<PAGE> 1
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 JUNE 30, 1997
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 0-14993
---------
CARMIKE CINEMAS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-1469127
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1301 FIRST AVENUE, COLUMBUS, GEORGIA 31901-2109
(Address of principal Executive Offices) (Zip Code)
</TABLE>
(706) 576-3400
(Registrant's telephone number, including area code)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $.03 par value --
9,918,587 shares outstanding as of August 13, 1997
Class B Common Stock, $.03 par value --
1,420,700 shares outstanding as of August 13, 1997
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ----------
(Unaudited)
(000's omitted)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,636 $ 5,569
Short-term investments 3,177 7,726
Recoverable construction allowances
under capital leases 1,400 4,178
Accounts and notes receivable 2,411 644
Inventories 3,614 2,631
Prepaid expenses 7,372 5,363
----------- ----------
TOTAL CURRENT ASSETS 26,610 26,111
OTHER ASSETS 19,655 12,749
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization - Notes B and D 455,984 387,915
EXCESS OF COST OVER FAIR
VALUE OF TANGIBLE ASSETS
ACQUIRED -- Notes B and D 71,530 62,608
----------- ----------
$ 573,779 $ 489,383
=========== ==========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
(000's omitted)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 21,544 $ 21,432
Accrued expenses 20,400 17,240
Current maturities of long-term debt
and capital lease obligations - Note C 34,053 15,026
----------- -----------
TOTAL CURRENT LIABILITIES 75,997 53,698
LONG-TERM DEBT - less current maturities 177,349 124,476
SENIOR NOTES - less current maturities 79,870 93,831
CAPITAL LEASE OBLIGATIONS -
less current maturities 40,677 31,351
CONVERTIBLE SUBORDINATED DEBT 3,715 3,575
DEFERRED INCOME TAXES 3,622 4,522
SHAREHOLDERS' EQUITY
Class A Common Stock, $.03 par value, authorized
22,500,000 shares, issued and outstanding 9,913,587
and 9,758,601 shares, respectively 297 292
Class B Common Stock, $.03 par value, authorized
5,000,000 shares, issued and outstanding
1,420,700 shares 43 43
Paid-in capital 104,635 99,927
Retained earnings 87,574 77,668
----------- -----------
192,549 177,930
----------- -----------
$ 573,779 $ 489,383
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------- --------- ---------- --------
(000's omitted except per share data)
<S> <C> <C> <C> <C>
REVENUES
Admissions $ 75,577 $ 72,595 $ 152,847 $136,539
Concessions and other 34,497 32,103 65,684 60,315
----------- --------- ---------- --------
110,074 104,698 218,531 196,854
COSTS AND EXPENSES
Film exhibition costs 39,056 38,101 78,595 70,104
Concession costs 4,374 4,128 8,381 7,889
Other theatre operating costs 41,918 40,883 85,870 80,147
General and administrative 1,634 1,558 3,228 3,003
Depreciation and amortization 8,103 6,989 15,837 14,089
Impairment of long-lived assets (Note B) -0- -0- -0- 45,447
----------- --------- ---------- --------
95,085 91,659 191,911 220,679
----------- --------- ---------- --------
OPERATING INCOME (LOSS) 14,989 13,039 26,620 (23,825)
Interest expense 5,406 5,136 10,643 10,071
----------- --------- ---------- --------
INCOME (LOSS) BEFORE INCOME TAXES 9,583 7,903 15,977 (33,896)
Income tax expense (benefit) 3,642 3,004 6,071 (12,881)
----------- --------- ---------- --------
NET INCOME (LOSS) $ 5,941 $ 4,899 $ 9,906 $(21,015)
=========== ========= ========== ========
NET INCOME (LOSS) PER SHARE $ .52 $ .43 $ .87 $ (1.88)
=========== ========= ========== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
---------- ----------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income(loss) $ 9,906 $ (21,015)
Items which did not use cash:
Depreciation and amortization 15,837 14,089
Impairment of long-lived assets -0- 45,447
Deferred income taxes -0- (17,270)
Gain on sale of property and equipment (1,809) (739)
Changes in operating assets and liabilities:
Accounts and notes receivable and inventories (2,750) 1,290
Prepaid expenses (1,509) (104)
Accounts payable (388) (479)
Accrued expenses 2,260 (2,310)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,547 18,909
INVESTING ACTIVITIES
Purchases of property and equipment (68,609) (26,435)
Purchases of assets from other theatre operators (16,800) (23,075)
Disposals of property and equipment 4,207 1,490
Decrease (increase) in:
Short-term investments 4,549 (315)
Other (6,969) (1,745)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (83,622) (50,080)
FINANCING ACTIVITIES
Debt and other liabilities:
Borrowings under revolving credit lines 974,000 630,000
Repayments of revolving credit lines (902,000) (595,500)
Payments on long term obligations (14,349) (11,598)
Issuance of Class A Common Stock 4,713 111
Due from lessor under capital leases 2,778 2,838
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 65,142 25,851
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,067 (5,320)
Cash and cash equivalents at beginning of period 5,569 11,345
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 8,636 $ 6,025
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
and six-month periods ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
NOTE B - IMPAIRMENT OF LONG LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards 121 (FASB 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", as of January 1, 1996. The Company reviews for impairment
long-lived assets, and goodwill related to those assets, to be held and used in
the business whenever events or changes in circumstances indicate that the
carrying amount of an asset or a group of assets may not be recoverable. The
Company considers a trend of operating results that are not in line with
management's expectations to be its primary indicator of potential impairment.
For purposes of Statement 121, assets are evaluated for impairment at the
theatre level, which management believes is the lowest level for which there
are identifiable cash flows. The Company deems a theatre to be impaired if a
forecast of undiscounted future operating cash flows directly related to the
theatre, including disposal value if any, is less than its carrying amount. If
a theatre is determined to be impaired, the loss is measured as the amount by
which the carrying amount of the theatre exceeds its fair value. Fair value is
based on management's estimates which are based on using the best information
available, including prices for similar theatres or the results of valuation
techniques such as discounting estimated future cash flows as if the decision
to continue to use the impaired theatres was a new investment decision.
Considerable management judgment is necessary to estimate discounted future
cash flows. Accordingly, actual results could vary significantly from such
estimates.
Recoverability of other long-lived assets, primarily investments in
unconsolidated affiliates and goodwill not identified with impaired theatres
covered by the above paragraph, will continue to be evaluated on a recurring
basis. The primary indicator of recoverability is current or forecasted
profitability over the estimated remaining life of these assets. If
recoverability is unlikely based on the evaluation, the carrying amount is
written down to the fair value. In the future, additional adjustments could be
required.
6
<PAGE> 7
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE B -- IMPAIRMENT OF LONG LIVED ASSETS(continued)
The initial non-cash charge upon the Company's adoption of Statement 121,
recorded during the period ended March 31, 1996, was approximately $45.4
million ($28.2 million after tax or $2.50 per share) to reduce the carrying
amount of 138 of the Company's theatres. This initial charge resulted from
evaluating the recoverability of individual theatres, which is at a lower level
of cash flow evaluation than under the Company's previous accounting policy for
measuring impairment. Under the Company's previous policy, the Company's
long-lived assets were evaluated on a market by market basis for impairment.
Statement 121 also requires, among other provisions, that long-lived assets
held for disposal and certain identified intangibles be reported at the lower
of the asset's carrying amount or its fair value less costs to sell. The
impact of adopting Statement 121 on assets held for disposal was not material.
The Company's policy is to perform its impairment calculations and evaluations
in the fourth quarter of each year.
NOTE C -- REVOLVING CREDIT FACILITY
On April 23, 1996, the Company entered into an Amended and Restated Credit
Agreement (the "Agreement") with four banks to provide a revolving line of
credit of up to $175 million for working capital, acquisitions and other
general corporate purposes. The Agreement has a three year revolving credit
period, extended upon the mutual consent of the Company and the banks for one
year periods and will convert to a four year term loan at the end of the
revolving credit period. The Company has the option to borrow at rates based
on either the base rate of Wachovia Bank of Georgia, N.A. or LIBOR + .40% and
is required to pay annual fees of .20% on the full amount of the facility. The
interest rate and facility fees are subject to adjustment based upon the
Company's ratio of total debt to defined cash flows. The Agreement contains
certain restrictive provisions which, among other things, limit additional
indebtedness of the Company, limit dividend and other restricted payments,
require that certain debt to capitalization ratios be maintained and require
minimum levels of cash flows.
On June 20, 1997 the Wachovia Bank of Georgia, N.A. provided the Company a $30
million loan (the "Loan") (the Loan and the Agreement are collectively know as
the "Agreements") pending an increase in the revolving line of credit under the
Agreement. The Loan matures November 26, 1997 and the Company pays interest
under the Loan at the same rates as under the Agreement. While the Company
intends to refinance the amounts outstanding under the temporary financing, $19
million under this facility is included in current liabilities.
7
<PAGE> 8
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE C -- REVOLVING CREDIT FACILITY (continued)
Under the terms of the Agreement, no payments are due until after April 23,
1999, nor does the Company anticipate reducing the amount outstanding at June
30, 1997. Accordingly, no amounts outstanding under the Agreement have been
classified as current maturities in the accompanying Condensed Consolidated
Financial Statements.
At June 30, 1997, the Company had $194 million outstanding under these
facilities.
The Company has entered into interest rate swap agreements to modify the
interest characteristics of a portion of its outstanding debt. The agreements
involve the exchange of amounts based on a variable interest rate for amounts
based on a fixed interest rate over the life of the agreements without an
exchange of the notional amount upon which the payments are based. The Company
specifically designates interest rate swaps on hedges of debt instruments and
recognizes interest differentials as adjustments to interest expense in the
period they occur. The differential to be paid or received as interest rates
change is accrued and recognized as an adjustment of interest expense related
to the debt (the accrual accounting method). The related amount payable to, or
receivable from, counter-parties is included in other liabilities or assets.
The fair value of the swap agreements is not recognized in the financial
statements. If, in the future, an interest rate swap agreement were
terminated, any resulting gain or loss would be deferred and amortized to
interest expense over the remaining life of the interest rate swap agreement.
In the event of the early extinguishment of a designated debt obligation, any
realized or unrealized gain or loss from the swap would be recognized in income
coincident with the extinguishment.
Under one agreement, the Company has fixed $50 million of the Company's
floating rate debt for seven years. The effective rate at June 30, 1997 was
6.105%, equal to a fixed rate of 5.705% plus the margin of .40% the Company
presently pays over LIBOR. Under another agreement, the Company has fixed $20
million of its floating rate debt for five years at a fixed rate of 5.51% plus
the margin the Company pays over LIBOR (presently .40%) for a total effective
rate of 5.91%.
NOTE D -- ACQUISITIONS
The Company's acquisitions have been accounted for under the purchase method of
accounting. Under the purchase method of accounting, the results of operations
of the acquired businesses are included in the accompanying consolidated
statements as of their respective acquisition dates. The assets and
liabilities of acquired businesses in 1997 are included based on a preliminary
allocation of the purchase price.
8
<PAGE> 9
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE D -- ACQUISITIONS (continued)
In separate transactions, the Company acquired certain assets and businesses as
follows:
<TABLE>
<CAPTION>
Number of
Approximate --------------------
Seller Purchase Price Theatres Screens Effective Date
------ -------------- -------- ------- --------------
(in thousands)
<S> <C> <C> <C> <C>
1997
First International
Theatres $ 16,800 19 104 May 23, 1997
============= ====== =====
1996
Maxi Saver Cinemas $ 3,975 2 18 January 5, 1996
Fox Theatres Corp. 19,100 12 61 February 16, 1996
------------- ------ -----
$ 23,075 14 79
============= ====== =====
</TABLE>
The First International Theatres acquisition purchase price included 128,986
shares of the Company's Class A Common Stock with a fair market value of
approximately $4.25 million.
The excess of purchase prices over net assets of businesses acquired has been
recorded as an intangible asset. Amounts recorded were approximately $10.0
million in 1997 and $17.0 million in 1996.
Pro-forma results have not been presented for those acquisitions which were not
significant during the periods presented.
NOTE E - ACCOUNTING POLICY NOT YET ADOPTED
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which the Company will adopt on December 31, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in an increase
in primary earnings per share for the quarter ended June 30, 1997 and June 30,
1996 of $.01 and $.01 per share, respectively and for the year to date periods
ended June 30, 1997 and June 30, 1996 of $.01 and $.00 per share, respectively.
The impact of Statement 128 on the calculation of fully diluted earnings per
share for these quarters is not expected to be material.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
COMPARISON OF THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the financial information
included herein and the Company's annual report on Form 10-K for the fiscal
year ended December 31, 1996 (the "1996 Form 10-K"), as filed with the
Securities and Exchange Commission (the "SEC"). Except for the historical
information contained herein, the following discussion contains forward-looking
statements that involve a number of risks and uncertainties. Factors which
could cause the Company's actual results in future periods to differ materially
include, but are not limited to, those discussed below, as well as those
discussed or identified from time to time in the Company's filings with the
SEC, including, but not limited to, the Company's 1996 Form 10-K.
RESULTS OF OPERATIONS
Total revenues for the quarter ended June 30, 1997 increased 5.1% to
$110,074,000 from $104,698,000 for the quarter ended June 30, 1996. This
increase consists of a $2,982,000 increase in admissions and a $2,394,000
increase in concessions and other. The increases are attributed to additional
revenues generated by the increased number of screens in operation, increases
in admission prices, a higher level of gains on sale of assets and additional
income from the Company's new family entertainment center, The Hollywood
Connection(SM) but were partially offset by a 8.5% decline in attendance per
average screen.
Total revenues for the six months ended June 30, 1997 increased 11.0% to
$218,531,000 from $196,854,000 for the six months ended June 30, 1996. This
increase consists of a $16,308,000 increase in admissions and a $5,369,000
increase in concessions and other. These increases are due primarily to the
additional revenues generated by the increase in the number of screens in
operation, increases in admission prices, a higher level of gains on sale of
assets and additional income from the Company's new family entertainment
center, The Hollywood Connection(SM) but were offset partially by a 1.9%
decrease in attendance per average screen.
Cost of operations (film exhibition costs, concession costs and other theatre
operating costs) increased 2.7% from $83,112,000 to $85,348,000 for the quarter
ended June 30, 1997. This dollar increase is due to the increased number of
screens in operation. As a percentage of total revenues, cost of operations
decreased to 77.5% of total revenues in the quarter ended June 30, 1997 from
79.4% for the quarter ended June 30, 1996.
Cost of operations for the six months ended June 30, 1997 increased 9.3% from
$158,140,000 to $172,846,000 also as a result of the increased number of
screens in operation. As a percentage of total revenues, cost of operations
decreased from 80.3% of total revenues to 79.1% of total revenues in the six
months ended June 30, 1997.
General and administrative costs for the quarter ended June 30, 1997 and
remained at 1.5% of total revenues.
General and administrative costs for the six months ended June 30, 1997
remained at 1.5% of total revenues.
10
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
COMPARISON OF THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
Depreciation and amortization increased 15.9% from $6,989,000 to $8,103,000 for
the quarter ended June 30, 1997 due to the Acquisitions and expansions.
Depreciation and amortization increased by additional depreciation and
amortization from the acquisitions and expansions in 1996 and 1997.
Depreciation and amortization for the six months ended June 30, 1997 increased
12.4% from $14,089,000 to $15,837,000 due to the Company's acquisitions and
expansions.
Reference is made to Note B of Notes to Condensed Consolidated Financial
Statements with respect to the Company's adoption of FASB 121 effective January
1, 1996.
Interest expense for the quarter ended June 30, 1997 increased 5.3% to
$5,406,000 from $5,136,000 due to the increase in the average amount of
outstanding debt.
Interest expense for the six months ended June 30, 1997 increased 5.6% to
$10,643,000 from $10,071,000 for the six months ended June 30, 1996 due to the
increase in the average amount of outstanding debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, principally through box office
admissions and theatre concessions. Because its revenues are received in cash
prior to the payment of related expenses, the Company has an operating "float"
which partially finances its operations.
The Company's capital requirements arise principally in connection with new
theatre openings and acquisitions of existing theatres and theatre circuits.
New theatre openings and acquisitions typically have been financed with
internally generated cash and by debt financings, including borrowings under
the Company's revolving credit facilities.
Pursuant to a Stock Purchase Agreement (the "Agreement") by and between the
Company, Eastwynn Theatres, Inc., Morgan Creek Theatres, Inc., SB Holdings,
Inc., RDL Consulting Limited Liability Company and the Sellers (as defined in
the Agreement), effective May 23, 1997, the Company acquired First International
Theatres, which operated 19 theatres with an aggregate of 104 screens. The
total consideration for this $16.8 million acquisition was a combination of cash
and the issuance of an aggregate of 128,986 shares of the Company's Class A
Common Stock.
The Company believes that its presently anticipated capital needs for theatre
construction and possible acquisitions will be satisfied by the cash and cash
equivalents and short-term investments on hand, borrowings under the revolving
credit lines (see Note C of the Notes to Condensed Consolidated Financial
Statements herein), additional sale of debt and/or equity securities, additional
bank financings and other forms of long-term debt, internally generated cash
flow and, where appropriate, future lease financings. On August 12, 1997, the
Company had approximately $4 million in cash and short term investments on hand
and approximately $19 million was available under the Company's revolving credit
facilities.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security-Holders.
The annual meeting of shareholders of the Company was held on May 5,
1997. At the annual meeting, the shareholders voted on the election of six
directors. The results of the voting were as follows:
<TABLE>
<CAPTION>
FOR VOTE WITHHELD
--- -------------
<S> <C> <C>
C. L. Patrick 20,109,739 24,850
Michael W. Patrick 20,119,239 15,350
Carl L. Patrick, Jr. 20,118,939 15,650
Carl E. Sanders 20,110,039 24,550
John W. Jordan, II 20,110,339 15,250
David W. Zalaznick 20,119,039 15,550
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 - Loan Agreement dated as of June 20, 1997 by and between
Wachovia Bank N.A. and Carmike Cinemas, Inc.
10.2 - Stock Purchase Agreement dated June 27, 1997 by and
between Carmike Cinemas, Inc., Eastwynn Theatres, Inc., Morgan Creek
Theatres, Inc., SB Holdings, Inc., RDL Consulting Limited Liability
Company and the Sellers (as defined therein).
11 - Statement re: computation of earnings per share
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
CARMIKE CINEMAS, INC.
(Registrant)
Date: August 14, 1997 By: /s/ Michael W. Patrick
---------------------- --------------------------------------
Michael W. Patrick - President
(Chief Executive Officer)
Date: August 14, 1997 By: /s/ John O. Barwick, III
---------------------- --------------------------------------
John O. Barwick, III -
Vice President - Finance
(Chief Accounting and
Financial Officer)
13
<PAGE> 1
EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into as of June 20,
1997 by and among WACHOVIA BANK, N.A., a national banking association and
successor by merger to Wachovia Bank of Georgia, N.A. (the "Bank"); and CARMIKE
CINEMAS, INC., a corporation organized under the laws of the State of Delaware
(the "Borrower").
Recitals.
The Borrower has requested the Bank to make loans (individually a
"Loan" and collectively the "Loans") under a line of credit from time to time
in the maximum principal amount at any one time outstanding of $30,000,000 to
the Borrower and the Bank has agreed to make the Loans on the terms and
conditions set forth below.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Definitions and Interpretation. (a) The terms as
defined in this Section 1 shall, for all purposes of this Agreement, have the
meanings set forth herein:
"Amended and Restated Credit Agreement" shall mean the Amended
and Restated Credit Agreement dated as of April 23, 1996, among Wachovia Bank
of Georgia, N.A., as Agent, the Borrower, and certain other Banks listed
therein, as it may have been or may hereafter be amended, modified or restated
from time to time.
"Applicable Facility Fee Rate" shall have the meaning set
forth in the Amended and Restated Credit Agreement.
"Applicable Margin" shall mean the Applicable Margin for
Euro-Dollar Loans as set forth in the Amended and Restated Credit Agreement.
"Base Rate" means for any day, the rate per annum equal to the
higher as of such day of (i) the Prime Rate, and (ii) one-half of one percent
above the Federal Funds Rate for such day. For purposes of determining the
Base Rate for any day, changes in the Prime Rate and the Federal Funds Rate
shall be effective on the date of each such change.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized or required by
law to close.
"Commitment" means the Bank's commitment to make the Loans in
the maximum principal amount at any one time outstanding of $30,000,000.
"Default" means any condition or event which constitutes an
Event of Default, or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
<PAGE> 2
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Euro-Dollar Business Day" means any Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate charged to the Bank on such day on such transactions as determined
by the Bank.
"Interest Period" shall mean: (a) with respect to Loans
bearing interest based on the LIBOR Rate, the period commencing on the date
such Loan is made, and ending on the numerically corresponding day in the
first, second or third month thereafter, as Borrower may elect by notice to the
Bank provided that: (i) any Interest Period (subject to clause (iii) below)
which would otherwise end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar Business Day, unless such
Euro-Dollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business Day; (ii)
any Interest Period which begins on the last Euro-Dollar Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the appropriate subsequent calendar month) shall end on the last Euro-Dollar
Business Day of the appropriate subsequent calendar month; and (iii) no
Interest Period may end after the Maturity Date; and (b) with respect to Loans
bearing interest at the Base Rate, the period commencing on the date such Loan
is made and ending on the first day after the date such Loan is made which is
the last day of a fiscal quarter of the Borrower; provided that (i) any
Interest Period (subject to clause (ii) below) which would otherwise end on a
day which is not a Business Day shall be extended to the next succeeding
Business Day; and (ii) no Interest Period may end after the Maturity Date.
"LIBOR" for any Interest Period hereunder shall mean the rate
per annum determined on the basis of the rate for deposits in Dollars of
amounts equal or comparable to the principal amount of the Loans outstanding
during such Interest Period offered for a term comparable to such Interest
Period, which rate appears on the display designated as Page "3750" of the
Telerate Service (or such other page as may replace page 3750 of that service
or such other service or services as may be nominated by the British Bankers
Association for the purpose of displaying London interbank offered rates for
U.S. dollar deposits), determined as of 1:00 p.m. (Atlanta, Georgia time), 2
Euro-Dollar Business Days prior to the first day of such Interest Period.
"LIBOR Rate" applicable to any Interest Period means a rate
per annum equal to
2
<PAGE> 3
the quotient obtained (rounded upwards, if necessary, to the next higher 1/100
of 1%) by dividing (a) the applicable LIBOR for such Interest Period by (b)
1.00 minus the LIBOR Reserve Percentage.
"LIBOR Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on the Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
the Bank to United States residents). The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the LIBOR
Reserve Percentage.
"Maturity Date" shall mean the earliest to occur of (i)
November 26, 1997, or (ii) termination (for any reason) or increase in amount
of the Commitments as defined in and under the Amended and Restated Credit
Agreement.
"Prime Rate" refers to that interest rate so denominated and
set by the Bank from time to time as an interest rate basis for borrowings.
The Prime Rate is but one of several interest rate bases used by the Bank. The
Bank lends at interest rates above and below the Prime Rate.
(b) All terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Borrower and its consolidated subsidiaries delivered to the
Bank.
(c) Unless otherwise indicated, references in this
Agreement to "Exhibits" and "Sections" are references to exhibits and sections
hereof.
