FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ............... to ...............
Commission file number 1-649
READING COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-6000773
(State of incorporation) (I.R.S. Employer Identification No.)
30 South Fifteenth Street
13th Floor
Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 215-569-3344
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 28, 1996, 4,961,186 shares of Class A Common Stock and 12,218
shares of Common Stock were outstanding and the aggregate market value of voting
stock held by nonaffiliates of the Registrant was approximately $22,799,231.25.
Documents incorporated by reference:
Part III: Portion of proxy statement for 1995 Annual Meeting of Reading
Company shareholders.
<PAGE>
PART I
Item 1. Business
General
The Company was organized under the laws of Pennsylvania in 1833. It
operated the Reading Railroad until April 1, 1976, when substantially all of the
Company's railroad assets were conveyed to Consolidated Rail Corporation
("Conrail").
In 1993, the Company determined to focus its activities on the
"Beyond-the-Home" segment of the entertainment industry, acquiring Theater
Acquisitions of Puerto Rico, Inc. ("TAPR") for a cash purchase price of $22.7
million in mid-1994. At the time of acquisition, TAPR operated six motion
picture exhibition theaters with a total of 36 screens in the Commonwealth of
Puerto Rico. Renamed Cine Vista in 1994, the theater circuit currently consists
of 44 screens in 7 locations with an additional 16 screens under development.
Cine Vista is also in negotiations with respect to several additional theater
locations.
During 1995, the Company initiated theater development activities in
Australia. In November 1995, the Company and Craig Corporation ("Craig"), the
owner of approximately 49.3% of the Company's outstanding capital stock, formed
Reading International Cinemas LLC (referred to herein together with its
Australian subsidiaries as "Reading International"), a limited liability
corporation owned equally by the Company and Craig to exploit opportunities in
Australia. Reading International has acquired a 43 acre site in Melbourne, New
South Wales and is currently seeking permits for the developments of a 24 screen
multiplex cinema on this site. Reading International is also currently in
negotiations with respect to several additional locations.
The Company also currently owns approximately 27 parcels of real estate
located primarily in Pennsylvania and is a participant in two real estate joint
ventures in center city Philadelphia.
Description of Business
The Company also has been liquidating certain of its assets since its
emergence from bankruptcy in 1981. By late 1993, the various operating
businesses owned by the Company had been sold.
In late 1993, following a review of investment opportunities in a number
of industries, the Company determined to focus on acquiring or developing
businesses in the "Beyond-the-Home" segment of the entertainment industry. The
Company entered into two other development projects in the "Beyond-the-Home"
segment of the entertainment industry in 1993 and early 1994: a joint venture
project with Pacific Theatres ("Pacific") to develop multiplex cinemas in
California and Hawaii ("PRT") and a project to develop a theme park based on the
Wizard of Oz in Kansas (the "Oz Project"). Effective July 1, 1994, the Company
acquired Cine Vista for a cash purchase price of $22.7 million, inclusive of
$323,000 of acquisition expenses. Cine Vista operates 7 motion picture theaters
in Puerto Rico. With the acquisition of Cine Vista, the development of internal
operating capabilities, and the focusing of the Company's attention on foreign
exhibition opportunities, the Company determined to terminate PRT and to make no
additional financial commitments to the Oz Project. The Company continues to
seek acquisitions and development opportunities in the "Beyond-the-Home" segment
of the entertainment industry, but is currently emphasizing cinema exhibition
opportunities. During 1995, the Company initiated theater development activities
in Australia. In November 1995, the Company and Craig formed Reading
International, a limited liability corporation owned equally by the Company and
Craig, to exploit opportunities in Australia.
The Company's real estate activities include the sale or development of
certain center city Philadelphia property, the sale of parcels outside center
city and participation in two real estate joint ventures. Proceeds from the
Company's real estate activities and sales of operating businesses, to the
extent not needed to fund the Company's real estate operations, development and
acquisition activities or to reduce indebtedness, have been held in readily
marketable securities issued by the United States Treasury and federal agency
securities, with the intent of preserving capital until needed in accordance
with the Company's business plan to develop or acquire operating businesses. The
Company attempts to avoid investment risk to the maximum extent practicable by
holding
2
<PAGE>
federal agency securities and United States Treasury obligations with maturities
consistent with presently anticipated cash requirements.
Cine Vista
Cine Vista operates motion picture exhibition theaters in seven leased
locations in Puerto Rico. Cine Vista currently has 16 screens under development
in two locations, including a ten screen complex to replace an existing six
screen facility. Cine Vista is also involved in negotiations for additional
theater sites in Puerto Rico. While no assurances can be given, the Company
anticipates a net increase of at least 12 screens over the next 24 months. Cine
Vista continues to seek additional sites for the development of multiscreen
movie theaters in Puerto Rico.
All of Cine Vista's theaters are modern multiscreen facilities.
Number of
Existing Theaters Location Screens
- - ----------------- -------- -------
Plaza de las Americas Mall San Juan 10
El Senorial Shopping Center San Juan 4
Cinema Centro Bayamon * 6
Plaza del Norte Shopping Center Hatillo 6
Mayaguez Mall 1 Hormigueros ** 6
Cayey Shopping Center Cayey 4
Plaza Palma Real Humacao 8
Under Development
- - -----------------
Mayaguez Shopping Center Mayaguez 6
Mayaguez Mall 1 Hormigueros ** 10
* San Juan metropolitan area
** Mayaguez metropolitan area
1 Cine Vista is negotiating to demolish the building housing four of the
existing six screens at the Mayaguez Mall and build a 10-plex on the
site. After completion of the 10-plex, the remaining two screens at the
Mayaguez Mall would be returned to the landlord.
Puerto Rico is a self-governing Commonwealth of the United States with a
population of approximately 3.8 million people. The Commonwealth exercises
control over internal affairs similar to states; however, the relationship with
the United States Federal Government is different than that of a state.
Residents of Puerto Rico are citizens of the United States but do not vote in
national elections and, with certain exceptions, do not pay federal income
taxes. Income taxes are paid instead under a system established by the
Commonwealth. In recent years there have been two major views concerning the
future relationship with the United States Government, one favoring statehood
and the other favoring continuation of commonwealth status. In 1993, Puerto Rico
voters were asked in a plebiscite to express their preference for statehood
(48.4%), commonwealth status (46.2%) or independence (4.4%). The United States
mainland is Puerto Rico's largest trading partner.
During the last four years, the Commonwealth has undergone significant
retail shopping center development during which period the number of multiplex
theaters has increased substantially. With approximately one screen per 24,000
of population, versus approximately one screen per 10,000 in the mainland United
States, the Company
3
<PAGE>
believes that Cine Vista has an opportunity to expand its operations through the
development of new multiplex theaters and improvement of its existing
operations.
Cine Vista derives approximately 70% of its revenues from box office
receipts. Ticket prices vary by location, and provide for reduced rates for
senior citizens and children. Box office receipts are reported net of a 10%
excise tax imposed by the Commonwealth. Show times and features are placed in
advertisements in local newspapers with the costs of such advertisements paid by
Cine Vista. Film distributors may supplementally advertise certain feature films
with the costs generally paid by distributors.
Concession sales account for approximately 25% of total revenues.
Concession products primarily include popcorn, candy, and soda. Cine Vista has
implemented training programs and incentive programs and experiments with
product mix changes in order to increase the amount and frequency of concession
purchases by theater patrons.
Screen advertising revenues contribute approximately 4% of total revenues.
Cine Vista has agreements with a major soft-drink bottler and an independent
advertising production company to show advertisements on theater screens prior
to feature film showings. Other sources of revenue include revenues from theater
rentals for meetings, conferences, special film exhibitions and vending and
video machine receipts or rentals.
Films are licensed under agreements with major film distributors and
several local distributors specializing in films of special interest to the
Commonwealth. Commonwealth regulations generally require that film exhibitors be
provided with an opportunity to view films prior to submitting bids, that film
distributors provide advance notice of films which will be provided to the
market, and are generally designed to preclude anticompetitive practices. Films
are licensed on a film-by-film, theater-by-theater basis. Generally, film
payment terms provide for payment to film distributors under a percentage of
gross box office receipts formula or an adjusted gross receipts formula. Under
the gross receipts formula, the film distributor receives a specified percentage
of the gross box office receipts. Ordinarily, the percentage will decline from a
range of 60-70% in the first playweek to a low of 30% after 4-5 weeks. Under an
adjusted gross receipts formula, the film distributor receives a specified
percentage (usually 90%) of the box office receipts over the "House Allowance,"
a negotiated allowance for theater expenses.
Cine Vista licenses film from substantially all of the major United States
studios and is not dependent upon any one film distributor for all of its
products. However, in the event the Company was unable to license film from a
major studio, such lack of supply could have a material effect upon Cine Vista's
business. Cine Vista believes that the popularity of the Puerto Rico exhibition
market and the Commonwealth rules governing film licensing make such a situation
unlikely. In 1995, films licensed from Cine Vista's 4 largest film suppliers
accounted for approximately 65% of Cine Vista's box office revenues.
Competition - The Company believes there are approximately 30 first-run
movie theaters in daily operation with approximately 156 screens in Puerto Rico.
Based upon number of screens, box office revenues and number of theaters, Cine
Vista is the second largest exhibitor in the Commonwealth. The three largest
exhibitors are believed to account for over 98% of the box office revenues
recorded in 1995 by theaters in daily operation. Competition among the theater
exhibitors exists not only for theater patrons within certain geographic areas,
but also for the licensing of films and the development of new theater sites.
The number of sites suitable for multiplex cinema is limited. Competitors of
Cine Vista are expected to open competitive theaters with approximately 30
screens during the next twelve months, certain of which are in locations
competitive with those of Cine Vista's. It is likely that these new theaters
will attract business that would otherwise have gone to theaters owned by Cine
Vista.
Seasonality - Most major films are released to coincide with the summer
months, when schools are closed, or the winter holiday seasons. Accordingly,
Cine Vista has historically recorded greater revenues and earnings during the
second half of the calendar year.
4
<PAGE>
Reading International LLC
In November 1995, the Company and Craig formed Reading International to
develop and operate multiplex cinemas in Australia. Reading and Craig each
committed to make an initial contribution of $5 million on an as needed basis
for an aggregate initial capitalization of $10 million. The provisions of the
agreement which governs the activities of Reading International provide, among
other things, that each party will have preemptive rights with respect to the
provision of future capital and rights of first refusal regarding any proposed
disposition of the other's interest in Reading International.
Reading International has retained the services of several key executive
employees resident in Australia to assist in the implementation of its plan to
be a major participant in the Australian market for multiplex theaters. A site
has been acquired in Melbourne, Australia, on which the Company intends to
develop a 24 screen multiplex theater, subject to obtaining the necessary
governmental land use entitlements and approvals. The contracts with respect to
that site provide for a total purchase price of approximately $6.5 million. In
addition, corporate joint venture agreements between Reading International and
an existing owner and operator of cinemas in Australia are currently being
negotiated with respect to the development and management of certain additional
cinema sites. Reading International is also in negotiation with several
developers and landlords with respect to other potential locations.
On March 29, 1996, the Company and Craig entered into a capital funding
agreement (the "Capital Funding Agreement") with respect to Reading
International pursuant to which they agreed to increase the capital committed by
the Company and Craig to Reading International from $10 million to approximately
$103 million through a combination of cash contributions and secured capital
funding undertakings. Under the terms of the Capital Funding Agreement, the
Company and Craig each agreed to immediately contribute to Reading International
$12,500,000 in cash, for an aggregate $25,000,000. In addition, the Company and
Craig have undertaken to contribute up to an additional $37,500,000 each, for an
aggregate future commitment of $75,000,000 on an as needed basis. The
commitments of the Company and Craig are secured by various assets of the two
parties. The collateral pledged by Craig was reviewed by an independent
committee of the Company's Board of Directors comprised of outside directors who
are unaffiliated with Craig, and found to be adequate.
Although the Company believes that there are significant opportunities for
multiplex cinema development in Australia, several substantial and well
capitalized competitors are already well established and active in this market.
Accordingly, although Reading International believes that it has retained
talented and experienced senior executives to lead its operations in Australia,
no assurance can be given that Reading International will be able to
successfully develop sites or to compete successfully in this market. Reading
International activities in this market are currently entirely developmental in
nature.
Other Acquisition and Development Activities
On November 8, 1995, the Company, for a price of $1,285,000, acquired from
a major bank a judgement encumbering, among other things, a controlling interest
in a Company which owns a Manhattan multiplex theater. The judgement has been
acquired as part of the Company's plan to acquire, in conjunction with
Manhattan-based City Cinemas Corp. ("City Cinemas"), all or at least a
controlling interest in this multiplex theater. James J. Cotter, Chairman of the
Company, has an ownership interest in City Cinemas. The Company has also
acquired options to obtain shares representing 5/13ths of the voting power of
the company owning the multiplex theater and to obtain certain other creditor
claims against that company. No assurance can be given that the Company's plan
to acquire the theater will ultimately prove successful.
In January 1994, the Company and an affiliate of Pacific formed PRT as a
California general partnership in order to fund the development of new multiplex
theaters to be built and managed by Pacific in California and Hawaii. In early
1995, the Company and Pacific dissolved PRT in order to permit the Company to
focus on international theater exhibition opportunities and its expansion of
Cine Vista.
The Company loaned Oz Resorts and Entertainment, Inc. ("OREI") a total of
$795,000 in late 1993 and early 1994. The loans were made as part of a
transaction intended to result in the acquisition by the Company of a
controlling interest in OREI, which owns the rights to the Oz Project, a planned
destination theme park, hotel and golf complex in Kansas City, Kansas. In May
1994, the Company entered into an agreement with OREI which provided the Company
with a right, but no obligation, to participate in future debt or equity
offerings by OREI. The Company elected to write off the $795,000 loan to OREI
during 1994 due to the developmental nature of the project. As a result of the
Company's acquisition of Cine Vista and its decision to explore international
theater exhibition opportunities, the Company has determined not to enter into
further financial commitments with respect to the Oz Project.
5
<PAGE>
Real Estate
The Company's real estate activities include the managed sale of certain
of its real properties, the possible future development of certain center city
Philadelphia properties and participation in two real estate joint ventures.
The Company owns property in the Market Street East area which is situated
at the hub of center city Philadelphia. Company-owned holdings in Market Street
East include several parcels leased to a parking lot operator near the site of
the Pennsylvania Convention Center, which total approximately .67 acres. See
"Properties."
In addition to its properties in center city Philadelphia, the Company
also owns a viaduct, a raised structure which was used to carry trains (the
"Viaduct"), north of Vine Street to Fairmount Avenue and adjacent parcels which
collectively total approximately 6.75 acres. The Company also owns approximately
23 parcels and other properties, including rights-of-way, located primarily in
eastern Pennsylvania totaling approximately 425 acres. The Company is a
participant in two real estate joint ventures, Parametric Garage Associates and
S.R. Developers. See "Properties."
Employees
Cine Vista employment is seasonal with the number of employees ranging
from approximately 165 to 220 depending upon the time of the year. Approximately
15 projectionists are covered by a collective bargaining agreement which expires
in May 1997. In late 1993, certain part-time employees voted to be represented
by a collective bargaining unit. Approximately 80 employees would be covered by
the collective bargaining agreement. To date, no agreement has been signed
between the union representing the employees and Cine Vista.
Reading International employs eight people on a full-time or substantially
full time basis. In addition to Cine Vista employees and Reading International
employees, the Company has ten full-time employees and two part-time employees.
Classes of Common Stock
As of December 31, 1995, the Company had available approximately $163
million in tax loss carryforwards. In order to preserve these carryforwards, the
Company in 1989 in essence replaced its Common Stock with a new issue of Class A
Common Stock. Substantially all of the Company's outstanding capital stock is
now comprised of Class A Common Stock, which limits the ability of a holder
thereof to acquire more than 4.75% of the Company's outstanding capital stock
unless waived by the Board of Directors of the Company. The Board of Directors
has waived certain restrictions on the transfer of Class A Common Stock in order
to permit Craig to acquire up to approximately 49.9% of the Company's
outstanding capital shares and an unrelated investment partnership to acquire up
to 7%. Craig currently owns approximately 49.3% of the Company's outstanding
capital shares and the investment partnership owns approximately 5.4%.
Subsequent Event
On March 29, 1996 the (Company purchased from Craig 1,564,473 shares of
the common stock, par value $.01 per share, of Citadel Holding Corporation
("Citadel" and the "Citadel Common Stock", respectively) for an aggregate
purchase price of $3,324,505, representing slightly less than $2.125 per share.
The closing price of Citadel Common Stock on the American Stock Exchange on
March 28, 1996 was $2.25 per share. The Company paid Craig for the Citadel
Common Stock with a five year, unsecured promissory note which provides for the
payment of interest at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 2.25%. The Company also acquired from Craig a one year option to
acquire 1,329,114 shares of the 3% Cumulative Voting Convertible Preferred
Stock, stated value $3.95 per share of Citadel (the "Citadel Preferred Stock")
and an option to acquire a warrant to acquire 666,000 shares of Citadel Common
Stock (the "Warrant").
6
<PAGE>
The option to acquire the Citadel Preferred Stock (the "Preferred Share
Option") will be exercisable commencing on the later to occur of July 1, 1996 or
ten business days after the date of the next Citadel Annual Meeting of
Stockholders. The Preferred Share Option is exercisable for a period of twelve
months at an exercise price equal to the fair market value of the Citadel
Preferred Stock as determined by an investment banking firm to be mutually
agreed upon or, if the Company determines to proceed with a transaction or
series of transactions pursuant to which the Company acquires sufficient
additional shares of Citadel Common Stock to permit the consolidation of the
Company and Citadel for Federal income tax purposes (an "Acquisition
Transaction") the exercise price shall be in the amount and form of the price
paid by the Company to an unrelated stockholder pursuant to such Acquisition
Transaction. In all other cases the exercise price for the Preferred Share
Option is payable by delivery by the Company of its promissory note having the
same terms (including due date) of the note issued by the Company to acquire the
Citadel Common Stock. The Company paid an option fee of $50,000 in cash upon
acquisition of the Preferred Share Option, which will be credited against the
Preferred Share Option exercise price if exercised. The Company may extend the
exercise period for the Preferred Share Option for an additional 12 months by
paying an additional option fee of $50,000 prior to expiration of the original
12-month option period, which additional $50,000 will also be credited against
the option exercise price, if exercised.
The option to acquire the Warrant (the "Warrant Option") is exercisable if
the Company determines to proceed with an Acquisition Transaction and remains
exercisable for a period of twelve months, provided that any closing on the
exercise of the Warrant Option is conditioned upon consummation of an
Acquisition Transaction. No separate consideration was paid by the Company for
the grant of the Warrant Option. The Warrant Option exercise price will be the
price per share paid to an unrelated Citadel stockholder in an Acquisition
Transaction less $3.00 (the exercise price of the Warrant); provided, however,
that if Craig exercises the Warrant prior to exercise of the Warrant Option, the
Warrant Option shall become an option to purchase the Citadel Common Stock
issued on exercise of the Warrant for an option price equal to the full price
paid to an unrelated Citadel stockholder in an Acquisition Transaction.
If the Company determines to proceed with an Acquisition Transaction,
Craig has the right under the agreement to require the Company to purchase the
Preferred Shares and the Warrant (or Common Stock issued on exercise of the
Warrant) on the same terms as if the Company had exercised the Preferred Share
Option and the Warrant Option.
The transaction was separately reviewed, negotiated and approved by a
special committee composed of the independent directors of the Board of
Directors.
