<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended..............................September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -------------------
Commission file number 000-
------------------------------------------- -----
SILVER CINEMAS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-2656147
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4004 BELTLINE ROAD, SUITE 205, ADDISON, TEXAS 75001-4363
(Address of principal executive offices)
(Zip Code)
(972) 503-9851
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 143,644 shares of common stock
as of November 9, 1999
-1-
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balanced Sheets as of September 30, 1999 (unaudited)
and December 31, 1998 3
Condensed Consolidated Statements of Operations (unaudited) for the
three and nine months ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures
</TABLE>
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,147,840 $ 2,880,955
Inventories 543,656 560,886
Receivables 522,538 1,210,328
------------- -------------
Total current assets 2,214,034 4,652,169
THEATER PROPERTIES AND EQUIPMENT, Net 65,623,068 66,913,041
GOODWILL - Net 48,592,370 49,981,350
OTHER ASSETS - Net 8,521,149 10,845,858
------------- -------------
TOTAL $ 124,950,621 $ 132,392,418
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 110,000 $ 110,000
Current portion of capital lease obligations 319,162 306,284
Accounts payable 1,161,822 522,733
Accrued film rentals 1,449,370 2,098,791
Accrued payrolls 1,682,367 1,190,914
Accrued interest 4,820,750 2,209,500
Accrued property taxes and other liabilities 1,956,129 1,646,509
------------- -------------
Total current liabilities 11,499,600 8,084,731
LONG-TERM DEBT, less current portion 100,000,000 100,110,000
CAPITAL LEASE OBLIGATIONS, less current obligations 4,174,506 4,414,299
OTHER LONG-TERM OBLIGATIONS 1,526,543 2,198,380
------------- -------------
Total liabilities 117,200,649 114,807,410
STOCKHOLDERS' EQUITY:
Series preferred stock, 100,000 shares authorized, no shares issued
Series A preferred stock, $.01 par value, 400,000 shares
authorized, 358,470 shares issued and outstanding at September 30, 1999
and December 31, 1998 35,847,006 35,987,442
Convertible preferred stock, $.01 par value, 5,000 shares authorized,
3,000 shares issued and outstanding at September 30, 1999 300,000
Common stock, $.01 par value; 200,000 shares authorized, 143,644 and
140,458 shares issued and outstanding at September 30, 1999 and
December 31, 1998, respectively 1,436 1,405
Additional paid-in capital 142,177 139,053
Stockholder notes receivable (51,780) (201,780)
Deferred compensation (299,970)
Accumulated deficit (28,188,897) (18,341,112)
------------- -------------
Total stockholders' equity 7,749,972 17,585,008
------------- -------------
TOTAL $ 124,950,621 $ 132,392,418
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 22,201,139 $ 18,995,287 $ 58,122,405 $ 34,823,818
Concessions 8,586,094 8,533,513 23,054,676 16,563,320
Other 414,488 370,736 1,246,608 846,558
------------ ------------ ------------ ------------
Total 31,201,721 27,899,536 82,423,689 52,233,696
COSTS AND EXPENSES:
Costs of operations:
Film rentals 10,391,404 8,158,305 25,930,141 14,942,182
Concessions supplies 1,749,932 1,113,075 4,433,615 2,482,639
Salaries and wages 4,422,395 4,623,469 12,817,390 9,262,502
Occupancy costs 4,639,088 3,877,347 13,505,394 7,999,380
Advertising 1,124,457 739,983 2,866,612 1,921,355
Utilities and other 4,233,713 4,557,612 12,254,292 8,704,920
General and administrative expenses 2,474,417 1,678,711 6,124,338 3,850,746
Depreciation and amortization 2,191,462 2,603,726 6,338,979 5,022,914
------------ ------------ ------------ ------------
Total 31,226,868 27,352,228 84,270,761 54,186,638
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (25,147) 547,308 (1,847,072) (1,952,942)
OTHER INCOME (EXPENSE):
Interest expense (2,749,804) (2,759,893) (8,255,162) (5,256,683)
Amortization of debt issue costs (166,030) (142,377) (475,534) (1,287,554)
Interest income and other expense, net 258,141 151,657 349,730 390,646
Gain on sale of theaters 6,284 380,257
------------ ------------ ------------ ------------
Total (2,651,409) (2,750,613) (8,000,709) (6,153,591)
------------ ------------ ------------ ------------
NET LOSS (2,676,556) (2,203,305) (9,847,781) (8,106,533)
PREFERRED STOCK DIVIDENDS (596,891) (427,507) (1,766,416) (1,097,273)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCK $ (3,273,447) $ (2,630,812) $(11,614,197) $ (9,203,806)
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (9,847,781) $ (8,106,533)
Noncash items in net loss:
Depreciation and amortization 6,814,512 6,114,801
Straight-line rent adjustment 183,486
Gain on sale of theater (380,257)
Amortization of long-term liabilities (259,169)
Capitalized interest (22,085)
Cash from (used for) working capital:
Receivables and other 705,020 (536,670)
Accounts payable 300,792 (290,471)
Accrued liabilities 2,579,416 8,304,699
------------- -------------
Net cash from (used for) operating activities 73,934 5,485,826
------------- -------------
INVESTING ACTIVITIES:
Acquisitions of theater properties and equipment (802,816) (88,549,922)
Sale of theaters 3,755,806
Additions to theater properties and equipment (5,721,841) (9,275,893)
Decrease (increase) in other assets 1,919,347 (1,981,459)
------------- -------------
Net cash from (used for) investing activities (849,504) (99,807,274)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from the issuance of debt 100,000,000
Payments of debt and capital leases (336,915) (6,616,466)
Payments on long-term liabilities (61,338)
Increase in debt issue costs (559,006) (4,523,317)
Issuance (repurchase) of capital stock (286) 13,323,380
Increase in stockholder notes receivable (35,900)
------------- -------------
Net cash from (used for) financing activities (957,545) 102,147,697
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,733,115) 7,826,249
CASH AND CASH EQUIVALENTS:
Beginning of period 2,880,955 276,497
------------- -------------
End of period $ 1,147,840 $ 8,102,746
============= =============
SUPPLEMENTAL INFORMATION -
Stock issued for notes receivable $ $ 98,790
============= =============
Cash paid for interest $ 5,643,912 $ 520,753
============= =============
Deferred compensation $ 299,970 $
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Silver Cinemas International, Inc. and its subsidiaries
(collectively referred to as the "Company") own or lease and operate motion
picture theaters.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - The
accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash
flows for the periods presented have been included. Results of operations
for the periods presented herein are not necessarily indicative of results
of operations for any subsequent quarter or the year ending December 31,
1999.
The information included in this Form 10-Q should be read in conjunction
with the audited financial statements and the notes thereto for the year
ended December 31, 1998 included in the Annual Report filed on Form 10-K by
the Company under the Securities Exchange Act of 1934 on March 31, 1999.
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 Securities and
Exchange Commission's rules and regulations.
ACCOUNTING 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 amounts.
2. THEATER PROPERTIES AND EQUIPMENT
The following is a summary of theater properties and equipment:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
Land $ 1,810,062 $ 1,810,062
Buildings 10,685,601 10,689,846
Leasehold interests and improvements 32,965,181 31,770,730
Theater furniture and equipment 26,900,802 26,295,904
Theaters under construction 1,423,967 897,181
------------ ------------
Total 73,785,613 71,463,723
Less accumulated depreciation and amortization (8,162,545) (4,550,682)
------------ ------------
Theater properties and equipment - net $ 65,623,068 $ 66,913,041
============ ============
</TABLE>
-6-
<PAGE> 7
3. OTHER ASSETS
The following is a summary of other assets:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
Noncompete agreements $ 2,026,400 $ 2,026,400
Debt issue costs 5,114,665 4,555,659
Organization costs 52,431 52,431
------------ ------------
Total 7,193,496 6,634,490
Less accumulated amortization (2,139,470) (1,274,262)
------------ ------------
Net 5,054,026 5,360,228
Employee notes receivable 128,189 136,681
Equipment, lease and other deposits 3,338,934 5,348,949
------------ ------------
Total $ 8,521,149 $ 10,845,858
============ ============
</TABLE>
4. DEBT
The following is a summary of debt:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
Senior subordinated notes $100,000,000 $100,000,000
Other 110,000 220,000
------------ ------------
Total 100,110,000 100,220,000
Less current portion 110,000 110,000
------------ ------------
Long-term debt, less current portion $100,000,000 $100,110,000
============ ============
</TABLE>
The senior subordinated notes bear interest at 10 1/2% and are due in 2005.
The notes are redeemable, in whole or in part, at the option of the Company
at a redemption price of 107.875% in 2001, 105.250% in 2002, 102.625% in
2003 and 100% in 2004 and thereafter plus any accrued but unpaid interest.
In addition, on or before April 15, 2001, the Company may, at its option
and subject to certain requirements, use an amount equal to the net cash
proceeds from one or more public equity offerings, as defined, to redeem up
to an aggregate of 35% of the principal amount of the notes originally
issued at a redemption price of 110.5% plus any accrued but unpaid
interest. Upon a change in control of the Company, as defined in the
indenture, the Company will be required to make an offer to repurchase all
or any part of each holder's notes at a price equal to 101% of the
principal amount thereof plus interest. The notes also include restrictive
covenants relative to the incurrence of additional indebtedness, the
payment of dividends and other matters.
-7-
<PAGE> 8
5. CAPITAL STOCK
As of September 30, 1999 and December 31, 1998, aggregate Series A
Preferred Stock dividends of $4,542,652 and $2,776,235, respectively, are
in arrears.
6. SEGMENTS
The Company identifies its segments based on type of films exhibited and
management responsibility. Segment profit (loss) is measured as operating
profit (loss), which is defined as profit (loss) before other income
(expense). During the three months ended March 31, 1998, the Company had no
operations in the Specialty Film segment. Revenues by operating segment
were as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Landmark (Specialty Film) $19,332 $14,961 $50,700 $25,213
Silver Cinemas (Second and First-Run) 11,870 12,939 31,724 27,021
------- ------- ------- -------
Total revenues: $31,202 $27,900 $82,424 $52,234
======= ======= ======= =======
</TABLE>
Depreciation and amortization by operating segment were as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Landmark $ 1,167 $ 1,146 $ 3,491 $ 2,198
Silver Cinemas 1,024 1,458 2,848 2,825
-------- -------- -------- --------
Total depreciation and amortization: $ 2,191 $ 2,604 $ 6,339 $ 5,023
======== ======== ======== ========
</TABLE>
Operating income (loss) and reconciliation to consolidated income (loss)
are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Landmark $ 2,084 $ 819 $ 4,791 $ 284
Silver Cinemas (2,109) (272) (6,638) (2,237)
--------- --------- --------- ---------
Operating loss (25) 547 (1,847) (1,953)
Interest expense and debt issue costs (2,916) (2,902) (8,731) (6,545)
Interest income and other expense 258 152 350 391
Gain on sale of theater 6 380
--------- --------- --------- ---------
Net loss $ (2,677) $ (2,203) $ (9,848) $ (8,107)
========= ========= ========= =========
</TABLE>
7. INCOME TAXES
As a result of net losses and the Company's inability to recognize a
benefit for its deferred tax assets, the Company did not record a provision
for income taxes in the three or nine months ended September 30, 1999 and
1998.
-8-
<PAGE> 9
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.
OVERVIEW
The following analysis of the financial condition and results of operations
of Silver Cinemas International ("Silver Cinemas") and its wholly owned
subsidiaries, Silver Cinemas, Inc. ("Silver") and Landmark Theatre Corp.
("Landmark") (collectively referred to as the "Company") should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes
thereto included elsewhere herein.
Since inception in May 1996, the Company has experienced rapid revenue
growth through theater acquisitions and the development of new theaters. During
fiscal year 1996, the Company acquired 18 theaters with 102 screens. During
fiscal year 1997, the Company acquired eight additional theaters with a total of
52 screens, constructed one theater with ten screens and added one screen to an
existing theater. During fiscal year 1998, the Company acquired 81 theaters with
372 screens, opened three newly constructed theaters with 18 screens, closed 4
theaters with 10 screens, and terminated the management agreement on 2 theaters
with 11 screens. In the current fiscal year through September 30, 1999, the
Company acquired 2 specialty film theaters with 7 screens, sold one specialty
film theater with 3 screens and one first run theater with 6 screens, closed two
discount theaters with 16 screens, constructed one theater with 6 screens, added
2 screens to an existing theater and acquired one discount theater with 6
screens, bringing the Company's total theater and screen count to 105 and 530,
respectively. The Company expects that its future revenue growth will be derived
primarily from the operation of its existing theaters, the acquisition and
construction of specialty film theaters and the addition of screens and seating
to existing theaters.
In the nine months ended September 30, 1999, the Company incurred a net
loss of $9.8 million compared with a net loss for the same period of 1998 of
$8.1 million.
The consolidated operating loss for the three months ended September 30,
1999 was $0.1 million, compared with operating income of $0.5 million for the
three months ended September 30, 1998. Revenues for the three months ended
September 30, 1999 grew $3.3 million, or 11.8%, to $31.2 million. Expenses
increased $3.8 million, or 13.8%.
The consolidated operating loss for the nine months ended September 30,
1999 was $1.8 million, compared with an operating loss of $2.0 million for the
nine months ended September 30, 1998. Revenues for the nine months ended
September 30, 1999 grew $30.2 million, or 57.9%, to $82.4 million, primarily as
a result of the Company's acquisitions in the second quarter of 1998. Expenses
increased $30.1 million, or 55.5%.
SEGMENT DATA
A summary of the results of operations for each of the Company's principal
business segments is displayed in Note 6 to the condensed consolidated financial
statements.
The Company's business operations are aligned into the following two
segments: Landmark (Specialty Film) and Silver Cinemas (primarily second-run).
-9-
<PAGE> 10
RESULTS OF OPERATIONS OF LANDMARK
The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $12,027 80.4% $15,825 81.9%
Concessions 2,766 18.5 3,263 16.9
Other 168 1.1 244 1.2
------- ------- ------- -------
Total 14,961 100.0 19,332 100.0
Costs and expenses
Cost of operations:
Film rentals 5,381 36.0 7,985 41.3
Cost of concessions 550 3.7 639 3.3
Payroll and related expenses 2,505 16.7 2,278 11.8
Occupancy costs 1,712 11.4 1,947 10.1
Advertising 339 2.2 665 3.4
Other theater operating costs 1,769 11.8 1,689 8.7
------- ------- ------- -------
Total 12,256 81.8 15,203 78.6
General & administrative 740 4.9 878 4.5
Depreciation and amortization 1,146 7.7 1,167 6.1
------- ------- ------- -------
Operating income (loss) $ 819 5.6% $ 2,084 10.8%
======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
Admissions Revenues. Admissions revenues increased $3.8 million or 31.6% to
$15.8 million during the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. The increased admissions revenue was
primarily the result of a 22.8% increase in attendance from 2,068,990 to
2,540,797 and an increase in the average ticket price from $5.81 to $6.23.
Landmark benefits from having an average ticket price that is substantially
higher than the national average and strong customer loyalty due to their
dedication to the specialty film market.
Concessions Revenues. Concessions revenues increased $0.5 million or 18.0%
to $3.3 million during the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. The increase in concession revenue was
primarily the result of the increase in attendance, but was partially offset by
a decrease in the average concession sale per attendee from $1.34 to $1.28.
Film Expenses. Film rental expenses as a percentage of admissions revenue
increased from 44.7% to 50.5% as a result of higher film settlement rates on
several successful film releases (primarily "The Blair Witch Project") during
the third quarter of 1999. Landmark's film rental rates are typically below film
rental rates of first-run theaters, which average in the mid 50% range.
Cost of Concessions. Concession costs as a percentage of concession revenue
was flat for the three months ended September 30, 1999 compared to the three
months ended September 30, 1998 from 19.9% to 19.6%.
Payroll and Related Expense. Payroll expense decreased $0.2 million or 9.0%
to $2.3 million for the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. Payroll per attendee, a key measure for
staff efficiency, decreased from $1.21 per attendee to $0.90 per attendee. The
increased staffing efficiency is primarily attributable to the Company's efforts
to train theater managers to adjust their staffing levels to the level of
business.
-10-
<PAGE> 11
Occupancy Costs. Occupancy costs increased $0.2 million or 13.8% to $1.9
million for the three months ended September 30, 1999 compared to the three
months ended September 30, 1998. This increase was primarily the result of the
payment of percentage rents at several theaters playing "The Blair Witch
Project" and the addition of two new theaters acquired in 1999.
Advertising Expenses. Advertising expenses increased $0.3 million or 96.3%
to $0.7 million for the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. This increase was primarily the result of
advertising expenses associated with the promotion of third-quarter films.
Utilities and Other Expenses. Utilities and other expenses decreased from
$1.8 million to $1.7 million or 4.6% for the three months ended September 30,
1999 compared to the three months ended September 30, 1998. The decrease was
primarily the result of lower repairs and maintenance, and health insurance.
General and Administrative Expenses. General and administrative expenses
increased $0.1 million or 18.8% to $0.8 million for the three months ended
September 30, 1999 compared to the three months ended September 30, 1998.
Operating Profit. The operating profit for the three months ended September
30, 1999 increased by $1.3 million to $2.1 million or 10.8% of total revenues,
compared to an operating profit of $0.8 million, or 5.6% of total revenues, for
the three months ended September 30, 1998.
The following table sets forth information for certain predecessor and
successor fiscal periods used to present, without adjustment, information for
the nine months ended September 30, 1999 and 1998. This information is provided
herein for the purpose of presenting comparisons for such periods; however, the
Company makes no representations as to its usefulness for such purpose.
<TABLE>
<CAPTION>
UNAUDITED (1) UNAUDITED
------------------- -------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $32,822 80.3% $41,200 81.3%
Concessions 7,486 18.3 8,781 17.3
Other 565 1.4 719 1.4
------- ------- ------- -------
Total 40,873 100.0 50,700 100.0
Costs and expenses
Cost of operations:
Film rentals 15,132 37.0 19,512 38.5
Cost of concessions 1,512 3.7 1,603 3.2
Payroll and related expenses 6,893 16.9 6,602 13.0
Occupancy costs 4,680 11.4 5,421 10.7
Advertising 1,218 3.0 1,640 3.2
Other theater operating costs 4,048 9.9 5,146 10.2
------- ------- ------- -------
Total 33,483 81.9 39,924 78.8
General & administrative 2,801 6.9 2,494 4.9
Depreciation and amortization 3,488 8.5 3,491 6.9
------- ------- ------- -------
Operating income $ 1,101 2.7% $ 4,791 9.4%
======= ======= ======= =======
</TABLE>
(1) The nine months ended September 30, 1998 contain predecessor results
through March 31, 1998 and successor results through September 30, 1998.
This predecessor information is provided herein for the purposes of
presenting comparisons for such periods; however, the Company makes no
representations as to its usefulness for such purpose.
-11-
<PAGE> 12
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1998
Admissions Revenues. Admissions revenues increased $8.4 million or 25.5% to
$41.2 million during the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. The increased admissions revenue was
primarily the result of a 22.6% increase in attendance from 5,574,131 to
6,834,171 and an increase in the average ticket price from $5.89 to $6.03.
Landmark benefits from having an average ticket price that is substantially
higher than the national average and strong customer loyalty due to their
dedication to the specialty film market.
Concessions Revenues. Concessions revenues increased $1.3 million or 17.3%
to $8.8 million during the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. The increase in concession revenue was
primarily the result of the increase in attendance, but was partially offset by
a decrease in the average concession sale per attendee from $1.34 to $1.28.
Film Expenses. Film rental expenses as a percentage of admissions revenue
increased from 46.1% to 47.4% as a result of higher settlements on several
successful releases during the first nine months of 1999. Landmark's film rental
rates are typically below film rental rates of first-run theaters, which average
in the mid 50% range.
Cost of Concessions. Concession costs as a percentage of concession revenue
decreased for the nine months ended September 30, 1999 compared to the nine
months ended September 30, 1998 from 20.2% to 18.3%. The reduction is primarily
attributable to the Company's negotiated volume discounts on the traditional
theater concession items including fountain drinks. The Company put most of the
volume discounts in place during the second and third quarters of 1998.
Payroll and Related Expense. Payroll expense decreased $0.2 million or 4.2%
to $6.6 million for the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1999. Payroll per attendee, a key measure for
staff efficiency, decreased from $1.24 per attendee to $0.97 per attendee. The
increase in payroll efficiency is primarily attributable to the Company's
efforts to train theater managers to adjust their staffing to the level of
business.
Occupancy Costs. Occupancy costs increased $0.7 million or 15.8% to $5.4
million for the nine months ended September 30, 1999 compared to the nine months
ended September 30, 1998. This increase was primarily the result of two new
theaters opened in 1998 and contractual rent increases.
Advertising Expenses. Advertising expenses increased $0.4 million or 34.7%
to $1.6 million for the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. This increase was the result of increased
print advertising associated with promoting the specialized film product.
Utilities and Other Expenses. Utilities and other expenses increased from
$4.0 million to $5.1 million or 27.1% for the nine months ended September 30,
1999 compared to the nine months ended September 30, 1998. The increase was
primarily the result of the additional theaters operated at September 30, 1999
compared to September 30, 1998.
-12-
<PAGE> 13
General and Administrative Expenses. General and administrative expenses
decreased $0.3 million or 10.9% to $2.5 million for the nine months ended
September 30, 1999 compared to the nine months ended September 30, 1998. The
decrease was primarily the result of the elimination of duplicate staff
positions following the acquisition.
Operating Profit. The operating profit for the nine months ended September
30, 1999 increased by $3.6 million to $4.7 million or 9.4% of total revenues,
compared to an operating profit of $1.1 million, or 2.7% of total revenues, for
the nine months ended September 30, 1998.
RESULTS OF OPERATIONS OF SILVER CINEMAS
The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
---------------------- ----------------------
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $ 6,968 53.8% $ 6,376 53.7%
Concessions 5,767 44.6 5,322 44.8
Other 204 1.6 172 1.5
-------- -------- -------- --------
Total 12,939 100.0 11,870 100.0
Costs and expenses
Cost of operations:
Film rentals 2,777 21.5 2,406 20.3
Cost of concessions 563 4.3 1,111 9.3
Payroll and related expenses 2,119 16.4 2,144 18.1
Occupancy costs 2,780 21.5 2,692 22.7
Advertising 401 3.1 460 3.9
Other theater operating costs 2,174 16.8 2,546 21.4
-------- -------- -------- --------
Total 10,814 83.6 11,359 95.7
General & administrative 939 7.2 1,596 13.4
Depreciation and amortization 1,458 11.3 1,024 8.6
-------- -------- -------- --------
Operating income (loss) $ (272) (2.1)% $ (2,109) (17.7)%
======== ======== ======== ========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
Admissions Revenues. Admissions revenue decreased $0.6 million or 8.5% to
$6.4 million for the three months ended September 30, 1999 compared to the three
months ended September 30, 1998. The decrease was primarily the result of a 5.5%
decrease in the average ticket price for the circuit from $1.65 to $1.56 and a
3.2% decrease in attendance from 4,219,340 to 4,086,266 for the three months
ended September 30, 1998 and September 30, 1999 respectively.
Concession Revenues. Concession revenue decreased $0.4 million or 7.7% to
$5.3 million during the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. The decreased concession revenue was
primarily the result of a 5.1% decrease in the average concession sale per
attendee from $1.37 to $1.30 due primarily to the implementation of the
Company's reduced price concession menu aimed at stabilizing attendance at
several locations and a 3.2% decrease in attendance.
Film Rental Expenses. Film rental expenses as a percentage of admissions
revenues decreased from 39.9% for the three months ended September 30, 1998
compared to 37.7% for the three months ended September 30, 1999. The decrease
was primarily attributable to the increased percentage of admission revenue that
was contributed by discount theaters when compared to September 30, 1998.
-13-
<PAGE> 14
Concession Supplies Expenses. Concession costs as a percentage of
concession revenue for the period to period comparison increased from 9.8% of
concession sales to 20.9% primarily due the implementation of the Company's
reduced price concession menu at several locations and conversion benefits
recognized in the three months ended September 30, 1998 for the change in
fountain drink suppliers.
Salaries and Wage Expenses. Payroll expense was flat at $2.1 million for
the three months ended September 30, 1999 compared to the three months ended
September 30, 1998. Payroll per attendee, a key measure for staff efficiency,
increased from $0.50 per attendee to $0.52 per attendee, primarily as a result
of the decrease in attendance.
Facility Lease Expenses. Facility lease expense decreased $0.1 million or
3.6% to $2.7 million for the three months ended September 30, 1999 compared to
$2.8 million for the three months ended September 30, 1998. Included in facility
lease expense for the three months ended September 30, 1999 is noncash rent
expense of $0.1 million.
Advertising Expenses. Advertising expenses increased $0.1 million or 14.6%
from the three months ended September 30, 1998 to $0.5 million for the three
months ended September 30, 1999. Advertising expenses comprised 3.9% and 3.1% of
total revenues for the three months ended September 30, 1999 and 1998
respectively.
Utilities and Other Expenses. Utilities and other expenses increased from
$2.1 million to $2.5 million or 17.1% for the three months ended September 30,
1999 compared to the three months ended September 30, 1998. The increase was
primarily the result of the additional theaters operated at September 30, 1999
compared to September 30, 1998.
General and Administrative Expenses. General and administrative expenses
increased from $0.9 million to $1.6 million or 70.0% for the three months ended
September 30, 1999 compared to the three months ended September 30, 1998. The
increase was primarily the result of approximately $0.5 million of one-time
charges for the appointment of the Company's President and CEO.
Operating Loss. The operating loss for the three months ended September 30,
1999 increased by $1.8 million to $2.1 million or 17.7% of total revenues,
compared to an operating loss of $0.2 million, or 2.1% of total revenues, for
the three months ended September 30, 1998.
-14-
<PAGE> 15
The following table sets forth for the fiscal periods indicated the percentage
of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
------------------------- ----------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $ 14,645 54.2% $ 16,922 53.3%
Concessions 11,890 44.0 14,273 45.0
Other 486 1.8 529 1.7
-------- -------- -------- --------
Total 27,021 100.0 31,724 100.0
Costs and expenses
Cost of operations:
Film rentals 5,735 21.2 6,418 20.2
Cost of concessions 1,552 5.7 2,831 8.9
Payroll and related expenses 4,840 17.9 6,215 19.6
Occupancy costs 6,234 23.1 8,085 25.5
Advertising 982 3.6 1,227 3.9
Other theater operating costs 4,683 17.3 7,108 22.4
-------- -------- -------- --------
Total 24,026 88.8 31,884 100.5
General & administrative 2,407 8.9 3,630 11.4
Depreciation and amortization 2,825 10.5 2,848 9.0
-------- -------- -------- --------
Operating income (loss) $ (2,237) (8.3)% $ (6,638) (20.9)%
======== ======== ======== ========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1998
Admissions Revenues. Admissions revenue increased $2.3 million or 15.5% to
$16.9 million during the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. The increased admission revenue was
primarily the result of the addition of 31 acquired or constructed theaters
representing 228 screens acquired in the second quarter of 1998, which
contributed to the 21.8% increase in attendance. The average ticket price for
the circuit decreased from $1.67 to $1.58 primarily as the result of
market-related price adjustments.
Concession Revenues. Concession revenue increased $2.4 million or 20.0% to
$14.3 million during the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. The increased concession revenue was
primarily the result of the newly acquired and constructed theaters and
partially offset by a 1.5% decrease in the average concession sale per attendee
from $1.36 to $1.34 due primarily to the implementation of the Company's reduced
price concession menu aimed at stabilizing attendance at several locations.
Film Rental Expenses. Film rental expenses as a percentage of admissions
revenues declined from 39.2% for the nine months ended September 30, 1998
compared to 37.9% for the nine months ended September 30, 1999. The decrease was
primarily attributable to the acquisition of 31 second-run theaters during 1998,
which increased the percentage of admission revenue that was contributed by
second-run theaters when compared to September 30, 1998.
Concession Supplies Expenses. Concession costs as a percentage of
concession revenue for the period to period comparison increased from 13.0% of
concession sales to 19.8% primarily due to the implementation of the Company's
reduced price concession menu at several locations. Management believes this new
pricing policy has assisted in stabilizing attendance levels at several theaters
where implemented.
Salaries and Wage Expenses. Payroll expense increased $1.4 million or 28.4%
to $6.2 million for the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998 due primarily to the addition of the newly
acquired and constructed theaters. Payroll per attendee, a key measure for staff
efficiency, increased from $0.55 per attendee to $0.58 per attendee. The
increase is primarily attributable to the increased staffing levels at those
theaters offering the reduced-rate concession menu.
-15-
<PAGE> 16
Facility Lease Expenses. Facility lease expense increased $1.9 million to
$8.1 million or 29.7% for the nine months ended September 30, 1999 from $6.2
million for the nine months ended September 30, 1998. The increase in facility
lease expense is primarily attributable to the additional theaters acquired and
constructed during 1998. Included in facility lease expense for the nine months
ended September 30, 1999 is noncash rent expense of $0.2 million.
Advertising Expenses. Advertising expenses increased $0.2 million or 25.0%
for the nine months ended September 30, 1998 to $1.2 million for the nine months
ended September 30, 1999. Advertising expenses comprised 3.9% and 3.6% of total
revenues for the nine months ended September 30, 1999 and 1998 respectively.
Utilities and Other Expenses. Utilities and other expenses increased from
$4.7 million to $7.1 million or 51.8% for the nine months ended September 30,
1999 compared to the nine months ended September 30, 1998. The increase was
primarily the result of the additional theaters operated at September 30, 1999
compared to September 30, 1998.
General and Administrative Expenses. General and administrative expenses
increased from $2.4 million to $3.6 million or 50.8% for the nine months ended
September 30, 1999 compared to the nine months ended September 30, 1998. The
increase was primarily the result of increased payroll costs associated with the
Company's expansion and approximately $0.5 million of one-time expenses
associated with the appointment of the Company's President and CEO.
Depreciation and Amortization. Depreciation and amortization was flat at
$2.8 million for the nine months ended September 30, 1999 compared to the nine
months ended September 30, 1998.
Operating Loss. The operating loss for the nine months ended September 30,
1999 increased by $4.3 million to $6.5 million or 20.9% of total revenues,
compared to an operating loss of $2.2 million, or 8.3% of total revenues, for
the nine months ended September 30, 1998.
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 the first nine months of 1999, the Company's capital requirements
were the result of a theater acquisition ($0.8 million), the renovation and
upgrade of existing theaters ($3.0 million), and the continued development and
construction of new theaters ($4.6 million). Such capital expenditures were
financed with a November 1998 equity sale and certain asset sales.
"Same Theater" attendance at the Company's Silver theaters has decreased by
approximately 4.3% for the three months ended September 30, 1999 compared to the
three months ended September 30, 1998 and has declined by approximately 4.6% for
the nine months ended September 30, 1999 compared to the nine months ended
September 30, 1998. Management believes the overall softness in discount theater
attendance levels is the result of several factors including the development of
megaplexes in certain markets, changes in film and video release patterns, and
the overall strength of the U.S. economy. If this downward trend in attendance
continues, the Company's ability to generate liquidity could be negatively
impacted.
-16-
<PAGE> 17
The preceding statements concerning the attendance declines may constitute
forward-looking statements within the meaning of the federal securities laws.
The Company warns that many factors could, individually or in aggregate, lead to
further declines in theater attendance, including, without limitation, the
following: consumer spending trends and habits; increased competition in the
theater industry; adverse developments in economic factors influencing the
exhibition industry; and lack of demand for films by the general public. The
Company does not expect to update such forward-looking statements continually as
conditions change, and readers should consider that such statements pertain only
to the date hereof.
On January 15, 1999, a wholly owned subsidiary of Landmark purchased the
stock of Dinger Brothers, Inc. which operated a 4-screen specialty-film theater,
located in Texas, for approximately $0.8 million. The purchase was financed by a
November 1998 equity sale and internally generated cash.
On March 5, 1999, the Company sold its specialty theater in Sacramento, CA
to a non-theater entity for approximately $1.6 million. The Company operated
this theater on a month-to-month basis through May 1999. On April 2, 1999, the
Company sold its first-run theater in Burton, MI for approximately $2.0 million.
The net proceeds from both sales are being used to continue the Company's
new-build expansion program.
On April 6, 1999 the Company entered into a Letter of Credit and
Reimbursement Agreement between the Company and NationsBank, N.A. The agreement
allows the Company to enter into up to $5.3 million in letters of credit
associated with specific to-be-built theaters. Under certain circumstances,
including the failure of the Company to pay amounts drawn under the letters of
credit, Brentwood Associates Buyout Fund II, L.P has agreed to purchase a
participation from the bank in outstanding letters of credit and reimbursement
obligations. This agreement released approximately $3.4 million in cash that was
securing previously issued letters of credit.
On October 6, 1999, Farallon Capital Funding, LLC ("Farallon"), as agent,
an affiliate thereof, as initial lender and the Company and its subsidiaries
entered into a four year, senior secured credit facility with aggregate
availability of $50.0 million, subject to a real estate collateral-based
borrowing base (the "New Credit Facility"). The $50.0 million facility is
comprised of a revolving credit facility of up to $15.0 million (the
"Revolver"), a term loan of up to $17.0 million ("Term A Loan") and a term loan
of up to $18.0 million ("Term B Loans"). The Term A Loan was funded in its
entirety on October 8, 1999. Under the Term A Loan and the Revolver, the Company
will utilize borrowings to fund working capital requirements, and for other
general corporate purposes, including, subject to conditions, the acquisition
and construction of theaters. The Term B Loans may be used only for repurchasing
the Notes, and the amount of the Term B Loans will be limited to the lesser of
(i) $18.0 million and (ii) the amount by which the real estate collateral-based
borrowing base exceeds approximately $32.0 million (i.e. the sum of the
outstanding principal balance (including capitalized interest) of the Term A
Loan and the $15.0 million revolving loan commitment). The Company and each of
Silver Cinemas, Inc., Landmark Theatre USA, Inc., and Landmark Theatre Corp.
(the "Guarantors") are jointly and severally liable as co-borrowers for all
borrowings under the New Credit Facility. The New Credit Facility ranks senior
in right of payment to the Notes and is secured by a perfected first priority
security interest in substantially all existing and future assets of the Company
and its 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 Guarantors.
Farallon's obligations under the New Credit Facility to advance funds at
any time during the four-year term are subject to certain conditions customary
in secured credit facilities, including the absence of a default under the New
Credit Facility. The New Credit Facility contains a number of covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness or guarantees, prepay other
indebtedness, 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
-17-
<PAGE> 18
certain transactions with affiliates and otherwise restrict certain corporate
activities. In addition, under the New Credit Facility, the Company is required
to maintain a minimum ratio of EBITDA (as defined in the Credit Agreement) to
fixed charges. The inability of the Company to meet such ratio or satisfy other
conditions, or any breach of such covenants, will result in the Company being
unable to borrow under the New Credit Facility, in addition to constituting a
default under the Credit Agreement. Draws and outstanding amounts under the New
Credit Facility are subject to a borrowing base, determined based on theater
level cash flow of mortgaged theaters and, as to leased properties, the term of
the related lease. As of November 9, 1999, the aggregate borrowing base under
the New Credit Facility was $25.0 million. If at any time the borrowing base
does not exceed outstanding amounts, the Company will be unable to borrow under
the Credit Facility and, to the extent outstanding amounts exceed the borrowing
base, the excess must be repaid. In circumstances where the Company is unable to
borrow, the Company could be unable to effect its new-build strategy or fund
capital expenditures.
The Credit Agreement contains 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)
bankruptcy, (iv) change of control, (v) the occurrence of a material adverse
effect and (vi) material judgements. The ability of the Company to comply with
the conditions in the New Credit Facility may be affected by events that are
beyond its control. The breach of any such conditions could result in a default
under the New Credit Facility, and in the event of any such default, could
result in the acceleration of the debt outstanding thereunder. All such
outstanding debt would be required to be repaid in full before any payments
could be made on the Notes. There can be no assurance that the assets of the
Company or its subsidiaries would be sufficient to repay all such outstanding
debt under the New Credit Facility and repay or service the Notes.
As of September 30, 1999, the Company had $4.5 million of Series A
Preferred Stock dividends in arrears.
INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
SEASONALITY
The Company's 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 the Company.
YEAR 2000
The "Year 2000 Issue" is the result of computer programs that use two
digits instead of four to record the applicable year. Computer programs that
have date-sensitive software might recognize a date using "00" as the Year 1900
instead of the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other events,
a temporary inability to process transactions or engage in similar normal
business activities. The Year 2000 is a leap year, which may also lead to
incorrect calculations, functions or system failure. As of September 30, 1999,
the Company has completed its assessment of the day-to-day operating and
reporting systems for all theaters and has implemented the necessary
modifications and upgrades. The Company's financial reporting and operational
databases associated with the corporate offices have been tested, and modified
as needed to ensure compliance with the Year 2000. All projects to modify the
existing systems to ensure Year 2000 compliance have been completed as of
September 30, 1999. Related costs associated with modifications and upgrades did
not exceed $0.1 million and were funded through internally generated cash flow.
-18-
<PAGE> 19
Under the "most reasonably likely worst case scenario" the Company's point
of sale equipment will fail to operate at the theater level. In this event, the
Company could return to a manual system of recording daily admission and
concession revenues, which are primarily received in cash. Given the Company's
daily reliance on point of sale equipment, theaters are currently trained in
operating within a manual system when the point of sale equipment is
occasionally inoperable. The impact from a system failure at the corporate
office would only effect financial reporting and analysis of operating results.
The Company is still in the assessment phase with respect to its
significant suppliers and critical business partners to determine the extent to
which the Company may be vulnerable in the event that those parties fail to
properly remediate their own Year 2000 issues. The major third party vendors
include financial institutions, utility suppliers, providers of communication
services and parties that provide goods or services that are essential to the
Company's operations. While the Company is not presently aware of any such
significant exposure, there can be no guarantees that the systems of
third-parties on which the Company relies will be converted in a timely manner,
or that failure to properly convert by another company would not have a material
adverse effect on the Company. The Company will develop appropriate contingency
plans in the event that a significant exposure is identified relative to the
dependence on third-party systems.
Although the Year 2000 assessment has not been completed, management
currently believes, based on available information, that resolving these matters
will not have a material adverse impact on the Company's financial position,
results of operations or cash flows.
The preceding statements concerning the Company's efforts and management's
expectations, relating to year 2000 compliance and the incremental costs
associated therewith may constitute forward-looking statements within the
meaning of the federal securities laws. The Company warns that many factors
could, individually or in aggregate, adversely impact the company's ability to
achieve year 2000 compliance including without limitation, the availability and
costs of programming and testing resources, vendors' ability to modify
proprietary software and unanticipated problems identified in the ongoing
compliance review. The Company does not expect to update such forward-looking
statements continually as conditions change, and readers should consider that
such statements pertain only to the date hereof.
-19-
<PAGE> 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to the Registrant.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time a party to legal proceedings that arise
in the ordinary course of business. Management does not believe that the
resolution of any threatened or pending legal proceedings will have a
material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 25, 1999, the Board of Directors of the Silver Cinemas
International, Inc. amended its Restated Certificate of Incorporation to
allow for the issuance of a new series of Convertible Preferred Stock
consisting initially of 5,000 shares with a liquidation preference of
$100 per share. The dividend and conversion terms of the Convertible
Preferred Stock are described in the Certificate of Amendment of
Restated Certificate of Incorporation filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K dated as of September 16, 1999.
The Convertible Preferred Stock ranks senior to the Series A Preferred
Stock with respect to the payment of dividends and upon liquidation,
dissolution, winding-up or otherwise and the Series A Preferred Stock
ranks senior to all the Company's common stock and to all other series
or classes of preferred stock.
On September 7, 1999 the Company issued 3,000 shares of Convertible
Preferred Stock to Larry Hohl in connection with the execution of his
employment agreement. The shares were granted in a private placement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The senior subordinated notes include a restrictive covenant relative to
the payment of dividends. As of September 30, 1999, aggregate Series A
Preferred Stock dividends of $4.5 million are in arrears.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
There have been no matters to a vote of the holders of securities of the
Company since the Company became subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.1 Material Contracts - New Credit Facility
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
On September 16, 1999, the Company filed a report on Form 8-K dated
September 13, 1999, announcing the appointment of Larry D. Hohl to
the position of President and CEO of Silver Cinemas and all of its
subsidiaries. In addition to his operating duties, Mr. Hohl was
named to the Board of Directors of Silver Cinemas International,
Inc.
In connection with Mr. Hohl's appointment, the Company amended its
Restated Certificate of Incorporation to allow for the issuance of a
new class of preferred stock and entered into an employment
agreement and stock purchase agreement with Mr. Hohl, all of which
were filed as exhibits. The Registrant also amended its bylaws to
increase the number of directors to eight (8).
-20-
<PAGE> 21
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILVER CINEMAS INTERNATIONAL, INC.