Section 2. Borrowings. When the Borrower desires to borrow a
Loan, a duly authorized representative of the Borrower (as identified or
defined in the resolution of the Borrower's board of directors authorizing the
execution, delivery and performance of this Agreement and the borrowings
hereunder, a copy of which resolutions, certified by a secretary or assistant
secretary of Borrower, shall be furnished to the Bank simultaneously with the
execution of this Agreement) shall notify the Bank in writing or by telephone
(prior to 11:00 a.m. Atlanta, Georgia time on the Business Day of each Loan
which will bear interest at the Base Rate and at least 3 Euro-Dollar Business
Days before each Loan which will bear interest based on the LIBOR Rate), which
notice shall specify the Interest Period applicable thereto, and whether such
Loan will bear interest at the Base Rate or based on the LIBOR Rate and the
Bank may conclusively rely on any such notification which the Bank in good
faith believes to have been made by a duly authorized representative of
Borrower. In such case the Bank is authorized to credit to the account of the
Borrower at the Bank the amount of the Loan as
3
<PAGE> 4
specified by the Borrower in such notice (subject to the limitation of the
aggregate principal amount as above stated). During the term of this Agreement
and subject to its terms and conditions the Borrower may borrow, repay, and
reborrow under the line of credit provided herein. All notifications hereunder
to either the Bank or the Borrower shall be given to the address(es) set forth
under the signatures of the parties hereto.
Section 3. Interest; Fees. (a) Each Loan bearing interest at
the Base Rate shall bear interest on the outstanding principal amount thereof,
for each day from the date such Loan is made until it becomes due, at a rate
per annum equal to the Base Rate for such day. Each Loan bearing interest
based upon the LIBOR Rate shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the Applicable Margin plus the LIBOR Rate for such Interest
Period; provided that if any such Loan shall, as a result of the definition of
Interest Period, have an Interest Period of less than one month, such Loan
shall bear interest during such Interest Period at the Base Rate during such
period. Interest on the Loans shall be payable for each Interest Period on the
last day thereof.
(b) The Borrower shall pay to the Bank a facility fee
equal to the product of: (i) the aggregate of the daily average amount of the
Commitment, times (ii) a per annum percentage equal to the Applicable Facility
Fee Rate. The facility fee shall be payable in arrears after each 90 day
period after the date of this Agreement and on the Maturity Date.
(c) All interest and fees due hereunder shall be computed
on the basis of a year of 360 days, and paid for the actual number of days
elapsed, calculated as to each period from and including the first day thereof
to but excluding the last day thereof.
(d) The Borrower shall pay the Bank on the date this
Agreement is executed a closing fee in an amount equal to $45,000.
Section 4. Prepayment. The Borrower may, upon at least 1
Business Day's notice to the Bank, prepay any Loan bearing interest at the Base
Rate. Loans bearing interest based upon the LIBOR Rate shall not be prepaid at
any time, in whole or in part. Any prepayment hereunder must be accompanied by
payment of all accrued, unpaid interest on the amount prepaid and by any other
sums then due to the Bank with respect thereto. In the event that after the
date hereof the Borrower enters into one or more agreements to borrow, or
borrows, money in an aggregate principal amount of $10,000,000 or more
(excluding however any borrowings under the Amended and Restated Credit
Agreement) the Commitment shall immediately be reduced by the amount of such
borrowings or agreements to borrow. To the extent the principal amount of the
Loans outstanding exceeds the Commitment as reduced, the excess amount of such
Loans shall be immediately prepaid together with all accrued interest thereon
and any amounts due under Section 5 hereof.
Section 5. Payments. (a) The Borrower promises to repay the
entire outstanding principal amount of the Loans, and any accrued interest
thereon, upon the expiration of the
4
<PAGE> 5
Interest Period applicable to such Loans. All payments under this Agreement
shall be made in Dollars in immediately available funds to the Bank at its
offices at 191 Peachtree Street, N.E., Atlanta, Georgia 30303. Any such
payment not received by the Bank by 11:00 a.m. Atlanta, Georgia time and on a
Business Day shall be deemed to be made on the following Business Day;
provided, however, that if any amount hereunder shall first become due and
payable on a day which is not a Business Day, then the time for payment of such
amount shall be the first Business Day thereafter (and interest shall accrue
thereon for such extended period). Notwithstanding any other provision of this
Agreement, if any payment of principal of or interest on the Loans, or any
other sum payable under this Agreement, is not paid on the date when the same
first becomes due and payable, the amount of such overdue principal, interest
or other sum shall, to the extent permitted by law, accrue interest, payable on
demand, from such date until such principal, interest or other sum is paid, at
a rate per annum equal to the sum of (x) the then highest interest rate
(including the Applicable Margin) which may be applicable to any Loans
hereunder (irrespective of whether any such type of Loans are actually
outstanding hereunder), plus (y) two percent (2.0%). If the Borrower is
otherwise entitled under this Agreement to repay any Loans maturing at the end
of an Interest Period applicable thereto with the proceeds of a new Loan, and
the Borrower fails to repay such Loans using its own moneys and fails to give a
notice of a new Loan pursuant to Section 2, a new Loan shall be deemed to be
made on the date such Loans mature in an amount equal to the principal amount
of the Loans so maturing, and such new Loan shall bear interest at the Base
Rate. The Commitment shall terminate on the Maturity Date and any Loans then
outstanding (together with accrued interest thereon) and all other amounts
accruing hereunder shall be due and payable on such date.
The Loans shall be evidenced by a promissory note (the "Note"), in the
form of Exhibit A attached hereto and made a part hereof.
(b) Upon the request of the Bank, the Borrower shall pay
to the Bank such amount or amounts as shall compensate the Bank for any loss,
cost or expense (including, without limitation, funding or hedging costs or
losses) incurred by the Bank as a result of (i) any payment, prepayment or
other early payment (pursuant to Section 9 or otherwise) of any Loans bearing
interest based upon the LIBOR Rate on a date other than the end of the Interest
Period applicable to such Loan; (ii) any failure by the Borrower to borrow a
Loan bearing interest based upon the LIBOR Rate after notice is given under
Section 2, or (iii) any failure by the Borrower to prepay all or a portion of
the Loans on the date for such prepayment specified in the relevant notice of
prepayment hereunder.
Section 6. Representations and Warranties. The Borrower hereby
represents and warrants to the Bank that each of the representations and
warranties set forth in Article IV of the Amended and Restated Credit Agreement
(which provisions and all definitions used therein are incorporated herein by
this reference) are true and correct on the date hereof as if made on the date
hereof, provided that (i) references to "Agent" or "Banks" shall be deemed to
be a reference to the Bank, (ii) references to "Agreement", "Notes" or "Loan
Documents" shall be deemed to be references to this Agreement and the Note,
(iii) the references to specific financial statements in Section 4.04 of the
Amended and Restated Credit Agreement shall be deemed to be references to the
latest quarterly and annual unaudited and audited financial statements
delivered to the Bank prior
5
<PAGE> 6
to the date of this Agreement, and (iv) references to "Effective Date" shall be
deemed to be references to the date of this Agreement. The modification of the
references in the Sections incorporated herein shall also apply to any
definitions of capitalized terms used in such Sections or in any definition of
capitalized terms used in definitions of capitalized terms in such Sections.
Section 7. Conditions to Borrowings. The obligation of the
Bank to make any Loan is subject to the satisfaction of the following
conditions:
(a) receipt by the Bank of notice as required by Section 2;
(b) the fact that, immediately before and after such Loan is
made, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower incorporated by reference in Section 6 of this Agreement
shall be true on and as of the date of such Loan; and
(d) the fact that, immediately after such Loan is made the
aggregate outstanding principal amount of the Loans of the Bank will
not exceed the amount of the Commitment.
Each Loan hereunder shall be deemed to be a representation and warranty by the
Borrower on the date of such Loan as to the truth and accuracy of the facts
specified in clauses (b), (c) and (d) of this Section: provided that (i) such
Loan shall not be deemed to be such a representation and warranty as to the
truth and accuracy of the fact specified in clause (c) of this Section, if the
aggregate outstanding principal amount of the Loans immediately after such Loan
is made will not exceed the aggregate outstanding principal amount thereof
immediately before such Loan is made, (ii) if the aggregate outstanding
principal amount of the Loans immediately after such Loan is made will not
exceed the aggregate outstanding principal amount thereof immediately before
such Loan is made, then (A) such Loan shall be deemed to be a representation
and warranty as to the truth and accuracy of the fact specified in clause (b)
of this Section determined as if the term "Default" appearing in such clause
(b) were instead the term "Event of Default" and (B) the representation
contained in the last sentence of Section 4.12 of the Amended and Restated
Credit Agreement shall when remade pursuant to this Section in connection with
such Loan be deemed to exclude the words "Default or", (iii) the
representation contained in the first sentence of Section 4.12 of the Amended
and Restated Credit Agreement shall when remade pursuant to this Section in
connection with such Loan be deemed to refer to "Restricted Subsidiaries"
instead of "Subsidiaries", (iv) any representation and warranty contained in
Article IV of the Amended and Restated Credit Agreement which by its terms is
made as to matters as of a specified date shall when remade pursuant to this
Section in connection with such Borrowing be deemed to be made as to matters as
of such specified date and not any later date, and (v) the representation
contained in Section 4.04(b) of the Amended and Restated Credit Agreement shall
when remade pursuant to this Section in connection with such Loan be deemed to
refer to the last day of the fiscal quarter of the Borrower most recently ended
prior to the date of such Loan as to which the Borrower shall have delivered
financial statements to the Bank pursuant to Section 5.01 of the Amended and
Restated Credit Agreement.
6
<PAGE> 7
Section 8. Increased Costs; Illegality. (a) If, after the date
hereof, the overall introduction of, change in, or change in the interpretation
or application of, any law, regulation, rule, or the compliance by the Bank
with any directive or request from any United States (including subdivisions)
or foreign governmental or regulatory authority or central bank (whether or not
having the force of law) imposes, deems applicable or modifies any requirement
applicable to the Bank or any of its property or operations (including, without
limitation, a requirement to make any deduction or withholding from any sum
paid or payable by the Borrower hereunder or which affects the Bank s capital
adequacy or the allocation of capital resources to its obligations, or any
imposition of changes in reserve requirements, excise taxes, non-United States
income taxes or monetary restraints) and, as a result, the cost to the Bank of
making or maintaining amounts available under this Agreement is increased, or
the Bank's return under this Agreement or on all or any of its capital is
reduced, or the Bank is, in its sole opinion, unable to obtain the rate of
return on all or any of its capital that it would have been able to achieve but
for its obligations hereunder and/or their performance, or any sum received or
receivable by the Bank under this Agreement is directly or indirectly reduced,
or the Bank directly or indirectly makes any payment or forgoes any interest or
other return on or calculated by reference to the amount of any sum received or
receivable by it under this Agreement, then the Bank shall promptly notify the
Borrower of such occurrence and the Borrower shall pay to the Bank on demand
such additional amounts which will, in the sole opinion of the Bank, compensate
the Bank for the effects of any such introduction or change (provided the
foregoing shall not include a tax imposed on the overall net income of the Bank
by the jurisdiction, including subdivisions, in which the Bank has its
principal office). A certificate of the Bank specifying the amount of
compensation payable by the Borrower pursuant to this Section 8 shall, in the
absence of manifest error, be conclusive.
(b) If the Bank shall determine that (i) it may not
lawfully continue to maintain and fund the Loans bearing interest at the LIBOR
Rate to maturity and shall so specify in a written notice to the Borrower, or
(ii) deposits in Dollars (in the applicable amounts) are not being offered in
the London Interbank market or that the LIBOR as determined by the Bank will
not adequately and fairly reflect the cost to the Bank of funding and
maintaining the Loans bearing interest at the LIBOR Rate and shall so specify
in a written notice to the Borrower, the Borrower shall immediately prepay in
full the then outstanding principal amount of the Loans bearing interest at the
LIBOR Rate, together with accrued interest thereon and any penalty arising from
such prepayment.
Section 9. Events of Default. Upon the occurrence of any of the
following specified events of default (each an "Event of Default"):
(a) the Borrower shall fail to pay when due any amount
payable hereunder or under the Note; or
(b) the Borrower shall fail to observe or perform any
covenant in this Agreement (other than those covered by clause (a) above) for
thirty days after the earlier of (i) the first day on which a Responsible
Officer (as defined in the Amended and Restated Credit Agreement) has knowledge
of such failure or (ii) written notice thereof has been given to the Borrower
by the Bank;
7
<PAGE> 8
or
(c) any representation, warranty, certification or
statement incorporated by reference in Section 6 or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or deemed
made); or
(d) an Event of Default under Section 6.01 of the Credit
Agreement shall occur and be continuing;
then, at the option of the Bank (but automatically in the case of any Event of
Default specified in the immediately preceding clause (d) which results from
the occurrence of an Event of Default specified in Section 6.01(g) or (h) of
the Amended and Restated Credit Agreement as incorporated herein), the
Commitment shall terminate and all amounts due under this Agreement and the
aggregate outstanding principal balance of, and all accrued, unpaid interest
on, the Loans shall become forthwith due and payable in full, without protest,
presentment, notice or demand, all of which are expressly waived by the
Borrower.
Section 10. Remedies, Other Matters.
(a) No failure or delay on the part of the Bank in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and are not inclusive of any rights or
remedies which the Bank or any subsequent holder(s) of the Note would otherwise
have.
(b) Upon the occurrence of a default hereunder, the Bank
is hereby authorized at any time or from time to time, without notice to the
Borrower, any such notification being expressly waived, to set-off and to
appropriate and to apply any and all deposits (general or special) and any
other indebtedness at any time held or owing by the Bank to or for the credit
or the account of the Borrower against and on account of any indebtedness of
the Borrower to the Bank hereunder.
(c) The descriptive headings of the several sections and
subsections of the Agreement are inserted for convenience only and shall not be
deemed to affect the meaning or construction of any provisions hereof.
(d) This Agreement or any provision hereof or document
referred to herein may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
(e) This Agreement will be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns, and, in particular,
8
<PAGE> 9
will inure to the benefit of the holders from time to time of the Note;
provided, however, that the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Bank. The Bank
shall have the right to sell participations in its interest hereunder or to
assign its interest hereunder. The Borrower agrees that any participant shall
be entitled to the benefits of Section 8 based on the circumstance of such
participant.
(f) This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all of which together constitute one and the same instrument.
(g) The Borrower agrees to indemnify, hold harmless and
defend the Bank against any claim, demand, action, suit, loss or liability
arising in any manner from any breach, inaction or omission of the Borrower, or
any of their officers, directors, employees, agents or affiliates, relating to
or otherwise in connection with this Agreement or the Note. The provisions of
this Section 10(g), and of Sections 8, 5(b) and 5(c), and shall survive the
repayment of the Loans and the termination of this Agreement.
(h) THIS AGREEMENT CONSTITUTES THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
(i) THIS AGREEMENT SHALL BE DELIVERED TO THE BANK IN
ATLANTA, GEORGIA (THE PLACE OF PERFORMANCE HEREUNDER), AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF GEORGIA. The
Borrower hereby expressly and irrevocably agrees to the exercise of personal
jurisdiction over it in any federal or state court of appropriate subject
matter jurisdiction in Atlanta, Georgia, in any suit or action to enforce
payment or performance or otherwise arising hereunder or under the Note. The
Borrower hereby irrevocably waives, to the fullest extent that it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding.
(j) Service of any and all process that may be served on
any party hereto in any suit, action or proceeding arising out of this
Agreement may be made to the address set forth below such party's signature
hereto and service properly made by first class mail, return receipt requested,
or delivered to such address shall be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
(k) If a Default occurs, the Borrower agrees to reimburse
the Bank for all expenses incurred by the Bank, including fees and
disbursements of counsel, in connection with such Default and collection and
other enforcement proceedings resulting therefrom, including expenses incurred
in enforcing this Agreement and the Note.
(l) The Borrower shall indemnify the Bank against any
transfer taxes,
9
<PAGE> 10
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Note.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed under seal by its duly authorized officer as of the
date first set forth above.
BORROWER:
CARMIKE CINEMAS, INC.
By: /s/ (SEAL)
--------------------------
Name:
Title: Vice President
Address:
10
<PAGE> 11
WACHOVIA BANK, N.A.
By: (SEAL)
--------------------------
Name:
Title:
Address:
11
<PAGE> 12
EXHIBIT A
NOTE
$30,000,000 Atlanta, Georgia
June 20, 1997
For value received, CARMIKE CINEMAS, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of WACHOVIA BANK,
N.A., a national banking association (the "Bank"), the principal sum of Thirty
Million and No/100 Dollars ($30,000,000), or such lesser amount as shall equal
the unpaid principal amount of each Loan made by the Bank to the Borrower
pursuant to the Loan Agreement referred to below, on the dates and in the
amounts provided in the Loan Agreement. The Borrower promises to pay interest
on the unpaid principal amount of this Note on the dates and at the rate or
rates provided for in the Loan Agreement. Interest on any overdue principal of
and, to the extent permitted by law, overdue interest on the principal amount
hereof shall bear interest at the rate provided for in the Loan Agreement. All
such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or
such other address as may be specified from time to time by the Bank.
All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Loan Agreement.
This Note is the Note referred to in the Loan Agreement dated
as of June 20, 1997 between the Borrower and the Bank (as the same may be
amended or modified from time to time, the "Loan Agreement"). Terms defined in
the Loan Agreement are used herein with the same meanings. Reference is made
to the Loan Agreement for provisions for the prepayment and the repayment
hereof and the acceleration of the maturity hereof.
The Borrower hereby waives presentment, demand, protest,
notice of demand, protest and nonpayment and any other notice required by law
relative hereto, except to the extent as otherwise may be expressly provided
for in the Loan Agreement.
The Borrower agrees, in the event that this note or any
portion hereof is collected by law or through an attorney at law, to pay all
reasonable costs of collection, including, without limitation, reasonable
attorneys' fees.
<PAGE> 13
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed under seal, by its duly authorized officer as of the day and year
first above written.
CARMIKE CINEMAS, INC.
By: /s/ (SEAL)
--------------------------
Title: Vice President
2
<PAGE> 14
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Type Amount Amount of
of Interest of Principal Maturity Notation
Date Interest(1) Rate Loan Repaid Date Made By
- ---- ---------- ---- ---- ------ ---- -------
<S> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
</TABLE>
__________________________________
(1) i.e. Base Rate or LIBOR Rate.
3
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
BETWEEN
CARMIKE CINEMAS, INC. AND
EASTWYNN THEATRES, INC.
AND
SHAREHOLDERS OF MORGAN CREEK THEATERS, INC.;
SHAREHOLDERS OF SB HOLDINGS, INC.; MEMBERS
OF RDL CONSULTING LIMITED LIABILITY COMPANY;
MORGAN CREEK THEATERS, INC.; SB HOLDINGS, INC.;
RDL CONSULTING LIMITED LIABILITY COMPANY;
AND FIRST INTERNATIONAL THEATRES
DATED JUNE 27, 1997
<PAGE> 2
THIS AGREEMENT is made this _____ day of ______________, 1997, by and
between CARMIKE CINEMAS, INC., a corporation organized and existing under the
laws of the State of Delaware (hereinafter "Carmike"), and EASTWYNN THEATRES,
INC., a corporation organized and existing under the laws of the State of
Alabama (collectively the "Purchaser"), and the undersigned shareholders of
MORGAN CREEK THEATERS, INC., a Delaware Corporation (the shareholders of Morgan
Creek Theaters, Inc. are hereinafter referred as "MCT"); the undersigned
shareholders of SB HOLDINGS, INC., a Delaware corporation (the shareholders of
SB Holdings, Inc. are hereinafter referred to as "SBH"); the members of RDL
CONSULTING LIMITED LIABILITY COMPANY, a Wyoming Limited Liability Company (the
members of RDL Consulting Limited Liability Company are hereinafter referred to
as "RDL"); MORGAN CREEK THEATERS, INC., a Delaware corporation (hereinafter
"MCTI"); SB HOLDINGS, INC., a Delaware corporation (hereinafter "SBHI"), and RDL
CONSULTING LIMITED LIABILITY COMPANY, a Wyoming Limited Liability Company
(hereinafter "RDLLLC") (MCT, SBH and RDL are collectively referred to herein as
"Sellers") .
WITNESSETH:
WHEREAS, First International Theatres is a joint venture organized and
existing under the laws of the State of Delaware ("Company"), and is engaged in
the operation of theatres for the exhibition of motion pictures in the states of
Arkansas, Kansas, Missouri, Nebraska and South Dakota; and
WHEREAS, MCTI owns a 39.5% joint venture interest in the Company (the
"MCTI Interest"), and MCT desires to exchange all of its MCTI stock for Carmike
Stock; and
WHEREAS, SBHI owns a 39.5% joint venture interest in the Company (the
"SBHI Interest"), and SBH desires to sell all of its SBHI stock to Purchaser for
cash; and
WHEREAS, RDLLLC owns a 21% joint venture interest in the Company (the
"RDLLLC Interest"), and RDL desires to sell all of its RDLLLC membership
interest to Purchaser for cash and Carmike Stock; and
WHEREAS, Purchaser desires to acquire 100% ownership interest in the
Company through acquisition of 100% ownership interest of MCTI, SBHI and RDLLLC
on the terms and conditions set forth herein; and
1
<PAGE> 3
WHEREAS, the parties hereto desire to make this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
in connection with the aforesaid exchange of MCTI's stock, and purchase and sale
of SBHI's stock and RDLLLC's membership interest.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, the parties hereto have agreed and do
hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall have the meanings set
forth below:
1.01. Affiliate - Any person, firm, corporation, partnership or
association controlling, controlled by or under common control with another
person, firm, corporation, partnership or association.
1.02. Agreement - This Agreement, including the Exhibits attached
hereto and the Schedules delivered pursuant hereto.
1.03. Balance Sheet - The consolidated balance sheet of the Company
as of 5/22/97.
1.04. Carmike Stock - The Class A common stock, $.03 par value of
Carmike Cinemas, Inc.(NYSE - "CKE").
1.05. Claim or Claims - Any demand, claim, action or cause of
action, assessment, loss, damage, liability, cost or expense, including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses.
1.06. Closing - The closing referred to in Section 2.02 hereof.
1.07. Closing Date - The date referred to in Section 2.02 hereof.
1.08. Code - The Internal Revenue Code of 1986, as amended.
1.09. Company - Unless the context otherwise requires, First
International Theatres.
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1.10. ERISA - The Employee Retirement Income Security Act of 1974,
as amended.
1.11. Financial Statements - (i) The Balance Sheet, (ii) audited
financial statements of the Company for years ended 1/2/97, 12/28/95 and
12/29/94, and (iii) theatre operating cash flow statements of Company as of and
for the years ended 1/2/97 and periods ended 5/8/97 and 5/2/96.
1.12. Guaranty - The unconditional guaranty of Morgan Creek
Productions, Inc. of the performance of MCT's, MCTI's and Company's obligations
hereunder in form substantially as set forth on Exhibit "A" attached hereto.
1.13. Holdback - The sum of Thirty-Nine Thousand Five Hundred and
00/100 Dollars ($39,500.00), to be retained by Purchaser.
1.14. Joint Venture Interest - The joint venture interest evidencing
complete ownership of the Company.
1.15. Letters of Credit - The Company's Letters of Credit as
described on Schedule 1.15 attached hereto.
1.16. MCTI - Morgan Creek Theatres, Inc., a Delaware corporation.
1.17. MCTI Balance Sheet - The unaudited balance sheet of MCTI as of
May 22, 1997.
1.18. MCTI Common Stock - The common stock, no par value, of MCTI.
1.19. MCTI Financial Statements - The financial statements of MCTI
and the MCTI Balance Sheet set forth on Schedule 4.02 A.
1.20. MCTI Shares - The total of 111 shares of the MCTI Common
Stock, constituting in the aggregate One Hundred percent (100%) of the issued
and outstanding MCTI Common Stock.
1.21. Permitted Title Exceptions - Easements and other non-material
encumbrances shown on title policies for the real property upon which the
Theatres are situate.
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1.22. Purchase Price - The amount determined and payable as provided
in Section 3.01.
1.23. RDLLLC - RDL Consulting Limited Liability Company, a Wyoming
limited liability company.
1.24. RDLLLC Balance Sheet - The unaudited balance sheet of RDLLLC
as of May 22, 1997.