7
<PAGE>
Item 2. Properties
Center City Philadelphia Properties
The Company's properties in center city Philadelphia, all of which are
owned in fee, consist of several parcels of land aggregating approximately .67
acres located near or adjacent to the site of the Convention Center currently
leased to a parking lot operator, the Viaduct north of Vine Street to Fairmount
Avenue and adjacent parcels, comprising approximately 6.75 acres, and properties
owned by partnerships in which the Company has interests. In 1993, the Company
sold the Reading Terminal Headhouse, a vacant nine-story building located at
12th and Market Streets containing approximately 196,000 gross rentable square
feet, and received gross proceeds of approximately $4.3 million. A center city
Philadelphia parcel, totaling .28 acres, was sold in March 1994 generating
gross proceeds of approximately $550,000.
Partnership Properties
S.R. Developers: A subsidiary of the Company is a general partner in S.R.
Developers, a partnership which owns one property in center city
Philadelphia.
Parametric Garage Associates: A subsidiary of the Company is a general
partner in Parametric Garage Associates, a partnership which owns the
750-car Gallery II Parking Garage (the "Garage"). The Garage is adjacent
to the Pennsylvania Convention Center Complex. The Company has primary
responsibility for the leasing and management of 19,000 gross rentable
square feet of retail space on the ground level of the Garage pursuant to
a management agreement and provides certain other management services to
the partnership.
Other Domestic Real Estate
When the Company's railroad assets were conveyed to Conrail, the Company
retained fee ownership of approximately 650 parcels of real estate located
throughout Pennsylvania, Delaware, and New Jersey. In addition, the Company
retained portions of 52 abandoned rights-of-way with about 200 more parcels
abutting these rights-of-way. Approximately 23 parcels and rights-of-way located
outside of center city Philadelphia are still owned by the Company. The parcels
consist primarily of vacant land and buildings, some of which are leased.
Cine Vista Properties
All of Cine Vista's real properties are leased. The seven theaters are
leased pursuant to long-term leases with remaining terms and renewal options
ranging from 12 to 38 years. Cine Vista has executed an additional theater
lease, which lease term commences with occupancy, expected in late 1996. The
landlord of one of Cine Vista's theaters has the right to terminate the lease
relating to space presently housing two theaters, subject to six months' notice.
All of Cine Vista's theater leases provide for the payment of minimum fixed
rental payments and, in certain cases, may require additional payments based
upon a percentage of theater revenues. Cine Vista also leases approximately
6,100 square feet of warehouse space and 2,200 square feet of office space.
Reading International Properties
Reading International maintains leased offices in Melbourne and Sydney,
Australia pursuant to short term leases. The total space leased is approximately
2,300 square feet. In December 1995, Reading International acquired a site of
approximately 43 acres in a suburban area outside of Melbourne. Reading
International has also entered into a purchase agreement to acquire an
additional six acres adjacent to the acquired site. Reading International
intends to build a 24 screen multiplex theater on this site and is in the
process of securing necessary permits to permit such development. No assurances
can be given that the Company will be successful in this development effort.
Reading International is also aggressively pursuing other locations in and about
Sydney and
8
<PAGE>
Melbourne and elsewhere in Australia upon which it may develop theater
operations. It has made several refundable deposits related to lease and
purchase proposals.
Item 3. Legal Proceedings
Reading Railroad Employee Health Claims
The Company is a defendant in actions instituted in the United States
District Court for the Eastern District of Pennsylvania or the [Pennsylvania
State] Court of Common Pleas by or on behalf of persons who had been employed by
the Reading Railroad prior to its reorganization under the federal bankruptcy
laws in 1980. In general, these actions also name Conrail, which acquired
substantially all of Reading's railroad assets in connection with the Company's
reorganization, as a defendant. Approximately 115 plaintiffs seek damages under
the Federal Employers Liability Act ("FELA") in varying amounts for illnesses or
death allegedly caused by exposure to asbestos fibers while employed by the
Reading Railroad and, in some cases, by Conrail. Approximately 122 plaintiffs in
pending actions seek damages in varying amounts for alleged impaired hearing
suffered while employed by the Reading Railroad prior to its reorganization and,
in some cases, by Conrail. The underlying actions are proceeding to trial.
The eventual outcome of the above-described litigation cannot be predicted
at this time, and the Company's liability, if any, cannot be accurately
determined. However, during 1990, the Company and its insurance carriers entered
into an agreement (the "Settlement Agreement") which provided the Company with
reimbursement for prior payments made to claimants in certain personal injury
actions and which provides for the Company to receive reimbursement of amounts
expended in conjunction with the matters described above or, if the Company
elects, to receive reimbursement from the parties to the Settlement Agreement
prior to expenditures. Three participants in the insurance settlement are
insolvent. Unreimbursed claims by these three carriers have totaled $61,000. The
Company believes that it may be entitled to reimbursement of such amounts from
the other parties to the Settlement Agreement and may file for an arbitration
hearing on such matters. The Company believes that the amounts available under
the Settlement Agreement are sufficient to prevent the above-described
litigation from having a materially adverse effect on the financial position,
results of operations, or liquidity of the Company.
Cine Vista
A landlord of Cine Vista has alleged that Cine Vista underpaid rent by
approximately $480,000 for the thirty month period ended December 31, 1995. The
Company is contesting the landlord's claim and believes the claim to be without
merit. If the landlord were to prevail in its assertion, the Company is
indemnified by TALP for the amount due at June 30, 1994 ($180,000) and the
Company believes it would be entitled to a reduction in the purchase price of
TAPR relating not only to the 18 months ended December 31, 1995 but also
relating to the 17 1/2 future years under the lease. Such purchase price
reduction would be funded, in part, from the proceeds of the TAPR purchase
escrow.
Environmental Litigation
McAdoo Site
The Company is one of approximately 63 private parties (the "Settlors")
which in 1988 signed a consent decree (the "1988 Consent Decree") to perform a
remedial action (the "RA") on a Superfund site located on land owned largely by
the Company in McAdoo, Pennsylvania ("McAdoo"). Apart from future operation and
maintenance ("O&M") expenses, the entire RA is complete. Under the 1988 Consent
Decree, a portion of the costs the Settlors incurred to perform the RA before
O&M is reimbursable from the Hazardous Substance Superfund (the "Fund"). In
1992, the Settlors submitted to the Fund a claim for reimbursement of such
pre-O&M expenses (the "Claim").
To protect their right to seek contribution towards O&M from certain
potentially responsible parties ("PRPs") who had refused to join in the 1988
Consent Decree (the "Non-Settlors"), the Settlors in 1992 attempted to intervene
in the attempted settlement of the federal civil action which the United States
had instituted against the Non-Settlors (the "Non-Settlors Litigation"). An
agreement in principle to settle the Non-Settlors Litigation (the "Tentative
Settlement") has now been reached and is being documented by the United States.
The Company anticipates that the Settlors will approve the Tentative Settlement.
Under the Tentative Settlement, the Settlors would withdraw the Claim and
instead recover most of the reimbursement sought thereby from funds which the
Non-Settlors had deposited, before the Settlors attempted intervention, into a
court registry to settle the Non-Settlors Litigation. The amount recovered by
the Settlors from the court registry, along with an additional amount newly
contributed by the Non-Settlors, would be dedicated to performing the remaining
O&M at McAdoo and would also be used to perform certain additional ground water
9
<PAGE>
monitoring sought by the United States. The Company has been advised that, in
the likely event that the Tentative Settlement is finalized, it is unlikely that
any additional amounts will be required to meet any of the Settlors' obligations
under either the 1988 Consent Decree or the Tentative Settlement. Any amounts
which might be so required would not be material.
Douglassville Site
Reading Company ("Reading") and a wholly-owned subsidiary, Reading
Transportation Company ("RTC"), have each been advised by the Environmental
Protection Agency ("EPA") that they are PRPs under environmental laws including
Federal Superfund legislation ("Superfund") for a site located in Douglassville,
Pennsylvania. The EPA issued an Administrative Order under Superfund against 34
PRPs requiring, among other things, that the named parties be required to
incinerate materials at the site pursuant to a June 30, 1989 Record of Decision
("ROD"). The ROD estimated that the incineration would cost approximately $53
million. Thirty-six PRPs were also named in a civil action brought by the United
States which seeks to recover alleged costs incurred at the site by the United
States of approximately $22 million. Reading and RTC have each been named in a
third-party action instituted by the majority of the 36 PRPs sued by the United
States. The actions instituted against the Company and approximately 300 PRPs
seek to have the parties contribute to reimbursement for past costs and any
costs associated with further remediation at the site.
On September 14, 1995, the federal district court judge who presided over
Reading's reorganization ruled that all liability asserted against Reading
relating to the site was discharged pursuant to the consummation order issued in
conjunction with the Company's amended plan of reorganization on December 31,
1980. The United States Department of Justice and a named defendant in the above
described Administrative Order have filed appeals of the decision. The judge's
decision did not affect the potential liability of RTC for the site. RTC has no
assets and therefore cannot fund a settlement or judgement relating to this
matter and the Company believes that the potential liability of RTC, if any, is
not in excess of $300,000. Based upon the appeal and possible alternate attempts
by the PRPs to obtain Reading's participation in funding for the site as well as
the existence of the other environmental matters set forth below, the Company
has not reduced its provision for these matters, which totals $1.2 million.
Reading Terminal Train Shed Litigation
In 1991, the Company filed a lawsuit in the United States District Court
for the Eastern District of Pennsylvania against the Southeastern Pennsylvania
Transportation Authority ("SEPTA"), Conrail, the City of Philadelphia and other
parties which sought to recover a portion of the approximately $9 million
expended by the Company in conjunction with the cleanup of polychlorinated
biphenyls ("PCBs") in the Reading Terminal Train Shed and a portion of the
viaduct south of Vine Street. The action also sought a declaratory judgement as
to future costs which could be incurred in cleaning up the remaining portions of
the Viaduct. In January 1995, the parties agreed in principle to settle the
claim for approximately $2.35 million which amount the Company anticipates
receiving during 1996. The defendants have also agreed to pay an amount ranging
from 52% to 55% of costs incurred by the Company, if any, relating to possible
PCB contamination on the Viaduct.
Atlantic City Site
During 1995, the Company settled an action seeking the recovery of
$3,800,000 of alleged environmental cleanup costs from five defendants under
various provisions of New Jersey law for $235,000 which approximates the amount
previously accrued by the Company to provide for its share of the liability.
Other Environmental
The Company removed six underground storage tanks at a site owned by the
Company in 1991 and in conjunction with such activities submitted an
environmental assessment of the site to the Pennsylvania Department of
Environmental Protection ("DEP"). DEP has advised the Company that no further
action is required at the site. With the advance knowledge and consent of DEP,
the Company extinguished a fire at a Company-owned site which
10
<PAGE>
had been used as a landfill by the Reading Railroad. The Company neither
anticipates nor faces any administrative action against it by DEP concerning the
site.
The Company believes that the Viaduct may be contaminated by PCBs resulting
from former railroad operations on that property conducted by or on behalf of
the Reading Railroad, Conrail, the City of Philadelphia or SEPTA. The Company
has advised the EPA of the potential contamination. The Company has not
determined the scope or extent of any such PCB contamination. However, the
Company has been advised by counsel that, given the lack of regulatory attention
to the Viaduct in the eleven years which have elapsed since EPA was notified of
the likelihood of contamination, it is unlikely that the Company will be
required to decontaminate the Viaduct or incur costs related thereto. In the
event that the Company was required to incur expenditures to remove PCB
contamination on the Viaduct, under terms of the settlement described above,
Conrail, the City of Philadelphia and SEPTA would be required to fund 52% to 55%
of such costs.
Prior to the Company's reorganization, the Company had extensive railroad
and related operations. Such operations may have contributed to environmental
contamination of properties now owned by the Company, previously sold or leased
by the Company, or to which the Company, prior to its reorganization, sent
waste. The ultimate extent of liabilities, if any, with respect to such matters,
as well as the timing of cash disbursements, if any, cannot be determined.
However, management is of the opinion, based on the information currently
available to it, that while the ultimate liability resulting from such matters
could have a material effect upon the results of operations in a given year,
they will not have a material adverse effect upon the Company's financial
position or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
11
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
---- --- --------
James J. Cotter 57 Chairman of the Board of Directors
S. Craig Tompkins 45 President and Director
Robert F. Smerling 61 Chief Executive Officer,
Domestic and Puerto Rico Cinema Operations,
Reading Cinemas and Cine Vista
John Rochester 52 Chief Executive Officer, Australian Cinemas
Operations and Reading Australia Pty Ltd.
James A. Wunderle 43 Executive Vice President, Chief Operating
Officer, Treasurer and Chief Financial
Officer
Charles S. Groshon 42 Vice President
Eileen M. Mahady 30 Controller
Mr. Cotter has been Chairman of the Board of Directors since December
1991, Chairman of the Company's Executive Committee since March 1993 and a
director since September 1990. Mr. Cotter has been Chairman of the Board of
Craig since 1988 and a director since 1985. Mr. Cotter has been a director and
the Chairman of the Board of Citadel Holding Corporation ("Citadel") since 1991.
From October 1991 to June 1993, Mr. Cotter also served as the acting Chairman of
Citadel's wholly-owned subsidiary, Fidelity Federal Bank, FSB ("Fidelity"), and
served as a director of Fidelity until December 1994. Mr. Cotter has been a
director and Chief Executive Officer of Townhouse Cinemas Corporation (motion
picture exhibition) since 1987, Executive Vice President and a director of The
Decurion Corporation (motion picture exhibition) since 1969 and a director of
Stater Bros. Holdings, Inc. (retail grocery chain) and its predecessors since
1987. From 1988 through January 1993, Mr. Cotter also served as the President
and a director of Cecelia Packing Corporation (a citrus grower and packer), a
company wholly owned by Mr. Cotter. Mr. Cotter is also a director and Executive
Vice President of Pacific, a wholly-owned subsidiary of Decurion.
Mr. Tompkins has been President and a director of the Company since March
1994. Mr. Tompkins is also President and a director of Craig and has served in
such positions since March 1, 1994. Prior thereto, Mr. Tompkins was a partner in
the law firm of Gibson, Dunn & Crutcher for more than five years. Mr. Tompkins
has been a director of Citadel since May 1994 and a director of G&L Realty
Corp., a New York Stock Exchange listed REIT (Real Estate Investment
Trust), since December 1994. He serves as the Vice Chairman of Reading Cinemas
and Managing Director of Reading International.
Mr. Smerling has been President of Reading Cinemas, Inc. since November
1994. Mr. Smerling also serves as the President of Cine Vista and the Chief
Executive Officer of Reading International. Mr. Smerling served as president of
Loews Theater Management Corporation, a subsidiary of Sony Corporation, from May
1990 until November 1994. Mr. Smerling also serves as President and Chief
Executive Officer of City Cinemas, a motion picture exhibitor located in
New York City, New York. City Cinemas is an affiliate of James J. Cotter and has
entered into an Executive Sharing Agreement with the Company with respect to the
services of Mr. Smerling.
Mr. Rochester has been Chief Executive Officer of the Australian Cinemas
Operations since November 1995. From 1990 through 1995, Mr. Rochester was the
Managing Director of Television & Media Services Ltd.
12
<PAGE>
(formerly Hoyts Entertainment Ltd.). He also served in several other executive
offices for that organization since 1987.
Mr. Wunderle has been Chief Operating Officer since February 1990 and
Executive Vice President, Treasurer, and Chief Financial Officer since December
1988. He was Vice President of Finance, Chief Financial Officer and Treasurer
from January 1987 to December 1988.
Mr. Groshon has been Vice President of the Company since December 1988. He
was an internal auditor with the Company from August 1984 until December 1988,
and a staff accountant prior thereto.
Ms. Mahady has been Controller of the Company since April 1990. Prior to
joining the Company, she was a senior auditor with Ernst & Young. Ms. Mahady is
a Certified Public Accountant.
13
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Common Stock Summary
The following table sets forth the high and low prices of the Company's
Class A Common Stock from January 1, 1994 through December 31, 1995, as reported
on the National Market System of the National Association of Securities Dealers,
Inc. ("NASDAQ"). The Company's Common Stock trades infrequently on the
over-the-counter "pink sheet" market. Historical bid/asked data is insufficient
to provide high and low price information on the Company's Common Stock during
1994 and 1995. No cash dividends have been paid on either class of the Company's
common stock during any of the periods indicated. Management does not intend to
authorize the payment of dividends in the foreseeable future.
1995
Quarter 1st 2nd 3rd 4th
- - ------- --- --- --- ---
High 11 1/2 11 1/8 10 3/16 9 1/2
Low 9 5/8 9 7/8 9 8 1/2
1994
Quarter 1st 2nd 3rd 4th
- - ------- --- --- --- ---
High 11 3/4 10 1/2 11 1/8 11 1/2
Low 9 7/8 9 1/2 9 3/4 11
On March 28, 1996, the high, low, and closing prices of the Company's
Class A Common Stock were $10.81, $10.63 and $10.63, respectively. On March 28,
1996, there were approximately 1,200 shareholders of record of the Company's
Class A Common Stock and approximately 350 shareholders of record of the
Company's Common Stock, which amounts do not include individual participants in
security position listings.
14
<PAGE>
Item 6. Selected Financial Data
The following table sets forth certain historical consolidated financial
information for the Company. This table is based on, and should be read in
conjunction with, the Consolidated Financial Statements included elsewhere
herein and the related notes thereto.
(in thousands, except per share information)
<TABLE>
<CAPTION>
Year ended December 31, 1995(1) 1994(1) 1993 1992 1991
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $19,973 $ 10,990 $ 3,509 $ 4,505 $ 6,188
Income (loss) before cumulative
effect of accounting change 2,351 (1,652) (520) (3,424) 1,982
Cumulative effect of accounting
change 0 0 132 0 0
- - ----------------------------------------------------------------------------------------
Net income (loss) $ 2,351 ($ 1,652) ($ 388) ($ 3,424) $ 1,982
========================================================================================
Per share information:
Income (loss) before cumulative
effect of accounting change $ 0.47 ($ 0.33) ($ 0.11) ($ 0.69) $ 0.40
Cumulative effect of accounting
change 0 0 0.03 0 0
- - ----------------------------------------------------------------------------------------
Net income (loss) per share $ 0.47 ($ 0.33) ($ 0.08) ($ 0.69) $ 0.40
========================================================================================
- - ----------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- - ----------------------------------------------------------------------------------------
Total assets $75,544 $ 72,716 $ 70,121 $ 71,509 $76,272
Shareholders' equity $68,712 $ 66,086 $ 68,026 $ 68,416 $71,841
========================================================================================
</TABLE>
(1) Results of operations of Cine Vista have been included since its acquisition
effective July 1, 1994.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Due to the nature of the Company's historical business activities, the
Company's revenues and earnings have varied significantly reflecting the results
of real estate and other asset sales. In addition, the operating results of Cine
Vista are only included in the consolidated operating results of the Company
since July 1, 1994 (see Note 2 to the Consolidated Financial Statements
contained elsewhere herein and "Item 1. Business"). Accordingly, year-to-year
comparisons of operating results will not be indicative of future financial
results.
15
<PAGE>
Revenues:
Revenues increased to $19,973,000 in 1995 from $10,990,000 in 1994 and
$3,509,000 in 1993 due largely to the inclusion of $14,991,000 and $8,100,000 in
revenue from Cine Vista for the year and six months ended December 31, 1995 and
December 31, 1994, respectively. Cine Vista's business is seasonal and the
second six months of the year have historically provided more than a
proportionate share of annual revenue.