Date: November 8, 1999 By /s/ STEVEN L. HOLMES
----------------------------------------
Steven L. Holmes
Chief Financial Officer
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.1 Material Contracts - New Credit Facility
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
U.S. $50,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of October 6, 1999
among
SILVER CINEMAS INTERNATIONAL, INC.,
SILVER CINEMAS, INC.,
LANDMARK THEATRE CORP.,
and
LANDMARK THEATRE USA, INC.,
as Borrowers
and
THE LENDERS PARTY HERETO
and
FARALLON CAPITAL FUNDING, LLC,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS..................................2
1.1. Defined Terms.........................................................................2
1.2. Computation of Time Periods..........................................................36
1.3. Accounting Terms.....................................................................36
1.4. Certain Terms........................................................................36
Article II THE LOANS........................................................................37
2.1. The Revolving Credit Loans...........................................................37
2.2. The Term Loans.......................................................................37
2.3. Making the Revolving Credit Loans and the Term Loans.................................38
2.4. Fees.................................................................................39
2.5. Reduction and Termination of the Commitments.........................................40
2.6. Repayment of Loans; Evidence of Debt.................................................40
2.7. Optional Prepayments.................................................................41
2.8. Mandatory Prepayments................................................................42
2.9. Interest.............................................................................45
2.10. Capital Adequacy.....................................................................47
2.11. Payments and Computations............................................................47
2.12. Taxes................................................................................49
2.13. Maintenance of Loan Account..........................................................50
2.14. Joint Borrower Provisions............................................................51
2.15. Termination Upon Event of Default....................................................51
Article III CONDITIONS TO LOANS..............................................................52
3.1. Conditions Precedent to Initial Loans................................................52
3.2. Conditions Precedent to Each Loan....................................................56
3.3. Conditions Precedent to Each Permitted Acquisition Loan or
Permitted Investment Loan........................................................58
3.4. Conditions Precedent to the Term B Loans.............................................63
Article IV REPRESENTATIONS AND WARRANTIES...................................................64
4.1. Corporate Existence; Compliance with Law.............................................64
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.2. Corporate Power; Authorization; Enforceable Obligations..............................65
4.3. Taxes................................................................................67
4.4. Full Disclosure......................................................................67
4.5. Financial Statements.................................................................67
4.6. Litigation...........................................................................69
4.7. Margin Regulations...................................................................69
4.8. Ownership of Borrowers; Subsidiaries.................................................69
4.9. ERISA................................................................................70
4.10. Liens................................................................................72
4.11. No Burdensome Restrictions; No Defaults..............................................72
4.12. No Other Ventures....................................................................73
4.13. Investment Company Act; Public Utility Holding Company Act...........................73
4.14. Insurance............................................................................74
4.15. Labor Matters........................................................................74
4.16. Use of Proceeds......................................................................74
4.17. Environmental Matters................................................................74
4.18. Intellectual Property................................................................76
4.19. Title; Real Property.................................................................76
4.20. Certain Indebtedness.................................................................80
4.21. Solvency.............................................................................80
4.22. Year 2000 Compliance.................................................................80
4.23. ADA Compliance.......................................................................80
4.24. Restricted Payments..................................................................80
4.25. Debt Repurchase......................................................................80
4.26. Senior Debt..........................................................................81
4.27. Financial Accounts...................................................................81
4.28. Material Agreements..................................................................81
Article V REPORTING COVENANTS..............................................................81
5.1. Financial Statements.................................................................82
5.2. Default Notices......................................................................84
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5.3. Asset Sales..........................................................................84
5.4. ERISA Matters........................................................................84
5.5. Litigation...........................................................................85
5.6. Notices Respecting the Indenture.....................................................86
5.7. SEC Filings; Press Releases..........................................................86
5.8. Labor Relations......................................................................86
5.9. Tax Returns..........................................................................86
5.10. Insurance............................................................................86
5.11. Environmental Matters................................................................86
5.12. Board of Directors...................................................................87
5.13. New Subsidiaries.....................................................................88
5.14. Compliance With the ADA..............................................................88
5.15. Defaults.............................................................................88
5.16. Other Information....................................................................88
5.17. No Implied Consent...................................................................88
Article VI AFFIRMATIVE COVENANTS............................................................88
6.1. Compliance with Laws, Etc............................................................88
6.2. Conduct of Business..................................................................88
6.3. Payment of Taxes, Etc................................................................89
6.4. Maintenance of Insurance.............................................................89
6.5. Preservation of Corporate Existence, Etc.............................................91
6.6. Access...............................................................................91
6.7. Keeping of Books.....................................................................91
6.8. Future Subsidiaries..................................................................91
6.9. Real Property Matters................................................................92
6.10. Maintenance of Properties, Etc.......................................................94
6.11. Performance and Compliance with Other Covenants......................................95
6.12. Application of Proceeds..............................................................95
6.13. Fiscal Year..........................................................................95
6.14. Environmental........................................................................95
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
6.15. Bank Accounts........................................................................96
6.16. Broker's Fee.........................................................................96
6.17. ADA Compliance.......................................................................97
6.18. Borrowing Base Determination.........................................................97
6.19. Debt Repurchase......................................................................97
6.20. Additional Collateral................................................................98
6.21. Further Assurances...................................................................98
Article VII NEGATIVE COVENANTS...............................................................98
7.1. Liens, Etc...........................................................................98
7.2. Indebtedness........................................................................101
7.3. No Restrictions on Subsidiary Distributions; No New Negative Pledge.................102
7.4. Restricted Payments.................................................................103
7.5. Restriction on Fundamental Changes; Acquisitions and Construction...................103
7.6. Sale of Assets......................................................................107
7.7. Investments in Other Persons........................................................109
7.8. Maintenance of Ownership of Subsidiaries............................................109
7.9. Change in Nature of Business........................................................110
7.10. Compliance with ERISA...............................................................110
7.11. Sale or Discount of Receivables.....................................................110
7.12. Modification of Debt Instruments....................................................110
7.13. Accounting Changes..................................................................111
7.14. Contingent Obligations..............................................................111
7.15. Transactions with Shareholders and Affiliates.......................................111
7.16. Sale/Leasebacks.....................................................................112
7.17. Cancellation of Indebtedness Owed to It.............................................112
7.18. No New Subsidiaries.................................................................112
7.19. Capital Structure...................................................................112
7.20. No Speculative Transactions.........................................................112
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
7.21. Environmental.......................................................................112
7.22. Debt Repurchase.....................................................................112
7.23. Accounts............................................................................113
Article VIII FINANCIAL COVENANT..............................................................113
8.1. Minimum Fixed Charge Coverage Ratio.................................................113
Article IX EVENTS OF DEFAULT...............................................................113
9.1. Events of Default...................................................................113
9.2. Remedies............................................................................116
Article X THE AGENT.......................................................................116
10.1. Authorization and Action............................................................116
10.2. Agents' Reliance, Etc...............................................................117
10.3. The Agent Individually..............................................................118
10.4. Lender Credit Decision..............................................................118
10.5. Indemnification.....................................................................118
10.6. Successor Agent.....................................................................119
10.7. Liens...............................................................................119
Article XI MISCELLANEOUS...................................................................119
11.1. Amendments, Waivers, Etc............................................................119
11.2. Removal of Lenders..................................................................120
11.3. Notices, Etc........................................................................121
11.4. No Waiver; Remedies.................................................................122
11.5. Costs; Expenses; Indemnities........................................................122
11.6. Right of Set-off....................................................................124
11.7. Sharing of Payments, Etc............................................................124
11.8. Binding Effect......................................................................125
11.9. Assignments and Participations......................................................125
11.10. GOVERNING LAW.......................................................................129
11.11. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS......................................129
11.12. Section Titles......................................................................130
11.13. Execution in Counterparts...........................................................130
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
11.14. Entire Agreement....................................................................130
11.15. Confidentiality.....................................................................131
11.16. Change in Accounting Principles.....................................................131
11.17. Suretyship and Other Waivers and Consents...........................................131
11.18. Waiver of Usury Defense.............................................................137
11.19. LIMITATION OF LIABILITY.............................................................137
11.20. Survival of Agreement...............................................................138
11.21. Amendment and Restatement...........................................................138
</TABLE>
vi
<PAGE> 8
SCHEDULES
Schedule I - Commitments
Schedule II - Lending Offices and Addresses for Notices
Schedule 1.1 - Adjustments to Applicable TLCF Amount
Schedule 3.1 - Amendment Documents
Schedule 4.8(a) - Ownership of Borrowers
Schedule 4.8(b) - Subsidiaries
Schedule 4.9 - List of Plans
Schedule 4.9(b) - ERISA Exceptions
Schedule 4.10 - Perfection Documents
Schedule 4.15 - Labor Matters
Schedule 4.17 - Environmental Matters
Schedule 4.19(a) - Real Property Assets
Schedule 4.19(b) - Leases
Schedule 4.19(g) - Flood Hazard Exceptions
Schedule 4.19(h) - Other Real Property Debt
Schedule 4.19(j) - Real Property Restrictions
Schedule 4.19(k) - Change of Control Exceptions
Schedule 4.20 - Other Debt
Schedule 4.27 - Financial Accounts
Schedule 4.28 - Material Agreements
Schedule 7.1(j) - Existing Other Liens
Schedule 7.5(b) - Permitted Theater Investments
Schedule 7.7 - Existing Investments
Schedule 7.22(b) - Debt Repurchase Percentage
vii
<PAGE> 9
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Term A Loan Note
Exhibit A-3 - Form of Term B Loan Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Security Agreement`
Exhibit E - Form of Intellectual Property Security Agreement
Exhibit F - Form of Mortgage
Exhibit G - Form of Leasehold Mortgage
Exhibit H - Form of Landlord Consent and Estoppel
Exhibit I - Form of Borrowing Base Certificate
Exhibit J - Form of Subsidiary Assumption Agreement
Exhibit K - Form of Opinion of Counsel for the Loan Parties (Latham &
Watkins)
Exhibit L - Form of Opinion of Counsel for the Loan Parties (Texas
Special Counsel)
Exhibit M - Form of Assignment and Acceptance
Exhibit N - Form of Environmental Questionnaire
Exhibit O - Form of Monthly Financial Report
Exhibit P - Form of Opinion of Counsel for the Loan Parties (Latham &
Watkins) regarding Debt Repurchase
viii
<PAGE> 10
AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"),
dated as of October 6, 1999, among Silver Cinemas International, Inc., a
Delaware corporation (the "Parent"), Silver Cinemas, Inc., a Delaware
corporation ("SC"), Landmark Theatre Corp., a Delaware corporation ("Landmark")
and Landmark Theatre USA, Inc., a Texas corporation ("LT USA") (each of the
Parent, SC, Landmark and LT USA individually an "Original Borrower" and
collectively, the "Original Borrowers"), the financial institutions from time to
time party hereto as Lenders, whether by execution of this Agreement or of an
Assignment and Acceptance (each individually a "Lender" and collectively, the
"Lenders"), and Farallon Capital Funding, LLC, a limited liability company
organized under the laws of the state of Delaware ("Farallon"), as Agent for the
Lenders (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Original Borrowers have requested that the
Lenders make available a senior secured term loan and revolving credit facility
(referred to herein as the "Facility") under which (a) the Term A Loan Lenders
make term loans to the Borrowers on the Closing Date of up to $17,000,000 in
aggregate principal amount outstanding, (b) the Revolving Credit Lenders make
revolving credit loans to the Borrowers of up to $15,000,000 at any time
outstanding, and (c) the Term B Loan Lenders make term loans to the Borrowers on
the Debt Repurchase Closing Date of up to $18,000,000, in each case for the
purposes specified in this Agreement;
WHEREAS, the Lenders are willing to make the Facility
available upon the terms and subject to the conditions set forth herein;
WHEREAS, SC, the Parent, those financial institutions party
thereto (the "Old Lenders") and DLJ Capital Funding, Inc. ("DLJ") (as assignee
of Bankers Trust Company ("BTC") pursuant to the BTC/DLJ Assignment Agreement
(as defined herein)), as agent for the Old Lenders, are parties to the Existing
Credit Agreement, dated as of April 7, 1997 and amended as of January 16, 1998,
March 25, 1998, April 16, 1998, June 23, 1998, December 14, 1998, February 15,
1999, March 22, 1999, June 25, 1999, July 20, 1999 and August 10, 1999 (the
"Existing Credit Agreement");
WHEREAS, in connection with the Existing Credit Agreement, SC,
the Parent and one or more of their respective subsidiaries executed and
delivered to the "Agent" thereunder for the benefit of the Old Lenders, various
mortgages, deeds of trust, security agreements, pledges, guarantees, financing
statements, and other Loan Documents (as defined in the Existing Credit
Agreement) (as amended, modified and supplemented prior to the effectiveness of
this Agreement, together with the Existing Credit Agreement, the "Existing
Credit Documents");
WHEREAS, to facilitate establishing the Facility, SC, the
Parent, DLJ and Farallon are entering into that certain Assignment Agreement of
even date herewith (the "Assignment Agreement") assigning to Farallon the right,
title and interest of the Old Lenders in the Existing Credit Agreement, the
Existing Credit Documents, all obligations
1
<PAGE> 11
of SC, the Parent and their respective subsidiaries thereunder, and any liens or
security interests created thereby; and
WHEREAS, SC, the Parent and Farallon desire to amend and
restate the Existing Credit Agreement to provide for changes to the terms and
conditions thereof so as to establish the Facility and therefore desire,
together with Landmark, LT USA and the initial Lenders, to execute this
Agreement to effectuate the same;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"ADA" means the Americans with Disabilities Act, 42 U.S.C.
Sections 12101, et seq., and all applicable rules and regulations promulgated
thereunder.
"Additional Borrower" means any Additional Subsidiary that
executes and delivers a Subsidiary Assumption Agreement and Note Allonges (which
have been executed and delivered by all other then existing Borrowers) in
accordance with Section 6.8.
"Additional Collateral" has the meaning specified in Section
3.3(a).
"Additional Mortgage" means any Mortgage with respect to an
Additional Mortgaged Property.
"Additional Mortgaged Property" means any Real Property Asset
of any Loan Party that becomes subject to a Mortgage executed and delivered by
such Loan Party after the Closing Date as required by Section 6.9(b) or
otherwise.
"Additional Subsidiary" means each Person that is or becomes
Subsidiary of a Borrower (other than any Original Borrower) at any time on or
after the Closing Date.
"Affected Lender" has the meaning specified in Section
11.2(a).
"Administrative Services Agreement" means that certain
Corporate Development and Administrative Services Agreement between the Parent
and Brentwood Private Equity LLC dated as of July 2, 1996, as amended prior to
the Closing Date and as it may be amended from time to time hereafter in
accordance with the terms of this Agreement.
2
<PAGE> 12
"Affiliate" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person, and includes each
officer, director, general partner or joint-venturer of such Person, and each
Person who is the beneficial owner of 5% or more of any class of voting Stock of
such Person. For the purposes of this definition, "control" means the possession
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities, membership
interests, by contract or otherwise.
"Agent" means Farallon or its successor appointed pursuant to
Section 10.6.
"Agreement" means this Amended and Restated Credit Agreement,
together with all Exhibits and Schedules hereto, as the same may be amended,
supplemented or otherwise modified from time to time in accordance herewith.
"Amendment Documents" means those amendments or restatements
of Existing Credit Documents, set forth on Schedule 3.1, including this
Agreement.
"Applicable Adjusted TLCF Amount" means, at any time, with
respect to any Mortgaged Property, (x) the Applicable TLCF Amount with respect
to such Mortgaged Property at such time less (y) the amount, if any, with
respect to such time set forth on Schedule 1.1 hereto with respect to such
Mortgaged Property.
"Applicable Amount" means, at any time, with respect to any
Qualifying Mortgaged Property at such time, the lesser of (x) the Applicable
Adjusted TLCF Amount with respect to such Mortgaged Property at such time and
(y) 80% of the Applicable Insured Title Amount with respect to such Mortgaged
Property at such time.
"Applicable Insured Title Amount" means, at any time, with
respect to any Mortgaged Property,
(i) if the title insurance policy with respect to such
Mortgaged Property covers only such Mortgaged Property and is not
subject to any "tie-in" endorsement, the insured amount under such
policy;
(ii) if the title insurance policy with respect to such
Mortgaged Property covers, or is subject to a "tie-in" endorsement
tying the title insurance coverage available thereunder to amounts
available under title insurance policies covering, one or more other
Mortgaged Properties (each, an "Other Mortgaged Property"), the amount
equal to the product of (A) the aggregate amount of title insurance
then available with respect to such Mortgaged Property (after giving
effect to such tie-in endorsement and any prior claims) and (B) a
fraction the numerator of which is the Applicable TLCF Amount for such
Mortgaged Property at such time (or, if such amount is negative for
such Mortgaged Property, $100,000) and the denominator of which is the
sum of the respective Applicable TLCF Amount (or, if the Applicable
3
<PAGE> 13
TLCF Amount (or if the Applicable TLCF Amount is negative for any Other
Mortgaged Property, $100,000) for such Mortgaged Property and each of
the Other Mortgaged Properties.
"Applicable TLCF Amount" means, at any time, with respect to
any Mortgaged Property at such time, the amount, determined in a manner
satisfactory to the Agent in the Agent's reasonable credit judgment, equal to
the product of (i) the TLCF for the Applicable Period at such time of such
Qualifying Mortgaged Property times (ii) 4.5 (if such Qualifying Mortgaged
Property is not a Leasehold Property) or the Applicable Factor at such time with
respect to such Qualifying Mortgaged Property (if such Qualifying Mortgaged
Property is a Leasehold Property).
"Applicable Factor" means, at any time, with respect to any
Qualifying Mortgaged Property that is a Leasehold Property, the applicable
number set forth in the table below under the heading "Factor" opposite the
applicable category set forth in the table below under the heading "Remaining
Term" within which the Remaining Term at such time of such Leasehold Property
falls:
<TABLE>
<CAPTION>
Remaining Term (in years) Factor
------------------------- ------
<S> <C>
Remaining Term < 0.5 years 0.0
1
0.5 years = or < Remaining Term < 4.0 years Remaining Term x -----
1.155
Remaining Term = or > 4.0 years 4.5.
</TABLE>
For purposes of this definition, "Remaining Term" means, at any time, with
respect to any Qualifying Mortgaged Property that is a Leasehold Property, the
remaining term of the Lease (expressed in years, taken to two decimal places)
calculated, in a manner satisfactory to the Agent in the Agent's reasonable
credit judgment, from the last day of the Applicable Period at such time to the
end of the Lease, including the term of any renewals that are at the sole option
of the Borrower that is the lessee thereunder.
"Applicable Period" means, on any date:
(i) if such date is during the first 20 days of any calendar
month (and no Borrowing Base Certificate has been delivered setting
forth TLCF for the 12-month period ending with the next preceding
calendar month), the period of 12 consecutive calendar months ending
with the second preceding calendar month or
(ii) if either (x) such date is during the first 20 days of
such calendar month and such a Borrowing Base Certificate has been so
delivered or (y) such date is after the 20th day of such calendar month
and on or before the last day of such calendar month (whether or not a
Borrowing Base Certificate has been delivered as required by Section
5.1(g)), the period of 12 consecutive calendar months ending with the
next preceding calendar month.
4
<PAGE> 14
"Art Theater" means a Theater that exhibits alternatives to
commercial first-run movies, including art films, specialty films, foreign
pictures and independent releases.
"Asset Sale" means any sale, lease or other disposition, or
series of sales, leases or other dispositions (including by merger or
consolidation, and whether by operation of law or otherwise and including any
disposition that is part of a Permitted Asset Swap, the loss of or damage to any
asset or property or group thereof and the taking of any asset or property or
group thereof pursuant to the power of eminent domain, condemnation or
otherwise), made on or after the Closing Date by any Borrower or any Subsidiary
of any Borrower to any Person of, or, in the case of any loss, damage or taking,
incurred on or after the Closing Date by any Borrower or any Subsidiary of any
Borrower with respect to, (a) any of the outstanding Stock of any of its
Subsidiaries, (b) all or substantially all of its assets or the assets of any
division of any Borrower or any of its Subsidiaries, (c) any Theater or any Real
Property Asset or (d) any other asset or assets (whether tangible or intangible,
real, personal or mixed) which, when taken together with all sales, leases or
other dispositions of assets not covered by the foregoing clauses (a), (b) and
(c) yield proceeds or involve assets having a Fair Market Value in excess of
$100,000 in any twelve-month period; provided, however, that, notwithstanding
the foregoing, any transaction that constitutes an "Asset Sale" under the
Indenture shall be an Asset Sale hereunder.
"Asset Sale Proceeds" means, subject to Section 2.8(a), all
payments in Cash or Cash Equivalents received by any Borrower or any Subsidiary
of any Borrower (including any cash payments received by way of deferred payment
of principal pursuant to a note or receivable or otherwise, but only as and when
received, any amount eliminated from any reserve referred to in clause (e)
below, but only as and when eliminated, any award of compensation for any asset
or property or group thereof taken by condemnation or eminent domain and any
insurance proceeds for any loss of or damage to any asset or property or group
thereof) from any Asset Sale (other than any Excluded Asset Sale) (after
repayment of any Indebtedness (other than the Loans or the Subordinated Notes)
due by reason of such Asset Sale), in each case net of the amount of (a)
brokers' and advisors' fees and commissions payable (including any such amounts
payable to an Affiliate of such Borrower or Subsidiary to the extent permitted
under Section 7.15) in connection with such Asset Sale, (b) all foreign,
federal, state and local taxes payable as a direct consequence of such Asset
Sale, including in connection with the payment of a dividend or the making of a
distribution by a Subsidiary of such Borrower or Subsidiary of such payments to
such Borrower or Subsidiary or any other Subsidiary of such Borrower or
Subsidiary (including taxes withheld in connection with the repatriation of such
proceeds), net of any tax benefits derived in respect of such dividend or
distribution, (c) the fees and expenses attributable to such Asset Sale, to the
extent not included in clause (a), including any such amounts payable to any
Affiliate of such Borrower or Subsidiary to the extent permitted under Section
7.15, (d) any amount required to be paid to any Person (other than such Borrower
or Subsidiary or any of their respective Subsidiaries) owning a beneficial
interest in the property or assets sold, and (e)
5
<PAGE> 15
deduction of appropriate amounts, in an amount determined in good faith by such
Borrower or Subsidiary and agreed to by the Agent, in its judgment exercised
reasonably, to be provided by such Borrower or Subsidiary or any of their
respective Subsidiaries as a reserve, in conformity with GAAP, against any
liabilities retained by such Borrower or Subsidiary or any of their respective
Subsidiaries associated with such assets after such Asset Sale, including any
indemnification associated with such Asset Sale.
"Assignment Agreement" has the meaning set forth in the
Recitals to this Agreement.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee in accordance with Section
11.9, and accepted by the Agent, in substantially the form of Exhibit M.
"Assignment Documents" means such UCC-3 assignments,
assignments of mortgage and other further documents or instruments, each dated
as of the Closing Date, as the Agent shall deem necessary or desirable (i) to
transfer to the Agent (or its successors and assigns), or evidence the transfer
to the Agent (or its successors and assigns), of all interests in any
"collateral" under the Existing Credit Documents or (ii) to transfer, or
evidence the transfer of, DLJ's rights as "Agent" under the Existing Credit
Documents to the Agent (or its successors and assigns) as successor "Agent"
under the Existing Credit Documents, in each case in accordance with the
Assignment Agreement on the Closing Date.
"Available Revolving Credit" means, at any time, with respect
to any Revolving Credit Lender, an amount equal to (a) the lower of (i) such
Revolving Credit Lender's Ratable Portion of the Borrowing Base (Revolving
Credit Loans) at such time and (ii) the then effective Revolving Credit
Commitment of such Lender minus (b) the aggregate unpaid principal amount of the
Revolving Credit Loans of such Revolving Credit Lender at such time.
"Available Term B Loan Credit" means, with respect to any Term
B Loan Lender, an amount equal to the lower of (i) such Term B Loan Lender's
Ratable Portion of the Borrowing Base (Term B Loans) at such time and (ii) the
then effective Term B Loan Commitment of such Lender.
"BofA L/C Facility Agreement" means that certain letter of
credit issuance and reimbursement agreement, dated as of April 6, 1999, between
SC and Bank of America (formerly NationsBank, N.A.), as such agreement may be
amended from time to time with the consent of the Agent.
"Borrower" means any Original Borrower or Additional Borrower.
"Borrowing" means a borrowing consisting of Loans made on the
same day by the Lenders ratably according to their respective Commitments.
6
<PAGE> 16
"Borrowing Base Certificate" means a certificate of the
Borrowers substantially in the form of Exhibit I.
"Borrowing Base (Revolving Credit Loans)" means, at any time,
(i) the Borrowing Base (Unadjusted) at such time minus (ii) the aggregate unpaid
principal amount of the Term Loans at such time.
"Borrowing Base (Term B Loans)" means, at any time, (i) the
Borrowing Base (Unadjusted) at such time minus (ii) the greater of (x) the
aggregate of the Revolving Credit Commitments at such time and (y) the aggregate
unpaid principal amount of the Revolving Credit Loans at such time minus (iii)
the aggregate unpaid principal amount of the Term Loans at such time.
"Borrowing Base (Unadjusted)" means, at any time, (i) either
(x) at any time on or prior to the first anniversary of the Closing Date, the
sum of (a) $2,500,000 and (b) the Designated Amounts for each of the New-Build
Theaters constituting a Mortgaged Property at such time or (y) at any time after
the first anniversary of the Closing Date, $2,500,000 plus (ii) the aggregate of
the Applicable Amounts at such time for each of the Qualifying Mortgaged
Properties at such time.
"Brentwood" means Brentwood Associates Buyout Fund II, LP.
"BTC" has the meaning set forth in the Recitals to this
Agreement.
"BTC/DLJ Assignment Date" means April 16, 1998.
"BTC/DLJ Assignment Agreement" means that certain Assignment
Agreement, dated as of April 16, 1998, among the Parent, SC, BTC and DLJ.
"BTC/DLJ Assignment Documents" means such UCC-3 assignments,
assignments of mortgage and other further documents or instruments, each dated
as of the BTC/DLJ Assignment Date, as the Agent shall deem necessary or
desirable to (i) transfer to DLJ (or its successors and assigns), or evidence
the transfer to DLJ (or its successors and assigns), of all interests in any
"Collateral" under the Existing Credit Agreement or (ii) transfer, or evidence
the transfer of, BTC's rights as "Agent" under the Existing Credit Agreement to
DLJ (or its successors and assigns) as successor "Agent" under the Existing
Credit Agreement, in each case in accordance with the BTC/DLJ Assignment
Agreement on the BTC/DLJ Assignment Date.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York, New York.
"Capitalized Lease" means, as to any Person, any lease of
property by such Person as lessee which would be accounted for as a capital
lease on a balance sheet of such Person prepared in conformity with GAAP.
7
<PAGE> 17
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Cash Concentration Account" means the Designated Account or
such other Qualified Account with any banking institution approved by the Agent
that is maintained by a Borrower for purposes of complying with Section 6.15.
"Cash Equivalents" means (a) securities issued or fully
guaranteed or insured by the United States government or any agency thereof, (b)
certificates of deposit, eurodollar time deposits, overnight bank deposits and
bankers' acceptances of any commercial bank organized under the laws of the
United States, any state thereof, the District of Columbia, any foreign bank, or
its branches or agencies (fully protected against currency fluctuations) which,
at the time of acquisition, are rated at least "A-1" by Standard & Poor's
Corporation ("S&P") or "P-1" by Moody's Investors Service ("Moody's"), and (c)
commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's,
(d) shares of any money market fund that (i) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (a)
through (c) above, (ii) has net assets of not less than $500,000,000 and (iii)
is rated at least "A-1" by S&P or "P-1" by Moody's; provided that the maturities
of all obligations of the type specified in clauses (a) through (c) above shall
not exceed 180 days.
"Cash Interest Expense" means, for any Person for any period,
the Interest Expense of such Person for such period less any amount of Interest
Expense of such Person for such period not payable in cash.
"Change of Control" means (i) any event, transaction or
occurrence as a result of which (a) Brentwood and its Affiliates shall cease to
be the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of at least fifty-one percent (51%) of the total voting
power of all classes of Stock of the Parent then outstanding entitled to vote in
the election of directors of the Parent under ordinary circumstances, (b)
Brentwood or its Affiliates shall have sold, transferred or otherwise disposed
of any issued and outstanding Stock or Stock Equivalents of the Parent at any
time owned or controlled by Brentwood or such Affiliate (other than to Brentwood
and its Affiliates), (c) a majority of the members of the Board of Directors of
the Parent are not Continuing Directors, (d) the Parent shall cease to own and
control, directly or indirectly through other Borrowers, all of the economic and
voting rights associated with ownership of all the outstanding Stock of all
classes of each other Borrower, or (e) the Parent shall cease to have the
ability, directly or indirectly, through one or more of its Subsidiaries to
elect all of the Board of Directors of each other Borrower, or (ii) the
occurrence of any "Change of Control" as defined in the Indenture.
"Closing Date" means October 8, 1999, the first date on which
any Loan is made.
8
<PAGE> 18
"Code" means the Internal Revenue Code of 1986 (or any
successor legislation thereto), as amended from time to time.
"Collateral" means the "Collateral" as defined in each of the
Security Agreements, the "Pledged Collateral" as defined in each of the Pledge
Agreements, the "Intellectual Property Collateral" as defined in each of the
Intellectual Property Security Agreements, the "Mortgaged Property" as defined
in each of the Mortgages and all other property and all interests in property
(including Stock, Stock Equivalents and other equity securities) and proceeds
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is purported to be granted under any of the Collateral Documents, and
includes Additional Collateral.
"Collateral Documents" means the Pledge Agreements, the
Security Agreements, the Intellectual Property Security Agreements, the
Mortgages and all other instruments or documents delivered by any Loan Party
pursuant to this Agreement or any of the other Loan Documents to grant a Lien on
any property of such Loan Party to secure payment of all or any part of the
Obligations.
"Commitment" means, as to any Lender at any time, such
Lender's then effective Revolving Credit Commitment, Term A Loan Commitment and
Term B Loan Commitment; and "Commitments" means the then effective aggregate
Revolving Credit Commitments, Term A Loan Commitments and Term B Loan
Commitments of all Lenders.
"Compliance Certificate" has the meaning specified in Section
5.1(b).
"Conforming Leasehold Interest" means any Recorded Leasehold
Interest as to which the lessor has agreed in writing for the benefit of the
Agent for the benefit of the Secured Parties (which writing has been delivered
to the Agent), whether under the terms of the applicable lease, under the terms
of a Landlord Consent and Estoppel, or otherwise, to the matters described in
the form of Landlord Consent and Estoppel (or to such other matters as may be
approved by the Agent), which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
"Consolidated Capital Expenditures" means, for any period, the
sum of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including Capitalized Lease
Obligations) by any Borrower and its Subsidiaries during that period for
property, plant or equipment, including renewals, improvements, replacements and
capitalized repairs, that, in conformity with GAAP, are included in "additions
to property, plant or equipment", "acquisitions of property plant or equipment"
or comparable items reflected in the consolidated statement of cash flows of
such Borrower and its Subsidiaries plus (ii) to the extent not covered by clause
(i) of this definition, the aggregate of all expenditures by any Borrower and
its Subsidiaries during that period (a) to purchase or develop computer software
or systems (but only to the extent such expenditures are capitalized on the
consolidated balance sheet of such
9
<PAGE> 19
Borrower and its Subsidiaries in conformity with GAAP) or (b) to acquire (by
purchase or otherwise) the business, property or fixed assets of any Person, or
the stock or other evidence of beneficial ownership of any Person that, as a
result of such acquisition, becomes a Subsidiary of such Borrower. For purposes
of this definition, (x) (i) the Total Consideration paid or payable by any
Borrower or any its Subsidiaries in connection with any Permitted Acquisition
and (ii) the total expenditures made or incurred by any Borrower or any of its
Subsidiaries in connection with any Permitted Theater Investment (but only to
the extent such expenditures are capitalized on the consolidated balance sheet
of such Borrower and its Subsidiaries in conformity with GAAP) and (y)
Consolidated Maintenance Capital Expenditures of any Borrower shall be included
as Consolidated Capital Expenditures of such Borrower and its Subsidiaries.
"Consolidated Maintenance Capital Expenditures" means, for any
period, for any Borrower, the aggregate amount of maintenance, conversion,
repair, remodeling and other similar expenditures made or incurred by such
Borrower or any of its Subsidiaries (but only to the extent such expenditures
are capitalized on the consolidated balance sheet of such Borrower and its
Subsidiaries in conformity with GAAP).
"Consolidated Net Income (Loss)" means, for any Person for any
period, the aggregate of net income (or loss) of such Person and its
Subsidiaries for such period, determined on a consolidated basis in conformity
with GAAP.
"Contaminant" means any substance, material or waste regulated
or forming the basis of liability under any Environmental Law, including any
substance, material or waste classified, characterized or otherwise regulated as
a pollutant, hazardous, toxic, contaminant, petroleum or petroleum-derived
substance, material or waste, or any constituent of any such substance, material
or waste.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness of another Person, if the primary purpose or intent
of such Person in incurring the Contingent Obligation is to provide assurance to
the obligee of such Indebtedness that such Indebtedness will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such Indebtedness will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person include,
without limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of Indebtedness
of another Person, and (b) any liability of such Person for Indebtedness of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such Indebtedness or any security therefor, or
to provide funds for the payment or discharge of such Indebtedness (whether in
the form of a loan, advance, stock purchase, capital contribution or otherwise),
(ii) to maintain the solvency or any balance sheet item, level of income or
financial condition of another Person, (iii) to make take-or-pay or similar
payments, if required, regardless of non-performance by any other party or
parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee)
property, or to purchase or
10
<PAGE> 20
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
or (v) to supply funds to or in any other manner invest in such other Person
(including to pay for property or services irrespective of whether such property
is received or such services are rendered), if in the case of any agreement
described under subclause (i), (ii), (iii), (iv) or (v) of this sentence the
primary purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the amount of the
Indebtedness so guaranteed or otherwise supported or, if less, the amount to
which the Contingent Obligation is limited by its terms.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Parent who (i) was a member of such
Board of Directors on the Closing Date or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the directors who were either members of such Board of Directors on the Closing
Date or whose nomination or election was previously so approved.
"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture, mortgage,
deed of trust or other instrument (excluding a Loan Document) to which such
Person is a party or by which it or any of its property is bound or to which any
of its properties is subject.
"Credit Event" means each acceptance by the Borrowers of the
proceeds of each Loan.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which any Borrower or any of its
Subsidiaries is a party.
"Debt Repurchase" means the repurchase by the Parent by means
of a tender offer or, in lieu thereof, private negotiations of a portion of the
Subordinated Notes at a discount from the principal amount thereof with the
proceeds of the Term B Loans hereunder and the cancellation of such Subordinated
Notes upon consummation of such repurchase.
"Debt Repurchase Amount" means the aggregate amount to be paid
by the Parent to the Noteholders for the repurchase of Subordinated Notes.
"Debt Repurchase Closing Date" means the date on which the
Debt Repurchase is consummated.
"Default" means any event which with the passing of time or
the giving of notice (as set forth in Section 9.1(d) or otherwise) or both would
become an Event of Default.
11
<PAGE> 21
"Derivatives Contracts" means all Interest Rate Contracts,
swaps, collars, floors, caps, futures contracts, hedges, foreign exchange
contracts, currency swap agreements, commodity purchase or option agreements or
other commodity price hedging arrangements, other similar agreements or
arrangements designed to alter the risks of any Person arising from fluctuations
in interest rates, currency values or commodity prices, in each case whether
contingent or matured and any contract or agreement relating to any other
financial product commonly known as a "derivative".
"Designated Account" means the account (account number
1296949838) of the Borrowers maintained with Bank of America whose office is
located at 901 Main Street, 7th Floor, TX1-492-07-01, Dallas, Texas 75202-3714
and whose ABA number is 111000025, or, at all times after the date 30 days after
the Agent has given written notice to the Borrowers pursuant to Section 6.15(d),
such Qualified Account of the Borrowers at such bank (located within the United
States) that has been designated in writing at such time by the Borrowers to the
Agent.
"Designated Amount" means, at any time, with respect to any
New-Build Theater that constitutes a Mortgaged Property, either (i) if the
Borrowers have delivered a written notice to the Agent electing to have the
Mortgaged Property constituting such New-Build Theater be deemed eligible for
being a "Qualifying Mortgaged Property" pursuant to clause (xi) of the
definition thereof, zero or (ii) if the Borrowers have not so delivered such a
notice as to such Mortgaged Property, the amount set forth below next to such
Theater:
<TABLE>
<CAPTION>
New-Build Theater Amount
----------------- ------
<S> <C>
Century $1,364,581.27
Lincoln Square 1,187,883.59
Sunshine 2,450,009.90
Macomb 386,062.17
Renaissance Place 334,092.26
Bethesda Row 1,042,367.85
West Village 735,002.97
</TABLE>
"DLJ" has the meaning set forth in the Recitals to this
Agreement.
"Dollars" and the sign "$" each mean the lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule II or on the Assignment and Acceptance by which it became a
Lender or such other office of such Lender as such Lender may from time to time
specify to the Borrowers and the Agent.
"EBITDA" means, with respect to any Person for any period, an
amount equal to (a) Consolidated Net Income of such Person for such period,
minus (b) the sum
12
<PAGE> 22
of (i) income tax credits, (ii) interest income, (iii) gains from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible and all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains which have been
added in determining Consolidated Net Income, in each case to the extent
included in the calculation of Consolidated Net Income of such Person for such
period in conformity with GAAP, but without duplication, plus (c) the sum of (i)
any provision for income or franchise taxes, (ii) Interest Expense (other than
Cash Interest Expense on Capitalized Lease Obligations in respect of any
Capitalized Lease of any Real Property Asset), (iii) loss from extraordinary
items for such period, (iv) the amount of non-cash charges (including
depreciation and amortization) for such period, (v) amortized debt discount for
such period, and (vi) the amount of any deduction to Consolidated Net Income as
the result of any grant to any members of the management of such Person of any
Stock, in each case to the extent included in the calculation of Consolidated
Net Income of such Person for such period in conformity with GAAP, but without
duplication, minus (d) all principal amounts having a scheduled due date during
such period payable by the Parent or any of its Subsidiaries determined on a
consolidated basis in conformity with GAAP on any Capitalized Lease Obligations
in respect of any Capitalized Lease of any Real Property Asset.
"Eligible Assignee" means a commercial bank, savings and loan
association, finance company, insurance company, fund or other financial
institution which makes, purchases or invests in loans in the ordinary course of
its business and which is acceptable to the Agent in its sole and absolute
discretion.
"Environmental Laws" means all federal, state and local laws,
statutes, ordinances, regulations and other legal requirements, now or hereafter
in effect, and in each case as amended or supplemented from time to time, and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment or natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws
include but are not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49
U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act, as amended (7 U.S.C. Section 136 et seq.); the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic
Substance Control Act, as amended (42 U.S.C. Section 7401 et seq.); the Clean
Air Act, as amended (42 U.S.C. Section 740 et seq.); the Federal Water Pollution
Control Act, as amended (33 U.S.C. Section 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. Section 651 et seq.); and the Safe
Drinking Water Act, as amended (42 U.S.C. Section 300f et seq.), and their state
and local counterparts or equivalents and any transfer of ownership notification
or approval statute,
13
<PAGE> 23
including the New Jersey Industrial Site Recovery Act (N.J. Stat. Ann. Section
13:1K-6 et seq.) ("ECRA").
"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, including any thereof arising under
any Environmental Law, Permit, order or agreement with any Governmental
Authority or other Person, and which relate to any environmental, health or
safety condition, or a Release or threatened Release, and result from the past,
present or future operations of, or ownership of property by, such Person or any
of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with any Loan Party or any of its
Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) a Reportable Event; (ii) the
withdrawal of any Loan Party, any of its Subsidiaries or any ERISA Affiliate (or
the treatment of any of the foregoing as having withdrawn under Section 4062(e)
of ERISA) from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (iii) the complete or partial withdrawal of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate (or the treatment of any of the foregoing as
having withdrawn under Section 4062(e) of ERISA) from any Multiemployer Plan;
(iv) the filing of a notice of intent to terminate a Title IV Plan or a
Multiemployer Plan pursuant to Section 4041 or 4041A of ERISA or the treatment
of a plan amendment as a termination under Section 4041 or 4041A of ERISA; (v)
the institution of proceedings by the PGBC to terminate, or to appoint a trustee
to administer, a Title IV Plan or a Multiemployer Plan; (vi) the failure to
timely make any required contribution to a Qualified Plan or (vii) any other
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer Plan, or the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
14
<PAGE> 24
"Excluded Asset Sale" means an Asset Sale permitted pursuant
to Section 7.6(a).
"Existing Credit Agreement" has the meaning set forth in the
Recitals to this Agreement.
"Existing Credit Documents" has the meaning set forth in the
Recitals to this Agreement.
"Facility" means, collectively, each of (a) the Term A Loan
Commitments and the Term A Loans made thereunder (the "Term A Loan Facility"),
(b) the Term B Loan Commitments and the Term B Loans made thereunder (the "Term
B Loan Facility") and (c) the Revolving Credit Commitments and the Revolving
Credit Loans made thereunder (the "Revolving Credit Facility").
"Fair Market Value" means, solely for purposes of the
definitions of "Asset Sale" and "Total Consideration" and Sections 7.6(c) and
7.16 hereof, (a) with respect to any asset or group of assets (other than a
marketable security) at any date, the value of the consideration obtainable in a
sale of such asset at such date assuming a sale by a willing seller to a willing
purchaser dealing at arm's length and arranged in an orderly manner over a
reasonable period of time having regard to the nature and characteristics of
such asset or, if such asset shall have been the subject of a relatively
contemporaneous appraisal by an independent third party appraiser, the basic
assumptions underlying which have not materially changed since its date, the
value set forth in such appraisal, and (b) with respect to any marketable
security at any date, the closing sale price of such security on the Business
Day next preceding such date, as appearing in any published list of any national
securities exchange or in the National Market List of the National Association
of Securities Dealers, Inc. or, if there is no such closing sale price of such
security, the final price for the purchase of such security at face value quoted
on such business day by a financial institution of recognized standing which
regularly deals in securities of such type.
"Farallon" has the meaning specified in the recitals.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto.
15
<PAGE> 25
"Financial Statements" means the consolidated and
consolidating statements of operations, statements of cash flows and balance
sheets of the Parent and its Subsidiaries delivered in accordance with Sections
4.5 and 5.1 of this Agreement.
"Fiscal Quarter" means each of the three month periods ending
on March 31, June 30, September 30 and December 31.
"Fiscal Year" means the twelve month period ending on December
31.
"Fixed Charges" means, for any period and without duplication,
the sum of (a) the Cash Interest Expense of the Parent for such period (other
than any Cash Interest Expense on Capitalized Lease Obligations in respect of
any Capitalized Lease of any Real Property Asset), (b) the principal amount of
Indebtedness for borrowed money of the Parent or any of its Subsidiaries having
a scheduled due date during such period, (c) all principal amounts having a
scheduled due date during such period payable by the Parent or any of its
Subsidiaries determined on a consolidated basis in conformity with GAAP, on
Capitalized Lease Obligations (other than Capitalized Lease Obligations in
respect of any Capitalized Lease of any Real Property Asset), (d) all cash
dividends paid by the Parent or any of its consolidated Subsidiaries on
preferred stock in respect of such period other than to any Borrower, (e) the
total federal income tax liability actually payable by the Parent or any of its
Subsidiaries in respect of such period, and (f) Consolidated Maintenance Capital
Expenditures during such period.
"Fixed Charge Coverage Ratio" means, with respect to any
period, the ratio of EBITDA to Fixed Charges for such period; provided, however,
in the event (x) any Theater was first constructed during such period or was
first acquired by any Borrower during such period and (y) such Theater has been
in operation by such Borrower during the entire last fiscal quarter in such
period, "EBITDA" and "Fixed Charges" for such period shall be adjusted, in a
manner satisfactory to the Agent in the Agent's reasonable credit judgment, by
annualizing the actual applicable revenues and expenses for such Theater as if
such Theater had been in operation for the entire period.
"Flood Hazard Property" means a Real Estate Asset all or a
portion of which is located in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
16
<PAGE> 26
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Highest Lawful Rate" means, with respect to each Lender, the
maximum lawful rate of interest permitted to such Lender by applicable usury
laws, now or hereafter enacted, as changed when and as such laws change, to the
extent permitted by such laws, effective on the day such change in such laws
becomes effective.
"Indebtedness", of any Person, means, without duplication, (a)
all indebtedness of such Person for borrowed money (including reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured) or for the deferred purchase price
of property or services, (b) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (c) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (d) all Capitalized Lease
Obligations of such Person, (e) all Contingent Obligations of such Person, (f)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (g) all
obligations of such Person under Derivative Contracts, (h) all Indebtedness
referred to above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and general intangibles) owned by such Person,
even though such Person has not assumed or become liable for the payment of such
Indebtedness, and (i) in the case of the Borrowers, the Obligations.
"Indemnified Matters" has the meaning specified in Section
11.5(b).
"Indemnitee" has the meaning specified in Section 11.5(b).
"Indenture" means the Indenture, dated as of April 15, 1998
and amended as of October 7, 1999, among the Parent, the Guarantors (as defined
therein) and Norwest Bank Minnesota, National Association, as Trustee, as the
same may be hereafter further amended, supplemented or modified from time to
time to the extent permitted by this Agreement.
"Initial Mortgage" means a Mortgage in respect of an Initial
Mortgaged Property, which Mortgage shall, in the case of each Initial Prior
Mortgaged Property, constitute an Amendment Document.
"Initial Mortgaged Property" means a Real Property Asset
indicated as being part of the Collateral on Schedule 4.19(a) or Schedule
4.19(b).
17
<PAGE> 27
"Initial Prior Mortgaged Property" means an Initial Mortgaged
Property that prior to the Closing Date was subject to a recorded mortgage or
deed of trust constituting an Existing Credit Document.
"Intellectual Property Security Agreement" means an
Intellectual Property Security Agreement executed and delivered by a Borrower on
the Closing Date or by any Additional Subsidiary from time to time after the
Closing Date in accordance with Section 6.8, substantially in the form of
Exhibit E annexed hereto (which Intellectual Property Security Agreement shall,
in the case of SC, constitute an Amendment Document), as such Intellectual
Property Security Agreement may be amended, amended and restated, supplemented
or otherwise modified from time to time.
"Interest Expense" means, for any Person for any period, total
interest expense (whether cash or non-cash) of such Person and its Subsidiaries
for such period determined on a consolidated basis in conformity with GAAP and
including, in any event, interest capitalized during construction for such
period, interest on Capitalized Lease Obligations and net costs under Interest
Rate Contracts, but excluding the amount of interest income for such period.
"Interest Payment Date" means the last Business Day of each
calendar month.
"Interest Period" means, with respect to any Interest Payment
Date, the period from (and including) the next preceding Interest Payment Date
(or, in the case of the first Interest Payment Date for any Loan, the date on
which such Loan was made) to (but excluding) such Interest Payment Date.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Investment" has the meaning specified in Section 7.7. The
amount of any Investment shall be the original cost of such Investment plus the
cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"IRS" means the Internal Revenue Service, or any successor
thereto.
"Landlord Consent and Estoppel" means, with respect to any
Leasehold Property, a duly executed and acknowledged letter, certificate or
other instrument in writing from the lessor under the related Lease
substantially in the form of Exhibit H annexed hereto or otherwise reasonably
satisfactory in form and substance to the Agent.
"Leasehold Property" means any leasehold interest of any Loan
Party as lessee under any Lease of real property.
18
<PAGE> 28
"Leases" means, with respect to any Person, all of those
leasehold estates in real property owned by such Person, as lessee, as such may
be amended, supplemented or otherwise modified from time to time.
"Lenders" has the meaning specified in the preamble and
includes the Term Loan Lenders and the Revolving Credit Lenders.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including any conditional sale
or other title retention agreement, the interest of a lessor under a Capitalized
Lease, any financing lease having substantially the same economic effect as any
of the foregoing, and the filing, under the Uniform Commercial Code or
comparable law of any jurisdiction, of any financing statement naming the owner
of the asset to which such Lien relates as debtor.
"Loan" means any loan made by any Lender pursuant to this
Agreement.
"Loan Account" has the meaning specified in Section 2.13.
"Loan Documents" means, collectively, this Agreement, any
Notes (and any Note Allonges thereto), each Subsidiary Assumption Agreement, the
Collateral Documents, the Assignment Agreement, the Amendment Documents and each
certificate, agreement or document executed by a Loan Party and delivered to the
Agent or any Lender in connection with or pursuant to any of the foregoing. Any
reference in this Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
such document as the same may be in effect at any and all times such reference
becomes operative.
"Loan Party" means each of SC, Landmark, LT USA, the Parent,
each Additional Borrower and each other Subsidiary of any Borrower that executes
and delivers a Loan Document.
"Material Adverse Change" means a material adverse change in
any of (a) the condition (financial or otherwise), business, performance,
prospects, results of operations or properties of the Borrowers and their
Subsidiaries taken as one enterprise, (b) the legality, validity or
enforceability of any Loan Document, (c) the perfection or priority of the Liens
granted pursuant to the Collateral Documents, (d) the ability of the Borrowers
taken as one enterprise to repay the Obligations or of the Loan Parties to
perform their obligations under any Loan Document, or (e) the rights and
remedies of the Lenders or the Agent under the Loan Documents.
"Material Adverse Effect" means an effect that results in or
causes a Material Adverse Change.
19
<PAGE> 29
"Maximum Total Consideration" means
(i) with respect to any Permitted Acquisition, the maximum
Total Consideration paid or payable by any Loan Party in connection
with such Permitted Acquisition as set forth in the writing pursuant to
which the Agent shall have consented to such Permitted Acquisition in
accordance with Section 7.5(a); or
(ii) with respect to any Permitted Theater Investment, the
maximum aggregate Consolidated Capital Expenditures paid or payable by
any Loan Party in connection with such Permitted Theater Investment as
set forth on Schedule 7.5(b) or in such other writing pursuant to which
the Agent shall have consented to such Permitted Theater Investment in
accordance with Section 7.5(b).