1.25. RDLLLC Financial Statements - The financial statements and the
RDLLLC Balance Sheet set forth on Schedule 6.02 A.
1.26. RDLLLC Membership Interest - The limited liability company
membership interest of 100% of the members of RDLLLC.
1.27. SBHI - SB Holdings, Inc., a Delaware corporation.
1.28. SBHI Balance Sheet - The unaudited balance sheet of SBHI as of
May 22, 1997.
1.29. SBHI Common Stock - The common stock, $.01 par value, of SBHI.
1.30. SBHI Financial Statements - The financial statements set forth
on Schedule 5.02 A.
1.31. SBHI Shares - The total of 100 shares of the SBHI Common
Stock, constituting in the aggregate One Hundred percent (100%) of the issued
and outstanding SBHI Common Stock.
1.32. Schedules - Those Schedules referred to in this Agreement.
1.33. Shares - Collectively, the MCTI Shares, SBHI Shares, RDLLLC
Membership Interest and the Joint Venture Interest.
1.34. Subsidiary - Any corporation, partnership, trust or other
legal entity, 10% or more of the ownership, voting or beneficial interest in
which is owned or controlled directly or indirectly by MCTI, SBHI, RDLLLC,
and/or Company.
1.35. Theatres - The Theatres set forth on Schedule 1.32 hereof.
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1.36. Undisclosed Liabilities - Any liability or obligation of MCTI,
SBHI, RDLLLC and/or Company, whether liquidated or contingent, as of May 22,
1997, that is not fully reflected or reserved against in the Balance Sheet, the
MCTI Balance Sheet, SBHI Balance Sheet, or RDLLLC Balance Sheet or fully
disclosed in a Schedule, other than liabilities or obligations arising
subsequent to the Balance Sheet date incurred in the normal and ordinary course
of business and which would not violate the provisions of Section 7.13, or, had
they occurred subsequent to the signing of this Agreement and prior to the
Closing Date, would not have violated the provisions of Section 8.01.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.01. Agreement to Sell. For the consideration hereinafter provided
and subject to the terms and conditions herein set forth, on the Closing Date
the Sellers shall exchange, sell, assign, transfer and deliver to the Purchaser,
and the Purchaser shall exchange, purchase and acquire from the Sellers, that
portion of the MCTI Shares, SBHI Shares or RDLLLC Membership Interest shown
opposite his or her respective name below:
<TABLE>
<CAPTION>
Number of Shares or
Membership Interest
Company Seller To Be Sold
- -------------------- ------------------------ ----------------------
<S> <C> <C>
MCTI James G. Robinson 100 Shares
Gary Barber 11 Shares
SBHI HB Svenska Bio 100 Shares
RDLLLC Ron D. Leslie 95%
Juanita R. Leslie 5%
</TABLE>
At the Closing Date Sellers shall cause to be delivered to the
Purchaser the certificates representing that portion of the applicable Shares to
be sold by the Sellers hereunder, together with accompanying stock powers or
instruments of assignment, duly endorsed in blank for good transfer of such
Shares to the Purchaser or Purchaser's designee, with all necessary transfer
taxes and other revenue stamps acquired at Sellers' expense affixed thereto.
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2.02. Closing. The Closing of the purchase and sale of the Shares
and payment of the Purchase Price shall take place at the offices of Spencer
Fane Britt & Browne, LLP, Suite 1400, 1000 Walnut Street, Kansas City, Missouri
64106, at 10:00 a.m. on June 27, 1997, or at such other time as shall be
mutually agreeable to the parties hereto. In the event Closing does not take
place on or before 7/15/97, this Agreement shall terminate, and neither party
shall have any further liability hereunder.
ARTICLE III
PURCHASE PRICE AND OTHER PAYMENTS
3.01.
A. At the Closing, the Purchaser shall pay and deliver
to Sellers, against delivery of the Shares, in the following manner, the amount
determined as follows: The Purchase Price of the Shares shall be the amount
determined by taking $16,800,000.00 (the "Gross Purchase Price") and reducing
said amount by the actual amount of current liabilities and long-term debt of
the Company to be assumed or discharged at Closing by Purchaser, and increasing
said amount by the amount of current assets of the Company as said items are
shown on the Balance Sheet attached hereto as Exhibit "B".
B. The Purchase Price will be allocated to Sellers in
accordance with each Seller's Joint Venture Interest (the "Allocated Purchase
Price") as shown on Schedule 3.01B and will be reduced by the actual amount of
current liabilities and long-term debt as shown on each of MCTI, SBHI, and
RDLLLC's respective May 22, 1997 balance sheet. This amount will be increased by
the actual amount of current assets as shown on each of the MCTI, SBHI, and
RDLLLC respective May 22, 1997 balance sheets. The final result (the "Sellers'
Proceeds") will be the amount used to calculate amounts in Sections 3.01 C, 3.01
D, and 3.01 E.
C. Exchange of MCTI Shares. At the Closing, the
Purchaser shall deliver to MCT 122,477 shares of Carmike Stock in exchange for
delivery by MCT of the MCTI Shares. The number of shares of Carmike Stock to be
delivered to MCT at Closing has been determined based upon a value per share of
said Carmike Stock of $33.00. In the event that on the day prior to the Closing
Date, the closing price of Carmike Stock is less than $31.00 or more than
$35.00, the parties agree to adjust the number of shares of Carmike Stock to be
delivered to MCT to a
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mutually agreed upon amount. It is acknowledged that certain of such shares
shall be allocated to James G. Robinson and Barry Reardon in satisfaction of
certain obligations to them.
D. SBHI Shares. At the Closing, the Purchaser shall
deliver to SBH by wire transfer the portion of the Purchase Price allocable to
SBH, less the Holdback.
E. RDLLLC Membership Interest. At the Closing, Purchaser
shall deliver to RDL 6,509 shares of Carmike Stock, and shall wire transfer to
RDL the remainder of the portion of the Purchase Price allocable to RDL in cash
in exchange for delivery by RDL of the RDLLLC Membership Interest. The number of
shares of Carmike Stock to be delivered to RDL at Closing has been determined
based upon a value per share of said Carmike Stock of $33.00. In the event that
on the day prior to the Closing Date, the closing price of Carmike Stock is less
than $31.00 or more than $35.00, the parties agree to adjust the number of
shares of Carmike Stock to be delivered to RDL to a mutually agreed upon amount.
3.02. Post Closing Settlement for Undisclosed Liabilities.
Six Month Settlement. Within six (6) months from the Closing Date:
(i) MCT will pay to Purchaser 39.5% of any Undisclosed
Liabilities;
(ii) RDL will pay to Purchaser 21% of any Undisclosed
Liabilities; and
(iii) Purchaser will pay SBH the Holdback less 39.5% of any
Undisclosed Liabilities unless 39.5% of the Undisclosed Liabilities is greater
than the Holdback in which case SBH will pay to Purchaser 39.5% of the
Undisclosed Liabilities less the Holdback and SBHI shall have no further claim
to said Holdback.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MCT
MCT hereby represents and warrants to Purchaser as follows:
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4.01. Organization and Capitalization.
A. MCTI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. MCTI has no Subsidiary,
other than the Company. MCTI has all requisite corporate or other power and
authority to carry on its business, to own, lease or operate its properties in
the places where such business is now conducted and where such properties are
now owned, leased or operated.
B. MCTI's sole asset consists of its ownership of a 39.5% Joint
Venture Interest, and MCTI, at Closing, will have no liabilities whatsoever.
C. The authorized capital stock of MCTI consists of 10,000 shares
of common stock, of which 111 shares are outstanding, and have been duly
authorized, and are validly issued, fully paid and non-assessable. MCTI Common
Stock is not subject to any preemptive or other similar rights of any
shareholder, or any voting trust, shareholder agreements or other contracts
affecting the voting rights or transferability thereof, except as shown on
Schedule 4.01 C, and there are no options, warrants or other rights presently
outstanding for the purchase or acquisition of shares of the MCTI Common Stock.
4.02. Financial Statements.
A. Schedule 4.02 A contains the MCTI Financial Statements.
B. The MCTI Financial Statements (i) are prepared from and in
accordance with the books and records of MCTI in accordance with generally
accepted accounting principles consistently applied; (ii) present fairly in all
material respects the financial condition and results of operation of MCTI as of
the respective dates indicated for the respective periods indicated; and (iii)
reflect adequate accruals for all material liabilities and reasonably
anticipated losses, except that the unaudited MCTI Financial Statements lack
footnotes.
C. There is no known basis for the assertion against MCTI of any
Undisclosed Liability.
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4.03. Taxes.
A. Schedule 4.03 (i) lists the jurisdictions in which MCTI has
filed federal and state income tax returns during the two (2) fiscal years ended
1995, and (ii) with respect to all fiscal years and periods, and all
jurisdictions in which MCTI has filed federal and state income tax returns which
have been examined by the Internal Revenue Service or any state agency with
respect to any period, lists all open and unsettled deficiencies, if any,
proposed as a result of all such examinations and any waivers of the applicable
statutes of limitations with respect to years under examination or proposed to
be under examination, and listing any powers of attorney given by MCTI
empowering the person, firm or corporation named therein to act on behalf of
MCTI in connection with tax matters. Except as otherwise set forth on Schedule
4.03, any and all prior audits or investigations by the Internal Revenue Service
or any state agency have been settled, and such settlements have been paid in
full or properly reflected on the MCTI Financial Statements. Except as set forth
on Schedule 4.03, MCTI has not received notice of, any pending or contemplated
investigation or audit by the Internal Revenue Service or any state agency
concerning any fiscal year or period ended prior to the date hereof.
B. As of the date hereof, MCTI has filed, and as of the Closing
Date MCTI will have filed, all federal and foreign income tax returns and all
state, county and local income, franchise, property, sales, use and other tax
returns required to be filed by MCTI in each taxing jurisdiction in which MCTI
operates, has property or is otherwise subject to taxation, taking into account
any extensions of the filing deadlines which have been validly granted to MCTI,
and such returns are and will be true and correct in all material respects, and
MCTI has paid or accrued on the MCTI Financial Statements all federal and state
income taxes and all state, county and local income, franchise, property, sales,
use and other taxes and assessments (including penalties and interest in respect
thereof, if any) that have become or are due with respect to any period ended on
or prior to the May 22, 1997 whether shown on such returns or not.
C. Schedule 4.03 C contains a true and correct copy of MCTI's
income tax returns for tax years ended 1994 and 1995.
4.04. Real or Personal Property. MCTI does not own or lease any Real
or Personal Property.
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4.05. Defaults. Except as set forth on Schedule 4.05, there is no
default or claim of purported or alleged default, or, to the knowledge of MCT or
MCTI, state of facts (including any facts which will exist as a result of the
consummation of and performance under this Agreement), which, with notice or
lapse of time, or both, would constitute a material default in any obligation on
the part of MCTI to be performed under any material contract or agreement to
which MCTI is a party, and MCTI has in all respects performed, and on the
Closing Date shall have performed, all material obligations required to be
performed by MCTI under any such material contract or agreement to which it is a
party; and MCTI has not waived any material right under any such material
contract or agreement.
4.06. Corporate Records.
A. Except as set forth on Schedule 4.06, on or before the Closing
Date, MCTI shall provide to Purchaser (i) copies of the Articles of
Incorporation of MCTI as in effect on the date hereof and as in effect on the
Closing Date, certified by the appropriate state officials; (ii) copies of all
By-Laws of MCTI certified by the Secretary or an Assistant Secretary; and (iii)
copies of all partnership and joint venture agreements to which MCTI is a party,
including any amendments thereto, certified by the Secretary or an Assistant
Secretary.
B. MCTI has provided Purchaser with true, correct and complete
copies of or originals of the minutes of all meetings, or consent actions of the
shareholders and directors of MCTI, and said minutes reflect all corporate
actions taken by the directors and shareholders, or any committee of the Board
of Directors of MCTI.
4.07. Litigation. Except as set forth on Schedule 4.07, there are no
actions, suits or proceedings (whether or not purportedly on behalf of MCTI), or
to the knowledge of MCT or MCTI, investigations to which MCTI is a party or to
which any of its assets or properties is or may be subject, pending or to MCT or
MCTI's knowledge threatened against or affecting MCTI or any of its assets or
properties, at law, in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
4.08. Compliance with Laws. Except to the extent disclosed on
Schedule 4.08, (i) MCTI has not been notified nor is
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any of its management aware that MCTI has failed to comply in any respect with,
or is in default in any respect under, any laws, ordinances, requirements,
regulations or orders applicable to its business, and (ii) MCTI is not subject
to any judgment, order, writ, injunction, or decree that adversely affects in a
material way, or might in the future reasonably be expected to adversely affect
in a material way, its business, operations, prospects, properties, assets or
condition, financial or otherwise. MCTI is not now and on the Closing Date will
not be in default concerning any order, writ, injunction or decree of any
federal, state, municipal court or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which default
would have a material adverse effect on the financial condition of MCTI, and to
MCTI's knowledge, there is no investigation pending or threatened against or
affecting MCTI by any state or federal governmental agency, department or
instrumentality.
4.09. Absence of Changes. Since May 22, 1997, and except for the
transactions contemplated by this Agreement, and satisfaction of debt to James
G. Robinson, there has not been any transaction or occurrence in which MCTI has:
A. Issued or delivered or agreed to issue or deliver any stock or
other securities of MCTI (whether stock, bonds, debentures or other corporate
securities) or granted, or agreed to grant any options or rights to purchase any
securities of MCTI, or borrowed, or agreed to borrow any funds;
B. Incurred or knowingly become subject to, or agreed to incur or
become subject to, any obligation or liability (absolute or contingent);
C. Discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities;
D. Other than to accomplish the distributions contemplated by
Section 8.02, declared, set aside or made, or agreed to declare, set aside or
make any payments of dividends or any distribution to shareholders, or
purchased, redeemed or otherwise acquired, directly or indirectly, or agreed to
purchase, redeem or acquire, any shares of stock or other securities;
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E. Mortgaged, pledged or subjected to a lien, charge or any other
encumbrance, or agreed so to do, any of its assets, tangible or intangible,
except the lien of current real and personal property taxes;
F. Sold, assigned, transferred or agreed so to do, any of its
tangible assets, or cancelled, agreed to cancel, prepaid or agreed to prepay any
debts or claims;
G. Sold, assigned or transferred any trademarks, trade names,
copyrights or other intangible assets;
H. Suffered any damage, destruction or loss, whether or not
covered by insurance, which materially adversely affected the properties or
business of MCTI, or waived any rights of substantial value;
I. Increased, or agreed to increase, the rate of compensation
payable or to become payable by it to any of its officers, directors, members,
partners, employees or agents over the rate being paid to them at 4/30/97;
J. Terminated or amended any material contract, agreement,
license or other instrument to which it is a party or suffered any loss or
termination or threatened loss or termination, of any material customer or
supplier;
K. Through negotiation or otherwise, made any commitment or
incurred any liability or obligation, enforceable or not, to any labor
organization;
L. Made or agreed to make any accrual or arrangement for or
payment of any bonuses or special compensation of any kind to any officer,
director, shareholder, employee or agent;
M. Directly or indirectly paid or made a commitment to pay any
severance or termination pay to any officer, director, shareholder, employee or
agent;
N. Introduced any new method of management, operation or
accounting that would have a material adverse effect on its business or on any
of the assets, properties or rights applicable thereto;
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O. Reclassified its shares of capital stock into a different
number of shares, membership interest or partnership interest;
P. Made or agreed to make any charitable contributions (other
than as accrued on the MCTI Financial Statements, or incurred or agreed to incur
any nonbusiness expenses;
Q. Paid or agreed to pay any service charges, interest charges or
payments or investment charges or similar fees to any of the Sellers or Company
or any Affiliate of the Sellers or Company or entered into any other
transactions;
R. Experienced any other event or condition materially or
adversely affecting the business or properties of MCTI.
4.10. Certain Transactions or Arrangements. Schedule 4.10 lists any
officer, director, shareholder, partner or member of MCTI or any Affiliate or
relative closer than first cousin of any such officer, director, shareholder,
partner or member who is presently, directly or indirectly, a party to any
transaction with MCTI and contains a brief description of each transaction,
including without limitation:
A. Any contract, agreement, understanding, commitment or other
arrangement providing for the employment of, furnishing services to or by,
furnishing access to real or personal property to or by, rental of real or
personal property from or otherwise requiring payments or delivery of value to
any such officer, director, shareholder, member, partner, Affiliate or relative
of such persons; and
B. Any loans or advances to or from MCTI, giving for each the
principal amount outstanding, interest rate, maturity date and security
therefor.
4.11. Brokers and Finders. Neither MCTI nor any of its officers,
directors, partners, members, or employees have employed any broker, agent or
finder or incurred any liability for any brokerage fees, agent's commissions or
finder's fees concerning the transactions contemplated hereby, except for any
such fees and commissions which are payable as provided by Section 15.06 hereof.
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4.12. Labor Matters. MCTI has no employees.
4.13. Power of Attorney. MCTI has not given any power of attorney
regarding its business, properties or assets, except for powers of attorney
given in connection with tax matters as listed in Schedule 4.03.
4.14. Title to Shares. MCT has or will have at the Closing Date good
title to the Shares to be sold by it pursuant to the Agreement; and has or will
have at the Closing Date full legal right, power and authority to sell, assign
and transfer the Shares to be sold by it to the Purchaser free and clear of all
claims, liens, encumbrances or security interests, whatsoever.
4.15. Employee Benefit Plans. MCTI has no employee benefit plans,
employee pension benefit plans, multi-employer plans, or welfare plans, as same
are defined in Section 3 (1) (2) and (3), or 4001 (a) (3) of ERISA covering
employees or former employees of MCTI.
4.16. Governmental Approval and Other Consents.
A. Except as set forth in Schedule 4.16A, MCTI has all
governmental approvals, authorizations, permits and licenses required to permit
the operation of its business as presently conducted and the absence of which
would adversely affect in a material way the operations of its business.
B. Except for requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no authorization, consent or approval of, or
designation, declaration or filing with, any public body, governmental
authority, bureau or agency or other persons or entities on the part of MCTI is
necessary or required as a condition to the validity of this Agreement and the
consummation of the transactions contemplated hereby.
4.17. Authority. This Agreement constitutes the valid and binding
obligation of MCTI, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws affecting creditors' rights generally, and to general
principles of equity, or as may be modified by a court of equity in an action
for specific performance. Except as set forth in Schedule 4.17, neither the
execution and delivery of this Agreement by MCTI nor the consummation of the
transactions contemplated hereby will violate any provisions of the Articles of
Incorporation or By-Laws of MCTI, or to the knowledge of MCTI,
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any law or any order of any court or any governmental unit to which MCTI is
subject, nor will such execution, delivery or consummation conflict with, result
in a breach of or constitute a material default under any indenture, mortgage,
agreement, or other instrument to which the MCTI is a party or by which it is
bound, or result in the creation of any lien, charge or encumbrance upon the
Shares or any of MCTI's assets or properties, or result in the acceleration of
the maturity of any payment date of any of MCTI's obligations, or increase or
materially and adversely affect the obligations of MCTI thereunder.
4.18. Banks. Schedule 4.18 lists all banks or other financial
institutions with which MCTI has an account, line of credit or safe deposit box
and the account numbers thereof and names of persons authorized to act in
connection therewith.
4.19. Accuracy of Information. No representation or warranty of, or
any information provided to Purchaser by MCTI in this Agreement or in any
certificate or Schedule furnished by MCTI pursuant hereto, knowingly contains
or, on the Closing Date, will knowingly contain any untrue statement of a
material fact, or knowingly omits, or on the Closing Date, will knowingly omit
to state any material fact necessary in order to make the statements contained
therein not misleading. True copies of all deeds, title insurance policies,
mortgages, indentures, notes, leases, agreements, plans, contracts and other
instruments listed on or referred to, or otherwise related to any item referred
to, in the Schedules delivered or furnished to the Purchaser by MCTI pursuant to
this Agreement have been delivered to or have been made available or will, upon
request, be made available for inspection by the Purchaser. Purchaser shall be
entitled to rely upon the accuracy of all such written information, in the
preparation of its filings with the Securities and Exchange Commission. MCTI
shall immediately notify Purchaser of any inaccuracies or omissions in any of
such information previously supplied to Purchaser.
4.20. Claims. Except as set forth on Schedule 4.20, and except for
Claims arising under or in connection with this Agreement, MCTI does not have,
and on the Closing Date will not have, any Claim of any nature, whether asserted
or unasserted, against Purchaser or Company.
4.21. Disclaimer of Other Representations and Warranties. Except as
set forth in this Article IV, MCT makes no
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representation or warranty, express or implied, at law or at equity, in respect
of MCTI or Company, or any of their assets, liabilities, or operations, and any
such other representations or warranties are hereby expressly disclaimed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SBH
SBH hereby represents and warrants to Purchaser as follows:
5.01. Organization and Capitalization.
A. SBHI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. SBHI has no Subsidiary,
other than the Company. SBHI has all requisite corporate or other power and
authority to carry on its business, to own, lease or operate its properties in
the places where such business is now conducted and where such properties are
now owned, leased or operated.
B. SBHI's sole asset consists of its ownership of a 39.5% Joint
Venture Interest, and SBHI had no liabilities whatsoever.
C. The authorized capital stock of SBHI consists of 1,000 shares
of common stock, of which 100 shares are outstanding, and have been duly
authorized, and are validly issued, fully paid and non-assessable. SBHI Common
Stock is not subject to any preemptive or other similar rights of any
shareholder, or any voting trust, shareholder agreements or other contracts
affecting the voting rights or transferability thereof, except as shown on
Schedule 5.01 C, and there are no options, warrants or other rights presently
outstanding for the purchase or acquisition of shares of the SBHI Common Stock.
5.02. Financial Statements.
A. Schedule 5.02 A contains the SBHI Financial Statements.
B. The SBHI Financial Statements (i) are not prepared from and in
accordance with the books and records of SBHI in accordance with generally
accepted accounting principles consistently applied, but are prepared on an
income tax basis of accounting; (ii) present fairly in all material respects the
financial condition and results of operation, on the income tax
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basis of accounting, of SBHI as of the respective dates indicated for the
respective periods indicated; and (iii) reflect adequate accruals for all
material liabilities and reasonably anticipated losses, except that the
unaudited SBHI Financial Statements lack footnotes.
C. There is no known basis for the assertion against SBHI of any
Undisclosed Liability.
5.03. Taxes.
A. Schedule 5.03 (i) lists the jurisdictions in which SBHI has
filed federal and state income tax returns during the two (2) fiscal years ended
1995, and (ii) with respect to all fiscal years and periods, and all
jurisdictions in which SBHI has filed federal and state income tax returns which
have been examined by the Internal Revenue Service or any state agency with
respect to any period, lists all open and unsettled deficiencies, if any,
proposed as a result of all such examinations and any waivers of the applicable
statutes of limitations with respect to years under examination or proposed to
be under examination, and listing any powers of attorney given by SBHI
empowering the person, firm or corporation named therein to act on behalf of
SBHI in connection with tax matters. Except as otherwise set forth on Schedule
5.03, any and all prior audits or investigations by the Internal Revenue Service
or any state agency have been settled, and such settlements have been paid in
full or properly reflected on the SBHI Financial Statements. Except as set forth
on Schedule 5.03, SBHI has not received written notice of, any pending or
contemplated investigation or audit by the Internal Revenue Service or any state
agency concerning any fiscal year or period ended prior to the date hereof.
B. Except as disclosed on Schedule 5.03, as of the date hereof,
SBHI has filed, and as of the Closing Date SBHI will have filed, all federal and
foreign income tax returns and all state, county and local income, franchise,
property, sales, use and other tax returns required to be filed by SBHI in each
taxing jurisdiction in which SBHI operates, has property or is otherwise subject
to taxation, taking into account any extensions of the filing deadlines which
have been validly granted to SBHI, and such returns are and will be true and
correct in all material respects. SBHI has paid or accrued on the SBHI Financial
Statements all federal and state income taxes and all state, county and local
income, franchise, property, sales, use and
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other taxes and assessments (including penalties and interest in respect
thereof, if any) that have become or are due with respect to any period ended on
or prior to 5/22/97 whether shown on such returns or not.