"Real estate" revenues include gains and losses from real estate sales,
rental income and real estate development activities. "Real estate" revenues
decreased to $272,000 in 1995 from $697,000 in 1994 and $533,000 in 1993 due in
part to fewer sales of the Company's remaining real estate parcels. Real estate
revenues included $179,000 in 1994 representing the Company's share of fire
insurance proceeds from the S.R. Developers joint venture and in 1993 included
$294,000 relating to the Rutherford Industrial Center joint venture as well as a
$151,000 loss from the sale of the Reading Terminal Headhouse (gross proceeds
received from the sale totaled $4,300,000). The Company has approximately 23
parcels and rights-of-way located outside of center city Philadelphia, all of
which are for sale, and several properties in center city Philadelphia which it
may sell or develop. Other than the parcels located in center city Philadelphia,
the size and location of the remaining properties limit their salability.
Accordingly, the Company believes that future proceeds from sales of real estate
will continue to decrease.
"Interest and dividends" revenues in 1995 increased $301,000 to $2,435,000
from 1994 and decreased $338,000 from $2,773,000 in 1993. The increase in
"Interest and dividends" revenue in 1995 versus 1994 was a result of higher
interest yields on invested funds. The reduction between 1993 and 1994 was due
to lower investable fund balances (due primarily to the $22,700,000 purchase of
Cine Vista) and lower interest yields in 1994 versus 1993.
"Condemnation and other" revenues increased to $2,341,000 in 1995 from
$79,000 in 1994 and $203,000 in 1993. In 1995, these revenues included
$1,146,000 in condemnation proceeds, $425,000 received by the Company in
settlement of certain litigation, $319,000 received in settlement of two matters
related to the Company's former railroad operations and $223,000 related to
unclaimed reorganization debt-holders' obligations (See Note 13 to the
Consolidated Financial Statements contained elsewhere herein).
Expenses:
"Theater costs,""Theater concession costs" and substantially all of
"Depreciation and amortization" expense reflect the direct theater costs of Cine
Vista's operations since Cine Vista's acquisition, effective July 1, 1994.
"General and administrative" expenses decreased $353,000 in 1995 from
$4,553,000 in 1994 to $4,200,000 in 1995. In 1995, these expenses included
$922,000 related to Cine Vista's operations for the twelve months ended December
31, 1995 versus $427,000 in such expenses for the six months ended December 31,
1994, both of which amounts are net of management fees paid to Reading Company
by Cine Vista. The increase associated with the inclusion of Cine Visa's general
and administrative expenses for a full year in 1995 was offset by a $795,000
charge in 1994 to fully reserve a loan to OREI (See Note 4 to the Consolidated
Financial Statements contained elsewhere herein). "General and administrative"
expenses increased $764,000 in 1994 from $3,789,000 in 1993 due primarily to the
inclusion of the $795,000 loan provision described above and $427,000 in Cine
Vista general and administrative expenses offset in part by a reduction in costs
resulting from the 1993 sale of the Reading Terminal Headhouse.
"Equity loss from investment in Australian theater developments" reflects
the Company's 50% share of the initial general and administrative expenses in
Australia and noncapitalized development expenditures relating to new theater
site analysis and selection (See Note 5 to the Consolidated Financial Statements
contained elsewhere herein). The Company does not anticipate material revenues
from Reading International during the next 18 months and therefore anticipates
continuing losses during such
16
<PAGE>
period as new theaters are developed and operations initiated. The investment in
and operating results of Reading International are reported under the equity
method.
During 1994, the Company increased its "Provision for environmental
matters" by $1,306,000, including $1,200,000 for the Douglassville Disposal Site
based upon the advice of the Company's counsel, who estimated that the likely
range of possible outcomes for the site was from $0 to $3,000,000, and an amount
paid of $106,000 (See "Item 3. Legal Proceedings" and Note 10 to the
Consolidated Financial Statements contained elsewhere herein). The Company
recorded a provision for environmental matters of $241,000 in 1993 and paid
environmental costs of $249,000, $133,000, and $676,000 during 1995, 1994 and
1993, respectively.
The "Condemnation and other" revenues of $2,341,000 comprised the
Company's net income of $2,351,000 in 1995 versus a loss of $1,652,000 in 1994
and a loss before the cumulative effect of an accounting change of $520,000 in
1993. Cine Vista contributed approximately $1,271,000 and $900,000 in earnings
for 1995 and the six months ended December 31, 1994, respectively.
Liquidity and Capital Resources:
The Company's existing financial resources are sufficient to fund the
Company's existing operations, obligations, acquisition plans and the present
development plans of Cine Vista and Reading International. Reading International
is actively seeking properties to develop in Australia and has acquired one site
and has made deposits for several other real property purchases or leases. The
Company is also negotiating to acquire a theater in Manhattan (See Note 4 to the
Consolidated Financial Statements contained elsewhere herein). Cine Vista has
two new theaters under development and is seeking additional theater sites in
Puerto Rico. In order to assure that the Company has adequate liquidity to fund
its current and planned activities the Company (i) arranged a line of credit for
Cine Vista (described below) (ii) formed Reading International and entered into
the Capital Funding Agreement (described below) and (iii) issued a promissory
note in conjunction with its acquisition of the Citadel Common Stock (described
below).
In November 1995, the Company and Craig formed Reading International in
order to make available additional capital and liquidity to develop theater
opportunities in Australia. On March 29, 1996, the Company and Craig entered
into the Capital Funding Agreement with respect to Reading International
pursuant to which they agreed to increase the capital committed by the Company
and Craig to Reading International from $10 million to approximately $103
million through a combination of cash contributions and secured capital funding
undertakings (See Note 16 to the Consolidated Financial Statements contained
elsewhere herein). The Company and Craig each agreed to immediately contribute
to Reading International $12,500,000 in cash and have undertaken to contribute
up to an additional $37,500,000 on an as needed basis (the "Funding
Commitment"). To secure the Funding Commitment, the Company pledged its interest
in Cine Vista and government agency securities. The Company may substitute
collateral for the Funding Commitment provided that the fair market value of the
collateral substituted is equal to at least 125% of the Funding Commitment or,
in the case of government or government agency securities, equal to 100% of the
Funding Commitment. The Capital Funding Agreement allows the Company and Craig
to be assured that each of the participants in Reading International has an
adequate asset base to meet its Funding Commitment without requiring the parties
to incur the expense associated with borrowing funds in advance of the need for
funding. If the Company is successful in its negotiation to acquire the
Manhattan theater described above, it anticipates utilizing the proceeds from
the sale of a portion of its government agency securities to fund the purchase
and substituting its interest in the acquired theater to secure its Capital
Funding Commitment.
Cine Vista entered into a revolving credit agreement in December 1995
(the "Credit Agreement"). In accordance with the terms of the Credit Agreement,
Cine Vista may borrow up to $15,000,000 to repay certain loans payable to a
wholly-owned subsidiary of the Company and fund certain new theater development
expenditures (See Note 14 to the Consolidated Financial Statements contained
elsewhere herein). No amounts are presently outstanding under the Credit
Agreement. The Company may use funds available under the Credit Agreement to
fund non-Cine Vista theater development activities or other activities provided
that a portion of such funds remain available under the Credit Agreement to fund
certain Cine Vista development projects.
On March 29, 1996, the Company purchased from Craig 1,564,473 shares
Citadel Common Stock for $3,324,505 (See Part I Subsequent Event and Note 17 to
the Consolidated Financial Statements contained elsewhere herein). The Company
paid Craig for the Citadel Common Stock with a five year unsecured promissory
note which provides for the payment of interest at a rate equal to LIBOR plus
2.25%. The Company also acquired from Craig a one year option to acquire, at
fair market value, as determined by an investment banker selected by the
parties, 1,329,114 shares of the 3% Cumulative Voting Convertible Preferred
Stock, stated value $3.95 per share of Citadel and an option to acquire a
warrant to acquire 666,000 shares of Citadel Common Stock. If the Company
elects to exercise the option to acquire the Citadel Preferred Stock, the
Company may pay for the acquisition with the issuance of a note with the same
terms as the note issued in payment of the Citadel Common Stock. Debt service on
the note (or notes, if the Company acquires the Citadel Preferred Stock) will be
paid from the Company's working capital.
In January 1995, the Company and several parties agreed to settle
litigation whereby the Company sought to recover certain environmental cleanup
costs previously expended by the Company on properties it formerly owned (See
Note 16 to the Consolidated Financial Statements contained elsewhere herein).
The agreement provides for the Company to receive payments totalling $2.35
million to recover these costs, which amount the Company anticipates receiving
in 1996. The parties to the settlement also agreed to pay an amount ranging from
52% to 55% of certain future costs, if any, the Company may incur in cleaning
environmental contamination on the Viaduct (See Note 10 to the
Consolidated Financial Statements contained elsewhere herein and "Legal
Proceedings -- Reading Terminal Train Shed Litigation").
Prior to the Company's reorganization, the Company had extensive railroad
and related operations. Such operations may have contributed to environmental
contamination of properties now owned by the Company, previously sold by the
Company, or to which the Company, prior to its reorganization, sent waste. The
ultimate extent of liabilities, if any, with respect to such matters, as well as
the timing of cash disbursements, if any, cannot be determined. However,
management is of the opinion, based on the information currently known, that
while the ultimate liability resulting from such matters could have a material
effect upon the results of operations in a given year, they will not have a
material adverse effect upon the Company's financial position or liquidity.
1995:
"Unrestricted cash and cash equivalents" together with "Available-for-sale
securities" decreased $747,000 in 1995 from $44,936,000 in 1994 to $44,189,000
at December 31, 1995. Working capital decreased $717,000 from $43,383,000 at
December 31, 1994 to $42,666,000 at December 31, 1995.
17
<PAGE>
While not necessarily indicative of its results of operations determined
under generally accepted accounting principles. Cine Vista's operating cash flow
(income before depreciation and amortization) of $2,625,000 contributed to the
Company's liquid funds in 1995. Other principal sources of liquid funds in 1995
were $2,435,000 in "Interest and dividends" income, $2,341,000 in "Condemnation
and other" proceeds from litigation (See Note 13 to the Consolidated Financial
Statements contained elsewhere herein), a decrease of $664,000 in "Insurance
proceeds receivable", a decrease of $208,000 in "Restricted cash" and $185,000
in proceeds from real estate joint venture investments.
In addition to operating expenses, principal uses of liquid funds in 1995
include a $1,040,000 increase in amounts "Due from affiliate" related to the
Company's advance to Reading International on behalf of Craig for their share of
certain capital contributions to the entity (See Note 5 to the Consolidated
Financial Statements contained elsewhere herein) which amount was reimbursed by
Craig to the Company in February 1996, $1,828,000 for the purchase of property,
plant and equipment related primarily to Cine Vista's new eight screen multiplex
theater which commenced operations during December 1995 (See Note 11 to the
Consolidated Financial Statements contained elsewhere herein) and $1,285,000 for
the purchase of a judgement encumbering certain cinema assets located in
Manhattan (See Note 4 to the Consolidated Financial Statements contained
elsewhere herein). Other uses of funds include $392,000 in payments of other
liabilities and an increase of $529,000 in "Amounts receivable."
1994:
"Unrestricted cash and cash equivalents" together with "Available-for-sale
securities" decreased $21,378,000 in 1994 from $66,314,000 at December 31, 1993
to $44,936,000 at December 31, 1994 due primarily to the $22,700,000 purchase of
Cine Vista. Working capital decreased accordingly. "Available-for-sale
securities" consist of liquid treasury securities having maturities in excess of
three months at the time of acquisition.
While not necessarily indicative of its results of operations determined
under generally accepted accounting principles, Cine Vista's operating cash
flows (income before depreciation and amortization) of $1,573,000 for the period
subsequent to July 1, 1994 (the acquisition effective date) contributed to the
Company's liquid funds in 1994. Other principal sources of liquid funds were
$2,114,000 in "Interest and dividends" income and receipt of $1,000,000 in full
repayment of a loan made in 1993 to an officer of Reading Cinemas in accordance
with the terms of his employment by the Company (see Note 12 to the Consolidated
Financial Statements contained elsewhere herein).
Other sources of liquid funds included $570,000 in proceeds from sales of
real estate and a net increase of $829,000 in "Accounts payable and accrued
expenses," primarily due to Cine Vista operations subsequent to the purchase
date. In addition to the purchase of Cine Vista, principal uses of liquid funds
include a net increase of $654,000 in insurance proceeds receivable, a $470,000
loan to OREI, and a net decrease of $458,000 in other liabilities.
1993:
Principal sources of liquid funds in 1993 included $4,470,000 in proceeds
from sales of real estate and "Interest and dividends" income of $2,773,000. In
addition to operating expenses, principal uses of liquid funds included a
reduction in accrued expenses and accounts payable of $660,000 which expenses
related to the extinguishment of a fire on land owned by the Company in the
fourth quarter of 1992. Principal uses of funds also included payment of
$298,000 in accrued professional fees and the $1,000,000 loan to the officer of
Reading Cinemas in accordance with the terms of his employment by the Company,
which loan was repaid in 1994.
Effects of Inflation
The Company does not believe that inflation has a material effect upon its
existing operations.
18
<PAGE>
Effects of a Change in Accounting Principle
The Company adopted the Statement of Financial Accounting Standard
("SFAS") No. 109, "Accounting for Income Taxes" on January 1, 1994 without
restating prior years' financial statements. The cumulative effect of $132,000
resulting from this change in accounting principle was recorded in the
Consolidated Statement of Operations for the three months ended March 31, 1994.
This amount is equivalent to the deferred tax asset recorded for the tax
benefits which are more likely than not to be realized from the Company's net
operating loss carryforwards.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123,
which must be adopted in 1996, establishes financial accounting and reporting
standards for stock-based employee compensation plans, and establishes
accounting standards for issuance of equity instruments to acquire goods and
services from non-employees.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121, which must be adopted in 1996, establishes accounting
standards for the, impairment, or disposal of long-lived assets, and certain
intangible assets.
The Company does not expect that adoption of SFAS No. 121 and SFAS No. 123
will have a material effect on its consolidated financial position, consolidated
statement of operations or liquidity.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated by reference to
pages F-1 through F-22.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
19
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item, to the extent that it relates to
directors of the Company, is incorporated by reference to the Company's proxy
statement with respect to its 1996 Annual Meeting of Shareholders and, to the
extent that it relates to executive officers, appears in Part I hereof.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the
Company's proxy statement with respect to its 1996 Annual Meeting of
Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
Company's proxy statement with respect to its 1996 Annual Meeting of
Shareholders.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to the
Company's proxy statement with respect to its 1996 Annual Meeting of
Shareholders.
20
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994. F-1 -- F-2
Consolidated Statements of Operations for the years ended
December 31, 1995, December 31, 1994 and December 31, 1993. F-3
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, December 31, 1994 and December 31, 1993. F-4 -- F-5
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, December 31, 1994 and December 31,
1993. F-6
Notes to Consolidated Financial Statements. F-7 -- F- 21
Report of Independent Auditors -- Ernst & Young LLP. F- 22
(a)(2) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts S-1
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable and therefore have been omitted.
(a)(3) Exhibits
2(a) Purchase Agreement dated July 8, 1994 by and among Theater
Acquisitions, L.P., Theater Acquisitions of Puerto Rico, Inc., and
Reading Company. (Incorporated by reference to Exhibit 2(a) to the
Company's Form 10-Q for the period ended June 30, 1994.)
2(b) Letter Agreement dated August 9, 1994 by and among Theater
Acquisitions, L.P., Theater Acquisitions of Puerto Rico, Inc., and
Reading Company. (Incorporated by reference to Exhibit 2(b) to the
Company's Form 10-Q for the period ended June 30, 1994.)
3.1 Articles of Incorporation of Registrant. (Incorporated by reference
to Exhibit 3(A) in Registration Statement No. 2-87410, as amended.)
3.2 Form of Amended and Restated Articles of Incorporation of
Registrant. (Incorporated by reference to Exhibit 3(C) in
Registration Statement No. 2-87410, as amended.)
3.3 Copy of Amendment to Articles of Incorporation filed October 13,
1989. (Incorporated by reference to Exhibit 3.4 in registrant's
annual report on Form 10-K for the year ended December 31, 1989.)
21
<PAGE>
3.4 Copy of Amendment to Articles of Incorporation filed October 13,
1989. (Incorporated by reference to Exhibit 3.5 in registrant's
annual report on Form 10-K for the year ended December 31, 1989.)
3.5 By-Laws of Registrant, as amended March 4, 1992. (Incorporated by
reference to Exhibit 3.6 in registrant's annual report on Form 10-K
for the year ended December 31, 1991.)
3.6 By-Laws of Registrant, as amended February 26, 1993. (Incorporated
by reference to Exhibit 3.6 in registrant's annual report on Form
10-K for the year ended December 31, 1993.)
3.7 By-Laws of Registrant, as amended October 6, 1995.
4.1 Instruments Defining the Rights of Security Holders. (Incorporated
by reference to Exhibits 3.1 and 3.5 hereof and to Exhibit 4 in
Registration Statement No. 2-87410, as amended.)
10.1 Reading Company 1982 Non-Qualified Stock Option Plan, as Amended.
(Incorporated by reference to Exhibit 4(b) to Registration Statement
No. 2-83039, as amended).
10.2 Reading Company 1982 Incentive Stock Option Plan, as Amended.
(Incorporated by reference to Exhibit 4(a) to Registration Statement
No. 2-83039, as amended.)
10.3 Reading Company 1992 Non-Qualified Stock Option Plan. (Incorporated
by reference to Exhibit 4(B) to Registration Statement No. 33-57222,
as amended.)
10.4 Executive Sharing Agreement by and between Reading Cinemas, Inc. and
City Cinemas Corp. dated as of November 1, 1993. (Incorporated by
reference to Exhibit 10.1 to registrant's annual report on Form 10-K
for the year ended December 31, 1993).
10.5 Lease Agreement between Plaza Las Americas, Inc. and Wometco de
Puerto Rico, Inc. dated as of August 24, 1979, as amended.
(Incorporated by reference to Exhibit 10.5 to registrant's annual
report on Form 10-K for the year ended December 31, 1994).
10.6 Lease Agreement between TJAC (Hatillo), S.E. and Theater
Acquisitions of Puerto Rico, Inc. dated as of May 11, 1992.
(Incorporated by reference to Exhibit 10.6 to registrant's annual
report on Form 10-K for the year ended December 31, 1994).
10.7 Agreement of Lease between Cinema Centro, S.E. and Theater
Acquisitions of Puerto Rico, Inc. dated as of May 16, 1994.
(Incorporated by reference to Exhibit 10.7 to registrant's annual
report on Form 10-K for the year ended December 31, 1994).
10.8 Memorandum of Understanding by and between Reading Company and
Robert Kory dated May 19, 1994. (Incorporated by reference to
Exhibit 10.8 to registrant's annual report on Form 10-K for the year
ended December 31, 1994).
22
<PAGE>
10.9 Lease Agreement between Palma Real Associates, S.E. and Theater
Acquisitions of Puerto Rico, Inc. dated as of July 13, 1994.
10.10 The First Amendment dated May 10, 1995 between Palma Real
Associates, S.E. and Reading Cinemas of Puerto Rico, Inc. (successor
by merger to Theater Acquisitions of Puerto Rico, Inc.) to the Lease
Agreement between Palma Real Associates, S.E. and Theater
Acquisitions of Puerto Rico, Inc. dated as of July 13, 1994.
10.11 Credit Agreement by and between Reading Cinemas of Puerto Rico,
Inc., and Citibank, N.A., as administrative agent for the Lenders
thereunder dated as of December 20, 1995.
