties. Seller shall be required to
promptly reimburse Purchaser for any Discount Tickets or gift
certificates on a quarterly basis upon presentation of such Discount
Tickets or gift certificates.
2.5. ESCROW AGREEMENT. AT THE CLOSING OF THE ASSET PURCHASE AGREEMENT,
PURCHASER SHALL DEPOSIT FIVE HUNDRED THOUSAND DOLLARS ($500,000) IN IMMEDIATELY
AVAILABLE FUNDS IN ESCROW (THE "Escrow Amount") TO BE RELEASED TO THE SELLER,
THE CORPORATION AND SUPER SAVER PURSUANT TO THE TERMS OF THE ESCROW AGREEMENT,
SUBJECT TO THE RIGHT OF PURCHASER TO OFFSET AGAINST THE ESCROW AMOUNT PURSUANT
TO SECTION 2.6 AND TO CERTAIN OTHER PROVISIONS OF THE ESCROW AGREEMENT.
2.6. OFFSETS AGAINST THE ESCROW AMOUNT. PURCHASER SHALL BE ENTITLED TO
OFFSET AGAINST THE ESCROW AMOUNT FOR ANY LIABILITY OF THE INDEMNITORS TO
PURCHASER PURSUANT TO THE PROVISIONS OF
<PAGE> 17
SECTION 2.4 OR "FINALLY DETERMINED" UNDER SECTION 4.1.12 HEREOF. ANY AMOUNTS
OFFSET PURSUANT TO THE PROVISIONS OF THIS SECTION 2.6 SHALL BE DEDUCTED FROM THE
ESCROW AMOUNT. ANY AMOUNTS REQUIRED TO BE PAID PURSUANT TO THE ESCROW AGREEMENT
MAY BE WITHHELD FROM THE DATE OF NOTIFICATION OF ANY CLAIM BY PURCHASER FOR
INDEMNIFICATION PURSUANT TO SECTION 4.1.12 HEREOF UNTIL RESOLUTION OF SUCH
CLAIM. AMOUNTS IN EXCESS OF PURCHASER'S CLAIMS FOR OFFSET ON THE DATE OF ANY
PAYMENT PURSUANT TO THE ESCROW AGREEMENT SHALL BE PAID TO SELLER, THE
CORPORATION AND SUPER SAVER. ANY AMOUNT RELEASED FROM THE ESCROW AGREEMENT
WHETHER TO THE SELLER, OR TO PURCHASER AS AN OFFSET, SHALL INCLUDE THE INTEREST
ACCRUED THEREON.
2.7. SELLER'S PERFORMANCE AT AND AFTER CLOSING. SELLER HEREBY COVENANTS
AND AGREES THAT AT OR AFTER THE CLOSING, AS REQUIRED, SELLER SHALL:
(a) at the request of Purchaser, take all action reasonably
necessary to put Purchaser in actual possession of the Property, and execute and
deliver such further instruments of conveyance, sale, transfer and assignment,
and take such other action (including the filing of any UCC-3s) as may be
reasonably necessary to transfer to Purchaser any of the Property and confirm
the title of Purchaser to the Property subject to Permitted Title Exceptions.
Further, after Closing, should Seller be a necessary party in order for
Purchaser to exercise its rights with respect to the Property, Seller will take
reasonable efforts, at Purchaser's expense, to assist Purchaser therein;
(b) for a period of four years following the Closing Date,
provide Purchaser access to any operating records, accounting records,
correspondence, memoranda, and other records and data relating to the ownership
or operation of the Property, which are in Seller's possession;
(c) grant to Purchaser a perpetual license to use the tradenames
"Super Saver Cinema" and "Budget Cinema" at the Theaters;
(d) subject to Section 4.1.12, indemnify and hold Purchaser
harmless from all charges or liabilities, other than the Assumed Liabilities,
incurred by Seller prior to the Closing Date relating to the Property; and
(e) transfer or deliver to Purchaser any and all cash
remittances or property Seller receives in respect of the Property to the extent
that such receipts are in respect of a period after the Closing.
2.8. PURCHASER DOES NOT ASSUME ANY OF SELLER'S LIABILITIES OR
OBLIGATIONS EXCEPT FOR THE ASSUMED LIABILITIES. SELLER, AT CLOSING, WILL
TRANSFER ALL OF THE PROPERTY TO PURCHASER FREE AND CLEAR OF ANY AND ALL LIENS
EXCEPT FOR (EACH OF THE FOLLOWING ITEMS COLLECTIVELY REFERRED TO AS THE "Assumed
Liabilities"):
(a) obligations and liabilities of Seller initially arising, and
related solely to the period, after the Closing Date under and relating to the
Continuing Contracts which are assigned to Purchaser and included in the
Property;
(b) Permitted Title Exceptions;
(c) Permitted Liens; and
<PAGE> 18
(d) That portion of the prorated items arising post-Closing for
which the Purchaser has agreed to pay in Section 2.4 hereof.
Except as expressly set forth herein, Purchaser shall not assume any
other obligations or liabilities of Seller or of Seller's business or any
liabilities (including contingent liabilities) attendant to, or arising from or
relating to the ownership of, any of the Property which may have occurred prior
to the Closing or any liabilities arising from or related to actions taken or
omitted under the Property and subject to Section 4.1.12 Seller shall indemnify
Purchaser with respect to Seller's liabilities.
2.9. CLOSING. UNLESS THIS AGREEMENT IS TERMINATED AND THE TRANSACTIONS
CONTEMPLATED HEREIN ABANDONED PURSUANT TO SECTION 7.1 AND SUBJECT TO THE
SATISFACTION OR, IF PERMISSIBLE, WAIVER OF THE CONDITIONS SET FORTH IN ARTICLE
V, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE
"Closing") SHALL TAKE PLACE (I) AT THE OFFICES OF C. MICHAEL GINNINGS, EL PASO,
TEXAS, AT 11:00 A.M. LOCAL TIME ON A DATE TO BE SPECIFIED BY PURCHASER AND
SELLER, BUT THE CLOSING SHALL TAKE PLACE ON AND BE EFFECTIVE AS OF THE CLOSE OF
BUSINESS ON THE FIRST THURSDAY THAT IS A BUSINESS DAY AFTER THE DAY ON WHICH THE
LAST OF THE CONDITIONS SET FORTH IN ARTICLE V IS FULFILLED (OTHER THAN
DELIVERIES OF INSTRUMENTS TO BE MADE AT CLOSING) OR, IF PERMISSIBLE, WAIVED BY
THE RELEVANT PARTY OR (II) AT SUCH OTHER TIME AND PLACE AS PURCHASER AND THE
CORPORATION SHALL AGREE UPON IN WRITING. THE DATE ON WHICH THE CLOSING OCCURS IS
REFERRED TO HEREIN AS THE "Closing Date."
ARTICLE 3. - REPRESENTATIONS AND WARRANTIES
3.1. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE INDEMNITORS. TO INDUCE PURCHASER TO ENTER INTO THIS AGREEMENT AND TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY, THE SELLER AND THE INDEMNITORS,
JOINTLY AND SEVERALLY, REPRESENT AND WARRANT, AS OF THE DATE HEREOF, AS
FOLLOWS:
3.1.1. Corporate Existence and Authority. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. It has all requisite corporate power, franchises,
licenses, permits and authority to own its properties and assets and to carry on
its business as it has been and is being conducted. The Corporation is qualified
to do business as a foreign corporation and is in good standing in each state,
nation or other jurisdiction listed on Part 1 of the Schedule, being each state,
nation or other jurisdiction wherein the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification necessary.
3.1.2. Subsidiaries. Part 2 of the Schedule lists each and every
Subsidiary and the Subsidiary's form of business organization, state of
incorporation or other organization, number of shares or nature and extent of
interests outstanding, and the number of shares or extent of interests
outstanding owned by the Corporation or each Subsidiary. Each Subsidiary other
than Super Saver and the Trust is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power, franchises, licenses, permits and authority to
own its properties and assets and to carry on its business as it has been and is
being conducted. Super Saver is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite partnership power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has been and is
being conducted. The Trust is a trust duly formed and validly existing under the
laws of the State of Texas and has all requisite trust power, franchises,
licenses,
<PAGE> 19
permits and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. Each Subsidiary is qualified to
do business in the respective states, nations and other jurisdictions listed on
Part 2 of the Schedule, being each state, nation or other jurisdiction in which
the character of the properties owned or held under lease by it or the nature of
the business conducted by it makes such qualification necessary. Except as
indicated on Part 2 of the Schedule, each Subsidiary is a consolidated
Subsidiary for the purposes of the Balance Sheet and the financial statements
referred to in Section 5.1.5 hereof.
3.1.3. Execution of Agreement. Except as disclosed in Part 3 of
the Schedule, the execution and delivery of this Agreement, the Asset Purchase
Agreement and the Escrow Agreements by the each of the Indemnitors does not, and
the consummation by each of the Indemnitors of the transactions contemplated
hereby and thereby will not: (a) violate, conflict with, modify or cause any
default under or acceleration of (or give any party any right to declare any
default or acceleration upon notice or passage of time or both), in whole or in
part, any charter, article of incorporation, certificate of incorporation,
bylaw, Lien, indenture, lease, agreement, instrument, order, injunction, decree,
judgment, law, rule, regulation or any other restriction of any kind or
character to which any of the Indemnitors is a party or by which any of them or
any of their properties is bound (including the Stock Purchase Agreement between
the Corporation and NationsBanc Capital Corporation dated August 15, 1994); (b)
result in the creation of any Lien on any property or asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement or business
of the Indemnitors; (c) violate any law, rule or regulation applicable to the
Indemnitors or the Indemnitors or (d) permit any federal or state regulatory
agency to impose any restrictions or limitations of any nature on the
Indemnitors or any of their respective activities.
3.1.4. Financial Statements. Attached as Exhibit J hereto are
the following financial statements: (a) the consolidated financial statements of
the Corporation and the Subsidiaries (including, without limitation, statements
of earnings, balance sheets as of the Balance Sheet Date and statements of
changes in financial position, statements of stockholders' equity, and all notes
relating thereto for the fiscal year then ended), which financial statements
have been audited and certified by the Corporation's Accountants; (b) the
consolidated financial statements of the Corporation and the Subsidiaries, for
the ten (10) months ended October 31, 1997, which financial statements shall
have been certified by the chief financial officer of the Corporation and are in
the form normally prepared by such officer for presentation to the board of
directors of the Corporation; and (c) the Balance Sheet. To the Indemnitors'
knowledge, all of the financial statements referred to in this Section present
fairly the financial condition of the Corporation and the Subsidiaries and the
results of their operations at the dates and for the periods covered thereby.
Such financial statements have been prepared in conformity with GAAP, except as
otherwise expressly disclosed in such financial statements. For the periods
covered by the financial statements referred to in subsections (a), (b) and (c)
of this Section, neither the Corporation nor any Subsidiary had any material
nonrecurring items of income.
3.1.5. Absence of Certain Liabilities. To the Indemnitors'
knowledge, as of the Balance Sheet Date, the Corporation and the Subsidiaries
had no liabilities or obligations of any nature (whether absolute, accrued,
contingent, due or to become due) except as and to the extent reflected and
fully reserved against in the Balance Sheet other than those liabilities and
obligations set forth on Part 4 of the Schedule and, except as disclosed in Part
4 of the Schedule, since the Balance Sheet Date, the
<PAGE> 20
Corporation and Subsidiaries have incurred no liabilities or obligations of any
nature other than in the ordinary course of business and consistent with past
practice.
3.1.6. Absence of Changes. Except as expressly provided in this
Agreement or as set forth on Part 5 of the Schedule in alphabetical order
corresponding to the following subsections, since the Balance Sheet Date there
has not been:
(a) Any change or aggregate of changes known to the Indemnitors
in the condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or prospects of
the Corporation and Subsidiaries resulting in a reduction of five
percent (5%) of the net worth of the Corporation;
(b) Any merger, consolidation or statutory share exchange or
agreement to merge, consolidate or enter into a statutory share exchange
by the Corporation or any Subsidiary with another Person, or any
purchase of or investment in or agreement to purchase or invest by the
Corporation or any Subsidiary in the business of another Person;
(c) Any amendment to the Articles of Incorporation, Certificate
of Incorporation, partnership agreement or Bylaws of the Corporation or
any Subsidiary;
(d) Any General Increase in the compensation or rate of
compensation payable or to become payable to any of their hourly
employees or salaried employees ("GENERAL INCREASE" for purposes hereof
shall mean any increase applicable to a class or group of employees and
does not include increases granted to individual employees for merit,
length of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group
thereof);
(e) Any mortgage, pledge or other subjection to any Lien or
option of any property, asset, right or business of the Corporation or
any Subsidiary, other than (i) Liens for taxes not yet due and payable,
(ii) any continuing statutory landlord's Lien for rent not yet due and
payable, (iii) those incurred in the ordinary course of business and
(iv) those identified on Part 5 of the Schedule;
(f) Any incurrence of any indebtedness, obligations or
liabilities (whether absolute, accrued, contingent, known or unknown,
due or to become due) by the Seller except (i) those arising in the
ordinary course of business and consistent with past practice or (ii)
those to be paid in full on or before Closing;
(g) Any assumptions, guarantees or endorsements by the Seller of
the obligations of any Person, except (i) in the ordinary course of
business and consistent with past practice or (ii) those to be paid in
full on or before Closing;
(h) Any actions taken or transactions entered into by the
Corporation or any Subsidiary involving the Theaters and more than
$12,500 per Theater, other than in the ordinary course of business and
consistent with past practice, or any capital expenditures or
commitments therefor in excess of $12,500 per Theater; in each case,
other than indebtedness, obligations or liabilities allowed for in
paragraph (f) above;
<PAGE> 21
(i) Any creations, renewals, changes or terminations, or any
notice of any proposed renewal, change or termination of any Continuing
Contract or any contract by which the Property is bound;
(j) To the Indemnitors' knowledge, any action or inaction which
has caused or will cause a breach or default in any contract, agreement,
obligation, lease or license to which the Corporation or any Subsidiary
is a party or by which the Corporation or any Subsidiary or their
property is bound and which is being assumed by Purchaser pursuant
hereto;
(k) Any sale, assignment, lease, abandonment or other
disposition by the Corporation or any Subsidiary of any real property,
or any sale, assignment, transfer, license, lapse, or other disposition
by the Corporation or any Subsidiary of any trademark, trade name,
copyright (or pending application for any trademark or copyright), or
other intangible asset;
(l) Any sale, assignment or transfer of any contract, agreement,
lease, or asset by the Corporation or any Subsidiary, except in the
ordinary course of business and consistent with past practice;
(m) To the Indemnitors' knowledge, any violation by the
Corporation or any Subsidiary of, or any charge against the Corporation
or any Subsidiary for alleged violations of, any governmental laws,
rules, regulations or standards, including, without limitation, unlawful
employment practices, occupational health and safety standards, and
environmental control standards;
(n) To the Indemnitors' knowledge, any labor dispute, or threat
of a labor dispute, or any attempt or threat of any attempt by a union
to organize any employees of the Corporation or any Subsidiary who are
not now covered under an existing union or collective bargaining
agreement;
(o) Any material failure by the Seller to replenish inventories
and supplies in a normal and customary manner consistent with prior
practice; any purchase commitment by the Corporation or any Subsidiary
in excess of the normal, ordinary and usual requirements of business or
at any price in excess of the then current market price or upon terms
and conditions more onerous than those usual and customary in the
Corporation's or any Subsidiary's business;
(p) Any arrangement for Discount Tickets or other similar
arrangements (excluding free passes in the ordinary course of business);
or
(q) Any significant action taken or transaction entered into by
the Corporation or any Subsidiary other than in the ordinary course of
business, which do or could result in material indebtedness or material
liability (including contingent liability) after Closing.
3.1.7. Taxes. Except as set forth on Part 6 of the Schedule in
alphabetical order corresponding to the following subsections:
(a) The Corporation and Subsidiaries have duly filed all
required federal, state, local and other tax returns, notices and
reports (including, without limitation, income, property, sales, use,
franchise, capital stock, excise, value added, employees' income
withholding, social security and unemployment tax returns, notices and
reports) heretofore due
<PAGE> 22
(collectively the "TAX RETURNS"), and all such Tax Returns are correct,
accurate and complete in all material respects;
(b) All deposits required to be made by the Corporation and
Subsidiaries with respect to any tax (including, without limitation,
estimated income, franchise and employee withholding taxes) have been
duly made;
(c) No audits of the Tax Returns of the Corporation and
Subsidiaries are currently being conducted or are currently pending by
the United States Internal Revenue Service or any other taxing
authority;
(d) All taxes, assessments, fees, penalties, interest and other
governmental charges with respect to each of the Corporation and
Subsidiaries which have become due and payable by the Balance Sheet Date
have been paid in full or adequately reserved against on the Balance
Sheet, and all taxes, assessments, fees, penalties, interest and other
governmental charges which have become due and payable subsequent to the
Balance Sheet Date have been paid in full or adequately reserved against
on its books of account and the amounts reflected on the Balance Sheet
and such books are sufficient for the payment of all unpaid federal,
state, local, foreign and other taxes, fees and assessments (including,
without limitation, income, property, sales, use, franchise, capital
stock, excise, value added, employees' income withholding, social
security and unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods prior
thereto;
(e) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any
tax or deficiency against the Corporation or any Subsidiary, nor are
there any actions, suits, proceedings, investigations or claims now
pending against the Corporation or any Subsidiary in respect of any tax
or assessment, or any matters under discussion with any federal, state,
local or foreign authority relating to any taxes or assess ments, or any
claims for additional taxes or assessments asserted by any such
authority, and, to the Indemnitors' knowledge, there is no basis for the
assertion of any additional taxes or assessments against the Corporation
or any Subsidiary; and
(f) Neither the Corporation nor any Subsidiary has ever filed a
consent pursuant to Section 341(f) of the United States Internal Revenue
Code.
3.1.8. Disputes and Litigation. Except as noted on Part 7 of the
Schedule: (a) there is no suit, action, litigation, proceeding, investigation,
claim, complaint or accusation pending or, to the Indemnitors' knowledge,
threatened against or affecting the Corporation or any Subsidiary or any of
their properties, assets or business or to which the Corporation or any
Subsidiary is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and no facts are known by the
Corporation or any Subsidiary which are reasonably likely to give rise to any
such suit, action, litigation, proceeding, investigation, claim, complaint or
accusation; (b) there is no pending or, to the Indemnitors' knowledge,
threatened change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect the Corporation or any Subsidiary or any
of their properties, assets or businesses, and the Indemnitors or the
Corporation do not know, and have no reasonable grounds to know, of any basis
for any such change; and (c) there is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitrator or governmental body against
or affecting the Corporation or any Subsidiary or any of their properties,
assets or business. Except as set forth on Part 7 of the Schedule, none of
<PAGE> 23
the items nor aggregate of items listed on Part 7 of the Schedule would, if
adversely determined, materially and adversely affect the business, operations,
properties or financial position of the Corporation or any of the Subsidiaries.
To the Indemnitors' knowledge, there is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of the Corporation or any Subsidiary or
any such person's heirs, executors or administrators as against the Corporation
or any Subsidiary.
3.1.9. Compliance with Laws. To the Indemnitors' knowledge, the
Corporation and Subsidiaries have at all times been, and presently are, in full
compliance with any applicable federal, state, local, foreign and other laws,
rules and regulations other than those where noncompliance would not have a
material adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have not received notice of any claimed
violation of any such law, rule or regulation. The Corporation and Subsidiaries
have filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and information are
true and complete in all respects. To the Indemnitors' knowledge, all permits,
licenses, orders, franchises and approvals of all federal, state, local and
foreign governmental or regulatory bodies required of the Corporation and
Subsidiaries for the conduct of their businesses have been obtained, no
violations are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or informal,
pending or threatened, which may revoke, limit, or question the validity,
sufficiency or continuance of any such permit, license, order, franchise or
approval. Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by the Corporation and
Subsidiaries.
3.1.10. Insurance. Part 8 of the Schedule sets forth a true and
complete list of all insurance policies (including the policy number, the name
of the insurer, the amounts of coverage, the premium rate, the cash value, if
any, the expiration date and the risks and losses insured against) maintained by
the Corporation and Subsidiaries on the Property , and copies of all such
policies, agreements, studies and analyses previously have been delivered to
Purchaser. All of the foregoing insurance policies are in full force and effect
and are fully paid as to all premiums heretofore due. Neither the Corporation
nor any Subsidiary has, to the Indemnitors' knowledge, failed to give any notice
or present any claim under such insurance policies in a timely fashion, nor has
the Corporation or any Subsidiary received any notification of the cancellation
of any of such policies or that any of them will not be renewed. To the
Indemnitors' knowledge and except as set forth on Part 8 of the Schedule, there
is no claim, demand or offset, or any state of facts or occurrence of events
which might form the basis of any claim, demand or offset, which may increase
the premiums or impair the full value of said insurance policies.
3.1.11. Title to Properties. The Property consists of (i) all of
the properties and assets reflected on the Balance Sheet relating to the
Theaters, and (ii) all other properties and assets presently carried on the
Corporation's and the Subsidiaries' books or used in their businesses at any
time since the Balance Sheet Date relating to the Theaters, except, in each
case, properties and assets subsequently disposed of in the ordinary course of
business. Except as set forth in Part 9(a) of the Schedule, the Corporation and
Subsidiaries have title (good and marketable with respect to real property) to
all of the Property, free and clear of all Liens, conditions and covenants,
other than (x)
<PAGE> 24
Liens for taxes not yet due and payable, (y) minor imperfections of title, if
any, which do not interfere with the present or proposed use of such Property or
otherwise adversely affect the Corporation or the Subsidiaries in the conduct of
their respective businesses, and (z) such other Liens, charges or encumbrances
contemplated by the terms of this Agreement as set forth on Part 9(a) to the
Schedule. Except as set forth in Part 9(b) of the Schedule or otherwise
specifically disclosed in this Agreement, there have not been filed any Liens or
financing statements under the applicable state Uniform Commercial Code or other
similar statute on the properties or assets, whether real, personal or mixed, of
the Corporation or any Subsidiary, nor has the Corporation or any Subsidiary
signed any security agreement or similar agreement authorizing any secured party
thereunder to file any such Lien or financing statement.
3.1.12. Real Property and Real Property Leases. Part 10(a) of
the Schedule contains a true and complete list of (i) all real property owned by
the Corporation and the Subsidiaries together with a summary description of the
buildings and improvements thereon and the method by which such real property is
depreciated for tax and book purposes, (ii) all real estate leases to which the
Corporation or any Subsidiary is a party together with a summary description of
the buildings and improvements thereon, the address of each property, the name
of each landlord and tenant and the expiration date of each lease, and (iii) all
other interests, if any, in real property owned or claimed by the Corporation or
any Subsidiary. To the Indemnitors' knowledge, the Corporation and Subsidiaries
have all easements and rights, including parking rights and easements for power
lines, water lines, roadways and other access, necessary to conduct the
businesses they now conduct and enjoy peaceful and undisturbed possession of all
properties occupied by them. Neither the whole nor any portion of any real
property owned, occupied or leased to or by the Corporation or any Subsidiary
has been rezoned or condemned or otherwise taken by any public authority and, to
the Indemnitors' knowledge, no such rezoning, condemnation or other taking is
threatened or contemplated. To the Indemnitors' knowledge, none of the real
properties owned, occupied or leased to or by the Corporation or any Subsidiary,
or the occupancy or operation thereof, constitutes a nuisance or violation of
any law or any building, zoning or other ordinance, code or regulation or any
private or public covenant or restriction, and no notice from any governmental
body or other Person has been served upon the Corporation or any Subsidiary
claiming any violation of any such law, ordinance, code, regulation, covenant or
restriction, or requiring or calling attention to the need for any work,
repairs, construction, alterations or installations on or in connection with any
of such properties which has not been complied with except to the extent set
forth in Part 10(b) of the Schedule. All leases of real property to which the
Corporation or any Subsidiary is a party are valid, binding and in full force
and effect, and, to the Indemnitors' knowledge, there exists no default
thereunder by any party thereto, nor any events which, with notice or lapse of
time, or both, would constitute a default, and all amounts heretofore payable
under such leases have been paid in full. True, correct and complete copies of
all deeds to the real property listed on Part 10(a) of the Schedule and true,
correct and complete copies of all real estate leases listed on Part 10(a) of
the Schedule, including all amendments, modifications, letter agreements and
assignments relating thereto have been previously delivered to Purchaser.
3.1.13. Equipment. Part 11(a) of the Schedule contains a true
and complete list of (i) all equipment of the Corporation and the Subsidiaries
(having a cost basis in excess of $5,000 each) presently owned and used by the
Corporation and the Subsidiaries in their businesses; and (ii) all equipment
(including, but not limited to, trade fixtures and motor vehicles) leased by the
Corporation and the Subsidiaries, including the name and address of each lessor
and lessee, the expiration date of each lease, the monthly rent and any
additional rent payable under each such lease. To the Indemnitors' knowledge, no
party to any such lease is in default, each such lease is valid, binding, in
<PAGE> 25
full force and effect, and enforceable in accordance with its terms. True,
correct and complete copies of all such leases, including all amendments,
modifications, letter agreements and assignments relating thereto have
previously been delivered to Purchaser.
3.1.14. Condition of Tangible Property. Except as set forth on
Part 11(b) of the Schedule, to the Indemnitors' knowledge, with the exception of
inventory, all tangible properties owned or used by the Corporation and
Subsidiaries, including, without limitation, all buildings, offices, theaters
and other structures owned or occupied by the Corporation and Subsidiaries and
all machinery, equipment, tools, fixtures and motor vehicles owned or used by
them, are in good operating condition, reasonable wear and tear excepted,
reasonably suitable for the purposes for which they are being utilized, and
sufficient for all current operations of the Corporation and the Subsidiaries.
3.1.15. Inventory. The inventories of each of the Corporation
and Subsidiaries shown on the Balance Sheet and inventories acquired by it
subsequent to the Balance Sheet Date consist solely of items of a quality and
quantity usable and salable in the normal course of its business.
3.1.16. Intangible Personal Property. Part 12(a) of the Schedule
contains a true and complete list and summary description of all trademarks,
service marks, trade names, and copyrights and applications for the foregoing,
all franchises, permits and other authorizations owned or used by the
Corporation and Subsidiaries, all licenses to which the Corporation or any
Subsidiary is a licensor or licensee, all non-competition covenants, and all
other intangible personal property owned or used by the Corporation and
Subsidiaries. Each of the Corporation and Subsidiaries validly owns or is
validly licensed under all intangible properties which are required or necessary
for the conduct of its business as now conducted, and except as set forth on
Part 12(b) of the Schedule, is the sole and exclusive owner of said properties,
free and clear of all Liens and has the unrestricted right to use said
properties, having not granted or entered into any agreement, covenant, license
or sublicense with respect thereto.
Except as set forth on Part 12(c) of the Schedule, no claims or
demands have been asserted against the Corporation or any Subsidiary with
respect to any such items of intangible property, and no proceedings have been
instituted, are pending or, to the Indemnitors' knowledge, have been threatened
which challenge the rights of the Corporation or any Subsidiary with respect to
any of such assets. To the Indemnitors' knowledge and except as set forth on
Part 12(c) of the Schedule, the businesses and operations of the Corporation and
Subsidiaries, and the use or publication by them of their trademarks, trade
names, and advertising literature and other intangible personal properties do
not involve infringement or claimed infringement of any United States trademark,
trade name, or copyright.
No director, officer, stockholder, employee, consultant,
distributor, representative, advisor, salesman or agent of the Corporation or
any Subsidiary owns, directly or indirectly, in whole or in part, any
trademarks, trade names, or copyrights, or applications for the foregoing, or
tangible personal property which the Corporation or any Subsidiary is presently
using or the use of which is necessary for the business of the Corporation or
any Subsidiary as now conducted. To the Indemnitors' knowledge, none of the
directors, officers, stockholders, employees, consultants, distributors, agents,
representatives, advisors or salesmen of the Corporation or any Subsidiary has
entered into any agreement regarding know-how, trade secrets, or prohibition or
restriction of
<PAGE> 26
competition, or solicitation of customers or any other similar restrictive
agreement or covenant, whether written or oral, with any Persons other than the
Corporation and Subsidiaries.
3.1.17. Agreements. Part 13 of the Schedule contains a true and
complete list of all oral and written contracts, agreements, commitments,
understandings and obligations to which the Corporation or any Subsidiary is a
party or by which any of them or their properties may be bound which are not
otherwise listed in the Schedule and which (a) involve obligations by any party
thereto in excess of $50,000; (b) extend beyond six months from the date of this
Agreement and are not terminable on thirty (30) days' notice or less without any
liability or continuing obligation on the part of the Corporation or any
Subsidiary (including any management, consulting or retainer agreement); (c)
contain any escalator, renegotiation or redetermination clause; (d) require the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (e) contain covenants limiting the freedom of the
Corporation or any Subsidiary to compete in any line of business or with any
Person or in any geographical area; (f) contain any provision or option relating
to the acquisition by the Corporation or any Subsidiary of any business or
relating to the sale by the Corporation or any Subsidiary of any business; (g)
contain an agreement or commitment by the Corporation or any Subsidiary for a
material capital expenditure; (h) are contracts or agreements to which the
United States government is a party; or (i) contain any other agreement,
commitment, understanding or obligation which materially affects the business,
properties or assets of the Corporation or any Subsidiary. All of the aforesaid
agreements and all of the Continuing Contracts were entered into in the ordinary
course of business, are valid and binding agreements, in full force and effect
and enforceable in accordance with their respective terms, and, to the
Indemnitors' knowledge, there exists no breach or default, or any event which,
with notice or lapse of time or both, would constitute a breach or default, by
any party thereto. True and complete copies, including all amendments,
modifications, letter agreements and assignments relating thereto, of all of the
aforesaid written agreements and true and correct summaries of all such oral
agreements have previously been delivered to Purchaser.
To the Indemnitors' knowledge, neither the Corporation nor any
Subsidiary presently has, nor during the last five (5) years has had, directly
or indirectly, any type of contract, agreement, commitment, understanding or
obligation, whether written or oral, (i) with its customers or suppliers for the
sharing of fees, the rebating of the Corporation's or any Subsidiary's charges
to customers, kickbacks from customers or suppliers, or other similar
arrangements, or (ii) with any competitor regarding bidding for movie product or
product splitting; provided, the Corporation and the Subsidiaries have entered
into written video game rental agreements with the suppliers thereof that
provide for shared revenues from their operation and specific written and oral
rebate agreements with concession item suppliers that have been previously
disclosed to Purchaser. To the Indemnitors' knowledge, neither the Corporation
nor any Subsidiary is a party to or otherwise bound by any contract, obligation
or commitment to purchase above the current market price or to sell below its
current list price supplies, equipment, capital assets, inventories or services,
or any contract, obligation or commitment which upon completion will result in a
net loss to the Corporation or Subsidiary of more than $50,000.
3.1.18. Indebtedness and Guaranties. Part 14(a) of the Schedule
sets forth a true and complete list, including the names of the parties thereto
and summary description of the terms thereof, of all debt instruments, loan
agreements, indentures or other obligations, whether written or oral, relating
to indebtedness for borrowed money or money loaned to others to which the
Corporation or any Subsidiary is a party or obligor. Except as set forth on Part
14(b) of the Schedule, the Corporation has not guaranteed any dividend,
obligation or indebtedness of any Subsidiary or any other Person; nor has any
Subsidiary guaranteed any dividend, obligation or indebtedness of the
Corporation, any other Subsidiary or any
<PAGE> 27
other Person. All of the aforesaid items were entered into in the ordinary
course of business, are valid and binding, in full force and effect and
enforceable in accordance with their respective terms and, to the Indemnitors'
knowledge, there exists no breach or default, or any event which with notice or
lapse of time or both, would constitute a breach or default by any party
thereto.
3.1.19. Books and Records. Each of the Corporation and
Subsidiaries keeps its books, records and accounts (including, without
limitation, those kept for financial reporting purposes and for tax purposes) in
sufficient detail to accurately and fairly reflect the transactions and
dispositions of its assets, liabilities and equities. The minute books of each
of the Corporation and incorporated Subsidiaries contain complete and accurate
records of all of its stockholders' and directors' meetings and of all action,
with respect to the Corporation and the Subsidiaries, taken by such stockholders
and directors. The meetings of directors and stockholders referred to in such
minute books were duly called and held, and the resolutions appearing in such
minute books were duly adopted. The signatures appearing on all documents
contained in such minute books are the true signatures of the persons purporting
to have signed the same.
3.1.20. ERISA. Neither the Corporation nor any Subsidiary has
any "qualified" plans within the meaning of Section 401(a) of the Internal
Revenue Code of 1986 and, except as set forth in Part 16 of the Schedule, does
not maintain, administer or otherwise contribute to any "EMPLOYEE BENEFIT PLAN",
as defined in Section 3(3) of ERISA, which is subject to any provisions of ERISA
and covers any employee, whether active or retired, of the Corporation or any
Subsidiary.
3.1.21. Employees.
(a) Part 17 of the Schedule sets forth a true and complete list
of: (1) all collective bargaining agreements and other labor agreements
to which the Corporation or any Subsidiary is a party or by which any of
them may be bound; (2) all employment, profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consultant, retirement, welfare and incentive plans, agreements or
contracts, whether written or oral, to which the Corporation or any
Subsidiary is a party or by which any of them may be bound; (3) all
agreements and plans, whether written or oral, to which the Corporation
or any Subsidiary is a party and which constitute "fringe benefits" to
their employees or salesmen, including, without limitation, group life
and health insurance, vacation plans or programs, sick leave plans or
programs, termination or severance pay programs and employee discounts;
and (4) the name and current annual compensation of each director and
each officer of the Corporation and the Subsidiaries, and of each
employee or salesman thereof whose current annual salary and/or
estimated current annual commission is $25,000 or more, together with
such person's job title and amounts and forms of compensation and fringe
benefits. True and complete copies of all written, and correct summaries
of all oral, contracts, agreements, plans and programs set forth on Part
17 of the Schedule have previously been delivered to Purchaser.
(b) To the Indemnitors' knowledge, all of the aforesaid
contracts, agreements, plans and programs are in full compliance with
all applicable federal, state and local laws, and the Corporation and
Subsidiaries are in full compliance with all federal, state and local
laws respecting employment, wages and hours. Neither the Corporation nor
any Subsidiary is
<PAGE> 28
engaged in any unfair labor practice or discriminatory employment
practice and no complaint of any such practice against the Corporation
or any Subsidiary is filed or, to the Indemnitors' knowledge, threatened
to be filed with or by the National Labor Relations Board or the Equal
Employment Opportunity Commission, nor is any grievance filed or, to the
Indemnitors' knowledge, threatened to be filed against the Corporation
or any Subsidiary by any employee pursuant to any collective bargaining
or other employment agreement to which the Corporation or any Subsidiary
is a party. To the Indemnitors' knowledge, the Corporation and the
Subsidiaries are in full compliance with all applicable federal and
state laws and regulations respecting occupational safety and health
standards other than those where noncompliance would not have a material
adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have received no complaints from
any federal or state agency or regulatory body alleging violations of
any such laws and regulations.
(c) To the Indemnitors' knowledge, the Corporation and
Subsidiaries are in full compliance with the terms of all contracts,
agreements, plans and programs set forth on Part 17 of the Schedule.
Except as noted in Part 17 of the Schedule, the employment of all
persons and officers employed by the Corporation and the Subsidiaries is
terminable at will, without any penalty or severance obligation of any
kind on the part of the employer, and the consummation of the
transactions contemplated by this Agreement will not trigger any
payments to any officers, directors or employees of the Corporation or
any Subsidiary. All sums due for employee compensation and benefits and
all vacation time owing to any employees have been duly and adequately
accrued on the books of the Corporation and Subsidiaries. To the
Indemnitors' knowledge, all employees of the Corporation and
Subsidiaries are either United States citizens or resident aliens
specifically authorized to engage in employment in the United States in
accordance with all applicable laws. The Indemnitors do not know, and
have not been informed, that any employee, consultant, distributor,
representative, advisor, salesman, agent, customer or supplier of the
Corporation or any Subsidiary will terminate his employment or cease to
do business with the Corporation or any Subsidiary after the Closing.
(d) To the Indemnitors' knowledge, neither the Corporation nor
any Subsidiary has experienced since the Balance Sheet Date, any labor
troubles or strife, work stoppages, slowdowns, or other interference
with or impairment of the businesses of the Corporation and Subsidiaries
by their employees. To the Indemnitors' knowledge, neither the
Corporation nor any Subsidiary has experienced since the Balance Sheet
Date, any union or collective bargaining organization efforts or
negotiations, or requests for negotiations, for any representation or
any labor contract relating to any employees of the Corporation or the
Subsidiaries not covered by a union or collective bargaining agreement
as of the Balance Sheet Date, except to the extent disclosed in Part 17
of the Schedule.
3.1.22. Governmental and Other Consents. Except as set forth on
Part 18 of the Schedule, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or other
Person is required on the part of the Corporation or any Subsidiary, the
stockholders of the Corporation, the Trust, Seller, or the partners of Super
Saver in connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.1.23. Environmental Matters. Except as set forth in Part 19 of
the Schedule and to the Indemnitors' knowledge, with respect to the real estate
owned or leased by the Corporation or any
<PAGE> 29
of the Subsidiaries, (i) all permits, licenses, filings and approvals necessary
for the lawful construction, occupancy and operation of such real estate
required by any federal, state, county, regional or local authorities whose
jurisdiction includes, in whole or in part, environmental protection or matters
pertaining to health, safety and welfare have been obtained; (ii) none of such
real estate contains any (a) asbestos in any form, (b) urea formaldehyde foam
insulation, (c) transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs) in excess of fifty parts
per million, or (d) other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any federal, state, county, regional or
local authority, except in compliance with applicable law; and (iii) none of
such real estate has been used at any time in the past for any activities
involving, directly or indirectly, the use, generation, treatment, storage,
spill or disposal of any hazardous or toxic chemical, material, substance or
waste, except in compliance with applicable law.
3.1.24. Discounts and Gift Certificates. Any outstanding
discount or promotional tickets, gift certificates, prepaid tickets or admission
passes or any other arrangements allowing the holder thereof to reduced or free
admission to any of the Theaters will expire on or before December 31, 1998,
other than (i) those issued prior to December 1, 1997 and (ii) free passes
issued in the ordinary course of business.
3.1.25. Full Disclosure. As of the date of this Agreement, the
Indemnitors have, and at the Closing will have, disclosed in writing to
Purchaser all events, conditions or facts which, to the Indemnitors' knowledge,
materially affect the condition (financial or otherwise), business or prospects
of the Theaters. The Indemnitors have not now, and will not have at the Closing,
withheld from Purchaser knowledge of any events, conditions or facts which the
Indemnitors know may materially affect the condition (financial or otherwise),
business or prospects of the Theaters. No representation or warranty by the
Indemnitors in this Agreement, and no information contained in the Schedule, the
exhibits, lists, certificates and other instruments and documents furnished or
to be furnished to Purchaser pursuant hereto, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements and information contained herein or
therein not misleading. The Indemnitors shall execute and deliver to Purchaser
at Closing the Certificate described in Section 5.1.5. For the purposes of this
Section 3.1.25, events, conditions and facts which have effects aggregating less
than 5% of the transaction value is deemed not material.
3.1.26. Organization of the Trust. The Trust is a duly formed
and validly existing trust under the laws of the State of Texas.
3.1.27. Authority of Curley. Curley, in his individual capacity,
has full right, power and authority to enter into this Agreement and the Asset
Purchase and to consummate the transactions contemplated hereby and thereby.
3.1.28. Authority of Indemnitors. Each of the Indemnitors has
full right and power to enter into this Agreement and the Asset Purchase
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution of this Agreement and the Asset Purchase Agreement by each of the
Indemnitors, their delivery to Purchaser and the performance of their respective
terms have been fully authorized by the Board of Directors of the Corporation,
the stockholders and the Board of Directors of Seller, the partners of Super
Saver and the trustee of the Trust, as required, and
<PAGE> 30
no further corporate, partnership or trust action will be necessary on their
part to make this Agreement and the Asset Purchase Agreement valid and binding
upon each of the Indemnitors in accordance with their respective terms, other
than the stockholder approval required pursuant to Section 5.2.7. The execution
and delivery of this Agreement and the Asset Purchase Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not,
result in a violation or breach of any term or provision of, nor constitute a
default under, the Corporation's or Seller's articles of incorporation or
bylaws, Super Saver's partnership agreement, the Trust's formation documents, or
other constituent documents, or any indenture, mortgage, deed of trust or other
material contract or agreement to which the Corporation, Seller, Super Saver or
the Trust is a party.
3.1.29. Validity and Enforceability. This Agreement and the
Asset Purchase Agreement are valid and binding agreements, enforceable against
the Indemnitors and the Subsidiaries to the extent each is ostensibly a party in
accordance with their respective terms by Purchaser, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws and principles of equity affecting the rights of
creditors generally from time to time in effect.
3.1.30. Insolvency. Neither the Seller nor any Indemnitor is now
Insolvent, nor will the Seller or any Indemnitor be rendered Insolvent by the
occurrence of the transactions contemplated hereby.
3.1.31. Cash Flow Figures.
(a) Seller has provided cash flow figures (the "CASH FLOW
FIGURES") indicating gross revenues less direct operating expenses for
the Theaters operated by Seller from November 1, 1996 through October
31, 1997 in Exhibit S attached hereto.
(b) Seller's Cash Flow Figures are in accordance in all material
respects with the books and records of Seller and, except as stated
therein, fairly represent said Cash Flow Figures for said Theaters.
3.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. TO INDUCE SELLER AND
THE INDEMNITORS TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY, PURCHASER REPRESENTS, WARRANTS AND AGREES AS OF THE DATE
HEREOF AS FOLLOWS:
3.2.1. Organization and Good Standing. Purchaser is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware.
3.2.2. Authority. The execution of this Agreement and the Asset
Purchase Agreement by Purchaser, their delivery to the Indemnitors and the
performance of their respective terms have been fully authorized by the Board of
Directors of Purchaser and Purchaser's stockholders, if required, and no further
corporate action will be necessary on their part to make this Agreement and the
Asset Purchase Agreement valid and binding upon Purchaser to the extent it is
ostensibly a party in accordance with their respective terms. The execution and
delivery of this Agreement and the Asset
<PAGE> 31
Purchase Agreement do not, and the consummation of the transactions contemplated
hereby and thereby will not, result in a violation or breach of any term or
provision of, nor constitute a default under, Purchaser's certificate of
incorporation or bylaws, or any indenture, mortgage, deed of trust or other
material contract or agreement to which Purchaser is a party.
3.2.3. Validity and Enforceability. This Agreement and the Asset
Purchase Agreement are valid and binding agreements, enforceable against
Purchaser to the extent it is ostensibly a party in accordance with their
respective terms by the Seller, the Corporation and Super Saver, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws and principles of equity affecting the
rights of creditors generally from time to time in effect. The execution and
performance of this Agreement and the Asset Purchase Agreement by Purchaser and
the consummation of the transactions contemplated hereby or thereby do not
violate any statutory or common law or rule or regulation or give rise to a
cause of action of any type in any Person (other than the parties to such
agreements, upon a violation hereof or thereof), which will result in any
liability to Seller.
ARTICLE 4. - COVENANTS
4.1. THE SELLER'S AND THE INDEMNITORS' COVENANTS. TO INDUCE PURCHASER TO
ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY, AND WITHOUT LIMITING ANY COVENANT, AGREEMENT, REPRESENTATION OR WARRANTY
MADE ELSEWHERE IN THIS AGREEMENT, THE SELLER AND THE INDEMNITORS COVENANT AND
AGREE AS FOLLOWS:
4.1.1. Access and Information. Between the date of this
Agreement and the Closing Date, each of the Corporation and Subsidiaries will:
(i) provide to Purchaser and its officers, attorneys, accountants and other
representatives, during normal business hours, or otherwise if Purchaser deems
necessary, free and full access to all of the properties, assets, agreements,
commitments, books, records, accounts, tax returns and documents of the
Corporation and Subsidiaries and permit them to make copies thereof; (ii)
furnish Purchaser and its representatives with all information concerning the
business, properties and affairs of the Corporation and Subsidiaries as
Purchaser requests and certified by the officers of the Corporation, if
requested; (iii) use their best efforts to cause the Corporation's Accountants
to make available to Purchaser and its representatives all financial information
relating to the Corporation and the Subsidiaries requested, including all
working papers pertaining to audits and reviews made heretofore by such
auditors; (iv) furnish Purchaser true and complete copies of all financial and
operating statements of the Corporation and Subsidiaries; (v) permit access to
customers and suppliers for consultation or verification of any information
obtained by Purchaser and use their best efforts to cause such customers and
suppliers to cooperate with Purchaser in such consultation and in verifying such
information; and (vi) cause their employees, accountants and attorneys to make
disclosure of all material facts known to them affecting the financial condition
and business operations of the Corporation and Subsidiaries and to cooperate
fully with any audit, review, investigation or examination made by Purchaser and
its representatives, including, without limitation, with respect to:
(a) The books and records of the Corporation and Subsidiaries;
(b) The reports of state and federal regulatory examinations;
<PAGE> 32
(c) Leases, contracts and commitments between the Corporation or
any Subsidiary and any other Person;
(d) Physical examination of any real properties owned by, or
leased to or by the Corporation or any Subsidiary;
(e) Physical examination of any real property upon which the
Corporation or any Subsidiary has a Lien; and
(f) Physical examination of any furniture, fixtures, equipment
or other personal property owned by or leased to or by the Corporation
or any Subsidiary.
4.1.2. Notices and Approvals. Each of the Seller and Indemnitors
agrees: (a) to give, and to cause the Subsidiaries to give, all notices to third
parties (including their respective stockholders and limited and general
partners) which may be necessary or deemed desirable by Purchaser in connection
with this Agreement and the consummation of the transactions contemplated
hereby, (b) to use its best efforts to obtain, and to cause the Subsidiaries to
obtain, all federal and state governmental regulatory agency approvals,
consents, permits, authorizations, and orders necessary or deemed desirable by
Purchaser in connection with this Agreement and the consummation of the
transaction contemplated hereby and (c) to use its best efforts to obtain, and
to cause Subsidiaries to obtain, all consents and authorizations of any
governmental authorities or other third parties (including their respective
stockholders and limited and general partners) and lenders (including Norwest
Bank El Paso, N.A. and Frost National Bank, N.A.) necessary or deemed desirable
by Purchaser in connection with this Agreement and the consummation of the
transactions contemplated hereby. At least ten (10) business days prior to the
submission of any application with respect to any of the foregoing approvals,
consents, permits, authorizations and orders, the Corporation shall, and shall
cause any Subsidiary to, deliver a copy thereof to Purchaser. In the event
Purchaser shall request any modification in the form or content of any such
application, the Corporation shall, or shall cause any Subsidiary to, make such
change or modification and submit the application as modified or changed.
4.1.3. Information for Purchaser's Statements and Applications.
The Seller, the Corporation and Super Saver shall, and shall cause the
Subsidiaries and their employees, accountants and attorneys to, cooperate fully
with Purchaser in the preparation of any statements or applications made by
Purchaser to any federal or state governmental regulatory agency in connection
with this Agreement and the transactions contemplated hereby and to furnish
Purchaser with all information concerning the Corporation and Subsidiaries
necessary or deemed desirable by Purchaser for inclusion in such statements and
applications, including, without limitation, all requisite financial statements
and schedules. At the time any such statement or application is filed and at
such other times as Purchaser may request, the Seller, the Corporation and Super
Saver shall provide Purchaser with a certificate executed by the respective
Corporation's or Subsidiary's executive officers confirming in such detail as
Purchaser may request the information concerning the Corporation or Subsidiary
which is contained in such statement or application.
<PAGE> 33
4.1.4. Termination of Employees. On the Closing Date, Seller
shall terminate all of its Theater employees; provided, Purchaser may elect to
hire any of such employees. Seller will pay on or before the Closing Date any
accrued vacation pay earned prior to the Closing by any employees of Seller,
other than those employees set forth on the Exhibit described in Section
2.4(a)(vii).
4.1.5. Conduct of Business.
(a) Except as otherwise specifically contemplated by this
Agreement and disclosed on the Schedule, from the date of this Agreement
and through the Closing, unless Purchaser has given its prior written
consent otherwise, each of the Seller, the Corporation and Super Saver
shall, and shall cause each Subsidiary to, conduct its business and
affairs only in the ordinary and usual course and in the same manner in
which they have heretofore been conducted. Any purchases of equipment or
fixtures from the date of this Agreement through the Closing, shall be
of equipment and fixtures of comparable quality and standards as such
items purchased prior to the date of this Agreement. Without limiting
the generality of the foregoing, absent Purchaser's prior written
consent, the Seller, the Corporation and Super Saver shall not, and
shall not permit any Subsidiary to, take any action or omit to take any
action where such action or omission would by the terms of this
Agreement require an item to be listed on Part 5 of the Schedule in
order to make the representations herein true as of the date of such
action or omission.
(b) From and after the date hereof until the Closing or
termination of this Agreement pursuant to the terms hereof, Seller,
without the prior written consent of Purchaser, shall not:
(i) encumber or permit the encumbrance by Seller of the
Property owned or leased thereby, except for encumbrances that are
discharged on or before Closing;
(ii) dispose of or contract to dispose of any of the
Property owned or leased thereby, except for replacements or substitutes
in the ordinary course of business (but will not sell any of the
Theaters operated thereby); and
(iii) amend or terminate any of the Leases or Continuing
Contracts to which Seller is a party.
4.1.6. Preservation of Business. From the date of this Agreement
and through the Closing, the Seller, the Corporation and Super Saver shall use
commercially reasonable efforts, and shall cause the Subsidiaries to use
commercially reasonable efforts, to preserve and keep intact the respective
business organizations of the Corporation and Subsidiaries, to retain their
respective officers, and to preserve the goodwill of their respective employees,
customers, suppliers and all other persons having business relations with the
Corporation or any Subsidiary.
4.1.7. Insurance. From the date of this Agreement and through
the Closing, the Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, continue in force all existing insurance now carried by the
Corporation and Subsidiaries.
<PAGE> 34
4.1.8. Contracts and Commitments. From the date of this
Agreement and through the Closing, unless Purchaser has given its prior written
approval, the Seller, the Corporation and Super Saver shall not, and shall not
permit any Subsidiary to, enter into any contract or commitment by which any of
the Property is bound except contracts or commitments in the ordinary and usual
course of business not involving (i) an expenditure in any one transaction in
excess of $2,000; and (ii) the purchase of a quantity of materials not
reasonably anticipated (based on current operations) to be consumed in less than
six (6) months; and the Seller, the Corporation and Super Saver shall not, and
shall not permit any Subsidiary to, make or incur any capital expenditures in an
aggregate amount in excess of $3,000, except for items of equipment on order on
the date hereof and set forth on Part 13 of the Schedule.
4.1.9. Actions, Etc. The Seller, the Corporation and Super Saver
shall promptly notify Purchaser of any lawsuits, claims, proceedings or
investigations which are threatened or commenced against the Corporation or any
Subsidiary or against any of their employees, consultants, officers or
directors, or, to the Indemnitors' knowledge, their employees or consultants
between the date of this Agreement and the Closing Date and which may relate to,
or affect, the business or assets of the Corporation or any Subsidiary or the
transactions contemplated hereby. From the date of this Agreement and through
the Closing, the Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, duly comply with all laws, regulations, ordinances, orders,
injunctions and decrees applicable to them, their properties, and the conduct of
their respective businesses, and with all covenants, terms and conditions upon
or under which any of their properties are held.
4.1.10. Repairs. From the date of this Agreement and through the
Closing, the Seller, the Corporation and Super Saver shall, and shall cause the
Subsidiaries to, maintain, preserve and protect the property used in the conduct
of the business of the Corporation and Subsidiaries and, except as set forth on
Part 11(b) to the Schedule, keep the same in good repair, working order and
condition and, from time to time make, or cause to be made, all needful and
proper repairs, renewals and replacements thereto, subject to the limitation
contained in Section 4.1.8 hereof, so that the business carried on in connection
therewith may be advantageously conducted at all times.
<PAGE> 35
4.1.11. Reports and Returns. The Seller, the Corporation and
Super Saver shall, and shall cause the Subsidiaries to, duly and timely file all
reports and returns required to be filed with federal, state, local and other
authorities prior to Closing, including, without limitation, any federal income
tax returns, which returns shall be prepared in accordance with all regulatory
requirements. The Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, promptly pay all federal, state, foreign and local tax
assessments and governmental charges levied or assessed upon the Corporation and
Subsidiaries or their properties prior to the date on which penalties attach
thereto and all lawful claims which, if unpaid when due and payable, might
become a Lien upon property of the Corporation or any Subsidiary, except taxes,
charges and claims being contested in good faith by appropriate proceedings by
the Corporation or a Subsidiary and for which adequate reserves have been made
on the books of the Corporation or the Subsidiaries. The Seller, the Corporation
and Super Saver shall, and shall cause the Subsidiaries to, duly and timely make
all deposits required of the Corporation and Subsidiaries with respect to any
taxes (including, without limitation, employee withholding taxes).