"Monthly Financial Report" means a report of the Borrowers,
substantially in the form of Exhibit O annexed hereto, required to be delivered
each month by the Borrowers pursuant to Section 5.1.
"Mortgage" means (i) a security instrument (whether designated
as a deed of trust or a mortgage or by any similar title) executed and delivered
by any Loan Party, substantially in the form of Exhibit F or Exhibit G annexed
hereto or in such other form as may be approved by the Agent in its sole
discretion, in each case with such changes thereto as may be recommended by the
Agent's local counsel or by local counsel to such Loan Party approved by the
Agent based on local laws or customary local mortgage or deed of trust
practices, or (ii) at the Agent's option, in the case of an Additional Mortgaged
Property, an amendment to an existing Mortgage, in form reasonably satisfactory
to the Agent, adding such Additional Mortgaged Property to the Real Property
Assets encumbered by such existing Mortgage, in either case as such security
instrument or amendment may be amended, amended and restated, supplemented or
otherwise modified from time to time. "Mortgages" means all such instruments,
including the Initial Mortgages and any Additional Mortgages, collectively.
"Mortgaged Property" means an Initial Mortgaged Property or an
Additional Mortgaged Property.
"Mortgage Related Documents" means, with respect to each
Mortgage, except to the extent waived by the Agent in writing with respect to
such Mortgage, each dated as of a date satisfactory to the Agent:
(a) if such Mortgage is on any interest of any Loan Party in
any Real Property Asset other than a Leasehold Property:
(i) (A) a favorable opinion of counsel to such Loan Party, in
form and substance reasonably satisfactory to the Agent, as to the due
authorization, execution and delivery by such Loan Party of such
Mortgage and such other matters as the Agent may reasonably request,
and (B) an opinion of counsel
20
<PAGE> 30
reasonably satisfactory to the Agent in the state in which the related
Mortgaged Property is located with respect to the validity and
enforceability of such Mortgage and such other matters (including any
matters governed by the laws of such state regarding personal property
security interests in respect of any Collateral) as the Agent may
reasonably request, in each case in form and substance reasonably
satisfactory to the Agent;
(ii) (A) a mortgagee title insurance policy or an
unconditional commitment therefor (a "Mortgage Policy") issued by a
title company satisfactory to the Agent with respect to such Mortgaged
Property, in an amount and in form and substance reasonably
satisfactory to the Agent, insuring fee simple title to, or a valid
leasehold interest in, such Mortgaged Property vested in such Loan
Party and assuring the Agent that such Mortgage creates a valid and
enforceable first priority mortgage Lien on such Mortgaged Property
encumbered thereby, subject only to a standard survey exception and
Permitted Mortgaged Property Liens, which Mortgage Policy (1) shall
include an endorsement for mechanics' liens, for future advances under
this Agreement and for any other matters reasonably requested by the
Agent and (2) shall provide for affirmative insurance and such
reinsurance as the Agent may reasonably request, all of the foregoing
in form and substance reasonably satisfactory to the Agent; (B) true
copies of each document, instrument or certificate required by the
terms of such Mortgage Policy or such Mortgage to be, or have been,
filed, recorded, executed or delivered in connection therewith; and (C)
evidence satisfactory to the Agent that such Loan Party has (i)
delivered to such title company all certificates and affidavits
required by such title company in connection with the issuance of such
Mortgage Policy and (ii) paid or arranged for payment on or prior to
the date such Mortgage is recorded to such title company or to the
appropriate governmental authorities, as the case may be, all expenses
and premiums of such title company in connection with the issuance of
such Mortgage Policy and all recording and stamp taxes and fees
(including mortgage recording and intangible taxes and fees) payable in
connection with recording such Mortgage in the appropriate real estate
records and issuance of such Mortgage Policy;
(iii) a title report issued by such title company with respect
thereto, dated not more than 60 days prior to the date such Mortgage
was recorded and reasonably satisfactory in form and substance to the
Agent;
(iv) copies of all recorded documents listed as exceptions to
title or otherwise referred to in the Mortgage Policy or title report
delivered pursuant to clause (ii) or (iii) above;
(v) unless waived by the Agent, (A) evidence, which may be in
the form of a letter from an insurance broker or a municipal engineer,
as to (1) whether such Mortgaged Property is a Flood Hazard Property
and (2) if so, whether the community in which such Flood Hazard
Property is located is participating in the National Flood Insurance
Program and (B) if such Mortgaged
21
<PAGE> 31
Property is a Flood Hazard Property, evidence that such Loan Party has
obtained flood insurance in respect of such Flood Hazard Property
(which may constitute any qualifying private flood insurance) to the
extent required under the applicable regulations of the Board of
Governors of the Federal Reserve System;
(vi) unless waived by the Agent, an environmental indemnity
agreement, reasonably satisfactory in form and substance to the Agent,
with respect to the indemnification of the Agent and the Lenders for
any liabilities that may be imposed on or incurred by any of them as a
result of any Contaminant located at, on or under such Mortgaged
Property or otherwise associated therewith;
(vii) if required by any Governmental Authority or under any
Requirements of Law, unless waived by the Agent, appraisals from one or
more independent real estate appraisers satisfactory to the Agent, in
form, scope and substance reasonably satisfactory to the Agent and
satisfying the requirements of any applicable laws and regulations,
concerning such Mortgaged Property;
(viii) unless waived by the Agent, reports and other
information, in form, scope and substance reasonably satisfactory to
the Agent and prepared by environmental consultants satisfactory to the
Agent, concerning any environmental hazards or liabilities to which any
Loan Party or any of its Subsidiaries may be subject to as a result of
such Mortgaged Property, which reports shall (A) at a minimum include a
recent Phase I environmental site assessment for such Mortgaged
Property which is addressed to the Agent or on which the consultant
that prepared such report has authorized the Agent in writing to rely
and (B) indicate the absence of any condition at the Mortgaged Property
that could reasonably be expected to result in either (x) such Loan
Party incurring material liabilities under Environmental Laws or (y)
the imposition or attachment of an Environmental Lien to such Mortgaged
Property;
(ix) current ALTA surveys and surveyor's certification by
surveyors selected by the Agent with respect to such Mortgaged Property
and, to the extent available from the applicable Governmental
Authority, zoning letters and certificates of occupancy with respect to
such Mortgaged Property, in each case reasonably satisfactory in form
and substance to the Agent;
(x) evidence satisfactory to the Agent that the Agent (for the
benefit of itself and the Lenders) has a valid and perfected first
priority security interest (subject only to Permitted Liens) in any
tangible personal or mixed property (including fixtures) Collateral
attached to or located in or on such Mortgaged Property, including (A)
such documents duly executed and filed by each Loan Party (including
acknowledgment copies of proper financing statements (Form UCC-1) duly
filed under the UCC and other applicable documents under the laws of
any jurisdiction with respect to the perfection of Liens) as the Agent
may request to perfect its security interests in such Collateral and
(B) certified copies
22
<PAGE> 32
of requests for information or copies (Form UCC-11), or equivalent
reports, listing all effective financing statements, fixture filings
and judgment and tax lien filings that name any Loan Party as debtor,
together with copies of such financing statements, fixture filings and
judgment and tax lien filings, none of which shall cover such
Collateral except for any financing statement that is an Existing
Credit Document and has been duly assigned to the Agent and amended by
an Amendment Document and except for Permitted Liens; and
(xi) duly executed and acknowledged subordination and
non-disturbance agreements from any third party mortgagee of such
Mortgaged Property, in form and substance satisfactory to the Agent;
and
(b) if such Mortgage is on an interest of any Loan Party in a
Leasehold Property:
(i) each of the documents listed in subsections (i) through
(vii) and (x) of section (a) above;
(ii) current ALTA surveys and surveyor's certification by
surveyors selected by Agent with respect to such Leasehold Property or,
in lieu thereof, a legal description for such Leasehold Property
sufficient for the title company issuing the related Mortgage Policy
for such Leasehold Property to utilize and rely upon in issuing such
Mortgage Policy and, to the extent available from the applicable
Governmental Authority, zoning letters and certificates of occupancy
with respect to such Leasehold Property, in each case reasonably
satisfactory in form and substance to the Agent;
(iii) unless waived by the Agent in writing, a Landlord
Consent and Estoppel with respect to such Leasehold Property;
(iv) evidence that such Leasehold Property is a Recorded
Leasehold Interest;
(v) unless waived by the Agent in writing, the following
additional consents and agreements, together with evidence satisfactory
to the Agent of the filing or recording thereof in all appropriate
public records: (A) duly executed and acknowledged subordination and
non-disturbance agreements with any third party mortgagee of such
Leasehold Property, (B) duly executed and acknowledged consents
required to be obtained under the applicable ground lease, sublease or
mortgage from any third party ground lessor, sublessor or mortgagee of
such Leasehold Property, and (C) if such Loan Party has subleased any
portion of such Leasehold Property to any third party, duly executed
and acknowledged subordination and attornment agreements of each such
sublessee, unless the lease of such sublessee, by its terms, is subject
and subordinate to the Lien of such Mortgage and stipulates that such
sublessee shall attorn to the Agent and recognize the Agent as the
sub-landlord or sub-lessor in the event of a foreclosure
23
<PAGE> 33
of the Loan Party's interest in said Lease or a taking in lieu of
foreclosure, in each case in form and, substance satisfactory to the
Agent; and
(vi) an environmental questionnaire in substantially the form
of Exhibit N hereto duly completed as to such Mortgaged Property and
signed by the theater manager of the Theater constituting such
Mortgaged Property (or, in lieu thereof, a Responsible Officer) on
behalf of such Loan Party and, if deemed necessary by the Agent, as a
result of matters disclosed or required to be disclosed in such
questionnaire, the documents listed in subsection (viii) of section (a)
above.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or
been obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"New-Build Theater" means one of the seven Theaters Landmark
expects to construct pursuant to Section 7.5(b) as a Permitted Theater
Investment specified in Schedule 7.5(b) hereto in Chicago, Illinois (Century);
Washington, D.C. (Lincoln Square); New York City (Sunshine); Roseville, Michigan
(Macomb); Highland Park, Illinois (Renaissance Place); Bethesda, Maryland
(Bethesda Row); or Dallas, Texas (West Village).
"Non-Funding Lender" has the meaning specified in Section
2.3(i).
"Non-U.S. Lender" means each Lender (or transferee of such
Lender) that is not a United States person as defined in Section 7701(a)(30) of
the Code.
"Note Allonges" means, with respect to any Additional
Subsidiary, an Allonge, substantially in the form of Schedule II to the form of
Subsidiary Assumption Agreement attached hereto as Exhibit J executed at or
prior to the time such Additional Subsidiary becomes a Subsidiary of any
Borrower, with respect to each then outstanding Note, by such Additional
Subsidiary and by all other then existing Borrowers in accordance with Section
6.8, as such Allonge may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"Notes" means, collectively, the Revolving Credit Notes, the
Term A Loan Notes and the Term B Loan Notes.
"Noteholders" means the holders of the Subordinated Notes.
"Notice of Borrowing" has the meaning specified in Section
2.3(a).
"Obligations" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by any of the Borrowers to
the Agent, any Lender, any Affiliate of any of them or any Indemnitee, arising
under this Agreement or under any other Loan Document, of every type and
description, present or future, whether
24
<PAGE> 34
or not evidenced by any note, guaranty or other instrument, whether or not for
the payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, foreign exchange transaction or Derivative Contract
or in any other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term "Obligations" includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Borrowers under this Agreement
or any other Loan Document.
"Operating Plan" has the meaning specified in Section 5.1(e).
"Original Borrower" has the meaning specified in the
introductory paragraph to this Agreement.
"Other Debt" has the meaning specified in Section 7.2(f).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Other Theater" means any Theater other than an Art Theater,
including any first-run commercial film Theater or second-run or discount
commercial film Theater.
"Parent Stockholders' Agreement" means that certain
Stockholders' Agreement dated as of August 1, 1996 by and among the Parent,
Brentwood, DLJ Fund Investment Partners II, L.P., and the other stockholders of
Parent, as amended, supplemented or otherwise modified from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which is not
an individual account plan, as defined in Section 3(34) of ERISA, and which any
Loan Party, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute on behalf of
participants who are or were employed by any of them.
"Permit" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Acquisition" has the meaning specified in Section
7.5(a).
"Permitted Acquisition Closing Date" means, with respect to
any Permitted Acquisition, (i) in the event that a Revolving Credit Loan is
being made with respect to such Permitted Acquisition, the date upon which each
of the conditions set forth in Sections 3.2 and 3.3(a) are satisfied or waived
in accordance with Section 11.1
25
<PAGE> 35
and (ii) in the event that a Revolving Credit Loan is not being made with
respect to such Permitted Acquisition, the date upon which such Permitted
Acquisition is consummated in accordance with Section 7.5(a).
"Permitted Asset Swap" means the acquisition by any Borrower
or any of its Subsidiaries of one or more Theaters from any Person pursuant to a
Permitted Acquisition consummated in accordance with Section 7.5(a) in exchange
for the disposition (within 30 days before or after such acquisition) by such
Borrower or Subsidiary of one or more Theaters to such Person pursuant to an
Asset Sale made in accordance with Section 7.6(c).
"Permitted Liens" means at any time (i) with respect to any
Mortgaged Property, any Permitted Mortgaged Property Liens with respect to such
Mortgaged Property at such time and (ii) with respect to any other Collateral,
any Liens permitted at such time under Section 7.1.
"Permitted Mortgaged Property Liens" means, at any time, with
respect to any Mortgaged Property, Liens permitted at such time under clauses
(a), (b), (c), (d), (e), (f), (h) or (j) of Section 7.1.
"Permitted Theater Investment" has the meaning specified in
Section 7.5(b).
"Permitted Theater Investment Commencement Date" means, with
respect to any Permitted Theater Investment, the later of the (i) Closing Date
and (ii) the first day on which any work by any Borrower relating to
construction of the applicable Theater (including preparation of land with
respect thereto) commences or any expenditure by any Borrower in respect thereof
is made.
"Permitted Theater Investment Funding Date" means, with
respect to any Permitted Theater Investment, in the event that a Loan is being
made with respect to such Permitted Theater Investment, the applicable date upon
which each of the conditions set forth in Sections 3.2 and 3.3(b) are satisfied
or waived in accordance with Section 11.1.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, limited liability
company, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section
3(3) of ERISA, which any Loan Party, or any of its Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
"Pledge Agreement" means a Pledge Agreement executed and
delivered by a Borrower on the Closing Date or by any Additional Borrower from
time to time after the Closing Date in accordance with Section 6.8,
substantially in the form of Exhibit C
26
<PAGE> 36
annexed hereto (which Pledge Agreement shall, in the case of the Parent or SC,
constitute an Amendment Document), as such Pledge Agreement may be amended,
amended and restated, supplemented or otherwise modified from time to time.
"principal amount" means, with respect to any Loan, the
principal amount of such Loan (including any interest added thereto in
accordance with Section 2.9(b)). The "unpaid principal amount" of any Loan on
any Interest Payment Date shall be determined after giving effect to the
addition to such principal amount of the interest accrued during the Interest
Period ending on such date pursuant to Section 2.9(b).
"Projections" means (i) those financial projections dated
October 6, 1999, covering the fiscal year ending in 1999 and (ii) those
financial projections dated October 6, 1999 respecting the Art Theaters to be
constructed as described on Schedule 7.5(b) hereto, in each case delivered to
the Lenders by the Borrower prior to the Closing Date.
"Proposed Change" has the meaning specified in Section
11.2(b).
"PTO" means the United States Patent and Trademark Office or
any successor or substitute office in which filings are necessary or, in the
opinion of the Agent, desirable to create or perfect Liens on any Collateral
subject to any Intellectual Property Security Agreement.
"Purchasing Lender" has the meaning specified in Section
11.7(a).
"Qualified Account" means an account maintained at a banking
institution by and in the name of a Borrower that constitutes a "Qualified
Account" with respect to such Borrower within the meaning of the Security
Agreement with respect to such Borrower.
"Qualified Account Letter" has the meaning specified in any
Security Agreement.
"Qualified Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the Code, and which any Loan Party, any of its Subsidiaries or
any ERISA Affiliate maintains, contributes to or has an obligation to contribute
to on behalf of participants who are or were employed by any of them.
"Qualifying Mortgaged Property" means, at any time, any
Mortgaged Property if (but only if) each of the following conditions has been
satisfied or waived by the Agent in writing at such time:
(i) if such Mortgaged Property is a Leasehold Property, such
Leasehold Property is a Conforming Leasehold Interest;
27
<PAGE> 37
(ii) (A) the Agent shall have received (x) a duly executed and
acknowledged Mortgage with respect to such Mortgaged Property; (y) each
of the Mortgage Related Documents with respect to such Mortgaged
Property; and (z) evidence that counterparts of such Mortgage have been
recorded in all places to the extent necessary to create the security
interest specified in clause (B); and (B) a valid and perfected first
priority security interest in the property described in such Mortgage
exists in favor of the Agent for the benefit of the Secured Parties (or
in favor of such other trustee as may be required or desired under
local law) (subject only to Permitted Mortgaged Property Liens);
(iii) if such Mortgaged Property is a Leasehold Property, the
entire Lease constitutes a Recorded Leasehold Interest and is subject
to the Mortgage referred to in clause (ii);
(iv) if such Mortgaged Property is a Leasehold Property, no
default or other event shall have occurred and be continuing or
condition shall exist under such Lease beyond the end of any grace
period provided therefor in such Lease the effect of which default or
condition is (x) if such event constitutes a default in payment (other
than with respect to payment of common area maintenance charges), to
terminate, or to permit the landlord to terminate, such Lease or (y) if
such event constitutes any event other than such a payment default, to
terminate, or to permit the landlord to terminate (in circumstances
where, in the reasonable judgment of the Agent, such landlord is likely
to terminate), such Lease;
(v) if such Mortgaged Property is a Leasehold Property, such
Lease is in full force and effect and has not been terminated and has
not been modified, amended or rescinded (excluding any exercise of any
right of renewal or extension pursuant to the terms of such Lease as in
effect on the date such Leasehold Property first became a Mortgaged
Property) without the written consent of the Agent;
(vi) the Agent shall not have concluded that any Contaminants
exist at, on, or under such Mortgaged Property at concentrations
exceeding those allowed by Environmental Laws or that any Environmental
Lien has attached or could reasonably be expected to be attached to
such Mortgaged Property;
(vii) the Theater constituting such Mortgaged Property is not
a Theater that, as a result of a casualty, temporary cessation of
operations, closing or otherwise, is not in operation for at least 30
hours per week at such time;
(viii) the TLCF with respect to such Mortgaged Property for
the Applicable Period is not negative at such time;
(ix) a Borrower owns such Mortgaged Property at such time and
at such time enjoys quiet and undisturbed possession thereof;
28
<PAGE> 38
(x) if such Mortgaged Property is a Leasehold Property, the
Lease is not subject to termination and would not otherwise be
adversely affected by any sale or transfer of (or change in the
beneficial ownership of) any shares of Stock of the Parent;
(xi) if the Theater constituting such Mortgaged Property is a
New-Build Theater and such time is prior to the first anniversary of
the Closing Date, the Borrowers have delivered a written notice to the
Agent specifying this clause (xi) of this definition and electing to
have such Mortgaged Property be deemed eligible for being a "Qualifying
Mortgaged Property".
"Ratable Portion" or "ratably" means, with respect to any
Lender,
(a) with respect to the Revolving Credit Facility, the
percentage obtained by dividing (i) the Revolving Credit Commitment of such
Lender by (ii) the aggregate Revolving Credit Commitments of all Lenders (or, at
any time after the Revolving Credit Commitments of all Lenders have been reduced
to zero, the percentage obtained by dividing the aggregate unpaid principal
amount of the Revolving Credit Loans of such Lender by the aggregate unpaid
principal amount of the Revolving Credit Loans of all Lenders);
(b) with respect to the Term A Loan Facility, the percentage
obtained by dividing (i) the Term A Loan Commitment of such Lender by (ii) the
aggregate Term A Loan Commitments of all Lenders (or, at any time after the
Closing Date, the percentage obtained by dividing the aggregate unpaid principal
amount of such Lender's Term A Loans by the aggregate unpaid principal amount of
the Term A Loans of all Lenders);
(c) with respect to the Term B Loan Facility, the percentage
obtained by dividing (i) the Term B Loan Commitment of such Lender by (ii) the
aggregate Term B Loan Commitments of all Lenders (or, at any time after the Term
B Loan Commitments of all Lenders have been reduced to zero, the percentage
obtained by dividing the aggregate unpaid principal amount of such Lender's Term
B Loans by the aggregate unpaid principal amount of the Term B Loans of all
Lenders); or
(d) with respect to the Facility, the percentage obtained by
dividing (i) the sum of the Revolving Credit Commitment, the Term A Loan
Commitment, the Term B Loan Commitment and the aggregate unpaid principal amount
of the Term Loans of such Lender (or, at any time after the Revolving Credit
Commitments of all Lenders have been reduced to zero, the sum of the Term B Loan
Commitment and the aggregate unpaid principal amount of all of the Loans of such
Lender) by (ii) the sum of the aggregate Commitments and the aggregate unpaid
principal amount of the Term Loans of all Lenders (or, at any time after the
Revolving Credit Commitments of all Lenders have been reduced to zero, the sum
of the Term B Loan Commitments and the aggregate unpaid principal amount of all
of the Loans of all Lenders).
29
<PAGE> 39
"Real Property Asset" means, at any time of determination, any
fee or leasehold interest then owned by any Loan Party in any real property,
including any Leasehold Property.
"Recorded Leasehold Interest" means a Leasehold Property with
respect to which a Record Document (as hereinafter defined) has been recorded in
all places necessary or desirable, in the Agent's reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected Leasehold Property. For purposes of this
definition, the term "Record Document" means, with respect to any Leasehold
Property, (a) the Lease evidencing such Leasehold Property or a memorandum
thereof, executed and acknowledged by the Person that, at such time, was the
owner of the affected real property, as lessor, or (b) if such Leasehold
Property was acquired or subleased from the holder of a Recorded Leasehold
Interest the applicable assignment or sublease document, executed and
acknowledged by such holder, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form reasonably
satisfactory to the Agent.
"Register" has the meaning specified in Section 11.9(d).
"Related Documents" means the dealer manager or other
engagement agreement, offer to purchase and other tender offer documents or, if
the Debt Repurchase is effected by private negotiations rather than pursuant to
a tender offer, the repurchase agreements, "big-boy letters" and other documents
in respect of the Debt Repurchase, including any documents filed or required to
be filed by or on behalf of any Borrower or any Affiliate thereof with the
Securities and Exchange Commission in connection with the Debt Repurchase.
"Release" means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration, in each case of any Contaminant, into the indoor or
outdoor environment or into or out of any property owned by such Person.
"Remedial Action" means all actions required by any
Governmental Authority or under any Requirements of Law to (a) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment, or
(c) perform pre-remedial studies and investigations and post-remedial monitoring
and care.
"Reportable Event" means any of the events described in
Sections 4043(c) of ERISA with respect to a Title IV Plan (other than an event
for which the 30-day notice is waived.
"Required Lenders" on any date, means Lenders representing at
least 66-2/3% of the Required Lenders Amount on such date.
30
<PAGE> 40
"Required Lenders Amount" means on any date, the sum of (a)
the aggregate unpaid principal amount of the Term A Loans outstanding hereunder
on such date, (b) the Required Term B Lenders Amount, and (c) the aggregate
Revolving Credit Commitments of all Lenders (or, if the Revolving Credit
Commitments have been terminated, the aggregate Revolving Credit Loans
outstanding) on such date.
"Required Revolving Credit Lenders" on any date means
Revolving Credit Lenders representing at least 66-2/3% of the aggregate
Revolving Credit Commitments (or, if the Revolving Credit Commitments have been
terminated, Revolving Credit Lenders representing at least 66-2/3% of the
aggregate unpaid principal amount of all Revolving Credit Loans then
outstanding).
"Required Term A Loan Lenders" means (a) prior to the Closing
Date, Term A Loan Lenders representing at least 66-2/3% of the aggregate Term A
Loan Commitments of all Term A Loan Lenders, and (b) thereafter, Term A Loan
Lenders representing at least 66-2/3% of the aggregate unpaid principal amount
of all Term A Loans then outstanding.
"Required Term B Loan Lenders" means (a) prior to the Debt
Repurchase Closing Date, Term B Loan Lenders representing at least 66-2/3% of
the aggregate Term B Loan Commitments of all Term B Loan Lenders, and (b)
thereafter, Term B Loan Lenders representing at least 66-2/3% of the aggregate
unpaid principal amount of all Term B Loans then outstanding.
"Required Term B Lenders Amount" means, on any date, (a) prior
to the Debt Repurchase Closing Date, the aggregate Term B Loan Commitments of
all Lenders on such date and (b) thereafter, the aggregate Term B Loans
outstanding on such date.
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state, local and foreign laws, rules and
regulations, and all orders, judgments, decrees or other determinations of any
Governmental Authority or arbitrator, applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means, with respect to any Person, any
of the principal executive officers of such Person.
"Restricted Junior Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any class of Stock or Stock
Equivalents of the Parent, any of the Borrowers or any of their respective
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of Stock or Stock Equivalents to the holders of that class,
(b) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any class of Stock or Stock
Equivalents of the Parent, any of the Borrowers or any of their respective
Subsidiaries now or hereafter outstanding except for Stock of the Parent issued
upon exchange or
31
<PAGE> 41
conversion of Stock or Stock Equivalents issued by the Parent, and (c) any
payment or prepayment of principal, premium (if any), interest, fees or other
charges on, or redemption, purchase, retirement, defeasance, sinking fund or
similar payment with respect to, any Subordinated Indebtedness (other than, in
the case of clause (c), any required payments of interest).
"Revolving Credit Borrowing" means an advance consisting of
Revolving Credit Loans made on the same day by the Revolving Credit Lenders
ratably according to their respective Revolving Credit Commitments.
"Revolving Credit Commitment" means, as to each Revolving
Credit Lender, the commitment of such Lender to make Revolving Credit Loans to
the Borrowers in the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule I under the caption
"Revolving Credit Commitment" or in the most recent Assignment and Acceptance
executed by such Lender, as such amount may be reduced or modified pursuant to
this Agreement.
"Revolving Credit Lender" means each Lender having a Revolving
Credit Commitment or, if the Revolving Credit Commitments have been reduced to
zero, having an outstanding Revolving Credit Loan.
"Revolving Credit Loan" means a Loan made by a Lender to a
Borrower pursuant to Section 2.1.
"Revolving Credit Note" means a promissory note payable,
jointly and severally, by the Borrowers to the order of any Revolving Credit
Lender, evidencing the aggregate Indebtedness of the Borrowers to such Lender
resulting from the Revolving Credit Loans made by such Lender.
"Secured Parties" means the Lenders and the Agent.
"Security Agreement" means a Security Agreement executed and
delivered by a Borrower on the Closing Date or by any Additional Subsidiary from
time to time after the Closing Date in accordance with Section 6.8,
substantially in the form of Exhibit D annexed hereto (which Security Agreement
shall, in the case of the Parent or SC, constitute an Amendment Document), as
such Security Agreement may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"Selling Lender" has the meaning specified in Section 11.7(a).
"Solvent" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of liabilities
(including contingent and unliquidated liabilities) of such Person as of such
date and that, as of such date, such Person is able to pay all liabilities of
such Person as such liabilities mature and does not have unreasonably small
capital. In computing the amount of contingent or unliquidated
32
<PAGE> 42
liabilities at any time, such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Specified Schedules" has the meaning specified in Section
3.3(a).
"Stock" means shares of capital stock, beneficial, partnership
or membership interests, participations or other equivalent equity interests
(regardless of how designated) of or in a corporation or equivalent entity,
whether voting or non-voting, and includes common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any Stock, whether or not presently convertible, exchangeable or
exercisable.
"Subordinated Indebtedness" means (i) the Subordinated Notes
and (ii) any Indebtedness of any of the Borrowers or any of their respective
Subsidiaries subordinated in right of payment to the Obligations.
"Subordinated Notes" means the 10-1/2% Senior Subordinated
Notes due 2005 issued by the Parent and guaranteed by each of the other Original
Borrowers pursuant to the Indenture.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company or other business entity of
which an aggregate of 50% or more of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors, managers, trustees
or other controlling persons, is, at the time, directly or indirectly, owned or
controlled by such Person and/or one or more Subsidiaries of such Person
(irrespective of whether, at the time, Stock of any other class or classes of
such entity shall have or might have voting power by reason of the happening of
any contingency).
"Subsidiary Assumption Agreement" means a Subsidiary
Assumption Agreement to be executed and delivered by any Additional Subsidiary
and all other then existing Borrowers from time to time after the Closing Date
in accordance with Section 6.8, substantially in the form of Exhibit J annexed
hereto, as such Subsidiary Assumption Agreement may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Tax Affiliate" means, as to any Person, (a) any Subsidiary of
such Person, and (b) any Affiliate of such Person with which such Person files
or is eligible to file consolidated, combined or unitary tax returns.
"Tax Returns" has the meaning specified in Section 4.3.
"Taxes" has the meaning specified in Section 2.12(a).
33
<PAGE> 43
"Term A Loan" means a Loan made to the Borrowers pursuant to
Section 2.2(a).
"Term A Loan Borrowing" means a Borrowing consisting of Term A
Loans made on the Closing Date by the Term A Loan Lenders ratably according to
their respective Term A Loan Commitments on such date.
"Term A Loan Commitment" means, as to each Term A Loan Lender,
the commitment of such Lender to make Term A Loans to the Borrowers in the
aggregate principal amount outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule I under the caption "Term A Loan
Commitments" or in the most recent Assignment and Acceptance executed by such
Lender, as such amount may be reduced or modified pursuant to this Agreement.
"Term A Loan Lender" means each Lender having a Term A Loan
Commitment or, if the Term A Loan Commitments have been reduced to zero, having
an outstanding Term A Loan.
"Term A Loan Note" means a promissory note of the Borrowers
payable to the order of any Term A Loan Lender, evidencing the Indebtedness of
the Borrowers to such Lender resulting from the Term A Loan made by such Lender.
"Term B Loan" means a Loan made to the Borrowers pursuant to
Section 2.2(b).
"Term B Loan Borrowing" means a Borrowing consisting of Term B
Loans made on the Debt Repurchase Closing Date by the Term B Loan Lenders
ratably according to their respective Term B Loan Commitments on such date.
"Term B Loan Commitment" means, as to each Term B Loan Lender,
the commitment of such Lender to make Term B Loans to the Borrowers in the
aggregate principal amount outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule I under the caption "Term B Loan
Commitments" or in the most recent Assignment and Acceptance executed by such
Lender, as such amount may be reduced or modified pursuant to this Agreement.
"Term B Loan Lender" means a Lender having a Term B Loan
Commitment or, if the Term B Loan Commitments have been reduced to zero, having
an outstanding Term B Loan.
"Term B Loan Note" means a promissory note of the Borrowers
payable to the order of any Term B Loan Lender, evidencing the Indebtedness of
the Borrowers to such Lender resulting from the Term B Loan made by such Lender.
"Term Loans" means, collectively, the Term A Loans and the
Term B Loans.
34
<PAGE> 44
"Term Loan Lenders" means, collectively, the Term A Loan
Lenders and the Term B Loan Lenders.
"Termination Date" means the earliest of (a) the date that is
four years after the Closing Date, (b) the date on which the Loans become or are
declared due and payable pursuant to Section 9.2, and (c) the date of
indefeasible prepayment in full by the Borrowers of the Loans and the permanent
reduction of the Revolving Credit Commitments and the Term B Loan Commitments to
zero dollars ($0).
"Theater" means any building and related improvements or
complex of buildings and related improvements containing one or more movie
screens and operated as a movie theater.
"Theater Level Cash Flow" or "TLCF" means, with respect to any
Mortgaged Property, for any period, (a) the revenues of the Parent and its
Subsidiaries generated for such period by the Theater constituting such
Mortgaged Property less (b) the cost of operations (including film rentals,
concession supplies, salaries and wages, facility leases, advertising and
utilities but excluding depreciation and amortization and general and
administrative expense) of the Parent and its Subsidiaries allocable to such
Theater for such period, less (c) if such Mortgaged Property is a Leasehold
Property and the Lease in respect thereof is a Capitalized Lease, all interest
and principal amounts on the Capitalized Lease Obligations in respect of such
Capitalized Lease of the Parent and its Subsidiaries for such period, all
determined on a consolidated basis (i) with any volume discounts or similar
pricing matters associated with film rental, advertising or other expenses
incurred as a cost of operating such Theater and one or more other Theaters
being allocated equitably on a pro rata basis among all such Theaters and (ii)
otherwise in conformity with GAAP; provided, however, that if (x) such Theater
was first constructed during such period or was first acquired by any Borrower
during such period and (y) such Theater has been in operation by any Borrower
during at least three full consecutive calendar months ending on such
determination date, "TLCF" with respect to such Mortgaged Property determined as
aforesaid for such period shall be adjusted, in a manner satisfactory to the
Agent in its reasonable credit judgment, by annualizing the TLCF with respect to
such Mortgaged Property as if such Theater had been in operation for the entire
period.
"Title IV Plan" means a Pension Plan, other than a
Multiemployer Plan, which is subject to Title IV.
"Total Consideration" means, with respect to any acquisition
by any Loan Party of any Theaters and related assets, the total consideration
paid or payable by Loan Parties (including and without duplication any assumed
liabilities, any payments paid or payable under any non-competition agreements,
any other paid or payable deferred purchase price, and the Fair Market Value as
of the date of such acquisition of any non-cash assets being transferred by Loan
Parties) in connection with such acquisition.
35
<PAGE> 45
"Unfunded Pension Liability" means, as to any Loan Party at
any time, the aggregate amount, if any, of the sum of (a) the amount by which
the present value of all accrued benefits under each Title IV Plan of such Loan
Party, any of its Subsidiaries or any ERISA Affiliate exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, and (b) for a period of five years following a
transaction reasonably likely to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Loan Party,
any of its Subsidiaries or any ERISA Affiliate as a result of such transaction.
"Unused Portion" has the meaning specified in Section
2.8(a)(i).
"Welfare Benefit Plan" means an employee welfare benefit plan,
as defined in Section 3(1) of ERISA, to which any Loan Party or any of its
Subsidiaries maintains, contributes to, contributed to within the six year
period prior to the Closing Date, or has an obligation to contribute to, on
behalf of its former or active employees (or their beneficiaries).
"Withdrawal Liability" means, as to any Loan Party at any
time, the aggregate amount of the liabilities of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any
increase in contributions required to be made pursuant to Section 4243 of ERISA,
with respect to all Multiemployer Plans.
"Year 2000 Compliant" means the ability of hardware, firmware
or software systems associated with information processing and delivery,
operations or services, operated by, provided to or otherwise necessary to the
business or operations of the Borrowers taken as one enterprise to recognize and
properly perform date-sensitive functions involving certain dates prior to, and
at any date after, December 31, 1999.
1.2. Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including"; the words "to" and "until" each mean "to but
excluding"; the word "through" means "to and including".
1.3. Accounting Terms. Subject to Section 11.16, all accounting terms
not specifically defined herein shall be construed in conformity with GAAP and
all accounting determinations required to be made pursuant hereto shall, unless
expressly otherwise provided herein, be made in conformity with GAAP.
1.4. Certain Terms.
(a) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole, and not to any
particular Article, Section, subsection or clause in this Agreement. References
herein to an Exhibit,
36
<PAGE> 46
Schedule, Article, Section, subsection or clause refer to the appropriate
Exhibit or Schedule to, or Article, Section, subsection or clause in this
Agreement.
(b) The terms "Lender" and "Agent" include their respective
successors and the term "Lender" includes each assignee of such Lender who
becomes a party hereto pursuant to Section 11.9.
(c) Upon the appointment of any successor Agent pursuant to
Section 10.6, references to Farallon in Section 10.3 shall be deemed to refer to
the successor then acting as the Agent.
(d) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular; references to the
singular include the plural; the term "including" is not limiting; and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or."
ARTICLE II
THE LOANS
2.1. The Revolving Credit Loans. On the terms and subject to the
conditions contained in this Agreement, each Revolving Credit Lender severally
agrees to make loans (each a "Revolving Credit Loan") to the Borrowers from time
to time on any Business Day during the period from immediately after the funding
of the Term A Loans pursuant to Section 2.2(a) on the Closing Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
such Lender's Revolving Credit Commitment; provided, however, that at no time
shall any Revolving Credit Lender be obligated to make a Revolving Credit Loan
in excess of such Revolving Credit Lender's Available Revolving Credit. Within
the limits of each Lender's Revolving Credit Commitment, amounts prepaid
pursuant to Section 2.7(b) may be reborrowed under this Section 2.1. Amounts
prepaid pursuant to Section 2.8 (other than Section 2.8(e)) may not be
reborrowed under this Section 2.1.
2.2. The Term Loans.
(a) On the terms and subject to the conditions contained in
this Agreement, each Term A Loan Lender severally agrees to make a loan (each a
"Term A Loan") to the Borrowers on the Closing Date, in an amount not to exceed
the lesser of (i) its Term A Loan Commitment and (ii) such Term A Loan Lender's
Ratable Portion of the Borrowing Base (Unadjusted) at such time. Amounts prepaid
pursuant to Section 2.7(c) or Section 2.8 may not be reborrowed under this
Section 2.2.
(b) On the terms and subject to the conditions contained in
this Agreement, unless the Termination Date occurs on or prior to the Debt
Repurchase Closing Date, each Term B Loan Lender severally agrees to make a loan
(each a "Term B Loan") to the Borrowers on the Debt Repurchase Closing Date, in
an amount not to
37
<PAGE> 47
exceed its Term B Loan Commitment; provided, however, that Term B Loan Lender
shall not be obligated to make a Term B Loan in excess of such Term B Loan
Lender's Available Term B Loan Credit. Amounts prepaid pursuant to Section
2.7(d) or Section 2.8 may not be reborrowed under this Section 2.2.
2.3. Making the Revolving Credit Loans and the Term Loans.
(a) Each Revolving Credit Borrowing shall be made on notice,
given by the Borrowers to the Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the date of the proposed Revolving
Credit Borrowing. Each such notice (a "Notice of Borrowing") shall be
substantially in the form of Exhibit B, specifying therein (i) the date of such
proposed Revolving Credit Borrowing, which date shall be either the Closing Date
or the first Business Day of a calendar week, and (ii) the aggregate amount of
such proposed Revolving Credit Borrowing.
(b) The Term A Loan Borrowing shall be made upon receipt of a
Notice of Borrowing, given by the Borrowers to the Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the Closing Date.
The Notice of Borrowing shall specify therein (i) the Closing Date and (ii) the
aggregate amount of such proposed Term A Loan Borrowing, which amount shall not
exceed $17,000,000.
(c) The Term B Loan Borrowing shall be made upon receipt of a
Notice of Borrowing, given by the Borrowers to the Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the Debt Repurchase
Closing Date. The Notice of Borrowing shall specify therein (i) the Debt
Repurchase Closing Date and (ii) the aggregate amount of such proposed Term B
Loan Borrowing, which amount shall not exceed the lower of (x) $18,000,000 and
(y) the Borrowing Base (Term B Loans).
(d) The Agent shall give to each Lender prompt notice of the
Agent's receipt of a Notice of Borrowing. Each Lender shall, before 11:00 A.M.
(New York City time) on the date of each proposed Borrowing, make available for
the account of its Domestic Lending Office to the Agent at an account designated
from time to time by the Agent at a bank in New York City, in immediately
available funds, such Lender's Ratable Portion of such proposed Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available to
the Borrowers. The Borrowers agree to establish and maintain a single Designated
Account for the purpose of receiving the proceeds of the Borrowings requested by
the Borrowers and made by the Lenders hereunder. Unless otherwise agreed by the
Agent and the Borrowers, any Advance requested by the Borrowers and Borrowings
made by the Lenders hereunder shall be made to the Designated Account.
(e) Each Borrowing shall be in an aggregate amount of not less
than $100,000 or an integral multiple of $10,000 in excess thereof.
38
<PAGE> 48
(f) The Borrowers may request no more than one Revolving
Credit Borrowing be made in any calendar week.
(g) Each Notice of Borrowing shall be irrevocable and binding
on the Borrowers.
(h) Unless the Agent shall have received notice from a Lender
prior to the date of any proposed Borrowing that such Lender will not make
available to the Agent such Lender's Ratable Portion of such Borrowing, the
Agent may assume that such Lender has made such Ratable Portion available to the
Agent on the date of such Borrowing in accordance with this Section 2.3 and the
Agent may, in reliance upon such assumption, make available to the Borrowers on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such Ratable Portion available to the Agent, such Lender and
the Borrowers severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date such amount is
repaid to the Agent, at (i) in the case of the Borrowers, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall so repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement and, if
the Borrowers shall have so repaid such corresponding amount to the Agent, then
the Agent shall forthwith pay such amount to the Borrowers. If the Borrowers
shall repay to the Agent such corresponding amount, such payment shall not
relieve such Lender of any obligation it may have to the Borrowers hereunder.
(i) The failure of any Lender (a "Non-Funding Lender") to make
the Loan or any payment required by it hereunder, shall not relieve any other
Lender of its obligations to make such Loan on such date, but no Lender shall be
responsible for the failure of any Non-Funding Lender to make a Loan required
under this Agreement. Notwithstanding anything set forth herein to the contrary,
a Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a "Lender" (or be included in the
calculation of "Required Lenders", "Required Term A Loan Lenders, " "Required
Term B Loan Lenders" or "Required Revolving Credit Lenders" hereunder) for any
voting or consent rights under or with respect to any Loan Document.
2.4. Fees.
(a) The Borrowers agree to pay to each Revolving Credit Lender
a commitment fee on the average daily unused portion of such Lender's Revolving
Credit Commitment from the Closing Date until the Termination Date at the rate
of 1/2 of 1% (0.500%) per annum, payable (i) on the Interest Payment Date in
each month during the term of such Lender's Revolving Credit Commitment,
commencing October 31, 1999, (ii) on the date of any reduction of the Revolving
Credit Commitments pursuant to Section 2.5 and (iii) on the Termination Date.
39
<PAGE> 49
(b) The Borrowers agree to pay to each Term B Loan Lender a
commitment fee on the average daily unused portion of such Lender's Term B Loan
Commitment from the Closing Date until the Debt Repurchase Closing Date at the
rate of 1/2 of 1% (0.500%) per annum, payable (i) on the Interest Payment Date
in each month during the term of such Lender's Term B Loan Commitment,
commencing October 31, 1999, (ii) on the date of any reduction of the Term B
Loan Commitments pursuant to Section 2.5 and (iii) on the Debt Repurchase
Closing Date.
(c) The Borrowers agree to pay to the Agent on the Closing
Date, for the ratable benefit of the Secured Parties, a closing fee in the
amount of $750,000.
2.5. Reduction and Termination of the Commitments.
(a) The Borrowers may, upon at least three Business Days'
prior notice to the Agent, terminate in whole or reduce ratably in part the
unused portions of the respective Revolving Credit Commitments of the Revolving
Credit Lenders; provided, however, that each partial reduction shall be in the
aggregate amount of not less than $1,000,000 or an integral multiple of
$1,000,000 in excess thereof.
(b) The Borrowers may, upon at least three Business Days'
prior notice to the Agent, terminate in whole or reduce ratably in part the
unused portions of the respective Term B Loan Commitments of the Term B Loan
Lenders; provided, however, that each partial reduction shall be in the
aggregate amount of not less than $1,000,000 or an integral multiple of
$1,000,000 in excess thereof.
(c) The then current Revolving Credit Commitments shall be
reduced on each date on which a prepayment of Revolving Credit Loans is made
pursuant to Section 2.8(a), (b), (c) or (d) in the amount of such prepayment
(and the Revolving Credit Commitment of each Lender shall be reduced by its
Ratable Portion of such amount).
(d) The Term B Loan Commitments shall be reduced to zero upon
the funding of the Term B Loans on the earlier of the Debt Repurchase Closing
Date and the Termination Date or, if earlier, the date on which the Term B Loan
Commitments are terminated pursuant to Section 9.2.
(e) The Term A Loan Commitments shall be reduced to zero upon
the funding of the Term A Loans on the Closing Date.
(f) The Revolving Credit Commitment of each Revolving Credit
Lender shall be reduced to zero on the Termination Date or, if earlier, the date
on which the Revolving Credit Commitments are terminated pursuant to Section
9.2.
2.6. Repayment of Loans; Evidence of Debt.
(a) The Borrowers shall repay the entire unpaid principal
amount of the Revolving Credit Loans on the Termination Date, together with
accrued interest
40
<PAGE> 50
(including interest accrued (and not yet add principal) pursuant to Section
2.9(b)) to the Termination Date.
(b) The Borrowers shall repay the entire unpaid principal
amount of the Term Loans on the Termination Date, together with accrued interest
(including interest accrued (and not yet add principal) pursuant to Section
2.9(b)) to the Termination Date.
(c) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrowers to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(d) The Agent shall maintain accounts in accordance with its
usual practice in which it will record (i) the amount of each Loan made, (ii)
the amount of any principal or interest due and payable by the Borrowers to each
Lender hereunder and (iii) the amount of any sum received by the Agent hereunder
from the Borrowers and each Lender's share thereof, if applicable.
(e) The entries made in the accounts maintained pursuant to
paragraphs (c) and (d) of this Section 2.6 shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided, however, that the failure of any Lender
or the Agent to maintain such accounts or any error therein shall not in any
manner affect the obligations of the Borrowers to repay the Loans in accordance
with their terms.