C. Schedule 5.03 C contains a true and correct copy of SBHI's
income tax returns for tax years ended 1994 and 1995.
5.04. Real or Personal Property. SBHI does not directly own or lease
any Real or Personal Property.
5.05. Defaults. Except as set forth on Schedule 5.05, there is no
default or claim of purported or alleged default, or, to the knowledge of SBH or
SBHI, state of facts (including any facts which will exist as a result of the
consummation of and performance under this Agreement), which, with notice or
lapse of time, or both, would constitute a material default in any obligation on
the part of SBHI to be performed under any material contract or agreement to
which SBHI is a party, and SBHI has in all respects performed, and on the
Closing Date shall have performed, all material obligations required to be
performed by SBHI under any such material contract or agreement to which it is a
party; and SBHI has not waived any material right under any such material
contract or agreement.
5.06. Corporate Records.
A. Except as set forth on Schedule 5.06, on or before the Closing
Date, SBHI shall provide to Purchaser (i) copies of the Certificate of
Incorporation of SBHI as in effect on the date hereof and as in effect on the
Closing Date, certified by the appropriate state officials; (ii) copies of all
By-Laws of SBHI certified by the Secretary or an Assistant Secretary; and (iii)
copies of all partnership and joint venture agreements to which SBHI is a party,
including any amendments thereto, certified by the Secretary or an Assistant
Secretary.
B. SBHI has provided Purchaser with true, correct and complete
copies of or originals of the minutes of all meetings, or consent actions of the
shareholders and directors of SBHI, and said minutes reflect all corporate
actions taken by the directors and shareholders, or any committee of the Board
of Directors of SBHI.
5.07. Litigation. Except as set forth on Schedule 5.07, there are no
actions, suits or proceedings (whether or not
18
<PAGE> 20
purportedly on behalf of SBHI), or to the knowledge of SBH or SBHI,
investigations to which SBHI is a party or to which any of its assets or
properties is or may be subject, pending or to SBH or SBHI's knowledge
threatened against or affecting SBHI or any of its assets or properties, at law,
in equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
5.08. Compliance with Laws. Except to the extent disclosed on
Schedule 5.08, (i) SBHI has not been notified nor is any of its management aware
that SBHI has failed to comply in any respect with, or is in default in any
respect under, any laws, ordinances, requirements, regulations or orders
applicable to its business, and (ii) SBHI is not subject to any judgment, order,
writ, injunction, or decree that adversely affects in a material way, or might
in the future reasonably be expected to adversely affect in a material way, its
business, operations, prospects, properties, assets or condition, financial or
otherwise. SBHI is not now and on the Closing Date will not be in default
concerning any order, writ, injunction or decree of any federal, state,
municipal court or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which default would have a
material adverse effect on the financial condition of SBHI, and to SBHI's
knowledge, there is no investigation pending or threatened against or affecting
SBHI by any state or federal governmental agency, department or instrumentality.
5.09. Absence of Changes. Since May 22, 1997, and except for the
transactions contemplated by this Agreement and Section 8.02, there has not been
any transaction or occurrence in which SBHI has:
A. Issued or delivered or agreed to issue or deliver any stock or
other securities of SBHI (whether stock, bonds, debentures or other corporate
securities) or granted, or agreed to grant any options or rights to purchase any
securities of SBHI, or borrowed, or agreed to borrow any funds;
B. Incurred or knowingly become subject to, or agreed to incur or
become subject to, any obligation or liability (absolute or contingent);
19
<PAGE> 21
C. Discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities;
D. Declared, set aside or made, or agreed to declare, set aside
or make any payments of dividends or any distribution to shareholders, or
purchased, redeemed or otherwise acquired, directly or indirectly, or agreed to
purchase, redeem or acquire, any shares of stock or other securities;
E. Mortgaged, pledged or subjected to a lien, charge or any other
encumbrance, or agreed so to do, any of its assets, tangible or intangible,
except the lien of current real and personal property taxes;
F. Sold, assigned, transferred or agreed so to do, any of its
tangible assets, or cancelled, agreed to cancel, prepaid or agreed to prepay any
debts or claims;
G. Sold, assigned or transferred any trademarks, trade names,
copyrights or other intangible assets;
H. Suffered any damage, destruction or loss, whether or not
covered by insurance, which materially adversely affected the properties or
business of SBHI, or waived any rights of substantial value;
I. Increased, or agreed to increase, the rate of compensation
payable or to become payable by it to any of its officers, directors, members,
partners, employees or agents over the rate being paid to them at 5/22/97;
J. Terminated or amended any material contract, agreement,
license or other instrument to which it is a party or suffered any loss or
termination or threatened loss or termination, of any material customer or
supplier;
K. Through negotiation or otherwise, made any commitment or
incurred any liability or obligation, enforceable or not, to any labor
organization;
L. Made or agreed to make any accrual or arrangement for or
payment of any bonuses or special compensation of any kind to any officer,
director, shareholder, employee or agent;
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<PAGE> 22
M. Directly or indirectly paid or made a commitment to pay any
severance or termination pay to any officer, director, shareholder, employee or
agent;
N. Introduced any new method of management, operation or
accounting that would have a material adverse effect on its business or on any
of the assets, properties or rights applicable thereto;
O. Reclassified its shares of capital stock into a different
number of shares, membership interest or partnership interest;
P. Made or agreed to make any charitable contributions (other
than as accrued on the SBHI Financial Statements) or incurred or agreed to incur
any nonbusiness expenses;
Q. Paid or agreed to pay any service charges, interest charges or
payments or investment charges or similar fees to any of the Sellers or Company
or any Affiliate of the Sellers or Company or entered into any other
transactions;
R. Experienced any other event or condition materially adversely
affecting the business or properties of SBHI, other than general economic
conditions.
5.10. Certain Transactions or Arrangements. Schedule 5.10 lists any
officer, director, shareholder, partner or member of the SBHI or Company or any
Affiliate or relative closer than first cousin of any such officer, director,
shareholder, partner or member who is presently, directly or indirectly, a party
to any transaction with SBHI or Company and contains a brief description of each
transaction, including without limitation:
A. Any contract, agreement, understanding, commitment or other
arrangement providing for the employment of, furnishing services to or by,
furnishing access to real or personal property to or by, rental of real or
personal property from or otherwise requiring payments or delivery of value to
any such officer, director, shareholder, member, partner, Affiliate or relative
of such persons; and
B. Any loans or advances to or from SBHI or Company, giving for
each the principal amount outstanding, interest rate, maturity date and security
therefor.
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5.11. Brokers and Finders. Neither SBHI nor any of its officers,
directors, partners, members, or employees have employed any broker, agent or
finder or incurred any liability for any brokerage fees, agent's commissions or
finder's fees concerning the transactions contemplated hereby, except for any
such fees and commissions which are payable as provided by Section 15.06 hereof.
5.12. Labor Matters. SBHI has no employees.
5.13. Power of Attorney. SBHI has not given any power of attorney
regarding its business, properties or assets, except for powers of attorney
given in connection with tax matters as listed in Schedule 5.03.
5.14. Title to Shares. SBH has or will have at the Closing Date good
title to the Shares to be sold by it pursuant to the Agreement; and has or will
have at the Closing Date full legal right, power and authority to sell, assign
and transfer the Shares to be sold by it to the Purchaser free and clear of all
claims, liens, encumbrances or security interests, whatsoever.
5.15. Employee Benefit Plans. SBHI has no employee benefit plans,
employee pension benefit plans, multi-employer plans, or welfare plans, as same
are defined in Section 3 (1) (2) and (3), or 4001 (a) (3) of ERISA, covering
employees or former employees of SBHI.
5.16. Governmental Approval and Other Consents.
A. Except as set forth in Schedule 5.16A, SBHI has all
governmental approvals, authorizations, permits and licenses required to permit
the operation of its business as presently conducted and the absence of which
would adversely affect in a material way the operations of its business.
B. Except for requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no authorization, consent or approval of, or
designation, declaration or filing with, any public body, governmental
authority, bureau or agency or other persons or entities on the part of SBHI is
necessary or required as a condition to the validity of this Agreement and the
consummation of the transactions contemplated hereby.
22
<PAGE> 24
5.17. Authority. This Agreement constitutes the valid and binding
obligation of SBHI, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws affecting creditors' rights generally, and to general
principles of equity, or as may be modified by a court of equity in an action
for specific performance. Except as set forth in Schedule 5.17, neither the
execution and delivery of this Agreement by SBHI nor the consummation of the
transactions contemplated hereby will violate any provisions of the Articles of
Incorporation or By-Laws of SBHI, or to the knowledge of SBHI, any law or any
order of any court or any governmental unit to which SBHI is subject, nor will
such execution, delivery or consummation conflict with, result in a breach of or
constitute a material default under any indenture, mortgage, agreement, or other
instrument to which the SBHI is a party or by which it is bound, or result in
the creation of any lien, charge or encumbrance upon the Shares or any of SBHI's
assets or properties, or result in the acceleration of the maturity of any
payment date of any of SBHI's obligations, or increase or materially and
adversely affect the obligations of SBHI thereunder.
5.18. Banks. Schedule 5.18 lists all banks or other financial
institutions with which SBHI has an account, line of credit or safe deposit box
and the account numbers thereof and names of persons authorized to act in
connection therewith.
5.19. Accuracy of Information. No representation or warranty of, or any
information provided to Purchaser by SBHI in this Agreement or in any
certificate or Schedule furnished by SBHI pursuant hereto, knowingly contains
or, on the Closing Date, will knowingly contain any untrue statement of a
material fact, or knowingly omits, or on the Closing Date, will knowingly omit
to state any material fact necessary in order to make the statements contained
therein not misleading. True copies of all deeds, title insurance policies,
mortgages, indentures, notes, leases, agreements, plans, contracts and other
instruments listed on or referred to, or otherwise related to any item referred
to, in the Schedules delivered or furnished to the Purchaser by SBHI pursuant to
this Agreement have been delivered to or have been made available or will, upon
request, be made available for inspection by the Purchaser. Purchaser shall be
entitled to rely upon the accuracy of all such written information, in the
preparation of its filings with the Securities and Exchange Commission. SBHI
shall immediately notify Purchaser of any
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<PAGE> 25
inaccuracies or omissions in any of such information previously supplied to
Purchaser.
5.20. Claims. Except as set forth on Schedule 5.20, and except for
Claims arising under or in connection with this Agreement, SBHI does not have,
and on the Closing Date will not have, any Claim of any nature, whether asserted
or unasserted, against Purchaser or Company.
5.21. Disclaimer of Other Representations and Warranties. Except as
set forth in this Article V, SBH makes no representation or warranty, express or
implied, at law or at equity, in respect of SBHI or Company, or any of their
assets, liabilities, or operations, and any such other representations or
warranties are hereby expressly disclaimed.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF RDL
RDL hereby represents and warrants to Purchaser as follows:
6.01. Organization and Capitalization
A. RDLLLC is a Wyoming limited liability company, which is
validly existing and in good standing under the laws of the State of Wyoming.
RDLLLC has all requisite limited liability company or other power and authority
to carry on its business, to own, lease or operate its properties in the places
where such business is now conducted and where such properties are now owned,
leased or operated.
B. RDLLLC's sole asset consists of its ownership of a 21% Joint
Venture Interest, and RDLLLC has no liabilities whatsoever, except for a bank
loan of approximately $380,000.00, which is secured by a pledge of all the
Membership Interest of RDLLLC, said loan to be satisfied by RDLLLC at or prior
to Closing, or the Purchase Price payable to RDLLLC shall be reduced thereby.
C. The Members of RDLLLC are as set forth hereinbelow:
RON D. LESLIE
JUANITA R. LESLIE
D. All Membership Interests have been duly authorized and are
validly issued, fully paid and non-assessable. At the Closing, the RDLLLC
Membership Interest will not be subject to
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<PAGE> 26
any preemptive or other similar rights of any Member, or any voting trust,
membership agreements or other contracts affecting the voting rights or
transferability thereof, except as shown on Schedule 6.01 D, and there are no
options or other rights presently outstanding for the purchase or acquisition of
membership interest in RDLLLC.
6.02. Financial Statements.
A. Schedule 6.02 A contains the RDLLLC Financial
Statements.
B. The RDLLLC Financial Statements (i) are prepared from
and in accordance with the books and records of RDLLLC in accordance with
generally accepted accounting principles consistently applied; (ii) present
fairly in all material respects the financial condition and results of operation
of RDLLLC as of the respective dates indicated for the respective periods
indicated; and (iii) reflect adequate accruals for all material liabilities and
reasonably anticipated losses, except that the unaudited RDLLLC Financial
Statements lack footnotes.
C. There is no basis for the assertion against RDLLLC of
any Undisclosed Liability.
6.03. Taxes.
A. Schedule 6.03 (i) lists the jurisdictions in which
RDLLLC has filed federal and state income tax returns during the two (2) fiscal
years ended 1995, and (ii) with respect to all fiscal years and periods, and all
jurisdictions in which RDLLLC has filed federal and state income tax returns
which have been examined by the Internal Revenue Service or any state agency
with respect to any period, lists all open and unsettled deficiencies, if any,
proposed as a result of all such examinations and any waivers of the applicable
statutes of limitations with respect to years under examination or proposed to
be under examination, and listing any powers of attorney given by RDLLLC
empowering the person, firm or corporation named therein to act on behalf of
RDLLLC in connection with tax matters. Except as otherwise set forth on Schedule
6.03, any and all prior audits or investigations by the Internal Revenue Service
or any state agency have been settled, and such settlements have been paid in
full or properly reflected on the RDLLLC Financial Statements. Except as set
forth on Schedule 6.03, RDLLLC has not received notice of, any pending or
contemplated investigation or audit by
25
<PAGE> 27
the Internal Revenue Service or any state agency concerning any fiscal year or
period ended prior to the date hereof.
B. As of the date hereof, RDLLLC has filed, and as of the Closing
Date RDLLLC will have filed, all federal and foreign income tax returns and all
state, county and local income, franchise, property, sales, use and other tax
returns required to be filed by RDLLLC in each taxing jurisdiction in which
RDLLLC operates, has property or is otherwise subject to taxation, taking into
account any extensions of the filing deadlines which have been validly granted
to RDLLLC, and such returns are and will be true and correct in all material
respects, and RDLLLC has paid or accrued on the RDLLLC Financial Statements all
federal and state income taxes and all state, county and local income,
franchise, property, sales, use and other taxes and assessments (including
penalties and interest in respect thereof, if any) that have become or are due
with respect to any period ended on or prior to 5/22/97 whether shown on such
returns or not.
C. Schedule 6.03 C contains a true and correct copy of RDLLLC's
income tax returns for tax years ended 1994 and 1995.
6.04. Real or Personal Property. RDLLLC does not own or lease any
Real or Personal Property.
6.05. Defaults. Except as set forth on Schedule 6.05, there is no
default or claim of purported or alleged default, or, to the knowledge of RDL or
RDLLLC, state of facts (including any facts which will exist as a result of the
consummation of and performance under this Agreement), which, with notice or
lapse of time, or both, would constitute a material default in any obligation on
the part of RDLLLC to be performed under any material contract or agreement to
which RDLLLC is a party, and RDLLLC has in all respects performed, and on the
Closing Date shall have performed, all material obligations required to be
performed by RDLLLC under any such material contract or agreement to which it is
a party; and RDLLLC has not waived any material right under any such material
contract or agreement.
6.06. Limited Liability Company Records.
A. Except as set forth on Schedule 6.06, on or before the Closing
Date, RDLLLC shall provide to Purchaser (i) copies of the Articles of
Organization of RDLLLC, as in effect on the date hereof and as in effect on the
Closing Date, certified by the appropriate state officials; (ii) copies of the
RDLLLC Operating
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Agreement, certified by a Member; and (iii) copies of all partnership and joint
venture agreements to which RDLLLC is a party, including any amendments thereto,
certified by a Member.
B. RDLLLC has provided Purchaser with true, correct and complete
copies of or originals of minutes of all meetings of the Members, and said
minutes reflect all actions taken by the Members.
6.07. Litigation. Except as set forth on Schedule 6.07, there are no
actions, suits or proceedings (whether or not purportedly on behalf of RDLLLC),
or to the knowledge of RDL or RDLLLC, investigations to which RDLLLC is a party
or to which any of its assets or properties is or may be subject, pending or to
RDL or RDLLLC's knowledge threatened against or affecting RDLLLC or any of its
assets or properties, at law, in equity, or before any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
6.08. Compliance with Laws. Except to the extent disclosed on Schedule
6.08, (i) RDLLLC has not been notified nor is any of its management aware that
RDLLLC has failed to comply in any respect with, or is in default in any
respect under, any laws, ordinances, requirements, regulations or orders
applicable to its business, and (ii) RDLLLC is not subject to any judgment,
order, writ, injunction, or decree that adversely affects in a material way, or
might in the future reasonably be expected to adversely affect in a material
way, its business, operations, prospects, properties, assets or condition,
financial or otherwise. RDLLLC is not now and on the Closing Date will not be
in default concerning any order, writ, injunction or decree of any federal,
state, municipal court or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which default would
have a material adverse effect on the financial condition of RDLLLC, and to
RDLLLC's knowledge, there is no investigation pending or threatened against or
affecting RDLLLC by any state or federal governmental agency, department or
instrumentality.
6.09. Absence of Changes. Since May 22, 1997, except for satisfaction
of loans to Hillcrest Bank which will be satisfied by RDL at or prior to
Closing, and except for the transactions contemplated by this Agreement, there
has not been any transaction or occurrence in which RDLLLC has:
27
<PAGE> 29
A. Issued or delivered or agreed to issue or deliver any
membership interest of RDLLLC, or granted, or agreed to grant any options or
rights to purchase any membership interest of RDLLLC, or borrowed, or agreed to
borrow any funds;
B. Incurred or knowingly become subject to, or agreed to incur or
become subject to, any obligation or liability (absolute or contingent);
C. Discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities;
D. Other than to accomplish the distributions contemplated by
Section 8.02, declared, set aside or made, or agreed to declare, set aside or
make any payments or any distribution to members, or purchased, redeemed or
otherwise acquired, directly or indirectly, or agreed to purchase or acquire,
any membership interest;
E. Mortgaged, pledged or subjected to a lien, charge or any other
encumbrance, or agreed so to do, any of its assets, tangible or intangible,
except the lien of current real and personal property taxes;
F. Sold, assigned, transferred or agreed so to do, any of its
tangible assets, or cancelled, agreed to cancel, prepaid or agreed to prepay any
debts or claims;
G. Sold, assigned or transferred any trademarks, trade names,
copyrights or other intangible assets;
H. Suffered any damage, destruction or loss, whether or not
covered by insurance, which materially adversely affected the properties or
business of RDLLLC, or waived any rights of substantial value;
I. Increased, or agreed to increase, the rate of compensation
payable or to become payable by it to any of its members, employees or agents
over the rate being paid to them at 5/22/97;
J. Terminated or amended any material contract, agreement,
license or other instrument to which it is a party or suffered any loss or
termination or threatened loss or termination, of any material customer or
supplier;
28
<PAGE> 30
K. Through negotiation or otherwise, made any commitment or
incurred any liability or obligation, enforceable or not, to any labor
organization;
L. Made or agreed to make any accrual or arrangement for or
payment of any bonuses or special compensation of any kind to any member,
employee or agent;
M. Directly or indirectly paid or made a commitment to pay any
severance or termination pay to any member, employee or agent;
N. Introduced any new method of management, operation or
accounting that would have a material adverse effect on its business or on any
of the assets, properties or rights applicable thereto;
O. Reclassified its membership interest into a different
membership interest or partnership interest;
P. Made or agreed to make any charitable contributions (other
than as accrued on the RDLLLC Financial Statements) or incurred or agreed to
incur any nonbusiness expenses;
Q. Paid or agreed to pay any service charges, interest charges or
payments or investment charges or similar fees to any of the Sellers or Company
or any Affiliate of the Sellers or Company or entered into any other
transactions;
R. Experienced any other event or condition materially or
adversely affecting the business or properties of RDLLLC.
6.10. Certain Transactions or Arrangements. Schedule 6.10 lists any
officer, director, shareholder, partner or member of RDLLLC or Company or any
Affiliate or relative closer than first cousin of any such officer, director,
shareholder, partner or member who is presently, directly or indirectly, a party
to any transaction with RDLLLC or Company and contains a brief description of
each transaction, including without limitation:
A. Any contract, agreement, understanding, commitment or other
arrangement providing for the employment of, furnishing services to or by,
furnishing access to real or personal property to or by, rental of real or
personal property from or otherwise requiring payments or delivery of value to
any such officer,
29
<PAGE> 31
director, shareholder, member, partner, Affiliate or relative of such persons;
and
B. Any loans or advances to or from RDLLLC or Company, giving for
each the principal amount outstanding, interest rate, maturity date and security
therefor.
6.11. Brokers and Finders. Neither RDLLLC nor any of its officers,
directors, partners, members, or employees have employed any broker, agent or
finder or incurred any liability for any brokerage fees, agent's commissions or
finder's fees concerning the transactions contemplated hereby, except for any
such fees and commissions which are payable as provided by Section 15.06 hereof.
6.12. Labor Matters. RDLLLC has no employees.
6.13. Power of Attorney. RDLLLC has not given any power of attorney
regarding its business, properties or assets, except for powers of attorney
given in connection with tax matters as listed in Schedule 6.03.
6.14. Title to Shares. RDL has or will have at the Closing Date good
title to the Shares to be sold by it pursuant to the Agreement; and has or will
have at the Closing Date full legal right, power and authority to sell, assign
and transfer the Shares to be sold by it to the Purchaser free and clear of all
claims, liens, encumbrances or security interests, whatsoever.
6.15. Employee Benefit Plans. RDLLLC has no employee benefit plans,
employee pension benefit plans, multi-employer plans, or welfare plans, as same
are defined in Section 3 (1) (2) and (3), or 4001 (a) (3) of ERISA, covering
employees or former employees of RDLLLC.
6.16. Governmental Approval and Other Consents.
A. Except as set forth in Schedule 6.16A, RDLLLC has all
governmental approvals, authorizations, permits and licenses required to permit
the operation of its business as presently conducted and the absence of which
would adversely affect in a material way the operations of its business.
B. Except for requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no authorization, consent or approval of, or
designation, declaration or filing with, any
30
<PAGE> 32
public body, governmental authority, bureau or agency or other persons or
entities on the part of RDLLLC is necessary or required as a condition to the
validity of this Agreement and the consummation of the transactions contemplated
hereby.
6.17. Authority. This Agreement constitutes the valid and binding
obligation of RDLLLC, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws affecting creditors' rights generally, and to general
principles of equity, or as may be modified by a court of equity in an action
for specific performance. Except as set forth in Schedule 6.17, neither the
execution and delivery of this Agreement by RDLLLC nor the consummation of the
transactions contemplated hereby will violate any provisions of the Articles of
Organization or Operating Agreement of RDLLLC, or to the knowledge of RDLLLC,
any law or any order of any court or any governmental unit to which RDLLLC is
subject, nor will such execution, delivery or consummation conflict with, result
in a breach of or constitute a material default under any indenture, mortgage,
agreement, or other instrument to which RDLLLC is a party or by which it is
bound, or result in the creation of any lien, charge or encumbrance upon the
Shares or any of RDLLLC's assets or properties, or result in the acceleration of
the maturity of any payment date of any of SBHI's obligations, or increase or
materially and adversely affect the obligations of RDLLLC thereunder.