4.1.12. Indemnification of Purchaser.
(a) The sole remedy of Purchaser, its officers, directors,
representatives, shareholders, stockholders, lenders, assignees and
Affiliates against the Indemnitors and their Related Parties for any
Loss arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by Purchaser or such other Persons under the (i) Asset Purchase
Agreement shall be made, if at all, pursuant to Section 4.1.12 thereof
and (ii) Put Agreement shall be made, if at all, pursuant to Section
4.1.12 thereof) shall be a claim for indemnity made and enforced in
accordance with this Section 4.1.12. Each and every provision in this
Agreement has been independently bargained for and relied upon by
Purchaser.
(b) The Indemnitors jointly and severally agree to defend and
indemnify, reimburse and hold harmless Purchaser and its Related Parties
(collectively, the "PURCHASER INDEMNITEES") against and in respect of
any and all liability, damage, deficiency, loss, cost or expense
(including attorney's fees and costs of investigation), or diminution of
value, whether or not involving a third party claim (collectively, a
"LOSS") arising from (i) all third party claims to the extent that they
relate to (A) transactions contemplated herein to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries, (B) the business currently or ever
conducted by the Seller, the Corporation and Super Saver and the
Subsidiaries to the extent that they arise out of or relate to actions
or omissions of Curley, Lyco, the Indemnitors and/or the Subsidiaries
and (C) the Property prior to Closing to the extent that they arise out
of or relate to actions or omissions of Curley, Lyco, the Indemnitors
and/or the Subsidiaries and (ii) any untrue representation, breach of
warranty or non-fulfillment of any covenant contained herein or in any
document, certificate or instrument delivered to Purchaser hereunder
made by the Indemnitors, even though any such representation, warranty
or covenant may have been made by the Indemnitors in good faith and to
their knowledge; provided, however, that solely with respect to those
representations and warranties contained herein which have been
specifically limited to the Indemnitors' knowledge there shall be no
indemnification obligations under this Section 4.1.12(b) absent such
knowledge. Without limiting the foregoing, the Indemnitors agree to
defend, indemnify, reimburse and hold harmless each Purchaser Indemnitee
against and in respect of any Loss arising out of or related to:
<PAGE> 36
(1) any claim for a finder's fee or brokerage or other
commission arising by reason of any services rendered or alleged
to have been rendered to or at the instance of any of the
Indemnitors or any Subsidiary with respect to this Agreement or
any of the transactions contemplated hereby;
(2) any liability to any federal, state or local taxing
authority for income taxes, excise taxes, sales taxes, franchise
taxes or other taxes or penalties incurred by the Corporation or
any Subsidiary on or prior to the Closing Date; and
(3) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, and Losses incident to any of
the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(c) Notwithstanding the preceding provisions concerning
indemnification of the Purchaser Indemnitees by the Indemnitors,
Purchaser hereby expressly agrees that the liabilities and obligations
of the Indemnitors under this Section 4.1.12 shall be expressly limited
as follows:
(1) the amount of any damages asserted by any Purchaser
Indemnitee pursuant to any indemnification claim made pursuant
to this Section 4.1.12 shall include the amount of tax
liability, if any, incurred by any Purchaser Indemnitee upon
receipt of such indemnification and be limited in each case to
the total amount of actual damages incurred by any Purchaser
Indemnitee net of the then present value (calculated at 6% per
annum) of any related tax benefit to the Purchaser Indemnitee,
if any, resulting from such claim;
(2) the Indemnitors shall not be liable for any increase
in any tax liability of the Purchaser Indemnitees (including,
without limitation, income, property, sales, use, franchise,
capital stock, excise, value added, employees' income
withholding, social security, unemployment taxes and all
interest and penalties related to any of such taxes) to the
extent such increase in tax liability to the Purchaser
Indemnitees shall result from an audit or enforcement action
that in either case was voluntarily initiated by Purchaser or
its Affiliates;
(3) the Indemnitors shall not be required to defend,
indemnify or hold any Purchaser Indemnitee harmless from any
claim pursuant to Section 4.1.12(b)(ii) based upon any facts or
circumstances which were specifically disclosed by the
Indemnitors to Purchaser in this Agreement or in the Schedule or
any exhibit attached hereto or in any document delivered to
Purchaser which is specifically identified on Exhibit K attached
hereto;
(4) the Indemnitors shall not be required to defend,
indemnify or reimburse or hold any Purchaser Indemnitee harmless
from any claim except to the extent that the total of all such
claims established pursuant to this Section 4.1.12, Section
4.1.12 of the Asset Purchase Agreement and Section 4.1.12 of the
Put Agreement exceeds an aggregate amount of $25,000, subject to
reduction in accordance with Section 4.2.3; and
<PAGE> 37
(5) Indemnitors shall not be liable for any breach of
representation, warranty, covenant or any other matter to the
extent that it resulted in an adjustment in the Purchase Price.
(d) In the event the income or other tax returns of the
Purchaser Indemnitee are audited after Closing by any taxing authority,
the Indemnitors shall have the right to participate at their own expense
in such audit and to contest in good faith and on behalf of the
taxpayer/entity any assessments for additional tax, interest or penalty
proposed or imposed by such taxing authority for which the Indemnitors
may be liable or responsible under this Section 4.1.12, providing the
Indemnitors post bond for any liability resulting from such contest.
(e) Each of the Indemnitors shall be so obligated under this
Section 4.1.12 and Section 4.1.12 of the Asset Purchase Agreement and
Section 4.1.12 of the Put Agreement to the extent of an aggregate
maximum of an additional $3,200,000 over and above any and all offsets
against the Escrow Amount; provided, that the maximum aggregate amount
to be recovered by all Purchaser Indemnitees from the Indemnitors
collectively shall not exceed an additional $3,200,000 over and above
any and all offsets against the Escrow Amount and, provided further,
that any amounts paid by the Indemnitors (whether directly or by offset
of other payments due to Indemnitors) pursuant to Section 4.1.12 of the
Asset Purchase Agreement or Section 4.1.12 of the Put Agreement that are
not offset against the Escrow Amount shall be applied towards such
$3,200,000 limitation. Notwithstanding the foregoing, this paragraph (e)
shall not apply to any breach of Sections 3.1.11, 3.1.12 and 8.19
hereof.
(f) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.1.12, then after prompt written notice by
any Purchaser Indemnitee to the Indemnitors of such demand, claim or
lawsuit, the Indemnitors shall retain counsel reasonably satisfactory to
Purchaser to defend such claim or action. Thereafter, any Purchaser
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event the Indemnitors fail to respond to the prompt
written notice of any such demand, claim or lawsuit, or fail to retain
reasonably satisfactory counsel, then any Purchaser Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of the
Indemnitors. The above agreement of the Indemnitors to defend, indemnify
and hold harmless the Purchaser Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any Purchaser
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.1.12, "prompt written notice" shall mean that any Purchaser
Indemnitee, shall give written notice to counsel for the Indemnitors
designated in Section 8.2 of a demand, claim or lawsuit within thirty
(30) days after such demand, claim or lawsuit is brought to the
attention of a Purchaser Indemnitee, and in any event 15 days before any
pleading is due in any litigation.
(g) The Indemnitors agree that their agreement under this
Section 4.1.12 to defend, indemnify, reimburse and hold harmless the
Purchaser Indemnitees will first be accomplished by an offset against
the Escrow Amount as provided in Section 2.6 hereof, if established. For
any and all amounts in excess of the Escrow Amount (or, if no Escrow
Amount exists, $25,000), the Indemnitors agree to indemnify, reimburse
and hold harmless Purchaser Indemnitees from any Loss within thirty (30)
days after any such Loss shall be finally determined. Any Loss under
this Section 4.1.12 shall be deemed "finally determined" on the earlier
of (i) the date upon which the Indemnitors shall acknowledge in writing
to Purchaser that any claim for indemnity under this Section 4.1.12 has
been properly made and
<PAGE> 38
is in the correct amount, or (ii) in the event the Indemnitors shall
contest any claim made by a Purchaser Indemnitee or by any third party
on the date any final judgment, decision or award shall have been
rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been consummated, or
the parties shall have arrived at a mutually binding agreement with
respect to such claim, as applicable. The indemnity hereunder shall
include any and all costs and expenses incurred by a Purchaser
Indemnitee pending any such final determination.
(h) These indemnification obligations of the Indemnitors shall
survive until, but only until, the first anniversary of the Closing;
provided, that the obligations of the Indemnitors for any claim made by
a Purchaser Indemnitee under this Section 4.1.12 prior to such first
anniversary, shall survive such first anniversary.
4.1.13. Compliance with Agreement. The Seller, the Corporation
and Super Saver shall not, and shall not allow the Subsidiaries to, undertake
any course of action inconsistent with satisfaction of the conditions applicable
to them set forth in this Agreement, and the Seller, the Corporation and Super
Saver shall, and shall cause the Subsidiaries to, do all such acts and take all
such measures as may be reasonably appropriate as early as practicable to comply
with and satisfy (as applicable) the representations, agreements, conditions and
other provisions of this Agreement. The Seller shall give Purchaser prompt
written notice of any change in any information contained in the representations
and warranties made in Section 3.1 hereof and on the Schedule referred to
therein and of any condition or event which constitutes a default of any
covenant or agreement of the Seller, the Corporation and Super Saver made in
Section 4.1 or in any other section hereof and the Seller shall have a
continuing obligation to promptly supplement or amend the Schedule with respect
to any matter thereafter arising or discovered which, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Schedule; provided, however, that for the purposes of the
rights and obligations of the parties hereunder, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless so agreed to in writing by Purchaser. For the purposes of
this Section 4.1.13, "prompt written notice" shall mean notice given to
Purchaser within five (5) days after the occurrence of the event which by the
terms of this Agreement requires such change in information or constitutes such
a default, or if such event occurs within five (5) days prior to the Closing,
then "prompt written notice" shall mean written notice given prior to the
Closing.
4.1.14. Title Information. Purchaser, at the Seller's cost and
expense to the extent that the Purchase Price is adjusted as set forth in
Section 2.3, shall cause a title company satisfactory to Purchaser and its
lender to deliver to Purchaser a commitment for owner's and mortgagee's title
insurance policies, naming Purchaser as the insured party in amounts and with
exceptions to title acceptable to Purchaser, for each tract of real property
constituting Property, together with legible copies of all title exceptions
listed therein. If Purchaser or its lender object to the status of title to such
real property, they shall so notify the Seller in writing, and the Seller shall
have the right but not the obligation to cure such title objections prior to the
Closing Date. Purchaser shall have the right to terminate this Agreement in the
event the Seller fails to cure on or before the Closing Date any title objection
which (i) materially interferes or reasonably could materially interfere with
the present use of the properties subject thereto or (ii) its lender does not
waive.
<PAGE> 39
4.1.15. [INTENTIONALLY OMITTED.]
4.1.16. Actions in the Event of a Noncompliance Circumstance.
The Indemnitors shall have until the earlier to occur of the Closing Date or
fifteen (15) days following delivery of notice of a Noncompliance Circumstance
to cure and correct any Noncompliance Circumstance prior to Closing and shall
use their reasonable efforts to effect such a cure or correction up to an
aggregate of $100,000 pursuant to Section 4.1.16 of this Agreement less amounts
previously so expended pursuant to Section 4.1.16 of the Asset Purchase
Agreement and the Put Agreement.
4.1.17. Exclusive Dealing. Indemnitors shall not, directly or
indirectly, through any agents, representatives or otherwise, solicit, accept,
or entertain offers from, negotiate with or in any manner encourage, accept or
consider any proposal of, or enter into any agreement with any Person other than
Purchaser relating to, the sale of the Property (or any material portion
thereof), whether through purchase, merger, consolidation or other business
combination.
4.2. Purchaser's Covenants. To induce the Indemnitors to enter into this
Agreement and to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement, representation or warranty made elsewhere in
this Agreement, Purchaser covenants and agrees as follows:
4.2.1. Nondisclosure of Information. Unless and until the
transactions contemplated by this Agreement are fully consummated, Purchaser
shall hold all data and information obtained with respect to the Corporation and
Subsidiaries in such degree of confidence as the Corporation and Subsidiaries
maintain such information and further agrees not to use such data or information
or disclose the same to others (i) except to Purchaser's accountants, attorneys,
lenders, agents and representatives, (ii) except as permitted by the
Corporation, (iii) except to the extent such information is published or is a
matter of public knowledge or used in connection with any securities statement
or offering circular prepared by Purchaser or any Affiliate thereof or (iv)
except as required by law. In the event this Agreement is terminated pursuant to
Section 7.1 hereof for any reason, Purchaser shall, within ten (10) days
following the date of such termination, deliver to the Corporation all written
information and copies thereof obtained by Purchaser or any of its
representatives referenced in (i) above at any time from the beginning of the
discussions between the Corporation and Purchaser of the transactions
contemplated herein.
4.2.2. Compliance with Agreement; Cooperation. Purchaser shall
not undertake any course of action inconsistent with satisfaction of the
conditions applicable to Purchaser set forth in this Agreement, and shall
cooperate and assist the Seller, without expense to Purchaser, in all its
efforts and undertakings as early as practicable to comply with and satisfy (as
applicable) the representations, agreements, conditions and other provisions of
this Agreement applicable to the Purchaser, including, without limitation,
providing the Seller with such financial and other information relating to
Purchaser as the Seller or the Corporation may be required to deliver to the
lenders, lessors and sublessors of the Corporation or any Subsidiary in order to
obtain the releases and other consents contemplated by this Agreement.
<PAGE> 40
4.2.3. Disclosure to the Corporation. Purchaser shall give the
Seller prompt written notice of any information or other knowledge obtained by
Purchaser prior to Closing pursuant to its due diligence investigation or
otherwise that Purchaser considers to be either (a) inconsistent with or in
violation of any of the representations and warranties made by the Indemnitors
in Section 3.1 of this Agreement, or inconsistent with any information disclosed
on the Schedule, or (b) a condition or event which may constitute a default by
the Indemnitors or failure to comply with or fully perform any covenant or
agreement of the Indemnitors made in Section 4.1 or any other section of this
Agreement (hereafter referred to as a "NONCOMPLIANCE CIRCUMSTANCE"). Any amounts
previously spent pursuant to Section 4.1.16 of this Agreement, the Asset
Purchase Agreement and the Put Agreement up to an aggregate of $25,000 to effect
such cure or correction will (i) increase the Purchase Price by such amounts and
(ii) reduce the $25,000 deductible referred to in Section 4.1.12(c)(4) of this
Agreement and the Asset Purchase Agreement by such amounts. In the event the
Indemnitors fail to cure or correct such Noncompliance Circumstance, Purchaser
shall have the right to terminate this Agreement in accordance with the
provisions of Section 7.1. In the event Purchaser elects to proceed to Closing,
any such breach or failure to perform by the Indemnitors shall be deemed to be
waived by Purchaser and shall not constitute the basis for any claim of
indemnification or offset by Purchaser against the Indemnitors or the Escrow
Amount after Closing.
4.2.4. Indemnification by Purchaser.
(a) The sole remedy of the Indemnitors and their Related Parties
(collectively, the "STARTIME INDEMNITEES") and any of their officers,
directors, representatives, stockholders, lenders, assignees and
Affiliates against Purchaser, SCI and their Related Parties for any Loss
arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by the StarTime Indemnitees or such other Persons under the (i) Asset
Purchase Agreement shall be made, if at all, pursuant to Section 4.2.4
thereof and (ii) Put Agreement shall be made, if at all, pursuant to
Section 4.2.4 thereof) shall be a claim for indemnity made and enforced
in accordance with this Section 4.2.4.
(b) Purchaser shall defend, indemnify, reimburse, and hold
harmless, the StarTime Indemnitees from: (i) all third party claims
relating to the business conducted by Purchaser arising out of, or
relating to, actions or omissions of Purchaser after the Closing; and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein, in each case of Purchaser contained in
this Agreement, even though any such representation, warranty or
covenant may have been made by the Purchaser in good faith.
(c) Notwithstanding the preceding provisions concerning
indemnification by Purchaser, the StarTime Indemnitees hereby expressly
agree that the liabilities and obligations of Purchaser under this
Section 4.2.4 shall be expressly limited as follows:
(1) the amount of any damages asserted by the StarTime
Indemnitees pursuant to any indemnification claim made pursuant
to this Section 4.2.4 shall include the amount of tax liability,
if any, incurred by the StarTime Indemnitees upon receipt of
such indemnification and be limited in each case to the total
amount of actual damages incurred by the StarTime Indemnitees
net of the then present value (calculated at 6% per annum) of
any related tax benefit to the StarTime Indemnitees, if any,
resulting from such claim; and
(2) Purchaser shall not be required to defend,
indemnify, reimburse or hold the StarTime Indemnitees harmless
from any claim except to the extent that the
<PAGE> 41
total of all such claims established pursuant to this Section
4.2.4, Section 4.2.4 of the Asset Purchase Agreement and Section
4.2.4 of the Put Agreement exceeds an aggregate amount of
$25,000.
(d) Purchaser shall be so obligated under this Section 4.2.4 and
Section 4.2.4 of the Asset Purchase Agreement and Section 4.2.4 of the
Put Agreement to the extent of an aggregate maximum of $3,700,000;
provided, that the maximum aggregate amount to be recovered by all
StarTime Indemnitees from Purchaser and SCI collectively shall not
exceed $3,700,000 and, provided further, that any amounts paid by
Purchaser or SCI pursuant to Section 4.2.4 of the Asset Purchase
Agreement shall be applied towards such $3,700,000 limitation.
(e) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.2.4, then after prompt written notice by any
StarTime Indemnitee to Purchaser of such demand, claim or lawsuit, the
Purchaser shall retain counsel reasonably satisfactory to the StarTime
Indemnitees to defend such claim or action. Thereafter, any StarTime
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event Purchaser fails to respond to the prompt
written notice of any such demand, claim or lawsuit, or fails to retain
reasonably satisfactory counsel, then any StarTime Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of
Purchaser. The above agreement of Purchaser to defend, indemnify and
hold harmless the StarTime Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any StarTime
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.2.4, "prompt written notice" shall mean that any StarTime
Indemnitee, shall give written notice to Purchaser of a demand, claim or
lawsuit within thirty (30) days after such demand, claim or lawsuit is
brought to the attention of a StarTime Indemnitee, and in any event 15
days before any pleading is due in any litigation.
(f) These indemnification obligations of Purchaser shall survive
until, but only until, the first anniversary of the Closing; provided,
that the obligations of Purchaser for any claim made by the Corporation
under this Section 4.2.4 prior to such first anniversary shall survive
such first anniversary.
(g) Notwithstanding the foregoing, this Section 4.2.4 shall not
apply to Purchaser's failure to deliver the Purchase Price in accordance
with the terms of this Agreement.
ARTICLE 5. - CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement shall be subject to the fulfillment of each
and all of the following conditions at or before the Closing (unless an earlier
time is specified in this Agreement, in which case on or before such earlier
time), each of which is individually hereby deemed material, and any one or more
of which may be waived in writing by Purchaser:
<PAGE> 42
5.1.1. Representations and Warranties. Each of the
representations, warranties and statements made by the Indemnitors contained in
this Agreement or in any certificate, schedule, exhibit or other document
delivered to Purchaser pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects as of the date when made and shall be true and correct on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing.
5.1.2. Performance by the Indemnitors. The Indemnitors shall
have fully performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them in all
material respects on or before the Closing (unless an earlier time is specified
in this Agreement, in which case on or before such earlier time), including,
without limitation, the execution and delivery by them of all documents and
instruments required under the terms of Section 6.1.1 of this Agreement.
5.1.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal, state and other governmental regulatory agencies and
other Persons required in connection with this Agreement and the consummation of
the transactions contemplated hereby (including under the HSR Act), and all such
consents, approvals, authorizations, permits and orders shall be in full force
and effect as of the Closing.
5.1.4. [INTENTIONALLY OMITTED.]
5.1.5. Certificate of the Indemnitors. The Indemnitors shall
have provided to Purchaser a certificate (the "CERTIFICATE"), dated the Closing
Date, executed by each of the Indemnitors, and confirming, representing and
warranting to the reasonable satisfaction of Purchaser: (i) the accuracy as of
such date of the Indemnitors' representations and warranties contained in this
Agreement in all material respects or in any statement, deed, schedule or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby as if such representations and warranties were made as of
the Closing Date, (ii) that the conditions set forth in Section 5.1 of this
Agreement have been satisfied or waived, and (iii) that the Indemnitors have
fully performed all covenants and agreements to be performed by them in all
material respects on or prior to the Closing. The sole remedy of Purchaser, its
officers, directors, representatives, stockholders, lenders, assignees and
affiliates against the Indemnitors and their Related Parties for any Loss
arising out of or related to this Certificate shall be a claim for indemnity
made and enforced in accordance with Section 4.1.12.
5.1.6. Absence of Regulation Changes. There shall not have been
any material adverse change in any federal, state or other laws, rules or
regulations relating to the taxation, business, activities or operations of the
Corporation and the Subsidiaries, and no such change shall be threatened.
5.1.7. Satisfaction with Review of Purchaser. Since September
30, 1997, there shall have been no change or changes in the Corporation's or any
Subsidiary's business, labor relations, financial condition, prospects,
properties, assets, liabilities or results of operations (or the occurrence
<PAGE> 43
of any events which might reasonably be expected to result in any such change or
changes), other than seasonal changes historically experienced by the indoor
theater industry, which in the judgment of Purchaser or its lender, made in good
faith, has been or may be materially adverse to the Corporation or the
Subsidiary.
5.1.8. Approval of Instruments. Purchaser and its lender shall
have approved all lists, financial statements, certificates and other documents
to be delivered by the Indemnitors, the Subsidiaries, the stockholders of the
Corporation or Seller, the partners of Super Saver or their representatives
pursuant to the provisions of this Agreement, and such approval by Purchaser
shall not be unreasonably withheld. Furthermore, without limiting the foregoing,
all other instruments and documents delivered to Purchaser pursuant to the
provisions of this Agreement, or incidental to the transactions contemplated
hereby, shall be satisfactory to Purchaser and its lender as to form, scope,
substance and execution and such approval by Purchaser shall not be unreasonably
withheld.
5.1.9. Good Standing. The Seller shall have furnished to
Purchaser at the Closing certificates of the appropriate governmental officials,
dated within fifteen (15) days of the Closing Date, confirming that the Seller
is in good standing, owes no taxes and is duly qualified to transact business in
the State of Nevada and in each jurisdiction listed on Part 1 of the Schedule,
and such certificates shall be accompanied by a certificate executed by the
Secretary of the Seller, dated the Closing Date, stating that such certificates
are true and correct.
5.1.10. No Actions. At and as of the Closing Date, no action,
suit, proceeding or investigation shall have been instituted and be continuing,
or have been threatened and be unresolved, before a court or before or by a
governmental body or agency with respect to the transactions contemplated by
this Agreement or which might have a materially adverse effect on the assets,
properties or businesses of the Corporation and Subsidiaries.
5.1.11. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by any court or governmental regulatory agency directing that the
transactions contemplated herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person with respect to
any of the transactions contemplated hereby.
5.1.12. Officers' Certificate. Purchaser shall have received a
certificate dated the Closing Date and signed by Curley and the Secretary of the
Corporation to the effect that except as noted on Part 20 of the Schedule, none
of the events described in Section 3.1.6 shall have occurred and to the further
effect that any liabilities or obligations of the Corporation and Subsidiaries
at the Closing Date, which were not reflected on the Balance Sheet, are set
forth on Part 20 of the Schedule and are liabilities or obligations incurred
only in the ordinary course of business subsequent to the Balance Sheet Date or
are liabilities contemplated by this Agreement.
<PAGE> 44
5.1.13. Loan Agreements. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all loan agreements,
notes, mortgages, deeds of trust, security agreements and other evidences of
indebtedness of the Corporation and Subsidiaries.
5.1.14. Deeds and Leases. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all deeds and leases to
the real property used by the Corporation and Subsidiaries in the operation of
their businesses, copies of all equipment leases of which the Corporation or any
Subsidiary is a lessee and copies of all licenses of which the Corporation or
any Subsidiary is a licensee, along with certificates of each lessor or licensor
or other party to such agreement that such leases and licenses as of the Closing
Date are in effect, that the Corporation or Subsidiary, as the case may be, is
not in default under such lease or license.
5.1.15. Releases. The Seller shall have delivered into escrow
fully executed releases of any and all items of indebtedness described in
Section 4.1.16 of this Agreement and all other items of indebtedness of the
Corporation and the Subsidiaries arising prior to the Closing and any and all
Liens or guaranties associated therewith. Further, the Indemnitors, Curley, Bill
Busby, Lynn Hunt and Lyco shall have delivered a release which releases any and
all claims (other than those pursuant to the Transaction Documents (as such term
is defined in the Asset Purchase Agreement) held or to be held by the
Indemnitors, Curley, Bill Busby, Lynn Hunt and/or Lyco against Purchaser and/or
SCI and their respective successors, assigns, officers, directors, employees and
agents in the form of Exhibit Q.
5.1.16. Due Diligence. Satisfactory completion of Purchaser's
due diligence investigation.
5.1.17. Phase I Environmental Reports and Surveys. Purchaser
shall, at its sole cost and expense, receive, at least five business days prior
to Closing, Phase I Environmental Reports and surveys for each tract of real
property owned by the Seller, in form and substance satisfactory to Purchaser
and its lender.
5.2. Conditions Precedent to Obligations of the Indemnitors. The
obligations of the Indemnitors under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time), each of which is individually hereby deemed
material, and any one or more of which may be waived in writing by the
Corporation:
5.2.1. Representations and Warranties. Each of the
representations, warranties and statements made by Purchaser contained in this
Agreement and in all other documents furnished by Purchaser or its
representatives pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, shall be true and correct in all material
respects on and as of the Closing to the same extent and with the same effect as
if made on and as of the Closing Date.
5.2.2. Performance by Purchaser. Purchaser shall have fully
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it
<PAGE> 45
in all material respects on or before the Closing (unless an earlier time is
specified in this Agreement, in which case on or before such earlier time),
including, without limitation, the execution and delivery by it of all documents
and instruments required under the terms of Section 6.1.2 of this Agreement.
5.2.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal and state governmental regulatory agencies and other
Persons required in connection with this Agreement and the consummation of the
transactions contemplated hereby, and all such consents, approvals,
authorizations, permits and orders shall be in full force and effect as of the
Closing.
5.2.4. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental body or authority directing that the
transactions provided for herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person in connection
with any of the transactions contemplated herein.
5.2.5. [INTENTIONALLY OMITTED].
5.2.6. Certificate of Purchaser. Purchaser shall have provided
to the Corporation a certificate, dated the Closing Date, executed by Purchaser,
and confirming, representing and warranting to the reasonable satisfaction of
the Corporation: (i) the accuracy as of such date of Purchaser's representations
and warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.1 of this Agreement have been satisfied or waived, and (iii)
that Purchaser has fully performed all covenants and agreements to be performed
by it in all material respects on or prior to the Closing. The sole remedy of
the Indemnitors, their officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Purchaser and their Related
Parties for any Loss arising out of or related to such certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.2.4.
<PAGE> 46
5.2.7. Releases. Purchaser and SCI shall have delivered a
release which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by Purchaser and/or SCI against the
Indemnitors, Curley, Bill Busby, Lynn Hunt and/or Lyco and their respective
successors, assigns, officers, directors, employees and agents in the form of
Exhibit Q.
ARTICLE 6. - CLOSING AND DELIVERY OF DOCUMENTS
6.1. Closing. At the Closing, the following shall occur as a single
integrated transaction:
6.1.1. Delivery by the Seller. The Seller shall deliver, or
cause to be delivered, to Purchaser the following:
(a) all deeds, bills of sale, assignments of licenses, UCC-3s,
and permits (to the extent such are assignable), executory contracts, leases,
easements and rights of way in order to effectively vest in Purchaser good and
indefeasible title to the Property free and clear of all liabilities and Liens,
except for the Permitted Title Exceptions, Permitted Liens and Assumed
Liabilities.
(b) actual possession and operating control of the Property.
(c) the consents of third parties necessary for the transfer and
assignment of the Property.
(d) evidence of the payment of any and all government taxes or
other governmental charges with arise out of or relate to the transfer of the
Property, including any transfer, documentary stamp tax, surtax, gross receipts,
excise and title taxes. The parties agree to cooperate in taking such steps as
may be necessary or appropriate in order to take advantage of any exceptions
from any such governmental taxes, or other charges which may be available with
respect to the transfer of the Property.
(e) [INTENTIONALLY OMITTED.]
(f) assignment and assumption agreements (the "Assignment and
Assumption Agreements") in the form of Exhibit O, as applicable, duly
executed by Seller.
(g) The Certificate identified in Section 5.1.5 hereof.
(h) The good standing certificates identified in Section 5.1.9
hereof.
(i) Copies, certified or otherwise identified to Purchaser's
satisfaction, of all corporate or partnership documents that Purchaser
shall reasonably request, including resolutions of the board of
directors of the Corporation and the Subsidiaries and the general
partner of Super Saver and resolutions of the stockholders of the
Corporation and the Subsidiaries, dated on or before the date hereof to
authorize this Agreement, the related agreements and the transactions
and other acts contemplated either by this Agreement or the related
agreements.
(j) Bill of Sale from Seller in the form of Exhibit P.
<PAGE> 47
(k) The Indemnitors, Curley, Bill Busby, Lynn Hunt and Lyco
shall execute and deliver a mutual release in the form of Exhibit Q
which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by the Indemnitors, Curley,
Bill Busby, Lynn Hunt and Lyco against Purchaser and SCI and their
respective successors, assigns, officers, directors, employees and
agents.
(l) All such instruments, documents and certificates as are
required to be delivered by the Indemnitors or their representatives
pursuant to the provisions of this Agreement.
(m) Such other instruments, documents or information that
Purchaser reasonably requests in connection herewith and the
transactions contemplated hereby, in form and substance reasonably
satisfactory to Purchaser.
6.1.2. Delivery by Purchaser.
(a) Purchaser shall deliver the Purchase Price as adjusted
pursuant to Section 2.4.
(b) Purchaser shall deliver, or cause to be delivered, to the
Corporation such instruments, documents and certificates as are required
to be delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
(c) [INTENTIONALLY OMITTED].
(d) [INTENTIONALLY OMITTED].
(e) Assignment and Assumption Agreements duly executed by
Purchaser.
(f) Purchaser shall deliver, or cause to be delivered, such
other instruments, documents or information that the Corporation
reasonably requests in connection herewith and the transactions
contemplated hereby, in form and substance reasonably satisfactory to
the Corporation.
(g) Purchaser and SCI shall execute and deliver a mutual release
in the form of Exhibit Q which releases any and all claims (other than
those pursuant to the Transaction Documents) held or to be held by
Purchaser and SCI against the Indemnitors, Curley, Bill Busby, Lynn Hunt
and Lyco and their respective successors, assigns, officers, directors,
employees and agents.
ARTICLE 7. - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time prior to the Closing Date by the mutual written
consent of all of the parties;
<PAGE> 48
(b) by Purchaser at any time in the event of a breach or default
by the Indemnitors or any one of them in the observance or in the timely
performance of any of their obligations or representations and
warranties hereunder which is not waived by Purchaser and which remains
uncured upon the earlier to occur of (i) fifteen (15) days following
delivery of written notice of such breach or default or (ii) the Closing
Date;
(c) by the Corporation at any time in the event of a breach or
default by Purchaser in the observance or in the timely performance of
any of its obligations or representations and warranties hereunder which
is not waived by the Corporation and remains uncured upon the earlier to
occur of (i) fifteen (15) days following delivery of written notice of
such breach or default or (ii) the Closing Date;
(d) by Purchaser if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if Purchaser is not on said date
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(e) by Seller if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if the Seller on said date is not
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(f) by Purchaser if any of the conditions precedent to
obligations of Purchaser to consummate the transactions provided for
herein shall have become impossible to satisfy (a wilful material breach
of this Agreement by Seller shall be deemed to be one determination that
such conditions are impossible to satisfy for purposes of this
paragraph); or
(g) by Seller if any of the conditions precedent to obligations
of Seller to consummate of the transactions provided for herein shall
have become impossible to satisfy (a wilful material breach of this
Agreement by Purchaser shall be deemed to be one determination that such
conditions are impossible to satisfy for purposes of this paragraph); or
No termination under this Section 7.1 shall be effective unless and
until the terminating party gives written notice of such termination to the
other party. Notwithstanding the foregoing, termination of this Agreement shall
not relieve any party from its liability for the breach hereunder (subject to
all the limitations on liability set forth herein), prior to termination, of its
covenants or agreements or any of its representations or warranties being untrue
prior to termination.
7.2. Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty. No modification or amendment of
this Agreement shall be valid and binding unless it be in writing and signed by
all the parties hereto.
<PAGE> 49
ARTICLE 8. - MISCELLANEOUS
8.1. Expenses. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
It is specifically understood and agreed that all fees for legal services
rendered by legal counsel for the Corporation, the Subsidiaries, Curley, the
stockholders of the Corporation and Seller and the partners of Super Saver shall
be paid or accrued prior to the Closing Date by the Corporation. The Corporation
shall pay Purchaser $25,200 annually plus reasonable travel expenses incurred in
connection with, and in exchange for, the consulting services of Bill Schubert
for twenty-four hours per week for as long as Mr. Schubert is employed by
Purchaser and the Corporation wishes to avail itself of his services.
8.2. Notices. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telex or telecopy or delivered or mailed by certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
If to the Seller Lloyd Curley
or the Indemnitors: StarTime Cinema, Inc.
109 North Oregon
Suite 1000
El Paso, Texas 79901
Telecopy: 915.542.2945
With a copy to Timothy R. Gideon
Counsel to the 1010 MoPac Circle Indemnitors:
Suite 200
Austin, Texas 78746
Telecopy: 512.347.0394
If to Curley: Lloyd Curley
5712 Mira Sierra
El Paso, Texas 79912
Telecopy: 915.585.9571
With a copy to C. Michael Ginnings
Counsel for Curley: 303 Texas Avenue
Suite 902
El Paso, Texas 79901
Telecopy: 915.532.7073
<PAGE> 50
If to Purchaser: Thomas J. Owens
President
Silver Cinemas, Inc.
4004 Beltline Road
205, LB 18
Dallas, Texas 75244
Telecopy: 972.503.9013
With a copy to Greg R. Samuel, Esq.
Counsel for Purchaser: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Telecopy: 214.651.5940
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section 8.2, said notice shall be conclusively
deemed given at the time of such delivery. If notice is given by mail in
accordance with the provisions of this Section 8.2, such notice shall be
conclusively deemed given upon the third business day following deposit thereof
in the United States mail. If notice is given by telex or telecopy in accordance
with the provisions of this Section 8.2, such notice shall be conclusively
deemed given upon receipt with a confirming fax response.
8.3. Entire Agreement. This Agreement, together with the Schedule and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof except for Section 8 of that certain Term Sheet among
Purchaser, the Trust, Curley, the Corporation, Lyco, Super Saver, Bill Busby and
Lynn Hunt dated as of July 31, 1997, the Term Sheet Escrow Agreement and the
other Transaction Documents. Except as provided in the preceding sentence, no
understanding, promise, inducement, statement of intention, representation,
warranty, covenant or condition, written or oral, express or implied, whether by
statute or otherwise, has been made by any party hereto which is not embodied in
this Agreement, or in the Schedule or exhibits hereto or the written statements,
certificates, or other documents delivered pursuant hereto or in connection with
the transactions contemplated hereby, and no party hereto shall be bound by or
liable for any alleged understanding, promise, inducement, statement,
representation, warranty, covenant or condition not so set forth.
<PAGE> 51
8.4. Survival of Representations. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representations, warranties, agreements and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto. The sole effect of the survival of such representations and
warranties shall be to support a claim for indemnity under Sections 4.1.12 or
4.2.4 for untrue representations or breach of warranty, subject to the
limitations set forth in Sections 4.1.12 and 4.2.4.
8.5. Incorporated by Reference. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
8.6. Number and Gender of Words. When the context so requires in this
Agreement, words of any gender shall include either or both of the other genders
and the singular number shall include the plural.
8.7. Specific Performance. The Indemnitors acknowledge that a breach of
this Agreement by the Indemnitors will cause irreparable harm to Purchaser for
which there may be no adequate remedy at law, and the Indemnitors agree that
Purchaser shall be entitled, in addition to its other remedies specifically
described in this Agreement, to specific performance by the Indemnitors of this
Agreement.
8.8. Remedies Exclusive. The remedies provided in this Agreement are the
sole and exclusive remedies available to Purchaser and the Indemnitors arising
out of or in any way connected with this Agreement.
8.9. Execution of Additional Documents. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
8.10. Finders' and Related Fees. Each of the parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
8.11. Titles. The titles of the articles, sections and subsections of
this Agreement are for convenience of reference only and shall not be considered
a part of or affect the construction or
<PAGE> 52
interpretation of any provisions of this Agreement. References to "Sections"
herein are references to sections of this Agreement. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
8.12. No Third Party Beneficiary, Etc. There shall be no third party
beneficiary of this Agreement, other than as provided in Sections 4.1.12 and
4.2.4. Neither the availability of, nor any limit on, any remedy hereunder shall
limit the remedies of any party hereto against third parties.
8.13. Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.14. Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns. This Agreement,
and the rights and obligations created hereunder, may not be transferred or
assigned by the Indemnitors without the prior consent of Purchaser or by
Purchaser without the prior consent of the Corporation except that Purchaser may
assign its rights under this Agreement to a wholly-owned subsidiary; however, no
assignment shall serve to relieve or release the assigning party from liability
under this Agreement. Notwithstanding anything to the contrary set forth herein,
nothing shall prohibit Purchaser granting a Lien at or after Closing to its
lender in and to Purchaser's rights pursuant to this Agreement and such lender
shall have the right to exercise any and all of Purchaser's rights and remedies
hereunder.
8.15. 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. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
8.16. Governing Law; Attorneys' Fees. This Agreement and any related
agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 8.17, each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court for the Southern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Harris County, for the purposes of any action arising
out of this Agreement or any related agreements, or the subject matter hereof or
thereof, brought by any other party.
Subject to Section 8.17, to the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise in any such action, any claim
<PAGE> 53
(i) that it is not subject to the jurisdiction of the above-named courts, (ii)
that the action is brought in an inconvenient forum, (iii) that it is immune
from any legal process with respect to itself or its property, (iv) that the
venue of the suit, action or proceeding is improper or (v) that this Agreement
or any related agreement, or the subject matter hereof or thereof, may not be
enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any related agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
8.17. Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection
with this Agreement (including without limitation this Article VIII) or
any related agreements (except the Noncompetition Agreements) as to the
construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, or breach, shall be submitted
to arbitration pursuant to the following procedures:
(i) Except as modified hereby, the arbitration shall be
governed by the Commercial Arbitration Rules the AAA including
the Supplementary Procedures for Large Complex Disputes. After a
dispute or controversy arises, any party may, in a written
notice delivered to the other party, demand such arbitration.
Such notice shall designate the name of the arbitrator (who
shall be an impartial person who is an attorney with at least 15
years of experience in business law) appointed by such party
demanding arbitration, together with a statement of the matter
in controversy in reasonable detail.
(ii) Within 30 days after receipt of such demand, the
other party shall, in a written notice delivered to the other
party, name such party's arbitrator (who shall be an impartial
person who is an attorney with at least 15 years of experience
in business law). If such party fails to name an arbitrator,
then the second arbitrator shall be named by the AAA. The two
arbitrators so selected shall name a third arbitrator (who shall
be an impartial person who is an attorney with at least 15 years
of experience in business law) within 30 days, or in lieu of
such agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA.
If any arbitrator appointed hereunder shall die, resign, refuse,
or become unable to act before an arbitration decision is
rendered, then the vacancy shall be filled by the methods set
forth in this Section for the original appointment of such
arbitrator.
(iii) Each party shall bear its own arbitration costs
and expenses. The arbitration hearing shall be held in Houston,
Texas at a location designated by a majority of the arbitrators.
The substantive laws of the State of Texas (excluding conflict
of laws provisions) and the Federal Arbitration Act shall apply.
(iv) The arbitration hearing shall be concluded within
ten (10) days unless otherwise ordered by the arbitrators and
the written award thereon shall be made within fifteen (15) days
after the close of submission of evidence. An award rendered by
a majority of the arbitrators appointed pursuant hereto shall be
final and binding on all parties to the proceeding, shall
resolve the question of costs of the arbitrators, legal
<PAGE> 54
fees and expenses and all related matters, and judgment on such
award may be entered and enforced by any party in any court of
competent jurisdiction.
(v) Except as set forth in Section 8.17(b), the parties
stipulate that the provisions of this Section shall be a
complete defense to any suit, action or proceeding instituted in
any federal, state or local court or before any administrative
tribunal with respect to any controversy or dispute arising out
of this Agreement or any related agreements. The arbitration
provisions hereof shall, with respect to such controversy or
dispute, survive the termination or expiration of this Agreement
or any related agreements.
Except as required by law, the parties hereto and the
arbitrators may not disclose the existence or results of any arbitration
hereunder without the prior written consent of the other party; nor will
any party hereto disclose to any third party any confidential
information disclosed by any other party hereto in the course of an
arbitration hereunder without the prior written consent of such other
party.
(b) Emergency Relief. Notwithstanding anything in this Section
8.17 to the contrary and subject to the provisions of Section 8.16, any
party may seek from a court any provisional remedy or injunctive relief
that may be necessary to protect any rights or property of such party
pending the establishment of the arbitral tribunal or its determination
of the merits of the controversy. The prevailing party in any proceeding
based upon this Agreement shall be entitled to reasonable attorney's
fees and arbitral and court costs, in addition to any other recoveries
allowed by law.
<PAGE> 55
8.18. Confidentiality. Commencing on the date of this Agreement and
until: (i) the end of the five (5) year period following termination of this
Agreement pursuant to Article VII or (ii) Closing, Purchaser and the Indemnitors
will maintain in confidence, and will cause their respective directors,
officers, employees, agents, and advisors (the "Representatives") to maintain in
confidence, any written, oral, electronic, or other information of every kind
(including all analyses, compilations, forecasts, studies or other documents
prepared by a receiving party that contain or in any way reflect confidential
information) that has been or may be furnished by either party or its
representatives obtained in confidence (the "Confidential Information") from
another party to this agreement (the "Disclosing Party"), and will not use, and
will cause their respective Representatives not to use, any such information
except for the purpose of this Agreement or in connection with any legal
proceedings between any of the parties, unless (a) such information is already
known to such party and such party is not bound by a duty of confidentiality or
such information becomes publicly available through no fault of such party, (b)
the use of such information is necessary in making any release, report, filing
(including filings with the SEC) or obtaining any consent or approval required
for the consummation of the transactions contemplated by the Agreement, (c) the
furnishing or use of such information is required by any legal proceedings or
(d) the furnishing or use of such information is required in connection with a
public offering or private placement of securities. Each party shall only reveal
Confidential Information of the Disclosing Party to the receiving party's
Representatives (a) who reasonably need to have the Confidential Information for
purposes of evaluating the transactions contemplated hereby and (b) who are
aware of the confidential nature of the Confidential Information and of this
Section 8.18. Each party shall cause its Representatives to observe the
restrictions of this Section 8.18 and shall be responsible for any breach of
this Section 8.18 by its Representatives. If this Agreement is terminated for
any reason, each party must promptly return to the Disclosing Party all
Confidential Information obtained from the Disclosing Party that is by nature
returnable, and each receiving party will thereafter continue to comply with its
obligations under this Section 8.18.
8.19. Bulk Transfer. The parties hereby waive the applicable provisions,
if any, of the Uniform Commercial Code relating to Bulk Transfers in the states
in which the Theaters are located, and the Indemnitors hereby indemnify
Purchaser from the Seller's failure to comply with such provisions with respect
to the Seller.
<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
STARTIME PROPERTIES, INC.
By:
Name:
Title:
STARTIME CINEMA, INC.
By:
Name:
Title:
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.
By:
Name:
Title:
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST UNDER
DEED DATED MAY 14, 1994, FOR THE BENEFIT
OF STARTIME CINEMA, INC.
By its Trustee:
Lloyd Curley
LLOYD CURLEY
SILVER CINEMAS, INC.
By:
Name:
Title:
<PAGE> 57
SCHEDULE
Part 1 States of Business Qualification
Part 2 Subsidiaries
Part 3 Effects of Execution of Agreement
Part 4 Liabilities Not Reflected on Balance Sheet
Part 5 Changes
Part 6 Taxes
Part 7 Disputes and Litigation
Part 8 Insurance
Part 9(a) Title to Properties
Part 9(b) Liens & Financing Statements
Part 10(a) Real Property
Part 10(b) Violations
Part 11(a) Equipment & Equipment Leases
Part 11(b) List of Property in need of repair
Part 12(a) Intangible Personal Property
Part 12(b) Exceptions to Exclusive Ownership
Part 12(c) Adverse Claims
Part 13 Agreements
Part 14(a) Indebtedness
Part 14(b) Guarantees
Part 15 Debts to and from Related Parties
Part 16 Employee Benefit Plans
Part 17 Employee Agreements
Part 18 Consents Required
Part 19 Environmental Matters
Part 20 Changes in Financial Condition
Part 21 Prepayment Penalties and Charges on Loan
Agreements
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
ENCORE ENTERTAINMENT, INC.
Encore Entertainment, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
(the "Corporation") DOES HEREBY CERTIFY:
FIRST: That the Restated Certificate of Incorporation of the
Corporation is hereby amended by striking out Article "FIRST" thereof and by
substituting in lieu of said Article the following new Article:
"FIRST: The name of the corporation is Silver Cinemas
International, Inc. (hereinafter called the
"Corporation")."
SECOND: The amendment of the Restated Certificate of
Incorporation herein certified has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this
certificate to be signed by Steven L. Holmes, its Chief Executive
Officer, this 11th day of October, 1996.
-----------------------------
Steven L. Holmes
Chief Executive Officer
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
ENCORE ENTERTAINMENT, INC.
It is hereby certified that:
1. The present name of the corporation (hereinafter called the
"Corporation") is Encore Entertainment, Inc., which is the name for which an
amendment to the certificate of incorporation was filed on May 15, 1996. The
name under which the Corporation was originally incorporated was Celebration
Cinemas, Inc. and the date of filing of the original certificate of
incorporation of the Corporation with the Secretary of State of the State of
Delaware is May 10, 1996.
2. The Corporation has not received any payment for any of its stock.
3. The certificate of incorporation and the amendment to the certificate
of incorporation of the Corporation (the "Certificate of Incorporation") are
hereby amended and restated. The amendment and the restatement herein certified
have been duly adopted by the sole incorporator in the manner and by the vote
prescribed by Section 241 and Section 245 of the General Corporation Law of the
State of Delaware, no directors having been named in the Certificate of
Incorporation and no directors having been elected.
4. The Certificate of Incorporation of the Corporation, as amended and
restated herein, shall at the effective time of this Restated Certificate of
Incorporation, read as follows:
FIRST: The name of the corporation is Encore Entertainment, Inc.
(hereinafter called the "Corporation").
SECOND: The address, including street, number, city, county and
zip code, of the registered office of the Corporation in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle; and the name of
the registered agent of the Corporation in the State of Delaware at such address
is The Prentice-Hall Corporation System, Inc.
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.
<PAGE> 3
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Seven Hundred Thousand
(700,000), consisting of Two Hundred Thousand (200,000) shares of Common Stock,
par value $.01 per share, and Five Hundred Thousand (500,000) shares of
Preferred Stock, par value $.01 per share.
The Preferred Stock may be divided into such number of series as
the Board of Directors may determine. Other than with respect to the Series A
Preferred Stock referenced below, the Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions
(including without limitation voting rights) granted to and imposed upon the
Preferred Stock or any series thereof with respect to any wholly unissued class
or series of Preferred Stock, and to fix the number of shares of any series of
Preferred Stock and the designation of any such series of Preferred Stock. The
Board of Directors, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number of
any series then outstanding) the number of shares of any series subsequent to
the issue of shares of that series.
1. Designation. A series of the Preferred Stock of the
Corporation is hereby designated as Series A Preferred Stock (hereinafter called
the "Series A Preferred Stock") consisting initially of Four Hundred Thousand
(400,000) shares. Shares of the Series A Preferred Stock shall rank prior to the
Corporation's Common Stock, par value $.01 per share, with respect to the
payment of dividends and upon liquidation, dissolution, winding-up or otherwise.
Unless specifically designated as junior to the Series A Preferred Stock with
respect to the payment of dividends or upon liquidation, dissolution, winding-up
or otherwise, all other series of Preferred Stock and other classes of preferred
stock of the Corporation shall rank on parity with the Series A Preferred Stock
with respect thereto.
2. Dividends.
(a) Each holder of shares of Series A Preferred Stock shall
be entitled to receive dividends on each such share at the rate of six percent
(6%) per annum (computed on the basis of $100.00 per share), when, as and if
declared by the Board of Directors of the Corporation, out of funds legally
available for the payment of dividends, in respect of the period from and
including the date of the original issuance of each such share of Series A
Preferred Stock with respect to each such share to and
2
<PAGE> 4
including June 30, 1996 (the "Initial Dividend Period"), and for each quarterly
dividend period thereafter (a "Quarterly Dividend Period"), which Quarterly
Dividend Periods shall Commence on July 1, October 1, January 1, and April 1 in
each year and shall end on and include the day immediately preceding the first
day of the next Quarterly Dividend Period. Dividends on the shares of Series A
Preferred Stock shall be payable on June 30, September 30, December 31, and
March 31 of each year (a "Dividend Payment Date"), commencing June 30, 1996.
Each such dividend shall be paid to the holders of record of the Series A
Preferred Stock as they shall appear on the stock register of the Corporation on
such record date, not exceeding 45 days nor less than 10 days preceding such
Dividend Payment Date, as shall be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof.
If, on any Dividend Payment Date, the holders of the Series A
Preferred Stock shall not have received the full dividends provided for in this
Section 2 in cash then such dividends shall cumulate, whether or not earned or
declared, with additional dividends thereon, compounded quarterly, at the
dividend rate of six percent (6%) per annum, for each succeeding full Quarterly
Dividend Period during which such dividends shall remain unpaid.
(b) The amount of any dividends accrued on any share of the
Series A Preferred Stock on any Dividend Payment Date shall be deemed to be the
amount of any unpaid dividends accumulated thereon, to and including such
Dividend Payment Date, whether or not earned or declared. The amount of
dividends accrued on any share of the Series A Preferred Stock on any dated
other then a Dividend Payment Date shall be deemed to be the sum of (i) the
amount of any unpaid dividends accumulated, thereon to and including the last
preceding Dividend Payment Date, whether or not earned or declared, (ii) an
amount determined by multiplying (a) $100.00 by (b) the result (the
"Multiplier") of multiplying one and one-half percent (1.5%) per annum by a
fraction, the numerator of which shall be the number of days from the last
preceding Dividend Payment Date, to and including the date on which such
calculation is made, and the denominator of which shall be the full number of
days in such Quarterly Dividend Period, and (iii) an amount determined by
multiplying the amount set forth in clause (i) above by the Multiplier.
(c) Declaration Prior to Redemption or Liquidation. Immediately
prior to authorizing or making any distribution in redemption or liquidation
with respect to the Series A Preferred Stock (other than a purchase or
acquisition of Series A Preferred Stock pursuant to a purchase or exchange offer
3
<PAGE> 5
made on the same terms to holders of all outstanding Series A Preferred Stock),
the Board of Directors shall, to the extent of any funds legally available
therefor, declare a dividend in cash on the Series A Preferred Stock payable on
the distribution date in the amount equal to any accrued and unpaid dividends on
the Series A Preferred Stock as of such date.
3. Redemption.
(a) Optional Redemption. The Series A Preferred Stock may be
redeemed, in whole or in part, at any time at the election of the Corporation by
resolution of its Board of Directors, on notice as set forth in Section 3(c),
below, at the redemption price of $100.00 per share of Series A Preferred Stock,
plus accrued and unpaid dividends to the redemption date (the "Redemption
Price").
In the event that any rate less than all of the Series A
Preferred Stock outstanding is to be redeemed, the shares to be redeemed will be
selected by lot or pro rata, except that if the redemption is pro rata, the
Corporation may redeem all shares of Series A Preferred Stock held by all
holders of 100 or fewer shares as may be specified by the Corporation.
Notwithstanding anything to the contrary, the Corporation may not redeem less
than all of the Series A Preferred Stock outstanding unless all accrued and
unpaid dividends have been paid on all then outstanding shares of Series A
Preferred Stock.
(b) Notice of Redemption. Notice of any redemption pursuant to
this Section 3 shall be mailed, postage prepaid, at least 15 days but not more
than 60 days prior to said redemption date to each holder of record of the
Series A Preferred Stock to be redeemed at its address as the same shall appear
on the stock register of the Corporation. Each such notice shall state: (i) the
date fixed for such redemption, (ii) the place or places where certificates for
such shares of Series A Preferred Stock are to be surrendered for payment, (iii)
the Redemption Price, and (iv) that unless the Corporation defaults in making
the redemption payment, dividends on the shares of Series A Preferred Stock
called for redemption shall cease to accrue on and after the Date of Redemption.