10.12 The First Amendment dated February 7, 1996 to the Credit Agreement
by and between Reading Cinemas of Puerto Rico, Inc., and Citibank,
N.A., as administrative agent for the Lenders thereunder dated as of
December 20, 1995.
10.13 Limited Liability Company Agreement of Reading International Cinemas
LLC dated November 9, 1995.
10.14 RC Revocable Trust Agreement between Reading Investment Company,
Inc. and Craig Corporation and Craig Management, Inc. as trustee,
dated November 9, 1995.
10.15 Lease Agreement between Mayaguez Shopping Center, S.E. and Reading
Cinemas of Puerto Rico, Inc. dated as of August 10, 1995.
10.16 Contract of Sale of Real Estate between Brick & Pipe Industries LTD
and Burgundy Two Pty LTD dated October 10, 1995.
10.17 Contract of Sale of Real Estate between Royal Society for the
Prevention of Cruelty to Animals (Victoria) Incorporated and
Burgundy Two Pty LTD dated November 9, 1995.
10.18 Stock Purchase and Sale Agreement dated as of March 30, 1996 by and
between Reading Holdings, Inc. and Craig Corporation.
10.19 Amended and Restated Capital Funding Agreement by and between
Reading Investment Company, Inc., Craig Corporation, Craig
Management Inc., and Reading International Cinemas LLC.
21.1 Registrant's Subsidiaries.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
(b) Reports on Form 8-K.
None
(c) See item 14(a)(3) above.
(d)(1) Not applicable.
(d)(2) Not applicable.
(d)(3) Not applicable.
27. FINANCIAL DATA SCHEDULE
23
<PAGE>
Reading Company and Subsidiaries
Consolidated Balance Sheets
(in thousands, except shares and per share amounts)
December 31,
- - --------------------------------------------------------------------------------
1995 1994
- - --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $44,147 $9,413
Available-for-sale securities 42 35,523
Amounts receivable, less allowance
of $291 in 1995 and $339 in 1994 624 280
Due from affiliate 1,040 0
Restricted cash 360 333
Inventories 112 86
Prepayments and other current assets 498 593
Due from insurance companies 87 751
Deferred tax asset 0 132
- - --------------------------------------------------------------------------------
Total current assets 46,910 47,111
- - --------------------------------------------------------------------------------
Other investments 1,771 438
Equity investment in Australian
theater developments 640 0
Restricted cash 362 597
Real estate held for sale or development,
less valuation
allowance of $42 1,110 1,111
Property and equipment:
Buildings 733 720
Capitalized premises lease 538 538
Leasehold improvements 5,095 3,560
Equipment 3,787 2,811
Construction-in-progress 236 103
------ ------
10,389 7,732
Less: Accumulated depreciation 1,176 726
------ ------
9,213 7,006
Intangible assets:
Beneficial leases - net of accumulated
amortization of $1,370
in 1995 and $455 in 1994 15,538 16,453
- - --------------------------------------------------------------------------------
28,634 25,605
- - --------------------------------------------------------------------------------
$75,544 $72,716
================================================================================
See Notes to Consolidated Financial Statements.
F-1
<PAGE>
Reading Company and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands, except shares and per share amounts)
December 31,
- - --------------------------------------------------------------------------------
1995 1994
- - --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $2,279 $1,468
Accrued compensation 222 218
Accrued taxes and other 528 627
Film rent payable 299 359
Other liabilities 916 1,056
- - --------------------------------------------------------------------------------
Total current liabilities 4,244 3,728
- - --------------------------------------------------------------------------------
Capitalized lease, less current portion 521 525
Other liabilities 2,067 2,377
- - --------------------------------------------------------------------------------
Total long term liabilities 2,588 2,902
- - --------------------------------------------------------------------------------
Commitments and contingencies (See Note 10)
Shareholders' Equity
Preferred stock, par value $1.00 per share:
Authorized -- 5,000,000 shares
Common stock, par value $.01 per share:
Authorized -- 10,000,000 shares
Issued 1995 -- 11,530 shares; 1994 -- 12,291
shares 1 1
Class A common stock, par value $.01 per share:
Authorized -- 15,000,000 shares
Issued 1995 -- 5,145,161 shares;
1994 -- 5,144,400 shares 51 51
Unrealized loss on available-for-sale
securities 0 (286)
Other capital 56,257 55,057
Retained earnings 15,035 13,884
Foreign currency translation adjustment (10) 0
Class A common stock in treasury, at cost:
1995 -- 183,397 shares; 1994 -- 183,250
shares (2,622) (2,621)
- - --------------------------------------------------------------------------------
Total shareholders' equity 68,712 66,086
- - --------------------------------------------------------------------------------
$75,544 $72,716
================================================================================
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
Reading Company and Subsidiaries
Consolidated Statements of Operations
(in thousands, except shares and per share amounts)
Year Ended December 31,
- - --------------------------------------------------------------------------------
1995 1994 1993
- - --------------------------------------------------------------------------------
REVENUES:
Theater:
Admissions $10,356 $5,633 $0
Concessions 3,883 2,141 0
Advertising and other 686 306 0
Real estate 272 697 533
Interest and dividends 2,435 2,134 2,773
Condemnation and other 2,341 79 203
- - --------------------------------------------------------------------------------
19,973 10,990 3,509
- - --------------------------------------------------------------------------------
EXPENSES:
Theater costs 10,784 5,742 0
Theater concession costs 640 360 0
Depreciation and amortization 1,369 681 11
General and administrative 4,200 4,553 3,789
Provision for environmental
matters 0 1,306 241
Equity loss from investment in
Australian theater developments 390 0 0
- - --------------------------------------------------------------------------------
17,383 12,642 4,041
Income (loss) before income taxes and
cumulative effect of accounting
change 2,590 (1,652) (532)
Federal income tax (benefit) 239 0 (12)
- - --------------------------------------------------------------------------------
Income (loss) before cumulative effect
of accounting change 2,351 (1,652) (520)
Cumulative effect of
accounting change 0 0 132
- - --------------------------------------------------------------------------------
Net income (loss) $2,351 ($1,652) ($388)
- - --------------------------------------------------------------------------------
Per share information:
Income (loss) before cumulative effect
of accounting change $0.47 ($0.33) ($0.11)
Cumulative effect of accounting
change 0.00 0.00 0.03
- - --------------------------------------------------------------------------------
Net income (loss) $0.47 ($0.33) ($0.08)
================================================================================
Average shares outstanding 4,973,369 4,973,548 4,973,649
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
Reading Company and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
- - --------------------------------------------------------------------------------
1995 1994 1993
- - --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $2,351 ($1,652) ($388)
Adjustments to reconcile net income (loss) to
net cash provided from (used for) operating
activities:
Condemnation award (1,146) 0 0
Cumulative effect of accounting change 0 0 (132)
Gain on real estate joint venture investments 0 (179) (294)
Gain on sale of other real estate 0 (308) (32)
Discharge of reorganization obligations (223) 0 0
Depreciation 453 226 12
Amortization 916 455 0
Deferred rent expense 165 82 0
Deferred income tax expense 132 0 0
Equity loss from investment in
Australian theater developments 390 0 0
Provision for environmental matters 0 1,306 241
Valuation provision for loan to OREI 0 795 0
Changes in operating assets and liabilities:
(Increase) decrease in amounts receivable (529) 89 (59)
(Increase) decrease in inventories (26) 24 0
Decrease (increase) in prepaids and
other current assets 95 (119) 70
Decrease (increase) in insurance
proceeds receivable 664 (654) 125
Decrease (increase) in notes receivable due
from officer of subsidiary 0 1,000 (1,000)
(Decrease) increase in accounts payable and
accrued expenses (119) 829 (1,107)
Decrease in film rent payable (60) (65) 0
Decrease in other liabilities (392) (458) (132)
Other, net (49) 4 23
- - --------------------------------------------------------------------------------
Net cash provided from (used for) operating
activities 2,622 1,375 (2,673)
- - --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
Reading Company and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
- - ----------------------------------------------------------------------------------------------
1995 1994 1993
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash provided from (used for) operating
activities $ 2,622 $ 1,375 ($ 2,673)
- - ----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of TAPR (See Note 2) 0 (22,720) 0
Decrease in restricted cash (See Note 2) 208 83 177
Purchase of property, plant and equipment (1,828) (66) (25)
Net proceeds from condemnation award 1,146 0 0
Net proceeds from real estate joint venture
investments 185 138 161
Net proceeds from sales of real estate 0 570 4,470
Purchases of available-for-sale securities (552) (12,261) (50,240)
Sales and maturities of available-for-sale
securities 36,319 42,589 48,198
Loan to OREI 0 (470) (325)
Increase in due from affiliate (1,040) 0 0
Investment in Australian theater developments (See Note 5) (1,040) 0 0
Purchase of judgement (See Note 4) (1,285) 0 0
- - ----------------------------------------------------------------------------------------------
Net cash provided from investing activities 32,113 7,863 2,416
- - ----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Purchase of treasury stock (1) (2) (2)
- - ----------------------------------------------------------------------------------------------
Net cash used for financing activities (1) (2) (2)
- - ----------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 34,734 9,236 (259)
Cash and cash equivalents at beginning of year 9,413 177 436
- - ----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 44,147 $ 9,413 $ 177
==============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
Reading Company and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1995, 1994, 1993
(in thousands, except shares)
<TABLE>
<CAPTION>
Foreign
Unrealized Currency
Class A Gains Transla- Treasury
Common Stock Common Stock and Other Retained tion Stock
Shares Amount Shares Amount (Losses) Capital Earnings Adjustment Shares Amount
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 26,606 $1 5,127,085 $51 $0 $54,925 $16,056 $0 (182,954) ($2,617)
Net loss (388)
Realization of tax benefit resulting
from pre-quasi-reorganization
operating loss carryforwards 132 (132)
Common stock converted to
Class A common stock (15,457) 15,457
Treasury stock purchased (162) (2)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 14,149 1 5,142,542 51 0 55,057 15,536 0 (183,116) (2,619)
Net loss (1,652)
Adjustment to beginning balance
for change in accounting method
net of income taxes of $19 38
Change in unrealized gains and
losses net of income taxes of $19 (324)
Common stock converted to
Class A common stock (1,858) 1,858
Treasury stock purchased (134) (2)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 12,291 1 51,144,400 51 (286) 55,057 13,884 0 183,250 (2,621)
Net income 2,351
Change in unrealized gains and
losses 286
Realization of tax benefit resulting
from pre-quasi-reorganization
operating loss carryforwards 1,200 (1,200)
Foreign currency translation
adjustment: Investment in
Australian theater developments (10)
Common stock converted to
Class A common stock (761) 761
Treasury stock purchased (147) (1)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 11,530 $1 5,145,161 $51 $0 $56,257 $15,035 ($10) (183,397) ($2,622)
===================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
Reading Company (the "Company") has operated motion picture exhibition
theaters in leased locations in the Commonwealth of Puerto Rico since the
acquisition of Theater Acquisitions of Puerto Rico, Inc. ("TAPR") in 1994. In
November 1995, the Company and Craig Corporation ("Craig"), the owner of
approximately 49.3% of the Company's capital stock, formed Reading International
Cinemas LLC ("Reading International"), a limited liability company owned equally
by the Company and Craig, which has initiated theater development activities in
Australia. The Company's remaining real estate activities include the managed
sale of certain of its real properties, the possible future development of
certain center city Philadelphia properties and participation in two real estate
joint ventures.
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation: The consolidated financial statements of Reading
Company and Subsidiaries (the "Company") include the accounts of Reading Company
and its majority-owned subsidiaries. Significant intercompany transactions and
accounts have been eliminated. TAPR was acquired as of July 1, 1994 and the
results of TAPR have been consolidated with the Company's operating results
since that date (See Note 2). On December 31, 1994, TAPR was merged into its
parent corporation, Reading Cinemas of Puerto Rico, Inc. ("RCPR") with RCPR the
successor corporation and the operating name changed to Cine Vista (unless
otherwise required by the context, TAPR, RCPR and Cine Vista may be used
interchangeably herein).
Income Taxes: The Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 109, "Accounting for Income Taxes," on January 1, 1993,
without restating prior years' financial statements. The cumulative effect
resulting from this change in accounting principle was recorded in the
Consolidated Statement of Operations for the year ended December 31, 1993. This
amount is equivalent to the deferred tax asset recorded for the tax benefits
which are more likely than not to be realized from the Company's net operating
loss carryforwards. Under SFAS No. 109, an income tax provision is recorded in
the statement of operations using the enacted income tax rates and the deferred
asset is amortized in an amount equivalent to the tax provision as the tax
benefits are realized.
The Company underwent a quasi-reorganization in 1981. The
quasi-reorganization did not require restatement of any assets or liabilities or
any other modification of capital accounts. The Company is required to make a
transfer from "Retained earnings" to "Other capital" in the Consolidated
Statement of Shareholders' Equity in an amount equal to the tax benefit
resulting from utilization of federal net operating loss carryforwards which
relate to periods prior to the quasi-reorganization.
Cash Equivalents: The Company considers all highly liquid investments with
maturities of three months or less at the time of acquisition to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest, which
approximates fair market value, and consist principally of federal agency
securities and short-term money market instruments.
Available-for-Sale Securities: The Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," on January
1, 1994, without restating prior years' financial statements. Debt securities
that a company does not have both the intent and ability to hold to maturity are
to be classified as available-for-sale and carried at fair value with unrealized
holding gains and losses, net of tax, reported as a separate component of
shareholders' equity.
Management classifies treasury and federal agency securities held by the
Company with maturities in excess of three months at the time of purchase as
available-for-sale as such investments together with "Cash and cash equivalents"
are expected to be used to fund expansion of theater operations, acquisition or
other development activities.
F - 7
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
The amortized cost of securities available-for-sale is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization and the interest related to these securities are included in
"Interest and Dividends" revenues. Any realized gains and losses and declines in
value judged to be other-than-temporary on available-for-sale securities are
included in earnings.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Inventories: Inventories are comprised of confection goods used in Cine
Vista's operations and are stated at the lower of cost (first-in, first-out
method) or net realizable value.
Real Estate Held for Sale or Development: Real estate held for sale or
development is carried at the lower of cost, including related holding costs, or
estimated net realizable value and is classified as a noncurrent asset due to
the inherent difficulty in estimating the timing of future sales.
Property and Equipment: Property and equipment is carried at cost.
Depreciation of buildings, capitalized premises lease, leasehold improvements
and equipment is recorded on a straight-line basis over the estimated lives of
the assets or, if the assets are leased, the remaining lease term (inclusive of
options, if likely to be exercised), whichever is shorter. The estimated useful
lives are generally as follows:
Building and Improvements 40 years
Equipment 15 years
Furniture and Fixtures 7 years
Leasehold Improvements 20 years
Intangible Assets: Intangible assets are comprised of beneficial theater
leases used in Cine Vista's operations. The amount of the TAPR purchase price
ascribed to the beneficial leases was determined by an independent appraiser
computing the present value of the excess of market rental rates over the rental
rates in effect under TAPR's leases at the time of the Company's acquisition of
TAPR and allocating such amount as a component of the purchase price of TAPR.
The beneficial leases are amortized on a straight-line basis over the remaining
term of the underlying leases, which approximates 19 years.
Translation of Non-U.S. Currency Amounts: The financial statements and
transactions of Reading International's (See Note 5) Australian operations are
maintained in their functional currency (Australian dollars) and translated into
U.S. dollars in accordance with SFAS No. 52 "Foreign Currency Translation."
Assets and liabilities are translated at exchange rates in effect at the balance
sheet date and shareholders' equity is translated at historical exchange rates.
Revenues and expenses are translated at the average exchange rate for the
period. Translation adjustments are reported as a separate component of
shareholders' equity.
Income (Loss) Per Share: Income (loss) per share (Common Stock and Class A
Common Stock) is calculated by dividing net income (loss) by the aggregate of
the weighted average shares outstanding during the period and the dilutive
effect, if any, of common stock equivalents that are outstanding.
Reclassifications: Certain amounts in previously issued financial
statements have been reclassified to conform with the current presentation.
F - 8
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
Accounting Changes: In October 1995, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 123, "Accounting for Stack-Based Compensation."
SFAS No. 123 must be adopted in 1996 and establishes financial accounting and
reporting standards for stock-based employee compensation plans, and establishes
accounting standards for issuance of equity instruments to acquire goods and
services from non-employees.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
must be adopted in 1996 establishes accounting standards for the impairment of
long-lived assets, certain intangible assets and costs in excess of net assets
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of.
The Company does not expect that adoption of SFAS No. 121 and SFAS No. 123
will have a material effect on its consolidated financial statements.
NOTE 2 -- ACQUISITIONS
Effective July 1, 1993, the Company acquired TAPR from Theater
Acquisitions, LP ("TALP") for an aggregate cash purchase price of approximately
$22,700,000, inclusive of acquisition costs of $323,000. Cine Vista operates
motion picture exhibition theaters in seven leased locations with a total of 44
screens in the Commonwealth of Puerto Rico. At the time of its acquisition, TAPR
operated 36 screens in six leased locations. The acquisition was accounted for
using the purchase method and TAPR's operating results since July 1, 1994 have
been consolidated with the operating results of the Company.
The purchase price was subject to the satisfaction of certain
contingencies in accordance with the provisions of a purchase agreement by and
among TAPR, TALP and the Company dated July 1, 1994 (the "Purchase Agreement").
The landlord of one of Cine Vista's theaters has the right to terminate the
lease relating to space presently housing two theaters, subject to six months'
notice. Accordingly, $1 million of the purchase price was escrowed and was
payable over 36 months provided the landlord did not cancel the lease during
such period or assert other claims relating to the lease, in which case the
escrow is available for set off. The landlord has asserted certain claims
relating to the computation of the rent (See Note 10) and the Company and TALP
therefore amended the terms under which the payments are made from the escrow.
Under amended terms, payments of $30,000 are paid monthly to TALP. This escrow,
which is invested in short term treasury securities, has been classified as
"Restricted cash." At December 31, 1995, $707,000 was due to TALP under this
arrangement and has been classified as an "Other liability."
F - 9
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
The pro forma consolidated operating results set forth below assume that
the acquisition of TAPR was completed at the beginning of 1994 and include the
impact of certain adjustments, including amortization of intangibles,
depreciation and reductions in "Interest and dividend" income resulting from
payment of the purchase price.
Year Ended
December 31,
1994 1993
------- --------
Revenues $17,015 $ 15,628
======= ========
Net loss before cumulative
effect of accounting change ($1,617) ($ 70)
======= ========
Per Share:
Net loss before cumulative
effect of accounting change ($ 0.33) ($ .01)
======= ========
NOTE 3 -- AVAILABLE-FOR-SALE SECURITIES
The net adjustment for unrealized holding losses on available-for-sale
securities, included as a separate component of shareholders' equity, totaled $0
and $286,000 as of December 31, 1995 and 1994, respectively. As of December 31,
1994, the net adjustment consisted of an unrealized gain of $38,000, net of tax,
recorded on January 1, 1994 as a result of the change in accounting method and
an unrealized loss of $324,000, net of tax, recorded for the year ended December
31, 1994.
As of December 31, 1995, the amortized cost and estimated fair value of
the "Available-for-sale securities" was $42,000. The contractual maturity of
these securities as of December 31, 1995 was six months or less.
Accrued interest as of December 31, 1994 was $478,000 and is included in
"Available-for-sale securities" on the Consolidated Balance Sheet.