(f) Notwithstanding any other provision of this Agreement, in
the event that any Lender requests that the Borrowers execute and deliver a
promissory note or notes payable to such Lender to evidence the indebtedness
owing to such Lender by the Borrowers hereunder, the Borrowers will promptly
execute and deliver a note or notes to such Lender evidencing any Term A Loans,
Term B Loans and Revolving Credit Loans, as the case may be, of such Lender,
substantially in the forms of Exhibit A-1, A-2 or A-3, respectively, and the
interests evidenced by such note or notes shall at all times (including after
assignment of all or part of such interests) be evidenced by one or more notes
payable to the payee named therein or its registered assigns.
2.7. Optional Prepayments.
(a) The Borrowers shall have no right to prepay the principal
amount of any Revolving Credit Loan or any Term Loan other than as provided in
this Section 2.7.
(b) The Borrowers may, upon at least one Business Day's prior
notice to the Agent, stating the proposed date and aggregate principal amount of
the prepayment, prepay the outstanding principal amount of the Revolving Credit
Loans in whole or ratably in part, together with accrued interest (including
interest accrued (and
41
<PAGE> 51
not yet added to principal) pursuant to Section 2.9(b)) to the date of such
prepayment on the principal amount prepaid; provided, however, that each partial
prepayment shall be in an aggregate amount not less than $100,000 or integral
multiples of $10,000 in excess thereof. Upon the giving of such notice of
prepayment, the principal amount of the Revolving Credit Loans specified to be
prepaid shall become due and payable on the date specified for such prepayment.
(c) The Borrowers may, upon at least two Business Days' prior
notice to the Agent stating the proposed date and aggregate principal amount of
the prepayment, prepay the outstanding principal amount of the Term A Loans, in
whole or ratably in part, together with (x) a prepayment premium of 1.00% of the
principal amount of Term A Loans prepaid and (y) accrued interest (including
interest accrued (and not yet added to principal) pursuant to Section 2.9(b)) to
the date of such prepayment on the principal amount prepaid; provided, however,
that each partial prepayment shall be in an aggregate amount not less than
$1,000,000 or integral multiples of $1,000,000 in excess thereof. Upon the
giving of such notice of prepayment, the principal amount of the Term A Loans
specified to be prepaid shall become due and payable on the date specified for
such prepayment.
(d) The Borrowers may, upon at least two Business Days' prior
notice to the Agent stating the proposed date and aggregate principal amount of
the prepayment, prepay the outstanding principal amount of the Term B Loans, in
whole or ratably in part, together with (x) a prepayment premium of 1.00% of the
principal amount of Term B Loans prepaid and (y) accrued interest (including
interest accrued (and not yet added to principal) pursuant to Section 2.9(b)) to
the date of such prepayment on the principal amount prepaid; provided, however,
that each partial prepayment shall be in an aggregate amount not less than
$1,000,000 or integral multiples of $1,000,000 in excess thereof. Upon the
giving of such notice of prepayment, the principal amount of the Term B Loans
specified to be prepaid shall become due and payable on the date specified for
such prepayment.
2.8. Mandatory Prepayments.
(a) The Borrowers shall forthwith prepay the Loans upon
receipt by any Borrower or any of its Subsidiaries of Asset Sale Proceeds in an
amount equal to such Asset Sale Proceeds. Any such mandatory prepayment shall be
applied in accordance with Section 2.8(g) below and shall include, to the extent
any Term Loans are prepaid, a prepayment premium of 1.00% of the principal
amount of Term Loans prepaid. Notwithstanding any provision of this Agreement to
the contrary, for purposes of this Section 2.8(a), so long as no Default or
Event of Default shall have occurred and be continuing at the time the
applicable Asset Sale is consummated, "Asset Sale Proceeds" shall not include:
(i) Asset Sale Proceeds from an Asset Sale permitted under
Section 7.6(c) which Asset Sale Proceeds are reinvested in Permitted
Theater Investments, Permitted Acquisitions or Consolidated Maintenance
Capital
42
<PAGE> 52
Expenditures permitted pursuant to Section 7.5 within 180 days of such
sale; provided that any Asset Sale Proceeds not so reinvested (the
"Unused Portion") shall be deemed Asset Sale Proceeds for purposes of
this Section 2.8(a) on the earlier of (1) the expiration of such
180-day period or (2) the date on which such Borrower or Subsidiary
determines that the Unused Portion will not be so reinvested;
(ii) Asset Sale Proceeds from the sale of a Theater
permitted under Section 7.6(c) consummated pursuant to a Permitted
Asset Swap to the extent such proceeds are applied in payment of the
purchase price for the related Permitted Acquisition; provided that if
the related acquisition is not consummated prior to the date 30 days
after such sale such Asset Sale Proceeds shall, subject to clause (i)
above, be deemed Asset Sale Proceeds for purposes of this Section
2.8(a) on such date;
(iii) Asset Sale Proceeds consisting of any award of
compensation for any asset or property or group thereof taken by
condemnation or eminent domain and any insurance proceeds for the loss
of or damage to any asset or property or group thereof (other than any
insurance proceeds used for repair or replacement in accordance with
paragraph (iv) of this Section 2.8(a)) to the extent that (A) such
awards or proceeds do not exceed, in the aggregate, $100,000 in any
Fiscal Year, (B) such awards or proceeds are used to replace or repair
such asset or property and (C) such replacement or repair is completed
within 180 days of receipt of any such awards or proceeds; provided
that at such time as any repair or replacement is abandoned or is
otherwise discontinued or is not diligently pursued, as determined by
the Agent in its sole but reasonable discretion, the unused portion of
such awards or proceeds shall constitute Asset Sale Proceeds at such
time for purposes of this Section 2.8; or
(iv) Asset Sale Proceeds consisting of any insurance
proceeds for the loss of or damage to any asset or property or group
thereof constituting a Leasehold Property or equipment used in
connection therewith to the extent that (A) such proceeds are used to
replace or repair such asset or property, (B) such proceeds do not
exceed in any Fiscal Year in the aggregate $500,000 or such greater
amount as the Agent has consented to for such Fiscal Year in writing,
(C) such proceeds are required by the terms of the related Lease to be
applied to the replacement or repair of such Leasehold Property or
equipment used in connection therewith, (D) the Borrowers shall have
delivered to the Agent written notice of receipt of such proceeds
promptly after receipt thereof, together with a written certificate of
the Borrowers that: (1) such proceeds shall be substantially sufficient
to complete such replacement or repair in accordance with all
applicable laws, regulations and ordinances; and (2) to the best
knowledge of the Borrowers, no Default or Event of Default has arisen
or will arise as a result of such loss, damage, replacement or repair,
(E) pending application of such proceeds to the required replacement or
repair, unless the proceeds are required to be remitted to and held by
the lessor under the terms of the related Lease until
43
<PAGE> 53
used in payment for such replacement or repair, the Borrowers shall
within 2 Business Days of receipt thereof, deposit such proceeds with
the Agent pursuant to an agreement reasonably satisfactory to the Agent
providing that such proceeds and the earnings thereon may be disbursed
therefrom solely in payment for such replacement or repair or, upon the
occurrence and during the continuance of an Event of Default, to
repayment of the Obligations in accordance with Section 2.11(e), and
(F) such replacement or repair is completed within 180 days of receipt
of any such proceeds; provided that at such time as any repair or
replacement is abandoned or is otherwise discontinued or is not
diligently pursued, as determined by the Agent in its sole but
reasonable discretion, the unused portion of such proceeds shall
constitute Asset Sale Proceeds at such time for purposes of this
Section 2.8.
(b) The Borrowers shall forthwith prepay the Loans upon
receipt by any Borrower or any of its Subsidiaries of proceeds (net of
underwriting discounts and commissions and other reasonable costs and expenses
(including reasonable legal fees and expenses) associated therewith) of any
issuance of any debt securities (including any Stock Equivalents constituting,
or offered as a unit or otherwise with, debt securities) by any Borrower or any
of its Subsidiaries (other than Indebtedness permitted under Section 7.2(d),
(e), (f), (i), (k) or (l)) in an amount equal to such net proceeds of such
issuance. Any such mandatory prepayment shall be applied in accordance with
Section 2.8(g) below and shall include, to the extent any Term Loans are
prepaid, a prepayment premium of 1.00% of the principal amount of Term Loans
prepaid.
(c) The Borrowers shall, upon receipt by any Borrower or any
of its Subsidiaries of any reversion from a defined benefit plan, prepay the
Term Loans or, if there are no Term Loans outstanding, the Revolving Credit
Loans in an amount equal to the amount of such reversion so received. For
purposes of this subsection (b), reversion is defined as the amount of surplus
assets which, upon the termination of any defined benefit plan, revert to any
Borrower or any of its Subsidiaries (net of any taxes, after taking into account
any available tax credits or deductions, and excise taxes or penalties thereon).
Any such mandatory prepayment shall be applied in accordance with Section 2.8(g)
below and shall include, to the extent any Term Loans are prepaid, a prepayment
premium of 1.00% of the principal amount of Term Loans prepaid.
(d) Upon a Change of Control, the Borrowers shall forthwith
(i) notify the Agent in writing of the Agent's right to elect to have all of the
Loans prepaid, and (ii) upon receiving a request from the Agent so to have the
Loans prepaid, prepay all of the Loans, together with (x) a prepayment premium
of 1.00% of the principal amount of any Term Loans prepaid and (y) accrued
interest (including interest accrued (and not yet added to principal) pursuant
to Section 2.9(b)) to the date of such prepayment.
(e) If, at any time, including on the date of any reduction of
any Commitment pursuant to Section 2.5, the aggregate unpaid principal amount of
the Revolving Credit Loans of any Revolving Credit Lender at such time exceeds
the lower of (x) such Revolving Credit Lender's Ratable Portion of the Borrowing
Base (Revolving
44
<PAGE> 54
Credit Loans) at such time (or, if the Borrowing Base (Revolving Credit Loans)
is negative, zero) and (y) the Revolving Credit Commitment of such Revolving
Credit Lender at such time, the Borrowers shall forthwith prepay such Revolving
Credit Loans then outstanding in an amount equal to such excess, together with
accrued interest (including interest accrued (and not yet added to principal)
pursuant to Section 2.9(b)) to the date of such repayment.
(f) If, at any time, the aggregate unpaid principal amount of
Term Loans outstanding at such time exceeds the Borrowing Base (Unadjusted) at
such time, the Borrowers shall forthwith prepay the Term Loans in an amount
equal to such excess, together with (x) a prepayment premium of 1.00% of the
principal amount of Term Loans prepaid and (y) accrued interest (including
interest accrued (and not added to principal) pursuant to Section 2.9(b)) to the
date of such repayment.
(g) Subject to Section 2.11(e), any prepayments made by the
Borrowers pursuant to subsection (a), (b) or (c) of this Section 2.8 shall be
applied as follows: first, to fees and reimbursable expenses of the Agent then
due and payable pursuant to any of the Loan Documents; second, to interest
otherwise then due and payable on the Term Loans; third, to interest otherwise
then due and payable on the outstanding Revolving Credit Loans; fourth, to the
principal balance of the Term Loans, together with (x) a prepayment premium of
1.00% of the principal amount of Term Loans prepaid and (y) accrued interest
(including interest accrued (and not yet added to principal) pursuant to Section
2.9(b)) to the date of prepayment of such Loans on the amount prepaid, until the
same shall have been paid in full; and fifth, to the principal balance of
Revolving Credit Loans, together with accrued interest (including interest
accrued (and not yet added to principal) pursuant to Section 2.9(b)) to the date
of prepayment of such Loans on the amount prepaid, until the same shall have
been paid in full.
(h) All repayments and prepayments of Term Loans other than
pursuant to Section 2.7 shall be applied pro rata among all of the Term A Loans
and Term B Loans then outstanding in accordance with the respective unpaid
principal balances thereof.
(i) Nothing in this Section 2.8 shall constitute, or be deemed
to constitute, a consent to, or authorize, or be deemed to authorize, any sale
of assets or securities or other transaction otherwise prohibited by this
Agreement.
2.9. Interest.
(a) The Borrowers shall pay interest in cash on the unpaid
principal amount of each Loan from the date of such Loan until the principal
amount thereof shall have been paid in full at a rate of 12.875% (plus, during
the continuance of an Event of Default, 2.000%) per annum, payable monthly on
each Interest Payment Date, on the Termination Date and on the date any Loan is
paid in full; provided, however, that any amount of principal or interest
thereon which is not paid when due (whether at stated
45
<PAGE> 55
maturity, by acceleration or otherwise) shall bear interest from the date on
which such amount is due until such amount is paid in full, payable on demand,
at a rate per annum equal at all times to 17.500% per annum.
(b) In addition to the interest payable in cash on each Loan
pursuant to Section 2.9(a), interest shall accrue on each Loan on the unpaid
principal amount thereof from the date thereof until the principal amount
becomes due and payable, at the rate of 2.625% per annum, such interest to be
compounded monthly as of the open of business on each Interest Payment Date, at
which time such interest having accrued on such Loan during the Interest Period
ending on such Interest Payment Date shall be added to the principal amount of
such Loan.
(c) It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that, notwithstanding any
provisions to the contrary in this Agreement, the Notes, the Loan Documents or
in any of the documents or instruments otherwise relating hereto, in no event
shall this Agreement, the Notes, the Loan Documents or such instruments or
documents relating hereto require the payment or permit the collection of
interest in excess of the Highest Lawful Rate. If any such excess of interest is
contracted for, charged, taken, reserved or received under this Agreement, any
Notes, the Loan Documents or any of the documents or instruments otherwise
relating hereto, or if the maturity of the Loans is accelerated in whole or in
part, or if all or part of the principal of or interest on the Loans shall be
prepaid, so that under any of such circumstances the amount of interest
contracted for, charged, taken, reserved or received under this Agreement, any
Note, Loan Documents or any of the documents or instruments otherwise relating
hereto, on the amount of principal actually outstanding from time to time under
any Loan shall exceed the Highest Lawful Rate permitted by applicable usury
laws, then in any such event (i) the provisions of this paragraph shall govern
and control, (ii) neither the Borrowers nor any other person or entity now or
hereafter liable for the payment of the Loans shall be obligated to pay the
amount of such interest to the extent that it is in excess of the Highest Lawful
Rate allowed under the applicable usury laws, (iii) any such excess which may
have been collected either shall be applied at final maturity of said
Indebtedness as a credit against the then unpaid principal amount of the
applicable Loan or refunded to the person paying the same, at the holder's
option, and (iv) the effective rate of interest shall be automatically reduced
to the Highest Lawful Rate of interest allowed under the applicable usury laws
as now or hereafter construed by the courts having jurisdiction thereof. It is
further agreed that, without limitation of the foregoing, all calculations of
the rate of interest contracted for, charged, taken, reserved or received under
this Agreement, the Notes, the Loan Documents or any of the documents or
instruments otherwise relating hereto, for the purpose of determining whether
such rate exceeds the Highest Lawful Rate of interest, shall be made to the
extent permitted by the applicable usury laws, by amortizing, prorating,
allocating and spreading in equal or unequal parts during the period of the full
stated term of the applicable Loan all interest at any time contracted for,
charged, taken, reserved or received from the Borrowers or otherwise by the
holder or holders thereof in connection with the applicable Loan.
46
<PAGE> 56
2.10. Capital Adequacy. If at any time any Lender determines that (a)
the adoption of or any change in or in the interpretation of any law, treaty or
governmental rule, regulation or order regarding capital adequacy after the
Closing Date, (b) compliance with any such law, treaty, rule, regulation, or
order, or (c) compliance with any guideline or request or directive from any
central bank or other Governmental Authority (whether or not having the force of
law) shall have the effect of (i) reducing the amount of any payment (whether of
principal, interest or otherwise) receivable by such Lender or otherwise
reducing the rate of return on such Lender's (or any corporation controlling
such Lender's) capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such adoption, change, compliance or interpretation (taking into consideration
such Lender's or such controlling corporation's policies with respect to capital
adequacy), (ii) increasing the cost to such Lender of making or maintaining a
Loan, or (iii) requiring a payment in respect of a Loan, then, within 10
Business Days following demand from time to time by such Lender (with a copy of
such demand to the Agent), the Borrowers shall pay to the Agent for the account
of such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender for such reduction, additional cost
or payment. A certificate as to such amounts (in reasonable detail) submitted to
the Borrowers and the Agent by such Lender shall be conclusive and binding for
all purposes absent manifest error. Failure on the part of any Lender to demand
compensation for any increased costs, reduction in amounts received or
receivable or reduction in the rate of return earned on such Lender's or
controlling corporation's capital shall not constitute a waiver of such Lender's
rights to demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in rate of return. The protection under this
Section 2.10 shall be available to each Lender regardless of any possible
contention of the invalidity or inapplicability of any law, regulation or other
condition which shall give rise to any demand by such Lender for compensation
but if after receiving any such amounts such Lender determines that such
condition is not valid or applicable, such Lender shall refund amounts paid in
respect thereof.
2.11. Payments and Computations.
(a) The Borrowers shall make each payment hereunder (including
fees and expenses) not later than 11:00 A.M. (New York City time) on the day
when due, in Dollars to the Agent at an account designated from time to time by
the Agent at a bank in New York City in immediately available funds without
set-off or counterclaim. The Agent will promptly thereafter cause to be
distributed immediately available funds relating to the payment of principal or
interest or fees to the Lenders in accordance with their respective Ratable
Portions, for the account of their respective Domestic Lending Offices, and like
funds relating to the payment of any other amount payable to any Lender to such
Lender for the account of its Domestic Lending Office, in each case to be
applied in accordance with the terms of this Agreement; provided that amounts
payable pursuant to Sections 2.10 and 2.12 shall be paid only to the affected
Lender or Lenders. Payments received by the Agent after 1:00 P.M. (New York City
time) shall be deemed to be received on the next Business Day.
47
<PAGE> 57
(b) All computations of interest and of fees shall be made by
the Agent on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable. Each computation by the Agent of
interest or fees hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(c) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be.
(d) Unless the Agent shall have received notice from the
Borrowers to the Agent prior to the date on which any payment is due hereunder
that the Borrowers will not make such payment in full, the Agent may assume that
the Borrowers have made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrowers shall not have made such payment in full to the
Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon at the Federal Funds
Rate, for each day from the date such amount is distributed to such Lender until
the date such Lender repays such amount to the Agent.
(e) So long as no Event of Default shall have occurred and be
continuing, all payments and prepayments applied to a particular Loan (except as
set forth in Section 2.8) shall be applied ratably to the portion thereof held
by each Lender as determined by its Ratable Portion. As to all payments made
when an Event of Default shall have occurred and be continuing or following the
Termination Date, (i) the Borrowers and the Lenders hereby irrevocably waive the
right to direct the application of any and all payments received, and agree that
the Agent shall have the continuing exclusive right to apply any and all such
payments against the Obligations in such order as the Agent may deem advisable
and (ii) in the absence of a specific determination by the Agent with respect
thereto, payments shall be applied to amounts then due and payable in the
following order: first, to fees and the Agent's expenses reimbursable hereunder
and any expenses, disbursements and advances incurred by the Agent (including
any such advances constituting Loans) pursuant to Section 2.11(f) ; second, to
interest on the Loans, ratably in proportion to the interest accrued (including
interest accrued (and not yet added to principal) pursuant to Section 2.9(b)) as
to each Loan; third, to principal payments on the Loans, ratably to the
aggregate unpaid principal amount of the Loans; and fourth, to all other
Obligations including expenses of the Lenders to the extent reimbursable under
Section 11.5.
(f) The Agent is authorized to, and at its option may, make
advances on behalf of the Borrowers for the payment when due of all fees,
expenses, charges, costs, principal and interest incurred by the Borrowers
hereunder or under any of the other Loan Documents (including those expenses,
disbursements and advances incurred by the Agent pursuant to the Loan Documents
after the occurrence and during the
48
<PAGE> 58
continuance of an Event of Default which the Agent, in its sole discretion,
deems necessary or desirable to preserve or protect the Collateral or any
portion thereof or to enhance the likelihood, or maximize the amount, of
repayment of the Obligations) when and as the Borrowers fail to pay promptly any
such amounts. At the Agent's option and to the extent permitted by law, any
advances so made shall constitute Loans hereunder.
2.12. Taxes.
(a) Any and all payments by the Borrowers under each Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Lender
and the Agent, taxes measured by its net income, and franchise taxes imposed on
it, by the jurisdiction (or any political subdivision thereof) under the laws of
which such Lender or the Agent (as the case may be) is organized and, in the
case of each Lender, taxes measured by its net income, and franchise taxes
imposed on it, by the jurisdiction in which such Lender's Domestic Lending
Office is located (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrowers shall be required by law to deduct any Taxes from or in respect
of any sum payable under any Loan Document to any Lender or the Agent (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.12) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrowers shall make such deductions, (iii) the Borrowers shall
pay the full amount deducted to the relevant taxing authority or other authority
in accordance with applicable law, and (iv) the Borrowers shall deliver to the
Agent evidence of such payment; provided that the Borrowers shall not be
required to increase any such amounts payable to any Lender with respect to
Taxes that are attributable to such Lender's failure to comply with the
requirements of paragraph (f) of this Section 2.12.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies of the United States or any political subdivision thereof or
any applicable foreign jurisdiction, and all liabilities with respect thereto,
which arise from any payment made under any Loan Document or from the execution,
delivery or registration of, or otherwise with respect to, any Loan Document
(collectively, "Other Taxes").
(c) The Borrowers will indemnify each Lender and the Agent for
the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12) paid by
such Lender or the Agent (as the case may be) and any liability (including for
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date such Lender or
the Agent (as the case may be) makes written demand therefor.
49
<PAGE> 59
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrowers will furnish to the Agent, at its address referred to
in Section 11.3, the original or a certified copy of a receipt evidencing
payment thereof. If no Taxes are payable in respect of any payment hereunder,
the Borrowers will furnish to the Agent a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Agent, in either
case stating that such payment is exempt from or not subject to Taxes, provided,
however, that such certificate or opinion need only be given if: (i) any
Borrower makes any payment from any account located outside the United States,
or (ii) the payment is made by a payor that is not a United States Person. For
purposes of this Section 2.12, the terms "United States" and "United States
Person" shall have the meanings set forth in Section 7701 of the Code.
(e) Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 2.12 shall survive the payment in full of the
Obligations and shall survive until the statute of limitation with regard to any
Tax Returns.
(f) Prior to the Closing Date in the case of each Non-U.S.
Lender that is a signatory hereto, and on the date of the Assignment and
Acceptance pursuant to which it becomes a Lender in the case of each other
Non-U.S. Lender and from time to time thereafter if requested by the Borrowers
or the Agent, each Non-U.S. Lender that is entitled to an exemption from United
States withholding tax, or that is subject to such tax at a reduced rate under
an applicable tax treaty, shall provide the Agent and Borrowers with two copies
of either IRS Form 4224 or Form 1001, or in the case of a Non-U.S. Lender
claiming exemption under Section 871(h) or 881(c) of the Code with respect to
"portfolio interest," a Form W-8 or Form W-9, or other applicable form,
certificate or document prescribed by the IRS certifying as to such Non-U.S.
Lender's entitlement to such exemption from United States withholding tax or
reduced rate with respect to all payments to be made to such Non-U.S. Lender
hereunder. Unless the Borrowers and the Agent have received forms or other
documents satisfactory to them indicating that payments hereunder are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Borrowers or the Agent shall withhold
taxes from such payments at the applicable statutory rate in the case of
payments to or for any Non-U.S. Lender.
(g) If the Agent or any Lender determines that it has received
a refund in respect of any Taxes or Other Taxes as to which indemnification has
been paid by the Borrowers pursuant to this Section 2.12, it shall promptly
remit such refund to the Borrowers, net of all out-of-pocket expenses of the
Agent or such Lender; provided that the Borrowers upon the request of the Agent
or such Lender, agree promptly to return such refund (plus any interest) to such
party in the event such party is required to repay such refund to the relevant
taxing authority.
2.13. Maintenance of Loan Account. At the request of the Borrowers, to
facilitate and expedite the administration and accounting processes and
procedures of their borrowings under this Agreement, the Agent has agreed, in
lieu of maintaining
50
<PAGE> 60
separate loan accounts on the Agent's books in the name of each of the
Borrowers, that the Agent shall maintain a single account on its books in the
names of the Borrowers (the "Loan Account"). The Term Loans and all Revolving
Credit Loans, including accrued interest thereon, and any other payment
Obligations of the Borrowers shall be owed by the Borrowers jointly and
severally and charged to the Loan Account. The Loan Account will be credited
with all payments received by the Agent from any Borrower or for any Borrower's
account on the date received (or, if received on a day other than a Business Day
or after 1:00 P.M. (New York City time) on a Business Day, on the next Business
Day).
2.14. Joint Borrower Provisions.
(a) All Loans shall be made to, and all Obligations (including
those respecting fees and those pursuant to Section 11.5) shall be owed by, the
Borrowers on a joint and several basis. It is understood that the administration
of the credit facility on a collective borrowing basis as set forth in this
Agreement is solely as an accommodation to the Borrowers and at their request
and that the Secured Parties shall not incur any liability to the Borrowers as a
result thereof, nor shall the Secured Parties have any responsibility to inquire
into the correctness of the apportionment or allocation of, or any disposition
by, any Borrower of (i) any Loans made under this Agreement, or (ii) any of the
expenses and other items charged to the Loan Account pursuant to this Agreement.
(b) Each Borrower represents and warrants to the Secured
Parties that the request for collective administration of the Loans and other
financial accommodations to be made by the Secured Parties hereunder was made
because the Borrowers are engaged in an integrated operation that requires
financing on a basis permitting the availability of credit from time to time to
each Borrower. Each Borrower expects to derive benefit, directly or indirectly,
from such availability because the successful operation of the Borrowers is
dependent on the continued successful performance of the functions of the
integrated group.
2.15. Termination Upon Event of Default. If any Term Loans are
declared or become immediately due and payable pursuant to Section 9.2 upon the
occurrence of an Event of Default, and the Agent, in its reasonable credit
judgment, determines that such Event of Default arose out of Borrowers' attempt
to avoid the premium otherwise payable upon an optional or mandatory prepayment
of Term Loans prior to the stated maturity thereof as specified in Section
2.6(b) hereof, then in view of the impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of the lost profits of the Term Loan Lenders as a result
thereof, the Borrowers shall pay to the Agent, for the ratable benefit of the
Term Loan Lenders, upon the date such Term Loans so become due and payable, a
premium of 1.00% of the principal amount of the Term Loans so becoming due and
payable. Such premium shall be presumed to be the amount of damages sustained by
the Term B Loan Lenders as the result of the early payment of such Term Loans
and each Borrower agrees that it is reasonable under the circumstances currently
existing. Such premium provided for in this Section 2.15 shall be deemed
included in the Obligations.
51
<PAGE> 61
ARTICLE III
CONDITIONS TO LOANS
3.1. Conditions Precedent to Initial Loans. The effectiveness of this
amendment and restatement of the Existing Credit Agreement and the obligation of
each Lender on the Closing Date to make the Loans requested to be made by it,
are subject to, in the case of clauses (a) through (v), the Agent's receipt, on
or before the Closing Date, of the following documentary conditions precedent,
each dated the Closing Date unless otherwise indicated, in form and substance
satisfactory to the Agent and in sufficient copies for each Lender and, in the
case of clauses (w) through (y) to the satisfaction of the non-documentary
conditions precedent specified therein:
(a) Copies of each of the Existing Credit Documents, each duly
executed and, if recordable, acknowledged by the parties thereto and certified
to be true and correct and in full force and effect by the Secretary or
Assistant Secretary of each of the Borrowers; and evidence that counterparts of
each Existing Credit Document that is a mortgage in respect of an Initial Prior
Mortgaged Property have been recorded in the applicable real property records of
the jurisdiction in which such Mortgaged Property is located.
(b) Copies of the BTC/DLJ Assignment Agreement and each
BTC/DLJ Assignment Document, each duly executed and, if recordable, acknowledged
by the parties thereto and certified to be true and correct and in full force
and effect by the Secretary or Assistant Secretary of each of the Borrowers or
by an authorized officer of DLJ; and evidence that counterparts of each BTC/DLJ
Assignment Document that is an assignment of mortgage in respect of an Initial
Prior Mortgaged Property has been recorded in the applicable real property
records of the jurisdiction in which such Mortgaged Property is located.
(c) The Assignment Agreement and each other Assignment
Document, duly executed and delivered by DLJ, together with all of the original
promissory notes issued under the Existing Credit Agreement payable to BTC or
DLJ, each duly endorsed to the order of Farallon and marked "cancelled upon
renewal" and evidence that counterparts of each Assignment Document that is an
assignment of mortgage in respect of an Initial Prior Mortgaged Property have
been recorded in the applicable real property records of the jurisdiction in
which such Mortgaged Property is located.
(d) This Agreement, duly executed and delivered by the
Borrowers, and, for the account of each Lender requesting the same, a Note or
Notes of the Borrowers conforming to the requirements set forth herein and an
originally executed Notice of Borrowing.
(e) Copies of (i) the resolutions of the Board of Directors of
each Loan Party approving each Loan Document to which it is a party, and (ii)
all documents
52
<PAGE> 62
evidencing other necessary corporate action and required governmental and third
party approvals, licenses, consents and permits (other than any Landlord Consent
and Estoppels with respect to any Initial Mortgaged Property Collateral)
required to be obtained with respect to each Loan Document and the transactions
contemplated thereby (including a qualification pursuant to Section 25113 of the
California Corporate Securities Law exempting the Notes from the California
usury laws that shall not impose any terms or requirements as a condition
therefor that are not acceptable to the Agent), each certified as of the Closing
Date by the Secretary or Assistant Secretary of such Loan Party or, in the case
of clause (ii), of each Borrower as being a true and correct copy thereof and as
(to the knowledge thereof, in the case of clause (ii)) not having been modified,
amended or rescinded and being in full force and effect.
(f) A copy of the articles or certificate of incorporation (or
equivalent organizational documents) of each Borrower and of each of its
Subsidiaries that is not a Borrower, certified as of a recent date by the
Secretary of State of the state of incorporation of such Borrower or Subsidiary,
together with good standing certificates from such official and the Secretary of
State of each state in which such Borrower or Subsidiary operates a Theater or
is otherwise required to be qualified as a foreign corporation to do business
and, to the extent generally available, a certificate or other evidence of good
standing as to payment of any franchise or similar taxes from the appropriate
taxing authority of such jurisdictions, each dated a recent date prior to the
Closing Date, and a copy of the certificate of incorporation and the by-laws (or
equivalent organizational documents) of each Borrower and of each of its
Subsidiaries that is not a Borrower certified as of the Closing Date by the
Secretary or an Assistant Secretary of each such Borrower or Subsidiary as being
a true and correct copy thereof and as not having been modified, amended or
rescinded and as being in full force and effect.
(g) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of each officer of
such Loan Party who has been authorized to execute and deliver any Loan Document
or other document required hereunder to be executed and delivered by or on
behalf of such Loan Party.
(h) The Pledge Agreements, and the Security Agreements, each
duly executed by each Borrower party thereto, together with:
(i) evidence satisfactory to the Agent that the Agent (for
the benefit of itself and the Lenders) has a valid and perfected first
priority security interest in the Mortgaged Properties (subject only to
Permitted Mortgaged Property Liens) and in the other Collateral
(subject only to Permitted Liens), including (A) such documents duly
executed and filed by each Loan Party (including acknowledgment copies
of proper financing statements (Form UCC-1) duly filed under the UCC
and other applicable documents under the laws of any jurisdiction with
respect to the perfection of Liens) as the Agent may request to perfect
its security interests in the Collateral and (B) certified copies of
requests for information or copies (Form UCC-11), or equivalent
reports, which reports
53
<PAGE> 63
(i) shall list all effective financing statements, fixture filings and
judgment and tax lien filings that name any Loan Party as debtor and
shall be satisfactory to the Agent in its sole and absolute discretion,
together with copies of such financing statements, fixture filings and
judgment and tax lien filings, none of which shall cover the Collateral
(except for Permitted Liens, any financing statement that is an
Existing Credit Document and has been duly assigned to the Agent and
amended by an Amendment Document or Liens for which the Agent shall
have received duly executed termination statements in recordable or
fileable form and substance satisfactory to it);
(ii) share certificates representing all of the
certificated securities being pledged pursuant to the Pledge Agreements
and stock powers for such share certificates executed in blank; and
(iii) Qualified Account Letters from (A) all issuers of
uncertificated securities and financial assets held by any Borrower or
any of its Subsidiaries, (B) all securities intermediaries with respect
to all securities accounts and securities entitlements of any Borrower
or any of its Subsidiaries, and (C) all futures commission agents and
clearing houses with respect to all commodities contracts and
commodities accounts held by any Borrower or any of its Subsidiaries.
(i) The Intellectual Property Security Agreements, duly
executed by each Borrower party thereto, together with evidence of the
completion of all recordings and filings of the Intellectual Property Security
Agreements as may be necessary or, in the opinion of the Agent, desirable to
perfect and protect the Liens created by the Intellectual Property Security
Agreements.
(j) Duly executed and acknowledged Initial Mortgages together
with: (i) each of the Mortgage Related Documents with respect to each Initial
Mortgage; and (ii) evidence that counterparts of the Mortgages have been
recorded in all places to the extent necessary or desirable, in the judgment of
the Agent, to create a valid and perfected first priority security interest in
the property described therein in favor of the Agent for the benefit of the
Secured Parties (or in favor of such other trustee as may be required or desired
under local law) (subject only to Permitted Mortgaged Property Liens).
(k) Each of the Amendment Documents set forth on Schedule 3.1,
including UCC-3 amendments, duly executed and delivered by each Loan Party party
thereto.
(l) Favorable opinions of (x) Latham & Watkins, counsel to the
Loan Parties, in substantially the form of Exhibit K and (y) Haynes & Boone,
Texas special counsel to the Loan Parties, in substantially the form of Exhibit
L and, in each case, as to such other matters as any Lender through the Agent
may reasonably request.
54
<PAGE> 64
(m) Evidence satisfactory to the Agent that the procedures
with respect to cash management required by the Loan Documents have been
established and are currently being maintained by each Loan Party, together with
copies of all executed Qualified Account Letters executed by such Loan Party and
the related banking or other financial institution in connection with all
Qualified Accounts.
(n) Satisfactory evidence that the insurance policies required
by Section 6.4 and each Collateral Document are in full force and effect,
together with appropriate evidence showing loss payable or additional insured
clauses or endorsements, as requested by the Agent, in favor of the Agent on
behalf of the Secured Parties.
(o) A letter from the Loan Parties to their independent
auditors authorizing the independent certified public accountants of the Loan
Parties to communicate with the Agent and the Lenders in accordance with Section
6.6.
(p) A certificate of the Chief Financial Officer of each
Borrower, stating that such Borrower is Solvent after giving effect to the
initial Loans, the application of the proceeds thereof in accordance with
Section 6.12 and the payment of all estimated legal, accounting and other fees
related hereto and thereto.
(q) The Financial Statements of the Parent and its
Subsidiaries referred to in Section 4.5 and the Operating Plan for Fiscal Year
1999.
(r) Unless waived by the Agent, subordination agreements,
executed by the lessor of any Mortgaged Property and the Borrower that is the
lessee, as to any Lien that such lessor may have with respect to any Collateral
(including any Lien identified on Schedule 7.1(d) hereto), together with such
UCC-2 or UCC-3 Forms executed by such Person as the Agent may deem necessary or
desirable for filing to evidence subordination of any such Lien, in each case in
form and substance satisfactory to the Agent.
(s) A Borrowing Base Certificate, with respect to the
Applicable Period on the Closing Date, executed by a Responsible Officer of each
Borrower, satisfactory to the Agent.
(t) Copies of the following documents, each of which (x) shall
be certified as of the Closing Date by the Secretary or Assistant Secretary of
each Borrower as being a true and correct copy thereof and as not having been
modified, amended or rescinded and as being in full force and effect and (y)
which the Agent shall have had the opportunity to review and determine to be in
form and substance satisfactory to it:
(i) the Indenture and all other loan agreements, notes and
other documentation evidencing or relating to any Indebtedness for
borrowed money of any Loan Party or any of its Subsidiaries (including
copies of any amendments to or consents under the Indenture, together
with all exhibits and schedules thereto), and all other material
agreements of any of them listed on Schedule 4.28 hereto;
55
<PAGE> 65
(ii) the Administrative Services Agreement and the Parent
Stockholders' Agreement; and
(u) A letter from the Process Agent, indicating its consent to
its appointment by each Borrower as its agent to receive service of process as
specified in Section 11.11(b).
(v) Such other certificates, documents, agreements and
information respecting any Loan Party as the Agent may, in its sole discretion,
reasonably request.
(w) Except for any change in the condition (financial or
otherwise), business, performance, prospects, results of operations or
properties of the Borrowers and their Subsidiaries taken as one enterprise that
occurred prior to June 30, 1999 and was expressly disclosed in the Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, (x) there
shall have been no Material Adverse Change since December 31, 1998, and (y)
nothing shall have occurred since December 31, 1998 which, in the judgment of
the Agent or any Lender, has had a Material Adverse Effect.
(x) All costs and accrued and unpaid fees and expenses for
which Borrowers have received an invoice (including legal fees and expenses)
required to be paid to the Agent and the Lenders on or before the Closing Date
shall have been paid.
(y) There shall exist no Default or Event of Default under the
Loan Documents.
3.2. Conditions Precedent to Each Loan. The obligation of each
Lender to make any Loan (including any Loans being made by such Lender on the
Closing Date) shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such
Loan, both before and after giving effect thereto and to the application of the
proceeds therefrom:
(i) The representations and warranties of each Borrower
set forth in Article IV of this Agreement and in each other Loan
Document shall be true and correct in all material respects on and as
of the date of such Loan with the same effect as though made on and as
of the date of such Loan (or, to the extent such representations and
warranties expressly relate to an earlier date, on and as of such
earlier date); and
(ii) Each Borrower and each other Loan Party shall be in
compliance in all material respects with all the terms and provisions
set forth herein and in each other Loan Document on its part to be
observed or performed, and at the time of and immediately after such
date, no Default or Event of Default shall have occurred and be
continuing.
56
<PAGE> 66
(b) The making of the Loan on the date of such Loan does not
violate any Requirement of Law on the date of or immediately following such Loan
and is not enjoined, temporarily, preliminarily or permanently.
(c) The Agent shall have received at least three Business Days
prior to the date of such Loan a Borrowing Base Certificate, which shall include
calculations of Applicable Amounts (x) only for Mortgaged Properties that were
Qualifying Mortgaged Properties on the date of such Borrowing Base Certificate
and remain Qualified Mortgaged Properties on the date of such Loan and (y)
computed based on the Applicable Period on the date of such Loan, executed by a
Responsible Officer of each Borrower, satisfactory to the Agent.
(d) If on such date the Agent shall have (i) reasonably
determined that a revised version of the Uniform Commercial Code has become
effective in one or more jurisdictions in which Collateral is located or any
other facts, circumstances or conditions might exist on such date (and which did
not exist on the Closing Date) which could adversely affect either (x) the
ability of counsel to issue at such time the legal opinions originally delivered
pursuant to Section 3.1(l) or (y) the perfection or priority of the security
interests created pursuant to the Collateral Documents and (ii) requested same,
the Agent shall have received from counsel (who shall be reasonably satisfactory
to the Agent) for any Loan Party, an opinion or opinions in form and substance
satisfactory to the Agent, addressed to the Agent and the Lenders and dated such
date, covering such of the matters set forth in the opinions of counsel
theretofore required to be delivered pursuant to Section 3.1(l) as the Agent
shall specify or such other matters incident to the transactions contemplated
herein as the Agent may reasonably request.
(e) The Agent shall have received such additional documents,
information and materials as any Lender, through the Agent, may reasonably
request.
(f) No repayment of the Revolving Credit Loans shall be
required on such date pursuant to Section 6.15(c).
(g) Except for any change in the condition (financial or
otherwise), business, performance, prospects, results of operations or
properties of the Borrowers and their Subsidiaries taken as one enterprise that
occurred prior to June 30, 1999 and was expressly disclosed in the Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, (x) there
shall have been no Material Adverse Change since December 31, 1998, and (y)
nothing shall have occurred since December 31, 1998 which, in the judgment of
the Agent or any Lender, has had a Material Adverse Effect.
Each submission by the Borrowers to the Agent of a Notice of Borrowing and each
acceptance by the Borrowers of the proceeds of each Loan (each such event being
a "Credit Event") shall be deemed to constitute a representation and warranty by
each of the Borrowers on the date of such Credit Event as to the matters
specified in Sections 3.2(a), (b) and (f) above and that all of the applicable
conditions specified in Section 3.2 and if applicable, 3.3 or 3.4 have been
satisfied as of that time.
57
<PAGE> 67
3.3. Conditions Precedent to Each Permitted Acquisition Loan or
Permitted Investment Loan.
(a) Permitted Acquisition Loans. The obligations of each
Lender to make any Revolving Credit Loan all or any portion of the proceeds of
which will be used in connection with any Permitted Acquisition are, in addition
to the conditions precedent specified in Sections 3.1 and 3.2, subject to the
further conditions precedent that unless waived by the Agent in writing:
(i) The Agent shall have received evidence reasonably
satisfactory to it (A) in the event such Permitted Acquisition involves
the acquisition of any Leasehold Property, that the applicable Loan
Party has caused the lessor of such Leasehold Property to consent to
the encumbrancing thereof and has caused such Leasehold Property to
otherwise be a Conforming Leasehold Interest, and (B) in the event the
Permitted Acquisition involves the acquisition of any Additional
Mortgaged Property or the acquisition of a Subsidiary that owns any
Additional Mortgaged Property, that the applicable Loan Party has
delivered to the Agent on or prior to the Permitted Acquisition Closing
Date a duly executed and acknowledged Mortgage with respect to such
Additional Mortgaged Property, together with (i) each of the Mortgage
Related Documents with respect to such Additional Mortgaged Property;
and (ii) evidence that counterparts of such Mortgage have been recorded
in all places to the extent necessary or desirable, in the judgment of
the Agent, to create a valid and perfected first priority security
interest in the property described therein in favor of the Agent for
the benefit of the Secured Parties (or in favor of such other trustee
as may be required or desired under local law) (subject only to
Permitted Mortgaged Property Liens).
(ii) The Agent shall have received evidence satisfactory
to it that each Loan Party shall have taken or caused to be taken all
such actions, executed and delivered or caused to be executed and
delivered to the Agent all such agreements, documents and instruments,
and made or caused to be made all such filings and recordings that may
be necessary or, in the opinion of the Agent, desirable to create in
favor of the Agent, for the benefit of Lenders, a valid and perfected
first priority security interest (subject only to Permitted Liens) in
the entire personal and mixed property Collateral acquired pursuant to
the applicable Permitted Acquisition (together with any Additional
Mortgaged Property acquired in such Permitted Acquisition and the
entire personal, mixed and real property Collateral acquired pursuant
to Permitted Theater Investments, "Additional Collateral"). Such
actions shall include the following:
(A) If any Person becomes a Subsidiary of any
Borrower in connection with such Permitted Acquisition,
delivering to the Agent each of the agreements, documents,
instruments, opinions, certificates and other items required
to be delivered pursuant to Section 6.8.
58
<PAGE> 68
(B) Delivery of each of the documents, and the taking
of each of the actions, with respect to such Additional
Collateral (other than the Additional Mortgaged Property)
comparable to those described in Section 3.1(h), (i), (m) and
(n) with respect to the Collateral on the Closing Date.
(C) On or prior to the Permitted Acquisition Closing
Date, the Loan Parties shall have updated each of Schedules
4.8(a), 4.8(b), 4.9, 4.10, 4.19(a), 4.19(b), 4.19(k), 4.27 and
4.28 (and, if (but only if) the Agent consents thereto in
writing, any other Schedules) to this Agreement and Schedule I
to each of the Pledge Agreements, Schedules I, II and V to
each of the Security Agreements, and Schedules A, B, D and E
to each of the Intellectual Property Security Agreements
(collectively, the "Specified Schedules") to the extent
necessary to reflect changes resulting from the consummation
of the Permitted Acquisition, in each case, in form and
substance satisfactory to the Agent, and the Loan Parties
shall have delivered to the Agent an Officer's Certificate to
which such updated Specified Schedules shall be attached
certifying that such Specified Schedules are true, correct and
accurate as of the Permitted Acquisition Closing Date.
(D) As of the Permitted Acquisition Closing Date
(before and after giving effect to the consummation of such
Permitted Acquisition) and giving effect to any updating of
specified schedules pursuant to clause (C) above, (1) no event
which would constitute a Default or an Event of Default shall
have occurred and be continuing; (2) the representations and
warranties in Article IV hereof shall be true, correct and
complete in all material respects on and as of the Permitted
Acquisition Closing Date to the same extent as though made on
and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in
which case such representations or warranties shall have been
true, correct and complete in all material respects as of such
date; (3) since the date of the most recent audited financial
statement delivered pursuant to Section 5.1(c), no Material
Adverse Effect or Material Adverse Change shall have occurred;
(4) no litigation, inquiry or other action and no injunction
or restraining order shall be pending or threatened with
respect to the making of the Loans hereunder or the
transactions contemplated hereby and (5) each of the Borrowers
shall have delivered to the Agent an Officer's Certificate in
form and substance satisfactory to the Agent to such effect,
to the effect that all of the applicable conditions precedent
set forth in Article III hereof have been satisfied, that the
Permitted Acquisition complies with the provisions of Section
7.5(a) and, if the Permitted Acquisition is an Excluded
Permitted Acquisition, that the Permitted Acquisition is an
Excluded Permitted Acquisition.