If less than all the shares of the Series A Preferred Stock owned by such holder
are then to be redeemed, such notice shall also specify the number of shares
thereof which are to be redeemed and the number or the certificates representing
such shares.
If such notice of redemption shall have been so mailed and if
prior to the date of redemption specified in such notice all said funds
necessary for such redemption shall have
4
<PAGE> 6
been irrevocably deposited in trust, for the account of the holders of the
shares of the Series A Preferred Stock to be redeemed (and so as to be and
continue to be available therefor), with a bank or trust company named in such
notice doing business in Los Angeles, California and having capital surplus and
undivided profits of at least $50,000,000, thereupon, and without awaiting the
redemption date, all shares of the Series A Preferred Stock with respect to
which such notice shall have been so mailed and such deposit shall have been so
make, shall, notwithstanding that any certificate for shares of Series A
Preferred Stock shall not have been surrendered for cancellation, be deemed to
be no longer outstanding and all rights with respect to such shares of the
Series A Preferred Stock shall forthwith upon such deposit in trust cease and
terminate, except for the right of the holders thereof on or after the
redemption date to receive from such deposit the amount payable upon the
redemption, but without interest. In case the holders of shares of the Series A
Preferred Stock which shall have been called for redemption shall not within two
years (or any longer period if required by law) after the redemption date claim
any amount so deposited in trust for the redemption of such shares, such bank or
trust company shall, if permitted by applicable law, pay over to the Corporation
any such unclaimed amount so deposited with it, and shall thereupon be relieved
of all responsibility in respect thereof, and thereafter the holders of such
shares shall, subject to applicable escheat laws, look only to the Corporation
for payment of the redemption price thereof, but without interest.
(c) Status of Shares. Shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired for value by the Corporation shall,
after such acquisition, have the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Corporation at any time as shares of
any series of Preferred Stock, other than shares of Series A Preferred Stock.
4. Priority.
(a) Priority as to Dividends. Subject to section 4(b), no
dividends (other than dividends payable in Common Stock or in another stock
ranking, with respect to the payment of dividends and upon liquidation,
dissolution, winding-up or otherwise, junior to, or on a parity with, the Series
A Preferred Stock) shall be declared or paid or set apart for payment on the
Preferred Stock of any series, or stock of any other class which, in either
case, ranks, as to dividends and upon liquidation, dissolution, winding up or
otherwise, (x) junior to the Series A Preferred Stock ("Junior Stock") or (y) on
a parity with the
5
<PAGE> 7
Series A Preferred Stock ("Parity Stock") for any period unless at the time of
such declaration or payment or setting apart for payment (i) full cumulative
dividends have been or contemporaneously are declared and paid (or declared and
a sum sufficient for the payment thereof set apart for such payment) on the
Series A Preferred Stock for all quarterly Dividend Periods terminating on or
prior to the date of payment of such dividends on Junior Stock or Parity Stock,
(ii) the Corporation shall not be in default with respect to any obligation to
redeem or return shares of Series A Preferred Stock, and (iii) an amount equal
to the dividends accrued on the Series A Preferred Stock from the last Dividend
Payment Date to the Date of Payment of such dividends on Junior Stock or Parity
has been declared and set apart in cash for payment on the Series A Preferred
Stock.
(b) Notwithstanding anything to the contrary in Section
4(a) hereof, cumulative dividends on any parity Stock may be paid if cumulative
dividends shall be declared upon shares of Series A Preferred Stock and such
Parity Stock on a pro rate basis so that in all cases the amount of dividends
declared per share on the Series A Preferred Stock and such Parity Stock shall
bear to each other the same ratio that accrued dividends per share on the shares
of Series A Preferred Stock and on such Parity Stock bear to each other.
(c) Priority on Redemption. The Corporation shall not,
directly or indirectly, redeem or purchase or otherwise acquire for value any
Junior Stock or Parity Stock unless, at the time of making such redemption,
purchase or other acquisition the Corporation shall have redeemed, or shall
contemporaneously redeem, all of the then outstanding shares of Series A
Preferred Stock at the applicable redemption price (or shall have irrevocably
committed to redeem all of the then outstanding shares of Series A Preferred
Stock and have set aside a sum sufficient for the payment thereof at the
applicable Redemption Price on the date of such subsequent redemption).
5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of shares of the Series A Preferred Stock shall be
entitled to receive for each share of Series A Preferred Stock then held, out of
the assets of the Corporation, whether such assets are capital or surplus and
whether or not any dividends as such are declared, the applicable Redemption
Price on the date fixed for distribution, and no more, before any distribution
6
<PAGE> 8
shall be made to the holders of the Common Stock or Junior Stock with respect to
the distribution of assets.
If, upon any such liquidation, dissolution or other
winding up of the affairs of the Corporation, the assets of the Corporation
distributable among the holders of all outstanding shares of the Series A
Preferred Stock and of any Parity Stock shall be insufficient to permit the
payment in full to such holders of the preferential amounts to which they are
entitled, then the entire assets of the Corporation remaining after the payment
or provision for payment of the debts and other liabilities of the Corporation
shall be distributed among the holders of the Series A Preferred Stock and of
any Parity Stock ratably in proportion to the full amount so to which they would
otherwise be respectively entitled.
(b) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
stating a payment date and the place where the distributive amounts shall be
payable, shall be given by mail, postage prepaid, not less than 30 days prior to
the payment date stated therein, to the holders of record of the Series A
Preferred Stock at their respective addresses as the same shall appear on the
hooks of the Corporation.
(c) No payment on account of such liquidation, dissolution
or winding up of the affairs of the Corporation shall be made to the holders of
any Parity Stock, unless there shall likewise be paid at the same time to the
holders of the Series A Preferred Stock like proportionate distributive amounts,
ratably, in proportion to the full distributive amounts to which they and the
holders of such Parity Stock are respectively entitled with respect to such
preferential distribution.
6. Voting Rights.
(a) General Voting Rights. Except as otherwise required by
law, the holders of the Series A Preferred Stock shall be entitled to vote along
with the Common Stock (and not as a separate class) on all matters and shall be
entitled to one vote per share of Series A Preferred Stock.
FIFTH: The number of directors which shall constitute the
whole Board of Directors shall be fixed by, or in the manner provided in, the
Bylaws of the Corporation.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
repeal, alter, amend and rescind the Bylaws
7
<PAGE> 9
of the Corporation.
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article EIGHTH.
NINTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware (or any
successor section), as the same may be amended and supplemented, indemnify any
and all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities, or other matters referred
to in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified 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, and shall 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 a
person.
TENTH: No director shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director; provided that this Article TENTH shall not eliminate or limit the
liability of a director (i) for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the General Corporation law of the State of Delaware,
or (iv) for any transaction from which such director derives an improper
personal benefit. If the General Corporation Law of the State of Delaware is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation law of the State of Delaware as so amended. No amendment
to or repeal of this Article TENTH shall adversely affect any right or
protection of any director of the Corporation existing at the time of such
8
<PAGE> 10
amendment or repeal for or with respect to acts or omissions of such director
prior to such amendment or repeal.
ELEVENTH: Election of directors at an annual or special meeting
of stockholders need to be by written ballot unless the Bylaws of the
Corporation shall so provide.
9
<PAGE> 11
TWELFTH: The name and the mailing address of the incorporator
are as follows:
NAME and MAILING ADDRESS:
Ilona F. Bush
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Dated: May 17, 1996
-----------------------------
Ilona F. Bush
Incorporator
10
<PAGE> 1
EXHIBIT 3.2
MINUTES OF ACTION OF
THE BOARD OF DIRECTORS OF
SILVER CINEMAS INTERNATIONAL, INC.
TAKEN WITHOUT A MEETING
BY WRITTEN CONSENT
The following action is taken by the Board of Directors of Silver
Cinemas International, Inc., a Delaware corporation (the "Corporation"), by
written consent without a meeting, as of March 10, 1998, pursuant to Section
141(f) of the Delaware General Corporation Law permitting such action to be
taken.
Amendment of Bylaws. The following resolutions authorizing and
approving the amendment of the Bylaws of the Corporation (the "Bylaws") are
hereby adopted:
WHEREAS, pursuant to Article 6 of the Certificate of
Incorporation of the Corporation and Article IX, Section 1 of the
Bylaws of the Corporation, the Board of Directors has authority to
amend the Bylaws of the Corporation; and
WHEREAS, it is in the best interest of the Corporation to amend
the Bylaws of the Corporation to increase the number of directors.
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 1 of
the Bylaws of the Corporation be, and it hereby is, amended to read in
its entirety as follows:
"Section 1. THE NUMBER OF DIRECTORS. The number of directors
which shall constitute the whole Board shall be eight (8). The
directors need not be stockholders. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2
of this Article, and each director elected shall hold office until his
successor is elected and qualified; provided, however, that unless
otherwise restricted by the Certificate of Incorporation or by law, any
director or the entire Board of Directors may be removed, either with
or without cause, from the Board of Directors at any meeting of
stockholders by a majority of the stock represented and entitled to
vote thereat."
<PAGE> 2
BYLAWS
OF
ENCORE ENTERTAINMENT, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES...................................................... 1
Section 1. REGISTERED OFFICES........................................ 1
Section 2. OTHER OFFICES............................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................... 1
Section 1. PLACE OF MEETINGS......................................... 1
Section 2. ANNUAL MEETING OF STOCKHOLDERS............................ 1
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE
THEREOF................................................... 2
Section 4. VOTING.................................................... 2
Section 5. PROXIES................................................... 3
Section 6. SPECIAL MEETINGS.......................................... 3
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS.......................... 4
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER
LIST...................................................... 4
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING......................................... 5
ARTICLE III - DIRECTORS.................................................. 6
Section 1. THE NUMBER OF DIRECTORS................................... 6
Section 2. VACANCIES................................................. 6
Section 3. POWERS.................................................... 7
Section 4. PLACE OF DIRECTORS' MEETINGS.............................. 7
Section 5. REGULAR MEETINGS.......................................... 8
Section 6. SPECIAL MEETINGS.......................................... 8
Section 7. QUORUM.................................................... 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8. ACTION WITHOUT MEETING.................................... 9
Section 9. TELEPHONIC MEETINGS....................................... 9
Section 10. COMMITTEES OF DIRECTORS................................... 9
Section 11. MINUTES OF COMMITTEE MEETINGS............................. 10
Section 12. COMPENSATION OF DIRECTORS................................. 10
ARTICLE IV - OFFICERS..................................................... 11
Section 1. OFFICERS.................................................. 11
Section 2. ELECTION OF OFFICERS...................................... 12
Section 3. SUBORDINATE OFFICERS...................................... 12
Section 4. COMPENSATION OF OFFICERS.................................. 12
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES..................... 12
Section 6. CHAIRMAN OF THE BOARD..................................... 12
Section 7. CHIEF EXECUTIVE OFFICER................................... 13
Section 8. PRESIDENT................................................. 13
Section 9. VICE PRESIDENTS........................................... 13
Section 10. SECRETARY................................................. 14
Section 11. ASSISTANT SECRETARY....................................... 14
Section 12. CHIEF FINANCIAL OFFICER................................... 15
Section 13. TREASURER................................................. 15
Section 14. ASSISTANT TREASURER....................................... 16
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS..................... 16
ARTICLE VI - INDEMNIFICATION OF EMPLOYEES AND AGENTS...................... 21
ARTICLE VII - CERTIFICATES OF STOCK....................................... 22
Section 1. CERTIFICATES............................................... 22
Section 2. SIGNATURES ON CERTIFICATES................................. 22
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES,
PRIVILEGES................................................. 22
Section 4. LOST CERTIFICATES.......................................... 23
Section 5. TRANSFERS OF STOCK......................................... 23
Section 6. FIXED RECORD DATE.......................................... 24
Section 7. REGISTERED STOCKHOLDERS.................................... 24
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL PROVISIONS........................................ 25
Section 1. DIVIDENDS................................................. 25
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES................... 25
Section 3. CHECKS.................................................... 25
Section 4. FISCAL YEAR............................................... 26
Section 5. CORPORATE SEAL............................................ 26
Section 6. MANNER OF GIVING NOTICE................................... 26
Section 7. WAIVER OF NOTICE.......................................... 26
Section 8. ANNUAL STATEMENT.......................................... 27
ARTICLE IX - AMENDMENTS.................................................. 27
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.................... 27
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
ENCORE ENTERTAINMENT, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICES. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
<PAGE> 6
Section 2. OTHER OFFICES. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held
at any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority
of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less
2
<PAGE> 7
than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. 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 thereat.
Section 4. VOTING. When a quorum is present at any meeting, in all
matters other than the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes, or the Certificate of
Incorporation, or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors 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 5. PROXIES. At each meeting of the stockholders, each
3
<PAGE> 8
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders
are required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which notice shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the
4
<PAGE> 9
meeting is called. The written notice of any meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the 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 8. MAINTENANCE AND INSPECTION OF 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 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
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
5
<PAGE> 10
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
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 such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent 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 by delivery to its registered office
in Delaware, its principal place of business, or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. 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 9 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 Delaware, its principal place of business or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail,
6
<PAGE> 11
return receipt requested. 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 III
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS. The number of directors which
shall constitute the whole Board shall be seven (7). The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented and entitled to
vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by reason
of death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall
7
<PAGE> 12
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
8
<PAGE> 13
Section 3. POWERS. The property and business of the corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold
their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
Section 7. QUORUM. At all meetings of the Board of Directors a
9
<PAGE> 14
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. 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. If only one director is authorized, such sole director shall
constitute a quorum.
10
<PAGE> 15
Section 8. ACTION WITHOUT MEETING. 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 or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any 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 such participation in a
meeting shall constitute presence in person at such meeting.
11
<PAGE> 16
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board 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, to the extent 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; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
12
<PAGE> 17
authorize the issuance of stock.
13
<PAGE> 18
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
14
<PAGE> 19
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief Executive
Officer, a Chief Financial Officer, a Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3
hereof. In the event there are two or more Vice Presidents, then one or more may
be designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
15
<PAGE> 20
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers
and agents of the corporation shall be fixed by the Board of Directors.
16
<PAGE> 21
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of
the corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
an officer be elected, shall, if present, preside at all meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no Chief Executive Officer, the Chairman of the Board
shall in addition be the Chief Executive Officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
17
<PAGE> 22
Section 7. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall, subject
to the control of the Board of Directors, have general supervision, direction
and control of the business and the officers of the corporation. He shall
preside at all meetings of the shareholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall have the general powers and duties of management usually vested in the
office of the Chief Executive Officer of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
bylaws.
Section 8. PRESIDENT. In the absence or disability of the Chief
Executive Officer, the President, if any, shall perform all the duties of the
Chief Executive Officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer. The President
shall have such other powers and perform such other duties as from time to time
may be prescribed for him by the Board of Directors or the bylaws, the Chief
Executive Officer or the Chairman of the Board if there is no Chief Executive
Officer.
18
<PAGE> 23
Section 9. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 10. SECRETARY. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 11. ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of
19
<PAGE> 24
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys, and other valuable effects in the name
and to the credit of the corporation, in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Chief Financial Officer and of the financial condition of the
corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 13. TREASURER. The Treasurer shall perform the duties and
20
<PAGE> 25
exercise the powers of the Treasurer as determined by the Board of Directors. If
required by the Board of Directors, he shall give the corporation a bond, in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
21
<PAGE> 26
Section 14. ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
22
<PAGE> 27
(a) The corporation shall indemnify to the maximum extent permitted
by law 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 or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer 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) The corporation shall indemnify to the maximum extent permitted
by law 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
23
<PAGE> 28
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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 such 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 of Delaware 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 such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director or officer of the corporation
shall be successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (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.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon
24
<PAGE> 29
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are 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. The corporation, acting through its Board of Directors or
otherwise, shall cause such determination to be made if so requested by any
person who is indemnifiable under this Article V.
(e) 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.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of 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
25
<PAGE> 30
another capacity while holding such office.
(g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer 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.
(h) For the purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall
26
<PAGE> 31
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director or officer of the corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and 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" as referred to in
this section.
(j) 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
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only if the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
ARTICLE VI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
27
<PAGE> 32
The corporation may indemnify every person who was or is a party or
is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was an employee or agent of the corporation or, while an employee
or agent of the corporation, is or was serving at the request of the corporation
as an employee or agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the extent permitted by applicable law.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer of the corporation, certifying the
number of shares represented by the certificate owned by such stockholder in the
corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of 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
28
<PAGE> 33
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
29
<PAGE> 34
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
30
<PAGE> 35
Section 4. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation 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 issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or
the transfer agent of the corporation, of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
31
<PAGE> 36
Section 6. FIXED RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or 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 shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. 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. 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 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.
32
<PAGE> 37
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
33
<PAGE> 38
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment
of any dividend there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
34
<PAGE> 39
Section 6. MANNER OF GIVING NOTICE. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.
35
<PAGE> 40
These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.
36
<PAGE> 41
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Encore
Entertainment, Inc., a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of said
corporation as duly adopted by the written consent of the Incorporator of said
corporation as of May 17, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 17th day
of May, 1996.
--------------------------------------------
Thomas J. Owens, Secretary
37
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
SILVER CINEMAS, INC.
1. The name of the corporation is:
SILVER CINEMAS, INC.
2. The address of its registered office in the State of Delaware
is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is one thousand (1,000), all of which shall be
Common Stock; and the par value of each share shall be one cent ($.0l).
5. The name and mailing address of the incorporator is:
Ilona F. Bush
LATHAM & WATKINS
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
6. 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.
<PAGE> 2
7. Election of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
8. No director of this corporation shall be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, herein declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 11th day of October, 1996.
---------------------------
Ilona F. Bush, Incorporator
2
<PAGE> 1
EXHIBIT 3.4
MINUTES OF ACTION OF
THE BOARD OF DIRECTORS OF
SILVER CINEMAS, INC.
TAKEN WITHOUT A MEETING
BY WRITTEN CONSENT
The following action is taken by the Board of Directors of Silver
Cinemas, Inc., a Delaware corporation (the "Corporation"), by written consent
without a meeting, as of March 10, 1998, pursuant to Section 141(f) of the
Delaware General Corporation Law permitting such action to be taken.
Amendment of Bylaws. The following resolutions authorizing and
approving the amendment of the Bylaws of the Corporation (the "Bylaws") are
hereby adopted:
WHEREAS, pursuant to Article 6 of the Certificate of
Incorporation of the Corporation and Article IX, Section 1 of the
Bylaws of the Corporation, the Board of Directors has authority to
amend the Bylaws of the Corporation; and
WHEREAS, it is in the best interest of the Corporation to
amend the Bylaws of the Corporation to increase the number of
directors.
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 1
of the Bylaws of the Corporation be, and it hereby is, amended to
read in its entirety as follows:
"Section 1. THE NUMBER OF DIRECTORS. The number of
directors which shall constitute the whole Board shall be eight (8).
The directors need not be stockholders. The directors shall be
elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified; provided,
however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of
the stock represented and entitled to vote thereat."
<PAGE> 2
BYLAWS
OF
SILVER CINEMAS, INC.
<PAGE> 3
BYLAWS
OF
SILVER CINEMAS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES..................................................................... 1
Section 1. REGISTERED OFFICES.................................................... 1
Section 2. OTHER OFFICES......................................................... 2
ARTICLE II - MEETINGS OF STOCKHOLDERS................................................... 2
Section 1. PLACE OF MEETINGS..................................................... 2
Section 2. ANNUAL MEETING OF STOCKHOLDERS........................................ 2
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE
THEREOF............................................................... 2
Section 4. VOTING................................................................ 3
Section 5. PROXIES............................................................... 3
Section 6. SPECIAL MEETINGS...................................................... 4
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS...................................... 4
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER
LIST.................................................................. 5
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING..................................................... 6
ARTICLE III - DIRECTORS................................................................. 7
Section 1. THE NUMBER OF DIRECTORS............................................... 7
Section 2. VACANCIES............................................................. 7
Section 3. POWERS................................................................ 9
Section 4. PLACE OF DIRECTORS' MEETINGS.......................................... 9
Section 5. REGULAR MEETINGS...................................................... 9
Section 6. SPECIAL MEETINGS...................................................... 9
Section 7. QUORUM................................................................ 9
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8. ACTION WITHOUT MEETING................................................ 11
Section 9. TELEPHONIC MEETINGS................................................... 11
Section 10. COMMITTEES OF DIRECTORS............................................... 12
Section 11. MINUTES OF COMMITTEE MEETINGS......................................... 13
Section 12. COMPENSATION OF DIRECTORS............................................. 13
ARTICLE IV - OFFICERS................................................................... 13
Section 1. OFFICERS.............................................................. 14
Section 2. ELECTION OF OFFICERS.................................................. 14
Section 3. SUBORDINATE OFFICERS.................................................. 15
Section 4. COMPENSATION OF OFFICERS.............................................. 15
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES................................. 16
Section 6. CHAIRMAN OF THE BOARD................................................. 16
Section 7. CHIEF EXECUTIVE OFFICER............................................... 17
Section 8. PRESIDENT............................................................. 17
Section 9. VICE PRESIDENTS....................................................... 18
Section 10. SECRETARY............................................................. 18
Section 11. ASSISTANT SECRETARY................................................... 18
Section 12. CHIEF FINANCIAL OFFICER............................................... 19
Section 13. TREASURER............................................................. 19
Section 14. ASSISTANT TREASURER................................................... 21
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS................................... 21
ARTICLE VI - INDEMNIFICATION OF EMPLOYEES AND AGENTS.................................... 26
ARTICLE VII - CERTIFICATES OF STOCK..................................................... 27
Section 1. CERTIFICATES.......................................................... 27
Section 2. SIGNATURES ON CERTIFICATES............................................ 27
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES,
PRIVILEGES............................................................ 28
Section 4. LOST CERTIFICATES..................................................... 29
Section 5. TRANSFERS OF STOCK.................................................... 29
Section 6. FIXED RECORD DATE..................................................... 30
Section 7. REGISTERED STOCKHOLDERS............................................... 31
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL PROVISIONS....................................................... 31
Section 1. DIVIDENDS............................................................. 31
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES............................... 32
Section 3. CHECKS................................................................ 32
Section 4. FISCAL YEAR........................................................... 32
Section 5. CORPORATE SEAL........................................................ 32
Section 6. MANNER OF GIVING NOTICE............................................... 33
Section 7. WAIVER OF NOTICE...................................................... 33
Section 8. ANNUAL STATEMENT...................................................... 33
ARTICLE IX - AMENDMENTS................................................................. 33
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS................................ 33
</TABLE>
iii
<PAGE> 6
BYLAWS
OF
SILVER CINEMAS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICES. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
<PAGE> 7
Section 2. OTHER OFFICES. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held
at any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority
of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less
2
<PAGE> 8
than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. 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 thereat.
Section 4. VOTING. When a quorum is present at any meeting, in all
matters other than the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes, or the Certificate of
Incorporation, or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors 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 5. PROXIES. At each meeting of the stockholders, each
3
<PAGE> 9
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders
are required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which notice shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the
4
<PAGE> 10
meeting is called. The written notice of any meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the 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 8. MAINTENANCE AND INSPECTION OF 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 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
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
5
<PAGE> 11
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
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 such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent 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 by delivery to its registered office
in Delaware, its principal place of business, or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. 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 9 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 Delaware, its principal place of business or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail,
6
<PAGE> 12
return receipt requested. 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 III
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS. The number of directors which
shall constitute the whole Board shall be seven (7). The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented and entitled to
vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by reason
of death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall
7
<PAGE> 13
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
8
<PAGE> 14
Section 3. POWERS. The property and business of the corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold
their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
Section 7. QUORUM. At all meetings of the Board of Directors a
9
<PAGE> 15
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. 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. If only one director is authorized, such sole director shall
constitute a quorum.
10
<PAGE> 16
Section 8. ACTION WITHOUT MEETING. 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 or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any 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 such participation in a
meeting shall constitute presence in person at such meeting.
11
<PAGE> 17
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board 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, to the extent 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; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
12
<PAGE> 18
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
13
<PAGE> 19
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief Executive
Officer, a Chief Financial Officer, a Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3
hereof. In the event there are two or more Vice Presidents, then one or more may
be designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
14
<PAGE> 20
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers
and agents of the corporation shall be fixed by the Board of Directors.
15
<PAGE> 21
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of
the corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
an officer be elected, shall, if present, preside at all meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no Chief Executive Officer, the Chairman of the Board
shall in addition be the Chief Executive Officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
16
<PAGE> 22
Section 7. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall, subject
to the control of the Board of Directors, have general supervision, direction
and control of the business and the officers of the corporation. He shall
preside at all meetings of the shareholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall have the general powers and duties of management usually vested in the
office of the Chief Executive Officer of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
bylaws.
Section 8. PRESIDENT. In the absence or disability of the Chief
Executive Officer, the President, if any, shall perform all the duties of the
Chief Executive Officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer. The President
shall have such other powers and perform such other duties as from time to time
may be prescribed for him by the Board of Directors or the bylaws, the Chief
Executive Officer or the Chairman of the Board if there is no Chief Executive
Officer.
17
<PAGE> 23
Section 9. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 10. SECRETARY. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 11. ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of
18
<PAGE> 24
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys, and other valuable effects in the name
and to the credit of the corporation, in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Chief Financial Officer and of the financial condition of the
corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 13. TREASURER. The Treasurer shall perform the duties and
19
<PAGE> 25
exercise the powers of the Treasurer as determined by the Board of Directors. If
required by the Board of Directors, he shall give the corporation a bond, in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
20
<PAGE> 26
Section 14. ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
21
<PAGE> 27
(a) The corporation shall indemnify to the maximum extent
permitted by law 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 or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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) The corporation shall indemnify to the maximum extent
permitted by law 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
22
<PAGE> 28
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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 such 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 of Delaware 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 such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director or officer of the corporation
shall be successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (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.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon
23
<PAGE> 29
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are 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. The corporation, acting through its Board of Directors or
otherwise, shall cause such determination to be made if so requested by any
person who is indemnifiable under this Article V.
(e) 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.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other paragraphs of 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
24
<PAGE> 30
another capacity while holding such office.
(g) The Board of Directors may authorize, by a vote of a majority
of a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer 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.
(h) For the purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall
25
<PAGE> 31
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director or officer of the corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and 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" as referred to in
this section.
(j) 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
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only if the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
ARTICLE VI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
26
<PAGE> 32
The corporation may indemnify every person who was or is a party or
is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was an employee or agent of the corporation or, while an employee
or agent of the corporation, is or was serving at the request of the corporation
as an employee or agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the extent permitted by applicable law.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer of the corporation, certifying the
number of shares represented by the certificate owned by such stockholder in the
corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of 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, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
27
<PAGE> 33
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
28
<PAGE> 34
Section 4. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation 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 issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or
the transfer agent of the corporation, of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
29
<PAGE> 35
Section 6. FIXED RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or 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 shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. 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. 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 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.
30
<PAGE> 36
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
31
<PAGE> 37
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment
of any dividend there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
32
<PAGE> 38
Section 6. MANNER OF GIVING NOTICE. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.
33
<PAGE> 39
These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.
34
<PAGE> 40
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Silver
Cinemas, Inc., a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of said
corporation as duly adopted by the written consent of the Incorporator of said
corporation as of October 11, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 11th day
of October, 1996.
----------------------------------------
Thomas J. Owens, Secretary
35
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
SCI ACQUISITION CORP.
FIRST: The name of the Corporation is SCI Acquisition Corp.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road in the City of Wilmington, County of New
Castle. The name and address of its registered agent is Corporation Service
Company, Wilmington, Delaware 19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 10,000 shares of Common Stock, $.01 par value.
FIFTH: From time to time the Corporation may issue its authorized shares
for such consideration per share (with respect to shares having a par value, not
less than the par value thereof), either in money or money's worth of property
or services, and for such other consideration, whether greater or less, now or
from time to time hereafter permitted by law, as may be fixed by the Board of
Directors; and all shares so issued shall be fully paid and nonassessable.
No holder of any shares of any class shall as such holder have any
preemptive right to subscribe for or purchase any other shares or securities of
any class, whether now or hereafter authorized, which at any time may be offered
for sale or sold by the Corporation.
SIXTH: The name and the mailing address of the incorporator is:
Name Mailing Address
Greg R. Samuel 901 Main Street
Suite 8100
Dallas, TX 75202
SEVENTH: The number of directors shall be fixed by the bylaws of the
Corporation and until changed in accordance with the manner prescribed by the
bylaws shall be one (1). The name and address of the person who is to serve as
the sole director until the first annual meeting of stockholders, or until his
successors be elected and qualified, are as follows:
<PAGE> 2
Name Mailing Address
Thomas J. Owens 17103 Preston Road
Suite 190, LB-120
Dallas, Texas 75248
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the bylaws of the Corporation without action on the part of the stockholders.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TENTH: The Corporation is to have perpetual existence.
ELEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TWELFTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law hereafter is amended
to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this Section 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.
38
<PAGE> 3
THIRTEENTH: The Corporation shall indemnify and advance expenses to each
person who is or was a director or nominee for director of the Corporation in
every capacity in which such person serves for which the Corporation may or is
required to indemnify or advance expenses to such person, for amounts incurred
by such person in connection with any action, suit or proceeding to which such
person was, is or may be a party by reason of such person's position with the
Corporation or service on behalf of the Corporation, when and to the fullest
extent permitted or required by the Delaware General Corporation Law and any
other applicable law, as such laws now exist and to such greater extent as they
may provide in the future. Any repeal or modification of this Section shall be
prospective only and shall not adversely affect the rights existing at the time
of such repeal or modification.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this ___ day of _______, 1998.
-------------------------------------
Greg R. Samuel
<PAGE> 1
EXHIBIT 3.6
MINUTES OF ACTION OF
THE BOARD OF DIRECTORS OF
SCI ACQUISITION CORP.
TAKEN WITHOUT A MEETING
BY WRITTEN CONSENT
The following action is taken by the Board of Directors of SCI
Acquisition Corp., a Delaware corporation (the "Corporation"), by written
consent without a meeting, as of March 10, 1998, pursuant to Section 141(f) of
the Delaware General Corporation Law permitting such action to be taken.
Amendment of Bylaws. The following resolutions authorizing and
approving the amendment of the Bylaws of the Corporation (the "Bylaws") are
hereby adopted:
WHEREAS, pursuant to Article 6 of the Certificate of
Incorporation of the Corporation and Article IX, Section 1 of the
Bylaws of the Corporation, the Board of Directors has authority to
amend the Bylaws of the Corporation; and
WHEREAS, it is in the best interest of the Corporation to amend
the Bylaws of the Corporation to increase the number of directors.
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 1 of
the Bylaws of the Corporation be, and it hereby is, amended to read in
its entirety as follows:
"Section 1. THE NUMBER OF DIRECTORS. The number of directors
which shall constitute the whole Board shall be eight (8). The
directors need not be stockholders. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until
his successor is elected and qualified; provided, however, that unless
otherwise restricted by the Certificate of Incorporation or by law,
any director or the entire Board of Directors may be removed, either
with or without cause, from the Board of Directors at any meeting of
stockholders by a majority of the stock represented and entitled to
vote thereat."
<PAGE> 2
BYLAWS
OF
SCI ACQUISITION CORP.
<PAGE> 3
BYLAWS
OF
SCI ACQUISITION CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES....................................................... 1
Section 1. REGISTERED OFFICES........................................ 1
Section 2. OTHER OFFICES............................................. 2
ARTICLE II - MEETINGS OF STOCKHOLDERS..................................... 2
Section 1. PLACE OF MEETINGS......................................... 2
Section 2. ANNUAL MEETING OF STOCKHOLDERS............................ 2
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF............. 2
Section 4. VOTING.................................................... 3
Section 5. PROXIES................................................... 3
Section 6. SPECIAL MEETINGS.......................................... 4
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS.......................... 4
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST............ 5
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING... 6
ARTICLE III - DIRECTORS................................................... 7
Section 1. THE NUMBER OF DIRECTORS................................... 7
Section 2. VACANCIES................................................. 7
Section 3. POWERS.................................................... 9
Section 4. PLACE OF DIRECTORS' MEETINGS.............................. 9
Section 5. REGULAR MEETINGS.......................................... 9
Section 6. SPECIAL MEETINGS.......................................... 9
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7. QUORUM................................................... 9
Section 8. ACTION WITHOUT MEETING................................... 11
Section 9. TELEPHONIC MEETINGS...................................... 11
Section 10. COMMITTEES OF DIRECTORS.................................. 12
Section 11. MINUTES OF COMMITTEE MEETINGS............................ 13
Section 12. COMPENSATION OF DIRECTORS................................ 13
ARTICLE IV - OFFICERS..................................................... 13
Section 1. OFFICERS................................................. 14
Section 2. ELECTION OF OFFICERS..................................... 14
Section 3. SUBORDINATE OFFICERS..................................... 15
Section 4. COMPENSATION OF OFFICERS................................. 15
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES.................... 16
Section 6. CHAIRMAN OF THE BOARD.................................... 16
Section 7. CHIEF EXECUTIVE OFFICER.................................. 17
Section 8. PRESIDENT................................................ 17
Section 9. VICE PRESIDENTS.......................................... 18
Section 10. SECRETARY................................................ 18
Section 11. ASSISTANT SECRETARY...................................... 18
Section 12. CHIEF FINANCIAL OFFICER.................................. 19
Section 13. TREASURER................................................ 19
Section 14. ASSISTANT TREASURER...................................... 21
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS..................... 21
ARTICLE VI - INDEMNIFICATION OF EMPLOYEES AND AGENTS...................... 26
ARTICLE VII - CERTIFICATES OF STOCK....................................... 27
Section 1. CERTIFICATES.............................................. 27
Section 2. SIGNATURES ON CERTIFICATES................................ 27
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES........ 28
Section 4. LOST CERTIFICATES......................................... 29
Section 5. TRANSFERS OF STOCK........................................ 29
Section 6. FIXED RECORD DATE......................................... 30
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7. REGISTERED STOCKHOLDERS................................... 31
ARTICLE VIII - GENERAL PROVISIONS......................................... 31
Section 1. DIVIDENDS................................................. 31
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES................... 32
Section 3. CHECKS.................................................... 32
Section 4. FISCAL YEAR............................................... 32
Section 5. CORPORATE SEAL............................................ 32
Section 6. MANNER OF GIVING NOTICE................................... 33
Section 7. WAIVER OF NOTICE.......................................... 33
Section 8. ANNUAL STATEMENT.......................................... 33
ARTICLE IX - AMENDMENTS................................................... 33
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.................... 33
</TABLE>
iii
<PAGE> 6
BYLAWS
OF
SCI ACQUISITION CORP.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICES. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
<PAGE> 7
Section 2. OTHER OFFICES. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held
at any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority
of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less
2
<PAGE> 8
than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. 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 thereat.
Section 4. VOTING. When a quorum is present at any meeting, in all
matters other than the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes, or the Certificate of
Incorporation, or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors 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 5. PROXIES. At each meeting of the stockholders, each
3
<PAGE> 9
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders
are required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which notice shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the
4
<PAGE> 10
meeting is called. The written notice of any meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the 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 8. MAINTENANCE AND INSPECTION OF 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 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
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
5
<PAGE> 11
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
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 such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent 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 by delivery to its registered office
in Delaware, its principal place of business, or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. 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 9 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 Delaware, its principal place of business or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail,
6
<PAGE> 12
return receipt requested. 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 III
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS. The number of directors which
shall constitute the whole Board shall be seven (7). The first Board shall
consist of one (1). The directors need not be stockholders. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified; provided, however, that unless otherwise
restricted by the Certificate of Incorporation or by law, any director or the
entire Board of Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of the stock
represented and entitled to vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall
7
<PAGE> 13
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
8
<PAGE> 14
Section 3. POWERS. The property and business of the corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold
their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
Section 7. QUORUM. At all meetings of the Board of Directors a
9
<PAGE> 15
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. 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. If only one director is authorized, such sole director shall
constitute a quorum.
10
<PAGE> 16
Section 8. ACTION WITHOUT MEETING. 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 or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any 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 such participation in a
meeting shall constitute presence in person at such meeting.
11
<PAGE> 17
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board 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, to the extent 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; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
12
<PAGE> 18
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
13
<PAGE> 19
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief Executive
Officer, a Chief Financial Officer, a Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3
hereof. In the event there are two or more Vice Presidents, then one or more may
be designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
14
<PAGE> 20
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers
and agents of the corporation shall be fixed by the Board of Directors.
15
<PAGE> 21
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of
the corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
an officer be elected, shall, if present, preside at all meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no Chief Executive Officer, the Chairman of the Board
shall in addition be the Chief Executive Officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
16
<PAGE> 22
Section 7. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall, subject
to the control of the Board of Directors, have general supervision, direction
and control of the business and the officers of the corporation. He shall
preside at all meetings of the shareholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall have the general powers and duties of management usually vested in the
office of the Chief Executive Officer of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
bylaws.
Section 8. PRESIDENT. In the absence or disability of the Chief
Executive Officer, the President, if any, shall perform all the duties of the
Chief Executive Officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer. The President
shall have such other powers and perform such other duties as from time to time
may be prescribed for him by the Board of Directors or the bylaws, the Chief
Executive Officer or the Chairman of the Board if there is no Chief Executive
Officer.
17
<PAGE> 23
Section 9. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 10. SECRETARY. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 11. ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of
18
<PAGE> 24
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys, and other valuable effects in the name
and to the credit of the corporation, in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Chief Financial Officer and of the financial condition of the
corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 13. TREASURER. The Treasurer shall perform the duties and
19
<PAGE> 25
exercise the powers of the Treasurer as determined by the Board of Directors. If
required by the Board of Directors, he shall give the corporation a bond, in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
20
<PAGE> 26
Section 14. ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
21
<PAGE> 27
(a) The corporation shall indemnify to the maximum extent permitted
by law 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 or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer 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) The corporation shall indemnify to the maximum extent permitted
by law 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
22
<PAGE> 28
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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 such 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 of Delaware 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 such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director or officer of the corporation
shall be successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (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.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon
23
<PAGE> 29
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are 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. The corporation, acting through its Board of Directors or
otherwise, shall cause such determination to be made if so requested by any
person who is indemnifiable under this Article V.
(e) 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.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of 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
24
<PAGE> 30
another capacity while holding such office.
(g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer 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.
(h) For the purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall
25
<PAGE> 31
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director or officer of the corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and 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" as referred to in
this section.
(j) 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
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only if the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
ARTICLE VI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
26
<PAGE> 32
The corporation may indemnify every person who was or is a party or
is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was an employee or agent of the corporation or, while an employee
or agent of the corporation, is or was serving at the request of the corporation
as an employee or agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the extent permitted by applicable law.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer of the corporation, certifying the
number of shares represented by the certificate owned by such stockholder in the
corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of 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, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
27
<PAGE> 33
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
28
<PAGE> 34
Section 4. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation 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 issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or
the transfer agent of the corporation, of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
29
<PAGE> 35
Section 6. FIXED RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or 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 shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. 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. 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 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.
30
<PAGE> 36
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
31
<PAGE> 37
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment
of any dividend there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
32
<PAGE> 38
Section 6. MANNER OF GIVING NOTICE. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.
33
<PAGE> 39
These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.
34
<PAGE> 40
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of SCI
Acquisition Corp., a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of said
corporation as duly adopted by the written consent of the Incorporator of said
corporation as of January 14, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 14th day
of January, 1998.
--------------------------------------------
Thomas J. Owens, Secretary
35
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
LANDMARK THEATRE CORP.
1. The name of the corporation is:
LANDMARK THEATRE CORP.
2. The address of its registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is Corporation Service Company.
3. The nature of the business or purposes to be conducted or
promoted 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.
4. The total number of shares of stock which the corporation
shall have authority to issue is One Thousand (1,000), all of which shall be
Common Stock; and the par value of each share shall be One Cent ($.01).
5. The name and mailing address of the incorporator is:
Ilona F. Bush
LATHAM & WATKINS
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
6. 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.
<PAGE> 2
7. Election of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
8. No director of this corporation shall be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, herein
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 29th day of
December, 1997.
___________________________________
Ilona F. Bush, Incorporator
2
<PAGE> 1
EXHIBIT 3.8
MINUTES OF ACTION OF
THE BOARD OF DIRECTORS OF
LANDMARK THEATRE CORP.
TAKEN WITHOUT A MEETING
BY WRITTEN CONSENT
The following action is taken by the Board of Directors of Landmark
Theatre Corp., a Delaware corporation (the "Corporation"), by written consent
without a meeting, as of March 10, 1998, pursuant to Section 141(f) of the
Delaware General Corporation Law permitting such action to be taken.
Amendment of Bylaws. The following resolutions authorizing and
approving the amendment of the Bylaws of the Corporation (the "Bylaws") are
hereby adopted:
WHEREAS, pursuant to Article 6 of the Certificate of
Incorporation of the Corporation and Article IX, Section 1 of the
Bylaws of the Corporation, the Board of Directors has authority to
amend the Bylaws of the Corporation; and
WHEREAS, it is in the best interest of the Corporation to
amend the Bylaws of the Corporation to increase the number of
directors.
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 1
of the Bylaws of the Corporation be, and it hereby is, amended to
read in its entirety as follows:
"Section 1. THE NUMBER OF DIRECTORS. The number of
directors which shall constitute the whole Board shall be eight (8).
The directors need not be stockholders. The directors shall be
elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified; provided,
however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of
the stock represented and entitled to vote thereat."
<PAGE> 2
BYLAWS
OF
LANDMARK THEATRE CORP.
<PAGE> 3
BYLAWS
OF
LANDMARK THEATRE CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES..................................................................... 1
Section 1. REGISTERED OFFICES.............................................. 1
Section 2. OTHER OFFICES................................................... 2
ARTICLE II - MEETINGS OF STOCKHOLDERS................................................... 2
Section 1. PLACE OF MEETINGS............................................... 2
Section 2. ANNUAL MEETING OF STOCKHOLDERS.................................. 2
Section 3. QUORUM; ADJOURNED MEETINGS AND
NOTICE THEREOF.................................................. 2
Section 4. VOTING.......................................................... 3
Section 5. PROXIES......................................................... 3
Section 6. SPECIAL MEETINGS................................................ 4
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS................................ 4
Section 8. MAINTENANCE AND INSPECTION OF
STOCKHOLDER LIST................................................ 5
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING............................................... 6
ARTICLE III - DIRECTORS................................................................. 7
Section 1. THE NUMBER OF DIRECTORS......................................... 7
Section 2. VACANCIES....................................................... 7
Section 3. POWERS.......................................................... 9
Section 4. PLACE OF DIRECTORS' MEETINGS.................................... 9
Section 5. REGULAR MEETINGS................................................ 9
Section 6. SPECIAL MEETINGS................................................ 9
Section 7. QUORUM.......................................................... 9
Section 8. ACTION WITHOUT MEETING.......................................... 11
Section 9. TELEPHONIC MEETINGS............................................. 11
Section 10. COMMITTEES OF DIRECTORS......................................... 12
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11. MINUTES OF COMMITTEE MEETINGS................................... 13
Section 12. COMPENSATION OF DIRECTORS....................................... 13
ARTICLE IV - OFFICERS................................................................... 13
Section 1. OFFICERS........................................................ 14
Section 2. ELECTION OF OFFICERS............................................ 14
Section 3. SUBORDINATE OFFICERS............................................ 15
Section 4. COMPENSATION OF OFFICERS........................................ 15
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES........................... 16
Section 6. CHAIRMAN OF THE BOARD........................................... 16
Section 7. CHIEF EXECUTIVE OFFICER......................................... 17
Section 8. PRESIDENT....................................................... 17
Section 9. VICE PRESIDENTS................................................. 18
Section 10. SECRETARY....................................................... 18
Section 11. ASSISTANT SECRETARY............................................. 18
Section 12. TREASURER....................................................... 19
Section 13. ASSISTANT TREASURER............................................. 20
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS................................... 20
ARTICLE VI - INDEMNIFICATION OF EMPLOYEES AND AGENTS.................................... 25
ARTICLE VII - CERTIFICATES OF STOCK..................................................... 26
Section 1. CERTIFICATES.................................................... 26
Section 2. SIGNATURES ON CERTIFICATES...................................... 26
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES,
PRIVILEGES...................................................... 27
Section 4. LOST CERTIFICATES............................................... 28
Section 5. TRANSFERS OF STOCK.............................................. 28
Section 6. FIXED RECORD DATE............................................... 29
Section 7. REGISTERED STOCKHOLDERS......................................... 30
ARTICLE VIII - GENERAL PROVISIONS....................................................... 30
Section 1. DIVIDENDS....................................................... 30
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES......................... 31
Section 3. CHECKS.......................................................... 31
Section 4. FISCAL YEAR..................................................... 31
Section 5. CORPORATE SEAL.................................................. 31
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6. MANNER OF GIVING NOTICE......................................... 32
Section 7. WAIVER OF NOTICE................................................ 32
Section 8. ANNUAL STATEMENT................................................ 32
ARTICLE IX - AMENDMENTS................................................................. 32
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.......................... 32
</TABLE>
iii
<PAGE> 6
BYLAWS
OF
LANDMARK THEATRE CORP.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICES. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
<PAGE> 7
Section 2. OTHER OFFICES. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be
held at any place within or outside the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A
majority of the stock issued and outstanding and entitled to vote at any meeting
of stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less
2
<PAGE> 8
than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. 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 thereat.
Section 4. VOTING. When a quorum is present at any meeting, in
all matters other than the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes, or the Certificate of
Incorporation, or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors 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 5. PROXIES. At each meeting of the stockholders, each
3
<PAGE> 9
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
and shall be called by the President or the Secretary at the request in writing
of a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding, and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the
4
<PAGE> 10
meeting is called. The written notice of any meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the 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 8. MAINTENANCE AND INSPECTION OF 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 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
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
5
<PAGE> 11
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. 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 such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent 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 by delivery to its
registered office in Delaware, its principal place of business, or to an officer
or agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. 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 9 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 Delaware, its principal place of business or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail,
6
<PAGE> 12
return receipt requested. 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 III
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS. The number of directors which
shall constitute the whole Board shall be six (6). The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented and entitled to
vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall
7
<PAGE> 13
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
8
<PAGE> 14
Section 3. POWERS. The property and business of the corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold
their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
Section 7. QUORUM. At all meetings of the Board of Directors a
9
<PAGE> 15
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. 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. If only one director is authorized, such sole director shall
constitute a quorum.
10
<PAGE> 16
Section 8. ACTION WITHOUT MEETING. 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 or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any 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 such
participation in a meeting shall constitute presence in person at such meeting.
11
<PAGE> 17
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board 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, to the extent 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; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
12
<PAGE> 18
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
13
<PAGE> 19
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief Executive
Officer, a Treasurer, one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 hereof. In the event
there are two or more Vice Presidents, then one or more may be designated as
Executive Vice President, Senior Vice President, or other similar or dissimilar
title. At the time of the election of officers, the directors may by resolution
determine the order of their rank. Any number of offices may be held by the same
person, unless the Certificate of Incorporation or these Bylaws otherwise
provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
14
<PAGE> 20
Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers
and agents of the corporation shall be fixed by the Board of Directors.
15
<PAGE> 21
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of
the corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no Chief Executive Officer, the Chairman of the Board
shall in addition be the Chief Executive Officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
16
<PAGE> 22
Section 7. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall, subject
to the control of the Board of Directors, have general supervision, direction
and control of the business and the officers of the corporation. He shall
preside at all meetings of the shareholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall have the general powers and duties of management usually vested in the
office of the Chief Executive Officer of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
bylaws.
Section 8. PRESIDENT. In the absence or disability of the Chief
Executive Officer, the President, if any, shall perform all the duties of the
Chief Executive Officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer. The President
shall have such other powers and perform such other duties as from time to time
may be prescribed for him by the Board of Directors or the bylaws, the Chief
Executive Officer or the Chairman of the Board if there is no Chief Executive
Officer.
17
<PAGE> 23
Section 9. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 10. SECRETARY. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 11. ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of
18
<PAGE> 24
Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 12. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the corporation. If
required by the Board of Directors, he shall give the corporation a bond, in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
19
<PAGE> 25
Section 13. ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
20
<PAGE> 26
(a) The corporation shall indemnify to the maximum extent
permitted by law 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 or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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) The corporation shall indemnify to the maximum extent
permitted by law 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
21
<PAGE> 27
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer 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 such 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 of Delaware 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 such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director or officer of the corporation
shall be successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (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.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon
22
<PAGE> 28
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are 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. The corporation, acting through its Board of Directors or
otherwise, shall cause such determination to be made if so requested by any
person who is indemnifiable under this Article V.
(e) 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.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other paragraphs of 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
23
<PAGE> 29
another capacity while holding such office.
(g) The Board of Directors may authorize, by a vote of a
majority of a quorum of the Board of Directors, the corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director or officer 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.
(h) For the purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall
24
<PAGE> 30
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director or officer of the corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and 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" as referred to in
this section.
(j) 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
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only if the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
ARTICLE VI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
25
<PAGE> 31
The corporation may indemnify every person who was or is a party
or is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was an employee or agent of the corporation or, while an employee
or agent of the corporation, is or was serving at the request of the corporation
as an employee or agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the extent permitted by applicable law.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer of the corporation, certifying the
number of shares represented by the certificate owned by such stockholder in the
corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of 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, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
26
<PAGE> 32
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES.
If the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
27
<PAGE> 33
Section 4. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation 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 issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation,
or the transfer agent of the corporation, of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignation or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
28
<PAGE> 34
Section 6. FIXED RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or 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 shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. 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. 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 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.
29
<PAGE> 35
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
30
<PAGE> 36
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before
payment of any dividend there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation, and the directors may
abolish any such reserve.
Section 3. CHECKS. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall
be fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
31
<PAGE> 37
Section 6. MANNER OF GIVING NOTICE. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to
be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.
32
<PAGE> 38
These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.
33
<PAGE> 39
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Landmark
Theatre Corp., a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of said
corporation as duly adopted by the written consent of the Incorporator of said
corporation as of December 29, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 29th
day of December, 1997.
____________________________________
Thomas J. Owens, Secretary
34
<PAGE> 1
EXHIBIT 4.1
================================================================================
SILVER CINEMAS INTERNATIONAL, INC.,
as Issuer,
and
THE GUARANTORS
(defined herein)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
---------------------
INDENTURE
Dated as of April 15, 1998
---------------------
up to $115,000,000
10 1/2% Senior Subordinated Notes due 2005
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1).......................................... 7.10
(a)(2).......................................... 7.10
(a)(3).......................................... N.A.
(a)(4).......................................... N.A.
(a)(5).......................................... 7.08; 7.10
(b)............................................. 7.08; 7.10; 12.02
(c)............................................. N.A.
311(a)............................................. 7.11
(b)............................................. 7.11
(c)............................................. N.A.
312(a) ............................................ 2.05
(b)............................................. 12.03
(c)............................................. 12.03
313(a)............................................. 7.06
(b)(1).......................................... N.A.
(b)(2).......................................... 7.06
(c)............................................. 7.06; 12.02
(d)............................................. 7.06
314(a)............................................. 4.06; 4.08; 12.02
(b)............................................. N.A.
(c)(1).......................................... 12.04
(c)(2).......................................... 12.04
(c)(3).......................................... N.A.
(d)............................................. N.A.
(e)............................................. 12.05
(f)............................................. N.A.
315(a)............................................. 7.01(b)
(b)............................................. 7.05; 12.02
(c)............................................. 7.01(a)
(d)............................................. 7.01(c)
(e)............................................. 6.10
316(a)(last sentence).............................. 2.09
(a)(1)(A)....................................... 6.04
(a)(1)(B)....................................... 6.03
(a)(2).......................................... N.A.