NOTE 4 -- INVESTMENTS
On November 8, 1995, the Company acquired from a major bank for $1,285,000,
a judgement encumbering, among other things, a controlling interest in a company
which has as its principal asset a Manhattan multiplex theater. The judgement
has been acquired as part of the Company's plan to acquire, in conjunction with
Manhattan-based City Cinemas Corp. ("City Cinemas")(James J. Cotter, Chairman of
the Company, has an ownership interest in City Cinemas), all of or at least a
controlling interest in this theater. The Company also acquired options to
purchase shares representing 5/13ths of the voting power of the company that
owns the multiplex theater and to obtain certain other creditor claims against
that company. No assurance can be given that the Company's plan to acquire the
theater will ultimately prove successful.
Management believes that the December 31, 1995 carrying amounts of this
investment and the Company's other investments totalling $486,000 approximate
their fair value.
F - 10
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
NOTE 5 -- EQUITY INVESTMENT / ACQUISITION ACTIVITIES
In November 1995, the Company and Craig formed Reading International to
develop and operate multiplex cinemas in Australia and other markets. A wholly
owned subsidiary of Reading International has retained the services of several
executive employees in Australia who provide services with respect to such
Australian operations on a full time or substantially full time basis. Reading
International is equally owned by the Company and Craig, each of which committed
to make an initial contribution of $5 million, on an as needed basis, for an
aggregate initial investment of $10 million. (See Note 17).
The Company accounts for its investment in Reading International and its
foreign subsidiaries by the equity method. Summarized financial information for
Reading International as of December 31, 1995 is as follows:
Current assets $ 225
Noncurrent assets 4,534
------
Total assets $4,759
======
Current liabilities 3,480
Shareholders' equity 1,279
------
Total liabilities and shareholders' equity $4,759
======
Reading International's net loss from its inception through December 31,
1995 was $781,000, consisting primarily of general and administrative expenses
and development costs incurred with its theater development activities. The
Company's equity loss from Reading International was $390,000, which is included
in the Consolidated Statement of Operations.
As of December 31, 1995, advances and contributions amounting to
approximately $2,080,000 have been made to the joint venture by Reading and
Craig inclusive of $1,040,000 advanced on behalf of Craig classified as "Due
from affiliate" on the Company's Consolidated Balance Sheet. This advance was
repaid during the first quarter of 1996. These funds were used to finance
capital expenditures and general and administrative expenses. Reading
International's noncurrent assets at December 31, 1995 are comprised principally
of $4,223,000 related to the purchase of land and development costs and $351,000
of refundable property deposits. The land purchase was made pursuant to a real
estate purchase contract with the seller which provided for installment
payments, including $3,144,000 due on December 20, 1996 which is included in
current liabilities on Reading International's balance sheet at December 31,
1995. Reading International is also in negotiation with several developers and
landlords with respect to other potential locations.
In the fourth quarter of 1995, the Company acquired from a major bank, for
$1,285,000, a judgement encumbering among other things, a controlling interest
in a company which has as its principal asset a Manhattan multiplex theater (See
Note 4).
NOTE 6 -- REAL ESTATE HELD FOR SALE OR DEVELOPMENT
As described in Note 1, "Real estate held for sale or development" is
carried at the lower of cost or estimated net realizable value. The Company is
exploring development and sale options for its center city Philadelphia
properties which are adjacent to the Pennsylvania Convention Center site and is
actively seeking buyers for its properties located outside center city
Philadelphia.
F - 11
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
NOTE 7 -- OTHER LIABILITIES
Other liabilities consisted of the following at December 31:
1995 1994
--------------- --------------
Reserve for guarantee obligations of
SWS Industries, Inc. (See Note 10) $ 406 $ 555
Obligations related to past railroad operations
and environmental issues (See Note 10) 1,251 1,489
Reorganization obligations 13 236
Cine Vista deferred purchase price (See Note 2) 707 917
Minimum rent obligations 247 82
Other 359 154
--------------- --------------
2,983 3,433
Less estimated current portion (916) (1,056)
--------------- --------------
$2,067 $ 2,377
=============== ==============
The reorganization obligations represent the Company's remaining liability
to reorganization debt-holders. In accordance with the provisions of the
Company's Plan of Reorganization, the Company was obligated to repay a portion
of such indebtedness if certain debt-holders presented their claims for payment
to the Company on or before December 24, 1995. In December 1995, the Company
recorded $223,000 as "Condemnation and other revenues" in the Consolidated
Statement of Operations equal to the total of the unclaimed amounts. These funds
are presently available for use by the Company in accordance with the provisions
of the Company's Plan of Reorganization.
NOTE 8 -- STOCK OPTION PLANS
The Company has options outstanding under three Stock Option Plans, the
1982 Incentive Stock Option Plan, the 1982 Non-qualified Option Plan
(collectively, the "1982 Plans") and the 1992 Non-qualified Stock Option Plan
(the "1992 Plan"). Each plan was approved by shareholders in the year of
adoption. No further grants may be made under the 1982 Plans and all options
outstanding thereunder are currently exercisable at prices of $12.50 to $15.54
per share. All options granted under the 1982 Plans were at fair market value on
the date of grant.
The 1992 Plan reserved 500,000 shares for grant and provides for one-third
of options granted to be immediately exercisable, one-third exercisable on the
first anniversary of the date of grant, and the final one-third exercisable upon
the second anniversary date of the date of grant unless the Executive Committee
of the Board of Directors (the "Committee"), in its discretion, decides
otherwise. Options granted under the 1992 Plan shall not be for less than 100
percent of the fair market value on the date of grant and are eligible for
exercise for a period of ten years from the date of grant and may contain
certain other terms and conditions as determined by the Committee.
F - 12
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
Changes in the number of shares subject to options under the plans are
summarized as follows:
1995 1994 1993
-------- -------- --------
1982 Plans:
Outstanding at beginning
and end of period: 17,000 17,000 17,000
======== ======== ========
1992 Plan:
Outstanding at beginning of period 357,732 357,732 325,232
Granted (at $14.00 per share) 40,000
Canceled (at $14.00 per share) (15,000) (7,500)
-------- -------- --------
Outstanding at end of period 342,732 357,732 357,732
======== ======== ========
Total Outstanding at December 31,
1995 ranging in price from $12.50 to
$15.54 per share 359,732
Exercisable at December 31, 1995 324,982
NOTE 9 -- INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES
As described in Note 1, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," on January 1, 1993, without restating prior years' financial
statements. The cumulative effect of $132,000 ($.03 per share) resulting from
this change in accounting principle was recorded in the Consolidated Statement
of Operations. This amount is equivalent to the deferred tax asset recorded for
the tax benefits which were determined by management to be more likely than not
to be realized from the Company's net operating loss carryforwards. The Company
recorded a $132,000 tax provision in the 1995 Consolidated Statement of
Operations related to the realization of such tax benefits in that period.
Effective December 31, 1981, after approval by its shareholders, the
Company eliminated its accumulated deficit by a charge to "Other capital." This
quasi-reorganization did not require the restatement of any assets or
liabilities or any other modification of capital accounts. Tax benefits realized
from the carryforwards of pre-quasi-reorganization losses have been included in
the determination of net income and then reclassified from "Retained earnings"
to "Other capital." Had such tax benefits been excluded from net income, the
Company would have reported net income of $1,152,000 or $.23 per share for the
twelve months ended December 31, 1995.
F - 13
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
Carryforwards and temporary differences which give rise to the deferred
tax asset at December 31, 1995 and 1994 are as follows:
1995 1994
-------- --------
Net operating loss carryforwards $ 55,325 $ 56,695
Reserves 1,004 1,044
Other, net 242 108
-------- --------
Gross deferred asset 56,571 57,847
Valuation allowance (56,571) (57,715)
-------- --------
Net deferred asset $ 0 $ 132
======== ========
Based on an analysis of the likelihood of realizing the Company's gross
deferred tax asset (taking into consideration applicable statutory carryforward
periods), the Company concluded that under SFAS No. 109, a valuation allowance
for the entire amount was necessary.
The Company's federal tax net operating loss carryforwards expire as
follows:
Year Amount
- - ------------------- ------------
1996................... $123,097
1997................... 13
1998................... 2,096
1999................... 0
2000................... 26,915
2001................... 0
2002................... 7,382
2003................... 589
2004................... 0
2005................... 0
2006................... 0
2007................... 1,443
2008................... 1,155
2009................... 32
------------
$162,722
============
The Company is required to pay federal alternative minimum tax ("AMT") for
1995. AMT is calculated separately from the regular federal income tax and is
based on a flat rate applied to a broader tax base. Amounts payable thereunder
cannot be totally eliminated through the application of net operating loss
carryforwards. The Company recorded AMT expense in 1995 of $87,000 and recorded
no AMT expenses in 1994. The Company recorded an AMT benefit of $12,000 in 1993.
F - 14
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
SWS Industries, Inc.
The Company sold a subsidiary, SWS Industries, Inc. ("SWS") in 1987. SWS
subsequently filed for bankruptcy in 1988. Under the terms of the SWS sales
agreement, the Company remained liable as guarantor on various performance bonds
issued on behalf of SWS. The Company's liability under the performance bond
guarantees has been reduced as the related contracts have been completed or
settled. Completion activities will continue into 1996. Management believes the
reserve at December 31, 1995 is adequate for the remaining obligations of the
Company.
Cine Vista
A landlord of Cine Vista has alleged that Cine Vista underpaid rent by
approximately $480,000 for the thirty month period ended December 31, 1995. The
Company is contesting the landlord's claim and believes the claim to be without
merit. If the landlord were to prevail in its assertion, the Company is
indemnified by TALP for the amount due at June 30, 1994 ($180,000) and the
Company believes it would be entitled to a reduction in the purchase price of
TAPR relating not only to the 18 months ended December 31, 1995 but also
relating to the 17 1/2 future years under the lease. Such purchase price
reduction would be funded, in part, from the proceeds of the TAPR purchase
escrow (See Note 2).
Historical Railroad Operations
The Company is a defendant in various personal injury legal actions
relating to its railroad operations prior to reorganization and has insurance
coverage relating to such actions. In accordance with the provisions of a 1990
settlement agreement (the "Settlement Agreement") with its insurance carriers,
the Company receives quarterly reimbursement for certain personal injury legal
actions. At December 31, 1995, $87,000 was reimbursable to the Company for
amounts expended in defense and settlement of such actions. This amount has been
classified as "Due from insurance companies." Three participants in the
insurance settlement are insolvent. Unreimbursed claims insured by these
insolvent companies totaled $61,000 from 1992 through December 31, 1995. The
Company believes that it may be entitled to reimbursement of such amounts from
the other parties to the agreement and may request an arbitration hearing on
such matters. Based upon the backlog of pending personal injury cases and the
Company's experience in settling such cases, the Company has established a
reserve of $146,000 reflecting the potential effect of such insolvencies on
future insurance reimbursement if no recovery is received from either the
insolvent carriers or the other parties to the Settlement Agreement. The reserve
associated with such insolvencies may increase if additional claims are filed;
however, the Company does not believe that such amount will be material.
Environmental
Reading Company ("Reading") and a wholly-owned subsidiary, Reading
Transportation Company ("RTC"), have each been advised by the Environmental
Protection Agency ("EPA") that they are potentially responsible parties ("PRPs")
under environmental laws including Federal Superfund legislation ("Superfund")
for a site located in Douglassville, Pennsylvania. The EPA issued an
Administrative Order under Superfund against 34 PRPs requiring, among other
things, that the named parties be required to incinerate materials at the site
pursuant to a June 30, 1989 Record of Decision ("ROD"). The ROD estimated that
the incineration would cost approximately $53 million. Thirty-six PRPs were also
named in a civil action brought by the United States Government which seeks to
recover alleged costs incurred at the site by the United States of approximately
$22 million. Reading and RTC have each been named in a third-party action
instituted by the majority of the 36 PRPs sued by the United States. The actions
instituted
F - 15
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
against the Company and approximately 300 PRPs seek to have the parties
contribute to reimbursement for past costs and any costs associated with further
remediation at the site.
During 1994, based upon the Company's and counsel's evaluation of possible
outcomes in the matter, the Company increased its "Provision for environmental
matters" by $1,200,000. On September 14, 1995, the federal district court judge
who presided over Reading's reorganization ruled that all liability asserted
against Reading relating to the site was discharged pursuant to the consummation
order issued in conjunction with the Company's amended plan of reorganization on
December 31, 1980. The United States Department of Justice and a named defendant
in the above described Administrative Order have filed appeals of the decision.
The judge's decision did not affect the potential liability of RTC for the site.
RTC has no assets and therefore cannot fund a settlement or judgement relating
to this matter and the Company believes that the potential liability of RTC, if
any, is not in excess of $300,000. Based upon the appeal and possible alternate
attempts by the PRPs to obtain Reading's participation in funding for the site
as well as the existence of the other environmental matters set forth below, the
Company has not reduced its "Provision for environmental matters."
The Company is a party to a consent decree relating to a Superfund site
located on land owned by the Company. Apart from future operation and
maintenance expenses ("O&M"), remediation is complete. During 1994, the Company
paid approximately $106,000 as its estimated share of ten years of O&M and
charged such amount to "Provisions for environmental matters" expense. The
Company believes that the amounts expended to date will be adequate to fund O&M
at the site. If additional amounts are required, such amounts would not be
material.
During 1995, the Company settled an action seeking the recovery of
$3,800,000 of alleged environmental cleanup costs from five defendants under
various provisions of New Jersey law for $235,000, which approximates the amount
previously accrued by the Company to provide for its share of the liability.
The Company believes that one of its properties, the Viaduct may be
contaminated by polychlorinated biphenyls ("PCBs") resulting from former
railroad operations on that property conducted by or on behalf of the Reading
Railroad, Consolidated Rail Corporation ("Conrail"), the City of Philadelphia or
the Southeastern Pennsylvania Transportation Authority ("SEPTA"). The Company
has advised the Environmental Protection Agency of the potential contamination.
The Company has not determined the scope and extent of any such PCB
contamination. However, the Company has been advised by counsel that, given the
lack of regulatory attention to the Viaduct in the eleven years which have
elapsed since EPA was notified of the likelihood of contamination, it is
unlikely that the Company will be required to decontaminate the Viaduct or incur
costs related thereto. In the event that the Company is required to incur
expenditures to remove PCB contamination from the Viaduct, under terms of a
settlement of certain litigation (See Note 16), Conrail, the City of
Philadelphia and SEPTA would be required to fund 52 to 55% of such costs.
Prior to the Company's reorganization, the Company had extensive railroad
and related operations. Such operations could have contributed to environmental
contamination of properties now owned by the Company, previously sold or leased
by the Company, or to which the Company, prior to its reorganization, sent
waste. The ultimate extent of liabilities, if any, with respect to such matters,
as well as the timing of cash disbursements, if any, cannot be determined.
However, management is of the opinion that while the ultimate liability
resulting from such matters could have a material effect upon the results of
operations in a given year, they will not have a material adverse effect upon
the Company's financial position or liquidity.
F - 16
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
The following is an analysis of the Company's accrual for environmental
claims:
Balance at January 1, 1993 $ 771
Provisions 241
Payments (676)
------
Balance at December 31, 1993 336
Provisions 1,306
Payments (133)
------
Balance at December 31, 1994 1,509
Provisions 0
Payments (248)
------
Balance at December 31, 1995 $1,261
======
NOTE 11 -- LEASE AGREEMENTS
Cine Vista conducts all of its operations in leased premises. The leases
relate to motion picture theaters with remaining terms of approximately 6.5 to
27 years with certain leases containing options to extend the leases for up to
an additional 30 years. The minimum remaining lease term, inclusive of any
renewal options, for any of Cine Vista's theaters is approximately 17.5 years.
Cine Vista also leases office, warehouse space and various equipment. Certain
theater leases provide for contingent rentals based upon a specified percentage
of theater revenues with a guaranteed minimum. Performance under one lease has
been guaranteed by the Company. Substantially all of the leases require the
payment of property taxes, insurance and other costs applicable to the property.
The Company also leases office space and various equipment under noncancelable
operating leases. With the exception of one capital lease, all leases are
accounted for as operating leases.
Cine Vista determines annual base rent expense by amortizing total minimum
lease obligations on a straight-line basis over the lease terms. Base rent
expense under operating leases totaled $2,139,000, $1,097,000, and $75,000, in
1995, 1994, and 1993, respectively. In 1995 and 1994, contingent rental expense
under the Cine Vista operating leases totaled $197,000 and $111,000,
respectively.
F - 17
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
Future minimum lease payments, by year and in the aggregate, under
noncancelable operating leases and the capital lease consist of the following at
December 31, 1995:
Capital Operating
Lease Leases
----- ------
1996 $95 $1,411
1997 95 1,328
1998 95 1,401
1999 95 1,413
2000 95 1,401
Thereafter 1,258 14,526
----- ------
Total net minimum lease payments 1,733 $21,480
=======
Less amount representing interest (1,208)
------
Present value of net minimum lease
payments under capital lease $ 525
======
In May 1995, Cine Vista and a landlord amended a lease originally executed
in July 1994 for a new eight-plex motion picture theater. The lease became
effective and operations at the theater commenced in December 1995. Cine Vista
was responsible for certain construction costs of the theater.
In June 1995, Cine Vista entered into a lease agreement for a new six-plex
motion picture theater. The lease provides for a 20-year term with an average
annual base rent of approximately $195,000 with options to extend the lease up
to an additional 10 years. The lease will be effective after completion of
construction of the new theater. Cine Vista is responsible for certain
construction costs of the theater which are presently estimated to total $1.2
million. Completion of construction and commencement of theater operations is
scheduled to occur in late 1996 or early 1997. The lease provides for contingent
rentals based upon a specified percentage of theater revenues with a guaranteed
minimum and requires the payment of property taxes, insurance and other costs
applicable to the property.
NOTE 12 -- RELATED PARTY TRANSACTIONS
Robert F. Smerling serves as president of Cine Vista. In accordance with
the terms of Mr. Smerling's employment, the Board of Directors authorized and
extended a $1,000,000 loan to Mr. Smerling in December 1993. Principal relating
to the fully secured loan, which accrued interest at the prime rate of interest
plus one percent, was repaid by Mr. Smerling in April 1994.
In 1994 and 1995, the Company's Board of Directors voted to waive the
transfer restrictions imposed by the provisions of the Company's Class A Common
Stock to the extent necessary to permit James J. Cotter, Chairman of the Board
of Directors of the Company and Craig to acquire additional shares of the
Company's Class A Common Stock. The transfer provisions prohibit a party from
acquiring more than 4.75% of the Company's outstanding capital stock without the
permission of the Company's Board of Directors and are intended to assure the
continuing availability of the Company's tax loss carryforwards by precluding a
change in control which could limit the value of the carryforwards. Prior to
granting the waiver of the restrictions, the Board of Directors had determined
that acquisition of the shares by Mr. Cotter and Craig would not effect the
continuing availability of the Company's tax loss carryforwards.
F - 18
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
The Company is presently negotiating to acquire a multiplex theater
located in New York City (See Note 4). The theater will be owned jointly by City
Cinemas, a Manhattan-based theater operator (or its affiliates) and the
Company. It is anticipated that City Cinemas, owned in part by James J. Cotter,
the Company's Chairman, will operate the theater pursuant to a management
agreement. The terms of that management agreement have not yet been negotiated.
Robert F. Smerling, President of Cine Vista, also serves as President of City
Cinemas.
NOTE 13 - CONDEMNATION AND OTHER INCOME
During 1995, the Company and the Commonwealth of Pennsylvania Department
of Transportation ("PennDot") agreed to settle certain litigation related to
PennDot's 1985 condemnation of a bridge which connected sections of a
right-of-way which was owned by the Company and located in center city
Philadelphia. The Company received $1,146,000 in settlement of this claim during
the fourth quarter of 1995 and the income related thereto has been recorded as
"Condemnation and other" income in the Company's Consolidated Statement of
Operations.