59
<PAGE> 69
(E) The Lenders shall have received originally
executed copies of one or more favorable written opinions,
dated as of the Permitted Acquisition Closing Date, of (1)
counsel for the Loan Parties reasonably satisfactory to the
Agent, in form and substance reasonably satisfactory to the
Agent, as to such matters as the Agent may reasonably request
and (2) to the extent that a Mortgage is recorded and to the
extent required by the Agent, special counsel for the Loan
Parties affected by the Permitted Acquisition qualified in
each jurisdiction in which any such Loan Party is incorporated
or where Collateral Documents for such Loan Parties are being
filed or recorded, setting forth such matters with respect to
such Loan Parties and the Collateral Documents as the Agent
may reasonably request, all in form and substance satisfactory
to the Agent.
(F) The Borrowers shall have delivered to the Agent
(1) all documentation or materials provided to the Board of
Directors of any Borrower or any of its respective
Subsidiaries in connection with the evaluation, discussion,
determination or any other action relating to the Permitted
Acquisition and (2) all other documentation relating to the
Permitted Acquisition which Agent in its discretion may
request, but only to the extent such documentation has been,
or is intended to be, developed, compiled or otherwise
produced or obtained by any Borrower or any of its respective
Subsidiaries.
(G) All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated by
the Permitted Acquisition and all documents incidental thereto
shall be reasonably satisfactory in form and substance to the
Agent, and the Agent shall have received all such counterpart
originals or certified copies of such documents as the Agent
may reasonably request.
(b) Permitted Theater Investment Loans. The obligations of
each Lender to make any Revolving Credit Loan all or any portion of the proceeds
of which will be used in connection with any Permitted Theater Investment are,
in addition to the conditions precedent specified in Sections 3.1 and 3.2,
subject to the further conditions precedent that, unless waived by the Agent in
writing:
(i) The Agent shall have received evidence reasonably
satisfactory to it (A) in the event such Permitted Theater Investment
involves the construction of any Theater on any Leasehold Property,
that the applicable Loan Party has caused the lessor of such Leasehold
Property to consent to the encumbrancing thereof and has caused such
Leasehold Property to otherwise be a Conforming Leasehold Interest, and
(B) in the event such Permitted Theater Investment involves the
acquisition of any Additional Mortgaged Property or the formation or
acquisition of a Subsidiary that owns any Additional Mortgaged
Property, that the applicable Loan Party has delivered to the Agent on
or prior to such Permitted Theater Investment Funding Date (or, if
earlier, the related
60
<PAGE> 70
Permitted Theater Investment Commencement Date) a duly executed and
acknowledged Mortgage with respect to such Additional Mortgaged
Property, together with (i) each of the Mortgaged Related Documents
with respect to such Additional Mortgaged Property; and (ii) evidence
that counterparts of such Mortgage have been recorded in all places to
the extent necessary or desirable, in the judgment of the Agent, to
create a valid and perfected first priority security interest in the
property described therein in favor of the Agent for the benefit of the
Secured Parties (or in favor of such other trustee as may be required
or desired under local law) (subject only to Permitted Mortgaged
Property Liens).
(ii) The Agent shall have received evidence reasonably
satisfactory to it that each Loan Party shall have on or prior to such
Permitted Theater Investment Funding Date (or, if earlier, the related
Permitted Investment Commencement Date) taken or caused to be taken all
such actions, executed and delivered or caused to be executed and
delivered to the Agent all such agreements, documents and instruments,
and made or caused to be made all such filings and recordings that may
be necessary or, in the opinion of the Agent, desirable to create in
favor of the Agent for the benefit of the Secured Parties a valid and
perfected first priority security interest in the applicable Additional
Collateral (subject only to Permitted Liens). Such actions shall
include the following:
(A) If any Person becomes a Subsidiary of a Borrower
in connection with such Permitted Theater Investment,
delivering to the Agent each of the agreements, documents,
instruments, opinions, certificates and other items required
to be delivered pursuant to Section 6.8.
(B) Delivery of each of the documents, and the taking
of each of the actions, with respect to such Additional
Collateral (other than any Additional Mortgaged Property)
comparable to those described in Section 3.1(h), (i), (m) and
(n) with respect to the Collateral on the Closing Date.
(C) On or prior to the first Permitted Investment
Funding Date with respect to such Permitted Investment (or, if
earlier, the related Permitted Theater Investment Commencement
Date), the Loan Parties shall have updated each of the
Specified Schedules to the extent necessary to reflect changes
resulting from the consummation of the Permitted Theater
Investment, in each case, in form and substance satisfactory
to the Agent, and the Loan Parties shall have delivered to the
Agent an Officer's Certificate to which such updated Specified
Schedules shall be attached certifying that such Specified
Schedules are true, correct and accurate as of such date.
61
<PAGE> 71
(D) As of the first Permitted Theater Investment
Funding Date with respect to such Permitted Investment (or, if
earlier, the related Permitted Theater Investment Closing Date
(before and after giving effect to the consummation of such
Permitted Theater Investment) and giving effect to any
updating of specified schedules pursuant to clause (C) above,
(1) no event which would constitute a Default or an Event of
Default shall have occurred and be continuing; (2) the
representations and warranties in Article IV hereof shall be
true, correct and complete in all material respects on and as
of such date to the same extent as though made on and as of
that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which
case such representations or warranties shall have been true,
correct and complete in all material respects as of such date;
(3) since the date of the most recent audited financial
statement delivered pursuant to Section 5.1(c), no Material
Adverse Effect or Material Adverse Change shall have occurred;
(4) no litigation, inquiry or other action and no injunction
or restraining order shall be pending or threatened with
respect to the making of the Loans hereunder or the
transactions contemplated hereby and (5) each of the Borrowers
shall have delivered to the Agent an Officer's Certificate in
form and substance satisfactory to the Agent to such effect,
to the effect that all of the applicable conditions precedent
in Article III hereof have been satisfied, that the Permitted
Theater Investment complies with the provisions of Section
7.5(b).
(E) The Lenders shall have received originally
executed copies of one or more favorable written opinions,
dated as of the first Permitted Theater Investment Funding
Date with respect to such Permitted Investment (or, if
earlier, the related Permitted Commencement Closing Date), of
(1) counsel for the Loan Parties reasonably satisfactory to
the Agent, in form and substance reasonably satisfactory to
the Agent and its counsel, as to such matters as the Agent may
reasonably request and (2) special counsel for the Loan
Parties affected by the Permitted Theater Investment qualified
in each jurisdiction in which any such Loan Party is
incorporated or where Collateral Documents for such Loan
Parties are being filed or recorded, setting forth such
matters with respect to such Loan Parties and the Collateral
Documents as the Agent may reasonably request, all in form and
substance satisfactory to the Agent.
(F) The Borrowers shall have delivered to the Agent
(1) all documentation or materials provided to the Board of
Directors of any Borrower or any of its Subsidiaries in
connection with the evaluation, discussion, determination or
any other action relating to the Permitted Theater Investment
and (2) all other documentation relating to the Permitted
Theater Investment which Agent in its discretion may request,
but only to the extent such documentation has been, or is
intended to be,
62
<PAGE> 72
developed, compiled or otherwise produced or obtained by such
Borrower or any of its Subsidiaries.
(G) All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated by
the Permitted Theater Investment and all documents incidental
thereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all such counterpart
originals or certified copies of such documents as the Agent
may reasonably request.
3.4. Conditions Precedent to the Term B Loans.
The obligations of the Term B Loan Lenders to make the Term B
Loans are, in addition to the conditions precedent specified in Sections 3.1 and
3.2, subject to the further conditions precedent that:
(a) The Agent shall have received, on or before the Debt
Repurchase Closing Date, the following, each dated the Debt Repurchase Closing
Date unless otherwise indicated, in form and substance satisfactory to the Agent
and in sufficient copies for each Lender:
(x) a copy of each Related Document, each certified by a
Responsible Officer of the Parent as being complete and correct and as
not having been modified, amended or rescinded and as being in full
force and effect;
(y) copies of (i) the resolutions of the Board of Directors of
each Loan Party approving the Debt Repurchase and each Related Document
to which it is a party, and (ii) all documents evidencing other
necessary corporate action and required governmental and third party
approvals, licenses and consents required to be obtained with respect
to the Debt Repurchase and each Loan Document and each Related Document
and the transactions contemplated thereby, each certified as of the
Debt Repurchase Closing Date by the Secretary or Assistant Secretary of
such Loan Party or, in the case of clause (ii), of each Borrower as
being a true and correct copy thereof and as (to the knowledge thereof,
in the case of clause (ii)) not having been modified, amended or
rescinded and being in full force and effect; and
(z) a favorable opinion of Latham & Watkins, counsel to the
Loan Parties, in substantially the form of Exhibit P and as to such
other matters in respect of the Debt Repurchase as the Agent may
reasonably request.
(b) The Parent shall have accepted Subordinated Notes for
payment at an average purchase price, including accrued interest, per
Subordinated Note of not more than the percentage of the principal amount
thereof specified on Schedule 7.22(b) hereto or such greater percentage as shall
be acceptable to the Agent in its sole discretion.
63
<PAGE> 73
(c) Each Related Document and all terms and conditions of the
Debt Repurchase shall be in form and substance satisfactory to the Agent.
(d) Each representation and warranty contained in any Related
Document shall be true and correct in all material respects as if made on and as
of the Debt Repurchase Closing Date (except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete in all
material respects as of such date).
(e) None of the Related Documents nor any term of the Debt
Repurchase as recited therein shall have been amended or modified, and no
condition or provision thereof waived, without the prior written consent of the
Agent.
(f) The Debt Repurchase shall have been conducted pursuant to
the terms and conditions of the Related Documents and in compliance with the
Indenture and all applicable laws (including Federal and state securities laws,
including Sections 10 and 14 of the Exchange Act and Rules 10b-5 and 14e-1
thereunder).
(g) There shall not exist any judgment, order or injunction
prohibiting or imposing adverse conditions upon the Debt Repurchase or the
consummation thereof. There shall not exist any claim, action, suit,
investigation or proceeding (including bondholder litigation) pending or, to the
best knowledge of any Borrower, threatened in any court or before any arbitrator
or Governmental Authority which relates to the Debt Repurchase or the financing
thereof hereunder.
(h) The Subordinated Notes repurchased pursuant to the Debt
Repurchase shall have been delivered to the Trustee (as defined in the
Indenture) and cancelled pursuant to Section 2.11 of the Indenture.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Agent to enter into this
Agreement, each Borrower jointly and severally represents and warrants to the
Lenders and the Agent that:
4.1. Corporate Existence; Compliance with Law. Each Borrower and each
of its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; (b) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where such qualification is necessary, except for failures that
individually or in the aggregate could not have a Material Adverse Effect; (c)
has all requisite power and authority and the legal right to own and operate its
properties, to lease the property it operates under lease and to conduct its
business as now or currently proposed to be conducted; (d) is in compliance with
its organizational documents; (e) is in compliance with all other applicable
Requirements of Law except for such non-compliance that individually or in the
aggregate could not have a Material
64
<PAGE> 74
Adverse Effect; and (f) has all necessary licenses, permits, consents or
approvals from or by, has made all necessary filings with, and has given all
necessary notices to, each Governmental Authority having jurisdiction, to the
extent required for such ownership, operation and conduct, except for licenses,
permits, consents, approvals or filings which can be obtained or made by the
taking of ministerial action to secure the grant or transfer thereof or failures
that individually or in the aggregate could not have a Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable Obligations.
(a) The execution, delivery and performance by each Loan Party
of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby:
(i) are within such Loan Party's corporate or other
powers;
(ii) have been duly authorized by all necessary corporate
action, including the consent of shareholders where required;
(iii) do not and will not (A) contravene any Loan Party's
or any of its Subsidiaries' respective certificate of incorporation or
by-laws or other comparable organizational documents, (B) violate any
other applicable Requirement of Law applicable to any Loan Party
(including Regulations T, U and X of the Board of Governors of the
Federal Reserve System), or any order or decree of any Governmental
Authority or arbitrator applicable to any Loan Party, (C) conflict with
or result in the breach of, or constitute a default under, or result in
or permit the termination or acceleration of, any Contractual
Obligation of any Loan Party or any of its Subsidiaries, or (D) result
in the creation or imposition of any Lien upon any of the property of
any Loan Party or any of its Subsidiaries, other than those in favor of
the Secured Parties pursuant to the Collateral Documents and other
Liens permitted hereby; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person (including any consent of
any Person necessary to enter into the Mortgage delivered by any Loan
Party with respect to any Mortgaged Property), other than (x) those
which have been obtained or made and copies of which have been
delivered to the Agent pursuant to Section 3.1 and each of which is in
full force and effect and (y) as to any Additional Mortgaged Property,
the Landlord Consent and Estoppel and Additional Mortgage which will
have been obtained or filed, as applicable, and copies thereof will
have been delivered to the Agent, on or prior to the date such
Additional Mortgaged Property becomes such and each of which on and
after such date will be in full force and effect.
(b) This Agreement has been, and each of the other Loan
Documents will have been upon delivery thereof, duly executed and delivered by
each Loan Party
65
<PAGE> 75
thereto. This Agreement is, and the other Loan Documents will be, when delivered
hereunder, the legal, valid and binding obligation of each Loan Party thereto,
enforceable against such Loan Party in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
(c) The execution, delivery and performance by each Loan Party
of the Related Documents to which it is a party and the consummation of the Debt
Repurchase;
(i) are within such Loan Party's respective corporate or
other powers;
(ii) at all times on or after the Debt Repurchase Closing
Date will have been duly authorized by all necessary corporate or other
action, including the consent of stockholders where required;
(iii) do not and will not (A) contravene or violate any
Loan Party's or any of its Subsidiaries' respective certificate of
incorporation or by-laws or other comparable organizational documents,
(B) violate any other Requirement of Law (including Federal and state
securities and blue sky laws, including Sections 10 and 14 of the
Exchange Act and Rules 10b-5 and 14e-1 thereunder) applicable to any
Loan Party, or any order or decree of any Governmental Authority or
arbitrator, (C) conflict with or result in the breach of, or constitute
a default under, or result in or permit the termination or acceleration
of, the Subordinated Notes or the Indenture or any Contractual
Obligation of any Loan Party or any of its Subsidiaries or (D) result
in the creation or imposition of any Lien upon any of the property of
any Loan Party or any of its Subsidiaries; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than those which will
have been obtained at the Closing Date, each of which will be in full
force and effect on the Debt Repurchase Closing Date.
(d) The Parent has the requisite corporate power and authority
to consummate the Debt Repurchase. Each of the Related Documents has been or at
the Debt Repurchase Closing Date will have been duly executed and delivered by
each Loan Party party thereto and at the Debt Repurchase Closing Date will be
the legal, valid and binding obligation of each Loan Party party thereto
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
66
<PAGE> 76
4.3. Taxes.
(a) All federal, state, local and foreign tax returns, reports
and statements (collectively, the "Tax Returns") required to be filed by each
Borrower or any of its Tax Affiliates have been filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, all such Tax Returns are true and correct in all material
respects, and all taxes, charges and other impositions reflected therein or
otherwise due and payable have been paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for non-payment
thereof, except where contested in good faith and by appropriate proceedings if
adequate reserves therefor have been established on the books of such Borrower
or such Tax Affiliate in conformity with GAAP. Proper and accurate amounts have
been withheld by such Borrower and each of its Tax Affiliates from their
respective employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities.
(b) None of the Borrowers or any of their respective Tax
Affiliates has (i) executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any charges; (ii) agreed
or been requested to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise; or (iii) any obligation
under any written tax sharing agreement.
4.4. Full Disclosure.
(a) All written statements prepared or furnished by or on
behalf of any Loan Party in connection with any of the Loan Documents or the
Related Documents or the consummation of the transactions contemplated thereby
do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. There are
no facts known (or which should upon the reasonable exercise of diligence be
known) to any Borrower (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
(b) All information supplied to the Agent by or on behalf of
any Loan Party with respect to any of the Collateral (in each case taken as a
whole with respect to any particular Collateral) is accurate and complete in all
material respects.
4.5. Financial Statements.
(a) The consolidated balance sheet of the Parent and its
Subsidiaries as at December 31, 1998, and the related consolidated statements of
operations,
67
<PAGE> 77
stockholders' equity and cash flows of the Parent and its Subsidiaries for the
fiscal year then ended, certified by Deloitte & Touche LLP, and the consolidated
balance sheets of the Parent and its Subsidiaries as at June 30, 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows of the Parent and its Subsidiaries for the six months then ended,
certified by the Chief Financial Officer of the Parent, copies of which have
been furnished to each Lender, fairly present in all material respects, subject,
in the case of said balance sheets as at June 30, 1999, and said statements of
operations, stockholders' equity and cash flows for the six months then ended,
to year-end audit adjustments, the consolidated financial condition of the
Parent and its Subsidiaries as at such dates and the consolidated results of the
operations of the Parent and its Subsidiaries for the period ended on such
dates, all in conformity with GAAP (except for the absence of notes for such
statements as of and for the period ending June 30, 1999).
(b) Except for any change in the condition (financial or
otherwise), business, performance, prospects, results of operations or
properties of the Borrowers and their Subsidiaries taken as one enterprise that
occurred prior to June 30, 1999 and was expressly disclosed in the Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, since
December 31, 1998, (x) there has been no Material Adverse Change and (y) there
have been no events or developments that in the aggregate have had a Material
Adverse Effect.
(c) None of the Borrowers nor any of their respective
Subsidiaries had at June 30, 1999, any material obligation, contingent liability
or liability for taxes, long-term leases or unusual forward or long-term
commitment which is not reflected in the balance sheet at such date referred to
in subsection (a) above or in the notes thereto.
(d) The Projections have been prepared by the Borrowers in
light of the past operations of the business of the Parent and its Subsidiaries
and reflect projections of results of operations and cash flows for Fiscal Year
1999 or of the TLCF for the first year of operations of the Art Theaters to be
constructed as described on Schedule 7.5(b), as applicable, in each case on a
month by month basis. The Projections are based upon estimates and assumptions
stated therein, all of which each Borrower believes to be reasonable and fair in
light of current conditions and current facts known to such Borrower and, as of
the Closing Date, reflect such Borrower's good faith estimates of the future
financial performance of the Parent and its Subsidiaries and of the other
information projected therein for the period set forth therein, it being
recognized by the Agent and the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ in material respects from
the projected results.
(e) All financial statements delivered by any Loan Party
pursuant hereto or pursuant to any other Loan Document were prepared by such
Loan Party in good faith in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated basis) of the
entities described in such financial statements as at the respective dates
thereof and the results of operations and cash flows
68
<PAGE> 78
(on a consolidated basis) of the entities described therein for each of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.
4.6. Litigation. There are no pending or, to the best knowledge of each
Borrower, threatened disputes, actions, investigations or proceedings against or
affecting such Borrower or any of its Subsidiaries before any court,
Governmental Authority or arbitrator that, individually or in the aggregate,
have a reasonable risk of being determined adversely to any Loan Party and
which, if so determined, could reasonably be expected to have a Material Adverse
Effect. Neither the Debt Repurchase nor the performance of any action by any
Loan Party required or contemplated by any of the Loan Documents or the Related
Documents nor the making of the Loans is restrained or enjoined (either
temporarily, preliminarily or permanently) by any Governmental Authority or
arbitrator; and no material adverse condition has been imposed by any
Governmental Authority or arbitrator upon any of the foregoing transactions. No
Loan Party nor any of its properties is subject to any order, writ, judgment or
decree of any Governmental Authority.
4.7. Margin Regulations. None of the Borrowers nor any of their
respective Subsidiaries engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Borrowing will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
4.8. Ownership of Borrowers; Subsidiaries.
(a) A description of the jurisdiction of incorporation and as
of the Closing Date the authorized and outstanding capital stock (including par
value and numbers of shares) of the Parent and the record ownership thereof is
set forth on Schedule 4.8(a) hereto. A description of the jurisdiction of
incorporation and the authorized and outstanding capital stock (including par
value and numbers of shares) of each Borrower (other than the Parent) and the
beneficial and record ownership thereof is set forth on Schedule 4.8(a) hereto.
All of the outstanding capital stock of the Borrowers has been validly issued
and is fully paid and non-assessable, and all outstanding stock of any Borrower
(other than the Parent) is free and clear of all Liens (other than Liens in
favor of the Secured Parties created pursuant to the Collateral Documents).
Except for the Parent Stockholders' Agreement and as set forth on Schedule
4.8(a), (i) no Stock of the Parent is subject to any option, warrant, right of
conversion or purchase or any similar right under any agreement to which any
Borrower is a party; and (ii) there are no agreements to which any Borrower is a
party with respect to the voting, sale or transfer of any shares of Stock of the
Parent, or any agreement to which any Borrower is a party restricting the
transfer or hypothecation of any such shares. No Stock of any Borrower (other
than the Parent) is subject to any option, warrant, right of conversion or
purchase or any similar right; and, except for provisions in the Indenture
restricting sales of assets by the Borrowers and except as set on Schedule
4.19(k) hereto, there are no agreements
69
<PAGE> 79
or understandings with respect to the voting, sale or transfer of any shares of
Stock of any Borrower (other than the Parent), or any agreement restricting the
transfer or hypothecation of any such shares. The Borrowers are engaged only in
the respective businesses permitted to be engaged in pursuant to Section 7.9.
(b) Set forth on Schedule 4.8(b) hereto is a complete and
accurate list showing each Subsidiary of each Borrower that is not a Borrower
and, as to each such Subsidiary, the jurisdiction of its incorporation, the
number of shares of each class of its Stock authorized, the number outstanding
and the percentage of the outstanding shares of each such class owned (directly
or indirectly) by each Borrower. No Stock of any such Subsidiary is subject to
any outstanding option, warrant, right of conversion or purchase or any similar
right. All of the outstanding Stock of each such Subsidiary has been validly
issued, is fully paid and non-assessable and is owned by such Borrower, free and
clear of all Liens (other than Liens in favor of the Secured Parties created
pursuant to the Collateral Documents). Neither the Borrowers nor any of their
respective Subsidiaries is a party to, or has knowledge of, any agreement
restricting the transfer or hypothecation of any Stock of any such Subsidiary,
other than the Loan Documents. The Borrowers do not own or hold, directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person other than such Subsidiaries and Investments permitted by Section 7.7
hereof.
(c) Brentwood and its Affiliates are the "beneficial owner"
(as defined in rule 13d-3 under the Exchange Act), directly or indirectly, of at
least fifty-one percent (51%) of the total voting power of all classes of Stock
of the Parent outstanding entitled to vote in the election of directors of the
Parent under ordinary circumstances.
(d) Except for the Borrowers, no Subsidiary of any Borrower
owns assets or property with an aggregate fair market value of $5,000 or greater
(except that (i) Harvard Investments, a Washington general partnership in which
Landmark holds a 50% interest, owns a parcel of real property leased by Landmark
for operation of the Harvard Exit Theater and (ii) Pavilion Cinema Partners, a
California limited partnership in which Landmark is a 75% general partner, owns
equipment having a fair market value of not more than $300,000 used in the
operation of the Westside Pavilion Theater).
4.9. ERISA.
(a) With respect to each Loan Party, Schedule 4.9(a) hereto
sets forth a complete and accurate list as of the Closing Date separately
identifying all (i) all Plans, (ii) all Qualified Plans, (iii) all Title IV
Plans, (iv) all Multiemployer Plans, (v) all unfunded Pension Plans, and (vi)
all Welfare Benefit Plans that provide retiree benefits (other than continuation
coverage provided pursuant to Section 4980B of the Code).
(b) Each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
Code, and nothing has occurred to affect the qualified or exempt status of any
such Qualified Plan, except where
70
<PAGE> 80
all such failures to be qualified or exempt, as the case may be, in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
(c) Each Plan complies and has been administered and operated
in compliance in all material respects with its terms and applicable provisions
of ERISA, the Code and other applicable laws, including the filing of reports
required under ERISA or the Code which are true and correct in all material
respects as of the date filed, and with respect to each Plan, all required
contributions and benefits have been paid in accordance with the provisions of
each such Plan.
(d) No Loan Party or any of its Subsidiaries or any ERISA
Affiliate, with respect to any Qualified Plan, has failed to make any
contribution or pay any amount due as required by Section 412 of the Code or
Section 302 of ERISA or the terms of any such Qualified Plan.
(e) Except as set forth on Schedule 4.9(a), as of the Closing
Date, no Plan is a Title IV Plan or a Multiemployer Plan.
(f) There has been no, nor is there reasonably expected to
occur, any ERISA Event which could have a Material Adverse Effect.
(g) There are no pending or, to the best knowledge of each
Borrower, threatened, claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (i) any Title IV
Plan, or any other Plan or its assets, (ii) any fiduciary with respect thereto
or (iii) any Loan Party or any of its respective Subsidiaries or any ERISA
Affiliate with respect thereto. To the best knowledge of each Borrower, there
are no pending or threatened claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (i) any
Multiemployer Plan or its assets, (ii) any fiduciary with respect thereto or
(iii) any Loan Party or any of its respective Subsidiaries or any ERISA
Affiliate with respect thereto.
(h) Except as set forth on Schedule 4.9(b), no Loan Party nor
any of is respective Subsidiaries nor any ERISA Affiliate has incurred or has
any reasonable likelihood of incurring any Withdrawal Liability under Section
4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in any such liability).
(i) Except as set forth on Schedule 4.9(b), within the last
five years no Loan Party nor any of its respective Subsidiaries nor any ERISA
Affiliate has engaged in a transaction which resulted in a Title IV Plan with
Unfunded Liabilities being transferred outside of the "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA) of any such entity.
(j) Except as set forth on Schedule 4.9(b), no Plan which is a
Welfare Benefit Plan provides for continuing benefits or coverage for any
participant or any
71
<PAGE> 81
beneficiary of a participant after such participant's termination of employment
(except as may be required by Section 4980B of the Code and at the sole expense
of the participant or the beneficiary of the participant) which would result in
a liability in an amount which could have a Material Adverse Effect.
(k) No Loan Party nor any of its respective Subsidiaries has
engaged in a prohibited transaction, as defined in Section 4975 of the Code or
Section 406 of ERISA, in connection with any Plan, which would subject or has
any reasonable likelihood of subjecting any Loan Party or any of its
Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the Code or any other
material liability.
(l) Except as set forth on Schedule 4.9(b), no liability under
any Plan (whether terminated or on-going) has been funded or satisfied through
the purchase of a contract from an insurance company that is not rated AA or
better by Standard & Poor's Corporation or any equivalent or higher rating by
another nationally recognized rating agency.
(m) No Loan Party, nor any of its respective Subsidiaries nor
any ERISA Affiliate has any liability under any terminated "employee benefit
plan", as defined in Section 3(3) of ERISA, of any related or unrelated entity.
(n) The present value of the liability, if any, with respect
to all unfunded Pension Plans of each Loan Party, each of its Subsidiaries and
each ERISA Affiliate is reflected on the most recent audited financial
statements delivered to the Lenders pursuant to this Agreement.
4.10. Liens. There are no Liens of any nature whatsoever on any
properties of any Loan Party or any of its Subsidiaries other than those
permitted by Section 7.1. The Liens granted by the Loan Parties to the Agent
pursuant to the Collateral Documents are fully perfected first priority Liens in
and to the Collateral (other than the Mortgaged Properties), subject only to
Permitted Liens, and, upon recording of the Mortgage Related Documents referred
to in clause (a) (x) of the definition thereof with the appropriate Governmental
Authorities, will be fully perfected first priority Liens in and to the
Mortgaged Properties, subject only to Permitted Mortgaged Property Liens. The
only filings or recordings necessary to perfect the Liens granted by the Loan
Parties to the Agent pursuant to the Collateral Documents are the financing
statements and other documents listed on Schedule 4.10. As of the Closing Date,
Schedule 7.1(j) annexed hereto lists each financing statement or mortgage which
has been filed against any Loan Party and each other Lien securing Indebtedness
in excess of $10,000 (other than, in either case, the Liens securing the
Obligations).
4.11. No Burdensome Restrictions; No Defaults.
(a) None of the Borrowers nor any of their respective
Subsidiaries (i) is a party to any Contractual Obligation the compliance with
which could have a Material
72
<PAGE> 82
Adverse Effect or the performance of which by any thereof, either
unconditionally or upon the happening of an event, will result in the creation
of a Lien (other than a Lien granted pursuant to a Loan Document or otherwise
permitted hereby) on the property or assets of any thereof or (ii) is subject to
any charter or corporate restriction which could have a Material Adverse Effect.
(b) None of the Borrowers nor any of their respective
Subsidiaries is in default under or with respect to any Contractual Obligation
(other than any Lease) owed by it and, to the best knowledge of each Borrower,
no other party is in default under or with respect to any Contractual Obligation
(other than any Lease) owed to any Loan Party or to any Subsidiary of a Loan
Party, other than, in either case, those defaults which individually or in the
aggregate could not have a Material Adverse Effect.
(c) No Default or Event of Default has occurred and is
continuing.
(d) To the best knowledge of each Borrower, there is no
Requirement of Law applicable to any Loan Party the compliance with which by
such Loan Party could have a Material Adverse Effect.
(e) No Subsidiary of a Borrower is subject to any Contractual
Obligation restricting or limiting its ability to declare or make any dividend
payment or other distribution on account of any shares of any class of its Stock
or its ability to purchase, redeem, or otherwise acquire for value or make any
payment in respect of any such shares or any shareholder rights, except pursuant
to a Loan Document or the Indenture.
4.12. No Other Ventures. No Loan Party and no Subsidiary of a Loan
Party is engaged in any joint venture or partnership with any other Person.
4.13. Investment Company Act; Public Utility Holding Company Act.
(a) None of the Borrowers nor any of their respective
Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended. The making
of the Loans by the Lenders, the application of the proceeds and repayment
thereof by the Borrowers and the consummation of the transactions contemplated
by the Loan Documents will not result in a violation by any Borrower or any
Subsidiary of a Borrower of any provision of such Act or any rule, regulation or
order issued by the Securities and Exchange Commission thereunder.
(b) None of the Borrowers nor any of their respective
Subsidiaries is a "holding company", or an "affiliate" or a "holding company" or
a "subsidiary company" of a "holding company", as each such term is defined and
used in the Public Utility Holding Act of 1935, as amended.
73
<PAGE> 83
4.14. Insurance. All policies of insurance of any kind or nature of any
Loan Party or any of its respective Subsidiaries, including policies of fire,
theft, product liability, public liability, property damage, other casualty,
employee fidelity, workers' compensation and employee health and welfare
insurance, are in full force and effect and are of a nature and provide such
coverage as is customarily carried by companies of the size and character of
such Person and comply with the requirements of Section 6.4. No Loan Party nor
any of its respective Subsidiaries has been refused insurance for any material
coverage which it had applied or had any policy of insurance terminated (other
than at its request).
4.15. Labor Matters.
(a) There are no strikes, work stoppages, slowdowns or
lockouts pending or threatened against or involving any Loan Party or any of its
respective Subsidiaries, other than those which in the aggregate would have no
Material Adverse Effect.
(b) There are no unfair labor practices, grievances or
complaints pending, or, to the best knowledge of each Borrower, threatened
against or involving any Loan Party or any of its respective Subsidiaries, nor
are there any arbitrations or grievances threatened involving any Loan Party or
any of its respective Subsidiaries, other than those which, in the aggregate, if
resolved adversely to such Loan Party or such Subsidiary, would have no Material
Adverse Effect.
(c) Except as set forth on Schedule 4.15 and except for any
agreement entered into after the Closing Date a copy of which has been delivered
to the Agent, there is no collective bargaining agreement covering any of the
employees of any Borrower or Subsidiary of a Borrower.
4.16. Use of Proceeds.
(a) The proceeds of the Term B Loans will be used by the
Borrowers solely to fund the Debt Repurchase.
(b) The proceeds of the Term A Loans and the Revolving Credit
Loans are being used by the Borrowers (i) subject to Section 7.5, to fund
Permitted Acquisitions, Permitted Theater Investments and Consolidated
Maintenance Capital Expenditures; and (ii) for general working capital and
corporate purposes.
4.17. Environmental Matters. Except as disclosed on Schedule 4.17:
(a) The operations and properties of each Loan Party and each
of its respective Subsidiaries have been and are in compliance with all
Environmental Laws other than such non-compliance the consequences of which
could not result in the Loan Parties and their Subsidiaries incurring
Environmental Liabilities and Costs in excess of $25,000 individually or
$100,000 in the aggregate;
74
<PAGE> 84
(b) Each Loan Party and each of its Subsidiaries has obtained
all environmental, health and safety Permits necessary for their operations, and
all such Permits are in good standing and each Loan Party and each of its
Subsidiaries are in compliance with the terms and conditions of such Permits
other than any such failure to obtain or be in good standing or such
non-compliance the consequences of which could not could not result in the Loan
Parties and their Subsidiaries incurring Environmental Liabilities and Costs in
excess of $25,000 individually or $100,000 in the aggregate;
(c) No Loan Party nor any of its respective Subsidiaries
currently or previously owned, operated or leased property or operations, is
subject to any threatened or outstanding order from or agreement with any
Governmental Authority or other Person or is subject to any judicial or docketed
administrative proceeding respecting (i) Environmental Laws, (ii) Remedial
Action or (iii) any Environmental Liabilities and Costs arising from a Release
or threatened Release, other than those the consequences of which in the
aggregate could not have a Material Adverse Effect;
(d) No Loan Party nor any of its respective Subsidiaries is a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the regulations
thereunder or any state analog;
(e) No Loan Party nor any of its respective Subsidiaries has
filed or failed to file any notice required to be filed by it under any
applicable Environmental Law reporting a Release;
(f) There are no facts, circumstances or conditions arising
out of, associated with or otherwise related to the operations of any Loan Party
or any of its respective Subsidiaries, including any operations of or ownership
of property by any Loan Party or any of its respective Subsidiaries, which could
reasonably be expected to result in such Loan Parties and their respective
Subsidiaries incurring Environmental Liabilities and Costs in excess of $50,000;
(g) No Environmental Lien and no unrecorded Environmental Lien
has attached to any property of any Loan Party or any of its respective
Subsidiaries;
(h) There is not now on, in or under the property owned,
leased or operated by any Loan Party or any of its respective Subsidiaries any
underground storage tanks over which any Loan Party or any of its Subsidiaries
has control or surface impoundments;
(i) To the best knowledge of each Borrower, there is not now
on, in or under any property owned, operated or leased by any Loan Party or any
of its respective Subsidiaries (i) any asbestos-containing material, or (ii) any
polychlorinated biphenyl's used in electrical or other equipment; and
(j) Each Loan Party has provided to Agent copies of all
environmental or health or safety reports, including audits, assessments,
investigations, monitoring
75
<PAGE> 85
results, UST reports and asbestos surveys relating to the operations or property
of such Loan Party or any of its Subsidiaries to the extent such reports are in
the possession, custody or control of such Loan Party or any of its
Subsidiaries.
4.18. Intellectual Property. Each Loan Party and each of its
Subsidiaries owns or licenses or otherwise has the right to use all material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights (including all
Intellectual Property as defined in the Intellectual Property Security
Agreements) that are necessary for the operations of its businesses, without
infringement upon or conflict with the rights of any other Person with respect
thereto, including all trade names associated with any private label brands of
concession or other merchandise of any Loan Party or any of its Subsidiaries. To
the best knowledge of each Borrower, no slogan or other advertising device,
product, process, method, substance, part or component, or other material now
employed, or now contemplated to be employed, by any Loan Party or any of its
Subsidiaries infringes upon or conflicts with any rights owned by any other
Person, and no claim or litigation regarding any of the foregoing is pending or
threatened. There is no claim or action by any such other Person pending or, to
the knowledge of any Responsible Officer of any Borrower or any Subsidiary of
any Borrower, threatened against any Loan Party or any Subsidiary of any Loan
Party with respect to any of the rights or property referred to in this Section
4.18.
4.19. Title; Real Property.
(a) Each Loan Party and each of its respective Subsidiaries
owns fee simple absolute title to all of the Real Estate Assets purported to be
owned by such Loan Party or Subsidiary, which Real Estate Assets are described
in Schedule 4.19(a), and good title to, or valid leasehold interests in, all
other properties and assets purported to be owned by such Loan Party or
Subsidiary, including valid leasehold interests of such Loan Party or Subsidiary
pursuant to the Leases listed on Schedule 4.19(b) and all property reflected in
the most recent Financial Statements delivered by the Parent (other than those
properties or assets sold thereafter (if sold on or prior to the Closing Date)
in the ordinary course of business or as permitted under Section 7.6(a) or (if
sold after the Closing Date) as permitted under Section 7.6), and none of the
properties and assets of any Loan Party or any of its Subsidiaries, including
any Real Property Asset, is subject to any Liens, except for Liens granted to
the Agent pursuant to the Loan Documents and Permitted Liens. Each Loan Party
and each of its Subsidiaries has received all deeds, assignments, waivers,
consents, non-disturbance and recognition or similar agreements, bills of sale
and other documents, and has duly effected all recordings, filings and other
actions, necessary to establish, protect and perfect such Loan Party's or
Subsidiary's right, title and interest in and to all such property except, with
respect to any properties (other than any Mortgaged Properties), for any
documents which the failure to receive or actions which the failure to take
could not individually or in the aggregate have a Material Adverse Effect.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
76
<PAGE> 86
(b) Each Real Estate Asset owned by any Loan Party or any
Subsidiary, together with the name of the owner of record thereof, an accurate
street address, and a description of the use of such real property (if other
than as a Theater) or, if used as a Theater, whether used as an Art Theater or
as an Other Theater, are set forth on Schedule 4.19(a) hereto. All Real Estate
Assets leased by any Loan Party or any of its Subsidiaries (whether by lease,
sublease or assignment and whether such Loan Party or Subsidiary is landlord or
tenant (whether directly or as an assignee or successor in interest)) are listed
on Schedule 4.19(b), setting forth an accurate street address, a description of
the use of such real property (if other than as a Theater) or, if used as a
Theater, whether used as an Art Theater or as an Other Theater and information
regarding the parties thereto, the type of instrument, the commencement date,
expiration date, renewal options (if any) and annual base rents for the years
1999 through 2003. Each of such leases for which the expiration date specified
on Schedule 4.19(b) has not occurred and as to which the Agent has not received
notice of any exercise of a renewal option under, or amendment of, such lease
extending the expiration date to a date that has not occurred is valid and
enforceable in accordance with its terms and is in full force and effect. Each
Borrower has delivered to the Agent true and complete copies of each of such
leases, leases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) and, with
respect to the Leases constituting Mortgaged Properties, all documents affecting
the rights or obligations of any Loan Party or any of its Subsidiaries which is
a party thereto, including any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the leases. No default or other event has occurred and
is continuing or condition exists under any Lease beyond the end of any grace
period provided therefor in such Lease the effect of which event is (x) if such
event constitutes a default in payment (other than with respect to payment of
common area maintenance charges), to terminate, or to permit the landlord to
terminate, such Lease or (y) if such event constitutes any event other than such
a payment default, to terminate, or to permit the landlord to terminate (in
circumstances where such landlord is likely to terminate), such Lease, except
for any such Leases, the termination of which could not individually or in the
aggregate have a Material Adverse Effect.
(c) No Loan Party nor any of its Subsidiaries owns or holds,
or is obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
property owned or leased by such Loan Party or Subsidiary.
(d) All components of all improvements included within any
Real Property Asset owned or leased by any Loan Party or any of its Subsidiaries
(other than any Permitted Theater Investment property for which construction has
not been completed) (hereinafter collectively referred to as the
"Improvements"), including, without limitation, the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facilities included therein, (i) in the case of any owned
Real Property Asset, are or (ii) in the case of any Leasehold Property, (x) to
77
<PAGE> 87
the extent required to be maintained, repaired or replaced under the related
Lease, are or (y) to the extent not so required to be maintained, repaired or
replaced, to the best of such Borrower's knowledge, are, in each case, in good
working order and repair except, in the case of any Real Property Asset not
constituting a Mortgaged Property, as could not, individually or in the
aggregate for all such Real Property Assets, have a Material Adverse Effect. All
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage lines and systems and other similar systems currently serving the
real property owned or leased by any Loan Party or any of its Subsidiaries are
installed and operating and are sufficient to enable the real property owned or
leased by such Loan Party or Subsidiary to continue to be used and operated in
the manner currently being used and operated, and no Loan Party nor any of its
Subsidiaries has any knowledge of any factor or condition that could result in
the termination or material impairment of the furnishing thereof. No Improvement
or portion thereof is dependent for its access, operation or utility on any
land, building or other Improvement that is not both included in the real
property owned or leased by such Borrower or Subsidiary and, if such Improvement
or portion thereof is subject to a Mortgage, subject to such Mortgage (or, as to
any Leasehold Property, that is not available for use pursuant to a reciprocal
easement agreement or other contractual right of such Borrower or Subsidiary
that is subject to such Mortgage).
(e) All Permits required to have been issued to the Borrowers
to enable all real property owned or leased by any Loan Party or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect.
(f) No Loan Party nor any of its Subsidiaries has received any
notice, or has any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any real property owned or leased by any Loan
Party or any of its Subsidiaries or any part thereof or any proposed termination
or impairment of any parking at any such owned or leased real property or of any
sale or other disposition of any such owned or leased real property or any part
thereof in lieu of condemnation.
(g) No portion of any real property owned or leased by any
Loan Party or any of its Subsidiaries has suffered any damage by fire or other
casualty loss which has not heretofore been completely repaired and restored to
its original condition or, with respect to any damage or loss occurring after
the Closing Date, disclosed to the Agent within five (5) Business Days after the
occurrence thereof. Except as disclosed on Schedule 4.19(g), no portion of any
real property owned or leased by any Borrower or any of its Subsidiaries is a
Flood Hazard Property which is not insured as to flood hazards.
(h) Schedule 4.19(h) sets forth with respect to all Real
Estate Assets, (i) the amount of existing Indebtedness (other than the
Obligations) secured by a Lien on each property, (ii) the current monthly
payment of interest and principal in respect of such Indebtedness, and (iii) the
current interest payable in respect of such Indebtedness.
78
<PAGE> 88
(i) With respect to each Leasehold Property (other than any
Leasehold Property owned by a Borrower on the Closing Date that is not indicated
as being part of the Collateral on Schedule 4.19(b)) and each other Real
Property Asset, any consents from any holders of any Indebtedness secured by
such Real Property Asset that are required to permit the Agent to acquire and
hold a valid and perfected first priority security interest therein and (in the
case of any such Leasehold Property unless waived by the Agent in writing) the
related Landlord Consent and Estoppel have been obtained and such consents and
Landlord Consent and Estoppel are in full force and effect.
(j) Except as set forth on Schedule 4.19(j):
(i) no structure owned or leased by any Loan Party or any
of its Subsidiaries fails to conform in any material respect with
applicable ordinances, regulations, zoning laws and restrictive
covenants nor encroaches upon real property of others, nor is any such
real property encroached upon by structures of others in any case in
any manner that would have or would be reasonably likely to have a
Material Adverse Effect;
(ii) no charges or violations have been filed, served,
made or threatened against any Loan Party or, to the knowledge of such
Borrower, any other Person, against or relating to any such property or
structure or any of the operations conducted at any such property or
structure, as a result of any violation or alleged violation of any
applicable ordinances, requirements, regulations, zoning laws or
restrictive covenants or as a result of any encroachment on the
property of others where the effect of same would have or would be
reasonably likely to have a Material Adverse Effect;
(iii) other than pursuant to applicable laws, rules,
regulations or ordinances, covenants that run with the land or
provisions in the applicable leases, there exists no restriction on the
use, transfer or mortgaging of any such property;
(iv) such Loan Party or Subsidiary each has adequate
permanent rights of ingress to and egress from any such property used
by it for the operations conducted thereon; and
(v) there are no developments affecting any of the real
property or interests of any Loan Party therein pending or, to the best
knowledge of each Borrower, threatened which might reasonably be
expected to curtail or interfere in any material respect with the use
of such property for the purposes for which it is now used.
(k) No Lease in respect of any Mortgaged Property is subject
to termination, or would otherwise be adversely affected by, (i) any sale or
transfer of (or change in the beneficial ownership of) any shares of Stock of
the Parent or (ii) except for the Leases specified on Schedule 4.19(k) hereto,
any sale or transfer of (or change in the beneficial ownership of) any shares of
Stock of any Borrower (other than the Parent).
79
<PAGE> 89
4.20. Certain Indebtedness. Schedule 4.20 separately identifies all
Indebtedness (and the unpaid principal amount thereof as of the Closing Date)
(other than trade payables) of each Loan Party and each Subsidiary of a Loan
Party that is not a Loan Party which is either (i) for borrowed money, (ii)
incurred outside of the ordinary course of the business or in a manner and to
the extent not consistent with past practice, or (iii) material to the financial
condition, business, operations or prospects of such Loan Party or such
Subsidiary (or will be material to the financial condition, business, operations
or prospects of such Loan Party, any Borrower or such Subsidiary), $10,000 being
hereby deemed material for purposes of this Section 4.20.
4.21. Solvency. Both before and after giving effect to (a) the Loans to
be made or extended on the Closing Date or such other date as Loans requested
hereunder are made or extended, (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of the Borrowers, (c) the consummation of the
Debt Repurchase and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Loan Party is Solvent.
4.22. Year 2000 Compliance. Each of the Borrowers has reviewed the
areas within its business and operations and the business and operations of its
Subsidiaries which could be adversely affected by the risk that computer
applications used by such Borrower and its Subsidiaries may not be Year 2000
Compliant, and has developed a comprehensive program to eliminate on or before
September 30, 1999 all such non-compliance by any such computer applications so
used.
4.23. ADA Compliance. Each Loan Party has made all modifications or
provided all accommodations which are required to be made or provided by such
Loan Party to each Real Property Asset pursuant to the ADA, except where
noncompliance with such requirements could not have a Material Adverse Effect.