(b)............................................. 6.06
(c)............................................. 9.05
317(a)(1).......................................... 6.07
(a)(2).......................................... 6.08
(b)............................................. 2.04
318(a)............................................. 12.01
(c)............................................. 12.01
</TABLE>
- ----------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Incorporation by Reference of TIA ......................... 24
SECTION 1.03. Rules of Construction ..................................... 25
ARTICLE TWO THE NOTES
SECTION 2.01. Form and Dating ........................................... 25
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount .. 27
SECTION 2.03. Registrar and Paying Agent ................................ 28
SECTION 2.04. Paying Agent To Hold Assets in Trust ...................... 29
SECTION 2.05. Noteholder Lists .......................................... 29
SECTION 2.06. Transfer and Exchange ..................................... 30
SECTION 2.07. Replacement Notes ......................................... 30
SECTION 2.08. Outstanding Notes ......................................... 31
SECTION 2.09. Treasury Notes ............................................ 31
SECTION 2.10. Temporary Notes ........................................... 31
SECTION 2.11. Cancellation .............................................. 32
SECTION 2.12. Defaulted Interest......................................... 32
SECTION 2.13. CUSIP Number .............................................. 32
SECTION 2.14. Deposit of Moneys ......................................... 33
SECTION 2.15. Book-Entry Provisions for Global Note ..................... 33
SECTION 2.16. Special Transfer Provisions ............................... 34
ARTICLE THREE REDEMPTION
SECTION 3.01. Notices to Trustee......................................... 39
SECTION 3.02. Selection of Notes To Be Redeemed ......................... 40
SECTION 3.03. Notice of Redemption ...................................... 40
SECTION 3.04. Effect of Notice of Redemption ............................ 41
SECTION 3.05. Deposit of Redemption Price ............................... 41
SECTION 3.06. Notes Redeemed in Part .................................... 42
ARTICLE FOUR COVENANTS
SECTION 4.01. Payment of Notes .......................................... 42
SECTION 4.02. Maintenance of Office or Agency ........................... 42
SECTION 4.03. Corporate Existence ....................................... 43
SECTION 4.04. Payment of Taxes and Other Claims ......................... 43
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.05. Maintenance of Properties and Insurance ................... 43
SECTION 4.06. Compliance Certificate; Notice of Default ................. 44
SECTION 4.07. Compliance with Laws ...................................... 45
SECTION 4.08. SEC Reports ............................................... 45
SECTION 4.09. Waiver of Stay, Extension or Usury Laws ................... 46
SECTION 4.10. Limitation on Restricted Payments ......................... 46
SECTION 4.11. Limitation on Transactions with Affiliates ................ 48
SECTION 4.12. Limitation on Indebtedness ................................ 49
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries ................................ 49
SECTION 4.14. Limitation on Additional Senior Subordinated Indebtedness . 50
SECTION 4.15. Limitation on Change of Control ........................... 50
SECTION 4.16. Limitation on Asset Sales ................................. 52
SECTION 4.17. Limitation on Liens ....................................... 54
SECTION 4.18. Additional Subsidiary Guarantees .......................... 54
SECTION 4.19. Conduct of Business ....................................... 55
ARTICLE FIVE SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc ............................... 55
SECTION 5.02. Successor Corporation Substituted ......................... 56
ARTICLE SIX DEFAULT AND REMEDIES
SECTION 6.01. Events of Default ......................................... 57
SECTION 6.02. Acceleration .............................................. 58
SECTION 6.03. Waiver of Past Defaults ................................... 59
SECTION 6.04. Control by Majority ....................................... 59
SECTION 6.05. Limitation on Suits ....................................... 60
SECTION 6.06. Rights of Holders To Receive Payment ...................... 60
SECTION 6.07. Collection Suit by Trustee ................................ 61
SECTION 6.08. Trustee May File Proofs of Claim .......................... 61
SECTION 6.09. Priorities ................................................ 61
SECTION 6.10. Undertaking for Costs ..................................... 62
SECTION 6.11. Restoration of Rights and Remedies ........................ 62
ARTICLE SEVEN TRUSTEE
SECTION 7.01. Duties of Trustee ......................................... 63
SECTION 7.02. Rights of Trustee ......................................... 64
SECTION 7.03. Individual Rights of Trustee .............................. 65
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 7.04. Trustee's Disclaimer ...................................... 65
SECTION 7.05. Notice of Default ......................................... 65
SECTION 7.06. Reports by Trustee to Holders ............................. 66
SECTION 7.07. Compensation and Indemnity ................................ 66
SECTION 7.08. Replacement of Trustee .................................... 67
SECTION 7.09. Successor Trustee by Merger, Etc. ......................... 68
SECTION 7.10. Eligibility; Disqualification ............................. 68
SECTION 7.11. Preferential Collection of Claims Against Company ......... 69
ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations .................. 69
SECTION 8.02. Legal Defeasance and Covenant Defeasance .................. 70
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance ..... 71
SECTION 8.04. Application of Trust Money ................................ 73
SECTION 8.05. Repayment to the Company or the Guarantors ................ 74
SECTION 8.06. Satisfaction and Discharge ................................ 74
SECTION 8.07. Reinstatement ............................................. 75
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders ................................ 75
SECTION 9.02. With Consent of Holders ................................... 76
SECTION 9.03. Effect on Senior Debt ..................................... 77
SECTION 9.04. Compliance with TIA ....................................... 77
SECTION 9.05. Revocation and Effect of Consents ......................... 77
SECTION 9.06. Notation on or Exchange of Notes .......................... 78
SECTION 9.07. Trustee To Sign Amendments, Etc. .......................... 78
ARTICLE TEN SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt ........................ 79
SECTION 10.02. No Payment on Notes in Certain Circumstances ............. 79
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc. .......... 80
SECTION 10.04. Payments May Be Paid Prior to Dissolution ................ 82
SECTION 10.05. Subrogation .............................................. 82
SECTION 10.06. Obligations of the Company Unconditional ................. 83
SECTION 10.07. Notice to Trustee ........................................ 83
SECTION 10.08. Reliance on Judicial Order or Certificate of
Liquidating Agent ..................................... 84
SECTION 10.09. Trustee's Relation to Senior Debt ........................ 84
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt ............ 84
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes .............................. 85
SECTION 10.12. This Article Ten Not To Prevent Events of Default ........ 86
SECTION 10.13. Trustee's Compensation Not Prejudiced .................... 86
ARTICLE ELEVEN GUARANTEES
SECTION 11.01. Unconditional Guarantee .................................. 86
SECTION 11.02. Subordination of Guarantee ............................... 87
SECTION 11.03. Severability ............................................. 87
SECTION 11.04. Release of a Guarantor ................................... 87
SECTION 11.05. Limitation of Guarantor's Liability ...................... 88
SECTION 11.06. Guarantors May Consolidate, Etc., on Certain Terms ....... 88
SECTION 11.07. Contribution ............................................. 89
SECTION 11.08. Waiver of Subrogation .................................... 89
SECTION 11.09. Execution of Guarantee ................................... 90
SECTION 11.10. No Payment on Guarantees in Certain Circumstances ........ 90
SECTION 11.11. Payment Over of Proceeds upon Dissolution, Etc. .......... 92
SECTION 11.12. Payments May Be Paid Prior to Dissolution ................ 93
SECTION 11.13. Subrogation .............................................. 93
SECTION 11.14. Obligations of Each Guarantor Unconditional .............. 94
SECTION 11.15. Notice to Trustee ........................................ 94
SECTION 11.16. Reliance on Judicial Order or Certificate of
Liquidating Agent ................................... 95
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt .............. 95
SECTION 11.18. Subordination Rights Not Impaired by Acts or Omissions
of a Guarantor or Holders of Guarantor Senior Debt .. 96
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees ......................... 96
SECTION 11.20. This Article Eleven Not To Prevent Events of Default ..... 97
SECTION 11.21. Trustee's Compensation Not Prejudiced .................... 97
ARTICLE TWELVE MISCELLANEOUS
SECTION 12.01. TIA Controls ............................................. 97
SECTION 12.02. Notices .................................................. 98
SECTION 12.03. Communications by Holders with Other Holders ............. 99
SECTION 12.04. Certificate and Opinion as to Conditions Precedent ....... 99
SECTION 12.05. Statements Required in Certificate or Opinion ............ 99
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar ................ 100
SECTION 12.07. Legal Holidays ........................................... 100
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 12.08. Governing Law ............................................ 100
SECTION 12.09. No Adverse Interpretation of Other Agreements ............ 101
SECTION 12.10. No Recourse Against Others ............................... 101
SECTION 12.11. Successors ............................................... 101
SECTION 12.12. Duplicate Originals ...................................... 101
SECTION 12.13. Severability ............................................. 101
SIGNATURES .............................................................. 102
Exhibit A(1) - Form of Initial Note with Guarantee ...................... A(1)-1
Exhibit A(2) - Form of Exchange Note with Guarantee ..................... A(2)-1
Exhibit A(3) - Form of Regulation S Temporary Note with Guarantee ....... A(3)-1
Exhibit B - Form of Legend for Global Notes ............................. B-1
Exhibit C(1) - Certificate of Transferor from 144A Global Note to
Regulation S Global Note ........................... C(1)-1
Exhibit C(2) - Certificate of Transferor from Regulation S Global
Note to 144A Global Note ............................ C(2)-1
Exhibit C(3) - Certificate of Transferor of Physical Notes .............. C(3)-1
Exhibit C(4) - Certificate of Transferor from Global Note to
Physical Note ....................................... C(4)-1
Exhibit D - Certificate of Institutional Accredited Investor ............ D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-v-
<PAGE> 8
INDENTURE, dated as of April 15, 1998, among Silver Cinemas
International, Inc., a Delaware corporation (the "Company"), the Guarantors (as
hereinafter defined) and Norwest Bank, Minnesota, National Association, as
Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10 1/2%
Senior Subordinated Notes due 2005 (the "Notes") and, to provide therefor, the
Company has duly authorized the execution and delivery of this Indenture. All
things necessary to make the Notes, when duly issued and executed by the Company
and authenticated and delivered hereunder, the valid obligations of the Company,
and to make this Indenture a valid and binding agreement of the Company, have
been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"144A Global Note" means a permanent global senior note that contains
the legend set forth in Exhibit B hereto and that is deposited with the Note
Custodian and registered in the name of the Depository, representing a series of
Notes sold in reliance on Rule 144A or another exemption from the registration
requirements of the Securities Act, other than Regulation S.
"Acceleration Notice" has the meaning provided in Section 6.02.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"Act" means the Securities Act of 1933, as amended.
"Administrative Services Agreement" means that certain Corporate
Development and Administrative Services Agreement between the Company and
Brentwood dated as of July 2, 1996, as such agreement has been amended by that
certain First Amendment thereto dated on or about the Issue Date, as such
agreement is in effect on the Issue Date.
<PAGE> 9
-2-
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The
term "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;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.15.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprise any division or line of business of
such Person or any other properties or assets of such Person other than in the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company, or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $500,000, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company or any Restricted Subsidiary as permitted under Section 5.01, and (iii)
any permitted Restricted Payment.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02(a).
<PAGE> 10
-3-
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Brentwood" means Brentwood Private Equity LLP.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means: (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which
<PAGE> 11
-4-
invest substantially all their assets in securities of the types described in
clauses (i) through (v) above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture); (ii) (A) prior to the initial public offering of the Common Stock of
the Company, both (x) the Permitted Holders shall own less than 50% of the
aggregate ordinary voting power ("Voting Power") represented by the issued and
outstanding Capital Stock of the Company and (y) any Person or Group (other than
the Permitted Holders(s)) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing Voting Power greater than that
owned by the Permitted Holders or (B) subsequent to the initial public offering
of the Common Stock of the Company, both (x) the Permitted Holders shall own
less than 35% of the aggregate Voting Power represented by the issued and
outstanding Capital Stock of the Company and (y) any other Person or Group
(other than Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing greater than 35% of the
aggregate Voting Power of the Company; or (iii) the replacement of a majority of
the Board of Directors of the Company over a two-year period from the directors
who constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means Silver Cinemas International, Inc., a Delaware
corporation, and its successors that become a party to this Indenture in
accordance with its terms.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net
<PAGE> 12
-5-
Income has been reduced thereby, (A) all income taxes of such Person and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside the
ordinary course of business), (B) Consolidated Interest Expense and (C)
Consolidated Non-cash Charges less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for such
Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect (i) on a
pro forma basis for the period of such calculation to the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) on a pro
forma basis (calculated in accordance with Article 11 of Regulation S-X under
the Securities Act) to any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income") attributable to the assets which
are the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the
<PAGE> 13
-6-
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person or of any Restricted Subsidiary of such Person
(other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP; but (iii) excluding the amortization
of debt discount and amortization or write-off of deferred financing costs.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a
<PAGE> 14
-7-
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Non-cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning provided in Section 8.02(c).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Notice" has the meaning provided in Section 10.02(a).
"Depository" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Debt" means (i) Indebtedness under or in respect
of the Revolving Credit Facility and (ii) any other Indebtedness constituting
Senior Debt or Guarantor Senior Debt which, at the time of determination, has an
aggregate principal amount or commitment of at least $25.0 million and is
specifically designated in the instrument evidencing such Senior Debt or
Guarantor Senior Debt as "Designated Senior Debt" or "Designated Guarantor
Senior Debt" by the Company or such Guarantor.
<PAGE> 15
-8-
"Disqualified Capital Stock" means (i) that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, on or prior to the final maturity date of the Notes and (ii) Preferred
Stock of Subsidiaries of the Company.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Equity Interest" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (i) an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act, (ii) a purchase
of Qualified Capital Stock or an additional common equity contribution by any of
the Permitted Holders, or (iii) a purchase of Qualified Capital Stock by any
Person engaged in the movie theatre business which has a total equity market
value (as determined in good faith by the Company's Board of Directors) or total
private market value in excess of $100.0 million.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Exchange Notes" means the [ ]% Senior Subordinated Notes due 2005 to
be issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement or, with respect to Initial Notes issued under this Indenture
subsequent to the Issue Date pursuant to Section 2.02, a registration rights
agreement substantially identical to the Registration Rights Agreement.
"Exchange Offer" has the meaning assigned to such term in the
Registration Rights Agreement, dated as of April 16, 1998, by and among the
Company, the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation,
BT Alex. Brown Incorporated and Bear, Stearns & Co. Inc., as Initial Purchasers
(the "Registration Rights Agreement").
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the
<PAGE> 16
-9-
Company acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"Funding Guarantor" has the meaning provided in Section 11.07.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"Global Note" means individually and collectively, the Regulation S
Global Note and the 144A Global Note.
"Guarantee" means a guarantee, direct or indirect, in any manner of
all or any part of any Indebtedness.
"Guarantor" means (i) each Subsidiary of the Company on the Issue
Date and (ii) each Restricted Subsidiary that in the future executes a
supplemental indenture in which such Restricted Subsidiary agrees to be bound by
the terms of this Indenture as a Guarantor; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
of this Indenture.
"Guarantor Blockage Period" has the meaning provided in Section
11.10(a).
"Guarantor Default Notice" has the meaning provided in Section
11.10(a).
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on and all other Obligations with respect to
any Indebtedness of such Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts and
Obligations owing in respect of, (x) all
<PAGE> 17
-10-
Obligations of every nature of such Guarantor under the Revolving Credit
Facility, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (i) any Indebtedness of such Guarantor to a Restricted
Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such
Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of such Guarantor or any Restricted
Subsidiary of such Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (vi) Indebtedness incurred
in violation of Section 4.12, (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to such Guarantor and (viii) any Indebtedness which
is, by its express terms, subordinated in right of payment to any other
Indebtedness of such Guarantor.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if
<PAGE> 18
-11-
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Notes" means, collectively, (i) the 10 1/2% Senior
Subordinated Notes due 2005 of the Company issued on the Issue Date and (ii) one
or more series of 10 1/2% Senior Subordinated Notes due 2005 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02, in
each case for so long as such securities constitute Restricted Securities.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" when used with respect to any Note, means the
stated maturity of an installment of interest specified in such Note.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its
<PAGE> 19
-12-
Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Restricted Subsidiary, as the case
may be. For the purposes of Section 4.10, (i) "Investment" shall include and be
valued at the fair market value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) the amount of any Investment shall
be the original cost of such Investment plus the cost of all additional
Investments by the Company or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, 100% of the outstanding Common
Stock of such Restricted Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means April 16, 1998.
"Legal Defeasance" has the meaning provided in Section 8.02(b).
"Legal Holiday" has the meaning provided in Section 12.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means April 15, 2005.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing
<PAGE> 20
-13-
arrangements, (c) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale and (d) appropriate amounts to be provided by
the Company or any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"Net Proceeds Offer Amount" has the meaning provided in Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning provided in Section
4.16.
"Net Proceeds Offer Trigger Date" has the meaning provided in Section
4.16.
"Non-U.S. person" means a Person who is not a U.S. person, as defined
in Regulation S.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" means, collectively, the Initial Notes and the Unrestricted
Notes, treated as a single class of securities, as amended or supplemented from
time to time in accordance with the terms hereof, that are issued pursuant to
this Indenture.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" means the issuance and sale of Initial Notes in an
aggregate principal amount of $100,000,000 on the Issue Date.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 12.04 and 12.05, as they relate to the making of an
Officers' Certificate.
<PAGE> 21
-14-
"Opinion of Counsel" means a written opinion from legal counsel, who
may be counsel for the Company and who is reasonably acceptable to the Trustee,
complying with the requirements of Sections 12.04 and 12.05, as they relate to
the giving of an Opinion of Counsel.
"Participant" means with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder(s)" means Brentwood, Steven L. Holmes and Thomas J.
Owens.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes issued in the Offering,
and the Guarantees thereof;
(ii) Indebtedness of the Company and its Restricted
Subsidiaries incurred pursuant to the Revolving Credit Facility, not
to exceed $75.0 million reduced by any required permanent repayments
as a result of Asset Sales (which are accompanied by a corresponding
permanent commitment reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions therein;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of the Company
covering Indebtedness of such Restricted Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations
in interest rates on Indebtedness incurred in accordance with this
Indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company
and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
<PAGE> 22
-15-
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary
of the Company to the Company or to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by
the Company or a Wholly Owned Restricted Subsidiary of the Company,
in each case subject to no Lien (other than a lien in favor of
lenders under the Revolving Credit Facility) held by a Person other
than the Company or a Wholly Owned Restricted Subsidiary of the
Company; provided that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns
or holds any such Indebtedness or holds a Lien (other than a lien in
favor of lenders under the Revolving Credit Facility) in respect of
such Indebtedness, such date shall be deemed the date of the
incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary of the Company for so long as such Indebtedness
is held by a Wholly Owned Restricted Subsidiary of the Company, in
each case subject to no Lien (other than a lien in favor of lenders
under the Revolving Credit Facility); provided that (a) any
Indebtedness of the Company to any Wholly Owned Restricted Subsidiary
of the Company is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien (other than a lien in favor
of lenders under the Revolving Credit Facility) in respect of such
Indebtedness, such date shall be deemed the date of the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business;
provided, however, that such Indebtedness is extinguished within two
business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order
to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
(x) Refinancing Indebtedness;
(xi) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to
exceed $15.0 million at any one time outstanding;
<PAGE> 23
-16-
(xii) advances or extensions of credit on terms customary
in the industry in the form of accounts or other receivables
incurred, or prepaid film rentals, and loan and advances made in
settlement of such accounts receivable, all in the ordinary course of
business; and
(xiii) purchase money Indebtedness to finance property or
assets of the Company or any Restricted Subsidiary of the Company
acquired in the ordinary course of business in an aggregate amount
not to exceed $10.0 million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company in an amount not to exceed $5.0 million at any one time outstanding;
(iii) Investments in the Company by any Restricted Subsidiary of the Company;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and this Indenture; (iv) investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $500,000 at any one time outstanding; (vi)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with this Indenture; (vii) Investments in Unrestricted
Subsidiaries not to exceed $5.0 million at any one time outstanding plus the
proceeds from the sale of Qualified Capital Stock after the Issue Date that are
not otherwise used to make a Restricted Payment; (viii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and (ix) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with Section 4.16.
"Permitted Junior Securities" means equity interests in the Company
or debt securities of the Company, in each case as provided for in a plan of
reorganization, that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) and to all Guarantor Senior Debt
(and any debt securities issued in exchange for Guarantor Senior Debt) to the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to this Indenture that have a final maturity and a weighted
average life to maturity
<PAGE> 24
-17-
which is the same as or greater than that of the Notes and that are not secured
by any collateral.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges
or claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or any of its
Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, including
any Lien securing letters of credit issued in the ordinary course of
business consistent with past practice in connection therewith, or to
secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default
so long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and
other similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any
Capitalized Lease Obligation; provided that such Liens do not extend
to any property or asset which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in
the ordinary course of business; provided, however, that (A) the
related purchase money Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets
of
<PAGE> 25
-18-
the Company or any Restricted Subsidiary of the Company other than
the property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(ix) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and setoff;
(xi) Liens securing Interest Swap Obligations which
Interest Swap Obligations relate to Indebtedness that is otherwise
permitted under this Indenture;
(xii) Liens securing Indebtedness under Currency
Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; provided that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the incurrence
of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or
in anticipation of, the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company and (B) such
Liens do not extend to or cover any property or assets of the Company
or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company;
(xiv) Liens in favor of sellers of theaters in respect of
escrows or other deposits made in the ordinary course of business,
but in any event not exceeding 15% of the total consideration; and
(xv) 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 business.
<PAGE> 26
-19-
"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Placement Legend" means the legend initially set forth on
the Initial Notes in the form set forth in Exhibit A(1).
"pro forma" means with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors or the Chief Financial Officer of the Company in consultation
with its independent public accountants.
"Property" of any person means all types of real, personal, tangible,
intangible or mixed property owned by such person whether or not included in the
most recent consolidated balance sheet of such person and its Subsidiaries under
GAAP.
"purchase money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such person incurred in connection therewith.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means, with respect to any Note, any of the Record
Dates specified in such Note, whether or not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
<PAGE> 27
-20-
"Redemption Price," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"Reference Date" has the meaning provided in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii) or (xiii) of the definition of "Permitted
Indebtedness"), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such Refinancing)
or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" has the meaning provided in the
definition of "Exchange Offer."
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means one of the Regulation S Temporary
Global Note or the Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global note
issued following the 40-day restricted period (as defined in Regulation S) that
contains the legend set forth in Exhibit B hereto and that is deposited with the
Note Custodian and registered in the name of the Depository, representing a
series of Notes sold in reliance on Regulation S.
<PAGE> 28
-21-
"Regulation S Temporary Global Note" means a single temporary global
note in the form of the Note attached hereto as Exhibit A(3) that is deposited
with the Note Custodian and registered in the name of the Depository for the
accounts of Euroclear and Cedel, representing a series of Notes sold in reliance
on Regulation S.
"Replacement Assets" has the meaning provided in Section 4.16.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Restricted Payment" has the meaning provided in Section 4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Credit Agreement among the
Company, Silver Cinemas, Inc., as borrower, the lenders party thereto in their
capacities thereunder and DLJ Capital Funding, Inc., together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person by whom funds have
been or are to be advanced on the security of such Property.
<PAGE> 29
-22-
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other Obligations with respect to, any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "Senior Debt" shall
also include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts and
Obligations owing in respect of, (x) all Obligations of every nature of the
Company under the Revolving Credit Facility, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Senior Debt" shall not include (i) any Indebtedness of the
Company to a Subsidiary of the Company or any Affiliate of the Company or any of
such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of,
any shareholder, director, officer or employee of the Company or of any
Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by the Company, (vi) Indebtedness incurred in
violation of Section 4.12, (vii) Indebtedness 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 and (viii) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act.
"Subordinated Obligations" means any Indebtedness of the Company
which is expressly subordinated or junior in right of payment to the Notes.
"Subsidiary", with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the
<PAGE> 30
-23-
election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned
by such Person.
"Subsidiary Guarantee" means the Guarantees executed and delivered by
any Guarantor with respect to the Company's obligations under the Indenture and
the Notes.
"Surviving Entity" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.04.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
"U.S. Government Obligations" means non-callable direct obligations
of, and non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the private placement legend in the form set forth on Exhibit
A(1), including, without limitation, the Exchange Notes in the form set forth as
Exhibit A(2) hereto.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with Section
4.10 and (y) each Subsidiary to be so designated and each of its
<PAGE> 31
-24-
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12
and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
<PAGE> 32
-25-
"obligor" on the indenture securities means the Company, the
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if any.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular; and
(5) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the Guarantees,
if any, and the Trustee's certificate of authentication shall be substantially
in the form of Exhibit A(1) hereto (except that during the "40-day restricted
period" as defined in Regulation S the Initial Notes issued to Non-U.S. persons
shall be substantially in the form of Exhibit A(3)). The Exchange Notes, the
notation thereon relating to the Guarantees, if any, and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A(2)
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or depository rule or usage. The Company and the Trustee
shall approve the form of the Notes and any notation, legend or endorsement on
them. Each Note shall be dated the date of its issuance.
<PAGE> 33
-26-
The terms and provisions contained in the Notes and the Guarantees,
if any, annexed hereto as Exhibits A(1), A(2) and A(3), shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company, the Guarantors, if any, and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A(1) (the "Global Note"),
deposited with the Trustee, as custodian for the Depository, and shall bear the
legend set forth in Exhibit B, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in connection with the Offering by the Initial
Purchaser in reliance on Regulation S, if any, shall be issued initially in the
form of the Regulation S Temporary Global Note, which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, as
custodian for the Depository, and registered in the name of the Depository or
the nominee of the Depository for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. Until termination of the "40-day restricted
period" (as defined in Regulation S) ownership of beneficial interests in the
Regulation S Temporary Global Note will be limited to Persons that have accounts
with Euroclear or Cedel or Persons who hold interests through Euroclear or
Cedel, and any resale or transfer of such interests to U.S. Persons (within the
meaning of Regulation S) shall not be permitted during the 40-day restricted
period unless such resale or transfer is made pursuant to Rule 144A or
Regulation S. The 40-day restricted period shall be terminated upon the receipt
by the Trustee of (i) a written certificate from the Depository, together with
copies of certificates from Euroclear and Cedel certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
pursuant to another exemption from registration under the Securities Act and who
will take delivery of a beneficial ownership interest in a 144A Global Note, all
as contemplated by Section 2.16(a)(ii) hereof), and (ii) an Officer's
Certificate from the Company. Within a reasonable period of time following the
expiration of the 40-day restricted period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in the Regulation S Permanent Global Note upon delivery to DTC of certification
of compliance with the transfer restrictions applicable to the Notes and
pursuant to Regulation S under the Securities Act as hereinafter provided.
Following the termination of the 40-day restricted period, beneficial interests
in the Regulation S Permanent Global Note may also be held through organizations
other than Cedel or Euroclear that are Participants. The aggregate principal
amount of the
<PAGE> 34
-27-
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "Management Regulations" and "Instructions
to Participants" of Cedel shall be applicable to interests in the Regulation S
Global Note, if any, that are held by Participants through Euroclear or Cedel.
Neither the Company nor the Trustee shall have any obligation to notify Holders
of any such procedures or to monitor or enforce compliance with the same.
Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A
may be issued, in the form of permanent certificated Notes in registered form,
in substantially the form set forth in Exhibit A(1) (the "Physical Notes").
SECTION 2.02. Execution and Authentication; Aggregate Principal
Amount.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. Each Guarantor, if any, shall execute the Guarantee in the manner set
forth in Section 11.09.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $115,000,000 in one or more
series and (ii) Unrestricted Notes from time to time only (x) in exchange for a
like principal amount of Initial Notes or (y) in an aggregate principal amount
of not more than the excess of $115,000,000 over the sum of the aggregate
principal amount of (A) Initial Notes then outstanding and (B) Unrestricted
Notes issued in accordance with (ii)(x) above, in each case upon a written order
of the Company in the form of an Officers' Certificate of the Company. Each such
written order shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated,
<PAGE> 35
-28-
whether the Notes are to be Initial Notes, or Unrestricted Notes and whether the
Notes are to be issued as Physical Notes or Global Notes or such other
information as the Trustee may reasonably request. In addition, with respect to
authentication pursuant to clauses (ii) of the first sentence of this paragraph,
the first such written order from the Company shall be accompanied by an Opinion
of Counsel of the Company in a form reasonably satisfactory to the Trustee to
the effect that the issuance of the Unrestricted Notes does not give rise to an
Event of Default, complies with this Indenture and has been duly authorized by
the Company. The aggregate principal amount of Notes outstanding at any time may
not exceed $115,000,000, except as provided in Section 2.07.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (ii) of the first sentence of the immediately
preceding paragraph, the Company shall use its best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; provided, however, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Company may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company, upon
<PAGE> 36
-29-
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Neither the Company nor any
Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days prior written notice to the
Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Articles Ten and Eleven, each Paying Agent
shall hold in trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or interest on, the
Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and the Company and the Paying Agent shall notify
the Trustee in writing of any Default by the Company (or any other obligor on
the Notes) in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account for
any assets disbursed and the Trustee may at any time during the continuance of
any payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee as of each Record Date and before
each related Interest Payment Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
<PAGE> 37
-30-
reasonably require of the names and addresses of Noteholders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transaction are met; provided, however, that the Notes presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of transfer
and exchanges, the Company shall issue and execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made to a Noteholder for any registration of transfer or
exchange. The Company may require from such Noteholder payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Section 2.10, 3.06, 4.15,
4.16 or 9.06, in which event the Company shall be responsible for the payment of
such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and execute and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an affidavit of lost certificate and an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss
<PAGE> 38
-31-
which any of them may suffer if a Note is replaced. The Company may charge such
Holder for its reasonable out-of-pocket expenses in replacing a Note, including
reasonable fees and expenses of the Trustee and counsel and the Trustee may
charge the Company for the Trustee's reasonable out-of-pocket expenses in
replacing such Note. Every replacement Note shall constitute an additional
Obligation of the Company.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company, any Guarantor or any of their respective Affiliates holds
the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company, any Guarantor or any of their respective Affiliates shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of the Trustee
actually knows are so owned shall be so considered. The Company shall notify the
Trustee, in writing, when it or any of its Affiliates repurchases or otherwise
acquires Notes, and of the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary
<PAGE> 39
-32-
Notes to be authenticated and the date on which the temporary Notes are to be
authenticated, and shall direct the Trustee to authenticate such Notes and
certify that all conditions precedent to the issuance of such Notes contained
herein have been complied with. Temporary Notes shall be substantially in the
form of definitive Notes but may have variations that the Company and the
Trustee consider appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.02 definitive Notes in
exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall (subject
to the record-retention requirements of the Exchange Act) dispose of all Notes
surrendered for registration of transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company or
any Guarantor shall acquire any of the Notes, such acquisition shall not operate
as a redemption or satisfaction of the Indebtedness represented by such Notes
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification
<PAGE> 40
-33-
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m, New York City time, on each Interest Payment Date
and on the Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Note.
(a) Each Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Only Persons who acquire Notes in transfers made pursuant to Rule
144A, Rule 144 under the Securities Act or pursuant to an effective registration
statement under the Securities Act and in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction are permitted to take delivery in the form of a beneficial interest
in a Rule 144A Global Note. Only Persons who acquire Notes in transfers made
pursuant to Regulation S are permitted to take delivery in the form of a
beneficial interest in a Regulation S Global Note. Interests of beneficial
owners in the Global Note may be transferred or exchanged for Physical Notes in
accordance with the rules and procedures of the Depository and the provisions of
Section 2.16. In addition, Physical Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in the Global Note if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Note and a successor depositary
<PAGE> 41
-34-
is not appointed by the Company within 90 days of such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has received a
request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraph (d) of Section 2.16, bear the
legend regarding transfer restrictions applicable to the Physical Notes set
forth in Exhibit A(1).
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.16. Special Transfer Provisions.
(a) Transfers and Exchanges of Global Notes. Transfers of beneficial
interests in the Global Notes to Persons required to take delivery thereof in
the form of an interest in another Global Note shall be permitted as follows:
(i) 144A Global Note to Regulation S Global Note. If, at
any time, an owner of a beneficial interest in a 144A Global Note
deposited with the Depository (or the Trustee as custodian for the
Depository) wishes to transfer its beneficial interest in such 144A
Global Note to a Person who is required or permitted to take delivery
thereof in the form of an interest in a Regulation S Global Note,
such owner shall, subject to the Applicable Procedures, exchange or
cause the exchange of such interest for an equivalent beneficial
interest in a Regulation S Global Note as provided in this Section
2.16(a)(i). Upon receipt by the Trustee of (A) instructions given in
accordance
<PAGE> 42
-35-
with the Applicable Procedures from a Participant directing the
Trustee to credit or cause to be credited a beneficial interest in
the Regulation S Global Note in an amount equal to the beneficial
interest in the 144A Global Note to be exchanged, (B) a written order
given in accordance with the Applicable Procedures containing
information regarding the Participant account of the Depository and
the Euroclear, Cedel or other Participant account to be credited with
such increase, and (C) a certificate in the form of Exhibit C(1)
hereto given by the owner of such beneficial interest stating that
the transfer of such interest has been made in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 of Regulation S, then the
Trustee, as Registrar, shall instruct the Depository to reduce or
cause to be reduced the aggregate principal amount of the applicable
144A Global Note and to increase or cause to be increased the
aggregate principal amount of the applicable Regulation S Global Note
by the principal amount of the beneficial interest in the 144A Global
Note to be exchanged or transferred, to credit or cause to be
credited to the account of the Person specified in such instructions,
a beneficial interest in the Regulation S Global Note equal to the
reduction in the aggregate principal amount at maturity of the 144A
Global Note, and to debit, or cause to be debited, from the account
of the Person making such exchange or transfer of the beneficial
interest in the 144A Global Note that is being exchanged or
transferred.
(ii) Regulation S Global Note to 144A Global Note. If, at
any time, an owner of a beneficial interest in a Regulation S Global
Note deposited with the Depository or with the Trustee as custodian
for the Depository wishes to transfer its beneficial interest in such
Regulation S Global Note to a Person who is required or permitted to
take delivery thereof in the form of an interest in a 144A Global
Note, such owner shall, subject to the Applicable Procedures,
exchange or cause the exchange of such interest for an equivalent
beneficial interest in a 144A Global Note as provided in this Section
2.16(a)(ii). Upon receipt by the Trustee of (A) instructions from
Euroclear, Cedel or another Participant, if applicable, and the
Depository, directing the Trustee, as Registrar, to credit or cause
to be credited a beneficial interest in the 144A Global Note equal to
the beneficial interest in the Regulation S Global Note to be
exchanged, such instructions to contain information regarding the
Participant account with the Depository to be credited with such
increase, (B) a written order given in accordance with the Applicable
Procedures containing information regarding the Participant account
of the Depository and (C) a certificate in the form of Exhibit C(2)
attached hereto given by the owner of such beneficial interest
stating (1) if the transfer is pursuant to Rule 144A, that the Person
transferring such interest in a Regulation S Global Note reasonably
believes that the Person acquiring such interest in a 144A Global
Note is a QIB and is obtaining such beneficial interest in a
transaction meeting the requirements of Rule 144A, (2) that the
transfer complies with the requirements of Rule 144 under the
Securities Act, or (3) that the transfer is being
<PAGE> 43
-36-
effected pursuant to an effective registration statement under the
Securities Act and in each case of clause (1), (2) or (3) above, in
accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction, then the Trustee,
as Registrar, shall instruct the Depository to reduce or cause to be
reduced the aggregate principal amount at maturity of such Regulation
S Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable 144A Global Note by
the principal amount at maturity of the beneficial interest in the
Regulation S Global Note to be exchanged or transferred, and the
Trustee, as Registrar, shall instruct the Depository, concurrently
with such reduction, to credit or cause to be credited to the account
of the Person specified in such instructions a beneficial interest in
the applicable 144A Global Note equal to the reduction in the
aggregate principal amount at maturity of such Regulation S Global
Note and to debit or cause to be debited from the account of the
Person making such transfer the beneficial interest in the Regulation
S Global Note that is being exchanged or transferred.
(b) Transfer and Exchange of Physical Notes. When Physical Notes are
presented by a Holder to the Registrar with a request to register the transfer
of the Physical Notes or to exchange such Physical Notes for an equal principal
amount of Physical Notes of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested only if the Physical
Notes are presented or surrendered for registration of transfer or exchange, are
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by such Holder or by his attorney and containing
a signature guarantee, duly authorized in writing, and the Registrar received
the following documentation (all of which may be submitted by facsimile):
(i) in the case of Physical Notes that are Restricted
Securities, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Restricted Security is being
delivered to the Registrar by a Holder for registration in
the name of such Holder, without transfer, or such
Restricted Security is being transferred to the Company or
any of its Subsidiaries, a certification to that effect
from such Holder (in substantially the form of Exhibit
C(3) hereto);
(B) if such Restricted Security is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a
<PAGE> 44
-37-
certification to that effect from such Holder (in
substantially the form of Exhibit C(3) hereto);
(C) if such Restricted Security is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 904 under the
Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit C(3) hereto);
(D) if such Restricted Security is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those listed
in subparagraphs (B) or (C) above, a certification to that
effect from such Holder (in substantially the form of
Exhibit C(3) hereto), a certification substantially in the
form of Exhibit D hereto from the transferee, and, if such
transfer is in respect of an aggregate principal amount of
Notes of less than $100,000, an Opinion of Counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act and any applicable blue
sky laws of any state of the United States; or
(E) if such Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit C(3) hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Company and to the Registrar
to the effect that such transfer is in compliance with the
Securities Act and any applicable blue sky laws of any
state of the United States.
(c) Transfer of a Beneficial Interest in a 144A Global Note or
Regulation S Global Note for a Physical Note.
(i) Any Person having a beneficial interest in a 144A
Global Note and, after the termination of the 40-day restricted
period, any Person having a beneficial interest in a Regulation S
Permanent Global Note may upon request, subject to the Applicable
Procedures, exchange such beneficial interest for a Physical Note,
upon receipt by the Trustee of written instructions or such other
form of instructions as is customary for the Depository (or
Euroclear, Cedel or another Participant, if applicable), from the
Depository or its nominee on behalf of any Person having a beneficial
interest in a 144A Global Note or Regulation S Permanent Global Note,
and, in the case of a Restricted Security, the following additional
information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depository as
being the beneficial owner or to the Com-
<PAGE> 45
-38-
pany or any of its Subsidiaries, a certification to that
effect from such Person (in substantially the form of
Exhibit C(4) hereto);
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from the transferor (in substantially the form
of Exhibit C(4) hereto);
(C) if such beneficial interest is being
transferred to an Institutional Accredited Investor,
pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based
on an opinion of counsel if the Company so requests) other
than those listed in subparagraph (B) above, a
certification to that effect from such Holder (in
substantially the form of Exhibit C(4) hereto) and a
certification from the applicable transferee (in
substantially the form of Exhibit D hereto) and, if such
transfer is in respect of an aggregate principal amount of
Notes of less than $100,000, an Opinion of Counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act and any applicable blue
sky laws of any state of the United States; or
(D) if such beneficial interest is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit C(4) hereto) and an
Opinion of Counsel from the transferee or the transferor
reasonably acceptable to the Company and to the Registrar
to the effect that such transfer is in compliance with the
Securities Act and any applicable blue sky laws of any
state of the United States,
in which case the Trustee or the Note Custodian, at the direction of
the Trustee, shall, in accordance with the standing instructions and
procedures existing between the Depository and the Note Custodian,
cause the aggregate principal amount of 144A Global Notes or
Regulation S Permanent Global Notes, as applicable, to be reduced
accordingly and, following such reduction, the Company shall execute
and the Trustee shall authenticate and deliver to the transferee a
Physical Note in the appropriate principal amount.
(ii) Physical Notes issued in exchange for a beneficial
interest in a 144A Global Note or Regulation S Global Note, as applicable,
pursuant to this Section 2.16(c) shall be registered in such names and in such
authorized denominations as the Depository, pursuant to instructions from its
Participants or Indirect Participants or otherwise, shall instruct the
<PAGE> 46
-39-
Trustee. The Trustee shall deliver such Physical Notes to the Persons in whose
names such Notes are so registered.
(d) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the requested transfer is after April 16,
2000 and the transferor certifies that the Restricted Security was not acquired
from the Company or an Affiliate of the Company less than two years prior to the
date of the proposed transfer or (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(e) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16
for a period of three years. The Company shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph Six of
the Notes, it shall notify both the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 30 days before the Redemption Date (unless a shorter notice period
shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf
of the Trustee), together with an Officers' Certificate
<PAGE> 47
-40-
and Opinion of Counsel stating that such redemption shall comply with the
conditions contained herein and in the Notes.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed on a pro rata basis, by lot or in such other
fair and appropriate manner chosen at the discretion of the Trustee and, if the
Notes are listed on any securities exchange, by a method that complies with the
requirements of such exchange; provided, however, that if partial redemption is
made with the proceeds of a Equity Offering prior to April 15, 2001, selection
of the Notes or portions thereof for redemption shall be made by the Trustee
only on a pro rata basis unless such method is otherwise prohibited. The Trustee
shall make the selection from the Notes outstanding and not previously called
for redemption and shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes in denominations
of $1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the Trustee and any Paying Agent.
Each notice for redemption shall identify the Notes to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price plus accrued
interest, if any;
<PAGE> 48
-41-
(6) that, unless (a) the Company defaults in making the
redemption payment or (b) such redemption payment is prohibited
pursuant to Article Ten or Eleven or otherwise, interest on Notes
called for redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such Notes is to
receive payment of the Redemption Price plus accrued interest, if
any, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of
the principal amount (equal to $1,000 or any integral multiple
thereof) of such Note to be redeemed and that, on or after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be
outstanding after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption, unless prohibited
pursuant to Article Ten or Eleven or otherwise pursuant to this Indenture, shall
be paid at the Redemption Price (which shall include accrued interest thereon to
the Redemption Date), but installments of interest, the maturity of which is on
or prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant record dates referred to in the Notes.
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent in immediately available funds U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes or portions
thereof to be redeemed on that date. The Paying Agent shall promptly return to
the Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
If the Company complies with the preceding paragraph and payment of
the Notes is not prohibited under Article Ten or Eleven or otherwise, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be
<PAGE> 49
-42-
redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Notes are presented for payment.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Company
shall issue and execute, and the Trustee shall authenticate for the Holder, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior 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 address of the
Trustee set forth in Section 12.02.
<PAGE> 50
-43-
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do
or cause to be done, at its own cost and expense, all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each of the Restricted Subsidiaries in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) of the Company and each such
Restricted Subsidiary; provided, however, that the Company shall not be required
to preserve, with respect to itself, any material right and, with respect to any
of its Subsidiaries, any such existence or material right, if the Board of
Directors of the Company shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries, taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
its Properties or any of its Subsidiaries' Properties and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon its Properties or any of its Subsidiaries' Properties,
except, in each case, as would not be, in the aggregate, reasonably likely to
have a material adverse effect on the business and financial condition of the
Company and its Restricted Subsidiaries, taken as a whole; 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 properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its Properties in good working order and condition
(subject to ordinary wear and tear) and make all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto and actively
conduct and carry on its business, unless the failure to do so, in each case,
would not be, in the aggregate, reasonably likely to have a material adverse
effect on the business and financial condition of the Company and its Restricted
Subsidiaries, taken as a whole; provided, however, that nothing in this Section
4.05 shall prevent the Company or any of its Restricted Subsidiaries from
discontinuing the operation and maintenance of any of its Properties if such
discontinuance is, in the good faith judgment of the Board of Directors or other
governing body of the Company or the Restricted Subsidiary concerned, as the
case may
<PAGE> 51
-44-
be, desirable in the conduct of its businesses and is not disadvantageous in any
material respect to the Holders.
(b) The Company shall maintain insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Company, are adequate and appropriate for the conduct of the
business of the Company and its Restricted Subsidiaries in a prudent manner,
with reputable insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with such deductibles,
and by such methods as shall be customary, in the good faith judgment of the
Company, for companies similarly situated in the industry, except for any
omissions thereof which would not be, in the aggregate, reasonably likely to
have a material adverse effect on the business and financial condition of the
Company and its Restricted Subsidiaries, taken as a whole.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate which complies
with TIA Section 314(a)(4) stating that a review of its activities during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its Obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of such Officer's
knowledge the Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such covenant and the Obligations
contained in this Indenture and the Notes and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to then current recommendations of the
American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent accountants (who shall be a firm of
established national reputation) that in conducting their audit of such
financial statements nothing has come to their attention that would lead them to
believe that the Company has violated any provisions of Article Four or Five or
Section 6.01 insofar as they relate to accounting matters or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any person for any failure to obtain knowledge of any such
violation.
<PAGE> 52
-45-
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 12.02 hereof,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action (including any action the Company
is taking or proposes to take in respect thereof) within thirty days of such
occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall, and shall cause each of its Subsidiaries to,
comply with all applicable statutes, rules, regulations, orders and restrictions
of the United States of America, all states and municipalities thereof, and of
any governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of its
businesses and the ownership of its properties, except for such noncompliances
as are not in the aggregate reasonably likely to have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.08. SEC Reports.
(a) The Company shall file with the SEC all information, documents
and reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is subject to such filing requirements
so long as the SEC will accept such filings. The Company (at its own expense)
shall file with the Trustee within 15 days after it files them with the SEC,
copies of the quarterly and annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a).
(b) At the Company's expense, regardless of whether the Company is
required to furnish such reports and other information referred to in paragraph
(a) above to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar within
15 days after it files them with the SEC.
(c) Prior to the consummation of the Exchange Offer, the Company
shall provide to any Holder any information reasonably requested by such Holder
concerning the Company (including financial statements) necessary in order to
permit such Holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act.
<PAGE> 53
-46-
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor, if any, hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes or any Preferred Stock of a Restricted Subsidiary or (d)
make any Investment (other than Permitted Investments) (each of the foregoing
actions set forth in clauses (a), (b), (c) and (d) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or immediately
after giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12 or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (w) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned during
the period beginning on the first day of the fiscal quarter after the Issue Date
and ending on the last day of the fiscal quarter ending at least 30 days prior
to the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a
<PAGE> 54
-47-
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital Stock of the
Company (excluding any such proceeds that have been used to make Investments in
Unrestricted Subsidiaries pursuant to clause (vii) of the definition of
Permitted Investments); plus (y) without duplication of any amounts included in
clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (y), any net cash proceeds
from a Equity Offering to the extent used to redeem the Notes); plus (z) to the
extent that any Investment (other than a Permitted Investment) that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Investment.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes or any Preferred Stock of a Restricted Subsidiary
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company
from employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees, in an aggregate amount not to exceed $500,000 in any calendar year or
$2.5 million in the aggregate; (5) so long as no Default or Event of Default has
occurred and is continuing, amounts paid by the Company or its Subsidiaries to
Brentwood in accordance with the Administrative Services Agreement. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii) and (4) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
<PAGE> 55
-48-
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
the Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $1.0 million shall be approved by the disinterested members of the
Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution filed with the Trustee
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If the Company or any Restricted
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $5.0 million, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by this Indenture; (iii) any agreement as in effect as of the Issue
Date or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) so long as no Default or Event of Default has occurred and
is continuing, amounts paid by the Company or its Subsidiaries to Brentwood in
accordance with the Administrative Services Agreement; and (v) Restricted
Payments permitted by this Indenture.
<PAGE> 56
-49-
SECTION 4.12. Limitation on Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
its Restricted Subsidiaries may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of (1) applicable law; (2) this Indenture; (3) the Revolving Credit
Facility; (4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of the Company; (5)
any instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) restrictions arising by
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business and consistent with past practices; (8) restrictions
contained in purchase money or capital lease obligations for property acquired
in the ordinary course of business; (9) any customary restriction or encumbrance
contained in contracts for sales of assets or sales of Capital Stock of
Restricted Subsidiaries permitted by this Indenture; or (10) an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness, taken as a whole, are no less
favorable to the Company in any material respect than the provisions relating to
such encumbrance or restriction contained in agreements whose Indebtedness is
being refinanced.
<PAGE> 57
-50-
SECTION 4.14. Limitation on Additional Senior Subordinated
Indebtedness.
The Company shall not incur or suffer to exist Indebtedness that is
senior in right of payment to the Notes and subordinate in right of payment to
any other Indebtedness of the Company.
SECTION 4.15. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall
offer to purchase all of the Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to
(i) repay in full and terminate all commitments under Indebtedness under the
Revolving Credit Facility and all other Senior Debt or Guarantor Senior Debt the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Revolving
Credit Facility and all other such Senior Debt or Guarantor Senior Debt and to
repay the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Revolving Credit Facility and all other
Senior Debt to permit the repurchase of the Notes as provided below. The Company
shall first comply with the covenant in the immediately preceding sentence
before it shall be required to repurchase Notes pursuant to the provisions
described below.
(b) Within 30 days following the date upon which the Change of
Control occurred, the Company shall send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Notes tendered will be
accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30
days nor later than 45 days from the date such notice is mailed,
other than as may be required by law) (the "Change of Control Payment
Date");
(3) that any Note not tendered will continue to accrue
interest if interest is then accruing;
<PAGE> 58
-51-
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender
the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the
address specified in the notice prior to 5:00 p.m., New York City
time, on the third Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased; and
(7) the circumstances and relevant facts regarding such
Change of Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all Notes
or portions thereof so tendered and accepted and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail or deliver to the Holders of Notes so accepted payment in an amount equal
to the purchase price plus accrued interest, if any, and the Company shall
execute and issue, and the Trustee shall promptly authenticate and mail or
deliver to such Holders new Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
(c) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
<PAGE> 59
-52-
Notwithstanding the foregoing, the Company shall not be required to
make a Change of Control Offer upon a Change of Control if a third party makes
the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in this Indenture applicable to a
Change of Control Offer made by the Company, including any requirements to repay
in full the Revolving Credit Facility, any such Senior Debt or Guarantor Senior
Debt or obtain the consents of such lenders to such Change of Control Offer as
set forth in the second paragraph of this Section, and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless: (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors); (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and (iii) upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 360 days of receipt thereof either
(A) to prepay any Senior Debt or Guarantor Senior Debt and, in the case of any
Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect
a permanent reduction in the availability under such revolving credit facility,
(B) to make any investment in assets which constitute or are part of businesses
which are materially related to the business of the Company and its Subsidiaries
as of the Issue Date or in 100% of the issued and outstanding Capital Stock of a
Person the assets of which are principally comprised of such assets
("Replacement Assets"), or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). On the 361st day after
an Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B)
and (iii)(C) of the preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as
<PAGE> 60
-53-
the case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to any
such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this Section 4.16. The Company may defer the
Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5,000,000, shall be applied as required pursuant
to this paragraph).
Notwithstanding the immediately preceding paragraph, the Company and
its Restricted Subsidiaries shall be permitted to consummate an Asset Sale
without complying with such paragraph to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that if the total consideration
with respect to such Asset Sale is greater than $10.0 million (as determined in
good faith by the Company's Board of Directors), the Company shall obtain a
fairness opinion from an Independent Financial Advisor; provided, further, that
any consideration not constituting Replacement Assets received by the Company or
any of its Restricted Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph shall constitute Net Cash Proceeds
subject to the provisions of the immediately preceding paragraph.
Each Net Proceeds Offer shall be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 business days or such longer
period as may be required by law.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
<PAGE> 61
-54-
SECTION 4.17. Limitation on Liens.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Notes and
the Guarantees; (D) Liens in favor of the Company or a Restricted Subsidiary of
the Company; (E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under this
Indenture and which has been incurred in accordance with the provisions of this
Indenture; provided, however, that such Liens (A) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such Liens
than the Liens in respect of the Indebtedness being Refinanced and (B) do not
extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
SECTION 4.18. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary that is not a Guarantor,
or if the Company or any of its Restricted Subsidiaries shall organize, acquire
or otherwise invest in another Restricted Subsidiary having total assets with a
book value in excess of $500,000, then such transferee or acquired or other
Restricted Subsidiary shall (i) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes and this Indenture on the terms set forth
in this Indenture and (ii) deliver to the Trustee an opinion of counsel that
such supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
<PAGE> 62
-55-
SECTION 4.19. Conduct of Business.
The Company and its Restricted Subsidiaries shall not engage in any
businesses which are not the same, similar or related to the businesses in which
the Company and its Restricted Subsidiaries are engaged on the Issue Date.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of Section 4.12; (iii) immediately before and immediately after
giving effect to such transaction and the assumption contemplated by clause
(i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred and be continuing; and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each
<PAGE> 63
-56-
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with the
applicable provisions of this Indenture and that all conditions precedent in
this Indenture relating to such transaction have been satisfied.
(b) For purposes of clause (a) above, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
shall not, and the Company shall not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma basis,
the Company could satisfy the provisions of clause (ii) of the first paragraph
of this Section 5.01. Any merger or consolidation of a Guarantor with and into
the Company (with the Company being the surviving entity) or another Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company need only comply
with clause (iv) of the first paragraph of this Section 5.01.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
<PAGE> 64
-57-
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs upon:
(1) the failure by the Company to pay interest on any Notes
when the same becomes due and payable and the default continues for a
period of 30 days (whether or not such payment shall be prohibited by
the subordination provisions of this Indenture);
(2) the failure by the Company to pay the principal on any
Notes, when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Notes tendered pursuant to a Change of Control Offer or a
Net Proceeds Offer) (whether or not such payment shall be prohibited
by the subordination provisions of this Indenture);
(3) the default by the Company or any Guarantor in the
observance or performance of any other covenant or agreement
contained in this Indenture which default continues for a period of
30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the
Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to
Section 5.01, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement);
(4) the failure to pay at final maturity (giving effect to
any applicable grace periods and any extensions thereof) the
principal amount of any Indebtedness of the Company or any Restricted
Subsidiary of the Company, or the acceleration of the final stated
maturity of any such Indebtedness if the aggregate principal amount
of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $5.0 million or
more at any time;
(5) one or more judgments in an aggregate amount in excess
of $5.0 million shall have been rendered against the Company or any
of its Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and non-appealable;
(6) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (B)
<PAGE> 65
-58-
consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy
Law, (C) consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against
it, (E) makes a general assignment for the benefit of its creditors,
or (F) takes any corporate action to authorize or effect any of the
foregoing;
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding under
any Bankruptcy Law, which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any of its Significant
Subsidiaries, (B) appoint a Custodian of the Company or any of its
Significant Subsidiaries or for substantially all of its property or
(C) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(8) any of the Guarantees ceases to be in full force and
effect or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid or any
of the Guarantors denies its liability under its Guarantee (other
than by reason of release of a Guarantor in accordance with the terms
of this Indenture).