6.18. Banks. Schedule 6.18 lists all banks or other financial
institutions with which RDLLLC has an account, line of credit or safe deposit
box and the account numbers thereof and names of persons authorized to act in
connection therewith.
6.19. Accuracy of Information. No representation or warranty of, or
any information provided to Purchaser by RDLLLC in this Agreement or in any
certificate or Schedule furnished by RDLLLC pursuant hereto, knowingly contains
or, on the Closing Date, will knowingly contain any untrue statement of a
material fact, or knowingly omits, or on the Closing Date, will knowingly omit
to state any material fact necessary in order to make the statements contained
therein not misleading. True copies of all deeds, title insurance policies,
mortgages, indentures, notes, leases, agreements, plans, contracts and other
instruments listed on or referred to, or otherwise related to any item referred
to, in the Schedules delivered or furnished to the Purchaser by RDLLLC pursuant
to this Agreement have been delivered to or have
31
<PAGE> 33
been made available or will, upon request, be made available for inspection by
the Purchaser. Purchaser shall be entitled to rely upon the accuracy of all such
written information, in the preparation of its filings with the Securities and
Exchange Commission. RDLLLC shall immediately notify Purchaser of any
inaccuracies or omissions in any of such information previously supplied to
Purchaser.
6.20. Claims. Except as set forth on Schedule 6.20, and except for
Claims arising under or in connection with this Agreement, RDLLLC does not have,
and on the Closing Date will not have, any Claim of any nature, whether asserted
or unasserted, against Purchaser or Company.
6.21. Disclaimer of Other Representations and Warranties. Except as set
forth in this Article VI, RDLLLC makes no representation or warranty, express or
implied, at law or at equity, in respect of RDLLLC or Company, or any of their
assets, liabilities, or operations, and any such other representations or
warranties are hereby expressly disclaimed.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Purchaser as follows:
7.01. Organization and Capitalization.
A. The Company is a joint venture governed by the Uniform
Partnership Act of Delaware, and is duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has no
Subsidiaries. The Company has all requisite partnership or other power and
authority to carry on its business, to own, lease or operate its properties in
the places where such business is now conducted and where such properties are
now owned, leased or operated and is duly qualified to do business and is in
good standing in such states or jurisdictions where the failure to so qualify
would have a material adverse effect on the business or financial condition of
the Company. Except as shown on Schedule 7.01 A, there are no options or other
rights presently outstanding for the purchase or acquisition of Joint Venture
Interest in the Company.
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B. The Joint Venture Interest of the Company is owned as follows:
<TABLE>
<S> <C> <C>
MCTI - 39.5%
SBHI - 39.5%
RDLLLC - 21.0%
</TABLE>
7.02. Financial Statements.
A. Schedule 7.02 A contains the Financial Statements.
B. The Financial Statements (i) are prepared from and in
accordance with the books and records of Company in accordance with generally
accepted accounting principles consistently applied; (ii) present fairly in all
material respects the financial condition and results of operation of Company as
of the respective dates indicated for the respective periods indicated; and
(iii) reflect adequate accruals for all material liabilities and reasonably
anticipated losses, except there are no accruals for the Letters of Credit, and
provided, however, that the unaudited financial statements as of 5/8/97 lack
footnotes and would be subject to normal year end adjustments.
C. Except as set forth on Schedule 7.02 C, and except to the
extent of the reserves applicable thereto, if any, the accounts receivable and
notes receivable reflected on the Balance Sheet or acquired by Company after the
date thereof and prior to the date hereof have been, and all accounts receivable
and notes receivable acquired after the date hereof and prior to the Closing
Date will be acquired or created only in the ordinary course of business and
represent bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto. Except as set forth in
Schedule 7.02 C, there are no known set-offs, counterclaims or disputes asserted
with respect to any such account receivable or note receivable, and no discount
or allowance from any such account receivable or note receivable has been made
or agreed to. Except as set forth on Schedule 7.02 C, there is no known fact or
circumstance which would impair the validity or collectibility of the Company's
accounts receivable or notes receivable.
D. All accounts payable reflected on the Balance Sheet or
incurred or to be incurred by Company after the date thereof and prior to the
date hereof have been, and all accounts payable incurred after the date hereof
and prior to the Closing Date will be, incurred only in the ordinary course of
business and
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<PAGE> 35
represent bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto. Company has fully
provided for all film rental costs and related expenses to film distributors on
the Balance Sheet, and there is no known existing fact or circumstance with
respect to any material liability or obligation of Company, including disputes
with film distributors concerning such film rental costs and related expenses,
which is not fully reflected or reserved against on the Balance Sheet, except
for the Letters of Credit.
E. All inventories reflected on the Balance Sheet or acquired or
to be acquired by Company thereafter and prior to the Closing Date, except items
of inventory which have been written down to realizable market value, or written
off completely, and damaged or broken items in an amount which does not
materially affect the value of the inventory as reflected on the Balance Sheet
(i) consist and will consist of materials and supplies substantially all of
which are and will be of a quality and quantity which are usable or salable in
the ordinary course of its business, (ii) are now and will be on the Closing
Date, unless otherwise sold by Company in the ordinary course of business,
located on the regular business premises of Company, except for inventories to
be delivered to Company after the Closing Date pursuant to those contracts
listed on Schedule 7.02 E, (iii) except as set forth on Schedule 7.02 E, are now
and will be on the Closing Date owned by Company free of any liens, claims
(other than claims for due payment upon delivery), charges, encumbrances or
security interests in favor of others, and (iv) have been or will be acquired by
Company only in bona fide transactions entered into in the ordinary course of
business. None of such inventory is now or on the Closing Date will be held by
Company on consignment.
F. There is no basis for the assertion against Company of any
Undisclosed Liability.
G. Prepaid expenses shown on the Balance Sheet represent
prepayments for goods and/or services to be received in the future.
H. Notes payable as shown on Balance Sheet have been created only
in the ordinary course of business, and represent bona fide transactions
completed in accordance with the terms and provisions contained in the documents
related thereto.
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7.03. Taxes.
A. Schedule 7.03 (i) lists the jurisdictions in which Company has
filed federal and state income tax returns during the three (3) fiscal years
ended 1/2/97, and (ii) with respect to all fiscal years and periods through
which and all jurisdictions in which Company and any subsidiary has filed
federal and state income tax returns which have been examined by the Internal
Revenue Service or any state agency with respect to any period, lists all open
and unsettled deficiencies, if any, proposed as a result of all such
examinations and any waivers of the applicable statutes of limitations with
respect to years under examination or proposed to be under examination, and
listing any powers of attorney given by Company empowering the person, firm or
corporation named therein to act on behalf of Company in connection with tax
matters. Except as otherwise set forth on Schedule 7.03, any and all prior
audits or investigations by the Internal Revenue Service or any state agency
have been settled, and such settlements have been paid in full or properly
reflected on the Balance Sheet. Except as set forth on Schedule 7.03, Company is
not presently under investigation, nor has it received notice of, any
contemplated investigation or audit by the Internal Revenue Service or any state
agency concerning any fiscal year or period ended prior to the date hereof.
B. As of the date hereof, Company has filed, and as of the
Closing Date Company will have filed, all federal and foreign income tax returns
and all state, county and local income, franchise, property, sales, use and
other tax returns required to be filed by Company in each taxing jurisdiction in
which Company operates, has property or is otherwise subject to taxation, taking
into account any extensions of the filing deadlines which have been validly
granted to Company, and such returns are and will be true and correct in all
material respects, and Company has paid or accrued on the Balance Sheet all
federal and state income taxes and all state, county and local income,
franchise, property, sales, use and other taxes and assessments (including
penalties and interest in respect thereof, if any) that have become or are due
with respect to any period ended on or prior to 5/22/97 whether shown on such
returns or not.
C. Schedule 7.03 C contains a true and correct copy of Company's
income tax returns for tax years ended 1994 and 1995.
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<PAGE> 37
7.04. Personal Property.
A. Company's personal property includes, but is not limited to
all of the furniture, fixtures, equipment, machinery and vehicles described in
the fixed asset schedules maintained by Company, and set forth on Schedule 7.04
A (the "Personal Property"), and as reflected on the Balance Sheet as owned by
Company, is, except as set forth on Schedule 7.04 A, owned free and clear of all
liens, claims, charges, security interests and other encumbrances of any kind or
nature. Except for dispositions provided for in Section 8.02, and dispositions
of inventory in the ordinary course, none of Company's Personal Property shall
be removed from the premises of Company on or after the date hereof.
B. Except as set forth on Schedule 7.04 B, none of Company's
Personal Property is leased.
C. Except for dispositions provided for in Section 8.02 and
inventory sold in the ordinary course of business, Company's Personal Property
shall consist of the same items located in the Theatres on Purchaser's
inspection dates of Thursday, May 8, 1997, and Monday, May 12, 1997.
7.05. Real Property.
A. Schedule 7.05 A contains a true and correct description of all
real property owned by Company, including all structures located thereon,
excluding the property to be disposed of pursuant to Section 8.02. Company has
good and marketable title to all such real property owned by it, free and clear
of all mortgages, liens, charges and encumbrances, except for Permitted Title
Exceptions, and as set forth in Schedule 7.05 A.
B. Schedule 7.05 B contains a true and correct description of all
real property leased to Company, excluding the property to be disposed of
pursuant to Section 8.02. Each of the leases disclosed in said Schedule is in
full force and effect and there are no known existing defaults or events of
default by the Company, real or claimed, or events which with notice or lapse of
time or both would constitute defaults, the consequences of which, severally or
in the aggregate, would have a material adverse effect on the business or
operations of Company relating to or being carried on at the real property in
question.
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<PAGE> 38
C. Excluding property to be disposed of pursuant to Section 8.02,
to the best of Company's knowledge, all improvements on the real estate owned
by, leased to or used by Company conform in all material respects to all
applicable state and local laws, zoning and building ordinances and health and
safety ordinances, and the property is zoned for the various purposes for which
the real estate and improvements thereon are presently being used. Company has
not been notified, nor is any of its management aware, of any noncompliance of
such improvements with such applicable laws or ordinances.
D. Schedule 7.05 D contains a true and correct description of all
real property leased or subleased by Company to other persons or entities. Each
of the leases and subleases disclosed in said Schedule is in full force and
effect, and the continuation, validity and effectiveness thereof will in no way
be affected by the transactions contemplated by this Agreement.
7.06. Licenses, Permits, and Trademarks. Company has not received
written notice that their use of any trade names, trademarks, trade styles or
service marks violates or infringes upon any rights claimed therein by third
parties. Company does not own or have rights as licensee in any patents or
patent applications, and Company has not received notice that its operations
violate or infringe upon any claims of any United States or foreign patent or
patent application owned or held by any third party.
7.07. Insurance. Schedule 7.07 contains a list and brief description
of the policies of fire, liability and other forms of insurance (except title
insurance) owned or held by Company. The properties and business of Company of
an insurable nature are insured to the extent and against such risks as required
by the terms of leases to which the Company is a party. All policies listed on
Schedule 7.07 will be outstanding and duly in force at the Closing Date,
excluding those policies, or portions thereof, that pertain to the properties to
be disposed of pursuant to Section 8.02. Company is not now nor will be on the
Closing Date in material default regarding the provisions of any such policy,
and have not and shall not have failed to give any notice or present any claim
thereunder in due and timely fashion.
7.08. Intangible Properties. Company does not own any securities or
other intangible property except as reflected on the Balance Sheet, or set forth
in an appropriate Schedule.
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7.09. Defaults. Except as set forth on Schedule 7.09, there is no
default or claim or purported or alleged default, or to the knowledge of Company
state of facts (including any facts which will exist as a result of the
consummation of and performance under this Agreement, excluding a breach or
potential breach of any theatre lease), which, with notice or lapse of time, or
both, would constitute a material default in any obligation on the part of
Company to be performed under any material contract or agreement to which
Company is a party, including, but not limited to, contracts for the rental of
motion pictures and those contracts or agreements set out on Schedule 7.17
hereof; Company has in all respects performed, and on the Closing Date shall
have performed, all material obligations required to be performed by it under
any such material contract or agreement to which it is a party; and Company has
not waived any material right under any such material contract or agreement.
7.10. Corporate Records.
A. Except as set forth on Schedule 7.10, on or before the Closing
Date, Company shall provide to Purchaser the Joint Venture Agreement of the
Company, as in effect on the date hereof and as in effect on the Closing Date;
and (ii) copies of all partnership and joint venture agreements to which Company
is a party, including any amendments thereto, certified by the Secretary or an
Assistant Secretary, Partner or Member, as the case may be.
B. Company has provided Purchaser with true, accurate and
complete copies of or originals of respective minutes of all meetings or consent
actions of the joint venturers of Company.
7.11. Litigation. Except as set forth on Schedule 7.11, there are no
actions, suits or proceedings (whether or not purportedly on behalf of Company),
or to the knowledge of Company, investigations to which Company is a party or to
which any of its assets or properties is or may be subject, pending or to
Company's knowledge threatened against or affecting Company or any of its assets
or properties, at law, in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
7.12. Compliance with Laws. Except to the extent disclosed on
Schedule 7.12, Company has not been notified nor is any of its management aware
that it has failed to comply in any respect
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<PAGE> 40
with, or is in default in any respect under, any laws, ordinances, requirements,
regulations or orders applicable to its business, and Company is not subject to
any judgment, order, writ, injunction, or decree, that materially adversely
affects, or might in the future reasonably be expected to materially adversely
affect its business, operations, prospects, properties, assets or condition,
financial or otherwise. Company is not now and on the Closing Date will not be
in default concerning any order, writ, injunction or decree of any federal,
state, municipal court or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which default would have
material adverse effect on the financial condition of the Company, and to
Company's knowledge there is no investigation pending or threatened against or
affecting Company by any state or federal governmental agency, department or
instrumentality.
7.13. Absence of Changes. Except as set forth on Schedule 7.13, since
5/08/97, and except for the transactions contemplated by this Agreement, there
has not been any transaction or occurrence in which Company has:
A. Issued or delivered or agreed to issue or deliver any
partnership or joint venture interest of Company, or granted, or agreed to grant
any options or rights to purchase any joint venture or partnership interest of
Company, or borrowed, or agreed to borrow any funds;
B. Incurred or knowingly become subject to, or agreed to incur or
become subject to, any obligation or liability (absolute or contingent), which
exceeds $10,000.00 in the aggregate, other than in the ordinary course of
business;
C. Discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current indebtedness
under loans or credit facilities in existence on 5/8/97, or current liabilities
incurred in the ordinary course of business;
D. Declared, set aside or made, or agreed to declare, set aside
or make any payments of dividends or any distribution to shareholders, partners
or members, or purchased, redeemed or otherwise acquired, directly or
indirectly, or agreed to purchase, redeem or acquire, any shares of stock or
other securities;
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E. Mortgaged, pledged or subjected to a lien, charge or any other
encumbrance, or agreed so to do, any of its material assets, tangible or
intangible, except the lien of current real and personal property taxes;
F. Sold, assigned, transferred or agreed so to do, any of its
tangible assets, or cancelled, agreed to cancel, prepaid or agreed to prepay any
debts or claims, except, in each case, in the ordinary course of business;
G. Sold, assigned or transferred any trademarks, trade names,
copyrights or other intangible assets;
H. Suffered any damage, destruction or loss, whether or not
covered by insurance, which materially adversely affected the properties or
business of Company, or waived any rights of substantial value, whether or not
in the ordinary course of business;
I. Increased, or agreed to increase, the rate of compensation
payable or to become payable by it to any of its officers, directors, members,
partners, employees or agents over the rate being paid to them at 5/8/97;
J. Terminated or amended any material contract, agreement,
license or other instrument to which it is a party or suffered any loss or
termination or threatened loss or termination, of any material customer or
supplier;
K. Through negotiation or otherwise, made any commitment or
incurred any liability or obligation, enforceable or not, to any labor
organization;
L. Made or agreed to make any accrual or arrangement for or
payment of any bonuses or special compensation of any kind to any officer,
director, member, partner, employee or agent;
M. Directly or indirectly paid or made a commitment to pay any
severance or termination pay to any officer, director, partner, member, employee
or agent;
N. Introduced any new method of management, operation or
accounting that would have a material adverse effect on its business or on any
of the assets, properties or rights applicable thereto;
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O. Reclassified its shares of capital stock, membership interest
or partnership interest into a different number of shares, membership interest
or partnership interest;
P. Made or agreed to make any charitable contributions (other
than as accrued on the Balance Sheet) or incurred or agreed to incur any
nonbusiness expenses;
Q. Offered or extended more favorable terms, discounts or
advertising, promotional, display or other allowances than were offered or
extended regularly on and prior to 5/8/97;
R. Made any capital expenditure exceeding the amount of $5,000.00
in any instance except as disclosed on Schedule 7.13 R;
S. Paid or agreed to pay any service charges, interest charges or
payments or investment charges or similar fees to any of the Sellers or Company
or any Affiliate of the Sellers or Company or entered into any other
transactions other than in the ordinary course of business;
T. Charged off any bad debts or increased its bad debt reserve;
or
U. Experienced any other event or condition materially adversely
affecting the business or properties of Sellers or Company, other than general
economic conditions.
7.14. Certain Transactions or Arrangements. Schedule 7.14 lists any
officer, director, shareholder, partner or member of the Company or any
Affiliate or relative closer than first cousin of any such officer, director,
shareholder, partner or member who is presently, directly or indirectly, a party
to any transaction with Company and contains a brief description of each
transaction, including without limitation:
A. Any contract, agreement, understanding, commitment or other
arrangement providing for the employment of, furnishing services to or by,
furnishing access to real or personal property to or by, rental of real or
personal property from or otherwise requiring payments or delivery of value to
any such officer, director, shareholder, member, partner, Affiliate or relative
of such persons; and
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B. Any loans or advances to or from Company, giving for each the
principal amount outstanding, interest rate, maturity date and security
therefor.
7.15. Brokers and Finders. Company nor any of its partners, members,
employees, or agents have employed any broker, agent or finder or incurred any
liability for any brokerage fees, agent's commissions or finder's fees
concerning the transactions contemplated hereby, except for any such fees and
commissions which are payable by Seller as provided by Section 15.06 hereof.
7.16. Labor Matters.
A. Other than the employment agreement with Ron D. Leslie,
Company is not a party to or has any obligations under any agreement, collective
bargaining or otherwise, with any party regarding the rates of pay or working
conditions of any of the employees of Company, nor is Company obligated under
any agreement to recognize or bargain with any labor organization or union on
behalf of any of its employees;
B. To the knowledge of Company, there is no organization activity
among any of Company's employees, and Company nor any of its officers,
directors, partners, employees or agents have currently been charged or notified
of or threatened with or have knowledge of any charge of any unfair labor
practice; and
C. Company has not been notified (nor is any of Company's
management aware) that it has failed to comply with any applicable federal and
state laws and regulations concerning the employer/employee relationship and
with any of its agreements relating to the employment of its employees,
including, without limitation, regulations or agreement provisions relating to
wages, bonuses, employment practices, hours of work and the payment of Social
Security taxes. Except as reflected on the Balance Sheet or incurred in the
ordinary course of business from the Balance Sheet date to the Closing Date,
Company is not liable for any unpaid wages, bonuses or commissions or any tax,
penalty, assessment or forfeiture for failure to comply with any of the
foregoing.
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7.17. Contracts and Commitments.
A. Schedule 7.17 contains a list and brief description of any of
the following contracts or commitments to which Company is a party or by which
Company benefits which are not terminable by Company at will without penalty and
which are not listed or described in any other Schedule:
(i) oral or written contracts or commitments for the
employment of any officer, employee, agent or consultant, including any
severance or other termination provisions with respect to such employment;
(ii) oral or written contracts with or commitments to any
labor union or any other agreements, amendments, supplements, letters or
memoranda of understanding with any labor union or other representative of
employees;
(iii) oral or written contracts for the purchase, sale,
production or supply, whether on a continuing basis or otherwise, of goods or
services of any type except those made in the ordinary course of business;
(iv) oral or written advertising contracts or commitments
except those made in the ordinary course of business;
(v) oral or written leases under which it is lessor;
(vi) employee benefit plans, and, to the extent not
included, any other bonus, vacation, pension, profit sharing, retirement,
disability, stock purchase, stock option, health, hospitalization, insurance or
similar plan or practice, formal or informal, in effect concerning employees or
others;
(vii) contracts or commitments, oral or written, affecting
ownership of, title to or use of any interest in real property;
(viii) material contracts or commitments not made in the
ordinary course of business;
(ix) any continuing contract or commitment for the
purchase, use or leasing of materials, supplies, inventory, motion pictures,
equipment or services not terminable without
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penalty on less than 30 days' notice by Company, except those made in the
ordinary course of business;
(x) any material contract, agreement or commitment under
the terms of which Company is, directly or indirectly, liable upon or with
respect thereto or is obligated in any other way to provide funds with respect
of, or to guarantee or assume, any debt or obligation of any other person or
entity, except endorsements made in the ordinary course of business in
connection with the deposit of items for collection;
(xi) any contracts upon which the business, rights or
assets, or condition, financial or otherwise, of Company materially depends or
is materially affected;
(xii) oral or written agreements for the employment of any
agents, finders, brokers, booking agents, advertising agents or independent
contractors involving payment by the Company of salary, commissions or other
amounts under or in respect of such agreement in excess of $5,000 per year;
(xiii) oral or written contracts or commitments for the
acquisition (by lease, purchase or otherwise) of theatres, theatre sites or
other interests in real estate, construction of any buildings or fixtures, the
material expansion or remodeling of any of the Company's existing theatres and
the operation or management of theatres for, on behalf of, or in partnership
with, other persons or entities; and
(xiv) any other material contracts or commitments not
otherwise specified above.
B. Each of the contracts listed in Schedule 7.17 or described in
this Section 7.17, and which is included in any other Schedule is in full force
and effect and there are no known existing defaults or events of default by the
Company, real or claimed, or events which with notice or lapse of time or both
would constitute defaults, the consequences of which, severally or in the
aggregate, would have a material adverse effect on the business or financial
condition of Company. Except as reflected in such Schedules and for the breach
or potential breach of theatre leases, the continuation, validity and
effectiveness of such contracts, and all other material terms thereof, will in
no way be affected by the transactions contemplated by this Agreement.
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7.18. Power of Attorney. Except as set forth on Schedule 7.18,
Company has not given any power of attorney regarding its business, properties
or assets, except for powers of attorney given in connection with tax matters as
listed in Schedule 7.03.
7.19. Condition of Equipment. Except as set forth in Schedule 7.19,
all items of inventory, machinery and equipment, furniture and fixtures, and
leasehold improvements owned or leased by Company, other than items currently
being repaired, are in good operating condition (normal wear and tear excepted),
and in a state of good maintenance and repair, and all such inventory, machinery
and equipment, furniture and fixtures, and leasehold improvements are considered
by Company adequate and usable for the operation of Company's business as the
same is presently conducted.
7.20. Employee Benefit Plans.
A. Except as set forth on Schedule 7.20 A, there are no employee
benefit plans, as defined in Section 3(3) of ERISA, including employee pension
benefit plans as defined in Section 3(2) of ERISA maintained currently or in the
past by Company or under which Company has any present or future obligation or
liability or under which any employee of Company has any present or future
rights to benefits.
B. There are no multi-employer plans as defined in Section
4001(a)(3) of ERISA, to which Company contributes or in the past has contributed
or under which Company has any present or future obligation or liability.
C. Except as set forth in Schedule 7.20 C, there are no welfare
plans, as defined in Section 3(1) of ERISA, covering employees or former
employees of Company.
D. Schedule 7.20 D lists all employee benefit plans, including
retirement plans, of Company and describes all obligations and liabilities of
Company thereunder. Copies of all such plans are attached as exhibits to
Schedule 7.20 D. Except as set forth on Schedule 7.20 D, Company has not made,
entered into or agreed to any commitment, whether written or oral, which would
obligate Company to continue any employee benefit plan, employment agreement or
employment policy covering employees of Company, whether or not any such plan,
agreement or policy is subject to ERISA.