No Loan Party has received any notice or complaint regarding any noncompliance
with the ADA of any of the Real Property Assets or of any Loan Party's
employment practices and, to the best knowledge of each Borrower, there has been
no threatened litigation alleging any such noncompliance except where
noncompliance with such requirements could not have a Material Adverse Effect.
4.24. Restricted Payments. Since December 31, 1998 no Borrower has made
any Restricted Junior Payment or permitted any of its Subsidiaries to do so
except as permitted pursuant to Section 7.4.
4.25. Debt Repurchase. None of the Related Documents nor any term of
the Debt Repurchase as recited therein has been amended or modified, and no
condition or provision thereof waived, without the prior written consent of the
Agent. Each of the representations and warranties of the Borrowers therein is
true and correct in all material respects (or, to the extent any such
representation or warranty expressly relates to an earlier date, was true and
correct on and as of such earlier date); and no default or event which with the
giving of notice or lapse of time or both would be a default has occurred
thereunder. Each of the Borrowers shall have delivered to the Agent prior to the
Debt
80
<PAGE> 90
Repurchase Closing Date a true, complete and correct copy of each Related
Document. Each Related Document delivered to any holder of Subordinated Notes
complies as to form in all material respects with all applicable requirements of
all applicable state and federal securities laws.
4.26. Senior Debt.
(a) This Agreement constitutes the "Revolving Credit Facility"
under and as defined in the Indenture.
(b) The Obligations owing by the Parent do and at all times
will constitute "Senior Debt", the Obligations owing by each of SC, Landmark
(and, if LT USA becomes a "Guarantor" under the Indenture, LT USA) do and at all
times will constitute "Guarantor Senior Debt" with respect to SC, Landmark (and,
if LT USA becomes a "Guarantor" under the Indenture, LT USA), respectively, and
the Obligations owing by any Additional Subsidiary, if such Additional
Subsidiary becomes a "Guarantor" under the Indenture, do and at all times will
constitute "Guarantor Senior Debt" with respect to such Additional Subsidiary,
in each case under and as defined in the Indenture.
4.27. Financial Accounts. Except for any Qualified Account or any
payroll account maintained in accordance with Section 6.15 that was, in either
case, first opened after the Closing Date, Schedule 4.27 hereto sets forth a
list of all bank accounts, securities accounts and investment accounts of any
Loan Party.
4.28. Material Agreements. Schedule 4.28 hereto sets forth as of the
Closing Date a list of each Contractual Obligation (other than any lease set
forth on Schedule 4.19(b) hereto and the Loan Documents) to which any Loan Party
or any Subsidiary thereof is a party or by which any of such persons is bound
that (i) provides for payments to any Person based on the revenues or cash flow
of any Theater or Theaters or (ii) constitutes a contract that would be required
to be filed as an exhibit to an Exchange Act form filed on the Closing Date
pursuant to paragraph 10 of Item 601 of Regulation S-K under the Exchange Act,
and all amendments, modifications and supplements to each of the foregoing. No
Loan Party or any Subsidiary thereof is in default or breach (after the
expiration of any applicable grace period), or will, after giving effect to the
transactions contemplated hereby, be in default or breach of any such
Contractual Obligation, including the Indenture.
ARTICLE V
REPORTING COVENANTS
As long as any of the Obligations or the Commitments remain
outstanding, unless the Required Lenders otherwise consent in writing, the
Borrowers jointly and severally agree with the Lenders and the Agent that:
81
<PAGE> 91
5.1. Financial Statements. Each Borrower shall furnish to the Agent
(with sufficient copies for each of the Lenders) the following Financial
Statements:
(a) within thirty (30) days after the end of each fiscal month
(other than any month which is the end of a Fiscal Quarter or Fiscal Year), a
Monthly Financial Report, substantially in the form of Exhibit O hereto, setting
forth financial information regarding the Parent and its Subsidiaries, certified
by the Chief Financial Officers of each of the Borrowers, consisting of (i)
consolidated and consolidating unaudited balance sheets and statements of
stockholders' equity as of the close of such month and the related statements of
operations and cash flows for such Fiscal month and for that portion of the
Fiscal Year ending as of the close of such fiscal month, setting forth in
comparative form the figures for the corresponding periods in the prior year and
the figures contained in the Operating Plan for such Fiscal Year, all prepared
in conformity with GAAP (subject to normal year-end adjustments); (ii) a
statement of TLCF for each Theater operated by any Borrower for such month and
for that portion of the Fiscal Year ending as of the close of such fiscal month,
setting forth in comparative form the figures for the corresponding periods in
the prior year and the figures contained in the Operating Plan for such Fiscal
Year; (iii) a calculation of EBITDA and Fixed Charges for the 12-month period
ending with such month and of the Fixed Charge Coverage Ratio as of the close of
such month; (iv) a statement of Consolidated Capital Expenditures by the
Borrowers during such month and for that portion of the Fiscal Year ending as of
the close of such fiscal month, setting forth in comparative form the figures
for the corresponding periods in the prior year and the figures contained in the
Operating Plan for such Fiscal Year; (v) an updated "New Build Status Report",
in substantially the form of the report dated October 6, 1999 delivered to the
Agent; and (vi) a summary of the outstanding balance of all intercompany
Indebtedness as of the last day of that fiscal month;
(b) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year,
consolidated and consolidating balance sheets of the Parent and its Subsidiaries
as of the end of such quarter and consolidated and consolidating statements of
operations and cash flows of the Parent and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such Fiscal Quarter, all prepared in conformity with GAAP and certified by the
Chief Financial Officer or Treasurer of the Parent. Such financial information
shall be accompanied by a certificate (each, a "Compliance Certificate")
including (i) as to any Fiscal Quarter ending on or after March 31, 2001, a
statement in reasonable detail showing the calculations used in determining
compliance with the financial covenant set forth in Article VIII which is tested
on a quarterly basis, (ii) a statement by such Chief Financial Officer that such
financial information presents fairly in all material respects in conformity
with GAAP (subject to normal year-end adjustments) the financial position,
results of operations and statements of cash flows of the Parent and its
Subsidiaries, on both a consolidated and consolidating basis, as at the end of
such Fiscal Quarter and for the period then ended, (iii) a certificate of said
officer stating that no Default or Event of Default has occurred and is
continuing or, if a Default
82
<PAGE> 92
or an Event of Default has occurred and is continuing, a statement as to the
nature thereof and the action the Borrowers propose to take with respect
thereto, and (iv) a written discussion and analysis by the management of the
Borrowers of the financial statements furnished in respect of such Fiscal
Quarter;
(c) as soon as available and in any event within 90 days after
the end of each Fiscal Year, consolidated and consolidating balance sheets of
the Parent and its Subsidiaries as of the end of such year and consolidated and
consolidating statements of operations and cash flows of the Parent and its
Subsidiaries for such Fiscal Year, all prepared in conformity with GAAP and
certified, in the case of such consolidated financial statements, as fairly
presenting, in all material respects, the consolidated financial position of the
Parent and its Subsidiaries as at the dates indicated, and the results of their
operations and cash flows for the periods indicated, and without qualification
as to the scope of the audit or as to the Parent and its Subsidiaries being a
going concern, by Deloitte & Touche LLP or other independent public accountants
acceptable to the Agent, together with (i) a certificate of such accounting firm
stating that in the course of the regular audit of the business of the Parent
and its Subsidiaries, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting firm has
obtained no knowledge that (x) the Parent has failed to maintain the Fixed
Charge Coverage Ratio required pursuant to Section 8.1 at the end of each Fiscal
Quarter in such Fiscal Year (commencing with the Fiscal Quarter ending March 31,
2001) or (y) the Borrowing Base Certificate delivered pursuant to Section 5.1(g)
for the Applicable Period consisting of such Fiscal Year fails to fairly present
in all material respects the respective amounts of TLCF for each Theater for
such Fiscal Year, or, if in the opinion of such accounting firm, such a failure
has occurred, a statement as to the nature thereof, (ii) a schedule prepared by
the Borrowers in form satisfactory to the Agent of the computations used by such
accountants in determining, as of the end of such Fiscal Year, the Parent's
compliance with the covenant set forth in Article VIII and TLCF of each Theater
for such Fiscal Year, and (iii) a written discussion and analysis by the
management of the Borrowers of the financial statements furnished in respect of
such Fiscal Year;
(d) within five (5) Business Days after receipt thereof by any
Loan Party, copies of all management letters, exception reports or similar
letters or reports received by such Loan Party from its independent certified
public accountants;
(e) not later than forty-five (45) days after the end of each
Fiscal Year, an annual operating plan (each, an "Operating Plan") of the Parent
and its Subsidiaries for the following Fiscal Year, approved by the Board of
Directors of the Parent, which will include a statement of all of the material
assumptions on which such plan is based, will include monthly balance sheets and
a monthly budget for the following year and will integrate sales, gross profits,
operating expenses, operating profit, capital expenditures and cash flow
projections all prepared on the same basis and in similar detail as that on
which operating results are reported (and in the case of cash flow projections,
representing management's good faith estimates of future financial performance
based on historical performance);
83
<PAGE> 93
(f) promptly, from time to time, such other information
regarding the operations, including information regarding specific lines of
business of any Borrower or any of its respective Subsidiaries, business affairs
and financial condition of any Borrower or any of its respective Subsidiaries,
or compliance with the terms of any Loan Document, as the Agent or any Lender
through the Agent may reasonably request;
(g) within 20 days after the end of each calendar month,
commencing with September 1999, a Borrowing Base Certificate for the Applicable
Period consisting of the 12 consecutive calendar months ending with such month,
executed by a Responsible Officer of the Borrower; and
(h) promptly, from time to time, such other information
regarding any Loan Party as the Agent or any Lender may reasonably request,
including, all regulatory filings of any Loan Party and any information required
to be furnished to holders of Subordinated Notes under, or any amendment or
waiver in respect of, the Indenture.
5.2. Default Notices. As soon as practicable, and in any event within
five (5) Business Days after a Responsible Officer of any Loan Party has actual
knowledge of the existence of any Default, Event of Default or other event which
has had a Material Adverse Effect or which could reasonably be expected to cause
or result in a Material Adverse Change, each Borrower shall give the Agent
telephonic or telecopied notice specifying the nature of such Default or Event
of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day.
5.3. Asset Sales. Prior to any Asset Sale (other than any Excluded
Asset Sale) by any Borrower or any of its respective Subsidiaries permitted
pursuant to Section 7.6 and involving the disposition of any Collateral or other
assets anticipated to generate in excess of $100,000 (or its equivalent) in
Asset Sales Proceeds, each Borrower shall send the Agent a notice (a) describing
the assets being sold or the nature and material terms and conditions of such
transaction and (b) stating the estimated Asset Sale Proceeds anticipated to be
received by such Borrower or any of its Subsidiaries.
5.4. ERISA Matters. Each Borrower shall furnish the Agent (with
sufficient copies of each of the Lenders):
(a) (i) promptly and in any event within 30 days after such
Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, and (ii) promptly and in any event
within 10 days after such Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the Code has been filed with respect to any
Qualified Plan, a written statement of the Chief Financial Officer or other
appropriate officer of such Borrower describing such ERISA Event or waiver
request and the action, if any, which such Borrower, its Subsidiaries and ERISA
Affiliates propose to take with respect thereto and a copy of any notice filed
with the PBGC or the IRS pertaining thereto;
84
<PAGE> 94
(b) promptly and in any event within 30 days after the
adoption thereof, notice of (i) any amendment to a Title IV Plan which results
in an increase in benefits or the adoption of any new Title IV Plan, and (ii)
any amendment to a, or adoption of a new, Welfare Benefit Plan, which results in
new or increased benefits for retirees, their spouses or their beneficiaries;
(c) promptly and in any event after receipt of written notice
of commencement thereof, notice of any action, suit or proceeding before any
Governmental Authority or arbitrator affecting such Borrower, any of its
Subsidiaries or any ERISA Affiliate with respect to any Title IV Plan,
Multiemployer Plan or other Plan, except those which in the aggregate, if
adversely determined, could not have a Material Adverse Effect;
(d) promptly and in any event within 30 days after notice or
knowledge thereof, notice that such Borrower or any of its Subsidiaries has
become subject to the tax on prohibited transactions imposed by Section 4975 of
the Code, together with a copy of Form 5330;
(e) promptly and in any event within 10 days after receipt
thereof by such Borrower, any of its Subsidiaries or any ERISA Affiliate, a copy
of each notice from the PBGC, received by such Borrower, any of its Subsidiaries
or any ERISA Affiliate of the PBGC's intention to terminate any Pension Plan or
to have a trustee appointed to administer any Pension Plan;
(f) simultaneously with the date that such Borrower, any of
its Subsidiaries or any ERISA Affiliate files a notice of intent to terminate
any Title IV Plan under a distress termination within the meaning of Section
4041(c) of ERISA, a copy of each such notice; and
(g) simultaneously with the date that such Borrower, any of
its Subsidiaries or any ERISA Affiliate files a notice of intent to terminate
any Title IV Plan, if such termination would require material additional
contributions in order to be considered a standard termination within the
meaning of Section 4041(b) of ERISA, a copy of each notice.
5.5. Litigation. Promptly after a Responsible Officer of a Borrower
obtains knowledge thereof, each Borrower shall give the Agent written notice of
the commencement of any action, suit or proceeding before any domestic or
foreign Governmental Authority or arbitrator, against or affecting such Borrower
or any of its Subsidiaries, (i) which is brought by or on behalf of any
Governmental Authority or in which injunctive or other equitable relief is
sought or (ii) as to which it is probable (within the meaning of Statement of
Financial Accounting Standards No. 5) that there will be an adverse
determination and which, if adversely determined, would (A) reasonably be
expected to result in liability of such Borrower or Subsidiary in an aggregate
amount of $100,000 or more, not reimbursable by insurance, or (B) materially
85
<PAGE> 95
impair the right of any Loan Party to perform its obligations under this
Agreement or any other Loan Document to which it is a party.
5.6. Notices Respecting the Indenture. Each Borrower shall send the
Agent promptly after the receipt, sending or filing thereof, (i) copies of all
material notices, certificates or reports delivered or received by any Borrowers
in respect of or pursuant to the Indenture and (ii) prompt written notice of any
"Default" or "Event of Default" under the Indenture, specifying the nature and
extent thereof and the action (if any) that is proposed to be taken with respect
thereto. Promptly after the sending or filing thereof, the Borrower shall send
the Agent copies of all material notices, certificates or reports delivered
pursuant to any Related Document.
5.7. SEC Filings; Press Releases. Promptly after the receipt, sending
or filing thereof, each Borrower shall send the Agent (a) copies of all reports
which any Loan Party sends to its security holders generally, and copies of all
reports and registration statements which any Loan Party or any Subsidiary of
any Loan Party files with the Securities and Exchange Commission or any national
securities exchange or the National Association of Securities Dealers, Inc. and
(b) copies of all press releases and other statements made available by any Loan
Party to the public generally concerning material changes or developments in the
business of such Loan Party.
5.8. Labor Relations. Promptly after becoming aware of the same, each
Borrower shall give the Agent written notice of (a) any material labor dispute
to which such Borrower or any of its Subsidiaries is or becomes a party,
including any strikes, lockouts or other labor disputes relating to such
Person's Theaters and other facilities, and (b) any Worker Adjustment and
Retraining Notification Act or related liability incurred with respect to the
closing of any Theater or other facility of such Person.
5.9. Tax Returns. Upon the request of any Lender through the Agent,
each Borrower will provide copies of all federal, state, local and foreign tax
returns and reports filed by such Borrower or any of its Subsidiaries in respect
of taxes measured by income or net worth or capital (excluding sales, use and
like taxes).
5.10. Insurance. As soon as is practicable and in any event within 15
days of request, each Borrower will furnish the Agent (in sufficient copies for
each of the Lenders) with (i) a certificate of insurance or other report in form
and substance satisfactory to the Agent and the Lenders outlining all material
insurance coverage maintained as of the date of such report by the Borrowers and
their Subsidiaries, the duration of such coverage, the amounts and risks covered
and the related deductible amounts and otherwise indicating compliance of such
insurance with the requirements of Section 6.4 and (ii) an insurance broker's
statement that all premiums then due and payable with respect to such coverage
have been paid.
5.11. Environmental Matters. Each Borrower shall provide the Agent
promptly and in any event within 10 days of such Borrower or any of its
Subsidiaries learning of any of the following, written notice of any of the
following:
86
<PAGE> 96
(a) any Loan Party or any of its Subsidiaries is or is likely
to be liable to any Person as a result of a Release or threatened Release which
could reasonably be expected to subject such Loan Party or Subsidiary to
Environmental Liabilities and Costs of $50,000 or more or when combined with
other outstanding liabilities could reasonably be expected to subject such Loan
Party or any of its Subsidiaries to Environmental Liabilities and Costs in
excess of $250,000;
(b) the receipt by any Loan Party or any of its Subsidiaries
of notification that any real or personal property of such Loan Party or
Subsidiary is subject to any Environmental Lien;
(c) the receipt by any Loan Party or any of its Subsidiaries
of any notice of violation of, or knowledge by such Loan Party or Subsidiary
that there exists a condition which could reasonably be expected to result in a
violation by such Loan Party or Subsidiary of, any Environmental Law, except for
violations the consequence of which in the aggregate could not reasonably be
expected to result in the Loan Parties collectively incurring Environmental
Liabilities and Costs of $50,000 or more;
(d) the commencement of any judicial or administrative
proceeding or investigation alleging a violation or liability of any Loan Party
under any Environmental Law, other than those the consequences of which in the
aggregate could have no reasonable likelihood of subjecting the Loan Parties
collectively to Environmental Liabilities and Costs of $50,000 or more;
(e) any proposed acquisition of Theater, stock, assets or real
estate, or any proposed leasing of any Theater or other property, or any other
action by any Loan Party or any of its Subsidiaries other than those the
consequences of which in the aggregate have or would have in the reasonable
judgment of such Borrower no likelihood of subjecting the Loan Parties
collectively to Environmental Liabilities and Costs of $50,000 or more; and
(f) any proposed action taken by any Loan Party or any of its
Subsidiaries that require the Loan Parties to (i) obtain additional
environmental, health or safety Permits that collectively require the
expenditure of $50,000 or more or (ii) become subject to additional
Environmental Liabilities and Costs of $50,000 or more; and
(g) upon written request by any Lender through the Agent, a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice or report
delivered pursuant to this Agreement, other than those which in the aggregate
have in the reasonable judgment of such Borrower no likelihood of subjecting the
Loan Parties to Environmental Liabilities and Costs of $50,000 or more.
5.12. Board of Directors. Each Borrower shall, with reasonable
promptness, provide written notice of any change in (a) the Board of Directors
of any Borrower or (b) the compensation paid to any officer of any Borrower.
87
<PAGE> 97
5.13. New Subsidiaries. Each Borrower shall, promptly upon any Person
becoming a Subsidiary of any Borrower, provide a written notice setting forth
with respect to such Person (a) the date on which such Person became a
Subsidiary of such Borrower and (b) all of the data required to be set forth in
Schedule 4.8(a) and Schedule 4.8(b) with respect to all Subsidiaries of such
Borrower, which written notice shall be deemed to supplement Schedule 4.8(a) and
Schedule 4.8(b) for all purposes of this Agreement.
5.14. Compliance With the ADA. Each Borrower shall promptly provide the
Agent with copies of all claims which are received by any Borrower made by any
individual, entity or governmental agency as to any alleged noncompliance of any
Real Property Asset with the requirements of the ADA.
5.15. Defaults. Immediately upon any Responsible Officer of any
Borrower becoming aware thereof, each Borrower shall provide written notice to
the Agent of the breach beyond any applicable grace period by any party of any
Contractual Obligation of any Borrower or any of its Subsidiaries that is
material to the business of the Borrowers taken as one enterprise.
5.16. Other Information. Each Borrower will provide the Agent or any
Lender with such other information respecting the business, properties,
condition, financial or otherwise, or operations of such Borrower or any of its
Subsidiaries as any Lender through the Agent reasonably may request from time to
time.
5.17. No Implied Consent. No provision herein requiring the
notification of, or delivery of documents to, the Agent or any Lender in respect
of any transaction shall constitute, or be deemed to constitute, a consent to,
or authorize, or be deemed to authorize, any transaction otherwise prohibited by
this Agreement.
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as the Obligations or the Commitments remain
outstanding, unless the Required Lenders otherwise consent in writing, each
Borrower jointly and severally agrees with the Lenders and the Agent that:
6.1. Compliance with Laws, Etc. Each Borrower shall, and shall cause
each of its Subsidiaries to, comply with all applicable Requirements of Law and
Permits except for any Requirements of Law or Permits non-compliance with which
could not individually or in the aggregate have a Material Adverse Effect.
6.2. Conduct of Business. Each Borrower shall (a) conduct, and shall
cause each of its Subsidiaries to conduct, its business in the ordinary course
and consistent with past practice, (b) use, and cause each of its Subsidiaries
to use, its reasonable efforts, in the ordinary course and consistent with past
practice, to preserve its business and the
88
<PAGE> 98
goodwill and business of the advertisers, suppliers and others having business
relations with such Borrower or any of its Subsidiaries, (c) preserve, and cause
each of its Subsidiaries to preserve, all registered patents, trademarks, trade
names, copyrights and service marks material to the conduct of the business of
the Borrowers taken as one enterprise, and (d) perform and observe, and cause
each of its Subsidiaries to perform and observe, all the terms, covenants and
conditions required to be performed and observed by it under its Contractual
Obligations (including pay all rent and other charges payable, and perform any
repairs required to be performed, under any lease and all Indebtedness and other
obligations as the same become due), and do, and cause its Subsidiaries to do,
all things necessary to preserve and to keep unimpaired its rights under such
Contractual Obligations except for any Contractual Obligations non-performance
or observance of which could not individually or in the aggregate have a
Material Adverse Effect.
6.3. Payment of Taxes, Etc. Each Borrower shall pay and discharge, and
shall cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, all lawful governmental claims, taxes, assessments, charges
and levies, except where contested in good faith, by proper proceedings and with
respect to which adequate reserves therefor have been established on the books
of such Borrower or the appropriate Subsidiary in conformity with GAAP.
6.4. Maintenance of Insurance.
(a) Each Borrower shall, at its expense, keep the Collateral
insured against loss or damage by fire, theft, explosion, fraud, sprinklers and
all other hazards and risks, and in such amounts, as are in accordance with
normal industry practice. Such Borrower also shall maintain public liability,
product liability and property damage insurance relating to such Borrower's
ownership and use of the Collateral.
(b) Each Borrower shall, at its expense, obtain and maintain
(i) insurance of the type reasonably necessary to insure the Improvements (as
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as the Agent
may require, but in any event in amounts sufficient to prevent such Borrower
from becoming a co-insurer under such policies, (ii) combined single limit
bodily injury and property damages insurance against any loss, liability, or
damages commonly insured under a commercial general liability policy on, about,
or relating to each of the Mortgaged Properties, in an amount of not less than
$5,000,000; (iii) business interruption insurance covering annual receipts (net
of the amount of expenses not payable or accruing during the interruption) for a
12 month period for each of the Mortgaged Properties; and (iv) insurance for
such other risks as the Agent may reasonably require. Replacement costs, at the
Agent's option, may be redetermined by an insurance appraiser, reasonably
satisfactory to the Agent, not more frequently than once every 12 months at the
cost of the Borrowers.
89
<PAGE> 99
(c) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to the
Agent. All insurance required herein shall be written by companies which are
authorized to do insurance business in each of the states in which any Mortgaged
Properties are located. All hazard insurance and such other insurance as the
Agent shall specify shall contain a mortgagee endorsement satisfactory to the
Agent, showing the Agent as sole loss payee thereof (or, in the case of any such
insurance for any Leasehold Property where the related Lease expressly requires
that the landlord be named as a loss payee, showing the Agent and such landlord,
as their interests may appear, as sole loss payees) and shall contain a waiver
of warranties. Every policy of insurance referred to in this Section 6.4 shall
contain an agreement by the insurer that it will not cancel such policy except
after 30 days prior written notice to the Agent and that any loss payable
thereunder shall be payable to the Agent notwithstanding any act or negligence
of the Borrowers or the Secured Parties which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
notwithstanding (i) occupancy or use of the Mortgaged Properties for purposes
more hazardous than permitted by the terms of such policy, (ii) any foreclosure
or other action or proceeding taken by the Secured Parties pursuant to the
Collateral Documents upon the occurrence of an Event of Default, or (iii) any
change in title or ownership of the Mortgaged Properties. The Borrowers shall
deliver to the Agent copies of such policies of insurance and evidence of the
payment of all premiums therefor certified as complete by an Authorized Officer.
All liability insurance shall contain the Agent as a named insured.
(d) Original policies or certificates thereof satisfactory to
the Agent evidencing such insurance shall be delivered to the Agent at least 30
days prior to the expiration of the existing or preceding policies. The
Borrowers shall give the Agent prompt notice of any loss covered by such
insurance and, upon the occurrence and during the continuance of an Event of
Default, the Agent shall have the exclusive right to adjust all losses payable
under any such insurance policies without any liability to the Borrowers
whatsoever in respect of such adjustments. Any Loan Party shall cause any monies
received by such Loan Party as payment for any loss under any insurance policy,
including the insurance policies mentioned above, shall be paid over to the
Agent, for the ratable benefit of the Lenders, to be disbursed (if no Event of
Default has occurred or is continuing) to the Borrowers under stage payment
terms satisfactory to the Agent for application to the cost of repairs,
replacements, or restorations or if an Event of Default has occurred and is
continuing or such monies otherwise constitute "Asset Sale Proceeds", to be
applied by the Agent in accordance with Section 2.8(a). All repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction.
(e) The Borrowers shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.4, unless the Agent is included thereon as named
insured with the loss payable to the Agent, for the ratable benefit of the
Lenders, under a mortgagee endorsement
90
<PAGE> 100
satisfactory to the Agent, or its local equivalent. The Borrowers immediately
shall notify the Agent whenever such separate insurance is taken out, specifying
the insurer thereunder and full particulars as to the policies evidencing the
same, and originals or certificates of such policies immediately shall be
provided to the Agent.
6.5. Preservation of Corporate Existence, Etc. Each Borrower shall, and
shall cause each of its Subsidiaries to, preserve and maintain its corporate
existence, rights (charter and statutory) and franchises, except as permitted by
Section 7.5.
6.6. Access. Each Borrower shall, and shall cause each of its
Subsidiaries to, from time to time and as often as the Agent may request, permit
the Agent and the Lenders, or any agents or representatives thereof, within two
Business Days after written notification of the same (other than during the
continuance of an Event of Default, in which case no such notice shall be
required), during normal business hours, to (a) examine and audit and make
copies of and abstracts from the records and books of account of such Borrower
and each of its Subsidiaries, (b) visit the properties of such Borrower and each
of its Subsidiaries, (c) discuss the affairs, finances and accounts of such
Borrower and each of its Subsidiaries with any of their respective officers or
directors, (d) communicate directly with such Borrower's independent certified
public accountants (provided such Borrower shall have received at least 24 hours
notice thereof and the opportunity to participate) and (e) take such action as
the Agent deems necessary or desirable to review compliance by the Borrowers
with the terms and conditions of the Loan Documents. Each Borrower shall
authorize its independent certified public accountants to disclose to the Agent
or any Lender any and all financial statements, workpapers and other information
of any kind in respect of such Borrower, as the Agent or any Lender reasonably
requests, and which such accountants may have with respect to the business,
financial condition, results of operations or other affairs of such Borrower or
any of its Subsidiaries.
6.7. Keeping of Books. Each Borrower shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of such Borrower and each of its Subsidiaries.
6.8. Future Subsidiaries. Each Borrower shall, at least 30 days prior
to the date on which any Person becomes a direct or indirect Subsidiary of such
Borrower after the Closing Date, notify the Agent of that fact and, on or prior
to such date:
(a) cause such Subsidiary to execute and deliver to the Agent
a Subsidiary Assumption Agreement and the Note Allonges for all then outstanding
Notes (which agreement and allonges shall also have been executed and delivered
by all other then existing Borrowers), a Pledge Agreement, a Security Agreement
and an Intellectual Property Security Agreement, to deliver to the Agent a
letter from the Process Agent as to such Subsidiary substantially in the form of
the letters so delivered by the Process Agent as to the Borrowers on the Closing
Date and to take all such further actions and execute and file all such further
documents and instruments and obtain such search reports
91
<PAGE> 101
(including actions, documents and instruments comparable to those described in
Section 3.1(h), (i), (j), (m) and (n)) as may be necessary or, in the opinion of
the Agent, desirable to create in favor of the Agent, for the benefit of
Lenders, a valid and perfected first priority Lien on all of the property and
assets of such Subsidiary subject to Permitted Liens;
(b) deliver to the Agent (i) certified copies of such
Subsidiary's certificate or articles of incorporation, together with a good
standing certificate from the Secretary of State of the jurisdiction of its
incorporation and each other state in which such Person is qualified as a
foreign corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any applicable
franchise or similar taxes from the appropriate taxing authority of each of such
jurisdictions, each to be dated a recent date prior to their delivery to the
Agent, (ii) a copy of such Subsidiary's by-laws, certified by its corporate
secretary or an assistant secretary as of a recent date prior to their delivery
to the Agent, (iii) a certificate executed by the secretary or an assistant
secretary of such Subsidiary as to (x) stating that the attached resolutions of
the Board of Directors of such Subsidiary approve and authorize the execution,
delivery and performance of such Loan Documents, are in full force and effect
and have not been modified or amended and (y) certifying the incumbency and
signatures of the Responsible Officers of such Subsidiary executing such Loan
Documents, and (iv) a favorable opinion of counsel to such Borrower, in form and
substance reasonably satisfactory to the Agent, as to (w) the due organization
and good standing of such Subsidiary, (x) the due authorization, execution and
delivery by such Subsidiary of such Loan Documents (and by all other then
existing Borrowers of such Subsidiary Assumption Agreement and Note Allonges),
(y) the enforceability of such Loan Documents against such Subsidiary (and of
such Subsidiary Assumption Agreement and Note Allonges against such other
Borrowers) and (z) such other matters (including matters relating to the
creation and perfection of Liens in any Collateral pursuant to such Loan
Documents and the Pledge) as the Agent may reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to the Agent; and
(c) comply with Section 7.18 in respect of such Subsidiary.
6.9. Real Property Matters.
(a) Except as otherwise agreed by the Agent, if any Borrower
or any Subsidiary of such Borrower acquires, or enters into any extension,
renewal or other amendment of the Lease (excluding any exercise of any right of
renewal or extension pursuant to the terms of such Lease as in effect on the
Closing Date) in respect of, any Leasehold Property after the Closing Date, such
Borrower shall, and shall cause such Subsidiary to, unless waived by the Agent
in writing, (i) cause such Leasehold Property (x) to be a Conforming Leasehold
Interest on or prior to the date of acquisition thereof or amendment in respect
thereof and (y) be subject to a Leasehold Mortgage in accordance with Section
6.9(b) on or prior to the date of acquisition thereof or amendment in respect
thereof; and (ii) otherwise comply with Section 7.5 in respect of such Leasehold
Property.
92
<PAGE> 102
(b) From and after the Closing Date, unless waived by the
Agent in writing, in the event that (x) any Borrower or any Subsidiary of such
Borrower acquires any Real Property Asset (including any Real Property Asset
constituting a Leasehold Property acquired by entering into a Lease) or at the
time any Person becomes a Subsidiary of a Borrower, such Person owns any Real
Property Asset or (y) any Borrower or any Subsidiary of any Borrower enters into
any extension, renewal or other amendment of any Lease in respect of any
Leasehold Property that is not a Mortgaged Property (excluding any exercise of
any right of renewal or extension pursuant to the terms of such Lease as in
effect on the Closing Date), such Borrower shall, or shall cause such Subsidiary
to, at least thirty (30) days prior to the date on which such Real Property
Asset is acquired, such Person becomes a Subsidiary or such amendment is entered
into, notify the Agent of that fact and, on or prior to such date, deliver to
the Agent, a duly executed and acknowledged Mortgage with respect to such Real
Property Asset, together with (i) each of the Mortgage Related Documents with
respect to such Additional Mortgaged Property; and (ii) evidence that
counterparts of such Mortgage have been recorded in all places to the extent
necessary or desirable, in the judgment of the Agent, to create a valid and
perfected first priority security interest in the property described therein in
favor of the Agent for the benefit of the Secured Parties (or in favor of such
other trustee as may be required or desired under local law).
(c) If required by any Governmental Authority or under any
Requirements of Law, each Borrower shall, and shall cause each of its
Subsidiaries to, permit an independent real estate appraiser satisfactory to the
Agent, upon reasonable notice, to visit and inspect any Mortgaged Property for
the purpose of preparing an appraisal of such Mortgaged Property satisfying the
requirements of any applicable laws and regulations (in each case to the extent
required under such laws and regulations as determined by the Agent in its
discretion).
(d) At least twenty (20) days prior to the making by any
Borrower or any Subsidiary of such Borrower of any sale or disposition of assets
permitted under clause (b) or (c) of Section 7.6 of any assets of such Borrower
or Subsidiary encumbered by a Lien arising under any Collateral Document, such
Borrower shall, to the extent necessary to effect such sale or disposition of
assets, request that the Agent execute and deliver to such Borrower such
releases (including amendments to the UCC-1 financing statements that have been
filed or recorded in connection with such Collateral Document) releasing any
Liens on the assets being sold pursuant to such sale or disposition of assets
that were granted in favor of the Agent pursuant to such Collateral Document.
Upon receiving any such request, the Agent shall, at such Borrower's expense,
execute and deliver to such Borrower such releases, in recordable form, on the
date of such sale or disposition of assets; provided that, at the time of the
Agent's execution and delivery to such Borrower of such releases, (i) no Default
or Event of Default shall have occurred and be continuing or shall be caused
thereby, (ii) the Agent shall have received evidence satisfactory to it that
such sale or disposition of assets shall be permitted under clause (b) or (c) of
Section 7.6, and (iii) to the extent such disposition constitutes an Asset Sale
for purposes of Section 2.8(a), such Borrower shall have (x) paid the Agent, for
application
93
<PAGE> 103
to the prepayment of the Loans pursuant to Section 2.8(a), an amount equal to
the Asset Sale Proceeds of such sale or disposition of assets that are required
to be applied to the prepayment of the Loans pursuant to Section 2.8(a), or (y)
provided the Agent with evidence reasonably satisfactory to it that irrevocable
arrangements, in form and substance reasonably satisfactory to the Agent, have
been made to transfer the Asset Sale Proceeds to the Agent on the date of such
sale or disposition.
(e) Upon the request of the Agent, each Borrower shall provide
the Agent with a copy of each lease of real property to which such Borrower or
any Subsidiary of such Borrower is then a party, whether as lessor or lessee.
Each Borrower shall, and shall cause each of its Subsidiaries to, (i) comply (no
later than the expiration of any applicable grace period provided therefor in
the lease) with all of its obligations under all leases now or hereafter held by
it with respect to real property, including any such leases set forth on
Schedule 4.19(b), to the extent the effect of any non-compliance is (x) as to
any non-compliance constituting a default in payment (other than with respect to
payment of common area maintenance charges), to terminate, or to permit the
landlord to terminate, such lease, or (y) as to any other non-compliance, to
terminate, or to permit the landlord to terminate (in circumstances where such
landlord is likely to terminate), such lease except for non-compliance which
individually or in the aggregate for all such leases could not have a Material
Adverse Effect; (iii) not modify, amend, cancel, extend or otherwise change in
any adverse manner any of the terms, covenants or conditions of any leases
referred to in clause (i) (excluding any exercise of any right of renewal or
extension pursuant to the terms of such lease as in effect on the Closing Date
and any terminations of any lease (other than any Lease subject to a Leasehold
Mortgage) permitted pursuant to Section 7.6(f)); (iv) not assign or terminate or
sublet any portion of premises subject to a Leasehold Mortgage or assign or
(except for the termination of any lease permitted pursuant to Section 7.6(f))
terminate or sublet any lease (other than any Lease subject to a Leasehold
Mortgage) if such assignment or termination or sublet could have a Material
Adverse Effect; (v) provide the Agent with a copy of each notice of default
under any lease referred to in clause (i) received by such Borrower or any
Subsidiary of such Borrower promptly following receipt thereof and deliver to
the Agent a copy of each notice of default sent by such Borrower or any
Subsidiary of such Borrower under any such lease simultaneously with its
delivery of such notice under such lease; (vi) provide the Agent with a copy of
any notice to the landlord of such Borrower's or any Subsidiary of such
Borrower's intention either to renew or extend or to not renew or extend any
lease referred to in clause (i); (vii) notify the Agent at least fourteen (14)
days prior to the date such Borrower or any Subsidiary of such Borrower takes
possession of or becomes liable under any Leasehold Property or Lease not listed
on Schedule 4.19(b), whichever is earlier; and (viii) with respect to the Leases
subject to any Leasehold Mortgage, comply (no later than the expiration of any
applicable grace period provided for therein) with the provisions of the
Leasehold Mortgage encumbering the applicable Lease, which provisions shall
control.
6.10. Maintenance of Properties, Etc. Each Borrower shall, and shall
cause each of its Subsidiaries to, maintain and preserve (a) all of its
properties which are necessary in
94
<PAGE> 104
the conduct of its business in good working order and condition, ordinary wear
and tear excepted and (b) all rights, permits, licenses, approvals and
privileges (including all Permits) which are necessary in or material to the
conduct of the business of the Borrowers taken as one enterprise.
6.11. Performance and Compliance with Other Covenants. Each Borrower
shall, and shall cause each of its Subsidiaries to (i) perform and comply (no
later than the expiration of any applicable grace period) with each of the
covenants and agreements set forth in the Indenture to the extent such Borrower
or Subsidiary is a party thereto (subject to the subordination of all
obligations thereunder and under the Subordinated Notes to the prior payment in
full of the Obligations) and (ii) perform and comply (except for the termination
of any lease permitted pursuant to Section 7.6(f)) with each other Contractual
Obligation to which such Borrower or any of its Subsidiaries is a party (no
later than the expiration of any applicable grace period) if failure to do so
could, individually or in the aggregate, have a Material Adverse Effect.
6.12. Application of Proceeds. Each Borrower shall cause the entire
amount of the proceeds of the Loans to be used as specified in Section 4.16.
6.13. Fiscal Year. Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain, as its Fiscal Year the twelve month period ending on
December 31 of each year.
6.14. Environmental. Each Borrower shall, and shall cause each of its
Subsidiaries to, comply with all Environmental Laws applicable to the operations
or properties of such Borrower or Subsidiary. Each Borrower shall, at its sole
cost and expense, upon receipt of any notification or otherwise obtaining
knowledge of any Release by a Loan Party or other event that could result in
such Borrower or any of its Subsidiaries incurring Environmental Liabilities and
Costs in excess of $10,000, conduct or pay for consultants to conduct tests,
investigations or assessments of environmental conditions at such operations or
properties, including the investigation and testing of subsurface conditions,
and shall take such remedial, investigational or other action as required by
Environmental Laws, as any Governmental Authority or the Agent or the Required
Lenders require or as is appropriate and consistent with good business practice
to correct or otherwise address the condition. Each Borrower shall at all times
maintain an asbestos operation and maintenance ("O&M") program, which has been
developed by a licensed asbestos professional, at each Theater operated by such
Borrowers at which there is located asbestos-containing materials ("ACM") or
materials that are presumed to be ACM, as defined in 29 C.F.R. Section
1910.1001, which O&M program at a minimum shall be consistent with guidelines
established by the United States Environmental Protection Agency and any
guidelines established by the state in which the Theater is located.
95
<PAGE> 105
6.15. Bank Accounts.
(a) Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain any cash or Cash Equivalents (within the meaning of
clause (b) of the definition thereof) only in (i) the Cash Concentration Account
and other Qualified Accounts (not to exceed five more than the aggregate number
of Theaters operated by such Borrower), (ii) not more than three payroll
checking accounts maintained by and in the name of such Borrower in which the
aggregate amounts on deposit at any one time do not exceed the sum of (x) the
aggregate amount payable pursuant to payroll checks that have been drawn thereon
and delivered to employees in payment of wages but have not been collected prior
to such time, (y) the amounts of any associated withholding taxes that have been
withheld from such wages but have not previously been remitted to the
appropriate Governmental Authority and (z) $25,000, or (iii) other bank accounts
maintained by and in the name of a Borrower in which both (x) the aggregate
amounts on deposit for all such other accounts for all Borrowers at any one time
does not exceed $500,000 and (y) the aggregate of the average daily balances of
all such other accounts for all Borrowers during any calendar week does not
exceed $200,000.
(b) Such Borrower shall, and shall cause each of its
Subsidiaries to, at all times have in effect for all Qualified Accounts
maintained by such Borrower or Subsidiary and all other bank accounts maintained
by such Borrower or Subsidiary pursuant to clause (iii) of Section 6.15(a) a
cash management system providing for, with respect to each such account, the
transfer at least twice each week of all cash and Cash Equivalents in such
account in excess of $2,000 from such account to the Cash Concentration Account,
such system to be pursuant to such agreements and other documents as shall be in
form and substance reasonably satisfactory to the Agent.
(c) No later than the Business Day after the fifth consecutive
Business Day on which the closing daily balance in the Cash Concentration
Account (including any investments) is in excess of $3,000,000, to the extent
the aggregate unpaid principal balance of the Revolving Credit Loan exceeds
zero, each Borrower shall cause an amount equal to the integral multiple of
$100,000 that is (or is next larger than) such excess to be applied in repayment
of the Revolving Credit Loans pursuant to Section 2.7(b).
(d) At all times after the date 30 days after the Agent
delivers a written notice to the Borrowers that the Cash Concentration Account
be a Qualified Account, the Borrowers shall cause the Cash Concentration Account
to be a Qualified Account.
6.16. Broker's Fee. Such Borrower shall indemnify the Agent and the
Lenders for, and hold the Agent and the Lenders harmless from and against, any
and all claims for brokerage commissions, fees and other compensation made
against the Agent and the Lenders for any broker, finder or consultant
(including DLJ or any Affiliate thereof) with respect to any agreement,
arrangement or understanding made by or on behalf of any Loan Party or any of
its Subsidiaries in connection with the transactions contemplated by this
Agreement.
96
<PAGE> 106
6.17. ADA Compliance. Such Borrower shall, and shall cause each of its
Subsidiaries to, observe and comply in all material respects with all
obligations and requirements of the ADA as it applies to any Real Property
Asset, which shall include (to the extent required by the ADA), (i) installing
or constructing all improvements or alterations which may be necessary to cause
such Real Property Asset to be accessible to all persons if the use of any of
such Real Property Asset or any part thereof becomes a "public accommodation,"
as defined in the ADA, and (ii) making any reasonable accommodations which may
be necessary to accommodate the needs or requirements of any existing or future
employee of any Loan Party or any Subsidiary thereof.
6.18. Borrowing Base Determination.
(a) Each Borrower shall conduct, or shall cause to be
conducted, at its expense, and upon request of the Agent, and deliver to the
Agent, such investigations and reviews as the Agent shall reasonably request for
the purpose of determining the Borrowing Base (Unadjusted), all upon reasonable
notice and at such reasonable times during normal business hours and as often as
may be reasonably requested. Each Borrower shall furnish to the Agent any
information which the Agent may reasonably request regarding the determination
and calculation of the Borrowing Base (Unadjusted) including correct and
complete copies of any Leases, invoices, underlying agreements, instruments or
other documents.
(b) Each Borrower shall promptly notify the Agent in writing
in the event that at any time such Borrower or any of its Subsidiaries gains
knowledge that (i) as a result of a Mortgaged Property no longer being a
Qualified Mortgaged Property, the Borrowing Base (Unadjusted) is less than 99%
of the Borrowing Base (Unadjusted) reflected in the most recent Borrowing Base
Certificate delivered pursuant to Section 3.1 or 5.1, as applicable, (ii) the
outstanding Revolving Credit Loans exceed the Borrowing Base (Revolving Credit
Loans) as a result of a decrease in the Borrowing Base (Unadjusted), and the
amount of such excess, or (iii) the outstanding Term Loans exceed the Borrowing
Base (Unadjusted) as a result of a decrease in the Borrowing Base (Unadjusted),
and the amount of such excess.
(c) The Agent may make test verifications of the TLCF of any
Mortgaged Property in any manner and through any medium that the Agent considers
advisable, and each Borrower shall furnish all such assistance and information
as the Agent may require in connection therewith.
6.19. Debt Repurchase.
(a) Each Borrower shall cause the Debt Repurchase to be
conducted pursuant to the terms and conditions of the Related Documents and in
compliance with the Indenture and all applicable laws (including Federal and
state securities laws and Sections 10 and 14 of the Exchange Act and Rules 10b-5
and 14e-1 thereunder).
97
<PAGE> 107
(b) Each Borrower shall cause the Subordinated Notes
repurchased pursuant to the Debt Repurchase to be delivered to the Trustee (as
defined in the Indenture) and cancelled pursuant to Section 2.11 of the
Indenture.