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (6) of Section 6.01 with respect to the Company) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
outstanding Notes may declare the principal of and accrued interest on all the
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Revolving Credit Facility, shall become immediately due and payable upon the
first to occur of an acceleration under the Revolving Credit Facility or five
Business Days after receipt by the Company and the Representative under the
Revolving Credit Facility of such Acceleration Notice. If an Event of Default
specified in clause (6) of Section 6.01 occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on all
of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
<PAGE> 66
-59-
In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in clause (4) of Section 6.01, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (4) of Section 6.01 have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (i) the annulment of the acceleration of the
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction, and (ii) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived. At any time after a
declaration of acceleration with respect to the Notes as described in the
preceding paragraph, the Holders of a majority in principal amount of the Notes
may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (iii) to the
extent the payment of such interest is lawful, interest on overdue installments
of interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (6) of Section 6.01, the
Trustee shall have received an officers' certificate and an opinion of counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Waiver of Past Defaults.
Subject to Sections 2.09, 6.06 and 9.02, the Holders of a majority in
principal amount of the Notes may waive any existing Default or Event of Default
under this Indenture, and its consequences, except a default in the payment of
the principal of or interest on any Notes as specified in clauses (1) and (2) of
Section 6.01. When a Default or Event of Default is waived, it is cured and
ceases.
SECTION 6.04. Control by Majority.
Subject to Section 2.09, Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Indenture and under the TIA.
Subject to the provisions of this Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under this Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable indemnity.
Subject to all provisions of this Indenture and applicable law, the Holders of a
majority in aggregate principal amount of the then outstanding Notes have the
right to direct the time, method and place of
<PAGE> 67
-60-
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
SECTION 6.05. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 30
days after receipt of the request and the offer of satisfactory
indemnity; and
(5) during such 30-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with
the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof); provided that upon institution of
any proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.06. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
<PAGE> 68
-61-
SECTION 6.07. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, any Guarantor, if any, or any other obligor on the Notes for the whole
amount of principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Notes, and 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.
SECTION 6.08. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings 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 to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section 7.07. The
Company's payment obligations under this Section 6.08 shall be secured in
accordance with the provisions of Section 7.07. Nothing herein contained 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.
SECTION 6.09. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
<PAGE> 69
-62-
Second: subject to Articles Ten and Eleven, to Holders for
amounts due and unpaid on the Notes for interest and premium,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest and premium,
respectively;
Third: subject to Articles Ten and Eleven, to Holders for
amounts due and unpaid on the Notes for principal, ratably without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal; and
Fourth: subject to Articles Ten and Eleven, to the
Company, the Guarantors, if any, or any other obligor on the Notes,
as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.09.
SECTION 6.10. 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 or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.10 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.06, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Notes.
SECTION 6.11. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note 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 the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
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.
<PAGE> 70
-63-
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and the TIA and no others
and no covenants or obligations shall be implied in this Indenture
against the Trustee. To the extent of any conflict between the duties
of the Trustee hereunder and under the TIA, the TIA shall control.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificate or
opinion which by any provision hereof is specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.02, 6.03 or 6.04.
<PAGE> 71
-64-
(d) 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.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to
be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an
Opinion of Counsel, or both, which shall conform to Sections 12.04
and 12.05. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, 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.
<PAGE> 72
-65-
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have offered
to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction.
(g) The Trustee may consult with counsel and the advice or
opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of
any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(h) The Trustee shall not be charged with knowledge of any
Defaults or Events of Default unless either (1) a Trust Officer of
the Trustee shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default
shall have been given to the Trustee by any Holder or by the Company
or any other obligor on the Notes or any holder of Senior Debt or
Guarantor Senior Debt or any representative thereof.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, the
Trustee may withhold the notice if and so long as its Board of Directors, the
<PAGE> 73
-66-
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA Section 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Holder a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Sections 313(b) and (c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties under
this Indenture. Such expenses shall include the reasonable fees and expenses of
the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, directors and shareholders for, and hold it harmless against, any
loss, liability or expense incurred by it except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on its part, arising
out of or in connection with the administration of this trust including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the Trustee's sole discretion, the Company shall
defend the claim and the Trustee shall provide reasonable cooperation and may
participate at the Company's expense in the defense. Alternatively, the Trustee
may at its option have separate counsel of its own choosing and the Company
shall pay the reasonable fees and expenses of such counsel; provided that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense, there is no conflict of interest between the Company and the
Trustee in connection with such defense as reasonably determined by the Trustee
and no
<PAGE> 74
-67-
Default or Event of Default has occurred and is continuing. The Company need not
pay for any settlement made without its written consent, which consent shall not
be unreasonably withheld. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or 6.01(7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's Obligations pursuant to Article Eight or the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
<PAGE> 75
-68-
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; provided that such corporation shall be otherwise qualified
and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in
the case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
<PAGE> 76
-69-
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Notes have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused
to be deposited with the Trustee or a trustee satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee, as trust funds in trust
solely for the benefit of the Holders for that purpose, U.S. Legal
Tender in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any,
and interest on the outstanding Notes to maturity or redemption;
provided that the Trustee shall have been irrevocably instructed to
apply such U.S. Legal Tender to the payment of said principal,
premium, if any, and interest with respect to the Notes; and
provided, further, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior
Debt pursuant to the provisions of Article Ten or Eleven;
<PAGE> 77
-70-
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company
is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by
it hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent providing for the termination of the
Company's obligations under the Notes and this Indenture have been
complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under the
Revolving Credit Facility (if then in effect) or any other agreement
or instrument then known to such counsel that binds or affects the
Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.03, be
deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.04 and the other Sections of
this Indenture referred to in (i) and (ii) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
<PAGE> 78
-71-
under Section 8.03 shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Debt or Guarantor Senior Debt under Article Ten
or Eleven, as the case may be, or otherwise, except for the following
provisions, which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.04, and as more fully set forth in such
Section, payments in respect of the principal of and interest on such Notes when
such payments are due, (ii) the Company's obligations with respect to such Notes
under Article Two and Section 4.02, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (iv) this Article Eight. Subject to compliance with this Article
Eight, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be released from its
obligations under the covenants contained in Sections 4.03 through 4.08 and 4.10
through 4.19 and Article Five with respect to the outstanding Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
shall cease to be subject to any obligations to, or the rights of, any holder of
Senior Debt or Guarantor Senior Debt under Article Ten or Eleven or otherwise.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Notes, 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
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3), but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby. In addition, upon the Company's exercise
under paragraph (a) hereof of the option applicable to this paragraph (c),
subject to the satisfaction of the conditions set forth in Section 8.03, those
events described in Section 6.01 (except those events described in Section
6.01(1), (2), (6) and (7)) shall not constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) to the outstanding Notes:
<PAGE> 79
-72-
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, U.S. Legal Tender or U.S.
Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the Notes on the stated date for payment thereof
or on the applicable redemption date, as the case may be, of such
principal or installment of principal of or interest on the Notes;
provided that the Trustee shall have received an irrevocable written
order from the Company instructing the Trustee to apply such U.S.
Legal Tender or the proceeds of such U.S. Government Obligations to
said payments with respect to the Notes;
(b) in the case of an election under Section 8.02(b), the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) 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 of Counsel shall confirm that, the Holders of the Notes
will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.02(c), the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming
that the Holders of the Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default or event which with
notice or lapse of time or both would become a Default or an Event of
Default with respect to the Notes shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or
insofar as Sections 6.01(6) and 6.01(7) are concerned, at any time in
the period ending on the 91st day after the date of such deposit;
<PAGE> 80
-73-
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a default under this
Indenture, the Revolving Credit Facility or any other material
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that (i) the trust funds will not be
subject to any rights of any holders of Senior Debt, including,
without limitation, those arising under this Indenture, and (ii)
assuming no intervening bankruptcy or insolvency of the Company
between the date of deposit and the 91st day following the deposit,
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law.
SECTION 8.04. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary not withstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 hereof 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 that
<PAGE> 81
-74-
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
SECTION 8.05. Repayment to the Company or the Guarantors.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company, or if deposited with the Trustee by any Guarantor,
to such Guarantor, upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon request any money held by them for the payment of principal or
interest that remains unclaimed for two years; provided that the Trustee or such
Paying Agent, before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general circulation in
the City of New York or mail to each Holder entitled to such money notice that
such money remains unclaimed and that after a date specified therein which shall
be at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company or a
Guarantor. After payment to the Company or a Guarantor, as the case may be,
Noteholders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.06. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
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) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable, or are by their terms to become due
and payable within one year or are to be called for redemption within one year
upon delivery of notice under arrangements satisfactory to the Trustee, and the
Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the date of deposit
together with irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as the case
may be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of
<PAGE> 82
-75-
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Guarantor's obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Article Eight; provided that if the Company or any Guarantor, as
the case may be, has made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Company or any Guarantor,
as the case may be, shall be subrogated to the rights of the Holders of such
Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture, the Notes or any Guarantee
without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
provided that such amendment or supplement does not adversely affect
the rights of any Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
or
<PAGE> 83
-76-
(5) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect
the rights of any Holder;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.06, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes, may amend or supplement this Indenture, the Notes or any Guarantee
without notice to any other Holders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding Notes may
waive compliance by the Company with any provision of this Indenture or the
Notes without notice to any other Holder. Notwithstanding the foregoing no
amendment, supplement or waiver, including a waiver pursuant to Section 6.03,
shall, without the consent of each Holder of each Note affected thereby:
(1) reduce the principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver of any provision
of this Indenture, the Notes or any Guarantee;
(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted
interest, on any Notes;
(3) reduce the principal of or change or have the effect
of changing the fixed maturity of any Notes, or change the date on
which any Notes may be subject to redemption or repurchase, or reduce
the redemption or repurchase price therefor;
(4) make any Notes payable in money other than that stated
in the Notes;
(5) make any change in provisions of this Indenture
protecting the right of each Holder to receive payment of principal
of and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of
Default;
(6) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer after the occurrence of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that
has been consummated, in either such case, or modify any of the
provisions or definitions with respect thereto; or
<PAGE> 84
-77-
(7) make any change in the foregoing amendment and waiver
provisions.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Effect on Senior Debt.
Any modification or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the holders of Designated Senior
Debt or Designated Guarantor Senior Debt shall also require the consent of the
holders of such Designated Senior Debt or Designated Guarantor Senior Debt.
SECTION 9.04. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
written notice to the Trustee or the Company received before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph,
<PAGE> 85
-78-
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (6) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may, at the written direction of the Company, require the Holder of
the Note to deliver it to the Trustee. The Trustee at the written direction of
the Company may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company. Failure
to make the appropriate notation or issue a new Note shall not affect the
validity and effect of such amendment, supplement or waiver.
SECTION 9.07. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, if requested, an indemnity
reasonably satisfactory to it and to receive, and shall be fully protected in
relying upon, an Opinion of Counsel and an Officers' Certificate each stating
that the execution of any amendment, supplement or waiver authorized pursuant to
this Article Nine is authorized or permitted by this Indenture. Such Opinion of
Counsel shall not be an expense of the Trustee.
<PAGE> 86
-79-
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.
The Company covenants and agrees and the Trustee and each Holder of
the Notes, by its acceptance thereof, likewise covenants and agrees, that all
Notes shall be issued subject to the provisions of this Article Ten; and the
Trustee and each person holding any Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the payment of
all Obligations on the Notes by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all Obligations on the
Senior Debt; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt, and that each holder of
Senior Debt whether now outstanding or hereinafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. No Payment on Notes in Certain Circumstances.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under Article Eight).
In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind
<PAGE> 87
-80-
or character with respect to any Obligations on the Notes (except in Permitted
Junior Securities or from the trust described under Article Eight) or (y)
acquire any of the Notes for cash or property or otherwise (except in Permitted
Junior Securities or from the trust described under Article Eight).
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the payment on the Notes was due and
only one such Blockage Period may be commenced within any 360 consecutive days.
No event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior Debt
shall be, or be made, the basis for the commencement of a second Blockage Period
by the Representative of such Designated Senior Debt whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representatives, as their respective interests may
appear. The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Debt thereafter due or declared to be due
shall first be paid in full in cash or Cash Equivalents before the Holders are
entitled to receive any payment of any kind or character with respect to the
Obligations on the Notes (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
Article Eight).
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
(including interest accruing after the commencement date of any such proceeding
whether or not allowable as a claim in any such proceeding) due or to become due
<PAGE> 88
-81-
upon all Senior Debt shall first be paid in full in cash or Cash Equivalents
before any payment or distribution of any kind or character is made on account
of any Obligations on the Notes, or for the acquisition of any of the Notes for
cash or property or otherwise (except that Holders of Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
under Article Eight); and until all such Obligations with respect to all Senior
Debt are paid in full in cash or Cash Equivalents, any distribution to which the
Holders of the Notes would be entitled but for the subordination provisions will
be made to the holders of Senior Debt as their interests may appear (except that
Holders of the Notes may receive and retain permitted Junior Securities and
payments made from the trust described under Article Eight). Upon any such
dissolution, winding-up, liquidation, reorganization, bankruptcy, insolvency,
receivership or similar proceeding or assignment for the benefit of creditors or
marshalling of assets, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to which the
Holders of the Notes or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Notes or by the
Trustee under this Indenture if received by them, directly to the holders of
Senior Debt (pro rata to such holders on the basis of the respective amounts of
Senior Debt held by such holders) or their respective Representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Debt may have been issued, as their respective interests may appear, for
application to the payment of Senior Debt remaining unpaid until all such Senior
Debt has been paid in full in cash or Cash Equivalents after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under Article
Eight).
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (pro rata to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or
<PAGE> 89
-82-
to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of Senior Debt remaining unpaid until all such Senior
Debt has been paid in full in cash or Cash Equivalents, after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of such Senior Debt.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
of the Trustee that a given payment would be prohibited by Section 10.02 or
10.03, the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Notes to the
Holders entitled thereto unless at least one Business Day prior to the date upon
which such payment would otherwise become due and payable, the Trustee shall
have received the written notice provided for in Section 10.02(a) or in Section
10.07 (provided that, notwithstanding the foregoing, such application shall
otherwise be subject to the provisions of the first sentence of Section 10.02(a)
and Section 10.03). The Company shall give prompt written notice to the Trustee
of any dissolution, winding-up, liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the Notes shall be
paid in full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior Debt,
on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
amounts payable under the Senior Debt, then the Holders shall be entitled to
receive from the holders of such Senior Debt any payments or distributions
<PAGE> 90
-83-
received by such holders of Senior Debt in excess of the amount sufficient to
pay all amounts payable under or in respect of the Senior Debt in full in cash
or Cash Equivalents.
SECTION 10.06. Obligations of the Company Unconditional.
Nothing any contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of and any interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of the Senior
Debt, nor shall anything herein or therein prevent the Holder of any Note or the
Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
SECTION 10.07. 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 pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of 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 Ten 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.
<PAGE> 91
-84-
SECTION 10.08. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or the holders of the Notes, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders
or the Company or any other person money or assets to which any holders of
Senior Debt shall be entitled by virtue of this Article, except if such payment
is made as a result of willful misconduct or gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice given to
their Representatives, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure
<PAGE> 92
-85-
to act on the part of the Company or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company with the terms
of this Indenture, regardless of any knowledge thereof which any such holder may
have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the 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 otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business as assets of the Company,
the filing of a claim for the unpaid balance of its or his Notes and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Senior Debt or their Representative to authorize or
consent to or accept or adopt on behalf of any Holders any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
<PAGE> 93
-86-
SECTION 10.12. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns that: (i) the principal of and interest on the
Notes will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration or otherwise and interest on the
overdue principal, if any, and interest on any interest, to the extent lawful,
of the Notes and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be promptly paid in full, all in accordance
with the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Notes or of any such other obligations, the same will
be promptly paid in full when due in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 11.05. Each Guarantor hereby
agrees that its Obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Company, 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 Guarantor hereby waives diligence, presentment,
demand of payment, 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, notice and all demands whatsoever and covenants that this
Guarantee will not be discharged except by complete performance of the
obligations contained
<PAGE> 94
-87-
in the Notes, this Indenture and in this Guarantee. If any Noteholder or the
Trustee is required by any court or otherwise to return to the Company, any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor, any amount paid by the
Company or any Guarantor to the Trustee or such Noteholder, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect
as to such amount only. Each Guarantor further agrees that, as between each
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article Six for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article Six, such Obligations (whether or not
due and payable) shall forthwith become due and payable by each Guarantor for
the purpose of this Guarantee.
SECTION 11.02. Subordination of Guarantee.
Each Guarantor agrees, and each Holder by accepting a Guarantee
agrees, that all Obligations owed under and in respect of such Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
this Article Eleven, to the prior indefeasible payment in full in cash or Cash
Equivalents, of all Guarantor Senior Debt of such Guarantor, and that the
subordination of the Guarantees pursuant to this Article Eleven is for the
benefit of all holders of all Guarantor Senior Debt of such Guarantor, whether
outstanding on the Issue Date or issued thereafter.
SECTION 11.03. Severability.
In case any provision of this Guarantee 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 11.04. Release of a Guarantor.
Upon (i) the release by the lenders under the Revolving Credit
Facility, related documents and future refinancings thereof of all guarantees of
a Guarantor and all Liens on the property and assets of such Guarantor relating
to such Indebtedness, or (ii) the sale or disposition of a Guarantor (or all or
substantially all of its assets) to an entity which is not a Subsidiary of the
Company or (iii) the designation of a Guarantor as an Unrestricted Subsidiary
which, in each case, is otherwise in compliance with this Indenture, such
Guarantor shall be deemed released from all its obligations under this Article
Eleven and its Guarantee; provided, however, that any such termination shall
occur only to the extent that all Obligations of such Guarantor under the
Revolving Credit Facility and all of its guarantees of, and under all of its
<PAGE> 95
-88-
pledges of assets or other security interests which secure, Indebtedness of the
Company shall also terminate upon such release, sale or transfer. The Trustee
shall deliver an appropriate instrument evidencing such release upon receipt of
a written request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 11.04 and the other provisions
of this Indenture. Any Guarantor not so released remains liable for the full
amount of principal of and interest on the Notes as provided in this Article
Eleven.
SECTION 11.05. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the Obligations of such Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities 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 Guarantee or
pursuant to Section 11.07, result in the Obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.06. Guarantors May Consolidate, Etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the assets of a
Guarantor to the Company or another Guarantor. Upon any such consolidation,
merger, sale or conveyance, the Guarantee given by such Guarantor shall no
longer have any force or effect.
(b) Except as set forth in Article Four, 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
another 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 all or
substantially all of the assets of a Guarantor to a corporation other than the
Company or another Guarantor (whether or not affiliated with the Guarantor);
provided, however, that, subject to Sections 11.04 and 11.06(a), either (x) the
transaction is an Asset Sale consummated in accordance with Section 4.16, or (y)
(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, and (ii) each Guarantor hereby covenants and agrees that, upon any
such
<PAGE> 96
-89-
consolidation, merger, sale or conveyance, the Guarantee of such Guarantor set
forth in this Article Eleven, 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 such transaction), by supplemental
indenture satisfactory in form to the Trustee, executed and delivered to the
Trustee, together with an Officers' Certificate of the Company and an Opinion of
Counsel stating that the transaction and such supplemental indenture comply with
this Indenture, by the corporation formed by such consolidation, or into which
the Guarantor shall have merged, or by the corporation that shall have acquired
such property. In the case of any such consolidation, merger, sale or conveyance
that is not an Asset Sale consummated in accordance with Section 4.16, 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 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 11.07. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Guarantor's Obligations with
respect to this Guarantee.
SECTION 11.08. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall forthwith be
<PAGE> 97
-90-
paid to the Trustee for the benefit of such Holders to be credited and applied
upon the Notes, whether matured or unmatured, in accordance with the terms of
this Indenture. Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Indenture
and that the waiver set forth in this Section 11.08 is knowingly made in
contemplation of such benefits.
SECTION 11.09. Execution of Guarantee.
To evidence their guarantee to the Noteholders specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of Exhibit A recited to be endorsed on each Note ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
one Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) prior to the authentication of the Note on which it
is endorsed, and the delivery of such Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may be
by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be such officer before the Note on
which such Guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Note nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
SECTION 11.10. No Payment on Guarantees in Certain Circumstances.
(a) If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Guarantor Senior Debt or any Senior
Debt guaranteed by a Guarantor (which Guarantee constitutes Guarantor Senior
Debt of such Guarantor), no payment shall be made by or on behalf of the
Guarantor or any other person on its behalf with respect to any Obligations on
the Notes or any of the Obligations of such Guarantor on its Guarantee, or to
acquire any of the Notes for cash or property or otherwise (except that Holders
of Notes may receive and retain Permitted Junior Securities and payments made
from the trust described under Article Eight).
In addition, if any other event of default occurs and is continuing
with respect to the Designated Senior Debt guaranteed by a Guarantor (which
guarantee constitutes Guarantor Senior Debt of such Guarantor) or of a
Guarantor, as such event of default is defined in the
<PAGE> 98
-91-
instrument creating or evidencing such Designated Senior Debt permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Guarantor Default Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Guarantor Blockage Period (as defined below), during
the 180 days after the delivery of such Guarantor Default Notice (the "Guarantor
Blockage Period"), no Guarantor or any other Person on its behalf shall (x) make
any payment of any kind or character with respect to any Obligations on the
Notes or under its Guarantee (except in Permitted Junior Securities or from the
trust described under Article Eight) or (y) acquire any of the Notes for cash or
property or otherwise (except in Permitted Junior Securities or from the trust
described under Article Eight). Notwithstanding anything herein to the contrary,
in no event will a Guarantor Blockage Period extend beyond 180 days from the
date the payment on the Notes was due and only one such Guarantor Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Guarantor
Blockage Period with respect to the Designated Senior Debt shall be, or be made,
the basis for the commencement of a second Guarantor Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period of
360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 11.10(a), such payment shall be held in trust for the benefit of,
shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro
rata to such holders on the basis of the respective amount of Guarantor Senior
Debt held by such holders) or their respective Representatives, as their
respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Guarantor Senior Debt,
if any, received from the holders of Guarantor Senior Debt (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from such Guarantor and only amounts included in the
information provided to the Trustee shall be paid to the holders of Guarantor
Senior Debt.
Nothing contained in this Article Eleven shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Guarantor Senior Debt thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to the Obligations on the Notes or on account of any Guarantor's
Guarantee (except that Holders of Notes may receive and retain Permitted Junior
Securities and payments made from the trust described under Article Eight).
<PAGE> 99
-92-
SECTION 11.11. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors or marshalling of assets of such Guarantor, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to any Guarantor or its property, whether voluntary or involuntary, all
Obligations (including interest accruing after the commencement date of any such
proceeding whether or not allowable as a claim in any such proceeding) due or to
become due upon all Guarantor Senior Debt shall first be paid in full in cash or
Cash Equivalents before any payment or distribution of any kind or character is
made on account of any Obligations on the Notes any of the Obligations of such
Guarantor on its Guarantee, or for the acquisition of any of the Notes for cash
or property or otherwise (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
Article Eight); and until all such Obligations with respect to all Guarantor
Senior Debt are paid in full in cash or Cash Equivalents, any distribution to
which the Holders of the Notes would be entitled but for the subordination
provisions will be made to the holders of Guarantor Senior Debt as their
interests may appear (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
Article Eight). Upon any such dissolution, winding-up, liquidation,
reorganization, bankruptcy, insolvency, receivership or similar proceeding or
assignment for the benefit of creditors or marshalling of assets, any payment or
distribution of assets of any Guarantor of any kind or character, whether in
cash, property or securities, to which the Holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, or by the
Holders of the Notes or by the Trustee under this Indenture if received by them,
directly to the holders of Guarantor Senior Debt (pro rata to such holders on
the basis of the respective amounts of Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of Guarantor Senior Debt (except that Holders of Notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under Article Eight).
(b) To the extent any payment of Guarantor Senior Debt (whether by or
on behalf of such Guarantor, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person under any bankruptcy,
<PAGE> 100
-93-
insolvency, receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person, the Guarantor Senior Debt or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Guarantor of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 11.11(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis
of the respective amount of Guarantor Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Guarantor Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of
Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has
been paid in full in cash or Cash Equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Guarantor Senior Debt.
SECTION 11.12. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Eleven or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions described
in Sections 11.10 and 11.11, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
11.10 or 11.11, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest on the
Notes to the Holders entitled thereto unless at least one Business Day prior to
the date upon which such payment would otherwise become due and payable, the
Trustee shall have received the written notice provided for in Section 11.10(a)
or in Section 11.15 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 11.10(a) and Section 11.11). Each Guarantor shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of any Guarantor.
SECTION 11.13. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the Holders of the Notes shall be subrogated to the
rights of the holders of Guarantor Senior Debt to receive payments or
distributions of cash, property or securities of such Guarantor applicable to
the Guarantor Senior Debt of such Guarantor until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of
<PAGE> 101
-94-
the Guarantor Senior Debt by or on behalf of such Guarantor or by or on behalf
of the Holders by virtue of this Article Eleven which otherwise would have been
made to the Holders shall, as between the Guarantors and the Holders of the
Notes, be deemed to be a payment by such Guarantor to or on account of the
Guarantor Senior Debt, it being understood that the provisions of this Article
Eleven are and are intended solely for the purpose of defining the relative
rights of the Holders of the Notes, on the one hand, and the holders of the
Guarantor Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, to the payment of
amounts payable under the Guarantor Senior Debt, then the Holders shall be
entitled to receive from the holders of such Guarantor Senior Debt any payments
or distributions received by such holders of Guarantor Senior Debt in excess of
the amount sufficient to pay all amounts payable under or in respect of the
Guarantor Senior Debt in full in cash or Cash Equivalents.
SECTION 11.14. Obligations of Each Guarantor Unconditional.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair, as
among any Guarantor, its creditors other than the holders of Guarantor Senior
Debt, and the Holders of the Notes, the obligation of such Guarantor, which is
absolute and unconditional, to pay to the Holders of the Notes the principal of
and any interest on the Notes as and when the same shall become due and payable
in accordance with the terms of the Guarantees, or is intended to or shall
affect the relative rights of the Holders of the Notes and creditors of any
Guarantor other than the holders of Guarantor Senior Debt, nor shall anything
herein or therein prevent the Holder of any Note or the Trustee on its behalf
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, in respect of cash,
property or securities of any Guarantor received upon the exercise of any such
remedy.
SECTION 11.15. Notice to Trustee.
The Company or any Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or any such Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantees pursuant to the provisions of this Article Eleven. Regardless of
anything to the contrary contained in this Article Eleven or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
the Company or a Guarantor, or from a holder of Guarantor Senior Debt or a
Representative therefor, and, prior to the receipt of any
<PAGE> 102
-95-
such written notice, the Trustee shall be entitled to assume (in the absence of
actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Eleven, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of 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 Eleven, 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 11.16. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of any Guarantor referred
to in this Article Eleven, the Trustee, subject to the provisions of Article
Seven hereof, and the Holders of the Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Guarantor
Senior Debt and other Indebtedness of such Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Eleven.
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt.
The Trustee and any agent of any Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article Eleven with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Guarantor Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Guarantor Senior Debt and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of
<PAGE> 103
-96-
Holders or any such Guarantor or any other person money or assets to which any
holders of Guarantor Senior Debt shall be entitled by virtue of this Article,
except if such payment is made as a result of willful misconduct or gross
negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice
given to their Representatives, if any.
SECTION 11.18. Subordination Rights Not Impaired by Acts or Omissions
of a Guarantor or Holders of Guarantor Senior Debt.
No right of any present or future holders of any Guarantor Senior
Debt to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by such Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Debt may, at any time and from time
to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Eleven or the
obligations hereunder of the Holders of the Notes to the holders of the
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, Guarantor Senior Debt, or otherwise amend or supplement in any manner
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any person liable in any manner for the
payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain
from exercising any rights against such Guarantor and any other person.
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Guarantor
Senior Debt and the Holders of Notes, the subordination provided in this Article
Eleven, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any
<PAGE> 104
-97-
Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business as assets of such
Guarantor, the filing of a claim for the unpaid balance of its or his Notes and
accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 11.20. This Article Eleven Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Eleven will not be
construed as preventing the occurrence of an Event of Default.
SECTION 11.21. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eleven will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
<PAGE> 105
-98-
SECTION 12.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by private courier service guaranteeing next day delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Guarantors, if any:
Silver Cinemas International, Inc.
4004 Beltline Road
Suite 205
Dallas, Texas 75244
Attention: Chief Financial Officer
Telecopy: (972) 503-9013
if to the Trustee:
Norwest Bank Minnesota, National Association
Corporate Trust Services
6th and Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust
Telecopy: (612) 667-9825
with a copy to:
Norwest Bank Minnesota, National Association
c/o The Depository Trust Company
55 Water Street
New York, NY 10041
Attention: Norwest Window
Telecopy: (212) 558-2619
Each of the Company, the Guarantors, if any, and the Trustee by
written notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company, the Guarantors, if any, or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered or delivered
by private courier service guaranteeing next day delivery; when answered back,
if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
<PAGE> 106
-99-
Any notice or communication mailed to a Holder shall be mailed to
such Holder by first class mail or other equivalent means at such Holder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance
reasonably satisfactory to the Trustee, stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
and
(3) where applicable, a certificate or opinion by an
independent certified public accountant reasonably satisfactory to
the Trustee that complies with TIA Section 314(c).
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
<PAGE> 107
-100-
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(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 such Person, he
has made such examination or investigation as is reasonably 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 or not, in the opinion of
each such Person, such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE.
<PAGE> 108
-101-
SECTION 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company, the Guarantors, if any, or of the Trustee shall not have any
liability for any obligations of the Company under the Notes or this Indenture.
Each Holder by accepting a Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the Notes.
This provision does not affect any possible claims under federal securities
laws.
SECTION 12.11. Successors.
All agreements of the Company and the Guarantors, if any, in this
Indenture, the Notes and the Guarantees, if any, shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 12.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Notes or in the Guarantees, if any, shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
<PAGE> 109
-102-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
SILVER CINEMAS INTERNATIONAL, INC.
By: __________________________________
Name: Steven Holmes
Title: Chief Executive Officer
SILVER CINEMAS, INC.
By: __________________________________
Name: Steven Holmes
Title: Chief Executive Officer
SCI ACQUISITION CORP.
By: __________________________________
Name: Steven Holmes
Title: Chief Executive Officer
LANDMARK THEATRE CORP.
By: __________________________________
Name: Steven Holmes
Title: Chief Executive Officer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: __________________________________
Name: Steven Holmes
Title: Chief Executive Officer
<PAGE> 110
EXHIBIT A(1)
[FORM OF INITIAL NOTE]
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE.
BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE ACT)(A "QIB"), (II) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT OR (III) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO
THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT,
(IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.
A(1)-1
<PAGE> 111
CUSIP No.: [ ]
SILVER CINEMAS INTERNATIONAL, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2005
No. [ ] $[ ]
SILVER CINEMAS INTERNATIONAL, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to Cede & Co. or registered assigns, the principal sum of [ ]
Dollars, on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
SILVER CINEMAS INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Dated: April __, 1998 Title:
Certificate of Authentication
This is one of the 10 1/2% Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: ______________________________
Authorized Signatory
A(1)-2
<PAGE> 112
(REVERSE OF SECURITY)
10 1/2% Senior Subordinated Note due 2005
1. Interest. SILVER CINEMAS INTERNATIONAL, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from April 16, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing October 15, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, Norwest Bank Minnesota,
National Association (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of April 15, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Initial Notes of
the Company designated as its 10 1/2% Senior Subordinated Notes due 2005 (the
"Initial Notes"). The Notes include the Initial Notes and the Unrestricted Notes
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement or, with respect to Initial Notes issued under the Indenture
subsequent to the Issue Date, a registration rights agreement substantially
identical to the Registration Rights Agreement. The Initial Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in this Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to
A(1)-3
<PAGE> 113
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are general unsecured obligations of the Company limited in aggregate
principal amount to $115,000,000. Under certain circumstances as provided for in
Article Eleven of the Indenture, the payment on each Note may be guaranteed on a
senior subordinated basis by the Guarantors. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the Indenture, as the
same may be amended from time to time.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by
its acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may not
be redeemed prior to April 15, 2001.
(a) Optional Redemption. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time to
time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption (subject to the
rights of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing April 15:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2001............................................ 107.875%
2002............................................ 105.250%
2003............................................ 102.625%
2004 and thereafter............................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to April 1,
2001, the Company may at its options use the net cash proceeds of one or more
Equity Offerings, to redeem the Notes at a redemption price equal to 110 1/2%
of the principal amount thereof plus accrued and
A(1)-4
<PAGE> 114
unpaid interest thereon, if any, to the redemption date; provided that at least
65% of the principal amount of the Notes originally issued under the Indenture
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the consummation of any
such Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
upon a Change of Control if the Company does not redeem the Notes, each holder
will have the right, subject to certain conditions set forth in the Indenture,
to require the Company to repurchase such holder's Notes at a price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Section 4.16 of the Indenture provides that, after certain Asset
Sales, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. As more fully set
forth in Article Eight of the Indenture, if the Company at any time deposits
with the Trustee U.S. Legal
A(1)-5
<PAGE> 115
Tender or U.S. Government Obligations sufficient to pay the principal of and
interest on the Notes to redemption or maturity and complies with the other
provisions of the Indenture relating thereto, the Company will be discharged
from certain provisions of the Indenture and the Notes (including certain
covenants, but excluding its obligation to pay the principal of and interest on
the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture, the Notes or the Guarantee, if any, may be amended or supplemented
with the written consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments in respect of its
Capital Stock or Subordinated Obligations, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, incur Indebtedness that is, by its terms, subordinated or junior
to any other Indebtedness and senior to the Notes, merge or consolidate with any
other Person, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets or adopt a plan of liquidation and sell
Capital Stock of a Restricted Subsidiary. Such limitations are subject to a
number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
A(1)-6
<PAGE> 116
17. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture. Each Holder of a
Note by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Silver Cinemas International, Inc., 4004
Beltline Road, Suite 205, Dallas, Texas 75244, Attn: Chief Financial Officer.
A(1)-7
<PAGE> 117
SENIOR SUBORDINATED GUARANTEE
Silver Cinemas, Inc., SCI Acquisition Corp. and Landmark Theatre
Corp. (the "Guarantors") have unconditionally guaranteed on a senior
subordinated basis (such guarantee by each Guarantor being referred to herein as
the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Notes, whether at maturity, by acceleration or otherwise and the
due and punctual payment of interest on the overdue principal and interest, if
any, on the Notes, to the extent lawful, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Debt of such Guarantor,
to the extent and in the manner provided, in Article Eleven of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made. This Guarantee is limited under the Indenture to the
extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
A(1)-8
<PAGE> 118
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SILVER CINEMAS, INC.
By: ______________________________
Name:
Title:
SCI ACQUISITION CORP.
By: ______________________________
Name:
Title:
LANDMARK THEATRE CORP.
By: ______________________________
Name:
Title:
A(1)-9
<PAGE> 119
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________ agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date: _________________ Signed: __________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ___________________________________________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) April 15, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
[Check One]
(1) _________ to the Company or a subsidiary thereof; or
(2) _________ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) _________ to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form
of which letter can be obtained from the Trustee); or
(4) _________ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
A(1)-10
<PAGE> 120
(5) _________ pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
(6) _________ pursuant to an effective registration statement under the
Securities Act; or
(7) _________ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: _________________ Signed: __________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ___________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _________________ Signed: __________________________________________
NOTICE: To be executed by
an executive officer
A(1)-11
<PAGE> 121
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_______________________
Date: _________________ Signed: __________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee: ___________________________________________________________
A(1)-12
<PAGE> 122
EXHIBIT A(2)
[FORM OF EXCHANGE NOTE]
CUSIP No.:[ ]
SILVER CINEMAS INTERNATIONAL, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2005
No.[ ] $[ ]
SILVER CINEMAS INTERNATIONAL, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to Cede & Co. or registered assigns, the principal sum of [ ]
Dollars, on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
SILVER CINEMAS INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Dated: April __, 1998 Title:
Certificate of Authentication
This is one of the 10 1/2% Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:________________________________
Authorized Signatory
A(2)-1
<PAGE> 123
(REVERSE OF SECURITY)
10 1/2% Senior Subordinated Note due 2005
1. Interest. SILVER CINEMAS INTERNATIONAL, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from April 16, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing October 15, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, Norwest Bank Minnesota,
National Association (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of April 15, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Unrestricted
Notes of the Company designated as its 10 1/2% Senior Subordinated Notes due
2005 (the "Unrestricted Notes"). The Notes include the Initial Notes and the
Unrestricted Notes issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under the
Indenture subsequent to the Issue Date, a registration rights agreement
substantially identical to the Registration Rights Agreement. The Initial Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in this Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture.
A(2)-2
<PAGE> 124
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obligations of the Company
limited in aggregate principal amount to $115,000,000. Under certain
circumstances as provided for in Article Eleven of the Indenture, the payment on
each Note may be guaranteed on a senior subordinated basis by the Guarantors.
Each Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by
its acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may not
be redeemed prior to April 15, 2001.
(a) Optional Redemption. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time to
time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption (subject to the
rights of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing April 15:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2001............................................. 107.875%
2002............................................. 105.250%
2003............................................. 102.625%
2004 and thereafter.............................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to April 15,
2001, the Company may at its option, use the net cash proceeds of one or more
Equity Offerings to redeem the Notes at a redemption price equal to 110 1/2%
of the principal amount thereof plus accrued and
A(2)-3
<PAGE> 125
unpaid interest thereon, if any, to the redemption date; provided that at least
65% of the principal amount of the Notes originally issued under the Indenture
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the consummation of any
such Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
upon a Change of Control if the Company does not redeem the Notes, each holder
will have the right, subject to certain conditions set forth in the Indenture,
to require the Company to repurchase such holder's Notes at a price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Section 4.16 of the Indenture provides that, after certain Asset
Sales, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
A(2)-4
<PAGE> 126
12. Discharge Prior to Redemption or Maturity. As more fully set
forth in Article Eight of the Indenture if the Company at any time deposits with
the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay
the principal of and interest on the Notes to redemption or maturity and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, but excluding its obligation to pay the
principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture, the Notes or the Guarantee, if any, may be amended or supplemented
with the written consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments in respect of its
Capital Stock or Subordinated Obligations, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, incur additional Indebtedness that is by its terms subordinated or
junior to any other Indebtedness and senior to the Notes, merge or consolidate
with any other Person, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets or adopt a plan of liquidation
and sell Capital Stock of a Restricted Subsidiary. Such limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in
A(2)-5
<PAGE> 127
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest) if it determines that withholding notice is in
their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture. Each Holder of a
Note by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Silver Cinemas International, Inc., 4004
Beltline Road, Suite 205, Dallas, Texas 75244, Attn: Chief Financial Officer.
A(2)-6
<PAGE> 128
SENIOR SUBORDINATED GUARANTEE
Silver Cinemas, Inc., SCI Acquisition Corp. and Landmark Theatre
Corp. (the "Guarantors") have unconditionally guaranteed on a senior
subordinated basis (such guarantee by each Guarantor being referred to herein as
the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Notes, whether at maturity, by acceleration or otherwise and the
due and punctual payment of interest on the overdue principal and interest, if
any, on the Notes, to the extent lawful, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Debt of such Guarantor,
to the extent and in the manner provided, in Article Eleven of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made. This Guarantee is limited under the Indenture to the
extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
A(2)-7
<PAGE> 129
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SILVER CINEMAS, INC.
By: ______________________________
Name:
Title:
SCI ACQUISITION CORP.
By: ______________________________
Name:
Title:
LANDMARK THEATRE CORP.
By: ______________________________
Name:
Title:
A(2)-8
<PAGE> 130
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: ________________ Signed: ____________________________________________
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee: ___________________________________________________________
A(2)-9
<PAGE> 131
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$____________________
Dated: ____________________ __________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee: ___________________
A(2)-10
<PAGE> 132
EXHIBIT A(3)
[FORM OF REGULATION S TEMPORARY GLOBAL NOTE]
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE.
BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE ACT)(A "QIB"), (II) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT OR (III) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO
THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT,
(IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.
A(3)-1
<PAGE> 133
CUSIP No.: U82708AA3
SILVER CINEMAS INTERNATIONAL, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2005
No. [ ] $[ ]
SILVER CINEMAS INTERNATIONAL, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to Cede & Co. or registered assigns, the principal sum of [ ]
Dollars, on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
SILVER CINEMAS INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Dated: April __, 1998 Title:
Certificate of Authentication
This is one of the 10 1/2% Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:________________________________
Authorized Signatory
A(3)-2
<PAGE> 134
(REVERSE OF SECURITY)
10 1/2% Senior Subordinated Note due 2005
Subject to the provisions hereof, Silver Cinemas International, Inc.,
a Delaware corporation (the "Company"), promises to pay Cede & Co. the principal
sum of ___________ UNITED STATES DOLLARS (U.S. $___________) on April 15, 2005,
and to pay interest on the principal amount of this Note at the rate of 10 1/2%
per annum. Interest shall be paid in cash semi-annually in arrears on April 15
and October 15 or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"); provided that the first Interest
Payment Date shall be October 15, 1998. Interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
This Regulation S Temporary Global Note is issued in respect of an
issue of 10 1/2% Senior Subordinated Notes due 2005 (the "Notes") of the
Company, limited to the aggregate principal amount of U.S. $115,000,000 issued
pursuant to an Indenture (the "Indenture") dated as of April 15, 1998, between
the Company, the Guarantors and Norwest Bank Minnesota, National Association,
as trustee (the " Trustee"), and is governed by the terms and conditions of the
Indenture governing the Notes, which terms and conditions are incorporated
herein by reference and, except as otherwise provided herein, shall be binding
on the Company and the Holder hereof as if fully set forth herein. Unless the
context otherwise requires, the terms used herein shall have the meanings
specified in the Indenture.
Until this Regulation S Temporary Global Note is exchanged for
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon although interest will continue to accrue;
until so exchanged in full, this Regulation S Temporary Global Note shall in all
other respects be entitled to the same benefits as other Notes under the
Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or
in part for one or more Regulation S Permanent Global Notes or Rule 144A Global
Notes only (i) on or after the termination of the 40-day restricted period (as
defined in Regulation S) and (ii) upon presentation of certificates (accompanied
by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture.
Upon exchange of this Regulation S Temporary Global Note for one or more
Regulation S Permanent Global Notes or Rule 144A Global Notes, the Trustee shall
cancel this Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This Regulation
S Temporary Global Note shall be governed by and construed in accordance with
the laws of the State of New York. All references to "$,"
A(3)-3
<PAGE> 135
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts therein.
A(3)-4
<PAGE> 136
SENIOR SUBORDINATED GUARANTEE
Silver Cinemas, Inc., SCI Acquisition Corp. and Landmark Theatre
Corp. (the "Guarantors") have unconditionally guaranteed on a senior
subordinated basis (such guarantee by each Guarantor being referred to herein as
the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Notes, whether at maturity, by acceleration or otherwise and the
due and punctual payment of interest on the overdue principal and interest, if
any, on the Notes, to the extent lawful, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Debt of such Guarantor,
to the extent and in the manner provided, in Article Eleven of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made. This Guarantee is limited under the Indenture to the
extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
A(3)-5
<PAGE> 137
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SILVER CINEMAS, INC.
By: ______________________________
Name:
Title:
SCI ACQUISITION CORP.
By: ______________________________
Name:
Title:
LANDMARK THEATRE CORP.
By: ______________________________
Name:
Title:
A(3)-6
<PAGE> 138
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY
TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE 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.
B-1
<PAGE> 139
EXHIBIT C(1)
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.16(a)(i) of the Indenture)
[REGISTRAR]
Re: 10 1/2% Senior Subordinated Notes due 2005 of Silver Cinemas
International, Inc.
Reference is hereby made to the Indenture, dated as of April 15, 1998
(the "Indenture"), between Silver Cinemas International, Inc. (the "Company"),
the Guarantors and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $ _______________ principal amount of Notes
which are evidenced by one or more 144A Global Notes and held with the
Depository in the name of_____________ (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Notes to a Person who
will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Regulation S Global Notes, which amount, immediately
after such transfer, is to be held with the Depository through Euroclear or
Cedel or both.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor
hereby further certifies that:
(1) The offer of the Notes was not made to a Person in the United
States;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or the
Transferor and any Person acting on its behalf
reasonably believed and believes that the
transferee was outside the United States; or
C(1)-1
<PAGE> 140
(b) the transaction was executed in, on or through
the facilities of a designated offshore
securities market and neither the Transferor
nor any Person acting on its behalf knows that
the transaction was prearranged with a buyer in
the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
(4) the transaction is not part of a plan or scheme to evade
the registration provisions of the Securities Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to be
held with the Depository through Euroclear, Cedel or
another Participant.
Upon giving effect to this request to exchange a beneficial interest
in a 144A Global Note for a beneficial interest in a Regulation S Global Note,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company. Terms used in this certificate and
not otherwise defined in the Indenture have the meanings set forth in Regulation
S under the Securities Act.
[Insert Name of Transferor]
By:___________________________
Name:
Title:
Dated:
cc: Silver Cinemas International, Inc.
C(1)-2
<PAGE> 141
EXHIBIT C(2)
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO 144A GLOBAL NOTE
(Pursuant to Section 2.16(a)(ii) of the Indenture)
[REGISTRAR]
Re: 10 1/2% Senior Subordinated Notes due 2005 of Silver Cinemas
International, Inc.
Reference is hereby made to the Indenture dated as of April 15, 1998
(the "Indenture"), between Silver Cinemas International, Inc. (the "Company"),
the Guarantors and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $_________ principal amount of Notes which are
evidenced by one or more Regulation S Global Notes and held with the Depository
through Euroclear or Cedel in the name of ________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person who will take delivery thereof in the form of an equal principal amount
of Notes evidenced by one or more 144A Global Notes, to be held with the
Depository.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
C(2)-1
<PAGE> 142
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A;
or
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
and such Notes are being transferred in compliance with any applicable blue sky
securities laws of any state of the United States or any other applicable
jurisdiction.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in 144A Global Notes, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to 144A Global Notes pursuant to the Indenture and the Securities
Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:________________________________
Name:
Title:
Dated:
cc: Silver Cinemas International, Inc.
C(2)-2
<PAGE> 143
EXHIBIT C(3)
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF PHYSICAL NOTES
(Pursuant to Section 2.16(b) of the Indenture)
[REGISTRAR]
Re: 10 1/2% Senior Subordinated Notes due 2005 of Silver Cinemas
International, Inc.
Reference is hereby made to the Indenture dated as of April 15, 1998
(the "Indenture"), between Silver Cinemas International, Inc. (the "Company"),
the Guarantors and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This relates to $________ principal amount of Notes which are
evidenced by one or more Physical Notes in the name of ________ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Physical Note(s) in the form of an equal principal amount of Notes evidenced by
one or more Physical Notes, to be delivered to the Transferor or, in the case of
a transfer of such Notes, to such Person as the Transferor instructs the
Trustee.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
C(3)-1
<PAGE> 144
[CHECK ONE]
[ ] the Surrendered Notes are being acquired for the Transferor's own
account, without transfer;
or
[ ] the Surrendered Notes are being transferred to the Company or one of
its Subsidiaries;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one
or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an exemption
under the Securities Act other than Rule 144A, Rule 144 or Rule 904
to Person who is an Institutional Accredited Investor and the
Transferor further certifies that the Transfer complies with the
transfer restrictions applicable to beneficial interests in Global
Notes and Physical Notes bearing the legend set forth in Section
2.06(f) of the Indenture and the requirements of the exemption
claimed, which certification is supported by (a) if such transfer is
in respect of a principal amount of Notes at the time of Transfer of
$100,000 or more, a certificate executed by the Transferee in the
form of Exhibit C to the Indenture, or (b) if such Transfer is in
respect of a principal amount of Notes at the time of transfer of
less than $100,000, (i) a certificate executed in the form of Exhibit
C to the Indenture and (ii) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has
attached to this certification) in form reasonably acceptable to the
Company and to the Registrar, to the effect that (1) such Transfer is
in compliance with the Securities Act and (2) such Transfer complies
with any applicable blue sky securities laws of any state of the
United States;
C(3)-2
<PAGE> 145
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A,
Rule 144, or Rule 904 and the Transferor hereby further certifies
that the Notes are being transferred in compliance with the transfer
restrictions applicable to beneficial interests in the Global Notes
and Physical Notes bearing the legend set forth in Section 2.06(f) of
the Indenture and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of
which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the
effect that such transfer is in compliance with the Securities Act
and any applicable blue sky laws of any state of the United States;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States or any
other applicable jurisdiction.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:________________________________
Name:
Title:
Dated:
cc: Silver Cinemas International, Inc.
C(3)-3
<PAGE> 146
EXHIBIT C(4)
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO PHYSICAL NOTE
(Pursuant to Section 2.16(c) of the Indenture)
[REGISTRAR]
Re: 10 1/2% Senior Subordinated Notes due 2005 of Silver Cinemas
International, Inc.
Reference is hereby made to the Indenture, dated as of April 15, 1998
(the "Indenture"), between Silver Cinemas International, Inc. (the "Company"),
the Guarantors and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $__________ principal amount of Notes which
are evidenced by a beneficial interest in one or more 144A Global Notes or
Regulation S Global Notes in the name of ___________________ (the "Transferor").
The Transferor has requested an exchange or transfer of such beneficial interest
in the form of an equal principal amount of Notes evidenced by one or more
Physical Notes, to be delivered to the Transferor or, in the case of a transfer
of such Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
C(4)-1
<PAGE> 147
[CHECK ONE]
[ ] the Surrendered Notes are being transferred to the beneficial owner
of such Notes;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one
or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting they requirements of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an exemption
under the Securities Act other than Rule 144A, Rule 144 or Rule 904
to a Person who is an Institutional Accredited Investor and the
Transferor further certifies that the Transfer complies with the
transfer restrictions applicable to beneficial interests in Global
Notes and Definitive Senior Notes bearing the legend set forth in
Section 2.06(f) of the Indenture and the requirements of the
exemption claimed, which certification is supported by (a) if such
transfer is in respect of a principal amount of Notes at the time of
Transfer of $100,000 or more, a certificate executed by the
Transferee in the form of Exhibit C to the Indenture, or (b) if such
Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $100,000, (i) a certificate executed in the
form of Exhibit C to the Indenture and (ii) an Opinion of Counsel
provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
satisfactory to the Company and to the Registrar, to the effect that
(1) such
C(4)-2
<PAGE> 148
Transfer is in compliance with the Securities Act and (2) such
Transfer complies with any applicable blue sky securities laws of any
state of the United States;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A,
Rule 144 or Rule 904, and the Transferor hereby further certifies
that the Notes are being transferred in compliance with the transfer
restrictions applicable to beneficial interests in the Global Notes
and Physical Notes bearing the legend set forth in Section 2.06(f) of
the Indenture and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of
which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the
effect that such transfer is in compliance with the Securities Act
and any applicable blue sky securities laws of any state of the
United States;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States or any
other applicable jurisdiction.
C(4)-3
<PAGE> 149
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:________________________________
Name:
Title:
Dated:
cc: Silver Cinemas International, Inc.
C(4)-4
<PAGE> 150
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
_______________, _____
Norwest Bank Minnesota, National Association, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
We are delivering this letter in connection with the purchase of
10-1/2% Senior Subordinated Notes due 2005 (the "Notes") of Silver Cinemas
International, Inc., a Delaware corporation (the "Company").
(i) we are an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an
"Institutional Accredited Investor");
(ii) any purchase of Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors;
(iii) in the event that we purchase any Notes, we will
acquire Notes having a minimum purchase price of at least $100,000
for our own account and for each separate account for which we are
acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing Notes;
(v) we are not acquiring Notes with a view to any
distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United
States or any other applicable jurisdiction; provided that the
disposition of our property and the property of any accounts for
which we are acting as fiduciary shall remain at all times within our
control; and
(vi) we have received a copy of the Offering Memorandum
relating to the initial offering of the Notes and acknowledge that we
have had access to such financial and other information, and have
been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as we
deem necessary in connection with our decision to purchase Notes.
D-1
<PAGE> 151
We understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and we agree, on
our own behalf and on behalf of each account for which we acquire any Notes,
that such Notes may be offered, resold, pledged or otherwise transferred only
(i) to a Person whom we reasonably believe to be a qualified institutional buyer
(as defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A under the Securities Act, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States in
a transaction meeting the requirements of Rule 904 under the Securities Act, or
in accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (ii) to the Company or (iii) pursuant to an effective registration
statement under the Securities Act, and in each case, in accordance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction. We understand that the registrar will not be required
to accept for registration of transfer any Notes, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with.