"Condemnation and other" income also includes $425,000 received by the
Company from ARAMARK in accordance with a litigation settlement which
encompassed disputes relating to ARAMARK's tenancy in One Reading Center, a
32-story office tower in which the Company conveyed its interest in 1985.
Additionally, $319,000 was received in settlement of two matters relating to the
Company's former railroad operations and $223,000 relating to certain unclaimed
reorganization obligations (See Note 7) were also included in "Condemnation and
other" in the Company's Consolidated Statement of Operations.
NOTE 14 -- LONG-TERM DEBT
In December 1995, Cine Vista entered into a $15 million eight year
revolving credit agreement (the "Credit Agreement") with a bank. Under terms of
the Credit Agreement, Cine Vista may borrow up to $15 million to repay Cine
Vista acquisition loans, which loans are payable to a wholly-owned subsidiary of
the Company (the "Subsidiary Loans"), and fund certain new theater
development expenditures (the "Development Expenditures"). During the initial 30
months of the eight-year term, Cine Vista may borrow and repay amounts
outstanding under the Credit Agreement. Amounts outstanding at the end of the 30
month period are payable in increasing quarterly installments over the balance
of the loan term. At December 31, 1995, no amounts are outstanding under this
agreement.
As security for the loan, Cine Vista has pledged substantially all of its
assets. In addition, the stock of Cine Vista's parent company has been pledged
as security for the loan. In conjunction with the loan, the Company has also
agreed to subordinate to the lender its right to payment of the Subsidiary Loans
as well as certain other fees payable by Cine Vista to the Company under certain
circumstances. In addition, the Company has agreed to contribute funds to Cine
Vista in the event that estimated unpaid Development Expenditures exceed the
amount of funds available to Cine Vista under the Credit Agreement.
The provisions of the Credit Agreement require Cine Vista to maintain a
minimal level of net worth and other financial ratios, restrict the payment of
dividends and limit additional borrowings and capital expenditures. Borrowings
under the Credit Agreement accrue interest at LIBOR (the London Interbank
Offered Rate) plus 2.25%, the cost of Section 936 deposits (deposits held by
lenders in Puerto Rico which are qualified under Section 936 of the Internal
Revenue Code) to the lender (currently 4.91%) plus 2.25%, or the base rate plus
1/2 of 1%, at Cine Vista's election. In accordance with the provisions of the
Credit Agreement, Cine Vista is required to pay a commitment fee on the unused
commitment equal to 1/2 of 1%.
F - 19
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
NOTE 15 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for 1995 and 1994 is summarized below:
<TABLE>
<CAPTION>
First Second Third Fourth
1995: Quarter Quarter Quarter Quarter
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues $3,808 $4,561 $7,309 $4,295
Net (loss) income ($79) $401 $2,065 ($36)
=========== =========== =========== ============
Per share information:
Net (loss) income ($.02) $.08 $.42 ($.01)
=========== =========== =========== ============
First Second Third Fourth
1994: Quarter Quarter Quarter Quarter
----------- ----------- ----------- ------------
Revenues $755 $945 $5,437 $3,853
Net (loss) income ($125) $147 ($1,393) ($281)
=========== =========== =========== ============
Per share information:
Net (loss) income ($.03) $.03 ($.28) ($.05)
=========== =========== =========== ============
</TABLE>
1995:
The operating results of Cine Vista are included in each quarter's
financial information. The second quarter results include $425,000 received in
settlement of certain litigation between the Company and ARAMARK (See Note 13)
and $165,000 in expenses related to the review of theater acquisitions (See Note
4). The third quarter results include revenues of $1,146,000 in condemnation
proceeds (See Note 13) as well as $319,000 received in settlement of two matters
related to the Company's former railroad operations. Also included in the third
quarter was a $290,000 equity loss from Reading International. The fourth
quarter results include revenues of $223,000 related to unclaimed reorganization
debt-holders' obligations (See Note 7) and a $100,000 equity loss from Reading
International.
1994:
The operating results of Cine Vista are included in the quarterly
financial information after June 30. The third quarter results include
$4,924,000 in theater revenues and $3,768,000 in theater cost of sales
(inclusive of depreciation and amortization). Fourth quarter results include
$3,177,000 in theater revenues and $3,000,000 in theater cost of sales
(inclusive of depreciation and amortization). The second quarter results include
a $265,000 gain on sale of real estate which was located in center city
Philadelphia. Third quarter results also include a $1,305,000 provision for
environmental matters and a $795,000 charge related to loans the Company made to
OREI. Fourth quarter revenues include a gain of $179,000 from the S.R. joint
venture.
F - 20
<PAGE>
Reading Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1995
(amounts in tables in thousands, except shares and per share data)
NOTE 16 -- SUBSEQUENT EVENT I
In 1991, the Company filed a lawsuit against SEPTA, Conrail, the City of
Philadelphia, and other parties which sought to recover costs expended by the
Company in conjunction with the cleanup of PCBs in the Reading Terminal Train
Shed and a portion of the viaduct south of Vine Street. In January 1996, the
Company and several parties agreed to settle this litigation by providing for
the Company to receive payments totaling $2.35 million which amount the Company
anticipates receiving in 1996. The parties to the settlement also agreed to pay
an amount ranging from 52% to 55% of certain future costs the Company may incur
in cleaning environmental contamination on the Viaduct.
NOTE 17--SUBSEQUENT EVENTS II
On March 29, 1996, the Company and Craig entered into a capital funding
agreement (the "Capital Funding Agreement") with respect to Reading
International pursuant to which they agreed to increase the capital committed by
the Company and Craig to Reading International from $10 million to approximately
$103 million through a combination of cash contributions and secured capital
funding undertakings. Under the terms of the Capital Funding Agreement, the
Company and Craig each agreed to immediately contribute to Reading International
$12,500,000 in cash, for an aggregate $25,000,000. In addition, the Company and
Craig have undertaken to contribute up to an additional $37,500,000 each, for an
aggregate future commitment of $75,000,000 on an as needed basis. The
commitments of the Company and Craig are secured by various assets of the two
parties. The collateral pledged by Craig was reviewed by an independent
committee of the Company's Board of Directors comprised of outside directors who
are unaffiliated with Craig, and found to be adequate.
On March 29, 1996, the Company purchased from Craig 1,564,473 shares of the
common stock of Citadel Holding Corporation ("Citadel" and the "Citadel Common
Stock", respectively) for an aggregate purchase price of $3,324,505,
representing slightly less than $2.125 per share. The closing price of Citadel
Common Stock on the American Stock Exchange on March 28, 1996 was $2.25 per
share. The Company paid Craig for the Citadel Common Stock with a five year
unsecured promissory note which provides for the payment of interest at a rate
equal to LIBOR plus 2.25%. The Company also acquired from Craig a one year
option to acquire, at fair market value, as determined by an investment banker
selected by the parties, 1,329,114 shares of the 3% Cumulative Voting
Convertible Preferred Stock, stated value $3.95 per share of Citadel and an
option to acquire a warrant to acquire 666,000 shares of Citadel Common Stock.
The transaction was separately reviewed, negotiated and approved by an
independent committee of the Company's Board of Directors comprised of outside
directors who are unaffiliated with Craig, and found to be adequate.
F - 21
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Reading Company
We have audited the consolidated balance sheets of Reading Company and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Reading
Company and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes.
Philadelphlia, Pennsylvania
February 16, 1996, except Note 17,
the date of which is March 29, 1996
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
READING COMPANY AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance Balance
DESCRIPTION at Beginning Charged to Costs Charged to Other Deductions- at End
of Period and Expenses Accounts - Describe Describe of Period
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $ 339 $ 1 $49 (1) $291
Valuation provision for loan to
OREI (Development expense) 795 795
Real estate valuation provision 42 42
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $ 360 $ 10 $31 (1) $339
Valuation provision for loan to
OREI (Development expense) 0 795 795
Real estate valuation provision 42 42
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts $ 343 $ 86 $69 (1) $360
Real estate valuation provision 3,404 3,362 (2) 42
</TABLE>
(1) Uncollectible accounts written off and cash receipts.
(2) Property sales.
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
READING COMPANY
By: /s/ S. Craig Tompkins
----------------------------------
S. Craig Tompkins, President
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
/s/ James J. Cotter
- - -------------------------------------
James J. Cotter Chairman and Director 3/28/96
(Principal Executive Officer)
/s/ S. Craig Tompkins
- - -------------------------------------
S. Craig Tompkins President and Director 3/28/96
/s/ James A. Wunderle
- - -------------------------------------
James A. Wunderle Executive Vice President, 3/28/96
Chief Operating Officer and
Treasurer
(Principal Financial Officer)
/s/ Eileen M. Mahady
- - -------------------------------------
Eileen M. Mahady Controller 3/28/96
(Principal Accounting Officer)
/s/ Edward L. Kane
- - -------------------------------------
Edward L. Kane Director 3/28/96
<PAGE>
/s/ Gerard P. Laheney
- - -------------------------------------
Gerard P. Laheney Director 3/28/96
/s/ Ralph B. Perry III
- - -------------------------------------
Ralph B. Perry III Director 3/28/96
/s/ John W. Sullivan
- - -------------------------------------
John W. Sullivan Director 3/28/96
/s/ Albert J. Tahmoush
- - -------------------------------------
Albert J. Tahmoush Director 3/28/96
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
- - ------ ----
3.7 By-Laws of Registrant, as amended October 6, 1995.
10.9 Lease Agreement between Palma Real Associates, S.E. and Theater
Acquisitions of Puerto Rico, Inc. dated as of July 13, 1994.
10.10 The First Amendment dated May 10, 1995 between Palma Real Associates,
S.E. and Reading Cinemas of Puerto Rico, Inc. (successor by merger to
Theater Acquisitions of Puerto Rico, Inc.) to the Lease Agreement between
Palma Real Associates, S.E. and Theater Acquisitions of Puerto Rico, Inc.
dated as of July 13, 1994.
10.11 Credit Agreement by and between Reading Cinemas of Puerto Rico, Inc.,
and Citibank, N.A., as administrative agent for the Lenders thereunder
dated as of December 20, 1995.
10.12 The First Amendment dated February 7, 1996 to the Credit Agreement by and
between Reading Cinemas of Puerto Rico, Inc., and Citibank, N.A., as
administrative agent for the Lenders thereunder dated as of December 20,
1995.
10.13 Limited Liability Company Agreement of Reading International Cinemas
LLC dated November 9. 1995.
10.14 RC Revocable Trust Agreement between Reading Investment Company, Inc.
and Craig Corporation and Craig Management, Inc. as trustee, dated
November 9. 1995.
10.15 Lease Agreement between Mayaguez Shopping Center, S.E. and Reading
Cinemas of Puerto Rico, Inc. dated as of August 10, 1995.
10.16 Contract of Sale of Real Estate between Brick & Pipe Industries LTD and
Burgundy Two Pty LTD dated October 10, 1995.
10.17 Contract of Sale of Real Estate between Royal Society for the Prevention
of Cruelty to Animals (Victoria) Incorporated and Burgundy Two Pty LTD
dated November 9. 1995.
10.18 Stock Purchase and Sale Agreement dated as of March 30, 1996 by and
between Reading Holdings, Inc. and Craig Corporation.
10.19 Amended and Restated Capital Funding Agreement by and between Reading
Investment Company, Inc., Craig Corporation, Craig Management Inc., Craig
Corporation and Reading International Cinemas LLC.
21.1 Registrant's Subsidiaries.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
27 Financial Data Schedule
BY-LAWS OF
READING COMPANY
ARTICLE I
CORPORATION OFFICE
1.1 Registered Office. The Corporation shall have and continuously
maintain in the Commonwealth of Pennsylvania a registered office at an address
to be designated from time to time by the Board of Directors which may, but need
not, be the same as its place of business.
1.2 Business Office. The Corporation may also have offices at such
other places as the Board of Directors may from time to time designate or the
business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
2.1 Meetings.
2.1.1 Place. Meetings of the shareholders shall be held at
such place, within or without the Commonwealth of Pennsylvania, as may be
determined from time to time by the Board of Directors and need not be held at
the registered office of the Corporation.
2.1.2 Annual Meeting. An annual meeting of the shareholders
for the election of directors and for the transaction of other business as may
be properly be brought before the meeting shall be held in each calendar year at
such time and place as may be determined by the Board of Directors.
2.1.3 Special Meetings. Special meetings of the shareholders
may be called at any time by the President, the Chairman of the Board, any three
members of the Board of Directors or the holders of at least one-fifth of the
outstanding shares of stock of the Company entitled to vote at the meeting. The
request of any person who has called a special meeting of shareholders shall be
addressed to the Secretary of the Corporation, shall be signed by the persons
making the request and shall state the purpose or purposes of the meeting. Upon
receipt of any such request it shall be the duty of the Secretary to fix the
time and provide written notice of the special meeting of shareholders, which
shall be held not more than 60 days after the receipt of the request. If the
Secretary shall neglect or refuse to fix the time or provide written notice of
the special
<PAGE>
meeting, the person or persons making the request may fix the time and provide
written notice of the special meeting.
2.2 Notice. Written notice of the time and place of each meeting of
shareholders, other than an adjourned meeting of shareholders, and of the
general nature of the business to be transacted at each special meeting of
shareholders shall be given to each shareholder of record entitled to vote at
the meeting at least five days before the date of the meeting unless a greater
period of notice is required by law in a particular case.
2.3 Quorum. The presence in person or by proxy of the shareholders
entitled to cast at least a majority of votes that all shareholders are entitled
to cast on a particular matter to be acted upon at the meeting shall constitute
a quorum of the shareholders for the purpose of considering such matter. The
shareholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. If a meeting cannot be organized because a quorum has not
attended, those present may, except as otherwise provided by statute, adjourn
the meeting to such time and place as they may determine.
2.4 Voting Rights.
2.4.1 One Vote per share. Each shareholder shall have the
right at every shareholders' meeting to one vote for each share of Common Stock
and one vote for each share of Class A Common Stock of the Corporation standing
in the name of the shareholder on the books of the Corporation which is entitled
to vote at such meeting. Shares of Common Stock and Class A Common Stock shall
be voted together as a single class. Each shareholder may vote such shares
either in person or by proxy.
2.4.2 Majority. Whenever any corporate action is to be taken
by vote of the shareholders of this Corporation, it shall be authorized by a
majority of the votes cast at a duly organized meeting of the shareholders by
the holders of shares entitled to vote thereon.
2.5 Record Date. The Board of Directors may fix a time, not more
than ninety days prior to the date of any meeting of shareholders, or the date
fixed for the payment of any dividend or distribution, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares will be made or go into effect, as a record date for the determination of
the shareholders entitled to notice of, or to vote at, any such meeting, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect to any such
change, conversion, or exchange of shares. Only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to notice of, or
to vote at, such meeting
2
<PAGE>
or to receive payment of such dividend, or to receive such allotment of rights,
or to exercise such rights, as the case may be, notwithstanding any transfer of
any shares on the books of the Corporation after any record date fixed, as
aforesaid.
2.6 Shareholder Communications. Whenever the Corporation has been
unable to communicate with a shareholder for more than 24 consecutive months
because communications to the shareholder are returned unclaimed or the
shareholder has otherwise failed to provide the Corporation with a current
address, the giving of notice to such shareholder pursuant to Section 2.2 of
these By-laws shall not be required. Any action or meeting that is taken or held
without notice or communication to that shareholder shall have the same validity
as if the notice or communication had been duly given. Whenever a shareholder
provides the Corporation with a current address, this Section 2.6 shall cease to
be applicable to such shareholder. The Corporation shall not be required to give
notice to any shareholder pursuant to Section 2.2 of these By-laws if and for so
long as communication with such shareholder is unlawful.
2.7 Participation by Telephone. Unless otherwise provided by a
resolution with respect to a specific meeting or with respect to a class of
meetings, no shareholder may participate in such meeting or meetings of
shareholders by means of conference telephone or other communications equipment
by means of which all persons participating in the meeting can hear one another.
Any notice otherwise required to be given in connection with any meeting at
which participation by conference telephone or other communications equipment is
permitted shall so specify.
2.8 Adjournment. Any regular or special meeting of the shareholders
of the Corporation, including one at which directors are to be elected, may be
adjourned for such period as the shareholders present and entitled to vote shall
direct.
ARTICLE III
DIRECTORS
3.1. Number and Term. The Board shall consist of seven Directors.
Except as provided in Section 3.4 hereof, the Directors shall be elected by the
shareholders. Each Director shall hold office until the next annual meeting of
shareholders or until his earlier death, resignation or removal. Any director
may resign at any time upon written notice to the Corporation. Such resignation
shall be effective upon receipt thereof by the Corporation or at such subsequent
time as shall be specified in the notice of resignation. The Chairman of the
Board shall be elected by the Board and preside at all meetings of the
3
<PAGE>
shareholders and directors, and in his absence the Board shall designate a
member of the Board to act as chairman at such meeting. The Board may elect a
Vice Chairman of the Board. Unless designated as the Chief Executive Officer
pursuant to Section 4.1 hereof, neither the Chairman of the Board nor Vice
Chairman of the Board shall be an officer of the Corporation.
3.1.2 Nomination by Shareholders. No shareholder shall be
permitted to nominate a candidate for election as a Director at or at any time
after the 1993 Annual Meeting of Shareholders unless such shareholder shall
provide in writing, not later than 120 days before the first anniversary of the
preceding annual meeting of shareholders, to the Nominating Committee of the
Board or in the absence of such committee to the Secretary of the Corporation,
information about such candidate which, were such candidate a nominee of the
Board of Directors for whom the Corporation solicited proxies, would be required
to be disclosed in the proxy materials pursuant to which such proxies would be
solicited as set forth in Items 7-8 of Schedule 14A promulgated by the
Securities and Exchange Commission or any successor provisions.
3.2 Powers. All corporate powers as required or permitted by
applicable law, the Articles of Incorporation or these By-laws shall be
exercised by or under authority of, and the business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
3.3 Meetings.
3.3.1 Place. Meetings of the Board of Directors shall be held
at the principal office of the Corporation in Philadelphia, Pennsylvania or at
such other place as may be designated by the Board or in the notice of the
meeting.
3.3.2 Regular Meetings. Regular meetings of the Board of
Directors shall be held at least quarterly on such dates and at such time as the
Board may designate. Notice of regular meetings need not be given.
3.3.3 Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board and shall be
called by him on the written request of three Directors. Notice (which need not
be written) of the time and place of each special meeting shall be given to each
Director at least two days before the meeting.
3.3.4 Quorum. A majority of the Directors in office shall
constitute a quorum for the transaction of business at any meeting. The acts of
a majority of the Directors present and voting at any meeting at which a quorum
is present shall be the acts of the Board of Directors.
4
<PAGE>
3.3.5 Participation. One or more Directors may participate in
a meeting of the Board or a committee of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
3.4 Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, shall be filled
by vote of a majority of the remaining members of the Board, even if less than a
quorum. Any person selected to fill such a vacancy shall serve until the next
meeting of the shareholders called for the purpose of electing Directors.
3.5 Committees.
3.5.1 Executive Committee. The Board of Directors may, by
resolution adopted by a majority of the entire Board, create an Executive
Committee which shall consist of three or more Directors and shall have and
exercise the authority of the Board over the business of the Corporation between
meetings of the Board, except as restricted by Section 3.5.3 hereof.