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7.21. Governmental Approval and Other Consents.
A. Company has all governmental approvals, authorizations,
permits and licenses required to permit the operation of its business as
presently conducted and the absence of which would materially adversely affect
the operations of its business.
B. Except for requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no authorization, consent or approval of, or
designation, declaration or filing with, any public body, governmental
authority, bureau or agency or other persons or entities on the part of Company
is necessary or required as a condition to the validity of this Agreement and
the consummation of the transactions contemplated hereby.
7.22. Authority. This Agreement constitutes the valid and binding
obligation of Company, enforceable in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws affecting creditors' rights generally, or general
principles of equity, or as may be modified by a court of equity in an action
for specific performance. Except as set forth on Schedule 7.22 and for the
breach or potential breach of theatre leases, neither the execution and delivery
of this Agreement by Company nor the consummation of the transactions
contemplated hereby will violate any provisions of the joint venture agreement
of Company, or to the knowledge of Company, any law or any order of any court or
any governmental unit to which Company is subject, nor will such execution,
delivery or consummation conflict with, result in a breach of or constitute a
material default under any indenture, mortgage, agreement, or other instrument
to which Company is a party or by which it is bound, or result in the creation
of any lien, charge or encumbrance upon any of Company's assets or properties,
or result in the acceleration of the maturity of any payment date of any of
Company's obligations, or increase or materially and adversely affect the
obligations of Company thereunder.
7.23. Banks. Schedule 7.23 lists all banks or other financial
institutions with which Company has an account, line of credit or safe deposit
box and the account numbers thereof and names of persons authorized to act in
connection therewith.
7.24. Accuracy of Information. No representation or warranty of, or
any information provided to Purchaser by Company
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<PAGE> 48
in this Agreement or in any certificate or Schedule furnished by Company
pursuant hereto, knowingly contains or, on the Closing Date, will knowingly
contain any untrue statement of a material fact, or knowingly omits, or on the
Closing Date, will knowingly omit to state any material fact necessary in order
to make the statements contained therein not misleading. True copies of all
deeds, title insurance policies, mortgages, indentures, notes, leases,
agreements, plans, contracts and other instruments listed on or referred to, or
otherwise related to any item referred to, in the Schedules delivered or
furnished to the Purchaser pursuant to this Agreement have been delivered to or
have been made available or will, upon request, be made available for inspection
by the Purchaser. Purchaser shall be entitled to rely upon the accuracy of all
such written information, in the preparation of its filings with the Securities
and Exchange Commission. Company shall immediately notify Purchaser of any
inaccuracies or omissions in any of such information previously supplied to
Purchaser.
7.25. Claims. Except as set forth on Schedule 7.25, and except for
Claims arising under or in connection with this Agreement, Company does not
have, nor on the Closing Date will have, any Claim of any nature, whether
asserted or unasserted, against Purchaser.
7.26. Roof Warranties. Company has the roof warranties set forth on
Schedule 7.26, and said roof warranties are in full force and effect, in
accordance with their terms.
7.27. Closed Theatres. Schedule 7.27, attached hereto, sets forth a
list of all theatres closed by the Company for which Company will have any
liability whatsoever after Closing, and a description of such liability, and
Sellers shall hold harmless and indemnify Purchaser from any Claims relating to
Company's ownership or operation of said closed theatres.
7.28 Discount Tickets, Gift Certificates and Passes. Except as set
forth on schedule 7.28, to the knowledge of Company, there are not outstanding
any discount or promotional tickets, gift certificates, prepaid tickets or
admission passes or any other arrangements allowing the holder thereof to
reduced or free admission to any of the Theatres.
7.29. Disclaimer of Other Representations and Warranties. Except as
set forth in this Article VII, Company makes no representation or warranty,
express or implied, at law or at
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equity, in respect of Company, or any of its assets, liabilities, or operations,
and any such other representations or warranties are hereby expressly
disclaimed.
7.30. Guaranteed Film Contracts. Company has no film contracts
whereby Company has guaranteed a film distributor payment for a particular film.
7.31. Environmental Matters. To the best of Company's knowledge, no
Hazardous Waste, Hazardous Substances and Hazardous Materials, as said terms are
described under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") (hereinafter "Waste Material"), and all other
applicable environmental laws, except items such as cleaning supplies and in
connection with parking lot usage normally found in motion picture theatres or
occurring in motion picture theatre operations, generally, are present on, were
stored or disposed of on the Property to be conveyed or assigned hereunder
during the period Company was in possession of said Property to be conveyed or
assigned hereunder, other than material which may have been temporarily stored
thereon and removed prior to Closing, except as specifically disclosed in
Schedule 7.31. To the best of Company's knowledge, Company has no knowledge or
reason to believe that Waste Material from any source was stored or disposed of
on the Property to be conveyed or assigned at any time other than material which
may have been temporarily stored thereon and removed prior to Closing. To the
best of Company's knowledge, Company has at no time generated, stored or
disposed of Waste Material, including, but not limited to, asbestos, PCBs, and
urea formaldehyde foam insulation, as defined in CERCLA, the Hazardous Material
Transportation Act, 49 USC 1801, et. seq., as amended; the Clean Air Act, 42 USC
7401, et. seq., as amended; the Clean Water Act, 33 USC 1251, et. seq., as
amended; the Toxic Substances Control Act, 15 USC 2601, et. seq., as amended;
the Resource, Conservation and Recovery Act, 42 USC 6901, et. seq., as amended;
and the Rivers and Harbor Act, 33 USC 401, et. seq., as amended; or any other
federal and/or state environmental statute, except to the extent such Waste
Material, and their place of generation, interim or final storage, and site of
disposal are identified on Schedule 7.31. To the best of Company's knowledge, no
aboveground or underground storage tanks are located on any of the Property to
be conveyed or assigned hereunder.
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ARTICLE VIII
OBLIGATIONS AND COVENANTS OF THE SELLERS,
MCTI, SBHI, RDLLLC AND COMPANY
The Sellers, MCTI, SBHI, RDLLLC and Company covenant and agree with the
Purchaser as follows (the fulfillment of each covenant and agreement
constituting a condition precedent to the obligations of the Purchaser
hereunder):
8.01. Conduct of the Company's Business Prior to Closing.
Except with respect to those matters set forth in Section 8.02 hereof, and
except to the extent that the Purchaser shall otherwise consent in writing, from
the date hereof to the Closing Date the Sellers, MCTI, SBHI and RDLLLC shall and
will cause the Company to:
A. Operate its business substantially as presently
operated and only in the ordinary course, and use its best efforts, consistent
with past practices and policies, to preserve intact its good will, reputation
and present business organization and to preserve its relationships with persons
having business dealings with it, consistent with prudent business practice;
B. Maintain all of its properties in the same condition
presently existing, reasonable wear and use excepted;
C. Take all steps reasonably necessary to maintain its
intangible assets, including without limitation, its patents, trademarks, trade
names, brand names, copyrights, licenses and any pending applications therefore;
D. Pay its accounts payable and attempt to collect its
accounts receivable in accordance with the Company's past business practices;
E. Comply with all laws materially applicable to the
conduct of the business of the Company the failure of which will result in a
material injury to the Company; and
F. Maintain the books and records of the Company in the
usual, regular and ordinary manner, on a basis consistent with past practices.
8.02. Disposition of Excluded Assets. On or before the Closing Date,
Sellers, MCTI, SBHI and RDLLLC shall cause Company
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to sell, or otherwise dispose of, or transfer to the Sellers, directly or
indirectly by dividend or other distribution, the following theatres:
A. Jax Twin Theatre, Jacksonville, AR.
B. Metcalf Twin Theatre, Overland Park, KS.
C. Ranchmart 4 Theatre, Overland Park, KS.
D. Flick Twin, Pine Bluff, AR (Previously Sold).
E. Midwest Theatre, Scotts Bluff, NB (Previously
Donated).
F. Varsity Theatre, Manhattan, KS.
Disposition or transfer of the foregoing assets shall be with
no further liability to MCTI, SBHI, RDLLLC, Company or Purchaser, nor shall
MCTI, SBHI, RDLLLC, Company or Purchaser be responsible for any income or
transfer tax relative to this disposition, and Sellers shall indemnify and hold
harmless MCTI, SBHI, RDLLLC, Purchaser and Company therefrom after Closing. In
the event that such assets are transferred to Sellers by dividend, distribution,
or otherwise, directly or indirectly, Purchaser shall not be entitled to any
proceeds of sale or other consideration or benefits arising out of the
subsequent sale or transfer of any such assets by Sellers, directly or
indirectly.
From and after the Closing, Sellers shall:
A. Not Operate the Theatres in Pine Bluff, Arkansas, Scotts
Bluff, Nebraska and Manhattan, Kansas, nor allow any purchaser to operate said
Theatres.
B. Insert in any warranty deed for sale of the Varsity
Theatre, Manhattan, Kansas, the following clause: "The premises
devised herein shall not be used or operated for the exhibition of
motion pictures by Grantee, or any devisee, lessee, or assign."
C. Perform all the obligations of the Tenant under said
Leases in accordance with their terms.
On or before the Closing Date, Company shall transfer to RDL all
benefits and obligations relating to the lease covering the
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Company's home office located at 4200 West 83rd Street, Suite 206, Prairie
Village, Kansas 66208, and all furniture, fixtures, equipment, and vehicles
located on said premises, and RDL shall assume all lease and other obligations
relating to any and all of the foregoing assets and shall indemnify and hold
harmless Purchaser and Company therefrom after Closing.
The transfer of such assets to RDL shall not be a breach by the
Company, MCTI, SBHI, RDLLLC, or Sellers of any representation, warranty,
covenant, or other obligation under this Agreement.
8.03. Tax Returns. All income, sales, use, franchise, property and
other tax returns of MCTI, SBHI, RDLLLC and Company required to be filed by the
Closing Date, taking into account any extensions of the filing deadlines granted
to MCTI, SBHI, RDLLLC or Company, that have not yet been filed prior to the date
hereof, and all such returns applicable to periods prior to 5/22/97 filed after
the Closing Date shall be prepared at Sellers' direction by MCTI, SBHI, RDLLLC
and the Company consistent with its past practices. Sellers agree to use their
best efforts to obtain all extensions of time from governmental authorities
necessary to effect this provision.
8.04. Access and Information. From the date hereof to the Closing
Date, upon reasonable notice and at Purchaser's expense (excluding any
expenses attributable to Sellers' counsel, accountants and other
representatives), Sellers shall afford (and shall cause MCTI, SBHI, RDLLLC and
the Company to afford) to the Purchaser, its counsel, accountants and other
representatives, free and full access in a manner so as not to interfere with
the normal conduct of Company's business, to all the offices, properties,
books, contracts, commitments and records of MCTI, SBHI, RDLLLC and Company and
shall compile, prepare and furnish such persons with all information (including
financial and operating data) concerning its affairs as they reasonably may
request, including copies and extracts of pertinent records, documents and
contracts. The Sellers shall assist (and shall cause MCTI, SBHI, RDLLLC and the
Company and its employees to assist) the Purchaser, its counsel, accountants
and representatives, in their examination of the MCTI, SBHI, RDLLLC and
Company's books and records. To the extent that the MCTI, SBHI, RDLLLC and
Company shall have control over same, the accountants of MCTI, SBHI, RDLLLC and
Company shall furnish to the Purchaser or its accountants during such period
any and all of their statements, working papers, tax returns and underlying
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records and data as the Purchaser or its accountants reasonably may request.
8.05. Notification of Changes. Between the date hereof and the Closing
Date, MCTI, SBHI, RDLLLC and the Company shall promptly notify Purchaser in
writing of any material adverse change in the financial condition of MCTI, SBHI,
RDLLLC and the Company, the method of conducting its operations, any material
damage to or loss of any property or amount of property used in the business of
the Company, or the institution of or the threat of institution of legal
proceedings against MCTI, SBHI, RDLLLC or the Company or the status or conduct
of legal proceedings, including investigations by any government agency, against
MCTI, SBHI, RDLLLC or the Company.
8.06. Certain Acts Prohibited. Except for distributions contemplated by
Section 8.02 hereof, between May 22, 1997 and the Closing Date, MCTI, SBHI,
RDLLLC and the Company shall not, nor shall Sellers permit MCTI, SBHI or RDLLLC,
without the prior written consent of the Purchaser, to:
A. Incur any material liability or encumber or permit the
encumbrance of any properties or assets of MCTI, SBHI, RDLLLC or the Company,
other than liens arising under loans shown on Schedule 8.06 A;
B. Dispose of or contract to dispose of any material amount
of property or assets of MCTI, SBHI or RDLLLC or Company except as specifically
provided by Section 8.02 herein, or sales of inventory in the ordinary course
of business, with no adverse impact on the Company;
C. Enter into any lease or contract for the purchase, lease
or acquisition of real estate or any lease or contract for the purchase, lease
or acquisition of personal property of MCTI, SBHI, RDLLLC or the Company;
D. Excluding film contracts, other than guaranteed film
contracts, enter into any agreement that is not cancelable by MCTI, SBHI, RDLLLC
or the Company without penalty upon notice of thirty (30) days or less;
E. Cause to be formed any Subsidiary of MCTI, SBHI, RDLLLC or
Company, or make any charitable contribution other than as accrued on the
Balance Sheet or pay or incur travel or
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entertainment expenses other than in the ordinary course of business;
F. Declare or pay any dividends or make any other
distribution whatsoever, including, but not limited to, return of capital
contributions, guaranteed payments, service charges, interest charges,
investment charges or similar fees, to its shareholders, members or partners;
G. Issue, sell, or purchase stocks, notes or other
securities, Joint Venture Interest or membership interest of MCTI, SBHI, RDLLLC
or the Company or of any other corporation or business;
H. Enter into any contract or agreement involving the
acquisition or purchase of the stock, other securities or substantial portion of
the assets of any other company or business;
I. Make any advances of cash or other assets to its
shareholders, officers, directors, members or partners to any Affiliate thereof
or to any person related by blood or marriage to such shareholders, officers,
directors, members or partners;
J. Enter into or become a party to any contract or
commitment under which the value of services to be performed or the cost of
goods to be sold may exceed amounts arising in the ordinary course of business;
K. Make any commitment for capital expenditures in excess of
$5,000.00, other than for ordinary repairs or maintenance and minor equipment
additions and replacements;
L. Redeem, repurchase or otherwise reacquire any of the
capital stock, membership interest or Joint Venture Interest of MCTI, SBHI,
RDLLLC or the Company;
M. Issue any additional shares of Common Stock or any other
class of capital stock, securities convertible into Common Stock or any other
class of capital stock, membership interest or Joint Venture Interest, or issue
or grant any options, warrants or rights concerning the same, for consideration
or otherwise;
N. Make any adjustments in or to MCTI, SBHI, RDLLLC or
Company's financial books and records of the current fiscal year that shall in
any way affect the net income thereof;
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O. Grant any increase in rates of pay for its employees, or
grant any increase in benefits under any bonus, pension plan or other contract
or commitment, or increase compensation payable or to become payable to officers
or key salaried employees, or increase in bonus, insurance, pension or other
benefit plan, payment or arrangement (formal or informal) made to or for or with
any such officers, key salaried employees or agents, or grant any bonus to
officers, key salaried employees or agents of MCTI, SBHI, RDLLLC or the Company;
P. Create any indebtedness for borrowed money other than
that incurred pursuant to existing contracts disclosed in a Schedule;
Q. Amend the Articles of Incorporation or By-Laws of MCTI or
SBHI, or make any change in MCTI's or SBHI's authorized or issued capital stock,
except to eliminate prohibitions on transfer of stock, or, except to eliminate
prohibition on transfer of Membership Interest, amend the Articles of
Organization or Operating Agreement of RDLLLC, or the Joint Venture Agreement of
Company; or
R. Settle or agree to settle any liabilities of MCTI, SBHI,
RDLLLC or Company arising in connection with litigation matters set forth on
Schedules 4.07, 5.07, 6.07 and 7.11.
8.07. Insurance. From and after the date hereof and through the
Closing Date, MCTI, SBHI, RDLLLC and the Company shall maintain all of its
insurance policies in effect as of the date hereof; and all property shall be
used, operated, maintained and repaired in a normal business manner and in
accordance with provisions of such insurance policies relating thereto.
8.08. No Default. Neither MCTI, SBHI, RDLLLC or the Company shall at
any time after the date hereof and through the Closing Date do any act or omit
to do any act, or knowingly permit any act or omission to occur that would cause
a breach of any material contract, commitment or obligation of MCTI, SBHI,
RDLLLC or the Company.
8.09. Compliance with Laws. At all times after the date hereof and
through the Closing Date Sellers, MCTI, SBHI, RDLLLC and the Company shall use
reasonable best efforts to comply with all applicable laws as may be required
for the consummation of the transactions contemplated by this Agreement.
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8.10. Consent of Others. To the extent that the consummation of the
transactions provided for herein requires the consent of a third party, whether
to avoid the occurrence of an event of default under any contract, license,
lease or agreement to which MCTI, SBHI, RDLLLC or the Company is a party or by
which its assets are bound or otherwise, MCTI, SBHI, RDLLLC or the Company shall
reasonably cooperate with Purchaser to obtain any such consent prior to the
Closing Date. Also, MCTI, SBHI, RDLLLC and the Company shall reasonably
cooperate with Purchaser to procure estoppel letters from its landlords in form
and substance substantially as set forth on Exhibit C attached hereto.
8.11. Repayment of Debts to Company. Except as otherwise permitted by
the terms of this Agreement, on or before the Closing Date all loans and
advances from MCTI, SBHI, RDLLLC or Company to any of the Sellers or any
Affiliate of Sellers, other than MCTI, SBHI, RDLLLC or the Company, whether or
not disclosed in Schedule 7.14, shall be repaid in full, and Sellers, MCTI,
SBHI, RDLLLC and Company shall have delivered to Purchaser appropriate
instruments or writings to evidence the receipt of such repayments, and all
guarantees by MCTI, SBHI, RDLLLC or the Company of loans obtained by any
shareholder, officer, director, member or partner of MCTI, SBHI, RDLLLC or
Company or any of their Affiliates or relatives from third parties shall have
been released.
8.12. No Shopping. From and after the date hereof and until the Closing
or 7/15/97, whichever first occurs, neither Sellers, MCTI, SBHI, RDLLLC nor the
Company will, directly or indirectly, through any officer, director, member,
partner, agent, broker or otherwise solicit, initiate or encourage submission of
proposals or offers from any third party relating to any acquisition or purchase
of all or a material amount of the assets of, or any equity interest in, MCTI,
SBHI, RDLLLC or Company or any merger, consolidation or business combination
with MCTI, SBHI, RDLLLC or Company, provided, however, that the Sellers, MCTI,
SBHI, RDLLLC or the Company and their officers, directors, members, partners and
representatives will remain free to participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, facilitate in any other manner any effort or attempt by any
third party to do or seek any of the foregoing to the extent their fiduciary
duties may require. Sellers represent and warrant that they have not entered
into any confidentiality agreements with any other potential purchaser of the
Company or its Theatres.
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8.13. Covenants Not to Compete. For and in consideration of Purchaser
performing its obligations hereunder, and, specifically payment of the Purchase
Price, which is acknowledged by Sellers, Company and Ron Leslie, individually,
as adequate consideration, Sellers, Company and Ron Leslie shall enter into an
agreement, to be in substantially the form attached as Exhibit D hereto and
satisfactory to Purchaser, not to compete with the Company or Purchaser in the
motion picture exhibition business for a period of three (3) years following the
Closing within a 25-mile radius of the Theatres. No portion of the purchase
price of the Shares shall be allocated to the covenants not to compete.
8.14. Pro Forma Final Tax Returns. Sellers shall prepare at Sellers'
expense for the period ending May 22, 1997, pro forma final federal and foreign
income tax returns, and state, county and local tax returns for MCTI, SBHI and
RDLLLC and the Company, and said pro forma returns will correctly and
accurately compute any accrued tax liabilities for that period. Sellers shall
be responsible for, and pay all liabilities for federal and foreign income
taxes, and state, county and local income taxes, as calculated by said pro
forma returns to be due with respect to said period. Sellers shall have no
responsibility for any federal, foreign, state, local or other income,
franchise, capital gains, property, transfer, document or other tax liability
(including penalties and interest in respect thereto, if any), for the period
on or after May 23, 1997, including, without limitation, any such tax
liabilities, with respect to Purchasers' acquisitions hereunder, that result
from any election or deemed election under Section 338 of the Internal Revenue
Code of 1986 (or from any provision of foreign, state, local or other tax law
that treats a share sale as a sale or transfer of actual or beneficial
interests in underlying assets for tax purposes).
8.15. Conditions Precedent. Sellers shall use their best efforts
to satisfy the conditions precedent to the Purchaser's obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of the Purchaser to consummate the transactions
provided for herein are, at the option of the Purchaser, subject to the
satisfaction, in all material respects,
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of the following conditions precedent on or prior to the Closing Date:
9.01. Compliance by the Sellers, MCTI, SBHI, RDLLLC and the Company.
All the terms, covenants and conditions of this Agreement to be complied with
and performed by the Sellers, MCTI, SBHI, RDLLLC and the Company on or before
the Closing Date shall have been fully complied with and performed.
9.02. Representations and Warranties of Sellers, MCTI, SBHI, RDLLLC and
the Company. The representations and warranties of the Sellers, MCTI, SBHI,
RDLLLC and the Company contained herein and in the Exhibits, Schedules and
certificates delivered pursuant hereto shall be true and correct on and as of
the Closing Date with the same effect as though all such representations and
warranties had been made on and as of that date, and Purchaser shall have
received a certificate dated the Closing Date signed by Sellers, and an officer
of MCTI, SBHI, RDLLLC and the Company, as is appropriate, stating that all such
representations and warranties are true and correct. Any inspection or audit of
the inventories, properties, financial condition or other matters relating to
Sellers, MCTI, SBHI, RDLLLC or the Company and the business conducted pursuant
to this Agreement shall in no way limit, affect or impair the ability of
Purchaser to rely upon the representations, warranties, covenants and agreements
of the Sellers, MCTI, SBHI, RDLLLC or the Company set forth herein, unless
Purchaser had actual knowledge that any representation or warranty of Sellers,
MCTI, SBHI, RDLLLC or the Company was materially untrue.
9.03. No Adverse Change. Except as otherwise fully and adequately
disclosed in this Agreement or on Schedule 9.03 hereto, there shall not have
been any material adverse change in the business, assets, liabilities or
condition, financial or otherwise, of MCTI, SBHI, RDLLLC or Company between
5/22/97 and the Closing Date, and Sellers, MCTI, SBHI, RDLLLC and the Company
shall have delivered to Purchaser a certificate signed by Sellers, and an
officer of MCTI, SBHI, RDLLLC and the Company, dated the Closing Date, to such
effect.
9.04. Approval of Legal Matters. All actions, proceedings,
instruments and documents deemed necessary or appropriate by Purchaser or its
counsel to effectuate this Agreement and the consummation of the transactions
contemplated hereby, or incidental thereto, and all other related legal matters,
shall be reasonably acceptable to such counsel.
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9.05. Opinion of Counsel for MCTI, SBHI, RDLLLC, Morgan Creek
Productions, Inc. (MCPI) and the Company. Purchaser shall have received
opinions, dated the Closing Date, of Spencer Fane Britt & Browne LLP, counsel to
MCTI, MCPI, RDLLLC, and the Company, and from Loeb & Loeb LLP, counsel to SBHI,
dated the Closing Date, in substantially the form attached hereto as Exhibits D,
E, F, G, and H.
9.06. Accuracy of Schedules. Examination by the Purchaser shall not
have disclosed any material inaccuracy in the representations and warranties of
Sellers or Company set forth in Articles IV, V, VI and VII hereof, or in the
Schedules delivered to Purchaser pursuant to this Agreement.