We acknowledge that you and the Company will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
______________________________________
[Name of Purchaser]
By: ____________________________________
Name:
Title:
Address:
D-2
<PAGE> 1
EXHIBIT 4.2
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of April 16, 1998
by and among
SILVER CINEMAS INTERNATIONAL, INC.
SILVER CINEMAS, INC.
SCI ACQUISITION CORP.
LANDMARK THEATRE CORP.
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
BEAR, STEARNS & CO. INC.
- --------------------------------------------------------------------------------
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of April 16, 1998, by and among Silver Cinemas International,
Inc., a Delaware corporation (the "COMPANY"), Silver Cinemas, Inc., a Delaware
corporation, SCI Acquisition Corp., a Delaware corporation and Landmark Theatre
Corp. a Delaware corporation (collectively, the "Guarantors"), and Donaldson,
Lufkin & Jenrette Securities Corporation, BT Alex. Brown Incorporated and Bear,
Stearns & Co. Inc. each an "INITIAL PURCHASER" and, collectively, the "INITIAL
PURCHASERS"), each of whom has agreed to purchase the Company's 10 1/2% Senior
Subordinated Notes due 2005 (the "NOTES") pursuant to the Purchase Agreement (as
defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
April 9, 1998, (the "PURCHASE AGREEMENT"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 3 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them the Indenture, dated April 15, 1998,
among the Company, the Guarantors and Norwest Bank Minnesota, National
Association, as Trustee, relating to the Notes and the Exchange Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CERTIFICATED SECURITIES: Physical Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes tendered by Holders
thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
<PAGE> 3
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of Exchange Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Notes that are tendered by such Holders in connection with such exchange and
issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXCHANGE NOTES: The Company's 10 1/2% Senior Subordinated Notes due
2005 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii)
as contemplated by Section 4 hereof.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
-2-
<PAGE> 4
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer for
a Exchange Note which is entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the Act,
(b) the date on which such Note has been disposed of in accordance with a Shelf
Registration Statement (and the purchasers thereof have been issued Exchange
Notes), or (c) the date on which such Note is distributed to the public pursuant
to Rule 144 under the Act (and purchasers thereof have been issued Exchange
Notes) and each Exchange Note until the date on which such Exchange Note is
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including the
delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company [and the Guarantor(s)] shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 60 days after the
Closing Date (such 60th day being the "FILING DEADLINE"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Exchange Notes to be offered
in exchange for the Notes that are Transfer Restricted Securities and (ii)
resales of Exchange Notes by Broker-Dealers that tendered into the Exchange
Offer Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Notes acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
business days thereafter (such 30th day being the "CONSUMMATION DEADLINE").
-3-
<PAGE> 5
(c) The Company shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration Statement
and indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a result
of market-making activities or other trading activities (other than Notes
acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement.
Because such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer,
the Company and Guarantors shall permit the use of the Prospectus contained in
the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such
prospectus delivery requirement. To the extent necessary to ensure that the
prospectus contained in the Exchange Offer Registration Statement is available
for sales of Exchange Notes by Broker-Dealers, the Company and the Guarantors
agree to use their respective best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and current
as required by and subject to the provisions of Section 6(a) and (c) hereof and
in conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not
permitted by applicable law (after the Company and the Guarantors have complied
with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation Deadline that (A) such Holder was prohibited by law
or Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes
acquired directly from the Company or any of its Affiliates, then the Company
and the Guarantors shall:
(x) cause to be filed, on or prior to 45 days after the
earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of
clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a)(ii) above, (such earlier date, the
"FILING DEADLINE"), a shelf registration statement pursuant to Rule
415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement (the "SHELF REGISTRATION STATEMENT")),
relating to all Transfer Restricted Securities, and
-4-
<PAGE> 6
(y) shall use their respective best efforts to cause such
Shelf Registration Statement to become effective on or prior to 90
days after the Filing Deadline for the Shelf Registration Statement
(such 90th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under applicable
federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above; provided that, in such event, the Company shall remain obligated to meet
the Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf
Registration Statement is available for sales of Transfer Restricted Securities
by the Holders thereof entitled to the benefit of this Section 4(a) and the
other securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(b) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the Closing
Date or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 days after receipt of
a request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
(a) The parties hereto agree that the holders of Transfer
Restricted Securities will suffer damages if the Company and the Guarantors fail
to fulfill their obligations pursuant to Section 3 or Section 4, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that:
(i) if (A) neither the Exchange Offer Registration
Statement nor Shelf Registration Statement is filed with the
Commission on or prior to the Filing Deadline or (B) notwithstanding
that the Company and the Guarantors have consummated or will
consummate an Exchange Offer, the Company and the Guarantors are
required to file a Shelf Registration Statement and such Shelf
Registration Statement is not filed on or prior to the date required
by this Registration Rights Agreement, then commencing on the day
after either such required filing date, Liquidated Damages shall
accrue in an amount equal to $0.05 per week per $1000 in principal
amount of Notes for the first 90 days immediately following each such
filing date, such Liqui-
-5-
<PAGE> 7
dated Damages rate increasing by an additional $0.05 per week at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement is declared effective by
the Commission on or prior to 90 days after the applicable filing
date or (B) notwithstanding that the Company and the Guarantors have
consummated or will consummate an Exchange Offer, the Company and the
Guarantors are required to file a Shelf Registration Statement and
such Shelf Registration Statement is not declared effective by the
Commission on or prior to the 90th day following the date such Shelf
Registration Statement was filed, then, commencing on the day after
the 90th day following the applicable filing date, Liquidated Damages
shall accrue in an amount equal to $0.05 per week per $1000 in
principal amount of Notes for the first 90 days immediately following
such date, such Liquidated Damages rate increasing by an additional
$0.05 per week at the beginning of each subsequent 90-day period; or
(iii) if (A) the Company and the Guarantors have not
exchanged Exchange Notes for all Notes validly tendered in accordance
with the terms of the Exchange Offer on or prior to the 30th day
after the date on which the Exchange Offer Registration Statement was
declared effective or (B) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration
Statement ceases to be effective at any time prior to the expiration
of the Effectiveness Period, then Liquidated Damages shall accrue in
an amount equal to $0.05 per week per $1000 in principal amount of
the Notes for the first 90 days commencing on (x) the 31st day after
such effective date, in the case of (A) above, or (y) the day such
Shelf Registration Statement ceases to be effective in the case of
(B) above, such Liquidated Damages rate increasing by an additional
$0.05 per week at the beginning of each subsequent 90-day period; or
provided, however, that the Liquidated Damages rate on the Notes may
not exceed in the aggregate a maximum of $.50 per week per $1000 in
principal amount of Notes; provided, further, however, that (1) upon
the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon
the effectiveness of the Exchange Offer Registration Statement or a
Shelf Registration Statement (in the case of clause (ii) above), or
(3) upon the exchange of Exchange Notes for all Notes tendered (in
the case of clause (iii)(A) above), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in
the case of clause (iii)(B) above), Liquidated Damages on the Notes
as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue.
(b) All accrued liquidated damages shall be paid to the
Holders entitled thereto, in the manner provided for the payment of interest in
the Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. Notwithstanding the fact that any securities for which
liquidated damages are due cease to be Transfer Restricted Securities, all
obligations of the Company and the Guarantors to pay liquidated damages with
respect to securities shall survive until such time as such obligations with
respect to such securities shall have been satisfied in full.
-6-
<PAGE> 8
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection
with the Exchange Offer, the Company and the Guarantors shall (x) comply with
all applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Notes that such Broker-Dealer
acquired for its own account as a result of its market making activities or
other trading activities (other than Notes acquired directly from the Company or
any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and (z) comply with all of the following
provisions:
(i) If, following the date hereof there has been announced
a change in Commission policy with respect to exchange offers such as
the Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company and the
Guarantors hereby agree to seek a no-action letter or other favorable
decision from the Commission allowing the Company and the Guarantors
to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company and the Guarantors hereby agree to pursue the
issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Guarantors hereby
agree to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of
such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) 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 to be issued in the Exchange Offer and (C) it is
acquiring the Exchange Notes in its ordinary course of business. As a
condition to its participation in the Exchange Offer, each Holder
using the Exchange Offer to participate in a distribution of the
Exchange Notes shall acknowledge and agree that, if the resales are
of Exchange Notes obtained by such Holder in exchange for Notes
acquired directly from the Company or an Affiliate thereof, it (1)
could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993,
and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that
such a secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
-7-
<PAGE> 9
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide
a supplemental letter to the Commission (A) stating that the Company
and the Guarantors are registering the Exchange Offer in reliance on
the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including
a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to
distribute the Exchange Notes to be received in the Exchange Offer
and that, to the best of the Company's and each Guarantor's
information and belief, each Holder participating in the Exchange
Offer is acquiring the Exchange Notes in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes received in the
Exchange Offer and (C) any other undertaking or representation
required by the Commission as set forth in any no-action letter
obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the
Shelf Registration Statement, the Company and the Guarantors shall (i) comply
with all the provisions of Section 6(c) below and use their respective best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(ii) issue, upon the request of any Holder or purchaser of
Notes covered by any Shelf Registration Statement contemplated by
this Agreement, Exchange Notes having an aggregate principal amount
equal to the aggregate principal amount of Notes sold pursuant to the
Shelf Registration Statement and surrendered to the Company for
cancellation; the Company shall register Exchange Notes on the Shelf
Registration Statement for this purpose and issue the Exchange Notes
to the purchaser(s) of securities subject to the Shelf Registration
Statement in the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any
Registration Statement and any related Prospectus required by this Agreement,
the Company and the Guarantors shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3
or 4 of this Agreement, as applicable. Upon the occurrence of any
event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain an untrue statement of
material fact or omit to state any material fact necessary to make
the statements therein not misleading or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company and the Guarantors shall file
promptly an appropriate amendment to such Registration Statement
curing such defect, and, if Commission review is required, use their
respective best efforts to cause such amendment to be declared
effective as soon as practicable.
-8-
<PAGE> 10
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the applicable Registration
Statement as may be necessary to keep such Registration Statement
effective for the applicable period set forth in Section 3 or 4
hereof, as the case may be; cause the Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462, as applicable, under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method
or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by
such Holder, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event that
makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires
the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or
that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
initial Registration Statement filed with the Commission shall
include therein the adjusted pro forma information set forth in the
offering memorandum used in connection with the Exempt Resales and
the Company and the Guarantors shall use their respective reasonable
efforts to ensure that such information is included in the
Registration Statement upon the Registration Statement being declared
effective. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification
of the Transfer Restricted Securities under state securities or Blue
Sky laws, the Company and the Guarantors shall use their respective
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such
exchange or sale, if any, before filing with the Commission, copies
of any Registration Statement or any Prospectus included
-9-
<PAGE> 11
therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Registration Statement),
which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at
least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement
to any such Registration Statement or Prospectus (including all such
documents incorporated by reference) to which such Holders shall
reasonably object within five Business Days after the receipt
thereof. A Holder shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains an
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading or fails
to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to each Holder in
connection with such exchange or sale, if any, make the Company's and
the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
Holders may reasonably request;
(vii) make available, at reasonable times, for inspection
by each Holder and any attorney or accountant retained by such
Holders, all financial and other records, pertinent corporate
documents of the Company and the Guarantors and cause the Company's
and the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holders, attorney or
accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness; provided, however, that such Persons
shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in
writing as confidential at the time of delivery of such information
shall be kept confidential by such Persons, unless (i) disclosure of
such information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any
disclosure requirements pursuant to federal securities laws in
connection with the filing of such Registration Statement or the use
of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such Person or (iv) such
information becomes available to such Person from a source other than
the Company and its subsidiaries and such source is not known, after
the due inquiry, by such Person to be bound by a confidentiality
agreement; provided, further, that the foregoing investigation shall
be coordinated on behalf of such Persons by one representative
designated by and on behalf of such Persons and any such confidential
information shall be available from such representative to such
Persons so long as any Person agrees to be bound by such
confidentiality agreement;
(viii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after
the Company is
-10-
<PAGE> 12
notified of the matters to be included in such Prospectus supplement
or post-effective amendment;
(ix) furnish to each Holder in connection with such
exchange or sale, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to each Holder without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Holder reasonably may
request; the Company and the Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any amendment or
supplement thereto by each selling Holder in connection with the
offering and the sale of the Transfer Restricted Securities covered
by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
applicable Registration Statement contemplated by this Agreement as
may be reasonably requested by any Holder in connection with any sale
or resale pursuant to any applicable Registration Statement. In such
connection the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in
the case of paragraphs (2) and (3), use its best efforts
to cause to be furnished) to each Holder, upon
Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the
case may be:
(1) a certificate, dated such date,
signed on behalf of the Company and each
Guarantor by (x) the President or any Vice
President and (y) a principal financial or
accounting officer of the Company and such
Guarantor, confirming, as of the date thereof,
the matters set forth in Sections 6(dd), 9(a)
and 9(b) of the Purchase Agreement and such
other similar matters as such Holders may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date
of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for
the Company and the Guarantors covering matters
similar to those set forth in paragraph (e) of
Section 9 of the Purchase Agreement and such
other matter as such Holder may reasonably
request, and in any event including a statement
to the effect that such counsel has
participated in conferences with officers and
other representatives of the Company and the
Guarantors, representatives of the independent
public accountants for the Company and the
Guarantors and have considered the matters
required to be stated therein and the
statements contained therein, although such
counsel has not independently verified the
accuracy, completeness or fairness of such
statements; and that such counsel advises that,
on the basis of the foregoing (relying as to
materiality to the extent such counsel deems
appropriate upon the
-11-
<PAGE> 13
statements of officers and other
representatives of the Company and the
Guarantors) and without independent check or
verification), no facts came to such counsel's
attention that caused such counsel to believe
that the applicable Registration Statement, at
the time such Registration Statement or any
post-effective amendment thereto became
effective and, in the case of the Exchange
Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained
an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the
statements therein not misleading, or that the
Prospectus contained in such Registration
Statement as of its date and, in the case of
the opinion dated the date of Consummation of
the Exchange Offer, as of the date of
Consummation, contained an untrue statement of
a material fact or omitted 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.
Without limiting the foregoing, such counsel
may state further that such counsel assumes no
responsibility for, and has not independently
verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in
any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter,
dated the date of Consummation of the Exchange
Offer, or as of the date of effectiveness of
the Shelf Registration Statement, as the case
may be, from the independent accountants named
in Section 9(g) of the Purchase Agreement, in
the customary form and covering matters of the
type customarily covered in comfort letters to
underwriters in connection with underwritten
offerings, and affirming the matters set forth
in the comfort letters delivered pursuant to
Section 9(g) of the Purchase Agreement; and
(B) deliver such other documents and
certificates as may be reasonably requested by the selling
Holders to evidence compliance with the matters covered in
clause (A) above and with any customary conditions
contained in the any agreement entered into by the Company
and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered
by the applicable Registration Statement; provided, however, that
neither the Company nor any Guarantor shall be required to register
or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it
is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Se-
-12-
<PAGE> 14
curities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained
in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide
the Trustee under the Indenture with printed certificates for the
Transfer Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvi) otherwise use their respective best efforts to
comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders with regard to
any applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA
not later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate
with the Trustee and the Holders to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to
be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request,
each document filed with the Commission pursuant to the requirements
of Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) 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 Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number
-13-
<PAGE> 15
of days equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Exchange Notes to be issued in the Exchange Offer and printing of
Prospectuses whether for exchanges, sales, market making or otherwise),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company, the Guarantors and the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Exchange Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and the
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Notes into in the Exchange Offer and/or selling or
reselling Notes or Exchange Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Cahill Gordon & Reindel, unless another firm
shall be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Exchange Notes or registered Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is
-14-
<PAGE> 16
based upon information relating to any of the Holders furnished in writing to
the Company by any of the Holders.
(b) Each Holder of Transfer Restricted agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Guarantors to the same extent as the foregoing indemnity
from the Company and the Guarantors set forth in section (a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Guarantors, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying
-15-
<PAGE> 17
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action 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 the
indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Holder, on the other hand, 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 such Guarantor, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of Section
8(a), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders 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 the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims, damages,
liabilities or judgments. Notwithstanding the provisions of this Section 8, no
Holder, its directors, its officers or any Person, if any, who controls such
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) 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. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute
-16-
<PAGE> 18
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
(e) The Company and Guarantors agree that the indemnity and
contribution provisions of this Section 8 shall apply to Affiliated Market
Makers to the same extent, on the same conditions, as it applies to Holders.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor (i) is not subject to Section 13 or 15(d)
of the Exchange Act, to make available, upon request of any Holder, to such
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree
that any failure by the Company and/or the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being
-17-
<PAGE> 19
tendered pursuant to such Exchange Offer, may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company or the Guarantors:
Silver Cinemas International, Inc.
4004 Beltline Road, Suite 205
Lockbox 18
Dallas, Texas 75244
Telecopier No.: (972) 503-9013
Attention: Steve Holmes
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Telecopier No.: (213) 891-8763
Attention: Bryant Edwards, Esq.
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to
the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
-18-
<PAGE> 20
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
-19-
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
SILVER CINEMAS INTERNATIONAL, INC.
By: _______________________________
Name: Steven Holmes
Title: Chief Executive Officer
SILVER CINEMAS, INC.
By: _______________________________
Name: Steven Holmes
Title: Chief Executive Officer
SCI ACQUISITION CORP.
By: _______________________________
Name: Steven Holmes
Title: Chief Executive Officer
LANDMARK THEATRE CORP.
By: _______________________________
Name: Steven Holmes
Title: Chief Executive Officer
-20-
<PAGE> 22
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _______________________________________
Name:
Title:
BT ALEX. BROWN INCORPORATED
By: _______________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: _______________________________________
Name:
Title:
-21-
<PAGE> 1
EXHIBIT 5.1
[LATHAM & WATKINS LETTERHEAD]
June 15, 1998
(File No.)
Silver Cinemas International, Inc.
4004 Beltline Road, Suite 205
Dallas, Texas 75244
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
In connection with the registration of $100,000,000
aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2005 (the
"Exchange Notes") by Silver Cinemas International, Inc., a Delaware corporation
(the "Company"), together with the guarantees of the Exchange Notes (the
"Guarantees") by Silver Cinemas, Inc., Landmark Theatre Corp. and SCI
Acquisition Corp. (collectively, the "Guarantors"), on Form S-4 filed with the
Securities and Exchange Commission (the "Commission") on June 15, 1998 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below. The Exchange Notes will be issued pursuant to an
indenture (the "Indenture"), dated as of April 15, 1998, among the Company, the
Guarantors and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"). The
Exchange Notes will be issued in exchange for the Company's outstanding 10 1/2%
Senior Subordinated Notes due 2005 (the "Private Notes") on the terms set forth
in the prospectus contained in the Registration Statement and the Letter of
Transmittal filed as an exhibit thereto (the "Exchange Offer").
In our capacity as your special counsel, we have made such
legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for purposes of this opinion.
<PAGE> 2
[LATHAM & WATKINS]
Silver Cinemas International, Inc.
June __, 1998
Page 2
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject
transactions only of the internal laws of the State of New York and the General
Corporation Law of the State of Delaware and we express no opinion with respect
to the applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.
Subject to the foregoing and the other matters set forth
herein, it is our opinion that, as of the date hereof:
1. The Exchange Notes, when duly executed, issued,
authenticated and delivered in accordance with the terms of the Exchange Offer
and the Indenture, will be legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
2. The Guarantees, when duly executed and delivered and
when the Exchange Notes are duly executed, issued, authenticated and delivered
in accordance with the terms of the Exchange Offer and the Indenture, will be
legally valid and binding obligations of the Guarantors, enforceable against the
Guarantors in accordance with their terms.
The opinions rendered in paragraphs 1 and 2 above are
subject to the following exceptions, limitations and qualifications: (i) the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights and remedies
of creditors; (ii) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought and
(iii) we express no opinion concerning the enforceability of the waiver of
rights or defenses contained in Section 4.06 of the Indenture.
To the extent that the obligations of the Company and the
Guarantors under the Indenture may be dependent upon such matters, we have
assumed for purposes of this opinion that (i) the Trustee is validly existing
and in good standing under the laws of its jurisdiction of organization; (ii)
the Trustee has been duly qualified to engage in the activities contemplated by
the Indenture; (iii) the Trustee is in compliance generally, and with respect to
acting as Trustee under the Indenture, with all applicable laws and regulations;
and (iv) the Trustee has the requisite organizational and other power and
authority to perform its obligations under the Indenture.
We have not been requested to express and, with your
knowledge and consent, do not render any opinion with respect to the
applicability to the obligations of the Company or the Guarantors under the
Exchange Notes, the Guarantees or the Indenture of Sections 547 and 548 of Title
11 of the Bankruptcy Reform Act of 1978, as amended, or applicable state law
(including,
<PAGE> 3
[LATHAM & WATKINS]
Silver Cinemas International, Inc.
June __, 1998
Page 3
without limitation, Article 10 of the New York Debtor & Creditor Law) relating
to fraudulent transfers and obligations.
We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference to our firm contained under the
heading "Legal Matters".
Very truly yours,
<PAGE> 1
EXHIBIT 10.1
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement"), dated as of
August 1, 1996, is by and among the parties listed on the signature page hereto
(together with persons who become parties pursuant to Section XII.A herein, the
"Stockholders") and Silver Cinemas International, Inc. (formerly Encore
Entertainment, Inc.), a Delaware corporation ("Holdings").
RECITALS
WHEREAS, Holdings has issued shares of Common Stock and Series A
Preferred Stock ("Holdings Common Stock" and "Holdings Series A Preferred
Stock", respectively, and, collectively, "Holdings Stock");
WHEREAS, the parties hereto desire to enter into this Agreement
for the purpose of regulating certain aspects of their relationship with regard
to their ownership of Holdings Stock on and after the date hereof;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section I. Authorization.
Each Stockholder hereby represents and warrants to Holdings and
to each other that it has full power and authority to execute, deliver and
perform its obligations under this Agreement. The execution and delivery of this
Agreement has been duly and validly authorized, and all necessary action has
been taken, to make this Agreement a valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, except that the
enforcement thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
Section II. Certain Covenants of Holdings.
When it is first legally required to do so, Holdings will
register the Holdings Common Stock and/or the Holdings Series A Preferred Stock
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and will keep effective such registration and will timely file
such information, documents and reports as the Securities and Exchange
Commission (the "Commission") may require or prescribe under Section 13 of the
Exchange Act. From and after the effective date of the registration statement
filed by Holdings under the Act, Holdings will (whether or not it may then be
required to do so) timely file such information, documents and reports as the
Commission may require or present under Section 13 or 15(d) (whichever is
applicable) of the Exchange Act. Immediately upon becoming subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act,
<PAGE> 2
Holdings will forthwith upon request furnish any Stockholder (i) a written
statement by Holdings that it has complied with such reporting requirements,
(ii) a copy of the most recent annual or quarterly report of Holdings, and (iii)
such other reports and documents filed by Holdings with the Commission as such
Stockholder may reasonably request. Holdings acknowledges and agrees that the
purposes of the requirements contained in this Section II are to enable any such
Stockholder to comply with the current public information requirements contained
in Rule 144 and Rule 144A under the Securities Act of 1933, as amended (the
"Act"), should such Stockholder ever wish to dispose of any of the Holdings
Stock acquired by it hereunder, without registration under the Act in reliance
upon Rule 144 and Rule 144A (or any other similar exemptive provision). In
addition, Holdings will take such other measures and file such other
information, documents and reports, as shall hereafter be required by the
Commission as a condition to the availability of Rule 144 and Rule 144A under
the Act (or any similar exemptive provision hereafter in effect).
Section III. Rights of First Refusal.
A. Except as provided in Section VII below, before any shares of
Holdings Stock, or any beneficial interest therein, may be sold, transferred or
assigned (including transfer by operation of law) or pledged, hypothecated or
encumbered by any of the Stockholders (a "Selling Stockholder"), such shares
shall first be offered to Holdings as set forth below.
B. The Selling Stockholder shall deliver a notice (the "Notice")
to Holdings stating (i) his bona fide intention to sell or transfer such shares,
(ii) the number of shares proposed to be sold or transferred (the "Noticed
Shares"), (iii) the price for which it proposes to sell or transfer the Noticed
Shares (in the case of a transfer not involving a sale such price shall be
deemed to be fair market value of the Noticed Shares as determined pursuant to
Section III.D hereof) and the terms of payment of that price and other terms and
conditions of sale, and (iv) the name and address of the proposed purchaser or
transferee. A Selling Stockholder shall not effect, or attempt to effect, any
sale or other transfer for value of the Holdings Stock other than for money or
an obligation to pay money.
C. For a period of thirty (30) days after receipt of the Notice,
Holdings (or its assignee or assignees) shall have the right to purchase all of
the Noticed Shares. The price per share of the Noticed Shares purchased by
Holdings pursuant to this Section III.C shall be, in the case of a sale, the
price per share as set forth in the Notice and, in the case of a transfer not
involving a sale, the fair market value of such shares determined pursuant to
Section III.D hereof, and the purchase shall be on the same terms and subject to
the same conditions as those set forth in the Notice. If Holdings (including its
assignee or assignees) elects not to purchase all the Noticed Shares, it shall
give written notice within the thirty (30) day period following receipt of the
Notice.
D. In the case of a transfer of shares of Holdings Stock not
involving a sale, the fair market value of the shares shall be determined in
good faith by Holdings' Board of Directors. This determination will be final and
binding upon all parties and persons claiming under or through them. Anything in
this Section III.D to the contrary notwithstanding, if a Selling Stockholder is
not satisfied with the determination of fair market value, such
2
<PAGE> 3
Stockholder may elect not to proceed with the proposed transfer of shares of
Holdings Stock not involving a sale and retain such shares under this Agreement.
E. If Holdings (and/or any assignees of Holdings) does not elect
to purchase all of the shares of Holdings Stock to which the Notice refers as
provided in Section III.B hereof, then none of the shares shall be purchased
(unless the Selling Stockholder elects otherwise), and the Selling Stockholder
may sell or transfer all (but not less than all) of the shares to any purchaser
or transferee named in the Notice at, in the case of a sale, the price specified
in the Notice or at a higher price, provided that such sale or transfer is
consummated within five (5) months of the date of the Notice to Holdings.
F. Notwithstanding subsections A through E of this Section III,
Holdings shall not have any rights under this Section III: (i) in connection
with or at any time subsequent to the closing of an underwritten public offering
of the Common Stock pursuant to a registration statement declared effective
under the Act; (ii) at any time after any equity securities of Holdings have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended; or (iii) as a result of or at any time after any transfer of Holdings
Common Stock in connection with a sale of Holdings, whether such sale is
effected by merger, consolidation, sale of assets or sale of exchange of stock
representing at least fifty percent (50%) of the voting power of the stock of
Holdings (in terms of number of votes for the election of directors).
Section IV. Tag-Along Rights.
A. If Brentwood Associates Buyout Fund II, L.P. (the
"Partnership") or any of its respective Affiliates (as hereinafter defined)
(collectively, the "Selling Group"), at any time or from time to time, enters
into an agreement (whether oral or written) to transfer, sell or otherwise
dispose of, directly or indirectly (a "Tag-Along Sale"), any shares of Holdings
Common Stock or any interest therein, then each other Stockholder shall have the
right, but not the obligation, to participate in such Tag-Along Sale (and to
displace the Selling Group to the extent of such participation) by selling up to
the number of shares of Holdings Stock (the "Stockholders' Allotment") equal to
the product of (i) the total number of shares of Holdings Stock proposed to be
sold or otherwise disposed of by the Selling Group in the Tag-Along Sale
multiplied by (ii) a fraction, the numerator of which shall equal the aggregate
number of shares of Holdings Stock owned by other Stockholders who have elected
to participate in such Tag-Along Sale immediately prior to the Tag-Along Sale
and the denominator of which shall equal the sum of: (A) the aggregate number of
shares of Holdings Stock owned by members of the Selling Group who have elected
to participate in such Tag-Along Sale immediately prior to the Tag-Along Sale;
and (B) the aggregate number of shares of Holdings Stock owned by other
Stockholders who have elected to participate in such Tag-Along Sale, immediately
prior to the Tag-Along Sale.
Any such sale by any Stockholder shall be on the same terms and
conditions as the proposed Tag-Along Sale by the Selling Group; provided,
however, that all selling Stockholders shall share pro rata, based upon the
number of shares being sold by each (i) in any indemnity liabilities to the
proposed transferee or purchaser in the Tag-Along Sale (other than
representations as to unencumbered ownership of and ability to transfer the
shares being
3
<PAGE> 4
sold of any other seller in the Tag-Along Sale, which shall be the sole
responsibility of such other seller) and (ii) in any escrow for the purpose of
satisfying any such indemnity liabilities.
B. The foregoing notwithstanding, Section IV.A shall not apply to
(i) any transfer, sale or other disposition of shares of Holdings Stock solely
among the Partnership and its Affiliates for a price not in excess of the
original purchase price of such shares, (ii) any distribution by the Partnership
to its partners and (iii) any merger or consolidation of Holdings with or into
another corporation or a sale of all or substantially all of the assets of
Holdings followed by its dissolution, provided that all shares of Holdings Stock
subject to this Agreement are treated the same in any such transaction.
C. The Selling Group members participating in a Tag-Along Sale or
a representative of the Selling Group (the "Selling Group Representative," which
shall be the general partner of the Partnership until the other Stockholders are
notified of the name and address of a successor representative) shall promptly
provide each Stockholder with written notice (the "Tag-Along Sale Notice") not
more than 60 nor less than 30 days prior to the proposed date of the Tag-Along
Sale (the "Tag-Along Sale Date"). In order to facilitate the prompt delivery of
the Tag-Along Sale Notices, Holdings hereby covenants to provide the Selling
Group members participating in a Tag-Along Sale or the Selling Group
Representative, as the case may be, access to stock record books of Holdings.
Each Tag-Along Sale Notice shall set forth: (i) the name and address of each
proposed transferee or purchaser of shares of Holdings Stock in the Tag-Along
Sale; (ii) the name and address of each Selling Group member participating in
the Tag-Along Sale and the number of shares of Holdings Stock proposed to be
transferred or sold by each such Selling Group member; (iii) the proposed amount
and form of consideration to be paid for such shares and the terms and
conditions of payment offered by each proposed transferee or purchaser, (iv) the
aggregate number of shares of Holdings Stock held of record as of the close of
business on the date of the Tag-Along Sale Notice (the "Tag-Along Notice Date")
by the Stockholder to whom the notice is sent and the aggregate number of such
Stockholder's shares of Holdings Stock outstanding on the Tag-Along Notice Date;
(v) the aggregate number of shares of Holdings Stock held of record as of the
Tag-Along Notice Date by the Selling Group; (vi) the maximum number of shares of
Holdings Stock (the "Stockholder's Allotment") that the Stockholder to whom the
notice is sent is entitled to include in the Tag-Along Sale assuming each
Stockholder elected to participate in the Tag-Along Sale and elected to sell the
maximum number of shares owned by such Stockholder; (vii) the number of shares
of Holdings Stock constituting the Stockholders' Allotment; (viii) confirmation
that the proposed purchaser or transferee has been informed of the "Tag-Along
Rights" provided for herein and has agreed to purchase shares of Holdings Stock
in accordance with the terms hereof; (ix) the Tag-Along Sale Date and (x)
confirmation that, with respect to the shares of Holdings Stock to be received
by the proposed transferee or purchaser, the proposed transferee or purchaser
agrees in writing to be bound by, and covenants that each transferee of all such
shares shall be bound by, the provisions of this Agreement (other than the
provisions of this Section IV), as if it were a member of the Selling Group.
Each Stockholder shall provide written notice (or oral notice
confirmed in writing) (the "Tag-Along Notice") to the member(s) of the Selling
Group participating in the Tag-Along Sale, or, at such Stockholder's option, to
the Selling Group Representative, no less
4
<PAGE> 5
than 15 days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set
forth the number of shares of Holdings Stock, if any, that such Stockholder
desires to include in the Tag-Along Sale (which shall not exceed such
Stockholder's Allotment). The Tag-Along Notice shall also specify the aggregate
number of additional shares of Holdings Stock owned of record as of the
Tag-Along Notice Date by such Stockholder, if any, which such Stockholder
desires also to include in the Tag-Along Sale ("Additional Shares") in the event
there is an aggregate under subscription for the entire Stockholders' Allotment.
In the event there is an aggregate under subscription by the Stockholders for
the entire Stockholders' Allotment, the Selling Group member(s) participating in
the Tag-Along Sale shall apportion the unsubscribed shares of Holdings Stock to
Stockholders whose Tag-Along Notices specified an amount of Additional Shares,
which apportionment shall be on a pro rata basis among such Stockholders in
accordance with the number of Additional Shares specified by all such
Stockholders in their Tag-Along Notices.
The participating members of the Selling Group shall determine
the aggregate number of shares of Holdings Stock to be sold by each
participating Stockholder in any given Tag-Along Sale in accordance with the
terms hereof, and the Tag-Along Notices given by the Stockholders shall
constitute their binding respective agreements to sell such shares on the terms
and conditions applicable to such sale (including the requirements of this
Section IV). If the proposed transferee or purchaser does not purchase all of
such shares on the same terms and conditions applicable to the members of the
Selling Group, then the Partnership shall promptly offer to purchase, within
five business days of the date of such Tag-Along Sale, all such unpurchased
shares on such terms and conditions.
If a Tag-Along Notice is received by neither the members of the
Selling Group participating in the Tag-Along Sale nor the Selling Group
Representative, from a Stockholder within the 15-day period specified above, the
Selling Group members shall have the right to sell or otherwise transfer the
number of shares of Holdings Stock specified in the Tag-Along Sale Notice to the
proposed purchaser or transferee without any participation by such Stockholder,
but only on the terms and conditions stated in such Tag-Along Sale Notice and
only if such sale occurs on a date within five business days of the Tag-Along
Sale Date.
D. The provisions of this Section IV shall apply regardless of
the form of consideration received in the Tag-Along Sale.
E. "Affiliate" of a specified person means any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified person's immediate
family (as defined in instruction 2 of Item 404(a) of Regulation S-K promulgated
by the Securities and Exchange Commission) and (ii) trusts whose trustee and
beneficiaries include only such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i). 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.
5
<PAGE> 6
F. The provisions of this Section IV shall terminate on the
earlier to occur of (i) the closing of an underwritten public offering of the
Common Stock pursuant to a registration statement declared effective under the
Act, (ii) the first time at which any equity securities of Holdings have been
registered under Section 12(g) of the Exchange Act or (iii) as a result of or at
any time after any transfer of Holdings Common Stock in connection with a sale
of Holdings, whether such sale is effected by merger, consolidation, sale of
assets or sale of exchange of stock representing at least fifty percent (50%) of
the voting power of the stock of Holdings (in terms of number of votes for the
election of directors).
Section V. Drag-Along Rights.
A. In the event the Selling Group determines to accept an offer
from any person (other than a member of the Selling Group or any Affiliate
thereof) to purchase 100% of the outstanding shares of Holdings Stock, then,
subject to Section V.C below, each of the other Stockholders shall sell, and
shall cause any Affiliate of it to sell all shares of Holdings Stock held by it
or such Affiliate pursuant to such offer to purchase (the "Drag-Along Sale").
All holders of Holdings Stock in such Drag-Along Sale (i) shall receive the same
consideration per share of Holdings Stock, shall be subject to the same terms
and conditions of sale and shall otherwise be treated equally or, where
appropriate, pro rata based upon the number of shares of Holdings Stock held by
each stockholder and (ii) shall execute such documents and take such actions as
may be reasonably required by the Selling Group Representative.
Any such sale by any Stockholder shall be on the same terms and
conditions as the proposed Drag-Along Sale by the Selling Group; provided,
however, that all selling Stockholders shall share pro rata, based upon the
number of shares being sold by each, (i) in any indemnity liabilities to the
purchaser in the Drag-Along Sale (other than representations as to unencumbered
ownership of and ability to transfer the shares being sold of any other seller
in the Drag-Along Sale, which shall be the sole responsibility of such other
seller) and (ii) in any escrow for the purpose of satisfying any such indemnity
liabilities.
B. The Selling Group members participating in a Drag-Along Sale
or the Selling Group Representative shall promptly provide each Stockholder with
written notice (the "Sale Notice") not more than 60 nor less than 30 days prior
to the date of the Drag-Along Sale (the "Drag-Along Sale Date"). Each Sale
Notice shall set forth: (i) the name and address of each proposed transferee or
purchaser of shares of Holdings Stock in the Drag-Along Sale; (ii) the proposed
amount and form of consideration to be paid for such shares and the terms and
conditions of payment offered by each proposed transferee or purchaser, (iii)
confirmation that the proposed purchaser or transferee has been informed of the
"Drag-Along Rights" provided for herein and has agreed to purchase shares of
Holdings Stock in accordance with the terms hereof; and (iv) the Drag-Along Sale
Date.
C. The provisions of this Section V shall apply regardless of the
form of consideration received in the Drag-Along Sale, and if any non-cash
consideration is proposed in the Drag-Along Sale to each member of the Selling
Group, each Stockholder shall accept its pro rata share of such non-cash
consideration for the Holdings Stock based upon its proportional ownership of
shares of Holdings Stock; provided, however, that a Stockholder shall not be
required to participate in a Drag-Along Sale in which non-cash consideration is
6
<PAGE> 7
proposed if such Stockholder is not receiving cash consideration in connection
with such Drag-Along Sale in an amount sufficient to pay the federal income tax
that would be payable if it were to participate in the Drag-Along Sale.
D. The provisions of this Section V shall apply to warrants which
are exercisable for shares of Holdings Stock the same as if such warrants had in
fact been exercised by the holders thereof prior to the initiation of a
Drag-Along Sale.
E. The provisions of this Section V shall terminate on the
earlier to occur of (i) the closing of an underwritten public offering of
Holdings Common Stock pursuant to a registration statement declared effective
under the Act, (ii) the first time at which any equity securities of Holdings
have been registered under Section 12(g) of the Exchange Act or (iii) as a
result of or at any time after any transfer of Holdings Common Stock in
connection with a sale of Holdings, whether such sale is effected by merger,
consolidation, sale of assets or sale of exchange of stock representing at least
fifty percent (50%) of the voting power of the stock of Holdings (in terms of
number of votes for the election of directors).
Section VI. Registration Rights.
Each of the Stockholders shall have the registration rights
provided in the Registration Rights Agreement attached hereto as Exhibit A,
which Registration Rights Agreement is hereby incorporated herein as if set
forth in full in this Agreement. Execution and delivery of this Agreement shall,
without further act of any of the parties, constitute execution and delivery of
the Registration Rights Agreement.
Section VII. Exempt Transfers.
The provisions of Section III shall not apply to a transfer of
any Holdings Stock by a Stockholder, either during his lifetime or on death by
will or intestacy, to (i) his ancestors, descendants, spouse, brothers, sisters,
nephews or nieces, (ii) any custodian or trustee for the account or benefit of
such Stockholder or such Stockholder's ancestors, descendants, spouse, brothers,
sisters, nephews or nieces, or (iii) in the case of a Stockholder which is a
corporation, an entity directly or indirectly controlled by or under common
control with such Stockholder; provided, however, that the transferee shall
receive and hold such Shares subject to the provisions of Section VIII hereof
and to any legends on the certificates evidencing such shares and there shall be
no further transfer of such Shares except in accordance herewith; and provided
further, that the transferee shall acknowledge and agree, in a writing
satisfactory to Holdings, to be bound by the terms of this Agreement and shall
execute and deliver to Holdings a letter to such effect.
Section VIII. Restriction on Public Sale.
Anything to the contrary herein notwithstanding, in the event
that Holdings files a registration statement with respect to an underwritten
public offering under the Act in which any class of Holdings' equity securities
is offered, a Stockholder shall not effect any public sale or distribution of
any of the shares of Holdings Stock (which shares, for the purposes of this
Section VIII, shall include any and all voting securities received by such
Stockholder as a
7
<PAGE> 8
stock dividend, stock split or other recapitalization or similar distribution on
or in respect of the shares of Holdings Stock) or any of Holdings' other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning ten (10) days before the filing of such
registration statement with the Securities and Exchange Commission and ending
one hundred eighty (180) days after such registration statement has become
effective or ten (10) days after is has been withdrawn.
Section IX. Register of Securities; Removal of Restrictions on Transfer.
A. Register of Securities. Holdings or its duly appointed agent
shall maintain separate registers for the shares of Holdings Series A Preferred
Stock and the shares of Holdings Common Stock, in which it shall register the
issue and sale of all such respective shares. Holdings may issue stop transfer
instructions to such agent and make similar notations in such register to ensure
that all transfers of such securities are made in accordance with this
Agreement. All transfers of such securities shall be recorded on the register
maintained by Holdings or its agent, and Holdings shall be entitled to regard
the registered holder of such securities as the actual holder thereof until
Holdings or its agent is required to record a transfer of such securities on its
register. Subject to Sections III and VIII hereof, Holdings or its agent shall
be required to record any such transfer when it receives the security to be
transferred duly and properly endorsed by the registered holder thereof or by
its attorney duly authorized in writing.
B. Removal of Transfer Restrictions. Any legend endorsed on a
certificate evidencing shares of Holdings Stock and the stop transfer
instructions and record notations with respect to such shares shall be removed
and Holdings shall issue a certificate without such legend to the holder of such
shares of Holdings Stock (i) if such shares are registered under the Act, or
(ii) if a notification under Regulation A under the Act is in effect with
respect thereto, or (iii) if such shares may be sold under Rule 144 or Rule 144A
under the Act.
C. Legends. In addition to any legends required by securities
laws, each stock certificate evidencing shares of Holdings Stock shall bear a
legend in substantially the following form until such legends may be removed in
accordance with this Agreement:
"The shares represented by this certificate are subject to a
Stockholders' Agreement dated as of August 1, 1996, which contains
restrictions on transfer, rights of first refusal, drag-along rights and
certain registration rights. A copy of said Stockholders' Agreement may
be obtained from the Company by the holder of such certificate."
Section X. Enforcement.
The parties acknowledge that the remedy at law for any breach or
violation of the provisions of Section VIII hereof shall be inadequate and that,
in the event of any such breach or violation, Holdings and/or the Stockholders
shall be entitled to injunctive relief in addition to any other remedy, at law
or in equity, to which it may be entitled.
Section XI. Violation of Transfer Provisions.
8
<PAGE> 9
Holdings shall not be required (i) to transfer on its books any
shares of Holdings Stock which shall have been sold, transferred, assigned or
pledged in violation of any of the provisions set forth in this Agreement, or
(ii) to treat as owner of such shares of Holdings Stock or to accord the right
to vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
Section XII. General Provisions.
A. After-Acquired Shares. All of the provisions of this Agreement
shall apply to (i) all of the shares of Holdings Stock now owned or which may be
transferred hereafter to, or owned by, any Stockholder and (ii) all securities
and instruments (A) received by a Stockholder as a dividend on or other payment
made to holders of Holdings Stock, or (B) issued in connection with a split of
Holdings Stock or as a result of any exchange for or reclassification of
Holdings Stock or a reorganization, recapitalization, consolidation or merger.
In addition, any person or entity who does not presently own but subsequently
acquires shares of Holdings Stock may become a party to and bound by all or any
portion of this Agreement by executing a Joinder substantially in the form
attached hereto as Exhibit B.
B. Rights and Obligations of Transferees. If a Stockholder
transfers any or all of its shares of Holdings Stock to any person, such person
and each subsequent transferee shall have the same rights hereunder (including
pursuant to Exhibit A) as are given to the Stockholder, and shall be subject to
the same obligations as are imposed upon, the Stockholder by the terms hereof
(and all references herein to a Stockholder shall include such transferee),
unless otherwise provided herein. Holdings will not record any transfer of
Holdings Stock that was made in violation of any provision of this Agreement,
including, without limitation, Exhibit A.
C. Owner of Stockholder Shares. The person in whose name shares
of Holdings Stock are registered in the stock books of Holdings may be treated
as the owner thereof for all purposes, including without limitation, for the
giving of notices under this Agreement.
D. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given and made and served either by personal delivery
to the person for whom it is intended or if deposited, postage prepaid,
registered or certified mail, return receipt requested, in the United States
mail:
(1) if to any Stockholder, addressed to such Stockholder
at its address is shown on the stock register maintained by
Holdings, or at such other address as such Stockholder may
specify by written notice to Holdings; or
(2) if to Holdings, at Encore Entertainment, Inc., c/o
Brentwood Associates, 11150 Santa Monica Boulevard, Suite 1200,
Los Angeles, Ca 90025, Attention: David Wong
Each such notice, request, consent or other communication shall be deemed to
have been given
9
<PAGE> 10
upon receipt thereof or, if sooner, five (5) days after such has been deposited
as described above. The addresses for the purposes of this Section XII.D, may be
changed by giving written notice of such change in the manner provided herein
for giving notice. Unless and until such written notice is received, the address
provided herein shall be deemed to continue in effect for all purposes
hereunder.
E. Choice of Law. This Agreement shall be governed by and
construed in accordance with the internal laws, and not the laws of conflicts of
laws, of the State of Delaware.
F. Severability. The parties hereto agree that the terms and
provisions in this Agreement are reasonable and shall be binding and enforceable
in accordance with the terms hereof and, in any event, that the terms and
provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for
any reason be adjudged to be unenforceable or invalid, then such unenforceable
or invalid term or provision shall not affect the enforceability or validity of
the remaining terms and provisions of this Agreement, and the parties hereto
hereby agree to replace such unenforceable or invalid term or provision with an
enforceable and valid arrangement which in its economic effect shall be as close
as possible to the unenforceable or invalid term or provision.
G. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not.
H. Modification, Amendment and Waiver. No modification or
amendment of any provision of this Agreement shall be effective against Holdings
or any Stockholder unless approved in writing by a majority of the Stockholders,
and, in the case of Holdings, authorized by its Board of Directors. Furthermore,
no amendment or modification which adversely affects any Stockholder uniquely
(as opposed to the same effect on all Stockholders) shall be effective unless
such affected Stockholder consents in writing thereto. The failure at any time
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 any of the
parties thereafter to enforce each and every provision hereof in accordance with
its terms.
I. Integration. This Agreement, together with Schedule I,
Schedule II and Exhibit A hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and negotiations with respect thereto. Notwithstanding the
foregoing, certain parties hereto may have entered into stock purchase
agreements which contain provisions with regard to "vesting" of shares and
repurchase options in favor of Holdings. Those agreements are specifically
agreed to deal with a subject matter different from the subject matter hereof
and are therefore not superseded by this Agreement and are specifically
acknowledged to remain in full force and effect.
J. Headings and Pronouns. The headings of the sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement. Whenever used herein, words
importing the singular shall include the
10
<PAGE> 11
plural and words importing the masculine shall include the feminine and neuter,
and vice versa, unless the context otherwise requires.
K. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement as of the day and year first above written.
ENCORE ENTERTAINMENT, INC.
By:___________________________________
Name: _____________________________
Its: ______________________________
______________________________________
Steven L. Holmes
______________________________________
Thomas Owens
12
<PAGE> 13
BRENTWOOD ASSOCIATES BUYOUT FUND II, L.P.
By: Brentwood Private Equity LLC,
Its: General Partner
By: _________________________________
Name: David H. Wong
Its: Managing Member
13
<PAGE> 14
Exhibit A
REGISTRATION RIGHTS AGREEMENT
Section 1. Definitions.
Terms defined in the foregoing Stockholders' Agreement (the
"Agreement") are used as therein defined unless otherwise defined in this
Exhibit A. In addition, the following terms shall have the meanings indicated:
"Commission" means the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
Section 2. Rights of Stockholders.
If at any time Holdings proposes to register (other than a
registration (1) on Form S-8 or any successor form thereto; (2) of debt
securities of Holdings; (3) of Preferred Stock of Holdings; or (4) of securities
for the purpose of consummating any acquisition by Holdings including a
registration on Form S-4 (or any successor form thereto)) any public offering of
shares of its capital stock under the Securities Act, Holdings will give written
notice to each Stockholder of its intention so to do at least twenty (20) days
prior to the filing of the registration statement.
A. In the event of an underwritten public offering:
(1) If the representative of the underwriters
participating in the sale and distribution of Holdings'
securities covered by said registration statement agrees that a
number of shares of outstanding Holdings Common Stock (the
"Permissible Secondary Shares") may be included in the offering
covered by the registration statement, Holdings' notice shall
afford each Stockholder an opportunity to elect to include in
such filing all or any part of the shares of Holdings Common
Stock then owned by such Stockholder. Each Stockholder shall have
fifteen (15) days after receipt of Holdings' notice to notify
Holdings in writing of the number of shares of Holdings Common
Stock (the "Elected Shares") which such Stockholder elects to
include in the offering. The Elected Shares shall be included in
the offering to the extent permitted by the representative. If
the aggregate number of Elected Shares that each such electing
Stockholder and any other holders of securities of Holdings
possessing registration rights desire to include in such filing
exceeds the number of Permissible Secondary Shares, then such
Stockholder shall, subject to any priority available to other
holders of securities which was not granted in violation of the
Agreement or the Warrants (as defined therein), be entitled to
14
<PAGE> 15
include that number of shares of Holdings Common Stock that
bears the same ratio to the number of Permissible Secondary
Shares as the number of Elected Shares of Holdings Common Stock
that Stockholder desires to include bears to the number of
Elected Shares that all eligible holders of securities desire to
include. Such representative may increase or decrease the number
of Permissible Secondary Shares at any time until all shares of
Holdings Common Stock included in such registration shall have
been sold by such underwriters.
(2) The inclusion in such filing of shares of Holdings
Common Stock shall be upon the condition that such electing
Stockholder sells his shares of Holdings Common Stock to the
underwriters on the same terms and conditions as Holdings and
other selling holders.
(3) Holdings shall afford each Stockholder the right to
participate in each underwritten registration.
B. In the event of any public offering, whether or not
underwritten:
(1) Each Stockholder shall have fifteen (15) days after
receipt of Holdings' notice to notify Holdings in writing of the
number of shares of Holdings Common Stock that are owned by him
which such Stockholder elects to include in the offering.
(2) Holdings will use its best efforts to prepare and
file with the Commission a registration statement with respect
to such shares of Holdings Common Stock and shall cause such
registration statement to become effective, to prepare and file
with the Commission 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 until the earlier of the sale of all shares
of Holdings Common Stock covered thereby and the expiration of a
period of 9 months after its effective date and to comply with
the provisions of the Securities Act with respect to the
disposition of all shares of Holdings Common Stock covered by
such registration statement. In the event that any shares of
Holdings Common Stock included in a registration statement
subject to, or required by, this Exhibit A remain unsold at the
end of such period, Holdings may file a post-effective amendment
to the registration statement for the purpose of deregistering
such shares.
(3) Holdings will furnish to each Stockholder so many
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents, as such Stockholder may reasonably request.
(4) Holdings will use its best efforts to register or
qualify the securities covered by such registration statement
under such other securities or blue sky laws of such
jurisdictions (not exceeding ten (10) in number) as such
electing Stockholder shall request, and do any and all other
acts and things that
15
<PAGE> 16
may be reasonably necessary or advisable to enable such
Stockholder to consummate the disposition in such jurisdictions
of the shares of Holdings Common Stock covered by the
registration statement; provided, however, that Holdings shall
not be obligated, by reason thereof, to qualify as a foreign
corporation or file any general consent to service of process
under the laws of any such jurisdiction or subject itself to
taxation as doing business in any such jurisdiction.
(5) Holdings shall notify each Stockholder when the
registration statement covering the offering of the shares of
Holdings Common Stock to be registered has been filed with the
Commission under the Securities Act and when it has been made
effective by order of the Commission.
Section 3. Obligations of Stockholders.
To include any shares of Holdings Common Stock in any
registration, each Stockholder shall:
(1) cooperate with Holdings in preparing each such
registration and execute all such agreements as any
representative of the underwriters may deem reasonably necessary
in favor of the underwriters;
(2) promptly supply Holdings with all information,
documents, representations and agreements as the underwriters or
Holdings may deem reasonably necessary in connection with such
registration; and
(3) agree in writing not to sell or transfer any shares
of the capital stock of Holdings not included in such
registration during the period beginning ten (10) days prior to
the filing and ending one hundred eighty (180) days after the
effective date of such registration without the underwriters' or
Holdings' consent.
Section 4. Completion of Offering Not Required.
Anything herein to the contrary notwithstanding, Holdings shall
have no obligation to the Stockholders if the Board of Directors of Holdings
determines, for any reason, not to complete any proposed public offering of its
securities.
Section 5. Registration Expenses.
The costs and expenses (other than underwriting discount or
commission and such fees for counsel, printing, registration and other fees as
state securities officials may require that each Stockholder pay) of all
registrations and qualifications under the Securities Act, and of all other
actions that Holdings is required to take or effect pursuant to this
Registration Rights Agreement, shall be paid by Holdings (including, without
limitation, all registration and filing fees, printing expenses, costs of
special audits incident to or required by any such registration, fees and
disbursements of counsel for Holdings).
16
<PAGE> 17
Section 6. Indemnification by Company.