3.5.2 Additional Committees. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate one or more
additional committees, each committee to consist of two or more Directors and
such alternate members (also Directors) as may be designated by the Board. To
the extent provided in such resolution, any such committee shall have and
exercise the powers of the Board of Directors. Unless otherwise determined by
the Board, in the absence or disqualification of any member of a committee the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of any such absent or
disqualified member, except as restricted by Section 3.5.3 hereof.
3.5.3 Actions not permitted by Committees. No Committee shall
have power or authority as to the following:
(1) The submission to shareholders of any action requiring
approval of shareholders;
(2) The creation or filling of vacancies in the Board;
(3) The adoption, amendment or repeal of the By-laws;
(4) The amendment or repeal of any resolution of the Board that by
its terms is amendable or repealable only by the Board; or
(5) Action on matters committed by the By-laws or resolution of
the Board to another committee of the Board.
5
<PAGE>
3.6 Limitation of Liability of Directors.
3.6.1 Fiduciary Duty. A director of this Corporation shall
stand in a fiduciary relation to this Corporation and shall perform his duties
as a director, including his duties as a member of any committee of the Board of
Directors upon which he may serve, in good faith, in a manner he reasonably
believes to be in the best interests of this Corporation, and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. In performing his duties, a
director shall be entitled to rely in good faith on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by any of the following:
(1) One or more officers or employees of this Corporation whom the
director reasonably believes to be reliable and competent in
the matters presented.
(2) Counsel, public accountants or other persons as to matters
which the director reasonably believes to be within the
professional or expert competence of such persons.
(3) A committee of the Board of Directors upon which he does not
serve, duly designated in accordance with law, as to matters
within its designated authority, which committee the director
reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he
has knowledge concerning the matter in questions that would cause his reliance
to be unwarranted.
3.6.2 Consideration of all Factors. In discharging the duties
of their respective positions, the Board of Directors, committees of the Board
of Directors and individual directors may, in considering the best interests of
this Corporation, consider the effects of any action upon employees, upon
suppliers and customers of this Corporation and upon communities in which
offices or other establishments of this Corporation are located, and all other
pertinent factors. The consideration of these factors shall not constitute a
violation of Section 3.6 hereof.
3.6.3 Actions. Absent breach of fiduciary duty, lack of good
faith or self-dealing, actions taken as a director or any failure to take any
action shall be presumed to be in the best interests of this Corporation.
6
<PAGE>
3.6.4 No Personal Liability. A director of this Corporation
shall not be personally liable for monetary damages as such for any action taken
or any failure to take any action unless:
(1) the director has breached or failed to perform the duties of
his office under Sections 3.6.1 through 3.6.3 hereof; and
(2) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
3.6.5 Governing Law. The provisions of Section 3.6.4 hereof
shall not apply to:
(1) the responsibility or liability of a director pursuant to any
criminal statute; or
(2) the liability of a director for the payment of taxes pursuant
to local, state or federal law.
3.6.6 Shareholder Approval to Amend. Notwithstanding any other
provisions of these By-laws, the approval of shareholders shall be required to
amend, alter, change, repeal or adopt any provision as part of these By-laws
which is inconsistent with the purpose or intent of Sections 3.6.1, 3.6.2,
3.6.3, 3.6.4, 3.6.5 or 3.6.6 of this Article III. The provisions of this Section
3.6 were adopted by shareholders of the Corporation on April 24, 1987.
ARTICLE IV
OFFICERS
4.1 Election. The Board of Directors shall elect a President,
Treasurer, Secretary and such Vice President and other officers and assistant
officers as the board may authorize from time to time. Two or more offices may
be held by the same person. The Directors shall designate either the Chairman of
the Board or the President to be the chief executive officer of the Corporation.
Each officer shall hold office at the pleasure of the Board and until his
successor has been selected and qualified or until his earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Any such resignation shall be effective upon receipt thereof
by the Corporation or at such subsequent time as may be specified in the notice
of resignation.
4.2 President. The President may be designated as the chief
operating officer or the chief executive officer of the
7
<PAGE>
Corporation. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Board and of the shareholders and shall perform
the other duties of the Chairman of the Board.
4.3 Chief Executive Officer. The Chief Executive Officer of the
Corporation shall have general supervision over the business of the Corporation
and may perform any act and execute any instrument for the conduct of its
business and he or any officer or employee authorized by him may appoint, remove
or suspend agents or employees of the Corporation and may determine their duties
and compensation.
4.4 Vice President. The Vice President or, if more than one, the
Vice Presidents in the order, if any, established by the Board shall, in the
absence or incapacity of the President, have the authority to exercise all the
powers and perform the duties of the President. The Vice Presidents,
respectively, shall also have such other authority and perform such other duties
as may be provided in the By-laws or as shall be determined by the Board or the
President. Any Vice President may, in the discretion of the Board, be designated
as "executive," "senior," by departmental or functional classification, or chief
operating officer.
4.5 Secretary. The Secretary shall attend all meetings of the Board
and of the shareholders and keep accurate records thereof in one or more minute
books kept for that purpose and shall perform the duties customarily performed
by the secretary of a corporation and such other duties as may be assigned to
him by the Board or the President.
4.6 Treasurer. The Treasurer shall be responsible for the custody of
the corporate funds and securities; shall be responsible for full and accurate
accounts of receipts and disbursements in books belonging to the Corporation;
and shall perform such other duties as may be assigned to him by the Board or
the President.
4.7 Assistant Officers. Each assistant officer shall assist in the
performance of the duties of the officer to whom he is assistant and shall
perform such duties in the absence of the officer. He shall perform such
additional duties as the Board of Directors, the President or the officer to
whom he is assistant may from time to time assign him. Such officers may be
given such functional titles as the Board of Directors shall from time to time
determine.
4.8 Other Officers. The duties of the other officers shall be those
usually related to their officers, except as otherwise prescribed by resolution
of the Board of Directors.
8
<PAGE>
4.9 Standard of Care. An officer shall perform his duties as an
officer in good faith, in a manner he reasonably believes to be in the best
interests of the Corporation and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by reason
of having been an officer of the Corporation. The Corporation may secure the
fidelity of any or all of the officers by bond or otherwise at its expense.
4.10 Removal, Vacancies. Any officer or agent of the Corporation may
be removed by the Board with or without cause. The removal shall be without
prejudice to the contract rights, if any, of any person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
5.1 Indemnification. This Corporation shall indemnify any director
or officer, and may indemnify any other employee or agent, who was or is a party
to, or is threatened to be made a party to or who is called as a witness in
connection with any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of this Corporation, by reason of the fact that he
is or was a director, officer, employee or agent of this Corporation, or is or
was serving at the request of this Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding unless the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
5.2 Non Exclusive Right. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, contract,
vote of shareholders or disinterested directors pursuant to the direction,
howsoever embodied, of any court of competent jurisdiction or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office. It is the policy of this Corporation that indemnification
of, and advancement of expenses to, directors and officers of this Corporation
shall be made to the fullest extent
9
<PAGE>
permitted by law. To this end, the provisions of this Article V shall be deemed
to have been amended for the benefit of directors and officers of this
Corporation effective immediately upon any modification of the Business
Corporation Law of the Commonwealth of Pennsylvania (the "BCL") or the
Directors' Liability Act of the Commonwealth of Pennsylvania (the "DLA") or any
modification, or adoption of any other law that which expands or enlarges the
power or obligation of corporations organized under the BCL or subject to the
DLA to indemnify, or advance expenses to, directors and officers of this
Corporation.
5.3 Expenses. This Corporation shall pay expenses incurred by an
officer or director, and may pay expenses incurred by any other employee or
agent, in defending a civil or criminal action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by this
Corporation.
5.4 Continuation of Indemnification. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article V
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
5.5 Security for Obligations. This Corporation shall have the
authority to create a fund of any nature, which may, but need not be, under the
control of a trustee, or otherwise secure or insure in any manner, its
indemnification obligations, whether arising under these By-laws or otherwise.
This authority shall include, without limitation, the authority to (i) deposit
funds in trust or in escrow, (ii) establish any form of self-insurance, (iii)
secure its indemnity obligation by grant of a security interest, mortgage or
other lien on the assets of this Corporation or (iv) establish a letter of
credit, guaranty or surety arrangement for the benefit of such persons in
connection with the anticipated indemnification or advancement of expenses
contemplated by this Article V. The provisions of this Article V shall not be
deemed to preclude the indemnification of, or advancement of expenses to, any
person who is not specified in Section 5.1 of this Article V but whom this
Corporation has the power or obligation to indemnify, or to advance expenses
for, under the provisions of the BCL [or the DLA or] otherwise. The authority
granted by this Section 5.5 shall be exercised by the Board of Directors of this
Corporation.
5.6 Right to Defend. As soon as practicable after receipt by any
person specified in Section 5.1 of this Article V of notice of the commencement
of any action, suit or proceeding specified in Section 5.1 of this Article V,
such person shall, if
10
<PAGE>
a claim with respect thereto may be made against this Corporation under Article
V of these By-laws, notify this Corporation in writing of the commencement or
threat thereof; however, the omission so to notify this Corporation shall not
relieve this Corporation from any liability under Article V of these By-laws
unless this Corporation shall have been prejudiced thereby or from any other
liability which it may have to such person other than under Article V of these
By-laws. With respect to any such action as to which such person notifies this
Corporation of the commencement of threat thereof, this Corporation may
participate therein at its own expense and, except as otherwise provided below,
to the extent that it desires, this Corporation jointly with any other
indemnifying party similarly notified, shall be entitled to assume the defense
thereof, with counsel selected by this Corporation to the reasonable
satisfaction of such person. After notice from this Corporation to such person
of its election to assume the defense thereof, this Corporation shall not be
liable to such person under Article V of these By-laws for any legal or other
expenses subsequently incurred by such person in connection with the defense
thereof other than as otherwise provided below. Such person shall have the right
to employ his own counsel in such action, but the fees and expenses of such
counsel incurred after notice from this Corporation of its assumption of the
defense thereof shall be at the expense of such person unless: (i) the
employment of counsel by such person shall have been authorized by this
Corporation; (ii) such person shall have reasonably concluded that there may be
a conflict of interest between this Corporation and such person in the conduct
of the defense of such proceeding or (iii) this Corporation shall not in fact
have employed counsel to assume the defense of such action. This Corporation
shall not be entitled to assume the defense of any proceeding brought by or on
behalf of this Corporation or as to which such person shall have reasonably
concluded that there may be a conflict or interest. If indemnification under
Article V of these By-laws or advancement of expenses are not paid or made by
this Corporation, or on its behalf, within 90 days after a written claim for
indemnification or a request for an advancement of expenses has been received by
the Corporation, such person may, at any time thereafter, bring suit against
this Corporation to recover the unpaid amount of the claim or the advancement of
expenses. The right to indemnification and advancements of expenses provided
hereunder shall be enforceable by such person in any court of competent
jurisdiction. The burden of proving that indemnification is not appropriate
shall be on this Corporation. Expenses reasonably incurred by such person in
connection with successfully establishing the right to indemnification or
advancement of expenses, in whole or in part, shall also be indemnified by this
Corporation.
5.7 Contract. A contract shall exist between this Corporation and
its officers and directors with respect to
11
<PAGE>
indemnification and advancement of expenses as provided by this Article V and as
otherwise provided by applicable law.
5.8 Amendment. The repeal of Article V, in its entirety, of these
By-laws, or any other alteration or amendment thereof which may impair or
otherwise diminish the protection afforded by such provisions to the persons
described therein, shall be effective only with respect to transactions, actions
or omissions to act by such persons which occur after the effective date of such
repeal or amendment and shall have no effect whatsoever with respect to such
transactions, actions or omissions occurring prior to such effective date.
5.9 Adoption. The provisions of this Article V were adopted by the
shareholders of this Corporation on April 24, 1987.
ARTICLE VI
SHARE CERTIFICATES AND TRANSFERS
6.1 Share Certificates. Every shareholder of record shall be
entitled to a share certificate representing the shares held by him. Every share
certificate shall bear the corporate seal (which may be a facsimile) and the
signature of the President or a Vice President and the Secretary or an Assistant
Secretary or the Treasurer of the Corporation. Where a certificate is signed by
a transfer agent or registrar the signature of any corporate officer may be a
facsimile.
6.2 Transfers. Upon surrender to the Corporation of a share
certificate duly endorsed by the person named in the certificate or by attorney
duly appointed in writing and accompanied where necessary by proper evidence of
succession, assignment or authority to so transfer, and, subject to any
restrictions on transfer as provided on the certificate or in the Articles of
Incorporation, a new certificate shall be issued to the person entitled thereto
and the old certificate shall be cancelled and the transfer recorded on the
appropriate share register of the Corporation. A transferee of shares of the
Corporation shall not be a record holder of such shares entitled to the rights
and benefits associated therewith unless and until the share transfer has been
recorded on the share transfer books of the Corporation. No transfer shall be
made if it would be inconsistent with the provisions of Article 8 of the
Pennsylvania Uniform Commercial Code.
12
<PAGE>
ARTICLE VII
FISCAL YEAR
7.1 The fiscal year of the Corporation shall begin on the first day
of January of each year and shall end on the following thirty-first day of
December.
ARTICLE VIII
CONTRIBUTIONS
8.1 Contributions. The Board of Directors is authorized to make such
contributions and donations for such public and charitable purposes as may now,
or hereafter, be authorized or permitted under the laws of Pennsylvania.
ARTICLE IX
PROVISIONS OF BUSINESS CORPORATION LAW
NOT APPLICABLE TO THE CORPORATION
9.1 Section 910 of the Pennsylvania Business Corporation Law,
Pennsylvania Statute Annotated Title 15 ss.1910, shall not be applicable to this
Corporation. (Amended June 2, 1988)
9.2 Section 911 of the Pennsylvania Business Corporation Law,
Pennsylvania Statute Annotated Title 15, ss.1911, shall not be applicable to
this Corporation. (Amended June 2, 1988)
9.3 Subsections (d) through (f) of Section 511 of the Business
Corporation Law of 1988, Pennsylvania Statute Annotated Title 15 ss.511(d)
through ss.511(f), shall not be applicable to this Corporation. (Amended May 15,
1990)
9.4 Subsections (e) through (g) of Section 1721 of the Business
Corporation Law of 1988, Pennsylvania Statute Annotated Title 15 ss.1721(e)
through ss.1721(g), shall not be applicable to this Corporation. (Amended May
15, 1990)
9.5 Subchapter G of Chapter 25 of the Business Corporation Law of
1988 shall not be applicable to this Corporation. (Amended May 15, 1990)
9.6 Subchapter H of Chapter 25 of the Business Corporation Law of
1988 shall not be applicable to this Corporation. (Amended May 15, 1990)
13
<PAGE>
ARTICLE X
AMENDMENTS
10.1 These by-laws may be amended at any regular or special meeting
of the Board of Directors by the vote of a majority of all the Directors in
office or at any annual or special meeting of shareholders by the vote of the
holders of a majority of the outstanding stock entitled to vote. Notice to
shareholders of any such shareholders' meeting shall set forth the proposed
amendment or change or a summary thereof.
14
STANDARD RETAIL SPACE LEASE
THIS LEASE is made and entered into, effective as of the 13th day of July,
1994, by and between PALMA REAL ASSOCIATES, S.E., a Puerto Rico special
partnership ("Landlord"), and THEATER ACQUISITIONS OF PUERTO RICO, INC., a
Puerto Rico corporation ("Tenant").
I.
REFERENCE PROVISIONS; CERTAIN DEFINED TERMS;
SHOPPING CENTER; LEASED PREMISES; AND TERM
Section 1.1 Reference Provisions.
(a) LEASED PREMISES - The "Leased Premises" consist of that portion of
that certain building constructed (or to be constructed) containing
(or to contain) the space identified on the Site Plan for the
"Shopping Center" (as hereinafter defined) attached hereto as part
of composite Exhibit A (the other portion of composite Exhibit A
consisting of the legal description for the Shopping Center),
together with appurtenant improvements relating to such space. The
Leased Premises contain approximately 18,850 square feet of "floor
space" (as hereinafter defined). In the event that the square
footage of the Leased Premises increases above or decreases below
18,850 square feet, the provisions of this Lease which are based on
the square footage of the Leased Premises, including, but not
limited to, Sections 1.1(b), 1.1(c) and 1.1(f), shall be revised as
required to reflect any such increase or decrease in the square
footage of the Leased Premises. The Leased Premises are located on
the ground floor in a building constructed (or to be constructed) in
a Shopping Center (the "Shopping Center") now known, or intended to
be known, as PLAZA PALMA REAL (which name may be changed at any
time, or from time to time, by Landlord, in Landlord's sole
discretion), and located (or to be located) on southwest corner of
the intersection of P.R. 3 and P.R. 53, Humacao, Puerto Rico.
(b) TERM - The "Term" shall be for a period of one-hundred twenty (120)
full months, commencing as hereinafter provided. If the Term
commences on a day other than the first day of a month, then the
Term shall be extended for such fractional month. Reference in this
Lease to the "Term" shall include any and all written renewals
and/or extensions, if any, of the initial Term hereof.
Provided in all cases that Tenant is not then in default hereunder
as of the date when each such Option Term, as hereinafter defined,
is exercised, Tenant shall have the following five (5) Option Terms:
one (1) option to extend the Term of the Lease for one (1)
consecutive period of ten (10) years followed by four (4) options to
extend the Term of the Lease for consecutive periods of five (5)
years each. Any such extension shall be upon all of the same terms
and conditions as are contained in the Lease (except as hereinafter
provided with respect to Minimum Rent and except that the then
remaining number of options to extend the Term hereof shall be
reduced by the number of Option Terms theretofore exercised). Each
such option term is referred to herein as an "Option Term".
- 1 -
<PAGE>
To exercise each of the foregoing option(s), Tenant must give
irrevocable written notice to Landlord of its election to extend the
Term for the then forthcoming Option Term not later than six (6)
months prior to the end of the initial ten (10) year Term (for the
first extension), and six (6) months prior to the end of each
properly exercised Option Term (for each subsequent extension). If
Tenant fails to give proper and timely notice of the exercise of any
option (or if Tenant's prior default prohibits Tenant from
exercising any such option as aforesaid), such option and all
subsequent options shall automatically be null and void in all
respects, and the Lease shall terminate absolutely on the original
maturity date hereof (or, if any option has been properly and
validly exercised, at the end of the then current Option Term, as
appropriate), if not sooner as elsewhere provided in the Lease.
Upon the timely and valid giving of any of the foregoing notices,
Landlord and Tenant shall become bound under the Lease for the then
forthcoming Option Term. Further, Landlord and Tenant shall each
execute such other documents as the other deems reasonably necessary
to evidence and confirm the extension of the Lease, and to ratify
the terms and conditions of the Lease for the entire applicable
Option Term.
(c) MINIMUM RENT (or "Minimum Rent") shall be paid on an annual basis in
each Lease Year as follows:
Each of Lease Years: Annual Amount:
-------------------- --------------
Years 1 through 10: $164,937.50, or
$8.75 per annum per
square foot in the
Leased Premises.
Minimum Rent for each Lease Year of the Option Terms (if properly
and validly exercised) shall be as follows:
Annual Amount
-------------
Option Term 1
(each of Lease Years 11 - 15) $189,678.12
Option Term 1
(each of Lease Years 16 - 20) $218,129.84
Option Term 2
(each of Lease Years 21 - 25) $250,849.32
Option Term 3
(each of Lease Years 26 - 30) $288,476.72
Option Term 4
(each of Lease Years 31 - 35) $331,748.23
Option Term 5
(each of Lease Years 36 - 40) $381,510.46
(d) PERCENTAGE RENT - "Percentage Rent" shall be, on a calendar year
basis, an amount equal to eight percent (8%) multiplied by the
positive difference, if any, between (i) "Gross Sales" (as
hereinafter defined) during each full calendar year, and (ii) the
"Break Point" $2,061,719 for yeats 1-10 [defined as the amount
equal to Minimum Rent for each such full calendar year divided by
the aforesaid percentage]; provided that, in the case of a partial
calendar year, Gross Sales shall be calculated for such partial
calendar year and the Break Point shall be equal to Minimum Rent
actually paid by Tenant for such partial calendar year divided
by the aforesaid percentage.