6.20. Additional Collateral. Each Borrower acknowledges that it is its
intention to provide the Agent with a Lien on behalf and for the benefit of the
Secured Parties on all the property (excluding any Leasehold Property owned by a
Borrower on the Closing Date not constituting a Conforming Leasehold Property)
of such Borrower and its Subsidiaries, whether now owned or hereafter acquired
(other than as agreed to in writing by the Agent), subject only to Permitted
Liens. Without limitation of Sections 6.8 or 6.9 hereof, each Borrower shall
from time to time promptly notify the Agent of the acquisition by any Borrower
or any of its Subsidiaries of any material property (excluding any such
Leasehold Property) in which the Agent does not then hold a perfected Lien on
behalf and for the benefit of the Secured Parties (other than as agreed to in
writing by the Agent), or the creation or existence of any such property, and,
whether or not any Borrower has so notified the Agent thereof, such Borrower
shall, upon request by the Agent, promptly execute and deliver to the Agent or
cause to be executed and delivered to the Agent pledge agreements, security
agreements, mortgages or other like agreements with respect to such property,
together with such other documents, certificates, opinions of counsel and the
like as the Agent shall reasonably request in connection therewith, in form and
substance satisfactory to the Agent, such that the Agent shall receive valid and
perfected Liens on behalf and for the benefit of the Secured Parties (subject
only to Permitted Liens) on all such property (including property which, on the
Closing Date, is not subject to a Lien in favor of the Agent but excluding any
such Leasehold Property).
6.21. Further Assurances. Each Borrower shall promptly execute any and
all further documents and take all further actions which may be required under
applicable law, or which the Agent may reasonably request, to grant, preserve,
protect and perfect the Liens created by the Collateral Documents in the
Collateral.
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations or Commitments remain
outstanding, without the written consent of the Required Lenders, the Borrowers
jointly and severally agree with the Lenders and the Agent that:
7.1. Liens, Etc. Each Borrower shall not, and shall not permit any of
its respective Subsidiaries to, create or suffer to exist, any Lien upon or with
respect to any of its properties or assets, whether now owned or hereafter
acquired, or assign, or permit any of its respective Subsidiaries to assign, any
right to receive income, except for:
(a) Liens (x) created pursuant to the Loan Documents or (y)
created under the Existing Loan Documents and securing only the Obligations;
98
<PAGE> 108
(b) purchase money Liens or purchase money security interests
upon or in any property acquired or held by any Loan Party in the ordinary
course of business to secure the purchase price of such property or to secure
Indebtedness incurred solely for the purpose of financing the acquisition of
such property and Liens in respect of Capitalized Lease Obligations with respect
to personal property; provided, however, that (i) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
the property subject thereto, (ii) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost, (iii) such Lien does not
extend to or cover any property other than such item of property and any
improvements on such item and proceeds thereof, and (iv) the aggregate principal
amount of the Indebtedness secured by the Liens permitted by this clause (b)
shall not exceed $100,000 in the aggregate at any time outstanding;
(c) any Lien securing the renewal, extension, refinancing or
refunding of any Indebtedness or other Obligation secured by any Lien (i)
permitted by subsection (b) or (j) of this Section 7.1, in either case (x)
without any increase in the amount secured thereby or in the assets subject to
such Lien and (y) if such Lien renews, extends, refinances or refunds any Lien
permitted by subsection (j) of this Section 7.1 and is on any Mortgaged
Property, only if such Lien is subordinated to the Liens created pursuant to the
Loan Documents;
(d) any Lien arising by operation of law or provided for under
the terms of any Lease in favor of any lessor incurred by any Loan Party in the
ordinary course of business which secure its obligations to such lessor and
which do not extend to or cover any property other than fixtures or personal
property located at or on the related Leasehold Property; provided that (i) no
Loan Party is in default (after the expiration of any applicable grace period)
with respect to any such obligation to any such lessor unless (x) such Loan
Party is in good faith and by appropriate proceedings diligently contesting such
obligation and adequate provision is made for the payment thereof, on the books
of such Loan Party in conformity with GAAP, and (y) the aggregate amount of the
obligations secured by the Liens permitted pursuant to this clause (d) and
clause (e) of this Section 7.1 shall not exceed $250,000 in the aggregate, (ii)
all such Liens in the aggregate could not have a Material Adverse Effect and
(iii) if such Lien is on any Mortgaged Property and such Lien has been evidenced
of record by a UCC financing statement or other filing with any Governmental
Authority, unless such Lien is the Lien disclosed on Schedule 7.1(j) with
respect to the Mortgaged Property constituting the Kendall Square Theater or has
been waived in writing by the Agent, such Lien is subordinated to the Liens
created pursuant to the Loan Documents;
(e) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers or other similar Persons (other than lessors)
incurred by a Loan Party in the ordinary course of business which secures its
obligations to such Person; provided that (i) such Liens are for amounts not yet
overdue or for amounts that are overdue for less than thirty (30) days unless
(x) such Loan Party is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision
99
<PAGE> 109
is made for the payment thereof, on the books of such Loan Party in conformity
with GAAP, and (y) the amount of the obligations secured by the Liens permitted
pursuant to this clause (e) and clause (d) of this Section 7.1 shall not exceed
$250,000 in the aggregate and (ii) all such Liens in the aggregate could not
have a Material Adverse Effect;
(f) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; provided, that no Loan Party is
in default in respect of any payment obligation with respect thereto unless such
Loan Party is in good faith and by appropriate proceedings diligently contesting
such obligation and adequate provision is made for the payment thereof on the
books of such Loan Party in conformity with GAAP, and all such Liens in the
aggregate could not have a Material Adverse Effect;
(g) Liens incurred or pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions and other social security benefits;
(h) zoning restrictions, easements, licenses, reservations or
restrictions on the use of real property or minor irregularities of title
incident thereto which do not in the aggregate render title thereto unmarketable
or impair, in any material manner, the use of such property for the purposes for
which such property is held by such Loan Party or result in a material
diminution in the value of any Collateral;
(i) financing statements filed by a personal property lessor
for precautionary purposes in respect of any lease (other than any Capitalized
Lease) of such personal property to a Borrower by such lessor;
(j) Liens (other than in favor of lessors) existing on the
Closing Date that are (x) disclosed on Schedule 7.1(j) and (y) if on any Real
Property Asset that is a Mortgaged Property (excluding (at any time prior to
February 15, 2000) the Mortgaged Property constituting the Seven Gables Theater
in Seattle, Washington), subordinated to the Liens created pursuant to the Loan
Documents;
(k) Liens in favor of sellers of Theaters in respect of
escrows or other deposits made in the ordinary course of business in connection
with any Permitted Acquisitions, but in no event exceeding 15% of the Total
Consideration for such acquisition;
(l) Liens securing the performance of contracts (other than
Leases or contracts for the repayment of borrowed money), statutory obligations
and surety performance bonds, incurred as an incident to and in the ordinary
course of business, and appeal bonds and judgment liens; provided that all such
Liens (i) in the aggregate could have no Material Adverse Effect and (ii) do not
secure directly or indirectly judgments (not covered by insurance or an
indemnity from a creditworthy party who, in either case,
100
<PAGE> 110
has acknowledged coverage or is required to honor the same pursuant to a final
judgment or order) in excess of $100,000;
(m) Liens on cash security deposits under Leases and utility
deposits in an aggregate amount not to exceed $1,000,000;
(n) Liens constituting deposits of cash collateral to secure
the reimbursement obligations of Landmark in respect of letters of credit issued
for the benefit of Landmark pursuant to Section 7.2(m); and
(o) Liens not otherwise permitted by the foregoing clauses (a)
through (n) of this Section 7.1 (other than on any Mortgaged Property) securing
obligations or other liabilities (other than Indebtedness) of any Loan Party;
provided, however, that the aggregate amount of such obligations and liabilities
secured by such Liens shall not exceed $250,000 at any time outstanding.
7.2. Indebtedness. Each Borrower shall not, and shall not permit any of
its respective Subsidiaries to, directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness except:
(a) the Obligations;
(b) Indebtedness with respect to Contingent Obligations
permitted by Section 7.14;
(c) current liabilities for goods, materials or services
purchased in the ordinary course of business not more than 30 days overdue;
(d) Indebtedness owing to any Borrower;
(e) Indebtedness secured by Liens permitted by Section 7.1(b);
provided, however, that the aggregate amount of Indebtedness incurred pursuant
to this clause (e) shall not exceed $100,000 at any one time outstanding;
(f) Indebtedness outstanding on the Closing Date (other than
the Subordinated Notes) and listed on Schedule 4.20 (together with the
Subordinated Notes, the "Other Debt") and any refinancings of the Other Debt
(other than the Subordinated Notes) without any increase in the principal amount
of such Indebtedness (excluding at any time after November 1, 1999, the $660,000
indebtedness in respect of the Renaissance Place Theater or any refinancing
thereof);
(g) Obligations pursuant to Derivative Contracts to the extent
such obligations constitute Indebtedness, so long as such Derivative Contracts
are permitted under Section 7.20;
(h) Indebtedness under Capitalized Lease Obligations (i)
outstanding on the Closing Date and listed on Schedule 4.20 and indicated
thereon as being a
101
<PAGE> 111
Capitalized Lease Obligation or (ii) incurred on or after the Closing Date by
acquisition of a Leasehold Property (including by entering into a Lease)
permitted as a "Permitted Acquisition" or "Permitted Theater Investment"
pursuant to Section 7.5(a) or 7.5(b);
(i) unsecured Indebtedness not otherwise permitted under this
Section 7.2 in an aggregate principal amount at any time outstanding not in
excess of $250,000;
(j) Indebtedness of the Borrowers evidenced by the
Subordinated Notes in an aggregate principal amount not exceeding $100,000,000
less the principal amount of any Subordinated Notes repurchased pursuant to the
Debt Repurchase;
(k) unsecured Indebtedness of the Borrowers (other than the
Subordinated Notes) in an aggregate principal amount not to exceed $250,000 that
is subordinated to the payment in full of the Obligations on terms satisfactory
to the Required Lenders (together with the Subordinated Notes, "Subordinated
Debt");
(l) Indebtedness under the BofA L/C Facility Agreement in an
aggregate amount not to exceed $5,300,000 and not secured by any assets or
properties of any Borrower; and
(m) Indebtedness in respect of standby letters of credit in
aggregate face amounts not to exceed $3,700,000, $660,000 or $750,000,
respectively, issued to the landlords in connection with the Permitted Theater
Investments for the Art Theaters to be constructed in Chicago, Illinois
(Century), Highland Park, Illinois (Renaissance Place) and Bethesda, Maryland
(Bethesda Row), respectively.
7.3. No Restrictions on Subsidiary Distributions; No New Negative
Pledge.
(a) Each Borrower shall not, and shall not permit any of its
respective Subsidiaries to, agree to enter into or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of such Subsidiary to pay dividends or make any other distribution or transfer
of funds or assets or make loans or advances to or other Investments in, or pay
any Indebtedness owed to, any Borrower or any of its respective other
Subsidiaries.
(b) Each Borrower shall not, and shall not permit any of its
respective Subsidiaries to, enter into or suffer to exist or become effective
any agreement which prohibits or limits the ability of such Borrower or
Subsidiary of a Borrower to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, to secure the Obligations, other than pursuant to the Loan Documents,
any agreements governing any purchase money Liens or Capitalized Lease
Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall be effective only against the assets financed thereby) and
restrictions in leases of personal property or (except for any Lease in respect
of any Conforming Leasehold Interest) any Lease (which restrictions shall be
effective only against the property so leased).
102
<PAGE> 112
7.4. Restricted Payments. Each Borrower shall not, and shall not permit
any of its respective Subsidiaries to, directly or indirectly, declare, order,
pay, make or set apart any sum for any Restricted Junior Payment; provided that
(a) so long as no Event of Default shall have occurred and be continuing or
shall be caused thereby, (i) each of SC and the Parent may pay its respective
obligations to Brentwood under the Administrative Services Agreement and (ii)
the Parent may repurchase Common Stock of the Parent from any former or current
employee of any Loan Party so long as the aggregate amount of all such
repurchases does not exceed $50,000, (b) any Subsidiary of a Borrower may make
Restricted Junior Payments to any Borrower and (c) the Parent may apply the
proceeds of the Term B Loans on the Debt Repurchase Closing Date to the
repurchase of the Subordinated Notes pursuant to the Debt Repurchase.
7.5. Restriction on Fundamental Changes; Acquisitions and Construction.
Each Borrower shall not and shall not permit any of its respective Subsidiaries
to, (i) enter into any merger or consolidation, (ii) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), (iii) acquire by
purchase or otherwise all or substantially all of (x) the assets of, (y) the
assets constituting the business of a division, branch or other unit operation
of or (z) the Stock or Stock Equivalents of, any Person, (iv) enter into any
Lease or acquire by purchase, lease or sublease or otherwise any Theater or Real
Property Asset, (v) construct any Theaters, (vi) make any Consolidated Capital
Expenditures, or (vii) enter into any joint venture or partnership with any
Person, except:
(a) any Borrower (other than the Parent) may consummate
acquisitions of (1) a 100% interest in assets used or useful in the operation of
a Theater (including any such Theater acquired in a Permitted Asset Swap),
including a Leasehold Property acquired by entering into a Lease or (2) all of
the capital Stock of a Person primarily engaged in the Art Theater business
(each, a "Permitted Acquisition") upon satisfaction on or prior to the Permitted
Acquisition Closing Date of the following conditions:
(i) a written description of such Permitted
Acquisition, which description shall include the assets or Stock to be
acquired and the Maximum Total Consideration therefor, has been
approved in writing by the Agent;
(ii) delivery to the Agent of evidence in form and
substance satisfactory to the Agent (including an Officer's Certificate
to such effect) that (A) the Total Consideration paid or payable with
respect to such acquisition (including any such acquisition that is a
part of a Permitted Asset Swap) does not exceed the Maximum Total
Consideration therefor approved in writing by the Agent;
(iii) no Default or Event of Default shall have
occurred and be continuing as of the Permitted Acquisition Closing Date
or would result from such acquisition (and, in the case of any such
acquisition that is a part of a
103
<PAGE> 113
Permitted Asset Swap with a concurrent Asset Sale transaction, after
giving effect to such Asset Sale);
(iv) regardless of whether a Loan is being made in
connection with such Permitted Acquisition, delivery to the Agent on or
prior to the Permitted Acquisition Closing Date of evidence in form and
substance satisfactory to the Agent (including delivery of an Officer's
Certificate to such effect and delivery of each of the documents,
agreements, instruments, certificates, opinions and other items
described in Article III that would be required to be delivered in
connection therewith if a Loan were being made on such date) that (x)
the Agent, for the benefit of the Secured Parties, has a valid and
perfected first priority security interest in all of the Additional
Collateral (including any Leasehold Property or other Real Property
Asset) acquired or to be acquired pursuant to such Permitted
Acquisition as specified in Section 3.3(a) and (y) each of the
conditions set forth in Article III have been satisfied on or before
such date, in case of clause (x) and (y) as if a Loan were being made
on such date;
(v) the Agent shall receive at least thirty (30)
days' prior written notice of such proposed acquisition, which notice
shall include a reasonably detailed description of such proposed
acquisition;
(vi) such Permitted Acquisition shall involve only
assets located or a business operated in the United States; and all of
such assets or business shall be owned by any Borrower or, if approved
in writing by the Agent, a wholly owned Subsidiary thereof that is an
Additional Subsidiary that has become a Borrower in accordance with
Section 6.8;
(vii) such Permitted Acquisition shall be consensual
and, if required by law, shall have been approved by the Seller's board
of directors;
(viii) no additional Indebtedness, Contingent
Obligations or other liabilities shall be incurred, assumed or
otherwise be reflected on a consolidated balance sheet of the Parent
and its Subsidiaries after giving effect to such Permitted Acquisition,
except (A) Loans made or Indebtedness permitted under Section 7.2, (B)
ordinary course trade payables and accrued expenses and (C) if such
Permitted Acquisition constitutes the acquisition of a Leasehold
Property, the obligations under the related Lease and (D) customary
indemnities and purchase price adjustments;
(ix) concurrently with delivery of the notice
referred to in clause (v) above, the Borrowers shall have delivered to
the Agent, in form and substance satisfactory to the Agent and the
Lenders, such other financial information, financial analysis,
documentation or other information relating to such Permitted
Acquisition as the Agent or the Lenders shall reasonably request;
104
<PAGE> 114
(x) on or prior to the date of such Permitted
Acquisition, the Agent shall have received, in form and substance
satisfactory to the Agent, copies of the acquisition agreement and
related agreements and instruments, and, to the extent delivered in
connection therewith, all opinions (including any reliance letters
entitling the Secured Parties to rely thereon), certificates, lien
search results and other documents reasonably requested by the Agent;
(xi) in the event that the Permitted Acquisition is a
part of a Permitted Asset Swap, delivery to the Agent of an Officer's
Certificate in form and substance satisfactory to the Agent setting
forth a reasonably detailed description of the Permitted Asset Swap
(including the identity of the counterparty to such transaction, the
proposed assets to be acquired and sold, the proposed dates of such
acquisition and sale, and additional consideration to be received or
paid in connection therewith) and such other information as the Agent
may reasonably request; and
(xii) to the extent all or any part of such Permitted
Acquisition also involves or relates to a Permitted Theater Investment,
each of the conditions set forth in clauses (i) through (ix) of Section
7.5(b) shall have been satisfied with respect to such Permitted Theater
Investment; and
(b) any Borrower (other than the Parent) may make or incur
Consolidated Capital Expenditures to acquire Real Property Assets and construct
Theaters thereon or make other Consolidated Capital Expenditures in respect of
any Theater (each, a "Permitted Theater Investment"), upon satisfaction on or
prior to the Permitted Theater Investment Commencement Date and each Permitted
Theater Investment Funding Date of the following conditions:
(i) such Permitted Theater Investment is described on
Schedule 7.5(b) hereto, which description shall include the Maximum
Total Consideration therefor, or has been approved in writing by the
Agent and the Required Lenders;
(ii) the Consolidated Capital Expenditures made or
incurred from and after the Closing Date for such Permitted Theater
Investment shall not exceed the amount specified as the Maximum Total
Consideration for such Permitted Theater Investment on Schedule 7.5(b)
(plus $25,000) or the Maximum Total Consideration thereof approved in
writing by the Agent;
(iii) no Default or Event of Default shall have
occurred and be continuing or would result from such Permitted Theater
Investment; and
(iv) regardless of whether a Loan is being made in
connection with such Permitted Theater Investment, delivery to the
Agent on or prior to the Permitted Theater Investment Commencement Date
evidence in form and substance satisfactory to the Agent (including
delivery of an Officer's Certificate
105
<PAGE> 115
to such effect and delivery of each of the documents, agreements,
instruments, certificates, opinions and other items described in
Article III that would be required to be delivered in connection
therewith if a Loan were being made on such date) that (x) unless
waived in writing by the Agent, the Agent, for the benefit of the
Secured Parties, has a valid and perfected first priority security
interest in all of the Additional Collateral (including any Leasehold
Property or other Real Property Asset) acquired or to be acquired
pursuant to such Permitted Theater Investment as specified in Section
3.3(b) and (y) each of the conditions set forth in Article III have
been satisfied on or before such date, in case of clause (x) and (y) as
if a Loan were being made on such date;
(v) if not described on Schedule 7.5(b), the Agent
shall receive written notice of such proposed Permitted Theater
Investment at least thirty (30) days prior to the related Permitted
Theater Investment Commencement Date, which notice shall include a
reasonably detailed description of such proposed acquisition;
(vi) such Permitted Theater Investment shall involve
only assets located or a business operated in the United States; and
all of such assets or business shall be owned by a Borrower (other than
the Parent);
(vii) no additional Indebtedness, Contingent
Obligations or other liabilities shall be incurred, assumed or
otherwise be reflected on a consolidated balance sheet of the Borrowers
and their Subsidiaries after giving effect to such Permitted Theater
Investment, except (A) Loans made or Indebtedness permitted hereunder,
(B) ordinary course trade payables and accrued expenses, (C) if such
Permitted Theater Investment constitutes the acquisition of a Leasehold
Property, the obligations under the related Lease, (D) customary
indemnities and purchase price adjustments; and (E) obligations under
construction contracts or equipment acquisition agreements, payments
under which shall constitute Consolidated Capital Expenditures
permitted under clause (ii) of this Section 7.5(b);
(viii) concurrently with delivery of the notice
referred to in clause (v) above, the Borrower shall have delivered to
the Agent, in form and substance satisfactory to the Agent and the
Lenders, such other financial information, financial analysis,
documentation or other information relating to such Permitted Theater
Investment as the Agent or the Lenders shall reasonably request;
(ix) on or prior to the date of such Permitted
Theater Investment, the Agent shall have received, in form and
substance satisfactory to the Agent, copies of the construction
agreement and related agreements and instruments, and, to the extent
delivered in connection therewith, all opinions (including any reliance
letters entitling the Secured Parties to rely thereon), certificates,
lien search results and other documents reasonably requested by the
Agent; and
106
<PAGE> 116
(x) to the extent all or any part of such Permitted
Theater Investment also involves or relates to a Permitted Acquisition,
each of the conditions set forth in clauses (i) through (xi) of Section
7.5(a) shall have been satisfied with respect to such Permitted
Acquisition;
(c) any Borrower may acquire all of the Stock of any
Subsidiary incorporated or organized with prior written consent of the Agent and
in accordance with Section 6.8 and 7.18 hereof; and
(d) the Borrowers (other than the Parent) may make
Consolidated Maintenance Capital Expenditures in an aggregate amount for all
Borrowers not to exceed $2,430,000 for Fiscal Year 1999 or $1,000,000 in any
Fiscal Year thereafter plus, in any Fiscal Year, an amount equal to the proceeds
of any casualty insurance or any condemnation award received after the Closing
Date used in repair or replacement of damaged or condemned property to the
extent constituting Consolidated Maintenance Capital Expenditures and not
constituting "Asset Sale Proceeds" pursuant to Section 2.8(a)(iii) or Section
2.8(a)(iv).
7.6. Sale of Assets. Each Borrower shall not, and shall not permit any
of its respective Subsidiaries to, effect an Asset Sale, or permit or suffer any
other Person to acquire an interest in any of its assets, or, in the case of any
Borrower (other than the Parent) or any Subsidiary thereof, issue or sell any
shares of such Subsidiary's Stock or Stock Equivalents, except:
(a) the sale or disposition of concession inventory in the
ordinary course of business or equipment which has become obsolete or is
replaced in the ordinary course of business;
(b) an Asset Sale of any Theater the Asset Sale Proceeds of
which are applied to the Obligations in accordance with Section 2.8(a);
(c) Asset Sales constituting:
(x) Asset Sales (other than Excluded Asset Sales)
that (i) are not (A) Asset Sales involving the sale and concurrent
lease-backs of Theaters or (B) Asset Sales consummated in connection
with Permitted Asset Swaps (except as specifically provided in clause
(y) below)) and (ii) have a Fair Market Value not in excess of
$2,000,000 in the aggregate during the term of this Agreement;
(y) Asset Sales involving the sale and concurrent
lease-backs of Theaters having a Fair Market Value not in excess of
$2,000,000 in the aggregate during the term of this Agreement; or
(z) Asset Sales of Theaters involving Permitted Asset
Swaps so long as the Permitted Acquisition with respect to the related
Permitted Asset
107
<PAGE> 117
Swap is permitted under Section 7.5(a) and is consummated within 30
days of such Asset Sale;
provided that in the case of clauses (x), (y) or (z) of this clause (c), (A) the
consideration received for such assets shall be in an amount at least equal to
the Fair Market Value thereof; (B) the sole consideration received shall be cash
or, in the case of an Asset Sale that is a part of a Permitted Asset Swap, a
combination of the Theater or Theaters (including related equipment and
inventory) being acquired in such swap and cash; and (C) the Asset Sale Proceeds
shall be applied as required by Section 2.8(a); provided further, that in the
case of clause (z), the Loan Parties may consummate such Asset Sale only upon
satisfying as of the date of such Asset Sale each of the following conditions:
(1) delivery to the Agent of an Officer's
Certificate in form and substance satisfactory to the Agent
(I) setting forth a detailed description of the Permitted
Asset Swap (including the identity of the counterparty to such
transaction, the proposed assets to be acquired and sold, the
proposed dates of such acquisition and sale, and any
additional consideration to be received or paid in connection
therewith), (II) certifying that no Default or Event Default
shall have occurred and be continuing or would result from
such Asset Sale (and, in the case of any such Asset Sale with
a concurrent Permitted Acquisition, after giving effect to
such acquisition), (III) certifying that such Asset Sale meets
each of the requirements and conditions set forth in this
Section 7.6(c), (IV) certifying that the Permitted Acquisition
related to the Permitted Asset Swap is permitted under Section
7.5(a) and has been or is scheduled to be consummated within
30 days of the Asset Sale, and (V) setting forth such other
information as the Agent may reasonably request; and
(2) in the event that such Asset Sale occurs
concurrently or after the related acquisition, each of the
conditions set forth in Section 7.5(a) with respect to such
acquisition shall have been satisfied;
(d) any disposition of assets not covered by clauses (a), (b)
or (c) of the definition of "Asset Sale" to any Borrower (other than the
Parent);
(e) if approved in advance by the Agent, any disposition of
assets covered by clauses (a), (b) or (c) of the definition of "Asset Sale" to
any Borrower; and
(f) any termination of any Lease (other than the Lease in
respect of any Mortgaged Property) so long as (i) the Theater in respect of such
Lease has a negative TLCF for the Applicable Period on such date of termination,
(ii) the aggregate amount paid or payable in cash by any Loan Party under or in
respect of such Lease after the Closing Date does not exceed an amount consented
to in writing by the Agent, and, (iii) no other consideration is conveyed to
such landlord except for the surrender of any
108
<PAGE> 118
fixtures that were part of (and any personal property located on and customarily
used in the operation of) such Leasehold Property on the Closing Date.
7.7. Investments in Other Persons. Each Borrower shall not, and shall
not permit any of its respective Subsidiaries to, directly or indirectly, make
or maintain any loan or advance to any Person or own, purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interest, obligations or
other securities of, or any assets constituting the purchase of a business or
line of business, or make or maintain any capital contribution to, or otherwise
invest in, any Person (any such transaction being an "Investment"), except:
(i) Investments expressly permitted by Section 7.5 hereof;
(ii) Investments in any Borrower;
(iii) loans or advances to employees of the Loan Parties in
the ordinary course of business, which loans and advances shall not in
the aggregate exceed $100,000 outstanding at any time;
(iv) Investments in Cash Equivalents held in a securities
account; provided that the Agent for the benefit of the Secured Parties
has obtained a valid and perfected first priority security interest in
such securities account and the financial assets contained therein;
(v) Investments that were effected prior to the Closing Date
and are existing on the Closing Date but not otherwise permitted by
this Section 7.7 (excluding the Investment in Pavilion Cinema Partners
at any time after March 31, 2000), a description of which Investments
and the Persons in which such Investments exist is set forth on
Schedule 7.7 (no loan or advance to, or acquisition of obligations or
securities of, or assets constituting the purchase of a business or
line of business of, or capital contribution to or investment in, any
such Person on or after the Closing Date being permitted pursuant to
this clause (v)); or
(vi) Investments not otherwise permitted hereby not to exceed
$100,000 at any one time outstanding in the aggregate.
7.8. Maintenance of Ownership of Subsidiaries. No Borrower shall sell
or otherwise dispose of any shares of Stock or any Stock Equivalents of any
other Loan Party or permit any other Loan Party to issue, sell or otherwise
dispose of any shares of its Stock or any Stock Equivalents or the Stock or any
Stock Equivalents of any other Loan Party except (a) to a Loan Party and then
only if pledged to the Agent pursuant to a Collateral Document, (b) as permitted
by Section 7.5 and (c) the Parent may issue, sell or otherwise dispose of its
Stock or Stock Equivalents so long as such disposition does not result in a
Change of Control.
109
<PAGE> 119
7.9. Change in Nature of Business.
(a) Each Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than (i) the discount and art
motion picture exhibition theater business and, so long as the Parent and its
Subsidiaries continue to be primarily (for this purpose, at least 80% by
revenue) in the discount and art motion picture exhibition theater business, the
first-run motion picture exhibition theater business, and (ii) such other lines
of business as may be consented to in advance in writing by the Required
Lenders.
(b) The Parent shall not (i) engage in any business other than
entering into and performing its obligations under and in accordance with the
Loan Documents and the Indenture to which it is a party or (ii) own any assets
other than (A) the capital Stock of SC and (B) Cash and Cash Equivalents in an
amount not to exceed $10,000 at any one time for the purpose of paying its
general operating expenses.
7.10. Compliance with ERISA. Each Borrower shall not, and shall not
permit any of its respective Subsidiaries to, or cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the Code or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
7.11. Sale or Discount of Receivables. Each Borrower shall not, and
shall not permit any of its respective Subsidiaries to, directly or indirectly,
sell with recourse, or discount or otherwise sell for less than the face value
thereof, any of its notes or accounts receivable.
7.12. Modification of Debt Instruments. Each Borrower shall not, and
shall not permit any of its respective Subsidiaries to, change or amend the
terms of the Indenture or the Subordinated Notes (other than to add any
Additional Subsidiary as a guarantor of the Subordinated Notes as required by
the Indenture so long as prior thereto such Additional Subsidiary has become a
Borrower hereunder and the guaranty obligations of such Additional Subsidiary
with respect to the Subordinated Notes are subordinated to the Obligations of
such Additional Subsidiary to the same extent as the obligations of the Original
Borrowers in respect of the Subordinated Notes are subordinated to the
Obligations of the Original Borrowers) if the effect of such amendment is to:
(a) increase the interest rate on the Subordinated Notes; (b) change the dates
upon which payments of principal or interest are due on the Subordinated Notes
other than to extend such dates; (c) change any default or event of default
other than to delete or make less restrictive any default provision therein, or
add any covenant with respect to the Subordinated Notes; (d) change the
redemption or prepayment provisions other than to extend the dates therefor or
to reduce the premiums payable in connection therewith; (e) grant any security
or collateral to secure payment of the Subordinated Notes or change any terms of
subordination of payment of such Subordinated Notes; or (f) change or amend any
other term of the Subordinated Notes if such change or amendment would
materially increase
110
<PAGE> 120
the obligations of the obligor or confer additional material rights to any
holder of the Subordinated Notes in a manner adverse to the Borrowers or any of
their respective Subsidiaries or to the Agent or any Lender. The Borrowers shall
not amend or modify the BofA L/C Facility Agreement without the prior written
consent of the Agent.
7.13. Accounting Changes. Each Borrower shall not, and shall not permit
any of its respective Subsidiaries to, change its accounting treatment and
reporting practices or tax reporting treatment, except as required by GAAP or
law and disclosed to the Lenders and the Agent. Each Borrower shall not, and
shall not permit any of its respective Subsidiaries to, change its Fiscal Year.
7.14. Contingent Obligations. Each Borrower shall not, and shall not
permit any of its respective Subsidiaries to, incur, assume, endorse, be or
become liable for, or guarantee, directly or indirectly, or permit or suffer to
exist, any Contingent Obligation, except for (a) Contingent Obligations
evidenced by a Loan Document; (b) Contingent Obligations incurred by the
Borrowers in respect of Indebtedness of the Borrowers, to the extent such
underlying Indebtedness is permitted hereunder; (c) customary indemnities and
purchase price adjustments in agreements to purchase or sell assets permitted
hereunder; (d) reimbursement obligations of SC to Bank of America in the event
of a drawing under a letter of credit issued under the BofA L/C Facility
Agreement; (e) reimbursement obligations under letters of credit issued in
accordance with Section 7.6(m); and (f) guaranties of Leases existing on the
Closing Date.
7.15. Transactions with Shareholders and Affiliates. Each Borrower
shall not, and shall not permit any of its Subsidiaries to, do any of the
following: (a) make any Investment in an Affiliate of the Parent which Affiliate
is not a Borrower; (b) transfer, sell, lease, assign or otherwise dispose of any
asset to any Affiliate of the Parent which is not a Borrower; (c) merge into or
consolidate with or purchase, exchange, lease or otherwise acquire assets from
any Affiliate of the Parent, other than a Borrower; (d) repay any Indebtedness
to any Affiliate of the Parent, other than a Borrower; or (e) enter into any
other transaction directly or indirectly with or for the benefit of any
Affiliate of the Parent which is not a Borrower (including guaranties and
assumptions of obligations of any such Affiliate) except, in the case of clause
(e), for (i) salaries and other bona fide employee compensation to officers of
the Parent or any of its Subsidiaries, (ii) stock options and stock issuance
agreements involving only issuance of Stock of the Parent, (iii) reasonable and
customary fees paid to and indemnification of members of the Boards of Directors
of the Borrowers, (iv) amounts paid by the Parent or SC to Brentwood Private
Equity LLP in accordance with the Administrative Services Agreement to the
extent permitted under Section 7.4, (v) amounts paid to DLJ or its Affiliates
under that certain engagement letter, dated May 10, 1999, between DLJ and the
Parent; (vi) amounts paid to Bank of America (for the account of Brentwood)
under the BofA L/C Facility in reimbursement of amounts actually paid by
Brentwood to Bank of America under Brentwood's 100% participation interest in
the BofA L/C Facility upon the occurrence of an "Event of Default" thereunder;
(vii) loans or advances permitted under clause (iii) or (v) of Section 7.7; and
(viii) any Restricted Junior Payment permitted pursuant to clause (a) of the
proviso to Section 7.4. Each Borrower shall not amend,
111
<PAGE> 121
modify or waive any provision of the Administrative Services Agreement without
the prior written consent of the Agent.
7.16. Sale/Leasebacks. Each Borrower shall not, and shall not permit
any of its respective Subsidiaries to, enter into any sale and leaseback
transaction covering any property with a Fair Market Value in excess of $100,000
in the aggregate.
7.17. Cancellation of Indebtedness Owed to It. Each Borrower shall not,
and shall not permit any of its respective Subsidiaries to, cancel any claim or
Indebtedness owed to it except for reasonable consideration and in the ordinary
course of business consistent with the past practice.
7.18. No New Subsidiaries. Each Borrower shall not, and shall not
permit any of its Subsidiaries to, incorporate or otherwise organize or acquire
any Subsidiary which was not in existence on the Closing Date unless both (i)
the Agent has consented thereto in writing and (ii) all the outstanding Stock
and Stock Equivalents of such Subsidiary are pledged to the Agent pursuant to an
amendment to the Pledge Agreement of the Loan Parties that will own such Stock
and Stock Equivalents and such Subsidiary executes and delivers to the Agent a
Subsidiary Assumption Agreement and Note Allonges (which agreement and allonges
are also executed and delivered by all then existing other Borrowers), a
Security Agreement, a Pledge Agreement and an Intellectual Property Security
Agreement and delivers to the Agent a letter from the Process Agent
substantially in the form delivered with respect to the Original Borrowers.
7.19. Capital Structure. Each Borrower (other than the Parent) shall
not, and shall not permit any of its respective Subsidiaries to, change their
capital structure (including in the terms of its outstanding Stock) or amend its
certificate of incorporation or by-laws without the written consent of the
Agent. The Parent shall not amend its certificate of incorporation or by-laws
other than amendments which in the aggregate have no Material Adverse Effect.
7.20. No Speculative Transactions. Each Borrower shall not, and shall
not permit any of its respective Subsidiaries to, engage in any transaction
involving Derivatives Contracts except for the sole purpose of hedging in the
normal course of business and consistent with industry practices.
7.21. Environmental. Each Borrower shall not, and shall not permit any
of its respective Subsidiaries to, dispose of any Contaminant in violation of
any Environmental Law by placing it in or on the ground or waters of any
property owned or leased by any Loan Party.
7.22. Debt Repurchase.
(a) Each Borrower shall not, and shall not permit any of its
Subsidiaries to, (i) alter, rescind, terminate, amend, supplement, waive or
otherwise modify any provision of, or waive any condition of, or permit any
breach or default to
112
<PAGE> 122
exist under any Related Document, (ii) take or fail to take any action under any
Related Document if to do so could have a Material Adverse Effect; or (iii) make
any payment of principal of or premium or interest on any Subordinated Notes in
contravention of the subordination provisions thereof, or pay any fee to any
holder thereof for any waiver or amendment or for any other reason.
(b) Each Borrower shall not accept for payment or pay for
Subordinated Notes for an average purchase price, including accrued interest,
per Subordinated Note of more than the percentage of the principal amount
thereof specified on Schedule 7.22(b) hereto or such greater percentage as shall
be acceptable to the Agent in its sole discretion.
(c) Each Borrower shall not enter into or distribute to any
third party any Related Document that is not in form and substance satisfactory
to the Agent and the Required Lenders.
(d) Each Borrower shall not, and shall not permit any agent
thereof to, deliver any Related Document or any other document relating to the
Debt Repurchase to any holder or beneficial owner of any Subordinated Notes
without the prior approval of the Agent.
7.23. Accounts. Such Borrower shall not, nor shall it permit its
Subsidiaries to, transfer funds to, deposit funds in or permit funds to be
maintained in, any bank account of any Borrower or any Subsidiary thereof if the
maintenance of such funds (as cash or Cash Equivalents) in such account at such
bank would not comply with Section 6.15.
ARTICLE VIII
FINANCIAL COVENANT
From and after the Closing Date and as long as any of the
Obligations and Commitments remain outstanding, unless the Required Lenders
otherwise consent in writing, the Borrowers agree with the Lenders and the Agent
that:
8.1. Minimum Fixed Charge Coverage Ratio. The Parent shall maintain, at
the end of each Fiscal Quarter in each Fiscal Year, commencing on March 31,
2001, a minimum Fixed Charge Coverage Ratio, in each case determined on the
basis of the four Fiscal Quarters ending on the date of determination, of not
less than 1.00 to 1.
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. Each of the following events shall be an Event
of Default:
113
<PAGE> 123
(a) the Borrowers shall fail to pay any principal of any Loan
when the same becomes due and payable; or
(b) the Borrowers shall fail to pay any interest on any Loan,
any fee or any other Obligation under the Loan Documents (other than principal)
and such non-payment continues for a period of three (3) Business Days after the
due date therefor;
(c) any representation or warranty made or deemed made in
writing by any Loan Party in any Loan Document or by any Loan Party (or any of
its officers) in connection with any Loan Document shall prove to have been
incorrect in any material respect when made or deemed made; or
(d) any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in Section 5.2, Article VII or Article
VIII, or (ii) any other term, covenant or agreement contained in this Agreement
or in any other Loan Document if such failure under this clause (ii) shall
remain unremedied for thirty (30) days after the earlier of the date on which
(A) a Responsible Officer of any Borrower becomes aware of such failure or (B)
written notice thereof shall have been given to such Borrower by the Agent or
any Lender; or
(e) (i) any Loan Party or any of its Subsidiaries shall fail
to make any payment on any Indebtedness (other than Indebtedness incurred
hereunder) of such Loan Party or Subsidiary having a principal amount of
$100,000 or more, in each case beyond the end of any grace period provided
therefor, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or (ii) any other event
shall occur or condition shall exist under any agreement or instrument relating
to any such Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or (iii) any such Indebtedness shall become or be declared to be due and
payable, or required to be prepaid or repurchased (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against any
Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a custodian,
receiver, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceedings instituted against any
Loan Party or any of its Subsidiaries (but not instituted by it), either such
proceedings shall remain undismissed or unstayed for a period of thirty (30)
days or any of the actions sought in such proceedings shall occur; or any Loan
Party or any of its Subsidiaries shall take any corporate action to authorize
any of the actions set forth above in this subsection (f); or
114
<PAGE> 124
(g) any judgment or order (or other similar process)
involving, in any single case or in the aggregate, an amount in excess of
$100,000 to the extent not fully covered by insurance shall be rendered against
any Loan Party or any of its Subsidiaries and shall remain unpaid and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of twenty (20) consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(h) (i) with respect to any Qualified Plan, any Loan Party or
any ERISA Affiliate shall incur an accumulated funding deficiency or request a
funding waiver from the IRS or, (ii) with respect to any Title IV Plan, or any
Multiemployer Plan, an ERISA Event not described in clause (i) hereof shall
occur; provided, however, that the events listed in clauses (i) and (ii) hereof
shall constitute Events of Default only if the liability, deficiency or waiver
request of any Loan Party or any ERISA Affiliate, whether or not assessed,
exceeds $100,000 in the aggregate for all such cases;
(i) any provision of any Collateral Document after delivery
thereof pursuant to this Agreement or any other Loan Document shall for any
reason cease to be valid and binding on, or enforceable against, any Loan Party
thereto, or any Loan Party shall so state in writing; or
(j) except as expressly set forth in any of the Collateral
Documents or in Section 4.10, any Collateral Document after delivery thereof
pursuant to this Agreement or any other Loan Document shall, for any reason,
cease to create a valid Lien on any of the Collateral purported to be covered
thereby, or such Lien shall cease to be a perfected and first priority Lien
(subject only to Permitted Liens), or any Loan Party shall so state in writing;
or
(k) there shall occur any Change of Control;
(l) the Parent shall fail to own of record and beneficially
all of the outstanding Stock and Stock Equivalents of SC free and clear of all
Liens, or SC shall fail to own of record and beneficially all of the outstanding
Stock and Stock Equivalents of Landmark free and clear of all Liens or Landmark
shall cease to own directly or indirectly, all of the Stock and Stock
Equivalents of LT USA free and clear of all Liens, in each case except any Liens
in favor of the Agent;
(m) any default or other event shall occur and be continuing
or condition shall exist under any Lease (other than any Lease terminated in
accordance with Section 7.6(f)) beyond the end of any grace period provided
therefor in such Lease if the effect of such event is (x) if such event
constitutes a default in payment (other than with respect to payment of common
area maintenance charges), to terminate, or to permit the landlord to terminate,
such Lease or (y) if such event constitutes any event other than such a payment
default, to terminate, or to permit the landlord to terminate (in circumstances
where, in the reasonable judgment of the Agent, such landlord is likely to
terminate), such Lease and, in either case, the aggregate unpaid amounts owing
by any
115
<PAGE> 125
Loan Party under such Lease (together with all other such Leases) exceeds
$1,000,000 in the aggregate; or
(n) the Borrowers shall fail to obtain a credit rating of the
Facility from Moody's Investors Service, Inc. or Standard & Poors Rating Group
prior to the date 60 days after the Closing Date.
9.2. Remedies. During the continuance of any Event of Default, the
Agent (i) shall at the request, or may with the consent, of the Required
Revolving Credit Lenders by notice to the Borrowers declare the obligation of
each Lender to make Revolving Credit Loans to be terminated, whereupon the same
shall forthwith terminate, (ii) shall at the request, or may with the consent,
of the Required Term B Loan Lenders by notice to the Borrowers, declare the
obligation of each Term B Loan Lender to make a Term B Loan to be terminated,
whereupon the same shall forthwith terminate, and (iii) shall at the request, or
may with the consent, of the Required Lenders by notice to SC, declare the
Loans, all interest thereon (including any interest accrued to such date of
acceleration pursuant to Section 2.9(b) that as of such date has not been added
to principal) and all other amounts and Obligations payable under this Agreement
to be forthwith due and payable, whereupon the Loans, all such interest and all
such amounts and Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrowers; provided, however, that upon the
occurrence of the Event of Default specified in Section 9.1(f) above, (A) the
obligation of each Revolving Credit Lender to make Revolving Credit Loans and
the obligation, if any, of the Term B Loan Lenders to make Term B Loans shall
automatically be terminated and (B) the Loans, all such interest and all such
amounts and Obligations shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrowers. In addition to the remedies set forth
above, the Agent may exercise any remedies provided for by the Collateral
Documents in accordance with the terms thereof or any other remedies provided by
applicable law.
ARTICLE X
THE AGENT
10.1. Authorization and Action.
(a) Each Lender hereby appoints Farallon as the Agent
hereunder and each Lender authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof, and to
exercise such powers as are reasonably incidental thereto. Without limitation of
the foregoing, each Lender hereby authorizes the Agent to execute and deliver,
and to perform its obligations under, each of the Loan Documents to which the
Agent is a party, and to exercise all rights, powers and remedies that the Agent
may have under such Loan Documents.
116
<PAGE> 126
(b) As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including enforcement or collection),
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding upon all Lenders;
provided, that the Agent shall not be required to take any action which (i) the
Agent in good faith believes exposes it to personal liability unless the Agent
receives an indemnification satisfactory to it from the Lenders with respect to
such action or (ii) is contrary to this Agreement or applicable law. The Agent
agrees to give to each Lender prompt notice of each notice given to it by any
Loan Party pursuant to the terms of this Agreement or the other Loan Documents.
(c) In performing its functions and duties hereunder, the
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation or relationship of agency, fiduciary or
trustee with or for any Lender. The Agent may perform any of its duties under
any of the Loan Documents by or through its agents or employees.
10.2. Agents' Reliance, Etc. Neither the Agent, nor any of its
Affiliates or any of the directors, members, partners, shareholders, officers,
employees, agents, attorneys, consultants or investment or other advisors of the
Agent or any such Affiliate shall be liable for any action taken or omitted to
be taken by it, him, her or them under or in connection with this Agreement or
the other Loan Documents, except for its, his, her or their own gross negligence
or willful misconduct. Without limitation of the generality of the foregoing,
the Agent (a) may treat the payee of any Note as the holder thereof until such
Note has been assigned in accordance with Section 11.9; (b) may rely on the
Register to the extent set forth in Section 11.9(d); (c) may consult with legal
counsel (including counsel to the Borrowers or any other Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (d) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made by or on behalf of
the Borrowers or any of their respective Subsidiaries in or in connection with
this Agreement or any of the other Loan Documents; (e) shall not have any duty
to ascertain or to inquire either as to the performance or observance of any of
the terms, covenants or conditions of this Agreement or any of the other Loan
Documents or the financial condition of any Loan Party, or the existence or
possible existence of any Default or Event of Default; (f) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (g) shall incur no liability under or in respect of this
Agreement or any of the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by facsimile
transmission) or any telephone message believed by it to be genuine and signed
or sent by the proper party or parties. Neither the Agent nor any of its
directors, members, partners, shareholders,
117
<PAGE> 127
officers, employees, agents, attorneys, consultants or investment or other
advisors shall have any responsibility to any Loan Party on account of the
failure or delay in performance or breach by any Lender other than the Agent of
any of its obligations hereunder or to any Lender on account of the failure of
or delay in performance or breach by any other Lender or any Loan Party of any
of their respective obligations hereunder or in connection herewith.