In the event of any registration under the Securities Act of any
offering including shares of Holdings Common Stock, Holdings hereby agrees to
indemnify and hold harmless each Stockholder, and each other person or entity
that controls such Stockholder and each such Stockholder's officers, directors
and employees, against any losses, claims, damages or liabilities, joint or
several, to which such Stockholder and/or person or entity may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which shares of Holdings Common Stock were registered under the Securities Act,
in any preliminary prospectus or final prospectus contained therein or any
amendment or supplement thereto, (ii) 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 (iii) any failure or alleged failure of
Holdings to comply with any applicable statute, rule or regulation in connection
with the registration statement or the offering, and will reimburse such
Stockholder and/or such person or entity for any legal or other expenses
reasonably incurred by such Stockholder and/or such person or entity in
connection with investigating or defending any such loss, claim, damage,
liability or proceeding; provided, that Holdings will not 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 such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in strict
conformity with written information furnished by such Stockholder and/or such
person or entity on behalf of such Stockholder in such Stockholder's capacity as
such specifically for use in the preparation thereof.
Section 7. Indemnification by Stockholders.
In the event of any registration under the Securities Act of any
offering including shares of Holdings Common Stock, each Stockholder hereby
agrees to indemnify and hold harmless Holdings, and each other person, if any,
who controls Holdings within the meaning of the Securities Act and each other
person (including each underwriter, and each other person, if any, who controls
such underwriter) who participates in the offering of such Holdings Common Stock
against any losses, claims, damages or liabilities, joint or several, to which
Holdings, such controlling person or participating person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which an
offering of such Holdings Common Stock was registered under the Securities Act,
in any preliminary prospectus or final prospectus contained therein, or in 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 will
reimburse Holdings and each such controlling person or participating person for
any legal or other expenses reasonably incurred by Holdings or such controlling
person or participating person in connection with investigating
17
<PAGE> 18
or defending any such loss, claim, damage, liability or proceeding; provided
that each Stockholder will be liable in any such case to the extent, and only 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, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in strict
conformity with written information furnished by such Stockholder in his
capacity as such specifically for use in the preparation thereof and provided
further that each Stockholder will be liable only in his, her or its capacity as
such only to the extent of the proceeds received from the sale of securities
sold by him, her or it pursuant to such registration statement.
18
<PAGE> 19
Exhibit B
JOINDER
Reference is made to the Stockholders' Agreement (the
"Agreement") dated as of ____________, 1996, among Encore Entertainment, Inc.
and certain other parties listed on the signature page thereto. All capitalized
terms used but not otherwise defined herein with the meanings ascribed to such
terms in the Agreement.
The undersigned is the holder of [_______ shares of Common Stock]
[__________ shares of Series A Preferred Stock] (the "Securities"). The
undersigned hereby joins the Agreement as a party thereto with respect to the
Securities, entitled to the rights and benefits of, and subject to the
obligations of a party thereto with respect to the Securities.
The undersigned's address for notices is________________________
___________________________________________________________.
Dated this ____ day of _________, 19__.
By: ___________________________
Name:______________________
Its:_______________________
19
<PAGE> 20
AMENDMENT TO STOCKHOLDER'S AGREEMENT
This amendment (the "Amendment") is executed as of April 18, 1998 by
and between Silver Cinemas International, Inc. ("Holdings"), Brentwood
Associates Buyout Fund II, L.P. (the "Partnership") and DLJ Fund Investment
Partners II, L.P. (the "Purchaser") to modify the terms described in that
certain Stockholders' Agreement (the "Agreement") dated as of August 1, 1996 by
and between Holdings and the parties listed on the signature page thereto.
1. Section XII.H shall be deleted and replaced in its entirety by the
following language:
Modification, Amendment and Waiver. No modification or amendment of any
provision of this Agreement shall be effective against Holdings or any
Stockholder unless approved in writing by a majority of the
Stockholders, and, in the case of Holdings, authorized by its Board of
Directors. Furthermore, no amendment or modification which adversely
affects any Stockholder uniquely (as opposed to the same effect on all
Stockholders) or DLJ Fund Investment Partners II, L.P., with respect to
Tag-Along Rights as set forth in Section IV, shall be effective unless
such affected Stockholder or DLJ Fund Investment Partners II, L.P.,
respectively, consents in writing thereto. The failure at any time 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 any of the parties thereafter to enforce each and every provision
hereof in accordance with its terms.
2. A new Section XIII shall be added to the Agreement as follows:
Holdings agrees that it will not issue, sell or otherwise transfer to
the Partnership or any affiliates (as such term is defined in the
Securities Exchange Act of 1934, as amended) of the Partnership, any
common or preferred stock of Holdings unless Holdings delivers written
notice to the Purchaser of the terms of such proposed sale, issuance or
transfer, no later than ten days before the consummation of such
transfer. If the Purchaser notifies Holdings in writing that it wishes
to participate in such transfer, Holdings and the Partnership will make
available to the Purchaser a portion of the stock proposed to be
transferred in the same proportion to the relative ownership of the
Partnership and the Purchaser on that date immediately prior to such
proposed transfer, on the same terms and on the same basis as the
Partnership.
3. Except as expressly amended by this Amendment, the Agreement shall
remain unchanged and in full force and effect.
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and years first above written.
SILVER CINEMAS INTERNATIONAL, INC.
By: ___________________________________
Name:
Its:
BRENTWOOD ASSOCIATES BUYOUT FUND II, L.P.
By: ___________________________________
Name:
Its:
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: ___________________________________
Name:
Its:
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of April 16, 1998, and is entered
into between Landmark Theatre Corp. (the "Corporation") a wholly owned
subsidiary of Silver Cinemas, Inc., a Delaware corporation (the "Company"), and
Bert Manzari ("Executive").
WHEREAS, the Corporation desires to employ Executive and Executive
desires to be employed by the Corporation, and Executive and the Corporation
desire to embody in this Agreement the terms and conditions under which
Executive shall be employed.
NOW, THEREFORE, the parties hereby agree:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.01. Employment. Executive shall serve as President and Head Film
Buyer of the Corporation, effective as of the date of this Agreement. Executive
hereby accepts such employment. Executive agrees to devote his full time and
efforts to promote the interests of the Corporation. Notwithstanding the
foregoing, Corporation hereby acknowledges that Executive may from time to time
render consulting services to Leah Manzari in connection with her operation of
one or more commercial Internet site(s). Corporation further acknowledges that
any such services rendered by Executive shall not constitute a default or a
breach of this Agreement; provided Executive shall not render such services in a
manner that materially interferes with the services Executive is required to
provide hereunder. Executive shall also be elected to the Company's board of
directors effective as of the date of this Agreement.
1.02. Duties and Responsibilities. Executive shall have such duties and
responsibilities as are consistent with the position of President of the
Corporation, which duties and responsibilities shall include implementing the
Company's policies and procedures as determined by the Company's board of
directors and the Chief Executive Officer of the Company. Executive shall also
have such duties and responsibilities as are consistent with the position of
Head Film Buyer of the Corporation, which duties and responsibilities shall
include supervision of all booking and film buying activities of the
Corporation. Executive shall report to the Chief Executive Officer of the
Company. Executive may hire, on behalf of the Corporation and subject to the
approval of the Chief Executive Officer of the Company, an additional executive
(with a "director of" title) to perform certain film buying duties and
responsibilities as Executive may designate in Executive's discretion, provided
that Executive will continue to focus on and be primarily responsible for
maintaining relationships with film distributors. Corporation and Executive
acknowledge that a reasonable salary range for such an executive is $150,000 to
$200,000, with such executive's actual salary to be determined jointly by
Corporation and Executive.
1.03. Base of Operation. Executive's principal base of operation for
the performance of his duties and responsibilities under this Agreement shall be
the offices of the Corporation in Los Angeles, California; provided, however,
that Executive shall undertake
<PAGE> 2
reasonable business travel consistent with his position not involving a
permanent transfer of his base of operation outside of the greater Los Angeles
metropolitan area.
ARTICLE II.
TERM
2.01. Term. The term of this Agreement (the "Term") shall commence on
the date hereof and terminate on March 31, 2001, unless terminated earlier as
provided in Article V.
ARTICLE III.
COMPENSATION AND EXPENSES
3.01. Salary, Bonus and Benefits. As full compensation and consideration
for the performance by Executive of his obligations under this Agreement,
Executive shall be entitled to the following (subject, in each case, to the
provisions of Article V hereof):
(a) Salary. The Corporation shall pay Executive a base salary
during the Term, payable in accordance with the normal payment procedures of the
Corporation and subject to such withholding and other normal employee deductions
as may be required by law, at the rate of (i) $330,000 per year (pro rated for
the portion of the year in question) from the date hereof through December 31,
1998; and (ii) $360,000 per year from January 1, 1999 through December 31, 1999;
(iii) $390,000 per year from January 1, 2000 through December 31, 2000; and (iv)
$400,000 per year (pro rated for the portion of the year in question) from
January 1, 2001 through March 31, 2001.
(b) Long Term Incentive Compensation. During the Term, Executive
shall participate in the Long Term Incentive Plan attached hereto as Exhibit "A"
(the "Incentive Plan") and shall be eligible to receive an amount in accordance
with, and subject to the terms of the Incentive Plan. Executive shall have no
right to receive incentive compensation other than as specifically set forth in
the Incentive Plan or this Agreement. From and after December 31, 1998,
Executive's vested Points under the Long Term Incentive Plan will have a minimum
value of $50,000 per year (pro rated for partial years) (the "Minimum Payout
Amount") which shall be deemed to be 100% vested notwithstanding any
calculation, vesting schedule or any other determination under the Incentive
Plan.
(c) Annual Bonus Plan. During the Term, Executive shall
participate in the Annual Bonus Plan attached hereto as Exhibit "B" (the "Bonus
Plan") and shall be eligible to receive an amount in accordance with, and
subject to the terms of the Bonus Plan. Executive shall have no right to receive
bonus compensation other than as specifically set forth in the Bonus Plan or
this Agreement. Notwithstanding the foregoing, in the event that the Theater
Level Cash Flow (as such term is defined in the Bonus Plan) equals or exceeds
Targeted Theater Level Cash Flow (as such term is defined in the Bonus Plan),
Executive shall receive a minimum bonus equal to at least $50,000 for each Bonus
Period (as defined in the Bonus Plan) in question (pro rated for
2
<PAGE> 3
any portion of a Bonus Period in question) (the "Minimum Bonus"). In addition,
Targeted Theater Level Cash Flow for 1998 has been separately agreed on in
writing by the parties concurrently with the execution of this Agreement. The
Bonus Plan also provides for a guaranteed minimum bonus of $50,000 for 1998,
regardless of Theater Level Cash Flow.
(d) Benefits. Executive shall be eligible to participate during
the Term in such life insurance, health, disability and major medical insurance
benefits, and in such other employee benefit plans and programs generally
available for the benefit of the executive employees of the Corporation, as may
be maintained from time to time during the Term, in each case to the extent and
in the manner and on a basis at least as favorable as that generally available
to other such executives, subject to the terms and provisions of such plan or
program. In no event shall any such benefit provided to Executive be less
favorable than any such benefit provided to any other executive of the
Corporation, nor shall any executive of the Corporation be provided any such
benefit which has not been offered to Executive on the same basis. Executive
shall be entitled to severance under the Corporation's severance policy only if
and to the extent provided under Section 5.05 of this Agreement.
(e) Vacation. Executive shall be entitled to 4 weeks paid
vacation annually during the Term, in accordance with Corporation policy.
(f) Purchase of Company Stock. At any time while he is still an
employee of the Corporation, Executive will have the right to purchase common
stock of the Company at fair market value in an amount equal to the cash value
of his vested Points under the Incentive Plan, at which time his vested Points
shall be canceled and his participation in the Incentive Plan will cease. The
per share fair market value of the Company's common stock will be the closing
price on the principal stock exchange or interdealer quotation system on which
such stock is then listed, if the stock is then publicly traded, on the date on
which the Company receives Executive's written notice ("Purchase Notice") of his
desire to purchase such stock (the "Purchase Notice Date"). Otherwise, following
receipt of a Purchase Notice, the Company's board of directors will determine
such fair market value as of the Purchase Notice Date. Such exercise shall be
conditioned upon Executive's execution of any stockholders agreement then
required to be executed by other holders of non publicly-traded stock of the
Company. The form of such stockholders agreement currently being used has been
provided separately to Executive upon execution of this Agreement.
Section 3.02. Expenses
The Corporation will reimburse Executive for business-related
expenses incurred by him in his reasonable discretion in connection with the
performance of his duties hereunder during the Term upon presentation of written
documentation. Executive may fly business class, and the Corporation will
reimburse Executive for the related costs, for all business travel relating to
the Corporation and/or Company for all flights over two (2) hours in duration
and in the event that business class is unavailable for any such flight,
Executive may fly first class; provided that Executive shall use his reasonable
efforts consistent with the Corporation's travel policies applicable to other
senior executives to book all business travel flights in economy class and use
3
<PAGE> 4
Corporation paid upgrades. Executive may attend, and Corporation shall reimburse
Executive for the related costs, such film festivals as Executive deems
reasonably necessary for the performance of Executive's duties for the
Corporation.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.01. Exclusivity. Executive agrees to perform his duties,
responsibilities and obligations hereunder efficiently and to the best of his
ability. Executive agrees that he will devote his entire working time, care and
attention and best efforts to such duties, responsibilities and obligations
throughout the Term. Executive also agrees that during the Term he will not
engage in any business activities that are competitive with the business
activities of the Corporation or any of its divisions, subsidiaries or
affiliates. Executive agrees that all of his activities as an employee of the
Corporation shall be in conformity with all present and future policies, rules,
regulations and directions of the Corporation not inconsistent with this
Agreement. Notwithstanding anything contained in this Section 4.01 or any other
provisions of this Agreement, Corporation hereby acknowledges that Executive may
from time to time render consulting services to Leah Manzari in connection with
her operation of one or more commercial Internet site(s) (the first of which is
known currently as "Danni's Hard Drive"), the content of which Executive has
fully disclosed to Corporation and Company. Corporation further acknowledges
that any such services rendered by Executive (i) shall not constitute a default
or breach of this Agreement, and (ii) are not and will not be in violation of
any policy, rule or regulation or direction of the Corporation, whether now
existing or hereafter created. Corporation also acknowledges that any Internet
site of the same general type as "Danni's Hard Drive" is not competitive with
the business activities of the Corporation or any of its divisions subsidiaries
or affiliates. Executive shall not render services in connection with such
Internet site in a manner that materially interferes with the services Executive
is required to provide hereunder.
4.02. Other Business Ventures. Executive agrees that during the Term,
he will not own, directly or indirectly, any controlling or substantial stock or
other beneficial interest in any business enterprise which is engaged in
business activities that are competitive with the business activities of the
Corporation or any of its divisions, subsidiaries or affiliates. Notwithstanding
the foregoing, Executive may own, directly or indirectly, up to 5% of the
outstanding capital stock of any business having a class of capital stock which
is traded on any major stock exchange or in the over-the-counter market.
4.03. Properties; Business Secrets; and Non-Solicitation. (a) All
right, title and interest of every kind and nature whatsoever, in and to
inventions, patents, trademarks, copyrights, films, scripts, ideas, literary
works, creations and properties furnished to the Corporation or any of its
divisions, subsidiaries or affiliates, or used in or in connection with any of
the productions or other activities of any of such companies with which
Executive is in any way connected in the performance of his duties and
obligations hereunder, whether the same were invented, created, written,
developed, furnished, produced or disclosed by Executive or by any other party
since the inception of Executive's employment with the Corporation, shall, as
between
4
<PAGE> 5
the parties hereto, be, become and remain the sole exclusive property of the
Corporation or such division, subsidiary or affiliate (as the case may be) for
any and all purposes and uses whatsoever, and Executive shall have no right,
title or interest of any kind or nature therein. Executive hereby fully releases
and discharges the Corporation and all of its divisions, subsidiaries,
affiliates, successors, licensees and assigns (if any), and their respective
officers, directors and employees, from and against any and all claims, demands,
damages, liabilities, costs and expenses arising out of or relating to any such
inventions, patents, trademarks, copyrights, films, scripts, ideas, literary
works, creations and properties furnished to or used by any of such companies
with which Executive may be connected in the performance of Executive's duties
and obligations hereunder. This release and discharge shall not apply to any
obligations of the Corporation to indemnify the Executive for claims arising out
of Executive's conduct within the course and scope of Executive's employment.
This Agreement does not apply to any invention which qualifies under the
provisions of Section 2870 of The California Labor Code.
(b) Executive agrees that he will not, at any time during or
after the Term, make use of or divulge to any other person, firm or corporation
any trade or business secret, process, method or means, or any other
confidential information concerning the business or policies of the Corporation
or any of its divisions, subsidiaries or affiliates, which he may have learned
in connection with his employment by the Corporation. For purposes of this
Agreement, a "trade or business secret, process, method or means, or any other
confidential information" shall mean and include written information treated as
confidential or as a trade secret by the Corporation. Executive's obligation
under this Section 4.03(b) shall not apply to any information which (i) is known
publicly; (ii) is in the public domain or hereafter enters the public domain
without the fault of Executive; (iii) is known to Executive prior to his receipt
of such information from the Corporation, as evidenced by written records of
Executive or (iv) is hereafter disclosed to Executive by a third party not under
an obligation of confidence to the Corporation. Executive agrees not to remove
from the premises of the Corporation, except as an employee of the Corporation
in pursuit of the business of the Corporation or except as specifically
permitted in writing by the Corporation, any document or other object containing
or reflecting any such confidential information. Executive recognizes that all
such documents and objects, whether developed by him or by someone else, will be
the sole exclusive property of the Corporation. Upon termination of his
employment hereunder, Executive shall forthwith deliver to the Corporation all
such confidential information, including without limitation all lists of
customers, correspondence, accounts, records and any other documents or property
made or held by him or under his control in relation to the business or affairs
of the Corporation or its subsidiaries or affiliates, and no copy of any such
confidential information shall be retained by him.
(c) Executive shall not, for a period of one year after any
termination of his employment with the Corporation, directly or indirectly,
whether as an employee, consultant, independent contractor, partner, joint
venturer or otherwise, on behalf of any person or entity engaged in business
activities competitive with the business activities of the Corporation or any of
its divisions,
5
<PAGE> 6
subsidiaries or affiliates, solicit or induce, or in any manner attempt to
solicit or induce, any person employed by, or as agent of, the Corporation or
any of its divisions, subsidiaries or affiliates to terminate such person's
contract of employment or agency, as the case may be, with the Corporation or
with any such division, subsidiary or affiliate.
(d) Executive agrees that, at any time and from time-to-time
during and after the Term, he will execute any and all documents which the
Corporation may deem reasonably necessary or appropriate to effectuate the
provisions of this Section 4.03. It is also agreed that the provisions of this
Section 4.03 shall survive the termination, for any reason, of this Agreement or
Executive's employment, except that the provisions of Section 4.03(c) shall
survive such termination only to the extent provided in that Section.
4.04. Post Employment Competition. If Executive voluntarily terminates
his employment with the Corporation without "Good Reason" or is terminated by
the Corporation with "Cause", and if during the twenty-four (24) calendar months
following any such termination he directly or indirectly, whether as an
employee, consultant, independent contractor, partner, joint venturer or
otherwise, engages in business activities competitive with the business
activities of the Corporation or any of its divisions, subsidiaries or
affiliates, the Corporation may offset against any payments of salary otherwise
due (and not yet paid) Executive hereunder to the extent of Executive's earnings
from such other activities. Executive will cooperate in all reasonable respects
in providing information to assist in the calculation of any such offset.
ARTICLE V.
TERMINATION
5.01. Termination by the Corporation. The Corporation shall have the
right to terminate Executive's employment at any time for "Cause." For purposes
of this Agreement, "Cause" shall mean (a) Executive's failure, neglect or
refusal to fully perform his material duties under this Agreement, (b)
Executive's willful and continued failure or refusal to follow material
directions from his superiors or any other act of insubordination on the part of
Executive, (c) the engaging by Executive in willful misconduct which is
injurious to the Corporation or any of its divisions, subsidiaries or
affiliates, monetarily or otherwise, (d) the commission by Executive of an act
of fraud or embezzlement against the Corporation or any of its divisions,
subsidiaries or affiliates, (e) the conviction of Executive of a felony, or (f)
Executive's material breach of the provisions of any of Section 4.01, 4.02 or
any other material provision of this Agreement; provided, however, that except
in the case of acts described in clauses (d) and (e) of this sentence, Executive
shall have a period of 30 days to cure any acts which would otherwise give the
Corporation the right to terminate his employment for Cause. Such 30 day period
shall commence as of the date of receipt by Executive of written notice from the
Corporation of its intentions to terminate Executive's employment for Cause,
which notice shall state in reasonable detail the acts which the Corporation
considers to be grounds for such termination. The Corporation shall thereafter
have the right to terminate Executive's employment for Cause only if such acts
have not been substantially cured prior to the end of such 30-day period.
5.02. Death. In the event Executive dies during the Term, this
Agreement shall automatically terminate, such termination to be effective on the
date of Executive's death.
6
<PAGE> 7
5.03. Disability. In the event that Executive suffers a disability
which prevents him from substantially performing his duties under this Agreement
for a period of at least 60 consecutive days, or 90 non-consecutive days within
any 365-day period except as otherwise prohibited by law, the Corporation shall
have the right to terminate this Agreement, such termination to be effective
upon the giving of notice of Executive in accordance with Section 6.03 of this
Agreement.
5.04. Termination by Executive.
(a) Termination by Executive for "Good Reason". Executive may
terminate his employment with the Corporation for "Good Reason" by giving 30
days advance written notice to the Corporation of his intent to so terminate.
For purposes of this Agreement, the following circumstances shall constitute
"Good Reason":
(i) the assignment to Executive of any duties materially
inconsistent with his authority, duties or responsibilities, or any other action
by the Corporation which results in a material diminution or material adverse
change in such authority, duties or responsibilities, excluding for this purpose
an isolated action not taken in bad faith and which is remedied prior to the
expiration of the 30-day period after receipt of notice thereof given by
Executive; or
(ii) any material breach of this Agreement by the
Corporation, other than an isolated failure not occurring in bad faith and which
is remedied prior to the expiration of the 30-day period after receipt of
written notice thereof given by Executive; or
(iii) any action by the Corporation requiring Executive
to be based at any office or location outside the greater Los Angeles
metropolitan area.
(b) Termination by Executive without "Good Reason". Executive may
terminate his employment with the Corporation at any time during the Term by
giving ninety (90) days advance written notice to the Corporation of his intent
to so terminate. During the ninety (90) day period following such notice,
Executive shall use reasonable good faith efforts to assist the Corporation, as
the Corporation may reasonably request, with the recruitment and training of a
successor to Executive. During such ninety (90) day period, Executive shall use
reasonable good faith efforts to encourage those theatrical motion picture
distributors with then-existing professional relationships with the Corporation
to continue such relationships after Executive's departure from the Corporation.
5.05. Effect of Termination.
(a) For Cause; Without Good Reason; Death; Disability. In the
event of termination of this Agreement (i) by the Corporation for Cause, (ii) by
Executive without Good Reason, or (iii) by reason of Executive's death or
disability, the Corporation's sole obligation under this Agreement shall be (x)
to pay to Executive (or his beneficiary in the event of his death) any base
salary or other compensation, benefits or incentives earned or accrued and
7
<PAGE> 8
reimbursement of business expenses incurred in accordance with Corporation
policy, but not paid to Executive prior to the effective date of such
termination, (y) subject to Section 3.01(b), to allow Executive to retain and,
upon the occasion permitted by the Incentive Plan, redeem any vested Points
under but subject to the terms of the Incentive Plan and this Agreement (with
all unvested Points lapsing permanently) and (z) to pay a pro rata portion
(based on days elapsed) of the Minimum Bonus if and only if Theater Level Cash
Flow to the date of termination, on an annualized basis, would equal Targeted
Theater Level Cash Flow for the year under the Bonus Plan; except that with
respect to 1998, the Corporation must pay a pro-rata portion of the Minimum
Bonus,
(b) Without Cause; For Good Reason. In the event of termination
of this Agreement (i) by the Corporation other than for Cause; or (ii) by
Executive for Good Reason, the Corporation shall (w) pay Executive as and when
such amounts would have been due had Executive continued in the employ of the
Corporation (a) continuation of his salary for the remainder of the Term, taking
into account scheduled salary increases, and any base salary and other
compensation, benefits or incentives earned or accrued, but not paid prior to
the effective date of such termination; and (b) the Minimum Bonus (or pro rata
portion thereof) for each year through March 31, 2001 regardless of actual
Theater Level Cash Flow; (x) vest and allow Executive to retain and, upon the
occasion permitted by the Incentive Plan, redeem all Points under but subject to
the terms of the Incentive Plan and this Agreement; (y) reimburse Executive for
business expenses incurred in accordance with Corporation policy prior to the
effective date of such termination; and (z) pay or reimburse Executive for the
Executive's purchase of such medical insurance coverage as the Corporation is
obligated to offer for the remainder of the Term based on the insurance in force
for the Corporation or for any successor to its business.
ARTICLE VI.
MISCELLANEOUS
6.01. Life Insurance. Executive agrees that the Corporation or any of
its divisions, subsidiaries or affiliates may apply for and secure and own
insurance on Executive's life (in amounts determined by the Corporation).
Executive agrees to cooperate fully in the application for securing of such
insurance, including the submission by Executive to such physical and other
examinations, and the answering of such relevant questions and furnishing of
such relevant information by Executive, as may be required by the carrier(s) of
such insurance. Notwithstanding anything to the contrary contained herein,
neither the Corporation nor any of its divisions, subsidiaries or affiliates
shall be required to obtain any insurance for or on behalf of Executive, except
as provided by Section 3.01(d) of this Agreement.
6.02. Benefit of Agreement; Assignment; Beneficiary. This Agreement
shall inure to the benefit of and be binding upon the Corporation and its
successors and assigns, including, without limitation, any corporation or person
which may acquire all or substantially all of the Corporation's assets or
business or with or into which the Corporation may be consolidated or merged.
The Corporation will make appropriate provisions for the preservation of
Executive's rights under this Agreement in any agreement or plan which it may
enter into or adopt to effect
8
<PAGE> 9
any merger, consolidation, reorganization or transfer or assets in which the
Corporation is not the surviving entity. This Agreement shall also inure to the
benefit of, and be enforceable by, Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to Executive hereunder if he had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
beneficiary, devisee, legatee or other designee, or if there is no such
designee, to Executive's estate.
6.03. Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Corporation, to
Silver Cinemas, Inc., 4004 Beltline Road, Suite 205, Dallas, Texas 75244,
Attention: President, or to such other addresses and/or to the attention of such
other persons as the Corporation shall designate by written notice to Executive;
and (b) in the case of Executive, to Bert Manzari at Landmark Theatre Corp.,
2222 South Barrington, Los Angeles, California 90061, or to such other address
as Executive shall designate by written notice to the Corporation. Any notice
hereunder shall be deemed to have been given at the time of receipt thereof by
the person to whom such notice is given.
6.04. Entire Agreement; Amendment. This Agreement and any agreements
entered into with respect to the Bonus Plan and the LTIP contain the entire
agreement of the parties hereto with respect to the terms and conditions of
Executive's employment during the term and supersedes any and all prior
agreements and understandings, whether written or oral, between the parties
hereto with respect to compensation due for services rendered hereunder. In
addition, the parties acknowledge that this Agreement and any agreements entered
into with respect to the Bonus Plan and the Incentive Plan supersede the
Employment Agreement dated as of July 2, 1996, between Executive and Landmark
Theatre Corporation (including the related Bonus Plan and Long Term Incentive
Plan), which Employment Agreement and agreements are terminated and of no
further force and effect, subject to Executive's right to receive payment by
Landmark Theatre Corporation of any payout of vested points under the Landmark
Long Term Incentive Plan ("LTIP") and any accrued and unpaid salary and bonus
through the date of this Agreement. Neither the Company nor the Corporation
shall have any obligations or liabilities in connection with the Employment
Agreement dated as of July 2, 1996 between Executive and Landmark Theatre
Corporation ("LTC"). This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto. The Company and/or
Corporation will indemnify Employee against any claim, loss, liability, damage
or expense arising out of any claim by LTC against Employee for his failure to
continue to render services to LTC after the date hereof or breach of his
employment agreement with LTC as a result of executing this Agreement.
6.05. Waiver. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a continuing waiver or as
a consent to or waiver of any subsequent breach hereof.
9
<PAGE> 10
6.06. Headings. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any provision hereof.
6.07. Attorneys Fees; Enforcement. The prevailing party will be
responsible for reasonable costs and expenses incurred in connection with any
dispute or legal proceeding between the parties arising out of the subject
matter of this Agreement, including any proceeding to enforce any right or
provision under this Agreement. Executive shall have no right to enforce any of
his rights hereunder by seeking or obtaining injunctive or other equitable
relief and acknowledges that damages are an adequate remedy for any breach by
the Corporation of this Agreement.
6.08. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of California
without reference to the principles of conflict of laws.
6.09. Agreement to Take Actions. Each party to this Agreement shall
execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
6.10. Survivorship. The respective rights and obligations of the
parties under this Agreement shall survive any termination of this Agreement to
the extent necessary to the intended preservation of such rights and
obligations.
6.11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
6.12. Other Agreements. Executive represents and warrants to the
Corporation that to the best of his knowledge, neither the execution and
delivery of this Agreement nor the performance of his duties hereunder violates
or will violate the provisions of any other agreement to which he is a party or
by which he is bound.
6.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, the Corporation and Executive have duly executed
this Agreement as of the date first above written.
LANDMARK THEATRE CORP., a wholly owned
subsidiary of SILVER CINEMAS, INC.
By: _________________________________
Name:____________________________
Title:___________________________
______________________________________
Bert Manzari
11
<PAGE> 12
------------------------------------
MANZARI ANNUAL BONUS PLAN
I. PURPOSE
The purpose of the Plan is to provide annual bonus compensation to
designated key executives based on the performance of the Company.
II. DEFINITIONS
When used herein, the following terms have the following meanings:
"Bonus Pool" or "Bonus" means the amount, if any, available for
distribution to Participant, determined in accordance with Article IV of the
Plan; provided that notwithstanding Article IV, the Bonus Pool shall never
exceed $100,000 (pro rated based on days elapsed in the case of any Bonus Period
which is not a full calendar year) for any Bonus Period.
"Base Bonus Pool" means (i) the sum of $100,000 for each Bonus Period
through the Bonus Period ending December 31, 2000; and (ii) the sum of $25,000
for the Bonus Period ending March 31, 2001.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Article XIII hereof to receive the amount, if any, payable under
the Plan upon the Participant's death.
"Board of Directors" means the Board of Directors of the Company.
"Bonus Period" means (i) the period commencing April 16, 1998 and
ending December 31, 1998; and (ii) each succeeding calendar year thereafter (or
such other fiscal year as the Company may establish) through December 31, 2000;
and (iii) the period commencing January 1, 2001 and ending March 31, 2001.
"Cause" shall have the meaning assigned such term in Participant's
Employment Agreement.
"Company" means Silver Cinemas, Inc.
"Corporation" means the Company's wholly owned subsidiary which owns
and operates the theaters sold to the Corporation by Landmark Theatre
Corporation and its affiliates, plus any theaters subsequently owned, leased or
operated by the Corporation which exhibit art films and for which Participant is
the head film buyer.
"Disability" shall have the meaning assigned such term in Participant's
Employment Agreement.
"Employment Agreement" means the Employment Agreement of even date
herewith between Participant and the Corporation.
<PAGE> 13
"Participant" means Bert Manzari.
"Plan" means the Manzari Annual Bonus Plan.
"Theater Level Cash Flow" means an amount equal to (i) the actual total
revenues generated by the theaters owned, leased or operated by the Corporation
less (ii) the actual total operating expenses related to the theaters owned,
leased or operated by the Corporation.
"Targeted Theater Level Cash Flow" means the amount included as Theater
Level Cash Flow in the annual budget for the Corporation approved in good faith
by the Board of Directors of the Corporation or their designees prior to the
beginning of each Bonus Period thereafter.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Company.
IV. BONUS CALCULATION
The amount of the Bonus Pool for any Bonus Period shall be determined
as follows, subject always to Section 3.01(c) of Participant's Employment
Agreement and the definition of "Bonus Pool" set forth above:
(a) in the event Theater Level Cash Flow is less than 80% of
Targeted Theater Level Cash Flow, there shall be no Bonus Pool;
(b) in the event Theater Level Cash Flow is 80% or more but less
than 90% of Targeted Theater Level Cash Flow, the Bonus Pool
shall be an amount equal to 50% of the Base Bonus Pool;
(c) in the event Theater Level Cash Flow is 90% or more but less
than 100% of Targeted Theater Level Cash Flow, the Bonus Pool
shall be an amount equal to 75% of the Base Bonus Pool; and
(d) in the event Theater Level Cash Flow is 100% or more of Targeted
Theater Level Cash Flow, the Bonus Pool shall be an amount equal
to 100% of the Base Bonus Pool.
Notwithstanding the foregoing, the minimum bonus for 1998 shall
be $50,000 regardless of Theater Level Cash Flow achieved. In subsequent years,
a minimum bonus will be paid as set forth in Section 3.01(c) of Participant's
Employment Agreement; provided that if Theater Level Cash Flow equals or exceeds
Targeted Theater Level Cash Flow, then Participant's minimum bonus will be the
greater of $50,000 or the Bonus Pool calculated pursuant to Section IV above
(subject to proration for partial years).
2
<PAGE> 14
V. PAYMENT OF BONUS
Calculation of the attainment of Targeted Theater Level Cash Flow and
the determination and payment of any and all Bonuses shall be made and furnished
to the Participant no later than ninety (90) days after the end of each Bonus
Period.
VI. TERMINATION OF EMPLOYMENT
In the event of termination of Participant's employment with the
Corporation by reason of death, Disability, or by the Participant for good
reason (as defined in the Participant's Employment Agreement), or by the
Corporation without Cause on or before the last day of any Bonus Period, the
provisions of Participant's Employment Agreement shall control with respect to
bonus payments.
In the event of Participant's voluntary termination of employment
without Good Reason with the Corporation or termination by the Corporation for
Cause on or before the last day of any Bonus Period, payment of Bonuses, if any,
shall be as provided in Participant's Employment Agreement. No termination of
employment shall, however, affect the Participant's right to the amount of
earned but unpaid bonus for the prior Bonus Period, regardless of whether the
amount of such bonus has been determined as of the date of such termination.
VII. REORGANIZATION OR DISCONTINUANCE
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from merger, consolidation
or other reorganization of the Corporation, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Corporation. The Corporation will make appropriate provisions for the
preservation of Participant's rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation,
reorganization or transfer of assets.
VIII. NON-ALIENATION OF BENEFITS
Participant may not assign, sell, encumber, transfer or otherwise
dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the
preceding sentence shall be null and void.
IX. NO CLAIM OF RIGHT UNDER THE PLAN
Except as otherwise provided herein or in a separate written agreement
executed by the Corporation, neither the Plan nor any action taken pursuant to
the Plan shall be construed as giving the Participant any right to be retained
in the employ of the Corporation.
X. TAXES
The Corporation shall deduct from all amounts paid under the Plan all
federal, state, local and other taxes or withholdings required by law to be
withheld with respect to such payments.
3
<PAGE> 15
XI. DESIGNATION AND CHANGE OF BENEFICIARY
Participant shall indicate in writing upon execution of his Employment
Agreement a designation of one or more persons as the Beneficiary who shall be
entitled to receive the amount, if any, payable under the Plan upon the death of
Participant. Participant may, from time to time, revoke or change his
Beneficiary designation without the consent of any prior Beneficiary by filing a
written designation with the Board of Directors of the Company. The last such
designation received by the Board of Directors of the Company shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Board of Directors of the
Company prior to Participant's death, and in no event shall it be effective as
of a date prior to such receipt.
XII. NO LIABILITY OF BOARD OF DIRECTORS OF THE COMPANY MEMBERS
No member of the Board of Directors of the Company shall be personally
liable by reason of any contract or other instrument executed by such member or
on his or her behalf in his or her capacity as a member of the Board of
Directors of the Company, nor for any mistake of judgment made in good faith,
and the Corporation shall indemnify and hold harmless each employee, officer, or
director of the Corporation to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including legal fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person s own fraud or bad faith.
XIII. AMENDMENT OR TERMINATION
The Board of Directions may not, with prospective or retroactive
effect, amend, suspend or terminate the Plan or any portion thereof if the
effect thereof would be to reduce any amounts which are or might otherwise be
payable to Participant under the Plan or Participant's Employment Agreement or
delay the time at which such payment(s) would be made; provided, however, that
no amendment, suspension or termination of the plan shall deprive Participant of
any rights to a bonus previously earned under the Plan or his Employment
Agreement without Participant's written consent. Subject to earlier termination
pursuant to the provisions of this Article, and unless the Board of Directors
shall have approved an extension of the Plan beyond such date, no bonus award
shall be made with respect to any period ending after March 31, 2001.
XIV. UNFUNDED PLAN
Participant shall have no right, title, or interest whatsoever in or to
any investments which the Corporation may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and Participant,
any legal representative or any other person. Participant's (and Participant's
legal representative's or other person's) right to receive payments from the
Corporation under the Plan shall be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or separate fund
shall be
4
<PAGE> 16
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
XV. GOVERNING LAW
The terms of the Plan and all rights thereunder shall be governed by
and construed in accordance with the laws of the state of California, without
reference to principles of conflict of laws.
XVI. EFFECTIVE DATE
The effective date of the Plan is April 16, 1998.
5
<PAGE> 17
-----------------------------------
LONG TERM INCENTIVE PLAN FOR BERT MANZARI
1. Purpose. The purposes of the Long Term Incentive Plan for Bert
Manzari (the "Plan") are to provide a means to attract, reward and retain Bert
Manzari in the employ of Landmark Theatre Corp. (the "Corporation"), a wholly
owned subsidiary of Silver Cinemas, Inc. (the "Company") and to further the
long-term growth in profits of the Corporation by providing an incentive to Bert
Manzari by recognizing his efforts on behalf of the Corporation. These goals are
achieved by granting to Bert Manzari (also sometimes referred to as
"Participant") "points" in the Plan as more fully described in Section 5 hereof
(the "Points").
Nothing contained in the Plan shall be deemed to give any
employee the right to be retained in the employ of the Corporation, or to
interfere with the right of the Corporation to discharge or retire any employee
at any time.
The Plan is not intended to be an "employee pension benefit plan"
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and therefore, is not subject to the requirements of such
statute or the regulations promulgated thereunder.
2. Administration. The Plan shall be administered by the Long Term
Incentive Plan Administrative Committee (the "Committee") appointed by, and
serving at the pleasure of, the Board of Directors of the Company. The Committee
shall act by a majority of its members at the time in office and eligible to
vote on any particular matter, and such action may be taken either by a vote at
a meeting or in writing without a meeting. Mr. Manzari may not be a member of
the Committee. The Committee shall have the final authority to interpret and
construe the terms of the Plan and such good faith interpretation and
construction by the Committee shall be final, binding and conclusive upon all
persons. No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Plan. The
Committee may, but shall have no obligation to, grant additional Points under
the Plan after the initial grant pursuant to Section 5 hereof.
3. Effectiveness and Termination of Plan. The Plan has been approved
by the Board of Directors and will become effective upon the effectiveness of
Participant's Employment Agreement with the Corporation (the "Employment
Agreement").
4. Participant. The Participant shall be Bert Manzari.
5. The Points. The Committee hereby allocates to Bert Manzari 250
Points under this Plan.
6. Valuation of Points.
<PAGE> 18
6.1 The value of one Point shall equal .0001 multiplied by the
"Differential."
6.2 The total value of the Points allocated to Bert Manzari
equals the value of a Point, determined pursuant to this Section 6, multiplied
by the number of Points allocated to Participant.
6.3 The "Differential" means the amount, if any, by which (a) the
"Equity Value" of the Corporation at the time of an Eligible Event, exceeds (b)
$[PURCHASE PRICE OF LANDMARK ASSETS] plus liabilities assumed in Landmark
purchase plus any capital expenditures made by or on behalf of the Corporation
from and after the closing of the acquisition of Landmark's assets by the
Corporation. "Equity Value" of the Corporation shall mean (x) the percentage of
the Company's consolidated theater level cash flows (for the immediately
preceding twelve months for which financial statements are available)
represented by the Corporation's theater level cash flows for such time period,
times (y) Enterprise Value. "Enterprise Value" means the valuation of 100% of
the Company's outstanding common and preferred stock (calculated as (i) the
price paid for such stock in the case of an acquisition, (ii) as the price to
public of common stock plus the liquidation preference of preferred stock in the
case of a public offering or (iii) the appraised value determined by the board
of directors in good faith in the case of a termination of employment) plus
total consolidated debt. "Eligible Event" means (i) termination of employment of
Participant, (ii) death or permanent disability of Participant, (iii)
termination of the Plan in accordance with Section 12 or (iv) a "Change of
Control". "Change of Control" means (i) a sale or transfer to a third party of
(i) all or 51% or more of the stock of the Company (including a merger in which
the Company is the survivor but in which the Company's stock is converted into
the right to receive cash and/or other property), (ii) a sale or transfer to a
third party of all or substantially all of the assets of the Company or (iii) an
initial public offering of the Company's common stock. By way of illustration,
if the Corporation's theater level cash flows equal $100,000 and the Company's
consolidated theater level cash flows equal $1,000,000 and the Company is sold
for $10,000,000 with debt of $1,000,000, then the Equity Value would be
$1,100,000.
7. Redemption of Points.
7.1 A Participant's vested Points awarded hereunder will be
redeemed upon an Eligible Event if the Eligible Event is a termination of
employment by the Company without "cause" or by Participant for "good reason"
(as such terms are defined in the Employment Agreement of even date herewith
between Participant and the Company) and otherwise upon a Change of Control as
provided in Section 7.3 below. Any Points not yet vested at the time of a Change
of Control shall be vested upon the Change of Control, and, if a termination of
employment of Participant occurs due to the nonrenewal by the Company of
Participant's employment contract upon expiration at March 31, 2001, any
unvested Points of Participant shall be deemed vested and must be redeemed as
set forth above.
2
<PAGE> 19
7.2 A Participant's Points awarded hereunder must be redeemed
upon the occurrence of a Change of Control.
7.3 Points shall be redeemed at the value determined under
Section 6 above. Except as provided in Section 7.1, the redemption price shall
be paid in cash at or promptly following the closing of a transaction
constituting a Change of Control. In the case of termination of employment
described in Section 7.1, Points shall be redeemd at the value determined under
Section 6 above and paid in cash (over time if necessary) as quickly as possible
when and to the extent that any such payment would not constitute a default
under any indenture, loan agreement, credit facility or other indebtedness of
the Company or its parent company; provided that in all events the redemption
price shall be paid in full within two (2) years after the termination of
employment.
7.4 Points shall vest on the dates set forth below according to
the following schedule:
<TABLE>
<CAPTION>
Date Cumulative Percentage Vested
---- ----------------------------
<S> <C>
December 31, 1998 30%
December 31, 1999 60%
December 31, 2000 90%
March 31, 2001 100%
</TABLE>
Points shall vest on a pro-rated basis based on days elapsed for partial years
after Points are awarded (e.g. Points awarded on January 1, 1998 shall be
between 60% and 90% vested if a Change of Control occurs any time from January
1, 2000 through December 31, 2000, depending on the number of days elapsed, such
that such Points would be 75% vested if the Change of Control occurred on July
1, 2000). No Points which have already vested may thereafter lapse or be
forfeited, but Participant's Employment Agreement sets forth the circumstances
under which unvested Points vest or lapse on a termination of employment.
8. Funding. This Plan is an unfunded arrangement. To the extent
Participant acquires a right to receive payments under the Plan such right shall
be no greater than the right of any unsecured creditor of the Corporation.
9. Nontransferability. Participant's rights and interest under the
Plan may not be assigned, transferred, anticipated, sold, hypothecated, nor
encumbered other than by will or by the laws of descent and distribution; nor
except to the extent permissible by law shall the right of Participant or
beneficiary be subject in any manner to attachment or legal process for the debt
of Participant or beneficiary.
10. Beneficiaries. Participant shall designate a beneficiary under
the Plan at the time and in the manner as determined from time to time by the
Committee. Notwithstanding the foregoing, no designation of beneficiary shall be
valid unless in writing signed by the Participant,
3
<PAGE> 20
dated, and filed with the Committee. Beneficiaries may be changed without the
consent of prior beneficiaries. In the absence of a designation, Participant's
beneficiary shall be determined by his or her will or the laws of descent.
11. Withholding of Taxes. The Corporation shall have the right to
deduct from any payment pursuant to a redemption hereunder or any compensation
payable to a Participant any taxes required by law to be withheld in connection
with a redemption hereunder.
12. Expenses. All of the expenses of the Plan shall be borne by the
Corporation.
13. Governing Law. This Plan shall be construed and enforced in
accordance with the laws of the State of California other than its conflict of
law provisions.
4
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of April 16, 1998, and is
entered into between Landmark Theatre Corp. (the "Corporation") a wholly owned
subsidiary of Silver Cinemas, Inc., a Delaware corporation (the "Company"), and
Paul S. Richardson ("Executive").
WHEREAS, the Corporation desires to employ Executive and
Executive desires to be employed by the Corporation, and Executive and the
Corporation desire to embody in this Agreement the terms and conditions under
which Executive shall be employed.
NOW, THEREFORE, the parties hereby agree:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.01. Employment. Executive shall serve as Executive Vice President -
Development and Acquisitions, effective as of the date of this Agreement.
Executive hereby accepts such employment. Executive agrees to devote his full
time and efforts to promote the interests of the Corporation.
1.02. Duties and Responsibilities. Executive shall have such duties and
responsibilities as are consistent with the position of Executive Vice President
- - Development and Acquisitions, which duties and responsibilities shall include
the acquisition and development of new theaters exhibiting specialized art
films. Such responsibilities shall also include market and site scouting,
project financial analysis, lease or acquisition negotiations and documentation
(but any lease execution shall be subject to board approval), presentations to
developers and governmental bodies, and project design team leader (subject to
final decision and direction of design being approved by the Board of Directors
or Chief Executive Officer or President of the Company). Executive shall report
to the Chief Executive Officer or President of the Company.
1.03. Base of Operation. Executive's principal base of operation for
the performance of his duties and responsibilities under this Agreement shall be
the offices of the Corporation in Los Angeles, California; provided, however,
that Executive shall undertake reasonable business travel consistent with his
position not involving a permanent transfer of his base of operation outside of
the greater Los Angeles metropolitan area.
ARTICLE II.
TERM
2.01. Term. The term of this Agreement (the "Term") shall commence on
the date hereof and terminate on March 31, 2001, unless terminated earlier as
provided in Article V.
<PAGE> 2
ARTICLE III.
COMPENSATION AND EXPENSES
3.01. Salary, Bonus and Benefits. As full compensation and consideration
for the performance by Executive of his obligations under this Agreement,
Executive shall be entitled to the following (subject, in each case, to the
provisions of Article V hereof):
(a) Salary. The Corporation shall pay Executive a base salary
during the Term, payable in accordance with the normal payment procedures of the
Corporation and subject to such withholding and other normal employee deductions
as may be required by law, at the rate of (i) $ 260,000 per year from the date
hereof through March 31, 1998; and (ii) $285,000 per year from April 1, 1998
through March 31, 1999; (iii) $285,000 per year from April 1, 1999 through March
31, 2000; and (iv) $285,000 per year from April 1, 2000 through March 31, 2001.
With respect to section (iii) and (iv) only, such amounts shall be increased as
of April 1, 1999 and April 1, 2000 respectively in accordance with the Consumer
Price Index for the preceding twelve month period. (The Consumer Price Index in
such calculation shall be the U.S. Department of Labor, Bureau of Statistics,
Consumer Price Index All Urban Consumers (1967=100) or, in the event such index
is no longer published, its successor Consumer Price Index, or, if none, a
comparable Index).
(b) Stock Purchase. Executive shall have the right to purchase
1,000 shares of stock in the Company pursuant to the terms of the Stock Purchase
Agreement attached hereto as Exhibit "A."
(c) Annual Bonus Plan. During the Term, Executive shall
participate in the Annual Bonus Plan attached hereto as Exhibit "B" (the "Bonus
Plan") and shall be eligible to receive an amount in accordance with, and
subject to the terms of the Bonus Plan, and any agreement executed by the
Executive in connection with such plan (the "Bonus Agreement"). Executive shall
have no right to receive bonus compensation other than as specifically set forth
in the Bonus Plan and the Bonus Agreement or this Agreement. Notwithstanding the
foregoing, in the event that the Theater Level Cash Flow (as such term is
defined in the Bonus Plan) equals or exceeds Targeted Theater Level Cash Flow
(as such term is defined in the Bonus Plan), Executive shall receive a minimum
bonus equal to at least $37,500 for each year in question (pro rated for any
portion of a year in question) (the "Minimum Bonus"). In addition, Targeted
Theater Level Cash Flow for 1998 has been separately agreed on in writing by the
parties concurrently with the execution of this Agreement.
(d) Benefits. Executive shall be eligible to participate during
the Term in such life insurance, health, disability and major medical insurance
benefits, and in such other employee benefit plans and programs generally
available for the benefit of the executive employees of the Corporation, as may
be maintained from time to time during the Term, in each case to the extent and
in the manner generally available to other such executives and subject to the
terms and provisions of such plan or program, except that Executive shall be
entitled to severance
2
<PAGE> 3
under the Corporation's severance policy only if and to the extent provided
under Section 5.05 of this Agreement.
(e) Vacation. Executive shall be entitled to 4 weeks paid
vacation annually during the Term, in accordance with Corporation policy.
(f) Additional Incentive Program. Executive shall receive, upon
the "Commencement of Construction" of each new art house theater (whether such
theater is acquired or newly built), $2,000 per screen in such theater,
including, but not limited to, the following theaters: the Maple Theater,
Detroit, Michigan, the Rialto, South Pasadena, California, Shattuck, Berkeley,
California, Century, Chicago, Illinois, Sunshine Theater, New York, New York and
Lincoln Square Cinema, Washington, D.C, it being the intent of the parties that
Executive shall be eligible for the bonus awards set forth in this subsection
(f) in connection with any art house theater that is subsequently acquired by
the Company or the Corporation in addition to those theaters acquired by the
Company pursuant to that certain Agreement for the Purchase and Sale of Assets
dated as of December 17, 1997 between the Company and Landmark Theatre
Corporation, Seven Gables Corporation, Parallax Theatre Corporation, San
Francisco Landmark Theatre Corporation, Wisconsin Repertory Cinemas, Inc., and
Metromedia International Group, Inc. Commencement of Construction shall mean the
time at which (a) the Corporation causes a slab to be poured for a theater or
(b) in the case of an acquisition, the date on which a theater begins
operations. In addition, if, at the first anniversary of the opening of any such
theater, any such theater has earned a 25% or greater return on the
Corporation's cash investment (including but not limited to development costs,
construction costs, acquisition costs, equipment costs and any other amounts
necessary to begin operation of such theater), then Executive shall receive an
additional bonus of $500 per screen in such theater. In addition, the parties
acknowledge and agree that Executive shall be entitled to receive a bonus of
$1,000 per screen in such theaters upon the date on which the theaters known as
Waltham, Massachusetts and Plaza Frontenac begin operations. In the event that
the stated term of this Agreement expires or Executive's employment has been
terminated by the Corporation other than for "Cause" (as defined below), the
Corporation agrees to pay Executive the bonus amounts set forth in this Section
3.01(f) for any theater which, at the time of such termination, the Corporation
and any landlord or developer are negotiating in good faith to enter into a
lease or acquisition and have (a) signed a letter of intent; or (b) initiated a
draft lease; or (c) initiated draft acquisition documents. The $2,000 per screen
bonus shall be due and payable upon the Commencement of Construction for new
theaters and upon the opening of the theater for business for acquisition
theaters.
3
<PAGE> 4
3.02. Expenses.
The Corporation will reimburse Executive for reasonable business-related
expenses incurred by him in connection with the performance of his duties
hereunder during the Term upon presentation of written documentation, subject,
however, to the Company's reasonable policies relating to business-related
expenses as then in effect from time to time during the Term.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.01. Exclusivity. Executive agrees to perform his duties,
responsibilities and obligations hereunder efficiently and to the best of his
ability. Executive agrees that he will devote his entire working time, care and
attention and best efforts to such duties, responsibilities and obligations
throughout the Term. Executive also agrees that during the Term he will not
engage in any business activities that are competitive with the business
activities of the Corporation or any of its divisions, subsidiaries or
affiliates. Executive agrees that all of his activities as an employee of the
Corporation shall be in conformity with all present and future policies, rules,
regulations and directions of the Corporation not inconsistent with this
Agreement.
4.02. Other Business Ventures. Executive agrees that during the Term,
he will not own, directly or indirectly, any controlling or substantial stock or
other beneficial interest in any business enterprise which is engaged in
business activities that are competitive with the business activities of the
Corporation or any of its divisions, subsidiaries or affiliates. Notwithstanding
the foregoing, Executive may own, directly or indirectly, up to 5% of the
outstanding capital stock of any business having a class of capital stock which
is traded on any major stock exchange or in the over-the-counter market.