9.07. Litigation. No suit shall, at the Closing Date, be pending or
threatened before any court, governmental agency, bureau, board, or other
authority in which the transaction contemplated by this Agreement, is sought to
be restrained or in connection with which damages or other relief is sought, or
in which any material claim shall be asserted against MCTI, SBHI or RDLLLC not
disclosed herein or in the schedules delivered pursuant hereto.
9.08. Condition of Property and Risk of Loss. On the Closing Date, all
property, plant and equipment, including furniture and fixtures, of Company
shall be substantially in the same condition as at the close of business on the
date hereof, except for (a) ordinary use and wear thereof; (b) changes occurring
in the ordinary course of business between the date hereof and the Closing Date;
and (c) damage or loss from causes beyond the reasonable power and control of
Company, whether or not such damage or loss is covered by insurance; provided,
however, if on or prior to the Closing Date any of the equipment, inventory and
other tangible property of Company shall have suffered material loss or damage
on account of fire, flood, accident, act of war, civil commotion or any other
cause or event beyond the reasonable power and control of Company (whether or
not similar to the foregoing) to an extent which, in the opinion of the
Purchaser substantially affects the value of Company, the Purchaser shall have
the right to terminate this Agreement. In such event, all parties shall be
released from any liability hereunder.
9.09. Resignations of Directors, Officers, Members and Partners. The
Purchaser shall have received a written
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resignation signed by each of the directors, officers, members of management
committee, and manager of MCTI, SBHI, RDLLLC and Company.
9.10. Uniform Commercial Code Searches. The Purchaser shall have
received Uniform Commercial Code searches (conducted through a date reasonably
proximate in time to the Closing Date) of filings made pursuant to Article 9
thereof in all jurisdictions where MCTI, SBHI, RDLLLC or Company has any
material personal property or fixtures, which shall be in form, scope and
substance satisfactory to Purchaser and its counsel, and which shall not
disclose any liens, security interests or encumbrances not disclosed in a
Schedule.
9.11. Consents. Purchaser shall have obtained any written consents
required under the Theatre leases to transfer the Shares and estoppels of third
parties referred to in Section 8.10, which, if other than in form as set forth
on Exhibit C, shall be in form, scope and substantially satisfactory to
Purchaser and its counsel. Provided, however, receipt of consent of the
landlords to assignment of leases of the Theatres to either Carmike Cinemas,
Inc. or Eastwynn Theatres, Inc., or an affiliate of either, shall not be a
condition precedent to Purchaser's obligations hereunder.
9.12. Delivery of Guaranty. MCTI shall have delivered to Purchaser
the Guaranty of Morgan Creek Productions, Inc.
9.13. Hart-Scott-Rodino. The waiting period applicable to the
transaction contemplated hereby under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or been terminated, and no
governmental entity shall have expressed the intention to file an action to
restrain, modify or prohibit the transaction contemplated by this Agreement, or
any part thereof.
ARTICLE X
REPRESENTATIONS, WARRANTIES, COVENANTS AND
OBLIGATIONS OF THE PURCHASER
The Purchaser represents, warrants and covenants to the Sellers as
follows:
10.01. Organization and Good Standing. Carmike Cinemas, Inc. is a
Delaware corporation and Eastwynn Theatres, Inc. is an Alabama corporation, both
of said corporations are duly organized and existing and in good standing under
the laws of the State
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where incorporated, and have full corporate power to carry on their businesses,
to own and operate their properties and assets in the places where such business
is now conducted, and where such properties are now owned, leased or operated,
and is duly qualified to do business, and are in good standing in such states or
jurisdictions where the failure to so qualify would have a material adverse
effect on the business or financial condition of either.
10.02. Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Purchaser; no further corporate action of any nature is
required pursuant to the Articles of Incorporation and By-Laws of the Purchaser;
and this Agreement constitutes the valid and binding obligations of the
Purchaser, except as may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally or as may be modified by a court of equity
in an action for specific performance. The execution, delivery and performance
of this Agreement by Purchaser will not violate or result in default under any
provision of the Articles of Incorporation or By-Laws of the Purchaser or any
material commitment, indenture, license or other obligation to which the
Purchaser is a party, or by which either of them is bound, or result in the
creation of any lien, charge or encumbrance upon the Carmike Stock, or any of
Purchaser's assets or properties, or result in the acceleration of the maturity
of any payment date of any of Purchaser's obligations, or increase or materially
adversely affect the obligations of Purchaser thereunder, and will not, to the
best knowledge of the Purchaser, contravene any law, rule or regulation of any
administrative agency or governmental body or any order, writ, injunction or
decree of any court, administrative agency or governmental agency applicable to
the Purchaser.
10.03. Broker. Purchaser has not employed any broker, agent or
finder, or incurred any liability for any brokerage fees, agent's commissions or
finder's fees concerning the transactions contemplated hereby.
10.04. Purchaser shall use its reasonable best efforts to procure on
behalf of MCTI, SBHI, RDLLLC and the Company Landlord's Consents to the
transactions contemplated hereby, and Carmike shall guarantee Eastwynn's
performance under leases for the Company's Theatres.
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10.05. Purchaser is acquiring the Shares for its own account, for
investment purposes only, and not with a view to the distribution thereof.
10.06. Registration of Carmike Stock to be transferred to Sellers.
Carmike covenants and agrees to:
A. Number of Carmike Shares. The aggregate number of
shares of Carmike Stock to be delivered to Sellers, except SBH, at the Closing
shall be 128,986; provided, however, that if, on the business day immediately
prior to the Closing Date, the "Current Market Value" of the Carmike Stock is
less than $31.00 per share, or greater than $35.00 per share the parties will
then mutually agree upon the actual number of shares to be delivered. For
purposes of this Agreement, "Current Market Value" per share of the Carmike
Stock shall mean the closing price which shall be the last reported sale price
regular way, or, in case no such reported sale takes place on such date, the
average of the reported closing bid and ask prices regular way, in either case
on the composite tape, or if the shares are not quoted on the composite tape, on
the principal United States Securities Exchange registered under the Securities
Exchange Act of 1934 on which the Carmike Stock is listed or admitted to
trading. The number of shares of Carmike Stock to be delivered to Sellers
pursuant to this Section shall be adjusted proportionately to reflect changes in
the capitalization of Carmike between the date hereof and the Closing Date as a
result of any recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares or any other change in Carmike's
capital structure which affects holders of Carmike Stock generally.
B. Status of Carmike Shares. Each of the Sellers, except
SBH, acknowledges and agrees severally, as to itself only, as follows:
(i) The Carmike Stock to be received by Sellers at
Closing will not have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any applicable state securities laws.
(ii) Except for shares to be allocated to Barry Reardon,
the Carmike Stock is being acquired for Sellers' own account for investment and
not with a view to any distribution or public offering within the meaning of the
Securities Act, except as contemplated herein.
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(iii) Seller will not sell or otherwise transfer the
Carmike Stock except pursuant to the Resale Registration Statement as
contemplated by Section 10.06 C of this Agreement, or in one or more private
transactions if, in the opinion of counsel to Sellers, reasonably satisfactory
to Carmike, such transaction or transactions are not required to be registered
under the Securities Act or any applicable state securities laws.
(iv) Seller is an "Accredited Investor" within the
meaning of Rule 501 of the Securities Act, or it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of an investment in the Carmike Stock, and the information
provided to Carmike in the questionnaire completed by such Seller is true and
correct.
(v) Seller has received prior to executing this
Agreement the Carmike disclosure documents listed in Schedule 7.06 to this
Agreement.
(vi) Carmike has made available to Seller at a reasonable
time prior to its execution of this Agreement the opportunity to ask questions
and receive answers concerning the terms and conditions of this Agreement, and
to obtain any additional information which Carmike possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of the information referred to in (v) above.
(vii) Each certificate representing the Carmike Stock to
be issued to Sellers at the Closing shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES ACT, AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION, OR AN EXEMPTION THEREFROM, OR,
IN THE ABSENCE OF RECEIPT BY THE COMPANY OF
AN
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OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT THE SECURITIES MAY BE SOLD OR
TRANSFERRED WITHOUT SUCH REGISTRATION.
C. Registration of Carmike Stock for Resale by Sellers.
(i) SHELF REGISTRATION:
(a) Carmike agrees with Sellers that, as soon as
practicable after the Closing Date, but in no event later than 10 days after
the Closing Date, Carmike shall file with the Securities and Exchange
Commission (the "Commission") a Registration Statement (the "Resale
Registration Statement") under the Securities Act with respect to resales by
Sellers of Carmike Stock issued pursuant to this Agreement. Such Resale
Registration Statement shall provide for sales to be made on a continuous basis
pursuant to Rule 415 (or any similar rule that may be adopted by the
Commission) in accordance with the intended method or methods of disposition
designated by Sellers. Such Resale Registration Statement shall be filed on
Form S-3 or such other form as Carmike determines in its sole discretion to be
available and appropriate for the registration of resales of the Carmike Stock
by Sellers.
(b) Carmike shall prepare and file with the
Commission such amendments (including post-effective amendments) and
supplements to the Resale Registration Statement and the related prospectus as
may be necessary to keep such registration current and continuously effective
for a period to expire upon the earlier of (1) one year following the Closing
Date, or such earlier time, if any, as to which Rule 144 or any successor rule
or regulation under the Securities Act shall be available for immediate resales
of the Carmike Stock by Sellers; or (2) the date that all the Carmike Stock is
sold.
(ii) OBLIGATIONS WITH RESPECT TO REGISTRATION. In
connection with the registration of the Carmike Stock pursuant to this
subsection C, Carmike shall:
(a) Use all reasonable efforts to cause such
Resale Registration Statement to become and remain effective, within 45 days
after Closing.
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(b) Furnish to Sellers at a reasonable time
prior to the filing thereof with the Commission a copy of the Resale
Registration Statement in the form in which Carmike proposes to file the same;
not later than one day prior to the filing thereof, a copy of any amendment
(including any post-effective amendment) to such Resale Registration Statement;
and promptly following the effectiveness thereof, a conformed copy of the Resale
Registration Statement as declared effective by the Commission, and of each
post-effective amendment thereto, including financial statements and all
exhibits and reports incorporated therein by reference.
(c) Furnish to Sellers such number of copies of
the Resale Registration Statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
each supplement thereto, and such other documents as they may reasonably request
in order to facilitate the disposition of the Carmike Stock owned by them.
(d) Use all reasonable efforts to register and
qualify the Carmike Stock covered by the Resale Registration Statement under
such other securities laws of such jurisdictions as shall be reasonably
requested by Sellers, and do any and all other acts and things which may be
reasonably necessary or advisable to enable Sellers to consummate the
disposition of Carmike Stock owned by Sellers in such jurisdictions; provided,
however, that Carmike shall not be required in connection therewith, or as a
condition thereto to qualify to transact business, or to file a general consent
to service of process in any such states or jurisdictions, or to maintain the
effectiveness of any such registration or qualification for any period during
which it is not required to maintain the effectiveness of the related Resale
Registration Statement under the Securities Act.
(e) Promptly notify Sellers of the happening of
any event as a result of which the prospectus included in the Resale
Registration Statement contains a untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and, at the
request of Sellers, and subject to the further provisions of Section 10.06 C
(iv)(b), Carmike will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Carmike Stock, such
prospectus will not contain an untrue
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<PAGE> 66
statement of a material fact, or omit to state any fact necessary to make the
statements therein not misleading.
(f) Enter into such customary agreements in form
and substance satisfactory to Carmike, and take such other customary actions as
may be reasonably requested in order to expedite or facilitate the disposition
of such Carmike Stock.
(g) Make reasonably available for inspection by
Sellers pursuant to Resale Registration Statement and any attorney or accountant
retained by Sellers, all financial and other pertinent records and corporate
documents of Carmike, and use all reasonable efforts to cause the officers,
directors, employees and independent accountants of Carmike to supply all
information reasonably requested by Sellers, their attorneys or accountants, in
connection which such registration statement, and in each case as and to the
extent necessary to permit Sellers to conduct a reasonable investigation within
the meaning of the Securities Act. To minimize disruption expense to Carmike
during the course of the registration process, Sellers shall, to the extent
practicable, coordinate investigation and due diligent efforts hereunder, and,
to the extent practicable, coordinate investigation and due diligence efforts
hereunder, and, to the extent practicable, will act through a single set of
counsel, and a single set of accountants, and will enter into confidentiality
agreements with Carmike in form and substance reasonably satisfactory to Carmike
and Sellers prior to receiving any confidential or proprietary information of
Carmike.
(h) Promptly notify Sellers of the following
events, and (if requested by Sellers) confirm such notification in writing:
(1) The filing of the prospectus, or any
prospectus supplement in the Resale Registration Statement, and any
amendment or post-effective amendment thereof, and, with respect to the Resale
Registration Statement, or any post-effective amendment thereto, the
declaration of the effectiveness of such documents;
(2) Any request by the Commission for
amendments or supplements to the Resale Registration Statement, or the
prospectus, or for additional information;
(3) The issuance or threat of issuance by
the Commission of any stop order suspending the effectiveness of the Resale
Registration Statement, or the initiation of any
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proceedings for this purpose; provided, however, Carmike will use its best
efforts to prevent issuance of such stop order or obtain its withdrawal
promptly, if issued; and
(4) The receipt by Carmike of any
notification with respect to the suspension of the qualification of the Carmike
Stock for sale in any jurisdiction, or the initiation or threat of initiation of
any proceeding for such purpose.
(i) Cooperate with Sellers to facilitate the
timely preparation and delivery of certificates representing the Carmike Stock
to be sold, and not bearing any restrictive legends, and enable such Carmike
Stock to be sold in such lots and registered in such names as Sellers may
request at least 2 business days prior to any delivery of the Carmike Stock to
the purchaser so that new certificates free of restrictive legends will be
available for sale by Sellers at the time of such delivery.
(iii) Carmike's obligations with respect to and in
compliance with this Section 10.06 C shall be expressly conditioned upon
Sellers' compliance with the following:
(a) Sellers shall cooperate with Carmike in
connection with the preparation of the Resale Registration Statement, and for so
long as Carmike is obligated to keep the Resale Registration effective, shall
provide to Carmike, in writing, for use in the Resale Registration Statement,
all such information regarding Sellers' plan for distribution of the Carmike
Stock as may be necessary to enable Carmike to prepare the Resale Registration
Statement and prospectus covering the Carmike Stock, to maintain the currency
and effectiveness thereof, and otherwise to comply with all applicable
requirements of law in connection therewith.
(b) During such time as Sellers may be
engaged in a distribution of the Carmike Stock, Sellers shall comply with Rules
10 B-6, and 10 B-7 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and pursuant thereto, shall, among other things:
(1) Not engage in any stabilization
activity in connection with the securities of Carmike in
contravention in such rules;
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<PAGE> 68
(2) Distribute the Carmike Stock solely
in the manner described in the Resale Registration Statement;
(3) Cause to be furnished to each broker
from whom the Carmike Stock may be offered, or to the offeree if an offer is
not made through a broker, such copies of the prospectus and any amendment or
supplement thereto, and documents incorporated by reference therein as may be
required by law; and
(4) Not bid for or purchase any
securities of Carmike, or attempt to induce any person to purchase any
securities of Carmike other than as permitted under the Exchange Act.
(iv) HOLD BACK AGREEMENTS.
Notwithstanding anything set forth herein to
the contrary, Sellers agree that they will give Carmike prior oral notice,
directed to Carmike's Chief Executive Officer or Carmike's Chief Financial
Officer, confirmed immediately in writing by facsimile transmission, of its
intention to sell any Carmike Stock under the shelf Resale Registration
Statement, which notice shall be given not less than two days in advance of any
such proposed sale. In the event that Carmike thereafter informs Sellers within
one day of its receipt of such notice from Sellers that in the good faith
exercise of its reasonable business judgment, there exists bona fide financing,
acquisition or other plans of Carmike or other matters which would require
disclosure by Carmike of information, the premature disclosure of any of which
would adversely affect or otherwise be detrimental to Carmike, Sellers shall
refrain from selling Carmike Stock until the earlier to occur of the date (1)
Carmike notifies Sellers that it has filed with the Commission an amendment or
supplement to the prospectus included in the Resale Registration Statement, (2)
Carmike notifies Sellers that the potentially disclosable event no longer
exists, and that the prospectus included in the Resale Registration Statement
does not contain an untrue statement of material fact or omit to state any fact
necessary to make the statements therein not misleading, or (3) which is sixty
days after the date that Sellers orally notified Carmike of its intention to
sell any Carmike Stock, each of which is a "Disclosure Restricted Period".
Carmike's obligations to keep the Resale Registration Statement current and
effective shall be extended for a number of days equal to the Disclosure
Restricted Period, or, if earlier, until the date on which all the Carmike Stock
has been disposed of.
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<PAGE> 69
(v) EXPENSES. Carmike shall bear the expenses of
registration pursuant to this Section 10.06 C; provided, however, that Sellers
shall be responsible for (1) the fees and expenses of their own counsel, their
own accountants and other experts retained by Sellers with respect to such
registration and resales, and (2) all underwriting discounts and fees or
brokerage fees or commissions relating to the sale of the Carmike Stock.
(vi) INDEMNIFICATION.
(a) In connection with the registration under the Securities
Act of the Carmike Stock pursuant this Section 10.06, Carmike shall indemnify
and hold harmless Sellers, and each controlling person of Sellers, if any
(within the meaning of the Securities Act), against any losses, claims, damages
or liabilities, joint or several (or actions in respect thereto) ("Losses") to
which such indemnified party may be subject under the Securities Act, under any
other statute or at common law, but only to the extent such Losses arise out of
or are based upon (1) any untrue statement (or alleged untrue statement) of any
material fact contained in the Resale Registration Statement under which the
Carmike Stock held by Sellers were registered under the Securities Act or
offered for sale, any preliminary prospectus (if used prior to the effective
date of such Registration Statement), or any final prospectus or any
post-effective amendment or supplement thereto (if used during the period
Carmike is required to keep the Resale Registration Statement effective)(the
"Disclosure Documents); (2) any omission (or alleged omission) to state therein
a material fact required to be stated therein, or necessary to make the
statements made therein not misleading, or (3) any violation by Carmike of the
Securities Act or any applicable state securities laws ("Blue Sky Laws"), or
any rule or regulation promulgated under the Securities Act or any Blue Sky
Law, or any other law applicable to Carmike in connection with the performance
of its obligations under this Section 10.06; and Carmike shall reimburse each
such indemnified party for any legal or other expenses reasonably incurred by
such party in connection with investigating or defending any such loss, claim,
damage, liability or action, whether or not resulting in any liability, or in
connection with any investigation or proceeding by any governmental agency or
instrumentality relating to any such claims with respect to any offering of
securities pursuant to this Section 10.06, but excluding any amounts paid in
settlement of any action, suit, arbitration, proceeding, litigation, or
investigation
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(collectively "Litigation"), commenced or threatened, if such settlement is
effective without the prior written consent of Carmike, which consent shall not
be unreasonably withheld; provided, however, that Carmike shall not be liable to
any indemnified party in any such case to the extent that any such losses arise
out of are based upon an untrue statement or omission or alleged omission made
in any such Disclosure Document in reliance upon and in conformity with written
information furnished to Carmike by or on behalf of such indemnified party
expressly for use in the preparation thereof and so designated by such
indemnified party, or made in any preliminary prospectus if a copy of the final
prospectus was not delivered to the person alleging any loss, claim, damage or
liability for which Losses arise at or prior to the written confirmation of the
sale of such Carmike Sale to such person, and the untrue statement or omission
concerned had been corrected in such final prospectus and copies thereof had
timely been delivered by Carmike to such indemnified party; or (2) the use of
any prospectus after such time as Carmike has advised such indemnified party
that the filing of a post-effective amendment or supplement thereto is required,
except the prospectus as so amended or supplemented or the use of any prospectus
after such time as the obligation of Carmike to keep the same current and
effective has expired.
(b) In connection with the registration or
sale of Carmike Stock pursuant to this Section 10.06, Sellers shall, severally,
indemnify and hold harmless Carmike, each of its directors, each of its officers
who have signed such Resale Registration Statement, and each controlling person
of Carmike, (within the meaning of the Securities Act), against any Losses,
joint or several, to which such indemnified party may become subject under the
Securities Act under any other statute or at common law, but only to the extent
such Losses arise out of or are based upon (1) any untrue statement (or alleged
untrue statement) of any material fact contained in any of the Disclosure
Documents, or any omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, if the statement or omission was made in reliance upon and in
conformity with written information furnished to Carmike by or on behalf of such
indemnifying party expressly for use in the preparation thereof, and so
designated by such indemnifying party; (2) the use by such indemnifying party of
any prospectus after such time as Carmike has advised such indemnifying party
that the filing of a post-effective amendment or supplement thereto is required,
except the prospectus as so amended or supplemented or after such
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<PAGE> 71
time as the obligation of Carmike to keep the Resale Registration Statement
effective and current has expired; or (3) any information given or
representation made by such indemnifying party in connection with the sale of
Carmike Stock which is not contained in, and not in conformity with the
prospectus (as amended or supplemented at the time of the giving of such
information or making of such representation); and such indemnifying party shall
reimburse each such indemnified party for any legal and other expenses
reasonably incurred by such party in investigating or defending any such loss,
claim, damage, liability, or action, whether or not resulting in any liability,
or in connection with any investigations or proceedings by any governmental
agency, or instrumentality relating to any such claims with respect to any
offering of securities pursuant to this Section 7.06, but excluding any amounts
paid in settlement of any Litigation, commenced or threatened, if such
settlement is effective without the prior written consent of such indemnifying
party, which consent shall not be unreasonably withheld.
(c) ACTIONS COMMENCED. If a third party
commences any action or proceeding against an indemnified party related to any
of the matters subject to indemnification under subsection (a) or (b) hereof,
such indemnified party shall promptly give notice to the indemnifying party in
writing, and the commencement thereof, but failure so to give notice shall not
relieve the indemnifying party from any liability which it may have hereunder
unless the indemnifying party is prejudiced thereby.
The indemnifying party shall be
entitled to control the defense or prosecution of such claim or demand in the
name of the indemnified party, with counsel satisfactory to the indemnified
party, if it notifies the indemnified party in writing of its intention to do so
within 20 days of its receipt of the notice from the indemnified party without
prejudice however to the right of the indemnified party to participate therein
through counsel of its own choosing, which participation shall be at the
indemnified party's expense unless (1) the indemnified party shall have been
advised by its counsel that use of the same counsel to represent both the
indemnifying party and the indemnified party would represent a conflict of
interest (which shall be deemed to include any case where there may be a legal
defense or claim available to the indemnified party which is different from or
additional to those available to the indemnifying party, in which case the
indemnifying party shall not have the right to direct the defense of such action
on behalf
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of the indemnified party, or (2) the indemnifying party shall fail vigorously to
defend or prosecute such claim or demand within a reasonable time. Whether or
not the indemnifying party chooses to defend or prosecute such claim, the
parties hereto shall cooperate in the prosecution or defense of such claim, and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials, and appeals as may be
requested in connection therewith.
(d) CONTRIBUTION. If the indemnification provided
for in subsections (a) or (b) hereinabove is unavailable to or insufficient to
hold the indemnified party harmless under said subsections in respect of any
Losses referred to therein for any reason other than as specified therein, then
the indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and such indemnified party on the other in connection with the statements
or omissions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by (or omitted to be supplied by) Carmike or the
Sellers, and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by an indemnified party as a result of the Losses referred to above in
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation
or defending in any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10.07. Capitalization. Carmike's capital structure is set
forth as follows:
CLASS A COMMON STOCK
<TABLE>
<CAPTION>
Authorized Issued and Outstanding
---------- ----------------------
<S> <C>
22,500,000 ($.03 par value) 9,758,601 as of 3/31/97
</TABLE>
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CLASS B COMMON STOCK
<TABLE>
<S> <C>
Authorized Issued and Outstanding
5,000,000 1,420,700 as of 3/31/97
</TABLE>
PREFERRED STOCK
<TABLE>
<S> <C>
Authorized Issued and Outstanding
1,000,000 ($1.00 par value) 0 as of 3/31/97
</TABLE>
Carmike Stock to be issued pursuant hereto will be duly
authorized, validly issued, fully paid and non-assessable.