10.3. The Agent Individually. With respect to its Ratable Portion,
Farallon shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders," "Required Lenders," "Required
Term A Loan Lenders," "Required Term B Loan Lenders," "Required Revolving Credit
Lenders," or any similar terms shall, unless the context clearly otherwise
indicates, include Farallon in its individual capacity as a Lender. Farallon and
its Affiliates may lend money and generally engage in any kind of other business
with any Loan Party as if it were not acting as the Agent pursuant hereto.
10.4. Lender Credit Decision. Each Lender acknowledges that it shall,
independently and without reliance upon the Agent or any other Lender conduct
its own independent investigation of the financial condition and affairs of the
Borrowers and each other Loan Party in connection with the making and
continuance of the Loans hereunder. Each Lender also acknowledges that it will,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.5. Indemnification. Each Lender agrees to indemnify the Agent and
its Affiliates, and their respective directors, members, partners, shareholders,
officers, employees, agents, attorneys, consultants or investment or other
advisors (to the extent not reimbursed by the Borrowers), from and against such
Lender's aggregate Ratable Portion of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including fees and disbursements of legal counsel) of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against, the
Agent or any of its Affiliates, directors, members, partners, shareholders,
officers, employees, agents, attorneys, consultants or investment or other
advisors in any way relating to or arising out of this Agreement or the other
Loan Documents or any action taken or omitted by the Agent under this Agreement
or the other Loan Documents; provided, however, that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's or such Affiliate's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its Ratable Portion of any out-of-pocket expenses (including
fees and disbursements of legal counsel) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of its rights or responsibilities
under, this
118
<PAGE> 128
Agreement or the other Loan Documents, to the extent that the Agent is not
reimbursed for such expenses by the Borrowers or another Loan Party.
10.6. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent with (unless an Event of Default shall have occurred and be continuing)
the consent of the Borrowers (which consent shall not be unreasonably withheld
or delayed). If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, selected from among
the Lenders. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article X shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Loan Documents.
10.7. Liens. The Agent is hereby irrevocably authorized by each of the
Lenders to release any Lien covering any properties or assets of any Loan Party
that is the subject of an Asset Sale permitted by this Agreement or consented to
in accordance with Section 11.1. With respect to any action by the Agent to
enforce the rights and remedies of the Agent and the Lenders with respect to the
Collateral in accordance with the terms of this Agreement and the other Loan
Documents, each Lender, upon the written request of the Agent, shall deliver to
the Agent its written consent to jurisdiction of the court in which such action
is maintained (solely for purposes of enforcement of the rights of the Agent and
the Lenders in the Collateral located in such jurisdiction but not for purposes
of any counterclaims by any Loan Party or any other matters).
ARTICLE XI
MISCELLANEOUS
11.1. Amendments, Waivers, Etc. No amendment or waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by each Lender affected thereby, do any of the
following:
(a) increase the Commitments of the Lenders or subject the
Lenders to any additional obligations;
119
<PAGE> 129
(b) extend the scheduled final maturity of any Loan, or waive,
reduce or postpone any date fixed for the payment or reduction of principal
(other than any prepayment pursuant to Sections 2.8(a), (b) or (c));
(c) reduce the principal amount of any Loan;
(d) reduce the rate of interest on any Loan or any fee payable
hereunder;
(e) extend the time for payment of such interest or fees;
(f) change the percentage of Commitments or the aggregate
unpaid principal amount of the Loans or Required Lenders Amount required for the
Lenders or any of them to take any action hereunder;
(g) release any of the Collateral except as shall otherwise be
provided in Section 7.6 or in the Collateral Documents; or
(h) amend this Section 11.1 or the definition of the terms
"Required Lenders", "Required Revolving Credit Lenders", "Required Term A Loan
Lenders", "Required Term B Loan Lenders" or "Ratable Portion"; provided further
that no amendment, waiver or consent that affects adversely the Term A Loan
Lenders, the Term B Loan Lenders or the Revolving Credit Lenders (but not all
and to the same degree) shall be effective without the approval of the Required
Term A Loan Lenders, the Required Term B Loan Lenders or the Required Revolving
Credit Lenders, respectively; and provided further that no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Agent under this Agreement or the other Loan Documents. Each Lender and holder
of any Note shall be bound by any amendment, waiver or consent authorized by
this Section 11.1 regardless of whether its Notes shall be marked to make
reference thereto, and any consent by any Lender or holder of a Note pursuant to
this Section shall bind any person subsequently acquiring a Note from it,
whether or not such Note shall be so marked.
11.2. Removal of Lenders Notwithstanding any provision to the contrary
in this Agreement, in the event that:
(a) any Borrower is required to pay any amounts with respect
to a Lender (an "Affected Lender") pursuant to Section 2.10 in circumstances
which entitle such Affected Lender to receive such payments, and such amounts,
or similar amounts, have not been demanded by all the Lenders, the Borrowers
shall have the right to designate an Eligible Assignee which is not an Affiliate
of any Borrower and which is reasonably acceptable to the Agent (and which would
not require the Borrowers to pay such amounts or similar amounts) to purchase
for cash, pursuant to an Assignment and Acceptance, all of the Commitments, Term
Loans and Revolving Credit Loans of such Affected Lender and to assume all of
such Affected Lender's other rights and obligations
120
<PAGE> 130
without recourse to or warranty by, or expense to, such Affected Lender, for a
purchase price equal to the unpaid principal amount of all Term Loans and
Revolving Credit Loans held by the Affected Lender and all accrued interest
(including interest accrued (and not yet added to principal pursuant to Section
2.9(b)) and fees with respect thereto through the date of such sale, and each
Affected Lender agrees that, in such event, it will sell and assign all of its
outstanding Term Loans and Revolving Credit Loans to such Eligible Assignee upon
payment of such purchase price; or
(b) in connection with any proposed amendment, modification, waiver or
termination (a "Proposed Change") requiring the consent of all affected Lenders,
the consent of Required Lenders is obtained, but the consent of other Lenders
whose consent is required is not obtained (any such Lender whose consent is not
obtained as described in this Section 11.2 being referred to as a
"Non-Consenting Lender"), then, so long as the Agent is not a Non-Consenting
Lender, at the Borrowers' request, the Agent or an Eligible Assignee which is
acceptable to the Agent shall have the right with the Agent's consent and in the
Agent's sole discretion (but shall have no obligation) to purchase for cash,
pursuant to an Assignment and Acceptance, from such Non-Consenting Lenders, all
of the Commitments, Term Loans and Revolving Credit Loans of such Non-Consenting
Lender and to assume all of such Non-Consenting Lender's other rights and
obligations without recourse to, or warranty by, or expense to, such
Non-Consenting Lenders, for an amount equal to the unpaid principal amount of
all Term Loans and Revolving Credit Loans held by the Non-Consenting Lender and
all accrued interest (including interest accrued (and not yet added to principal
pursuant to Section 2.9(b)) and fees with respect thereto through the date of
sale, and each Non-Consenting Lender agrees that, in such event, upon the
Agent's request, such Non-Consenting Lender will sell and assign all of its
Commitments, Term Loans and Revolving Credit Loans to the Agent or such Eligible
Assignee upon payment of such amount.
11.3. Notices, Etc. All notices and other communications provided for
in this Agreement shall be in writing (including telecopy) and mailed,
telecopied, or delivered by hand, if to the Borrowers, care of the Parent at its
address at 4004 Beltline Road, Suite 205, Lockbox 18, Addison, Texas 75001
(telecopy number: (972) 503-9013) (telephone number: (972) 503-9851), Attention:
Steve Holmes with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000,
Los Angeles, California 90071, Attention: Mary Ruhl, Esq. (telecopy number:
(213) 891-8763); if to any Lender, at its Domestic Lending Office specified
opposite its name on Schedule II; and if to the Agent, at its address at c/o
Farallon Capital Management, LLC, One Maritime Plaza, Suite 1325, San Francisco,
California 94111 (telecopy number: (415) 421-2133) (telephone number: (415)
421-2132), Attention: Each of Meridee A. Moore, Derek Schrier and Colby Trexler
(collectively, the "Attention Persons") with a copy to Weil, Gotshal & Manges
LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002, Attention: Eugene F.
Cowell III, Esq. (telecopy number: (713) 224-9511); or, as to the Borrowers or
the Agent, at such other address as shall be designated by such party in a
written notice to the other parties and, as to each other party, at such other
address as shall be designated by such party in a written notice to the
Borrowers and the Agent. All such notices and communications shall, when
121
<PAGE> 131
mailed, telecopied or delivered, be effective when deposited in the mails,
telecopied with confirmation of receipt, or delivered by hand to the addressee
or its Agent, respectively, except that (i) notices and communications to the
Agent pursuant to Article II or X shall not be effective until received by the
Agent and (ii) notices and communications to the Agent by telecopy shall not be
effective unless one of the Attention Persons has received telephonic notice
thereof.
11.4. No Waiver; Remedies. No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11.5. Costs; Expenses; Indemnities.
(a) Regardless of whether the transactions contemplated by
this Agreement and other Loan Documents are consummated, the Borrowers agree to
pay on demand (i) all reasonable out-of-pocket costs and expenses of the Agent
in connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, each of the other Loan Documents
and each of the other documents to be delivered hereunder and thereunder,
including (A) the reasonable fees and out-of-pocket expenses of Weil, Gotshal &
Manges LLP, counsel to the Agent, (B) the reasonable fees of accountants,
appraisers, consultants or industry experts retained by the Agent, (C) all
reasonable out-of-pocket expenses incurred by the Agent in connection with the
taking and perfection of security interests and Liens against the Collateral and
obtaining any Mortgage Related Documents (including fees and expenses for doing
and updating title and Lien searches, surveys, title commitment and insurance
costs and corporate search fees), (D) all filings and recording fees and all
transportation and audit and field exam costs and expenses and (E) fees and
costs in connection with obtaining a credit rating of the Facility, and (ii) all
costs and expenses of the Agent and each Lender in connection with the
restructuring, workout or enforcement (whether through negotiation, legal
proceedings or otherwise) of this Agreement and the other Loan Documents;
provided, however, that Farallon shall pay up to $20,000 of any fees paid by
Borrowers to rating agencies in connection with obtaining a credit rating of the
Facility.
(b) Regardless of whether the transactions contemplated by
this Agreement and the other Loan Documents are consummated, the Borrowers agree
to indemnify and hold harmless the Agent and each Lender and their respective
Affiliates, and the directors, members, partners, shareholders, officers,
employees, agents, attorneys, consultants and investment and other advisors of
or to any of the foregoing (including those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (each of the foregoing being an "Indemnitee") from and against any
and all claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, disbursements and expenses of any kind or nature
(including reasonable fees and disbursements of counsel to any such Indemnitee,
whether or not suit is brought) which at any time may be imposed on, incurred by
or asserted against any
122
<PAGE> 132
such Indemnitee in connection with or arising out of any investigation,
litigation or proceeding, whether or not any such Indemnitee is a party thereto,
whether or not resulting from third party claims, whether direct, indirect, or
consequential and whether based on any federal, state or local law or other
statutory regulation, securities or commercial law or regulation, or under
common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of this Agreement, any other Loan Document, any
Obligation, any Related Document, the Debt Repurchase or any act, event or
transaction related or attendant to any thereof, including (i) all Environmental
Liabilities and Costs arising from or connected with the past, present or future
operations of the Borrowers or any of their respective Subsidiaries involving
any property subject to a Collateral Document, or damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Contaminants on, upon or into such property or any contiguous
real estate; (ii) any costs or liabilities incurred in connection with any
Remedial Action concerning the Borrowers or any of their respective
Subsidiaries; (iii) any costs or liabilities incurred in connection with any
Environmental Lien; (iv) any costs or liabilities incurred in connection with
any other matter under any Environmental Law, including CERCLA and applicable
state property transfer laws, whether, with respect to any of the foregoing,
such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee
in possession, the successor in interest to any Borrower or any of its
Subsidiaries, or the owner, lessee or operator of any property of any Borrower
or any of its Subsidiaries by virtue of foreclosure except, with respect to any
of the foregoing referred to in clauses (i), (ii), (iii) and (iv), to the extent
incurred following (A) foreclosure by the Agent or any Lender, or the Agent or
the Lender having become the successor in interest to the Borrower or any of its
Subsidiaries, and (B) attributable solely to acts of the Agent or such Lender or
any agent on behalf of the Agent or such Lender; (v) the use or intended use of
the proceeds of the Loans or in connection with any investigation of any
potential matter covered hereby or (vi) the administration of the Facility
hereunder on a joint borrowing basis (collectively, the "Indemnified Matters");
provided, however, that the Borrowers shall not have any obligation under this
Section 11.5(b) to an Indemnitee with respect to any Indemnified Matter directly
resulting from the gross negligence or willful misconduct of that Indemnitee, as
determined by a court of competent jurisdiction in a final non-appealable
judgment or order. All amounts payable under this Section 11.5(b) shall be due
and payable on written demand therefor.
(c) The Borrowers shall indemnify the Agent and the Lenders
for, and hold the Agent and the Lenders harmless from and against, any and all
claims for brokerage commissions, fees and other compensation made against the
Agent or the Lenders for any broker, finder or consultant (including DLJ or any
Affiliate thereof) with respect to any agreement, arrangement or understanding
made by or on behalf of any Loan Party or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement.
(d) The Agent and each Lender agree that in the event that any
such investigation, litigation or proceeding set forth in subparagraph (b) above
is asserted or
123
<PAGE> 133
threatened in writing or instituted against it or any other Indemnitee, or any
Remedial Action, is requested of it or any of its officers, directors, Agents
and employees, for which any Indemnitee may desire indemnity or defense
hereunder, such Indemnitee shall promptly notify the Borrowers in writing.
(e) The Borrowers, at the request of any Indemnitee, shall
have the obligation to defend against such investigation, litigation or
proceeding or requested Remedial Action, and the Borrowers, in any event, may
participate in the defense thereof with legal counsel of the Borrowers' choice.
In the event that such Indemnitee requests the Borrowers to defend against such
investigation, litigation or proceeding or requested Remedial Action, the
Borrowers shall promptly do so and such Indemnitee shall have the right to have
legal counsel of its choice participate in such defense. No action taken by
legal counsel chosen by such Indemnitee in defending against any such
investigation, litigation or proceeding or requested Remedial Action, shall
vitiate or in any way impair the Borrowers' obligation and duty hereunder to
indemnify and hold harmless such Indemnitee.
(f) The Borrowers agree that any indemnification or other
protection provided to any Indemnitee pursuant to this Agreement (including
pursuant to this Section 11.5) or any other Loan Document shall (i) survive and
remain operative and in full force and effect regardless of the occurrence of
the Termination Date, the termination of any Commitments hereunder, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or the Notes, any investigation made by or on behalf of the Agent or
any Lender and the payment in full of the Obligations and (ii) inure to the
benefit of any Person who was at any time an Indemnitee under this Agreement or
any other Loan Document.
11.6. Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of the Borrowers against any and all of the
Obligations now or hereafter existing whether or not such Lender shall have made
any demand under this Agreement or any other Loan Document and although such
Obligations may be unmatured. Each Lender agrees promptly to notify the
Borrowers after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section 11.6
are in addition to the other rights and remedies (including other rights of
set-off) which such Lender may have.
11.7. Sharing of Payments, Etc.
(a) If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off or otherwise) on
account of the
124
<PAGE> 134
Loans made by it (other than pursuant to Sections 2.10 or 2.12) in excess of its
Ratable Portion of payments obtained by all the Lenders on account of the
Obligations, such Lender (a "Purchasing Lender") shall forthwith purchase from
the other Lenders (each, a "Selling Lender") such participations in their Loans
or other Obligations as shall be necessary to cause such Purchasing Lender to
share the excess payment ratably with each of them.
(b) If all or any portion of any payment received by a
Purchasing Lender is thereafter recovered from such Purchasing Lender, such
purchase from each Selling Lender shall be rescinded and such Selling Lender
shall repay to the Purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Selling Lender's ratable share
(according to the proportion of (i) the amount of such Selling Lender's required
repayment to (ii) the total amount so recovered from the Purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered.
(c) The Borrowers agree that any Purchasing Lender so
purchasing a participation from a Selling Lender pursuant to this Section 11.7
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrowers in the amount of such
participation.
11.8. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrowers and the Agent and when the Agent shall
have been notified by each Lender that such Lender has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrowers, the
Agent and each Lender and their respective successors and assigns, except that
the Borrowers shall not have the right to assign their respective rights
hereunder or any interest herein.
11.9. Assignments and Participations.
(a) Each Lender may sell, transfer, negotiate or assign to one
or more Eligible Assignees all or a portion of its rights and obligations
hereunder (including all or a portion of its rights and obligations with respect
to the Term A Loans, Term B Commitments (or, after the Debt Repurchase Closing
Date, Term B Loans) or the Revolving Credit Commitments and Revolving Credit
Loans); provided, however, that:
(i) each such assignment shall be of a constant, and
not a varying, percentage of the assigning Lender's rights and
obligations under this Agreement being assigned;
(ii) if any such assignment shall be of the assigning
Lender's Revolving Credit Commitment or Revolving Credit Loans, such
assignment shall cover the same percentage of such Lender's Revolving
Credit Loans and Revolving Credit Commitment;
125
<PAGE> 135
(iii) the aggregate amount of the Revolving Credit
Commitment, Term B Loan Commitment (or, after the Debt Repurchase
Closing Date, Term B Loans) or Term A Loans being assigned pursuant to
each such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event (if less
than the entire interest of the Assignor) be less than (x) $5,000,000
or an integral multiple of $1,000,000 in excess thereof in the case of
a Revolving Credit Commitment, or (y) in the case of the Term Loan
Commitments or Term Loans, $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, except, in either case, (A) with the
consent of the Agent (which consent may be granted or withheld in the
Agent's sole and absolute discretion) and, if the amount Revolving
Credit Commitment or the amount of Term Loan Commitments or Term Loans,
respectively, being assigned is less than the $1,000,000 and such
assignment is not being made to an Affiliate of the Assignor, with the
consent of the Borrowers or (B) if such assignment is being made to a
Lender;
(iv) if such Eligible Assignee is not, prior to the
date of such assignment, a Lender or an Affiliate of a Lender, such
assignment shall be subject to the prior consent of the Agent (which
consent may be granted or withheld in the Agent's sole and absolute
discretion) and (if such assignment shall be of the assigning Lender's
Revolving Credit Commitment or Revolving Credit Loans (or, prior to the
Debt Repurchase Closing Date, Term B Loan Commitment) the prior consent
of the Borrowers (which consent shall not be unreasonably withheld);
and
(v) if such assigning Lender is Farallon or an
Affiliate thereof, after giving effect to such assignment, (x) Farallon
or an Affiliate thereof remains a Lender and (y) the aggregate of the
unpaid principal amounts of the Term Loans and the Revolving Credit
Commitments and Term B Loan Commitments of Farallon and any Affiliates
thereof are at least 10% of the aggregate of the unpaid principal
amounts of the Term Loans and the Revolving Credit Commitments and Term
B Loan Commitments of all Lenders;
provided that, notwithstanding any other provision of this Section 11.9, the
consent of the Borrowers shall not be required for any assignment that occurs
when any Event of Default shall have occurred and be continuing. Any such
assignment need not be ratable as among the Term A Loan Facility, the Term B
Loan Facility and the Revolving Credit Facility.
(b) The parties to each assignment shall execute and deliver
to the Agent, for its acceptance and recording, an Assignment and Acceptance,
together with any Note (if the assigning Lender's Loans are evidenced by a Note)
subject to such assignment. Upon such execution, delivery, acceptance and
recording and the receipt by the Agent from the assignee of an assignment fee in
the amount of $3,500, from and after the effective date specified in such
Assignment and Acceptance, (i) the assignee thereunder shall become a party
hereto and, to the extent that rights and obligations under the Loan Documents
have been assigned to such assignee pursuant to such Assignment and Acceptance,
have the rights and obligations of a Lender, and (ii) the assignor thereunder
shall, to the extent that rights and obligations under this Agreement have been
assigned by it pursuant to such Assignment
126
<PAGE> 136
and Acceptance, relinquish its rights (except those which survive the payment in
full of the Obligations) and be released from its obligations under the Loan
Documents, other than those relating to events or circumstances occurring prior
to such assignment (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under the Loan Documents, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any of the statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document furnished pursuant thereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan Document or of any other
instrument or document furnished pursuant hereto or thereto; (iii) such
assigning Lender confirms that it has delivered to the assignee and the assignee
confirms that it has received a copy of this Agreement and each of the Loan
Documents together with a copy of the most recent financial statements delivered
by the Borrowers to the Lenders pursuant to this Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as Agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at its address referred to in
Section 11.3 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitments of and principal amount of the Loans owing to each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the Loan
Parties, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender for all purposes of this
127
<PAGE> 137
Agreement. The Register shall be available for inspection by the Borrowers, the
Agent or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, the Agent shall, if such Assignment and
Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrowers. Within five Business Days after its receipt of
such notice, the Borrowers, at their own expense, shall, if requested by such
assignee, execute and deliver to the Agent, new Notes to the order of such
assignee in an amount equal to the Commitments assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has surrendered any Note
for exchange in connection with the assignment and has retained Commitments
hereunder, new Notes to the order of the assigning Lender in an amount equal to
the Commitments retained by it hereunder. Such new Notes shall be dated the same
date as the surrendered Notes and be in substantially the form of Exhibit A-1,
A-2 or A-3 hereto, as applicable.
(f) In addition to the other assignment rights provided in
this Section 11.9, each Lender may assign, as collateral or otherwise, any of
its rights under this Agreement (including rights to payments of principal or
interest on the Loans) to any Federal Reserve Bank without notice to or consent
of the Borrowers or the Agent; provided, however, that no such assignment shall
release the assigning Lender from any of its obligations hereunder. The terms
and conditions of any such assignment and the documentation evidencing such
assignment shall be in form and substance satisfactory to the assigning Lender
and the assignee Federal Reserve Bank.
(g) Each Lender may sell participations to one or more banks
or other Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including all its rights and obligations with respect to the
Term Loans and the Revolving Credit Loans). The terms of such participation
shall not, in any event, require the participant's consent to any amendments,
waivers or other modifications of any provision of any Loan Documents, the
consent to any departure by any Loan Party therefrom, or to the exercising or
refraining from exercising any powers or rights which such Lender may have under
or in respect of the Loan Documents (including the right to enforce the
obligations of the Loan Parties), except if any such amendment, waiver or other
modification or consent would (i) reduce the amount, or postpone any date fixed
for, any amount (whether of principal, interest or fees) payable to such
participant under the Loan Documents, to which such participant would otherwise
be entitled under such participation or (ii) result in the release of all or
substantially all of the Collateral other than in accordance with the Collateral
Documents. In the event of the sale of any participation by any Lender, (A) such
Lender's obligations under the Loan Documents shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (C) such Lender shall remain the holder of such
Obligations for all purposes of this Agreement, and (D) the Borrowers, the Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement.
128
<PAGE> 138
(h) Each participant shall be entitled to the benefits of
Sections 2.10 and 2.12 as if it were a Lender; provided, however, that anything
herein to the contrary notwithstanding, the Borrowers shall not, at any time, be
obligated to pay to any participant of any interest of any Lender, under Section
2.10 or 2.12, any sum in excess of the sum which the Borrowers would have been
obligated to pay to such Lender in respect of such interest had such
participation not been sold.
11.10. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO, INCLUDING THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEABILITY THEREOF, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.11. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH ANY OF THEM MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
(b) Each of the Borrowers hereby irrevocably designates,
appoints and empowers Corporation Services Company, 80 State Street, Albany, New
York 12207-2543, (telephone no: (800) 833-9848) (the "Process Agent"), in the
case of any suit, action or proceeding brought in the United States of America
as its designee, appointee and agent to receive, accept and acknowledge for and
on its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents that may be served in any action or
proceeding arising out of or in connection with this Agreement or any Loan
Document. Such service may be made by mailing (by registered or certified mail,
postage prepaid) or delivering a copy of such process to such Borrower in care
of the Process Agent at the Process Agent's above address, and each of the
Borrowers hereby irrevocably authorizes and directs the Process Agent to accept
such service on its behalf. As an alternative method of service, each Borrower
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing (by registered or certified mail, postage prepaid) of
copies of such process to the Process Agent or such Borrower at its address
specified in Section 11.3. Each Borrower agrees
129
<PAGE> 139
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(c) Nothing contained in this Section 11.11 shall affect the
right of the Agent or any Lender to serve process in any other manner permitted
by law or commence legal proceedings or otherwise proceed against any Borrower
or any other Loan Party in any other jurisdiction.
(d) If for the purposes of obtaining judgment in any court it
is necessary to convert a sum due hereunder in Dollars into another currency,
the parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase Dollars with such other currency at
the spot rate of exchange quoted by the Agent at 11:00 a.m. (New York time) on
the Business Day preceding that on which final judgment is given, for the
purchase of Dollars, for delivery two Business Days thereafter.
(e) EACH OF THE AGENT, THE LENDERS AND THE BORROWER
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(f) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any action or proceeding
with respect to this Agreement or any other Loan Document any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages.
(g) Each party hereto (i) certifies that no representative,
agent or attorney of any Lender or the Agent has represented, expressly or
otherwise, that such Lender or the Agent would not, in the event of litigation,
seek to enforce the foregoing waivers and (ii) acknowledges that it has been
induced to enter into this Agreement, the Notes or the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications
herein.
11.12. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
11.13. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different 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.
11.14. Entire Agreement. This Agreement, together with all of the other
Loan Documents and all certificates and documents delivered hereunder or
thereunder,
130
<PAGE> 140
embodies the entire agreement of the parties and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof,
including that certain commitment letter, dated on or about August 3, 1999 and
amended as of September 27, 1999, among the Borrowers and Farallon Capital
Management, LLC (it being understood that the acceptance fee paid pursuant
thereto was fully earned and non-refundable when paid and is in addition to the
fees payable pursuant hereto). In the event that any term contained in any of
the Existing Credit Documents (as assigned in connection with the Assignment
Agreement), and as amended by the Amendment Documents, is inconsistent with an
express term contained in this Agreement, then the term contained in this
Agreement shall govern.
11.15. Confidentiality. Each Lender and the Agent agree to keep
information obtained by it pursuant hereto and the other Loan Documents
confidential and agrees that it will only use such information in connection
with the transactions contemplated by this Agreement and not disclose any of
such information other than (a) to such Lender's or the Agent's, as the case may
be, employees, representatives and agents who are or are expected to be involved
in the evaluation of such information in connection with the transactions
contemplated by this Agreement and who are advised of the confidential nature of
such information, (b) to the extent such information presently is or hereafter
becomes available to such Lender or the Agent, as the case may be, on a
non-confidential basis from a source other than the Borrowers, (c) to the extent
disclosure is required by law, regulation or judicial order or requested or
required by bank or other regulators or auditors, (d) to assignees or
participants or potential assignees or participants who agree to be bound by the
provisions of this sentence or (e) information in respect of any Collateral
disclosed in connection with any sale thereof.
11.16. Change in Accounting Principles. If any change in the accounting
principles used in the preparation of the most recent Financial Statements
referred to in Section 4.5 or Section 5.1 is hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
any successors thereto) and are adopted by any Borrower and its Subsidiaries
with the agreement of its independent public accountants and such change results
in a change in the method of calculation of any of the covenants, standards or
defined terms found in Article VII and Article VIII, the parties hereto agree to
enter into negotiations in order to amend such provisions so as to equitably
reflect such change with the desired results that the criteria for evaluating
compliance with such covenants, standards and defined terms by such Borrower and
its Subsidiaries shall be the same after such change as if such change had not
been made; provided that no change in GAAP that would affect the method of
calculation of any such covenants, standards or defined terms shall be given
effect in such calculations until such provisions are amended to reflect such
changes in GAAP.
11.17. Suretyship and Other Waivers and Consents.
(a) Each Borrower agrees that it is jointly and severally,
directly, and primarily liable to the Secured Parties for payment in full of all
Obligations and that such
131
<PAGE> 141
liability is independent of the duties, obligations, and liabilities of the
other Borrowers. The Loan Documents are a primary and original obligation of
each Borrower, are not the creation of a surety relationship, and are an
absolute, unconditional, and continuing promise of payment and performance which
shall remain in full force and effect without respect to future changes in
conditions, including any change of law or any invalidity or irregularity with
respect to the Loan Documents. Each Borrower acknowledges that the obligations
of such Borrower undertaken herein might be construed to consist, at least in
part, of the guaranty of obligations of each other Borrower and, in full
recognition of that fact, each Borrower consents and agrees that the Secured
Parties may, at any time and from time to time, without notice or demand,
whether before or after any actual or purported termination, repudiation, or
revocation of this Agreement by any such Borrower, and without affecting the
enforceability or continuing effectiveness hereof as to such Borrower: (i)
supplement, restate, modify, amend, increase, decrease, extend, renew,
accelerate, or otherwise change the time for payment or the terms of the
Obligations or any part thereof with respect to any other Loan Party, including
any increase or decrease of the rate(s) of interest thereon; (ii) supplement,
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval, or consent with respect to, the Obligations or any part
thereof with respect to any other Loan Party, or any of the Loan Documents or
any additional security or guaranties, or any condition, covenant, default,
remedy, right, representation or term thereof or thereunder; (iii) accept new or
additional instruments, documents or agreements in exchange for or relative to
any of the Loan Documents or the Obligations or any part thereof; (iv) accept
partial payments on the Obligations from any other Loan Party; (v) receive and
hold additional security or guaranties for the Obligations or any part thereof
with respect to any other Loan Party; (vi) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer, or
enforce any security or guaranties, and apply any security and direct the order
or manner of sale thereof with respect to any other Loan Party, as the Agent in
its sole and absolute discretion may determine; (vii) release any Person
including any other Loan Party from any personal liability with respect to the
Obligations or any part thereof, (viii) with respect to any other Loan Party,
settle, release on terms satisfactory to the Secured Parties or by operation of
applicable laws, or otherwise liquidate or enforce any Obligations and any
security therefor or guaranty thereof in any manner, consent to the transfer of
any security and bid and purchase at any sale; or (ix) consent to the merger,
change, or any other restructuring or termination of the corporate or
partnership existence of any Borrower or any other Person, and correspondingly
restructure the Obligations, and any such merger, change, restructuring, or
termination shall not affect the liability of any Borrower or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations.
(b) Upon the occurrence and during the continuance of any
Event of Default, the Secured Parties may enforce this Agreement independently
as to each Borrower and independently of any other remedy or security Secured
Parties at any time may have or hold in connection with the Obligations, and it
shall not be necessary for Secured Parties to marshal assets in favor of any
Borrower or any other Person or to
132
<PAGE> 142
proceed upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Borrower expressly waives any right to require
Secured Parties to marshal assets in favor of any Borrower or any other Person
or to proceed against any other Borrower or any collateral provided by any
Person, and agrees that Secured Parties may proceed against Borrowers or any
collateral in such order as it shall determine in its sole and absolute
discretion.
(c) The Secured Parties may file a separate action or actions
against any Borrower, whether action is brought or prosecuted with respect to
any security or against any other Person, or whether any other Person is joined
in any such action or actions. Each Borrower agrees that the Secured Parties and
any Borrower and any Affiliate of any Borrower may deal with each other in
connection with the Obligations or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing efficacy
of this Agreement.
(d) The Secured Parties' rights hereunder shall be reinstated
and revived, and the enforceability of this Agreement shall continue, with
respect to any amount at any time paid on account of the Obligations which
thereafter shall be required to be restored or returned by the Secured Parties,
all as though such amount had not been paid. The rights of the Secured Parties
created or granted herein and the enforceability of this Agreement at all times
shall remain effective to cover the full amount of all the Obligations even
though the Obligations, including any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any Borrower and whether or not any other Borrower
shall have any personal liability with respect thereto.
(e) To the maximum extent permitted by applicable law, each
Borrower, in addition to the waivers or agreements made by such Borrower
elsewhere herein or in any other Loan Document, expressly waives any and all
defenses now or hereafter arising or asserted by reason of, and agrees that the
obligations of such Borrower hereunder and under the other Loan Documents shall
be absolute and unconditional irrespective of:
(i) any disability or other defense of any other
Borrower with respect to the Obligations,
(ii) any lack of validity or enforceability with
respect to any other Loan Party of any provision of any other Loan
Document or any other agreement or instrument relating to any Loan
Document, or avoidance or subordination of any of the Obligations,
(iii) any extension, forbearance or granting of any
indulgence by any of the Secured Parties with respect to any provision
of any Loan Document,
133
<PAGE> 143
(iv) the unenforceability or invalidity with respect
to any other Loan Party of any security or guaranty for the Obligations
or the lack of perfection or continuing perfection or failure of
priority of any security for the Obligations and any requirement that
any of the Secured Parties protect, secure, perfect or insure any
security interest in or other Lien on any property,
(v) the cessation for any cause whatsoever of the
liability of any other Borrower (other than by reason of the full
payment and performance (after the Termination Date) of all
Obligations),
(vi) any failure of the Secured Parties to marshal
assets in favor of any Borrower or any other Person,
(vii) any failure of the Secured Parties to give
notice of sale or other disposition of collateral to any other Borrower
or any other Person or any defect in any notice that may be given in
connection with any sale or disposition of collateral,
(viii) any failure of the Secured Parties to comply
with applicable law with respect to any other Borrower in connection
with the sale or other disposition of any collateral or other security
for any Obligation, including any failure of the Secured Parties to
conduct a commercially reasonable sale or other disposition with
respect to any other Borrower of any collateral or other security for
any Obligation,
(ix) any act or omission of the Secured Parties or
others that directly or indirectly results in or aids the discharge or
release of any other Borrower or the Obligations or any security or
guaranty therefor by operation of law or otherwise,
(x) any law which provides that the obligation of a
surety or guarantor must neither be larger in amount nor in other
respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal
obligation,
(xi) any failure of the Secured Parties to file or
enforce a claim in any bankruptcy or other proceeding with respect to
any other Person,
(xii) the election by the Secured Parties of the
application or non-application of Section 1111(b)(2) of the United
States Bankruptcy Code,
(xiii) the disallowance, under Section 502 of the
United States Bankruptcy Code, of all or any portion of the claims of
any of the Secured Parties for payment of any of the Obligations of any
other Borrower,
134
<PAGE> 144
(xiv) any extension of credit or the grant of any
lien under Section 364 of the United States Bankruptcy Code,
(xv) any use of cash collateral under Section 363 of
the United States Bankruptcy Code,
(xvi) any agreement or stipulation with respect to
the provision of adequate protection in any bankruptcy proceeding of
any Person,
(xvii) the avoidance of any lien in favor of the
Secured Parties for any reason,
(xviii) any action taken by the Secured Parties that
is authorized by this section or any other provision of any Loan
Document,
(xix) the benefit of any statute of limitation in
respect of any other Borrower, or
(xx) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a borrower or a
guarantor.
Until such time (after the Termination Date) as all of the Obligations have been
fully, finally, and indefeasibly paid in full in cash: (x) each Borrower hereby
waives and postpones any right of subrogation it has or may have as against any
other Borrower with respect to the Obligations; and (y) in addition, each
Borrower also hereby waives and postpones any right to proceed or to seek
recourse against or with respect to any property or asset of any other Borrower.
Each Borrower expressly waives all setoffs and counterclaims, promptness,
diligence, and all presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices of dishonor
and all other notices or demands of any kind or nature whatsoever with respect
to the Obligations of any other Borrower (other than any notice expressly
required to be given under any Loan Document, and all notices of acceptance of
this Agreement or of the existence, creation or incurring of new or additional
Obligations.
(f) In the event that all or any part of the Obligations at
any time are secured by any one or more deeds of trust or mortgages or other
instruments creating or granting liens on any interests in real property, each
Borrower authorizes the Agent on the Secured Parties' behalf, upon the
occurrence of and during the continuance of any Event of Default, at its sole
option, without notice or demand and without affecting the obligations of any
Borrower, the enforceability of this Agreement, or the validity or
enforceability of any Liens of the Secured Parties on any Collateral, to
foreclose any or all of such deeds of trust or mortgages or other instruments by
judicial or nonjudicial sale.
(g) To the fullest extent permitted by applicable law, each
Borrower expressly waives any defenses to the enforcement of this Agreement or
any rights of the Secured Parties created or granted hereby or to the recovery
by the Secured Parties
135
<PAGE> 145
against any Borrower or any other Person liable therefor of any deficiency after
a judicial or nonjudicial foreclosure or sale, even though such a foreclosure or
sale may impair the subrogation rights of such Borrower and may preclude such
Borrower from obtaining reimbursement or contribution from one or more other
Borrowers. To the fullest extent permitted by applicable law, each Borrower
expressly waives any suretyship defenses or benefits that it otherwise might or
would have under applicable law with respect to actions taken in respect of the
Obligations of any other Borrower. WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS AND DEFENSES
ARISING OUT OF AN ELECTION OF REMEDIES BY THE SECURED PARTIES, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR THE OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST ONE OR MORE OTHER BORROWERS BY THE OPERATION OF LAW OR
OTHERWISE.
(h) If, in the exercise of any of its rights and remedies, any
of the Secured Parties shall forfeit any of its rights or remedies, including
its right to enter a deficiency judgment against any Borrower or any other
Person, whether because of any applicable law pertaining to "election of
remedies" or the like, each Borrower hereby consents to such action by such
Secured Party and waives any claim based upon such action with respect to any
other Borrower. Any election of remedies which results in the denial or
impairment of the right of such Secured Party to seek a deficiency judgment
against any Borrower shall not impair the obligation of any other Borrower to
pay the full amount of the Obligations or any other obligation of such Borrower
contained herein or in any Loan Document.
(i) In the event any of the Secured Parties shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or under
any of the Loan Documents, such Secured Party may bid all or less than the
amount of the Obligations and the amount of such bid need not be paid by such
Secured Party but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether such Secured Party or any other Person
is the successful bidder, to the extent permitted by applicable law, shall be
conclusively deemed to be the fair market value of such Collateral and the
difference between such bid amount and, to the extent permitted by applicable
law, the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations, notwithstanding that any present or future law or
court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which any of the Secured Parties might otherwise be entitled
by reason of such bidding at any such sale.
(j) Each Borrower agrees that notwithstanding any other
provision of this Section 11.17 and without limiting the generality of any other
provision of this Section 11.17 if, after the occurrence and during the
continuance of an Event of Default,
136
<PAGE> 146
the Secured Parties are prevented by applicable law from exercising their
respective rights to accelerate the maturity of the Obligations, to collect
interest on the Obligations, or to enforce or exercise any other right or remedy
with respect to the Obligations, or the Agent is prevented from taking any
action to realize on the Collateral, in each case with respect to any Borrower,
each other Borrower agrees to pay to the Agent for the account of the Secured
Parties, upon demand therefor, the amount that would otherwise have been due and
payable had such rights and remedies been permitted to be exercised by the
Secured Parties.
(k) Each Borrower warrants and agrees that each of the waivers
and consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which such Borrower
otherwise may have against other Borrowers, the Secured Parties or others, or
against the Collateral. If any of the waivers or consents herein are, or are
determined to be, contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.
(l) Each of the Borrowers agrees that the Loans were
negotiated outside the State of Wisconsin and that no Borrower is incorporated
or has an executive office in Wisconsin; therefore, each Borrower expressly
waives any right of private action under Section 224.80(2) of the Wisconsin
Statutes.
11.18. Waiver of Usury Defense. To the extent permitted by applicable
law, each of the Borrowers agrees that it will not assert, plead (as a defense
or otherwise) or in any manner whatsoever claim (and will actively resist any
attempt to compel it to assert, plead or claim) in any action, suit or
proceeding that the effective interest rate on any Loan violates present or
future usury or other laws relating to the interest payable on any Obligations
and will not otherwise avail itself (and will actively resist any attempt to
compel it to avail itself) of the benefits or advantages of any such laws.
11.19. LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY ANY BORROWER,
ANY OTHER LOAN PARTY OR ANY OTHER PERSON AGAINST THE AGENT, ANY LENDER, FARALLON
OR THE AFFILIATES, DIRECTORS, MEMBERS, PARTNERS, SHAREHOLDERS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS, CONSULTANTS AND INVESTMENT AND OTHER ADVISORS OF
OR TO ANY OF THEM FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR, TO THE
FULLEST EXTENT PERMITTED BY LAW, FOR ANY EXEMPLARY OR PUNITIVE DAMAGES IN
RESPECT OF ANY CLAIM OR CAUSE OF ACTION (WHETHER BASED ON CONTRACT, TORT,
STATUTORY LIABILITY OR ANY OTHER GROUND) BASED ON, ARISING OUT OF OR RELATED TO
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH BORROWER (FOR ITSELF AND ON
BEHALF OF EACH OTHER LOAN PARTY) HEREBY WAIVES, RELEASES AND AGREES NEVER TO SUE
UPON ANY CLAIM FOR ANY SUCH DAMAGES,
137
<PAGE> 147
WHETHER SUCH CLAIM NOW EXISTS OR HEREAFTER ARISES AND WHETHER OR NOT IT IS NOW
KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. ON NO ACCOUNT SHALL ANY LENDER BE
LIABLE OR RESPONSIBLE TO ANY OTHER PARTY OR PERSON FOR ANY BREACH OF THIS
AGREEMENT BY ANOTHER LENDER OR FOR THE OBLIGATIONS OF SUCH OTHER LENDER. EACH
PARTY HERETO ACKNOWLEDGES THAT THE OBLIGATIONS OF EACH LENDER HEREUNDER IS
SEVERAL AND NOT JOINT, AND LIMITED TO SUCH LENDER'S RATABLE PORTION OF SUCH
OBLIGATIONS, AND THAT NO AFFILIATE, DIRECTOR, MEMBER, PARTNER, SHAREHOLDER,
OFFICER, EMPLOYEE, AGENT, ATTORNEY, CONSULTANT OR INVESTMENT OR OTHER ADVISOR OF
OR TO THE AGENT OR ANY LENDER SHALL BE LIABLE FOR ANY CLAIM ARISING HEREUNDER OR
IN CONNECTION HEREWITH.
11.20. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Borrower, any other Loan Party or any
of their respective subsidiaries herein or in the certificates or other
instruments prepared or delivered in connection with this Agreement, any of the
Collateral Documents or any other Loan Document shall be considered to have been
relied upon by the Lenders and the Agent shall survive the making by the Lenders
of the Loans and the execution and delivery to the Lenders of the Notes,
notwithstanding any investigation heretofore or hereafter made (or any prior or
future participation in the preparation or delivery of any such documents or
schedules thereto) by any of them (or by any employees, agents, attorneys,
consultants and advisors thereof or thereto).
11.21. Amendment and Restatement. The Borrowers acknowledge and agree
that the security interests granted by each of them pursuant to any Existing
Credit Document executed in connection with the Existing Credit Agreement
("Existing Security Agreements") (and maintained pursuant to the Collateral
Documents) continue (without interruption) in full force and effect in favor of
the Secured Parties. Upon the effectiveness of this Agreement, (i) the terms and
conditions of the Existing Credit Agreement and the notes issued in connection
therewith are hereby amended and restated in their entirety by this Agreement
and (ii) the notes issued in connection with the Existing Credit Agreement shall
be deemed satisfied and discharged, the Obligations henceforth to be evidenced
by this Agreement and the other Loan Documents, including any Notes issued
hereunder. All other Existing Credit Documents shall remain in effect, in favor
of the Agent (as assignee of DLJ, as "Agent" under the Existing Credit
Documents) and of the Lenders (as assignees of the Existing Lenders), except to
the extent amended or restated by an Amendment Document. The Borrowers agree and
acknowledge that concurrently herewith each of them has released DLJ from all
obligations and liabilities under the Existing Credit Documents arising out of
events occurring prior to the Closing Date, and that such release also shall be
for the express benefit of the Secured Parties as assignee of such Existing
Credit Documents.
138
<PAGE> 148
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWERS: SILVER CINEMAS INTERNATIONAL, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SILVER CINEMAS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
LANDMARK THEATRE CORP.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
LANDMARK THEATRE USA, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AGENT: FARALLON CAPITAL FUNDING, LLC
By: Farallon Capital Management, LLC,
Managing Member
By:
------------------------------------------
Name: Meridee A. Moore
Title: Managing Member
139
<PAGE> 149
LENDER: FARALLON CREDIT ALTERNATIVES, LLC
By: Farallon Capital Management, LLC, Manager
By:
------------------------------------------
Name: Meridee A. Moore
Title: Managing Member
140
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET OF SILVER CINEMAS, INTERNATIONAL,
INC. AS OF SEPTEMBER 30, 1999, AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,147,840
<SECURITIES> 0
<RECEIVABLES> 522,538
<ALLOWANCES> 0
<INVENTORY> 543,656
<CURRENT-ASSETS> 2,214,034
<PP&E> 73,785,613
<DEPRECIATION> (8,162,545)
<TOTAL-ASSETS> 124,950,621
<CURRENT-LIABILITIES> 11,499,600
<BONDS> 100,000,000
0
35,847,006
<COMMON> 1,436
<OTHER-SE> (28,098,500)
<TOTAL-LIABILITY-AND-EQUITY> 124,950,621
<SALES> 0
<TOTAL-REVENUES> 82,423,689
<CGS> 0
<TOTAL-COSTS> 71,807,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,730,696
<INCOME-PRETAX> (9,847,781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,847,781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,847,781)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