4.03. Properties; Business Secrets; and Non-Solicitation. (a) All
right, title and interest of every kind and nature whatsoever, in and to
inventions, patents, trademarks, copyrights, films, scripts, ideas, literary
works, creations and properties furnished to the Corporation or any of its
divisions, subsidiaries or affiliates, or used in or in connection with any of
the productions or other activities of any of such companies with which
Executive is in any way connected in the performance of his duties and
obligations hereunder, whether the same were invented, created, written,
developed, furnished, produced or disclosed by Executive or by any other party
since the inception of Executive's employment with the Corporation, shall, as
between the parties hereto, be, become and remain the sole exclusive property of
the Corporation or such division, subsidiary or affiliate (as the case may be)
for any and all purposes and uses whatsoever, and Executive shall have no right,
title or interest of any kind or nature therein. Executive hereby fully releases
and discharges the Corporation and all of its divisions, subsidiaries,
affiliates, successors, licensees and assigns (if any), and their respective
officers, directors and employees, from and against any and all claims, demands,
damages, liabilities, costs and expenses arising out of or relating to any such
inventions, patents, trademarks, copyrights, films, scripts, ideas, literary
works, creations and properties furnished to or used by any of such companies
with which
4
<PAGE> 5
Executive may be connected in the performance of Executive's duties and
obligations hereunder. This release and discharge shall not apply to any
obligations of the Corporation to indemnify the Executive for claims arising out
of Executive's conduct within the course and scope of Executive's employment.
This Agreement does not apply to any invention which qualifies under the
provisions of Section 2870 of The California Labor Code.
(b) Executive agrees that he will not, at any time during or
after the Term, make use of or divulge to any other person, firm or corporation
any trade or business secret, process, method or means, or any other
confidential information concerning the business or policies of the Corporation
or any of its divisions, subsidiaries or affiliates, which he may have learned
in connection with his employment by the Corporation. For purposes of this
Agreement, a "trade or business secret, process, method or means, or any other
confidential information" shall mean and include written information treated as
confidential or as a trade secret by the Corporation. Executive's obligation
under this Section 4.03(b) shall not apply to any information which (i) is known
publicly; (ii) is in the public domain or hereafter enters the public domain
without the fault of Executive; (iii) is known to Executive prior to his receipt
of such information from the Corporation, as evidenced by written records of
Executive or (iv) is hereafter disclosed to Executive by a third party not under
an obligation of confidence to the Corporation. Executive agrees not to remove
from the premises of the Corporation, except as an employee of the Corporation
in pursuit of the business of the Corporation or except as specifically
permitted in writing by the Corporation, any document or other object containing
or reflecting any such confidential information. Executive recognizes that all
such documents and objects, whether developed by him or by someone else, will be
the sole exclusive property of the Corporation. Upon termination of his
employment hereunder, Executive shall forthwith deliver to the Corporation all
such confidential information, including without limitation all lists of
customers, correspondence, accounts, records and any other documents or property
made or held by him or under his control in relation to the business or affairs
of the Corporation or its subsidiaries or affiliates, and no copy of any such
confidential information shall be retained by him.
(c) Executive shall not, for a period of one year after any
termination of his employment with the Corporation, directly or indirectly,
whether as an employee, consultant, independent contractor, partner, joint
venturer or otherwise, on behalf of any person or entity engaged in business
activities competitive with the business activities of the Corporation or any of
its divisions, subsidiaries or affiliates, solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or as agent of, the
Corporation or any of its divisions, subsidiaries or affiliates to terminate
such person's contract of employment or agency, as the case may be, with the
Corporation or with any such division, subsidiary or affiliate.
(d) Executive agrees that, at any time and from time-to-time
during and after the Term, he will execute any and all documents which the
Corporation may deem reasonably necessary or appropriate to effectuate the
provisions of this Section 4.03. It is also agreed that the provisions of this
Section 4.03 shall survive the termination, for any reason, of this Agreement or
Executive's employment, except that the provisions of Section 4.03(c) shall
survive such termination only to the extent provided in that Section.
5
<PAGE> 6
ARTICLE V.
TERMINATION
5.01. Termination by the Corporation. The Corporation shall have the
right to terminate Executive's employment at any time for "Cause." For purposes
of this Agreement, "Cause" shall mean (a) Executive's failure, neglect or
refusal to fully perform his material duties under this Agreement, (b)
Executive's willful and continued failure or refusal to follow material
directions from his superiors or any other act of insubordination on the part of
Executive, (c) the engaging by Executive in willful misconduct which is
injurious to the Corporation or any of its divisions, subsidiaries or
affiliates, monetarily or otherwise, (d) the commission by Executive of an act
of fraud or embezzlement against the Corporation or any of its divisions,
subsidiaries or affiliates, (e) the conviction of Executive of a felony, or (f)
Executive's material breach of the provisions of any of Section 4.01, 4.02 or
any other material provision of this Agreement; provided, however, that except
in the case of acts described in clauses (d) and (e) of this sentence, Executive
shall have a period of 30 days to cure any acts which would otherwise give the
Corporation the right to terminate his employment for Cause. Such 30 day period
shall commence as of the date of receipt by Executive of written notice from the
Corporation of its intentions to terminate Executive's employment for Cause,
which notice shall state in reasonable detail the acts which the Corporation
considers to be grounds for such termination. The Corporation shall thereafter
have the right to terminate Executive's employment for Cause only if such acts
have not been substantially cured prior to the end of such 30-day period.
5.02. Death. In the event Executive dies during the Term, this
Agreement shall automatically terminate, such termination to be effective on the
date of Executive's death.
5.03. Disability. In the event that Executive suffers a disability
which prevents him from substantially performing his material duties under this
Agreement for a period of at least 60 consecutive days, or 90 non-consecutive
days within any 365-day period except as otherwise prohibited by law, the
Corporation shall have the right to terminate this Agreement, such termination
to be effective upon the giving of notice of Executive in accordance with
Section 6.03 of this Agreement.
5.04. Termination by Executive for Good Reason. Executive may terminate
his employment with the Corporation for "Good Reason" by giving 30 days advance
written notice to the Corporation of his intent to so terminate. For purposes of
this Agreement, the following circumstances shall constitute "Good Reason":
(a) the assignment to Executive of any duties materially
inconsistent with his authority, duties or responsibilities, or any other action
by the Corporation which results in a material diminution or material adverse
change in such authority, duties or responsibilities, excluding for this purpose
an isolated action not taken in bad faith and which is remedied prior to the
expiration of the 30-day period after receipt of notice thereof given by
Executive; or
6
<PAGE> 7
(b) any material breach of this Agreement by the Corporation,
other than an isolated failure not occurring in bad faith and which is remedied
prior to the expiration of the 30-day period after receipt of written notice
thereof given by Executive; or
(c) any action by the Corporation requiring Executive to be based
at any office or location outside the greater Los Angeles metropolitan area.
5.05. Effect of Termination.
(a) For Cause; Without Good Reason; Death; Disability. In the
event of termination of this Agreement (i) by the Corporation for Cause, (ii) by
Executive without Good Reason, or (iii) by reason of Executive's death or
disability, the Corporation's sole obligation under this Agreement shall be (y)
to pay to Executive (or his beneficiary in the event of his death) any base
salary or other compensation, benefits or incentives earned or accrued and
reimbursement of business expenses incurred in accordance with Corporation
policy, but not paid to Executive prior to the effective date of such
termination, and (z) to allow Executive to retain any vested stock under the
terms of the Stock Purchase Agreement. In addition, if the termination is by the
Corporation for Cause or by Executive without Good Reason or as a result of
Executive's death or disability, he will receive a pro rated portion of his
Minimum Bonus based on days elapsed in the year in question divided by 365.
(b) Without Cause; For Good Reason. In the event of termination
of this Agreement (i) by the Corporation other than for Cause; or (ii) by
Executive for Good Reason, the Corporation shall (v) honor its obligations under
Section 3.01(f) as set forth therein; (w) pay Executive as and when such amounts
would have been due had Executive continued in the employ of the Corporation ,
including (a) continuation of his salary for the remainder of the Term, taking
into account scheduled salary increases, and any base salary and other
compensation, benefits or incentives earned or accrued, but not paid prior to
the effective date of such termination; and (b) the Minimum Bonus of $37,5000
per year for each remaining year through March 31, 2001; (x) vest all stock
under the Stock Purchase Agreement; (y) reimburse Executive for business
expenses incurred in accordance with Corporation policy prior to the effective
date of such termination; and (z) provide, or pay or reimburse Executive for the
Executive's purchase of, such medical insurance coverage as the Corporation
would be obligated to offer under Section 3.01(d) from time to time for the
remainder of the Term if Executive had remained employed, based on the insurance
in force for the Corporation or for any successor to its business.
ARTICLE VI.
MISCELLANEOUS
6.01. Life Insurance. Executive agrees that the Corporation or any of
its divisions, subsidiaries or affiliates may apply for and secure and own
insurance on Executive's life (in amounts determined by the Corporation).
Executive agrees to cooperate fully in the application for securing of such
insurance, including the submission by Executive to such physical
7
<PAGE> 8
and other examinations, and the answering of such relevant questions and
furnishing of such relevant information by Executive, as may be required by the
carrier(s) of such insurance. Notwithstanding anything to the contrary contained
herein, neither the Corporation nor any of its divisions, subsidiaries or
affiliates shall be required to obtain any insurance for or on behalf of
Executive, except as provided by Section 3.01(d) of this Agreement.
6.02. Benefit of Agreement; Assignment; Beneficiary. This Agreement
shall inure to the benefit of and be binding upon the Corporation and its
successors and assigns, including, without limitation, any corporation or person
with or into which the Corporation may be consolidated or merged. This Agreement
shall also inure to the benefit of, and be enforceable by, Executive and his
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amount
would still be payable to Executive hereunder if he had continued to live, all
such amounts shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary, devisee, legatee or other designee, or if there is no
such designee, to Executive's estate.
6.03. Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Corporation, to
Silver Cinemas, Inc., 4004 Beltline Road, Suite 205, Dallas, Texas 75244,
Attention: President, or to such other addresses and/or to the attention of such
other persons as the Corporation shall designate by written notice to Executive;
and (b) in the case of Executive, to Paul S. Richardson c/o the Corporation or
to such other address as Executive shall designate by written notice to the
Corporation. Any notice hereunder shall be deemed to have been given at the time
of receipt thereof by the person to whom such notice is given.
6.04. Entire Agreement; Amendment. This Agreement and any agreements
specifically referred to herein with respect to Executive's employment contain
the entire agreement of the parties hereto with respect to the terms and
conditions of Executive's employment during the term and supersedes any and all
prior agreements and understandings, whether written or oral, between the
parties hereto with respect to compensation due for services rendered hereunder.
In addition, the parties acknowledge that this Agreement and any agreements
entered into with respect to the Bonus Plan supersede the Employment Agreement
dated as of July 2, 1996, between Executive and Landmark Theatre Corporation,
which Employment Agreement is terminated and of no further force and effect.
Neither the Company nor the Corporation shall have any obligations or
liabilities in connection with the Employment Agreement dated as of July 2, 1996
between Executive and Landmark Theatre Corporation. This Agreement may not be
changed or modified except by an instrument in writing signed by both of the
parties hereto.
6.05. Waiver. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a continuing waiver or as
a consent to or waiver of any subsequent breach hereof.
8
<PAGE> 9
6.06. Headings. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any provision hereof.
6.07. Attorneys Fees; Enforcement. The prevailing party will be
responsible for reasonable costs and expenses incurred in connection with any
dispute or legal proceeding between the parties arising out of the subject
matter of this Agreement, including any proceeding to enforce any right or
provision under this Agreement. Executive shall have no right to enforce any of
his rights hereunder by seeking or obtaining injunctive or other equitable
relief and acknowledges that damages are an adequate remedy for any breach by
the Corporation of this Agreement.
6.08. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of California
without reference to the principles of conflict of laws.
6.09. Agreement to Take Actions. Each party to this Agreement shall
execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
6.10. Survivorship. The respective rights and obligations of the
parties under this Agreement shall survive any termination of this Agreement to
the extent necessary to the intended preservation of such rights and
obligations.
6.11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
6.12. Other Agreements. Executive represents and warrants to the
Corporation that to the best of his knowledge, neither the execution and
delivery of this Agreement nor the performance of his duties hereunder violates
or will violate the provisions of any other agreement to which he is a party or
by which he is bound.
6.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the Corporation and Executive have duly
executed this Agreement as of the date first above written.
LANDMARK THEATRE CORP., a wholly owned
subsidiary of SILVER CINEMAS, INC.
By: ___________________________________
Name:______________________________
Title:_____________________________
________________________________________
Paul S. Richardson
10
<PAGE> 11
GUARANTY
Reference is made to that certain employment agreement dated as of April
16, 1998, between Landmark Theatre Corp. ("Employer") and Paul S. Richardson
("Employee") and the Richardson Annual Bonus Plan of Landmark Theatre Corp.
(individually and collectively the "Agreement").
1. As a material inducement to Employee to enter into the Agreement, and
in consideration of the benefits the undersigned guarantor ("Guarantor") will
derive from the execution of the Agreement, Guarantor hereby unconditionally and
irrevocably guarantees to Employee the full and timely performance of each and
every contractual obligation of Employer under the Agreement, including, without
limitation, all payment obligations (whether fixed, contingent, deferred, net
profits or otherwise), all credit obligations and all indemnity obligations
(collectively, the "Guaranteed Obligations"). Guarantor's obligations hereunder
are direct and primary to Employee and are independent of the obligations of the
Employer and, in the event of any default hereunder, a separate action or
actions may be brought and prosecuted against Guarantor irrespective of whether
action is brought against the Employer or whether the Employer is joined in any
such action or actions.
2. Guarantor agrees that any modification of the Agreement by the
parties thereto shall not affect this Guaranty. Without further authorization
from, demand upon or notice to Guarantor and without affecting Guarantor's
liability hereunder, the parties to the Agreement may, in accordance with the
terms of the Agreement (i) alter, compromise, accelerate, extend or change the
time or manner of payment and/or performance of any of the Guaranteed
Obligations; (ii) release or add any one or more guarantors or endorsers; or
(iii) accept, surrender, release, reconvey (partially or otherwise), exchange or
alter any security of any kind now or hereafter given by Employer to secure the
performance of the Guaranteed Obligations. No exercise or non-exercise by
Employee of any right hereby given to him and no dealing by him with Employer or
any guarantors or endorsers shall in any way affect any of the duties or
obligations of Guarantor except to the extent that such failure, omission or
delay constitutes a waiver under the Agreement and is not otherwise waived by
Guarantor herein. Guarantor acknowledges its obligations hereunder shall not be
exonerated if, by any act of Employer, the remedies or rights of Employer
against Employee are in any way impaired or suspended. Notwithstanding anything
herein to the contrary, Guarantor does not waive any defense based upon the
statute of limitations or fraud by Employee.
3. Guarantor hereby waives the protection of, and any right to assert
the provisions of California Civil Code Sections 2810, 2819, 2845, 2849 and 2850
or any other successor or like provisions of applicable law for the benefit of
sureties or guarantors. Additionally, Guarantor hereby expressly waives (i)
notice of the acceptance of this Guaranty; (ii) notice of the amount of
indebtedness under the Agreement now existing or which may hereafter exist;
(iii) notice of demand for payment and/or performance, notice of default, notice
of nonpayment or
11
<PAGE> 12
nonperformance, presentment, protest, notice of protest and notice of dishonor
of the Agreement or any of the Guaranteed Obligations; and (iv) notice of
assignment, transfer, modification or negotiation of the Agreement.
4. The liability of Guarantor shall be unaffected by, and Guarantor
waives any defense arising out of, relating to or based upon, (i) a change of
ownership of or legal title to the Employer or any rights therein or any rights
under the Agreement, whether effected without or without the consent of
Employee; (ii) the dissolution, termination, legal incapacity, lack of
authority, revocation, recission, disability, insolvency, bankruptcy or
reorganization of Employer or the defense of any statute of limitations in any
action hereunder or for the collection or performance of any Guaranteed
Obligation; (iii) election of remedies or marshalling of assets; (iv) the
Agreement constituting a fraudulent transfer; (v) Employee failing to proceed
against (or otherwise exercise any of its rights against) the Employer, or any
other guarantor of the Guaranteed Obligations, or any other person, firm,
corporation or other entity or failing to proceed against or exhaust any
security held by him at any time or failing to pursue any other remedy in their
power; (vi) Employee failing to disclose any facts regarding Employer regardless
of whether they have reason to believe that any such facts materially increase
the risk beyond that which Guarantor intends to assume or have reason to believe
that such facts are unknown to Guarantor or have a reasonable opportunity to
communicate such facts to Guarantor; or (vii) the dissolution or termination of
Employer or Guarantor. This Guaranty shall continue to be effective or
reinstated, as the case may be, if at any time payment of any amount paid under
the Agreement is rescinded or otherwise returned by Employee upon or in
connection with the insolvency, bankruptcy or reorganization of Employer (or any
like or similar event), as if such amount had not been paid.
5. Employee's delay, omission or failure to file or enforce a claim
against the assets and/or estate (either in administration, bankruptcy or any
other proceeding) of Guarantor, Employer or any third party shall not affect the
liability of Guarantor under this Guaranty, except to the extent that such
failure, omission or delay constitutes a waiver under the Agreement and is not
otherwise waived by Guarantor herein. In the event that the maturity of any of
the Guaranteed Obligations is accelerated, such maturity shall also be deemed
accelerated for the purposes of this Guaranty.
6. Any indebtedness of Employer now or hereafter held by Guarantor is
hereby subordinated to any indebtedness of Employer to Employee until such time
as the Guaranteed Obligations have been indefeasibly satisfied in full and, to
the extent necessary for that purpose, Guarantor hereby assigns to Employee its
right to payments or distributions from Employer to which Guarantor would
otherwise be entitled. Until all of the Guaranteed Obligations have been
performed in full, Guarantor shall have no right of subrogation against Employer
unless it is expressly given to Guarantor in writing by Employee.
7. Guarantor agrees that Employee may, in its sole discretion, and
without notice to Guarantor, apply all payments from Employer or any third
party, or apply the proceeds realized from any security which may be held by
Employee in such manner and order of priority as
12
<PAGE> 13
Employee see fit, all without affecting the liability of Guarantor. The
obligations of Guarantor hereunder are independent of the obligations of
Employer. Guarantor waives any right to require Employee to proceed against
Employer, to apply or proceed against or exhaust any security held by Employee
or to pursue any remedy in his power against Employer or any other party prior
to, or concurrently with, proceeding against Guarantor. Employee may maintain a
separate action against Employer without in any manner waiving or compromising
any rights which he may have against Guarantor. Employee's rights hereunder are
cumulative and shall not be exhausted by any number of successive actions until
and unless all of the guaranteed Obligations have been fully paid and performed.
8. In the event of any action for breach of or to enforce this Guaranty,
Employee shall be entitled to recover all costs of suit, including without
limitation, reasonable attorney's fees.
9. This Guaranty shall inure to the benefit of Employee and his
successors and assigns. Employee may assign his rights under this Guaranty
pursuant to the terms of the assignment provisions of the Agreement.
10. Except as otherwise set forth herein, Guarantor's obligations under
this Guaranty are subject to all defenses which Employer may have against
Employee with respect to the enforcement of the Guaranteed Obligations.
11. This Guaranty shall be governed by California law and Guarantor
submits to the exclusive jurisdiction of its courts, including the federal
courts within California.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
April 16, 1998.
GUARANTOR
SILVER CINEMAS INTERNATIONAL, INC.,
By: ___________________________________
Name:______________________________
Title:_____________________________
13
<PAGE> 14
------------------------------------
RICHARDSON ANNUAL BONUS PLAN
I. PURPOSE
The purpose of the Plan is to provide annual bonus compensation to
designated key executives based on the performance of the Corporation.
II. DEFINITIONS
When used herein, the following terms have the following meanings:
"Bonus" means the amount paid as a bonus pursuant to this Plan.
"Base Bonus means (i) $37,500 for each Bonus Period through the Bonus
Period ending December 31, 2000; and (ii) $9,375 for the Bonus Period ending
March 31, 2001.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Article XIII hereof to receive the amount, if any, payable under
the Plan upon the Participant's death.
"Board of Directors" means the Board of Directors of the Company.
(a) Bonus Period" means (i) the period commencing April 17, 1998 and
ending December 31, 1998; and (ii) each succeeding calendar year
thereafter (or such other fiscal year as the Corporation may
establish) through December 31, 2000; and (iii) the period
commencing January 1, 2001 and ending March 31, 2001.
(b) "Cause" shall have the meaning assigned in the Employment
Agreement
"Company" means Silver Cinemas, Inc.
"Corporation" means the Company's wholly owned subsidiary designated by
the Company as the "Corporation" for purposes of this Annual Bonus Plan.
"Disability" shall have the meaning assigned in the Employment
Agreement.
"Employment Agreement" shall mean the Employment Agreement dated as of
April 16, 1998 , between the Corporation and Paul S. Richardson, as amended from
time to time.
"Participant" means Paul S. Richardson.
"Plan" means the Richardson Annual Bonus Plan.
<PAGE> 15
"Theater Level Cash Flow" means an amount equal to (i) the actual total
revenues generated by the theaters owned, leased or operated by the Corporation
less (ii) the actual total operating expenses related to the theaters owned,
leased or operated by the Corporation.
"Targeted Theater Level Cash Flow" means the amount included as Theater
Level Cash Flow in the annual budget for the Corporation approved in good faith
by the Board of Directors or their designees prior to the beginning of each
Bonus Period thereafter.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Company.
IV. ELIGIBLE CALCULATION
Mr. Richardson shall automatically become a Participant upon
commencement of his employment pursuant to the Employment Agreement.
V. BONUS CALCULATION
(a) The amount of the Bonus for any Bonus Period shall be determined
as follows, subject always to Section 3.01(c) of Participant's
Employment Agreement:
(b) in the event Theater Level Cash Flow is less than 80% of
Targeted Theater Level Cash Flow, there shall be no Bonus ;
(c) in the event Theater Level Cash Flow is 80% or more but less
than 90% of Targeted Theater Level Cash Flow, the Bonus shall be
an amount equal to 50% of the Base Bonus;
(d) in the event Theater Level Cash Flow is 90% or more but less
than 100% of Targeted Theater Level Cash Flow, the Bonus shall
be an amount equal to 75% of the Base Bonus;
(e) in the event Theater Level Cash Flow is 100% or more of Targeted
Theater Level Cash Flow, the Bonus shall be an amount equal to
100% of the Base Bonus plus, if Theater Level Cash Flow is more
than 100% of Targeted Theater Level Cash Flow, an amount equal
to 1% of the Base Bonus for each 1% by which Theater Level Cash
Flow exceeds Targeted Theater Level Cash Flow. If Theater Level
Cash Flow is more than 110% of Targeted Theater Level Cash Flow,
the Bonus shall be further increased by 2% for each 1% by which
Theater Level Cash Flow exceeds 110% of Targeted Theater Level
Cash Flow.
2
<PAGE> 16
VI. PAYMENT OF BONUS
Calculation of the attainment of Targeted Theater Level Cash Flow and
the determination and payment of any and all bonuses shall be made and furnished
to each Participant no later than ninety (90) days after the end of each Bonus
Period.
VII. TERMINATION OF EMPLOYMENT
In the event of termination of Participant's employment with the
Corporation, the provisions of the Employment Agreement shall govern the payment
of any Bonus.
VIII. REORGANIZATION OR DISCONTINUANCE
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from merger, consolidation
or other reorganization of the Corporation, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Corporation. The Corporation will make appropriate provisions for the
preservation of Participants' rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation,
reorganization or transfer of assets.
IX. NON-ALIENATION OF BENEFITS
A Participant may not assign, sell, encumber, transfer or otherwise
dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the
preceding sentence shall be null and void.
X. NO CLAIM OF RIGHT UNDER THE PLAN
Except as otherwise provided herein or in a separate written agreement
executed by the Corporation, no employee or other person shall have any claim or
right to be selected as a Participant under the Plan. Neither the Plan nor any
action taken pursuant to the Plan shall be construed as giving any employee any
right to be retained in the employ of the Corporation.
XI. TAXES
The Corporation shall deduct from all amounts paid under the Plan all
federal, state, local and other taxes or withholdings required by law to be
withheld with respect to such payments.
XII. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall indicate in their Participation Agreement a
designation of one or more persons as the Beneficiary who shall be entitled to
receive the amount, if any, payable under the Plan upon the death of the
Participant. A Participant may, from time to time, revoke or change their
Beneficiary designation without the consent of any prior Beneficiary by filing a
written designation with the Board of Directors of the Company. The last such
designation
3
<PAGE> 17
received by the Board of Directors of the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Board of Directors of the Company prior to
the Participant's death, and in no event shall it be effective as of a date
prior to such receipt.
XIII. NO LIABILITY OF BOARD OF DIRECTORS
No member of the Board of Directors of the Company or the Corporation
shall be personally liable by reason of any contract or other instrument
executed by such member or on his or her behalf in his or her capacity as a
member of such Board of Directors, nor for any mistake of judgment made in good
faith, and the Corporation and Company shall indemnify and hold harmless each
employee, officer, or director of the Corporation and/or Company to whom any
duty or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including legal fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Board of Directors) arising out of any act or omission to act in connection
with the Plan unless arising out of such person s own fraud or bad faith.
XIV. AMENDMENT OR TERMINATION
The Board of Directions may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time,
provided, however, that no amendment, suspension or termination of the plan
shall deprive any Participant of any rights to a bonus previously earned under
the Plan without such Participant's written consent. Subject to earlier
termination pursuant to the provisions of this Article, and unless the Board of
Directors shall have approved an extension of the Plan beyond such date, no
bonus award shall be made with respect to any period ending after March 31,
2001. If the Richardson Annual Bonus Plan is terminated during a Bonus Period,
the Bonus earned shall be prorated accordingly for that Bonus Period. Future
Bonus Periods that would have occurred if the Richardson Annual Bonus Plan had
not been terminated shall be paid to Executive at the Minimu Bonus rate pursuant
to the Employment Agreement.
XV. UNFUNDED PLAN
Participants shall have no right, title, or interest whatsoever in or
to any investments which the Corporation may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and any
Participant, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Corporation under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Corporation. All payments to be made hereunder shall be paid from the
general funds of the Corporation and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
4
<PAGE> 18
XVI. GOVERNING LAW
The terms of the Plan and all rights thereunder shall be governed by
and construed in accordance with the laws of the state of California, without
reference to principles of conflict of laws.
XVII. EFFECTIVE DATE
The effective date of the Plan is April 16, 1998.
5
<PAGE> 1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1.1
COMPUTATION OF COVERAGE DEFICIENCY
<TABLE>
<CAPTION>
SILVER CINEMAS INTERNATIONAL, INC.
----------------------------------------------------------------
MAY 10, 1996
(DATE OF INCEPTION) THREE MONTHS ENDED
TO YEAR ENDED MARCH 31,
DECEMBER 31, 1996 DECEMBER 31, 1997 1997 1998
------------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Net loss before taxes................................. $(382,207) $(1,156,230) $(160,040) $(471,730)
Interest expense...................................... 352,509 28,404 156,542
Amortization of debt issue costs...................... 54,907 34,119
Portion of rents representative of
the interest factor................................. 66,929 1,103,913 207,283 259,943
--------- ----------- --------- ---------
Loss before taxes, as adjusted........................ (315,278) 355,099 75,647 (21,126)
Fixed charges
Interest expense.................................... 352,509 28,404 156,542
Amortization of debt issue costs.................... 54,907 34,119
Portion of rents representative
of the interest factor............................ 66,929 1,103,913 207,283 259,943
--------- ----------- --------- ---------
Total fixed charges............................. 66,929 1,511,329 235,687 450,604
--------- ----------- --------- ---------
Deficiency of earnings to fixed charges............... $(382,207) $(1,156,230) $(160,040) $(471,730)
========= =========== ========= =========
</TABLE>
<PAGE> 2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1.2
COMPUTATION OF COVERAGE DEFICIENCY (IN THOUSANDS)
<TABLE>
<CAPTION>
PROFORMA
------------------------------------
Year Ended Three Months Ended
December 31, March 31,
1997 1998
------------- -----------------
<S> <C> <C>
Net loss before taxes ............................ $(9,095) $(2,114)
Interest expense ................................. 11,196 2,800
Amortization of debt issue costs ................. 800 200
Portion of rents representative of the interest
factor ......................................... 5,529 1,427
------- -------
Loss before taxes, as adjusted ................... 8,430 2,313
Fixed charges
Interest expense ............................... 11,196 2,800
Amortization of debt issue costs ............... 800 200
Portion of rents representative of interest
factor ....................................... 5,529 1,427
------- -------
Total fixed charges ....................... 17,525 4,427
------- -------
Deficiency of earnings to fixed charges .......... $(9,095) $(2,114)
======= =======
</TABLE>
<PAGE> 3
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1.3
COMPUTATION OF COVERAGE DEFICIENCY
<TABLE>
<CAPTION> THE LANDMARK THEATRE GROUP
-----------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED ENDED MARCH 31,
MARCH 31, 1996 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996 1997 1996
-------------- ------------- ----------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)
before taxes .............. $ 528,000 $ (1,000,000) $ 1,155,000 $ 264,000 $1,351,000 $ 657,000
Interest expense ........... 716,000 237,000 458,000 748,000 215,000 162,000
Portion of rents represen-
tative of the interest
factor .................... 2,238,000 563,000 1,217,000 2,333,000 528,000 543,000
------------ ------------ --------------- ------------- ---------- ----------
Loss before taxes, as
adjusted .................. 3,482,000 (200,000) 2,830,000 3,345,000 2,094,000 1,362,000
Fixed charges
Interest expense ......... 716,000 237,000 458,000 748,000 215,000 162,000
Portion of rents represen-
tative of the interest
factor .................. 2,238,000 563,000 1,217,000 2,333,000 528,000 543,000
------------ ------------ --------------- ------------- ---------- ----------
Total fixed charges ...... 2,954,000 800,000 1,675,000 3,081,000 743,000 705,000
------------ ------------ --------------- ------------- ---------- ----------
Excess (deficiency) of
earnings to fixed charges.. $ 528,000 $ (1,000,000) $ 1,155,000 $ 264,000 $1,351,000 $ 857,000
============ ============ =============== ============= ========== ==========
Ratio ...................... 1.18 1.69 1.09 2.82 1.93
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF SILVER
CINEMAS INTERNATIONAL, INC. JURISDICTION
Silver Cinemas, Inc. Delaware
SCI Acquisition Corp. Delaware
Landmark Theatre Corp. Delaware
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Silver Cinemas
International, Inc. on Form S-4 of our report dated March 26, 1998 with respect
to the consolidated financial statements of Silver Cinemas International, Inc.
as of December 31, 1997 and 1996 and for the year ended December 31, 1997 and
the period from May 10, 1996 (date of inception) to December 31, 1996; and our
report dated March 27, 1998 with respect to the consolidated financial
statements of The Landmark Theatre Group as of and for the year ended December
31, 1997; all appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 15, 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Silver Cinemas International, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in such Prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
June 15, 1998
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of Silver Cinemas
International, Inc. on Form S-4 of our report dated March 15, 1998 on our audits
of the consolidated financial statements of StarTime Cinema, Inc. as of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997, appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
COOPERS & LYBRAND L.L.P.
El Paso, Texas
June 15, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
SILVER CINEMAS INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 75-2656147
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4004 BELTLINE ROAD
SUITE 205, LOCKBOX 18
DALLAS, TEXAS 75244
(Address of principal executive offices) (Zip code)
-----------------------------
10.5 % SENIOR SUBORDINATED NOTES DUE 2005
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 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.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate
trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility.
Norwest Bank incorporates by reference
into this Form T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association
of the trustee now in effect.*
Exhibit 2. a. A copy of the certificate of
authority of the trustee to commence
business issued June 28, 1872, by the
Comptroller of the Currency to The
Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the
Comptroller of the Currency dated
January 2, 1934, approving the
consolidation of The Northwestern
National Bank of Minneapolis and The
Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity
being titled Northwestern National
Bank and Trust Company of
Minneapolis.*
c. A copy of the certificate of the
Acting Comptroller of the Currency
dated January 12, 1943, as to change
of corporate title of Northwestern
National Bank and Trust Company of
Minneapolis to Northwestern National
Bank of Minneapolis.*
d. A copy of the letter dated May 12,
1983 from the Regional
<PAGE> 3
Counsel, Comptroller of the Currency,
acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of
Minneapolis to Norwest Bank
Minneapolis, National Association.*
e. A copy of the letter dated January 4,
1988 from the Administrator of
National Banks for the Comptroller of
the Currency certifying approval of
consolidation and merger effective
January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 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.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-53851.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of May 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
-------------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
May 22, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
-----------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES B
FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES A
OF
SILVER CINEMAS INTERNATIONAL, INC.
PURSUANT TO THE PROSPECTUS DATED _____________________ ,1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
To: Norwest Bank Minnesota, National Association, The Exchange Agent
By Registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave. S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
By Overnight Delivery: By Facsimile:
(612) 667-4927
Norwest Bank Minnesota,
National Association Confirm by Telephone
Corporate Trust Operations (612) 667-9764
Norwest Center
Sixth and Marquette
Minneapolis, MN 55480-0113
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated
______________, 1998 (the "Prospectus"), of Silver Cinemas International, Inc.,
a Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together with the Prospectus constitutes the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
principal amount of its 10 1/2% Senior Subordinated Notes due 2005 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 10 1/2%
Senior Subordinated Notes due 2005 (the "Private Notes"). Recipients of the
Prospectus should read the requirements described in such Prospectus with
respect to eligibility to participate in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
20
<PAGE> 2
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes and the undersigned
represents that it has received from each beneficial owner of Private Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder from Beneficial Owner" accompanying this Letter of
Transmittal, instructing the undersigned to take the action described in this
Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private Notes (i)
if certificates representing Private Notes are to be forwarded herewith, (ii) if
delivery of Private Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Procedures for Tendering," or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information
received from the beneficial owners is accurately reflected in the boxes
entitled "Beneficial Owner(s)--Purchaser Status" and "Beneficial
Owner(s)--Residence."
Any beneficial owner whose Private 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 of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either maker appropriate
arrangements to register ownership of the private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private Notes,"
(ii) complete the boxes entitled "Beneficial Owner(s)--Purchaser Status" and
"Beneficial Owner(s)--Residence," (iii) if appropriate, check and complete the
boxes relating to book-entry transfer, guaranteed delivery, Special Issuance
Instructions and Special Delivery Instructions, (v) sign the Letter of
Transmittal by completing the box entitled "Sign Here" and (v) complete the
Substitute Form W-9. Each holder of Private Notes should carefully read the
detailed instructions below prior to completing the Letter of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for
exchange must complete columns (1) through (3) in the box below entitled
"Description of Private Notes," complete the boxes entitled and sign the box
below entitled "Sign Here." If only those columns are completed, such holder of
Private Notes will have tendered for exchange all Private Notes listed in column
(3) below. If the holder of Private Notes wishes to tender for exchange less
than all of such Private Notes, column (4) must be completed in full. In such
case, such holder of Private Notes should refer to Instruction 5.
- --------------------------------------------------------------------------------
DESCRIPTION OF PRIVATE NOTES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4)
PRINCIPAL AMOUNT
AGGREGATE TENDERED FOR EXCHANGE
NAME(S) AND ADDRESS(ES) OF REGISTERED PRIVATE NOTE PRINCIPAL (MUST BE IN
HOLDER(S) OF PRIVATE NOTE(S), EXACTLY AS NUMBER(S) AMOUNT INTEGRAL MULTIPLES OF
NAME(S) APPEAR(S) ON PRIVATE NOTE CERTIFICATE(S) (ATTACH SIGNED REPRESENTED BY $1,000)(2)
(PLEASE FILL IN, IF BLANK) LIST IF NECESSARY) CERTIFICATE(S)(1)
<S> <C> <C> <C>
- -------------------------------------------------------- ------------------------ ----------------------- -----------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------- ------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
- -------------------------------------------------------- ------------------------ ----------------------- -----------------------
</TABLE>
(1) Unless indicated in the column "Principal Amount Tendered for Exchange,"
any tendering Holder of 10 1/2% Senior Subordinated Notes due 2005 will
be deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregate Principal Amount Represented
by Certificate(s)."
(2) The minimum permitted tender is $1,000 in principal amount of 10 1/2%
Senior Notes due 2005. All other tenders must be in integral multiples
of $1,000.
o CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
o CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY:
Name of Tendering Institution:____________________________________________
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
o CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s):_____________________________
Date of Execution of Notice of Guaranteed Delivery:_______________________
Window Ticket Number (if available):______________________________________
Name of Institution which Guaranteed Delivery:____________________________
Account Number (if delivered by book-entry transfer):_____________________
o CHECK HERE IF YOU ARE A BROKER DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:_____________________________________________________________________
Address:__________________________________________________________________
__________________________________________________________________
<PAGE> 4
- --------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the Exchange Notes issued in
exchange for Private Notes, certificates for Private Notes in
a principal amount not exchanged for Exchange Notes, or
Private Notes (if any) not tendered for exchange, are to be
issued in the name of someone other than the undersigned or
(ii) if Private Notes tendered by book-entry transfer which
are not exchanged are to be returned by credit to an account
maintained at DTC.
Issue to:
Name:_______________________________________________________________
(PLEASE PRINT)
Address_____________________________________________________________
____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
____________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
Credit Private Notes not exchanged and delivered by book-entry
transfer to DTC account set forth below:
(ACCOUNT NUMBER)
____________________________________________________________________
- --------------------------------------------------------------------
- --------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the Exchange Notes issued in
exchange for Private Notes, certificates for Private Notes in
a principal amount not exchanged for Exchange Notes, or
Private Notes (if any) not tendered for exchange, are to be
mailed or delivered (i) to someone other than the undersigned
or (ii) to the undersigned at an address other than the
address shown below the undersigned's signature.
Issue to:
Name:_______________________________________________________________
(PLEASE PRINT)
Address_____________________________________________________________
____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
____________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
- --------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--RESIDENCE
- ------------------------------------------------------------------------------------------------------------------------------------
STATE OF DOMICILE/PRINCIPAL PLACE OF BUSINESS OF EACH PRINCIPAL AMOUNT OF PRIVATE NOTES HELD FOR ACCOUNT OF
BENEFICIAL OWNER OF PRIVATE NOTES BENEFICIAL OWNER(S)
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
<PAGE> 5
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--PURCHASER STATUS
The beneficial owner of each of the Private Notes described herein is (check the
box that applies):
o A "Qualified Institutional Buyer" as (defined in Rule 144A under the
Securities Act)
o An "Institutional Accredited Investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act
o A non "U.S. person" (as defined in Regulation S of the Securities
Act) that purchased the Private Notes outside the United States in
accordance with Rule 904 of the Securities Act
o Other (describe)____________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
<PAGE> 6
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by Silver Cinemas International, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated ____________________, 1998 (the "Prospectus") and
this Letter of Transmittal (the "Letter of Transmittal"), which together with
the Prospectus constitutes the Company's offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 10 1/2% Senior Subordinated Notes due
2005 (the "Exchange Notes") for each $1,000 principal amount of its outstanding
10 1/2% Senior Subordinated Notes due 2005 (the "Private Notes"), the
undersigned hereby tenders to the Company for exchange the Private Notes
indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith, the
undersigned will have irrevocably sold, assigned, transferred and exchanged, to
the Company, all right, title and interest in, to and under all of the Private
Notes tendered for exchange hereby, and hereby will have appointed the Exchange
Agent as the true and lawful agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as agent of the Company) of such holder of
Private Notes with respect to such Private Notes will full power of substitution
to (i) deliver certificates representing such Private Notes, or transfer
ownership of such Private Notes on the account books maintained by DTC (together
, in any such case, with all accompanying evidences of transfer and
authenticity), to the Company, (ii) present and deliver such Private Notes for
transfer on the books of the Company (iii) receive all benefits and otherwise
exercise all rights and incidents of beneficial ownership with respect to such
Private Notes, all in accordance with the terms of the Exchange Offer. The power
of attorney granted in this paragraph shall be deemed to be irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act of 1934, as amended ("Rule 14e-4") equal to or
greater than the principal amount of Private Notes tendered hereby; (iii) the
tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule
14e-4 is applicable to such exchange); (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes and (v)
that when such Private Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Private Notes
tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the Company
that (i) the Exchange Notes to be acquired by the undersigned in exchange for
the Private Notes tendered hereby and any beneficial owner(s) of such Private
Notes in connection with the Exchange Offer will be acquired by the undersigned
and such beneficial owner(s) in the ordinary course of business of the
undersigned, (ii) the undersigned have no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes, (iii) the
undersigned and each beneficial owner(s) acknowledge and agree that any person
who is a broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is 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 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 Commission set forth in certain
no-action letters, (iv) the undersigned and each beneficial owner understand
that a secondary resale transaction described in clause (iii) above and any
resales of Exchange Notes obtained by the undersigned in exchange for the
Private Notes acquired by the undersigned directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) neither the undersigned or any
beneficial owner is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for the Private Notes that were
acquired as a
<PAGE> 7
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned does not and will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of Private Notes for exchange may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes tendered by
the undersigned and not accepted for exchange will returned to the undersigned
at the address set forth above unless otherwise indicated in the box above
entitled "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
The undersigned acknowledges that the Company's acceptance of Private
Notes validly tendered for exchange pursuant to any one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer" and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has not obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Private Notes from the name of the holder of Private Note(s) thereof if the
Company does not accept for exchange any of the Private Notes so tendered for
exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death, incapacity, or dissolution of
the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
<PAGE> 8
- --------------------------------------------------------------------------------
SIGN HERE
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF OWNER(S)
Date:_________________________, 1998
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s):________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title):__________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. ( )____________________________________________
Tax Identification or Social Security Nos.______________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
Authorized Signature:___________________________________________________________
Date:___________________________________________________________________________
Name and Title:_________________________________________________________________
(PLEASE PRINT)
Name of Firm:___________________________________________________________________
- --------------------------------------------------------------------------------
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Associate of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3) an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, which is a member of one of the
following recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if
this Letter of Transmittal is signed by the registered holder(s) of the Private
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Private Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders of
Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Private
Notes or by any timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Private Notes who elect
to tender Private Notes and (i) whose Private Notes are not immediately
available or (ii) who cannot deliver the Private Notes, this Letter of
Transmittal or other required documents to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date, must tender their Private
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to 5:00 p.m., New York City time, on
the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder of such Private
Notes, the certificate number(s) of such Private Notes and the principal amount
of Private Notes tendered for exchange, stating that tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, this Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing such Private Notes (or a
Book-Entry Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent; and (c) a properly executed Letter of
Transmittal (or a facsimile hereof), as well as the certificate(s) for all
tendered Private Notes in proper form for transfer or a Book-Entry confirmation,
together with any other documents required by this Letter of Transmittal, are
received by the Exchange Agent within five New York Stock Exchange trading days
after the Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES
<PAGE> 10
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.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Private Notes" above is inadequate, the certificate numbers and
principal amounts of the Private Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a notice
of withdrawal of Private Notes must (i) specify the name of the person who
tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the
Private Notes to be withdrawn (including the certificate number of numbers and
aggregate principal amount of such Private Notes), and (iii) be signed by the
holder of Private Notes in the same manner as the original signature on the
Letter of Transmittal by which such Private Notes were tendered (including any
required signature guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Private Notes so withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offer and no Exchange Notes
will be issued with respect thereto unless the Private Notes so withdrawn are
validly retendered. Properly withdrawn Private Notes may be retendered by
following one of the procedures described in the section of the Prospectus
entitled "The Exchange Offer--Procedures for Tendering" at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to be
made with respect to less than the entire principal amount of any Private Notes,
fill in the principal amount of Private Notes which are tendered for exchange in
column (4) of the box entitled "Description of Private Notes," as more fully
described in the footnotes thereto. In case of a partial tender for exchange, a
new certificate, in fully registered form, for the remainder of the principal
amount of the Private Notes, will be sent to the holders of Private Notes unless
otherwise indicated in the appropriate box on this Letter of Transmittal as
promptly as practicable after the expiration or termination of the Exchange
Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents was there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or bond
powers are required. If, however, Private Notes not tendered or not accepted,
are to be issued or returned in the name of a person other than the holder of
Private Notes, then the Private Notes transmitted hereby must be endorsed or
accompanied by a properly completed bond power, in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the holder of Private
Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
<PAGE> 11
(e) If this Letter of Transmittal or Private 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
this Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed or
accompanied by a properly completed bond power, in either case signed by such
registered holder exactly as the name(s) of the registered holder of Private
Notes appear(s) on the certificates. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the exchange of Private Notes
pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the Private Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemptions therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are
to be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address other
than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Holders of Private Notes tendering Private Notes by
book-entry transfer may request that Private Notes not accepted be credited to
such account maintained at DTC as such holder of Private Notes may designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private 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 Private Notes not properly
tendered or any Private Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Private 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 Private Notes must be
cured with such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private 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
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer--Conditions" in the Prospectus in the case of any Private
Notes tendered (except as otherwise provided in the Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering
Holder whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further instructions:
Norwest Bank Minnesota,
National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, MN 55480-0113
<PAGE> 12
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
<PAGE> 13
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private Notes
is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Private Notes that he or
she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Private Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Private Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Private Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Private Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Private notes or other Payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) or the record
owner of the Private Notes. If the Private Notes are held in more than one name
or are note held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
<PAGE> 14
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005
OF
SILVER CINEMAS INTERNATIONAL, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
___________, 1998 (the "Prospectus") of Silver Cinemas International, 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 by not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the 10 1/2% Senior
Subordinated Notes due 2005 (the "Private Notes") held by you for the account of
the undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Private Notes held by you for the account of
the undersigned (insert principal amount of Private Notes to be tendered, if
any):
$ of the Private Notes
[ ] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private 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 representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned has no
arrangement or understanding with any person to participate in the distribution
of Exchange Notes, (iv) the undersigned acknowledges that any person who is a
broker-dealer registered under the Exchange Act or is 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, 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 certain no-action
letters (See the section of the Prospectus entitled "The Exchange Offer--Resale
of the Exchange Notes"), (v) the undersigned understands that a secondary resale
transaction described in clause (iv) above and any resales of Exchange Notes
obtained by the undersigned in exchange for the Private Notes acquired by the
undersigned directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, if applicable, of Regulation S-K of the
Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company, and (vii) if the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Private Notes that were acquired as a result of market-making activities o
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any sale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act; (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 Private Notes.
<PAGE> 15
The purchaser status of the undersigned is (check the box that applies):
[ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
[ ] A non "U.S. person" (as defined in Regulation S of the Securities
Act) that purchased the Private Notes outside the United States in
accordance with Rule 904 of the Securities Act.
[ ] Other (describe)_____________________________________________________
_____________________________________________________
- --------------------------------------------------------------------------------
SIGN HERE
________________________________________________________________________________
________________________________________________________________________________
Name of Beneficial Owner(s)_____________________________________________________
________________________________________________________________________________
Signature(s)____________________________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Principal place of business (if different from address listed above)____________
________________________________________________________________________________
Telephone Numbers.______________________________________________________________
________________________________________________________________________________
Taxpayer Identification of Social Security Number(s)____________________________
________________________________________________________________________________
Date:___________________________________________________________________________
- --------------------------------------------------------------------------------
<PAGE> 16
PAYER'S NAME:
<TABLE>
<S> <C>
- ----------------------------------------------------------- ---------------------------------- ---------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY
FORM W-9 BY SIGNING AND DATING BELOW OR_______________________________
Department of the Treasury Employer Identification Number
Internal Revenue Service
--------------------------------------------------------------------
Payer's Request for Taxpayer PART 2--PART 2--CERTIFICATION--Under Penalties of Perjury, I certify
Identification Number (TIN) that:
(1) The number shown on this form is my current taxpayer
identification number (or I am waiting for a number to be
issued to me) and
(2) I am not subject to backup withholding either because I have
not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the IRS has
notified me that I am no longer subject to backup withholding.
--------------------------------------------------------------------
PART 3--AWAITING TIN [ ]
- --------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are
subject to backup withholding because of underrporting interest or dividends on your tax return. However, if after being
notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you
are no longer subject to backup withholding, do not cross out item(2).
Signature_______________________________________________________________ Date___________________________________________
Name___________________________________________________________________________________________________________________________
Address________________________________________________________________________________________________________________________
City_________________________________ States_____________________________ Zip Code__________________________________
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT 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.
<PAGE> 17
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
number.
______________________________________________ _________________________
SIGNATURE DATE
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005
- --------------------------------------------------------------------------------
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY HOLDER OF
10 1/2% SENIOR SUBORDINATED NOTES DUE 2005 (THE "PRIVATE NOTES") OF SILVER
CINEMAS INTERNATIONAL, INC., A DELAWARE CORPORATION (THE "COMPANY"), WHO WISHES
TO TENDER PRIVATE NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED IN
THE PROSPECTUS DATED ___________________, 1998 (THE "PROSPECTUS") AND (i) WHOSE
PRIVATE NOTES ARE NOT IMMEDIATELY AVAILABLE OR (ii) WHO CANNOT DELIVER SUCH
PRIVATE NOTES OR ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL ON OR
BEFORE THE EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (iii) WHO CANNOT
COMPLY WITH THE BOOK-ENTRY TRANSFER PROCEDURE ON A TIMELY BASIS. SUCH FORM MAY
BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE
AGENT. SEE "THE EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES" IN THE
PROSPECTUS.
- --------------------------------------------------------------------------------
SILVER CINEMAS
INTERNATIONAL, INC.
NOTICE OF GUARANTEED DELIVERY
To: Norwest Bank Minnesota, National Association, the Exchange Agent
By Registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave. S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
By Overnight Delivery: By Facsimile:
(612) 667-4927
Norwest Bank Minnesota,
National Association Confirm by Telephone
Corporate Trust Operations (612) 667-9764
Norwest Center
Sixth and Marquette
Minneapolis, MN 55480-0113
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
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
Private Notes specified below pursuant to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus. By so tendering, the undersigned does hereby make, at and as of
the date hereof, the representations and warranties of a tendering Holder of
Private Notes set forth in the Letter of Transmittal. The undersigned hereby
tenders the Private Notes listed below:
<TABLE>
- --------------------------------------------------------------- --------------------------------------------------------------
CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- --------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
If Private Notes will be tendered SIGN HERE
by book-entry transfer
___________________________________
Signature(s)
Name of Tendering Institution:
___________________________________
________________________________
___________________________________
Name(s) (Please Print)
The Depository Trust Company
Account No.:
___________________________________
________________________________ ___________________________________
Address
___________________________________
Zip Code
___________________________________
Area Code and Telephone No.
Date:______________________________
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Private Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Private Notes into the Exchange Agent's account at the Depository Trust
Company, pursuant to the procedure for book-entry transfer set forth in the
prospectus, and any other required documents, all by 5:00 p.m., New York City
time, on the fifth New York Stock Exchange trading day following the Expiration
Date (as defined in the Prospectus).
SIGN HERE
___________________________________
Name of Firm
___________________________________
Authorized Signature
___________________________________
Name(s) (Please Print)
___________________________________
___________________________________
___________________________________
Address
___________________________________
Zip Code
___________________________________
Area Code and Telephone No.
Date:______________________________
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 4
INSTRUCTIONS
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 one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the Holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery procedures,
see the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." In all cases, sufficient time should be allowed to assure timely
delivery. No Notice of Guaranteed Delivery should be sent to the Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
Holder(s) of the Private Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Private Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered Holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
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, unless waived by the Company, evidence satisfactory
to the Company of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
Exchange Offer or the procedure for consenting and tendering as well as requests
for assistance or for additional copies of the Prospectus, the Letter of
Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
SILVER CINEMAS INTERNATIONAL, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001063799
<NAME> SILVER CINEMAS, INC.
[CIK] 0001063800
[NAME] SCI ACQUISITION CORP.
[CIK] 0001063801
[NAME] LANDMARK THEATRE CORP.
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 276,497 115,905
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 147,792 147,792
<CURRENT-ASSETS> 688,890 474,779
<PP&E> 9,369,560 13,988,641
<DEPRECIATION> (681,136) (936,753)
<TOTAL-ASSETS> 21,927,299 27,172,768
<CURRENT-LIABILITIES> 1,703,691 1,320,152
<BONDS> 6,590,561 2,714,162
0 0
15,203,800 25,301,322
<COMMON> 1,008 1,019
<OTHER-SE> (1,571,761) (2,163,887)
<TOTAL-LIABILITY-AND-EQUITY> 21,927,299 27,172,768
<SALES> 18,761,578 4,802,727
<TOTAL-REVENUES> 18,761,578 4,802,727
<CGS> 19,482,323 5,093,598
<TOTAL-COSTS> 19,482,323 5,093,598
<OTHER-EXPENSES> 28,069 (9,802)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 407,416 190,661
<INCOME-PRETAX> (1,156,230) (471,730)
<INCOME-TAX> 16,957 23,162
<INCOME-CONTINUING> (1,173,187) (494,892)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,173,187) (494,892)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