10.08. Governmental Approval and Other Consents.
A. Purchaser has all governmental approvals, authorizations,
permits and licenses required to permit the operation of its business as
presently conducted and the absence of which would adversely affect in a
material way the operations of its business.
B. Except for requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no authorization, consent or approval of, or
designation, declaration or filing with, any public body, governmental
authority, bureau or agency or other persons or entities on the part of Carmike
is necessary or required as a condition to the validity of this Agreement and
the consummation of the transactions contemplated hereby except for landlord
consents to assignment of Theatre leases.
10.09. Conditions Precedent. Purchaser shall use its reasonable best
efforts to satisfy the conditions precedent to Sellers' obligations hereunder.
10.10. Release of Ron Leslie from Film Contracts. Purchaser shall use
its reasonable best efforts to procure the release of Ron Leslie from any
personal guarantees of film contracts with motion picture distributors.
10.11. Tax Returns. Purchaser shall cause to be filed at Purchaser's
expense all tax returns for the period beginning May 23, 1997, for all federal,
state, county and local tax returns required to be filed by MCTI, SBHI, RDLLLC
and the Company, and said returns will be true and correct in all respects.
Purchaser shall pay all federal income taxes and all state, county and
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local income taxes, franchise, property, sales, use and other taxes and
assessments (including penalties and interest in respect thereof, if any) that
have become or are due with respect to said period, and shall hold harmless and
indemnify Seller's therefrom.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligation of the Sellers to consummate the transactions provided
for herein is, at the option of Sellers, subject to the satisfaction, in all
material respects, of the following conditions precedent on or prior to the
Closing Date:
11.01. Compliance by the Purchaser. All the terms, covenants and
conditions of this Agreement to be complied with and performed by the Purchaser
on or before the Closing Date shall have been fully complied with and performed
in all material respects.
11.02. Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser contained herein shall be true
and correct in all material respects, on and as of the Closing Date, with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, and the Purchaser shall have furnished to
the Sellers a certificate dated the Closing Date and signed by the President or
Vice President and Secretary or Assistant Secretary of the Purchaser to such
effect.
11.03. Opinion of Counsel for the Purchaser. The Sellers shall have
received an opinion of Champion & Champion, counsel for the Purchaser, dated the
Closing Date, in substantially the form attached hereto as Exhibit I.
11.04. Hart-Scott-Rodino. The waiting period applicable to the
transaction contemplated hereby under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or been terminated, and no
governmental entity shall have expressed the intention to file an action to
restrain, modify or prohibit the transaction contemplated by this Agreement, or
any part thereof.
11.05. No Adverse Change. Except as otherwise fully and adequately
disclosed in this Agreement, or on Schedule 11.05 hereto, there shall not have
been any material adverse change in the business, assets, liabilities or
condition, financial or
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otherwise, of Purchaser between 3/31/97 and the Closing Date, and Purchaser
shall have delivered to Seller a certificate signed by an officer of Purchaser,
dated the Closing Date to such effect.
11.06. Approval of Legal Matters. All actions, proceedings, instruments
and documents deemed necessary or appropriate by Sellers or their respective
counsel to effectuate this Agreement, and the consummation of the transactions
contemplated hereby, or incidental thereto, and all other related legal matters
shall be reasonably acceptable to such counsel.
11.07. Litigation. No suit shall, at the Closing Date, be pending or
threatened before any court, governmental agency, bureau, board, or other
authority in which the transaction contemplated by this Agreement, is sought to
be restrained or in connection with which damages or other relief is sought, or
in which any material claim shall be asserted against Purchaser not disclosed
herein or in the schedules delivered pursuant hereto.
11.08. Leslie Release from Bank Loan. Ron and Juanita Leslie shall
have been released at or before Closing from any guarantees of RDLLLC Bank
Loans.
ARTICLE XII
TERMINATION
12.01. Right of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date:
A. By the mutual consent of the Board of Directors of
Purchaser and the Boards of Directors and Members of Sellers (acting
unanimously).
B. By the Board of Directors of Purchaser by giving written
notice to Sellers at any time prior to the Closing Date in the event (i) any of
the Sellers has within the then previous 10 business days given the Purchaser
any notice pursuant to Section 12.04 below, and (ii) the development that is the
subject of the notice has had a material adverse effect upon the financial
condition of MCTI, SBHI, RDLLLC or Company, each taken as a whole;
C. By the Board of Directors of Purchaser in the event that
the obligations and conditions set forth in Articles VIII and IX of this
Agreement shall not have been satisfied or waived by the Closing Date.
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D. By any Seller in the event that the conditions set forth in
Articles X and XI of this Agreement shall not have been satisfied or waived by
the Closing Date.
E. By either Purchaser or any Seller if any action or
proceeding before any court or other governmental body or agency shall have been
instituted in good faith by an unrelated third party (i) to restrain, modify, or
prohibit the transaction contemplated by this Agreement, (ii) to recover damages
from Purchaser, MCTI, SBHI, RDLLLC or the Company, or any Seller if such action
or proceeding could result in the imposition of a material liability against or
affecting the business or properties of the Purchaser, MCTI, SBHI, RDLLLC or the
Company, or any Seller in the opinion of the party seeking to terminate this
Agreement, or (iii) to force Purchaser, MCTI, SBHI, RDLLLC or the Company, any
subsidiary or any Seller to take any action that would have a material and
adverse effect on the business or properties of the Purchaser, MCTI, SBHI,
RDLLLC or the Company or any Seller in the opinion of the party seeking to
terminate this Agreement unless either the Purchaser, MCTI, SBHI, RDLLLC or the
Company, or the Sellers causes such action or proceeding to be dismissed on or
prior to the Closing Date.
12.02. Notice of Termination. Notice of termination of this Agreement,
as provided for in this Article XII, shall be given by the parties so
terminating to the other parties hereto, in accordance with the provisions of
Section 15.09 of this Agreement.
12.03. Effect of Termination. In the event that this Agreement is
terminated, this Agreement shall become void and of no further force and effect,
without liability of any party to any other party except for those liabilities
for indemnification arising in connection with or under the provisions of
Section 15.03 and 15.07 hereof.
12.04. Notice of Developments. Any of the Sellers may elect at any time
to notify the Purchaser of any development causing a breach of any of the
representations and warranties in Articles IV, V, VI and VII above. Unless the
Purchaser has the right to terminate this Agreement pursuant to Section 12.01
above by reason of the development and exercises that right within the period
referred to in Section 12.01 above, the written notice pursuant to this Section
12.04 will be deemed to have amended the Schedules, to have qualified the
representations and warranties
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contained in Articles IV, V, VI and VII and to have cured any misrepresentation
or breach of warranty that otherwise might have existed hereunder by reason of
the development.
ARTICLE XIII
SELLER'S INDEMNIFICATION
13.01. Sellers' Agreement to Indemnify. From and after the Closing,
subject to the terms and conditions of this Article XIII, and if there is an
applicable survival period pursuant to Section 13.04 below, the Sellers agree to
indemnify, defend and hold MCTI, SBHI, RDLLLC, Purchaser and the Company
harmless from and against all Claims asserted against, imposed upon or incurred
by the Purchaser, MCTI, SBHI, RDLLLC or the Company by reason of or resulting
from:
A. A breach or nonfulfillment of any warranty or any
inaccuracy of any representation contained in, or made by Sellers or the
Company, pursuant to this Agreement, or
B. A breach or nonfulfillment of any covenant or agreement
of the Sellers or the Company, other than a representation or warranty,
contained in, or made, pursuant to this Agreement, or
C. Any Undisclosed Liability.
D. Any liability arising under Section 8.02.
13.02. Conditions of Indemnification. The obligations and
liabilities of the Sellers hereunder with respect to Claims shall be subject to
the following terms and conditions:
A. The Purchaser shall give the Sellers notice of any Claim
promptly after the Purchaser receives notice thereof (and in no event more than
thirty (30) days after Purchaser receives such notice), and the Sellers will
undertake the defense and payment thereof by representatives of their own
choosing satisfactory to Purchaser. All costs and expenses of such defense
(including fees of counsel), and any settlement or compromise resulting from the
defense of any Claim by the Sellers, shall be paid for by the Sellers. Purchaser
shall have the right of prior approval of any settlement or compromise which by
its terms could have an adverse impact on the ongoing business operations or
financial prospects of Purchaser or the Company.
76
<PAGE> 78
B. In the event that the Sellers, within a reasonable time
after receipt of notice of any such Claim, but in no event more than thirty (30)
days after receipt of such notice, fail to defend or pay, the Purchaser will
(upon further notice to the Sellers) have the right to undertake the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the Sellers, subject to the right of the Sellers to assume the defense of
such Claim at any time prior to settlement, compromise or final determination
thereof.
13.03. Assistance. In the event so requested by the Sellers, the
Purchaser shall use its best efforts to make available all information and
assistance reasonably required in the defense by the Sellers of a Claim.
13.04. Limitations. The Sellers' obligation to indemnify the Purchaser,
MCTI, SBHI, RDLLLC and the Company as provided in Section 13.01 above is subject
to the condition that the Sellers shall have been given notice by Purchaser,
MCTI, SBHI, RDLLLC or the Company of the Claim for which indemnity is sought:
A. Eighteen (18) months after the Closing Date for all
Claims, other than a Claim based on breach of the warranties or representations
contained in Section 4.03, 5.03, 6.03, 7.03 and 8.02; and
B. At any time after the Closing Date in the case of any claim
based upon a breach of the warranties or representations contained in Sections
4.03, 5.03, 6.03, 7.03 and 8.02.
13.05. Apportionment of Liability. Each Seller shall be severally
liable for the individual representations particularly pertaining to that Seller
and MCTI in the case of MCT, SBHI in the case of SBH, and RDLLLC in the case of
RDL, as set forth in this Agreement, and shall only be jointly liable, on a pro
rata basis in accordance with their ownership in the Company, for the
representations and warranties made by or pertaining to the Company. Further,
Sellers liability hereunder shall be limited to $6,000,000.00 in the aggregate.
13.06. Guaranty of Morgan Creek Productions, Inc. For Indemnification
by MCT. MCT acknowledges and agrees that the Shareholders of Morgan Creek
Theaters, Inc. and Morgan Creek Productions, Inc. are the same individuals. By
their individual executions hereof as Shareholders of MCTI, MCT hereby
acknowledges and agrees that receipt of MCT's portion of the
77
<PAGE> 79
Purchase Price by said Shareholders constitutes a direct and material benefit to
MCPI; and, therefore, constitutes good and valid consideration to MCPI for its
execution of the Guaranty. Purchaser agrees that it shall look solely to MCPI
pursuant to the Guaranty for any indemnification or other liability or claim
whatsoever hereunder, and shall not seek recovery against the Shareholders of
MCTI therefor.
ARTICLE XIV
PURCHASER'S INDEMNIFICATION
14.01. Purchaser's Agreement to Indemnify. From and after the Closing,
subject to the terms and conditions of this Article XIV, and if there is an
applicable survival period pursuant to Section 14.04 below, the Purchaser agrees
to indemnify, defend and hold the Sellers and the Company harmless from and
against all Claims asserted against, imposed upon or incurred by the Purchaser
or the Company by reason of or resulting from
A. A breach or nonfulfillment of any warranty or any
inaccuracy of any representation contained in or made pursuant to this
Agreement, or
B. A breach or nonfulfillment of any covenant or agreement
of the Purchaser, other than a representation or warranty, contained in or made
pursuant to this Agreement, or
C. Failure to pay any liabilities to film companies which
have been guaranteed by Ron Leslie, or
D. Failure to timely pay any taxes pursuant to Section 10.11.
14.02. Conditions of Indemnification. The obligations and
liabilities of the Purchaser hereunder with respect to Claims shall be subject
to the following terms and conditions:
A. Any Seller shall give the Purchaser notice of any Claim
promptly after any Seller receives notice thereof (and in no event more than
thirty (30) days after Seller receives such notice), and the Purchaser will
undertake the defense and payment thereof by representatives of their own
choosing satisfactory to Seller. All costs and expenses of such defense
(including fees of counsel), and any settlement or compromise resulting from the
defense of any Claim by the Purchaser, shall be paid for by the Purchaser. Each
Seller shall have the right
78
<PAGE> 80
of prior approval of any settlement or compromise which by its terms could have
an adverse impact on the ongoing business operations or financial prospects of
Seller or the Company.
B. In the event that the Purchaser, within a reasonable time
after receipt of notice of any such Claim, but in no event more than thirty (30)
days after receipt of such notice, fail to defend or pay, the Seller will (upon
further notice to the Sellers) have the right to undertake the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the Sellers, subject to the right of the Purchaser to assume the defense of
such Claim at any time prior to settlement, compromise or final determination
thereof.
14.03. Assistance. In the event so requested by the Purchaser, the
Sellers shall use their reasonable best efforts to make available all
information and assistance reasonably required in the defense by the Purchaser
of a Claim.
14.04. Limitations. The Purchaser's obligation to indemnify the
Sellers as provided in Section 14.01 above is subject to the condition that the
Purchaser shall have been given notice by Sellers, or any of them, of the Claim
for which indemnity is sought within eighteen (18) months after the Closing
Date, other than a claim based on breach of the representations, warranties,
covenants and obligations of the Purchaser set forth in Section 10.11.
ARTICLE XV
MISCELLANEOUS
15.01. Survival of Representations.
A. All statements contained in any Schedule or certificate
delivered by or on behalf of the Purchaser, MCTI, SBHI, RDLLLC, the Company or
the Sellers pursuant hereto, shall be deemed representations and warranties
hereunder by the Purchaser, MCTI, SBHI, RDLLLC, Sellers or the Company, as the
case may be. The representations, warranties and agreements made by the
Purchaser, MCTI, SBHI, RDLLLC, Company and the Sellers herein shall survive
consummation of the transactions contemplated hereby for a period of 18 months,
and no inspection or audit of the inventories, properties, financial condition,
records or other matters relating to Seller, MCTI, SBHI, RDLLLC, Company or
Purchaser shall limit, affect or impair the ability of the Purchaser, MCTI,
SBHI, RDLLLC, Company or Sellers to rely
79
<PAGE> 81
upon the representations, warranties and agreements of Purchaser, MCTI, SBHI,
RDLLLC, Sellers or Company set forth herein, unless either party had actual
knowledge that any representation or warranty of the other party was materially
untrue.
B. Nothing contained in this Agreement shall relieve Sellers
or any officer or director of the Purchaser of any liability or limit any
liability that he or she may have on account of common law fraud or purposeful
misrepresentation in connection with the transactions contemplated by this
Agreement or in connection with the delivery of any certificate required to be
delivered under the terms hereof, which certificate is untrue in any material
respect.
15.02. Confidentiality of Information. In the event of termination of
this Agreement, the Purchaser shall keep confidential the information (unless
readily ascertainable from public or published information or trade sources)
obtained from MCTI, SBHI, RDLLLC, Sellers or the Company or the Sellers
concerning their operations, financial condition and business, and shall return
to Company (without retaining copies thereof) any documents or other information
obtained from the Company or the Sellers in connection therewith. Purchaser
shall not disclose to any third party any such information regarding Sellers or
Company except only to those who have a need to know such information in order
to advise Purchaser with respect to this Agreement and the transactions
contemplated hereunder, and only if such third party is advised in advance of
the confidentiality of such information, and agrees to abide by this Section
15.03 to the same extent as if such person was a party to this Agreement.
Sellers and Company shall similarly keep confidential any non-public information
obtained from the Purchaser concerning the operation and business of Purchaser
and shall return to the Purchaser (without retaining copies thereof) any
documents or other written information obtained from the Purchaser in connection
therewith.
15.03. Public Announcements. Neither Purchaser, Company nor any
Sellers shall make any public announcement concerning this Agreement or the
transactions contemplated hereby without the prior written consent of the
Purchaser and Sellers.
15.04. Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Kansas.
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<PAGE> 82
15.05. Amendment. This Agreement may be amended, supplemented or
interpreted at any time only by a written instrument executed by all the parties
hereto.
15.06. Expenses; Brokers' and Finders' Fees. Sellers agree that they
are solely responsible for the payment of any brokers' or finders' fees or
commissions payable to any person employed by any Sellers in connection with the
transactions contemplated by this Agreement and will indemnify the Purchaser
with respect thereto, and Purchaser shall be solely responsible for any such fee
payable to any person employed by Purchaser. Except with respect to such fees or
commissions, each party hereto shall pay its or his or her own expenses incident
to this Agreement and the transactions contemplated hereby, including all fees
and expenses of their counsel, whether or not such transactions shall be
consummated.
15.07. Further Assurances. The parties hereto agree and acknowledge
that certain computations, exchange and notification of information and other
actions may be required from time to time and after the date hereof through and
after the Closing Date with respect to this Agreement. The parties hereto and
their respective representatives shall use their best efforts to cooperate with
one another in the expeditious completion of all such computations,
notifications and actions required. Without limiting the generality of the
foregoing, Sellers agrees to use his best efforts to assist Purchaser with
respect to the resolution of any matters arising in connection with or affecting
the title of the Company to any of its assets and properties. Sellers, MCTI,
SBHI, RDLLLC, the Company and Purchaser shall execute and deliver any and all
documents, and will cause any and all other action to be taken, either before or
after the Closing, which may be necessary or proper to effect or evidence the
provisions of this Agreement and the transactions contemplated hereby.
15.08. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have duly been given if
delivered or if mailed, by United States certified or registered mail, prepaid
to the parties or their assignees at the following addresses, or by confirmed
telecopy, (or at such other addresses as shall be given in writing by the
Parties to one another):
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<PAGE> 83
Purchaser:
Mr. John O. Barwick, III
Carmike Cinemas, Inc.
1301 First Avenue
Columbus, GA 31901
Tel: 706/576-3415
Fax: 706/576-3419
With a copy to:
F. Lee Champion, III
Champion & Champion
1030 Second Avenue
Columbus, GA 31901
Tel: 706/324-4477
Fax: 706/324-0470
Sellers:
MCT: c/o Morgan Creek Productions
4000 Warner Boulevard, Bldg. 76
Burbank, CA 91522
Tel: 818/954-2854
Fax: 818/954-4811
ATTN: Legal Department
SBH: HB Svenska Bio
Klippvagen 3
S-181 31 Lidingo
SWEDEN
Att: Peter Fornstam
Tel: 011-46-8-765-2610
Fax: 011-46-8-767-6140
With a copy to:
Michael L. Mayerson
Loeb & Loeb, LLP
10100 Santa Monica Boulevard
Suite 2200
Los Angeles, CA 90067
Tel: 213/688-3400
Fax: 213/688-3460
82
<PAGE> 84
RDL: Ron D. Leslie
12624 Cedar
Leawood, KS 66209
With a copy to:
James W. Kapp, Jr.
Spencer Fane Britt & Browne LLP
Suite 1400, 1000 Walnut Street
Kansas City, MO 64106-2140
Tel: 816/474-8100
Fax: 816/474-0476
15.10. Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy. The election of any one remedy by a party hereto shall not constitute a
waiver of the right to pursue other available remedies.
15.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.12. Entire Agreement. This Agreement, the Exhibits, certificates and
Schedules delivered pursuant hereto contain the entire agreement between the
parties hereto concerning the transaction contemplated herein and supersede all
prior agreements or understandings between the parties hereto relating to the
subject matter hereof, including the Letter of Intent. No oral representation,
agreement, understanding or modification made by any party hereto shall be valid
or binding upon such party or any other party hereto.
15.13. Additional Documents. The parties hereto will at any time after
the date hereof sign, execute, and deliver, or cause others so to do, all such
powers of attorney, deeds, assignments, documents and instruments and do or
cause to be done all such other acts and things as may be necessary or proper to
carry out the transactions contemplated by this Agreement.
15.14. Captions and Section Headings. Captions and section headings
used herein are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
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<PAGE> 85
15.15. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, or the indemnification set forth
herein, shall be settled by arbitration in accordance with the arbitration rules
of the American Arbitration Association, in Memphis, Tennessee, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
15.16. Schedules. To the extent that identical information may be
required by two or more schedules hereto, such information need be supplied on
only one schedule if appropriate cross-references are made on such other
schedules or if the information is readily available on another Schedule or in
the Agreement.
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<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, on the day and year first above written.
SELLERS:
SHAREHOLDERS OF MORGAN CREEK
THEATERS, INC.:
---------------------------------
JAMES G. ROBINSON
---------------------------------
GARY BARBER
SHAREHOLDERS OF SB HOLDINGS, INC.:
HB SVENSKA BIO
BY:
------------------------------
Title: Peter Fornstam
MEMBERS OF RDL CONSULTING LIMITED
LIABILITY COMPANY:
---------------------------------
RON D. LESLIE
----------------------------------
JUANITA R. LESLIE
85
<PAGE> 87
COMPANY:
FIRST INTERNATIONAL THEATERS,
A Delaware Joint Venture
BY: MORGAN CREEK THEATRES, INC.
A Delaware Corporation
BY:
-----------------------------
Title:
-----------------------
BY: SB HOLDINGS, INC.
A Delaware Corporation
BY:
-----------------------------
Title:
-----------------------
BY: RDL CONSULTING LIMITED LIABILITY
COMPANY, a Wyoming Limited
Liability Company
BY:
-----------------------------
Member
MCTI:
MORGAN CREEK THEATRES, INC.
A Delaware Corporation
BY:
--------------------------------------
Title:
-----------------------
SBHI:
SB HOLDINGS, INC.
A Delaware Corporation
BY:
--------------------------------------
Title:
-----------------------
86
<PAGE> 88
RDLLLC:
RDL CONSULTING LIMITED LIABILITY
COMPANY, a Wyoming Limited
Liability Company
BY:
---------------------------------------
Member
87
<PAGE> 89
PURCHASER:
CARMIKE CINEMAS, INC.
BY:
---------------------------------------
Title:
---------------------------
EASTWYNN THEATRES, INC.
BY:
---------------------------------------
Title:
---------------------------
88
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE
($000's omitted, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Average shares outstanding 11,251 11,167 11,215 11,169
Net effect of dilutive stock options
based on the treasury stock method 132 130 120 -0-
-------- --------- ---------- ----------
TOTALS 11,383 11,297 11,335 11,169
======== ========= ========== ==========
NET INCOME (LOSS) $ 5,941 $ 4,899 $ 9,906 $ (21,015)
======== ========= ========== ==========
NET INCOME(LOSS) PER SHARE $ .52 $ .43 $ .87 $ (1.88)
======== ========= ========== ==========
</TABLE>
Note: Fully diluted calculation is not presented because dilution is less than
3%.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,636
<SECURITIES> 3,177
<RECEIVABLES> 3,811
<ALLOWANCES> 0
<INVENTORY> 3,614
<CURRENT-ASSETS> 26,610
<PP&E> 589,236
<DEPRECIATION> 133,252
<TOTAL-ASSETS> 523,779
<CURRENT-LIABILITIES> 59,881
<BONDS> 0
340
0
<COMMON> 0
<OTHER-SE> 192,209
<TOTAL-LIABILITY-AND-EQUITY> 523,779
<SALES> 65,684
<TOTAL-REVENUES> 218,531
<CGS> 8,381
<TOTAL-COSTS> 172,846
<OTHER-EXPENSES> 19,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,643
<INCOME-PRETAX> 15,977
<INCOME-TAX> 6,071
<INCOME-CONTINUING> 9,906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,906
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
</TABLE>