- 2 -
<PAGE>
(e) (i) USE - First class, multi-screen movie theatre, with not more
than an aggregate total of one thousand four hundred seven
(1,407) seats, with associated movie theatre concessions and
other movie theatre services and such other use which is
permitted under Section 4.1 of this Lease.
Provided Tenant continues to operate as a movie theatre at all times
during the term hereof, Landlord covenants and agrees that no part
of the Shopping Center, other than the Leased Premises, shall,
during the term of this Lease or any renewals or extensions thereof,
be leased, occupied or used for the exhibition of entertainment
performances including, without limitation, motion pictures, live
performances of any type and/or television broadcasts, except
television or live performances which are incidental to another
Tenant's primary business, such as in the case of a restaurant or
lounge, or which are part of a promotion being conducted by the
Shopping Center. In addition, Landlord shall not permit the sale of
popcorn anywhere in the food court of the Shopping Center, except
within the Leased Premises. The foregoing restriction on Landlord
shall automatically be rendered null and void for all purposes if
Tenant ceases to operate as a movie theatre.
Notwithstanding Landlord's agreement with Tenant herein, Landlord
shall not be liable to Tenant in the event a tenant to which
Landlord now or hereafter leases premises in the Shopping Center
violates its lease and infringes on the exclusive granted to Tenant
herein provided Landlord promptly, upon being advised in writing of
the existence of a violation, makes reasonably vigorous efforts to
enforce the exclusive granted to Tenant herein. In the event
Landlord's efforts to enforce the exclusive granted to Tenant herein
are not successful, Landlord shall, upon receipt of a written
request from Tenant, assign to Tenant Landlord's right to monetary
damages, injunction and specific performance, if any, but no other
rights which Landlord may have against such tenant to enforce the
exclusive granted to Tenant herein, in which case Tenant shall have
the right to pursue such tenant directly and in Tenant's (not
Landlord's) name, to seek monetary damages, injunction and specific
performance, if available, to remedy such tenant's violation of its
lease. Under no circumstances shall Tenant have the right to seek
the eviction of such tenant, or otherwise seek to terminate such
tenant's lease with Landlord.
(ii) OPERATING UNDER THE FOLLOWING BUSINESS NAME
Wometco Theatres (or such other name as is then generally
utilized by Tenant for its theatres from time to time)
(f) MONTHLY MARKETING CHARGE - $-0-.
- 3 -
<PAGE>
(g) SECURITY DEPOSIT - $-0-.
(h) NOTICE ADDRESS -
TO LANDLORD: TO TENANT:
------------ ----------
Mr. Mark B. Davis Mr. Frank J. Moreno
TJAC, INC. President
Royal Bank Center Theater Acquisitions of
255 Ponce de Leon Avenue Puerto Rico, Inc.
Suite 1551 Miramar Plaza Center
Hato Rey, San Juan, Suite 608
Puerto Rico 00919 Santurce, Puerto Rico
00907
With a copy to: With a copy to:
--------------- ---------------
Mr. Mark B. Davis Mr. Frank J. Moreno
7104 MelRose Castle Lane President
Boca Raton, FL 33496 Wometco Theatres
2121 Ponce De Leon Blvd.
Suite 900
Coral Gables, FL 33134
With a copy to:
---------------
Post & Romero
Attn: Carlos A. Romero,
Jr.
3195 Ponce de Leon Blvd.
Suite 200
Coral Gables, FL 33134
(i) COMPLETION PERIOD FOR TENANT'S WORK - "Tenant's Work" (as
hereinafter defined) shall be completed within 180 days from
Landlord's "Tender of Possession" (as hereinafter defined), subject
to delays caused by a strike which makes Tenant unable to obtain
labor or materials, failure of power or other utilities, riots, war,
civil commotion, unavoidable casualty, severe weather or other
causes which are (a) material and directly impact on Tenant's Work,
(b) out of the control of Tenant, (c) documented (if capable of
being documented), and (d) noticed to Landlord.
(j) OPERATING HOURS: Tenant's operating hours shall be reasonably
consistent with those of similar movie theatres of Tenant in Puerto
Rico. Tenant shall have the sole discretion on whether to conduct
midnight showings.
(k) COMPLETION PERIOD FOR LANDLORD'S WORK; TENDER OF POSSESSION -
Landlord shall complete Landlord's Work and Tender of Possession as
provided in Section 1.2 hereof, but in no event later than December
31, 1995. If Landlord fails to deliver Tender of Possession to
Tenant on or before December 31, 1995, Tenant shall have the right
to (a) cancel this Lease by written notice to Landlord, which notice
to be effective must be received by Landlord on or before Landlord
in fact delivers Tender of Possession to Tenant, even if such Tender
of Possession is after December 31, 1995, or (b) extend such Tender
of Possession date.
- 4 -
<PAGE>
(l) SUBSTANTIAL COMPLETION OF LANDLORD'S WORK - "Substantial Completion
of Landlord's Work" shall mean the date on which Landlord's
architect certifies to Landlord and Tenant (and their respective
lenders, if any) that (1) Landlord's Work has been fully and finally
completed in substantial accordance with the plans and
specifications therefore previously approved by Landlord and Tenant
(with such amendments as Landlord and Tenant may have approved from
time to time in writing), subject only to the completion of minor,
punch-list items, and (2) all inspections of Landlord's Work to be
conducted by governmental officials or governmental representatives
(if any are then required) have been completed and approved, with
all additional requirements resulting from such inspections, if any,
relating to the Landlord's Work, being fully satisfied and
satisfactorily reinspected (if required) and approved.
Section 1.2 Shopping Center, Leased Premises and Term. Landlord hereby
leases to Tenant, and Tenant hereby lets from Landlord, the Leased Premises (as
now or hereafter completed) for the Term specified in Section 1.1 (b) above. The
Term shall commence on either (a) the date which is the number of days specified
in Section 1.1 (i) above following Landlord's Tender of Possession of the Leased
Premises (the date so determined by this clause (a) being referred to herein as
the "Commencement Deadline"); or (b) the date on which Tenant opens for business
in the Leased Premises; whichever of such two dates shall first occur (such
earlier date being referred to herein as the "Commencement Date"). Any access by
Tenant to the Leased Premises prior to the Commencement Date (which prior access
shall occur only with Landlord's prior written consent) shall be upon all of the
terms, covenants and conditions of this Lease, except only for the payment of
Minimum Rent and Percentage Rent (hereinafter referred to, together, as "Rent")
and other charges. Tenant shall, however, pay all utility charges relating to
the Leased Premises which accrue from and after Landlord's Tender of Possession.
Landlord's "Tender of Possession" shall be deemed to have occurred on the
earlier of the date (a) of Substantial Completion of Landlord's Work as set
forth in Section 1.1(l) above, subject, however, to extensions until such time
as Landlord completes the curing of Tenant's objections under Section 3.1
hereof, or (b) on which Tenant in fact commences Tenant's Work in and to the
Leased Premises, even if such date is prior to Substantial Completion of
Landlord's Work. Tenant shall, immediately after Landlord's Tender of
Possession, commence Tenant's Work in and to the Leased Premises and prosecute
Tenant's Work diligently thereafter to completion.
For purposes of this Lease, "Lease Year 1" shall be the period beginning
with the Commencement Date and ending in the following year on the last day of
the month in which the Commencement Date occurred; and each "Lease Year"
thereafter shall be the next succeeding 12- month period(s) in order.
- 5 -
<PAGE>
The boundaries of the Leased Premises shall extend (i) in the case of the
rear and side boundaries which abut "Common Areas" (as hereinafter defined), to
the exterior faces of rear or side exterior walls [or to the imaginary plane
formed by connecting the two outermost points of such rear or side exterior
walls, if there are (or are to be) indentations in any such walls, and extending
such plane(s) to its/their intersection(s) with the extensions of the other
boundary lines of the Leased Premises]; (ii) in the case of the front boundary
of the Leased Premises, to an imaginary plane intersecting the extensions, at
right angles to such plane, of the side lines of the Leased Premises, which
plane lies on the line which forms the boundary within which Tenant's store
front (including "pop-out", if any) may be erected, as shall be shown on the
"blockout" floor plan of the Leased Premises delivered (or to be delivered) to
Tenant as provided in Exhibit B attached hereto; and (iii) to the center lines
separating the Leased Premises from other leased premises in the Shopping
Center. The Leased Premises shall include the appurtenances specifically granted
in this Lease, but reserving and excepting to Landlord the right to install,
maintain, use, repair and replace pipes, ductwork, conduits, utility lines,
wires and other items through hung ceiling (or exposed beam and joist) space,
column space and partitions, or in or beneath the floor slab, or in, through,
above or below the Leased Premises or other parts of the Shopping Center.
Tenant agrees to use its best efforts to complete Tenant's Work and open
the Leased Premises for business to the public, fully equipped, stocked and
staffed, not later than the Commencement Deadline. In the event Tenant fails to
take possession of the Leased Premises or open for business to the public fully
fixtured, stocked and staffed by such Commencement Deadline, then, and in any
such event, Landlord shall have, in addition to any and all remedies elsewhere
herein provided, the right at its option to collect the Minimum Rent and other
charges herein provided.
Notwithstanding any provisions of this Lease to the contrary, if the
Commencement Date falls on a date which would make the Commencement Date (i) a
date between the Wednesday before Easter and the Wednesday before May 30th of
any year, then the Commencement Date shall be the June 1 of such year; or (ii) a
date between August 15th and the first Wednesday in November of any year, then
the Commencement Date shall be the Wednesday before Thanksgiving of such year;
or (iii) a date after the Wednesday before Thanksgiving and before Christmas Day
of any year, then the Commencement Date shall be Christmas Day of such year.
Notwithstanding the foregoing, Tenant shall have the right, but not the
obligation, to open for business after the actual Commencement Date but in
advance of the postponed Commencement Date pursuant to the immediately preceding
sentence, in which case the Commencement Date shall be date Tenant in fact opens
its business in the Leased Premises, except that Minimum Rent for the period
from the date Tenant in fact opens for business in the Leased Premises up to but
excluding the first postponed Commencement Date to occur, shall be fully abated
and Tenant shall be obligated to pay Landlord, for such period only, the lesser
of (a) eight percent (8%) of Tenant's Gross Sales during such period; or (b) or
Tenant's Minimum Rent; plus in either the case of (a) or (b), Tenant's pro-rata
share of Operating Costs, Insurance and Real Estate Taxes.
- 6 -
<PAGE>
Section 1.3 Acceptance of Leased Premises; Estoppel Certificates. As often
as may be requested by Landlord or Tenant, the other party shall promptly (but
no later than 10 days following any request therefor) and without cost to the
requesting party execute, acknowledge and deliver to the requesting party, such
party's mortgagee(s) and/or any other person(s) reasonably designated by the
requesting party, a written acceptance or estoppel certificate with respect to
this Lease and/or the Leased Premises containing such information as shall then
be reasonably requested by the requesting party and in form and substance
prepared by such requesting party.
Section 1.4 Quiet Enjoyment. Tenant, upon paying the Rent and all other
charges herein reserved, and performing and observing all of the other terms,
covenants and conditions of this Lease on Tenant's part to be performed and
observed, shall peaceably and quietly have, hold and enjoy the Leased Premises
during the Term, without interference of Landlord, subject, nevertheless, to the
terms and conditions of this Lease. Subject to the foregoing, Landlord hereby
represents and warrants to Tenant that Landlord, as of the date of this Lease,
is the owner, in fee simple, of the Shopping Center and of the Leased Premises.
II.
RENT AND OTHER CHARGES
Section 2.1 Minimum Rent. Tenant shall pay to Landlord, without previous
demand therefor and without any setoff or deduction whatsoever, the Minimum Rent
in equal monthly installments, in advance, on the first day of each and every
calendar month throughout the Term, and, if the Term commences on a date other
than the first day of a month, Tenant shall pay Landlord on such Commencement
Date a pro-rata portion of such Minimum Rent, calculated on a per diem basis,
for the then actual number of days contained in such partial month. For purposes
of this Lease, the term "Minimum Rent" shall mean the amount payable in
accordance with Section 1.1(c) of this Lease during any Lease Year consisting of
exactly 12 months. In the case of any partial Lease Year (and any fractional
month added to Lease Year 1), full or pro-rated monthly installments of Minimum
Rent during such partial Lease Year (and fractional month) shall be calculated
as aforesaid and paid as if such partial Lease Year (and fractional month) were
part of a full Lease Year (i.e., 1/12 of the applicable Minimum Rent for a full
month, or a prorata portion of such 1/12th for a fractional month).
Section 2.2 Percentage Rent.
(a) In addition to the aforesaid Minimum Rent, Tenant shall pay to
Landlord the Percentage Rent in the manner above and hereinafter described.
(b) The term "Gross Sales" means the total amount in dollars of the actual
sales price, whether for cash or on credit or partly cash and partly credit of
all "Box Office Receipts", as hereinafter defined, whether sold from the Leased
Premises (excluding, however, tickets sold in the Leased Premises for use at
other theaters and not in fact used at the Leased Premises) or elsewhere and, in
the case of tickets sold elsewhere, used at the Leased Premises, including, but
not limited to, sales by computer, cable, microwave or other current
- 7 -
<PAGE>
or future technology, and "Confection Receipts", as hereinafter defined, and all
sales of merchandise and services including gift certificates and all other
receipts of any business conducted in or from the Leased Premises, specifically
excluding all sales to employees of Tenant, any commissions or fees paid to
credit card companies or remote ticket sellers and discounted sales for charity
events. On vending machines and equipment located on the Leased Premises that
are owned by Tenant or an affiliated third party, all sales from the machines
and equipment shall be included in the calculation of "Gross Sales" for
Percentage Rent purposes. In the event that the machines and equipment are owned
by an independent third party, then only the gross commissions received by the
Tenant from sales from these machines and equipment shall be included in the
calculation of "Gross Sales" for percentage rent purposes. "Gross Sales" shall
not include any sums collected or paid out for any sales or rental excise tax
imposed by any duly constituted governmental authority, whether now or hereafter
in force.
As used herein, the term "Box Office Receipts" shall mean all money
received by Tenant from theatre admissions to the Leased Premises.
As used herein, the term "Confection Receipts" shall mean all Gross Sales
from any and all concessionaires received by Tenant, from the sale of food,
beverages and any and all other items sold at the candy counter or at any other
location in or about the Leased Premises, including, but not limited to, vending
machines or equipment in or about the Leased Premises as referenced above. In
addition, any and all commissions from the sale of lottery tickets, memorabilia,
symbiotic paraphernalia (including, but not limited to records, video tapes,
audio tapes, books, T-shirts, etc.), and "Bass or Ticketmaster" type ticket
sales (concert, etc.) shall be added to "Confection Receipts" to determine total
receipts from said sources and subsequently added to "Gross Sales" for purposes
for calculating Percentage Rent.
(c) Percentage Rent for each calendar year (or partial calendar year)
shall become due and payable on the 30th day of the month immediately following
the month during which the Gross Sales for such calendar year exceed the
applicable Break Point, and thereafter shall be paid monthly on all additional
Gross Sales made during the remainder of such calendar year. Tenant shall submit
to Landlord (i) on or before the 30th day of each month of each calendar year
(and partial calendar year), a written unaudited statement showing Tenant's
Gross Sales and itemized permitted deductions and exclusions for the preceding
calendar month, certified by Tenant, or Tenant's store manager or designated
representative; and (ii) on or before the 90th day following the end of each
calendar year (and partial calendar year), a written statement showing Tenant's
Gross Sales and itemized deductions and exclusions for the preceding calendar
year (or partial calendar year), signed by Tenant and certified under oath to be
complete and correct to the best of Tenant's knowledge and belief. If Tenant
shall fail to prepare and deliver on time any such statement of Gross Sales
required herein, Landlord, in addition to other rights or remedies it may have
and upon ten (10) days' notice to Tenant [if Tenant does not cure such failure
within such ten (10) day period], may elect to make an audit of all relevant
books and records of Tenant, including
- 8 -
<PAGE>
Tenant's relevant bank accounts, and to prepare the statement or statements
which Tenant has failed to prepare and deliver. Such audit shall be made and
such statement shall be prepared by an accountant selected by Landlord. Absent
material error, the statement or statements so prepared shall be conclusive on
Tenant, and Tenant shall promptly pay all reasonable expenses of such audit and
of the preparation of any such statements and all sums, if any, as may be shown
by such audit to be due as Percentage Rent, together with "Interest" (as
hereinafter defined) thereon.
(d) Tenant shall prepare and keep at the Leased Premises or Tenant's
primary place of business, for a period of not less than three (3) years,
adequate books and records (conforming to the requirements of this Lease and
otherwise to generally accepted accounting principles consistently applied)
showing Gross Sales for each month throughout the Term. Tenant agrees that all
Gross Sales shall be registered at the time each sale is made.
(e) Landlord or its duly authorized representatives may, during regular
business hours on ten (10) days prior written notice to Tenant, inspect any and
all relevant records of Gross Sales. Tenant and each assignee, subtenant,
licensee and concessionaire (this clause not being deemed a consent thereto)
shall produce said records on request of Landlord. If Landlord's audit shall
disclose a deficiency in Percentage Rent in an amount equal to or greater than
two (2%) of the amount of Percentage Rent reported by Tenant's statement for the
period of the audit, then Tenant shall promptly pay Landlord such deficiency
together with Interest and the reasonable cost of such audit. In addition, if
such audit shall disclose that Gross Sales were understated in any Gross Sales
statement furnished by Tenant in an amount equal to or greater than two (2%) of
the amount of Gross Sales reported by Tenant's statement for the period of the
audit, whether or not disclosing a deficiency in Percentage Rent due, Tenant
shall promptly pay the reasonable cost of such audit.
(f) INTENTIONALLY DELETED.
Section 2.3 Taxes. Tenant shall pay to Landlord each month, together with
Tenant's monthly installment of Minimum Rent, a sum equal to all taxes, patentes
and other governmental impositions now or hereafter imposed and/or assessed upon
the Rent and other charges and consideration to be received by Landlord for this
Lease, including, but not limited to, sales, business and occupancy, gross
receipts, patentes and other similar taxes; and, if Landlord is legally
responsible for the payment thereof, upon all personal property of Tenant.
Nothing in this Section shall require Tenant to pay for Landlord's income
taxes.
Tenant shall also pay to Landlord Tenant's share of real estate taxes as
hereinafter specified. Tenant's annual share of real estate taxes shall be
computed by multiplying the total amount of such taxes by a fraction, the
numerator of which shall be the number of square feet of floor space in the
Leased Premises, and the denominator of which shall be the number of square feet
of floor space in all "Store Space", as hereinafter defined. The Store Space of
the Shopping Center as currently contemplated for Phase I of the Shopping
- 9 -
<PAGE>
Center and as depicted on Exhibit A hereto is presently intended by Landlord to
be 127,163 square feet, subject to modifications which may occur in the plans
and specifications for Phase I of the Shopping Center prior to its initial
construction, and thereafter, the construction of Phase II of the Shopping
Center, and subject further to additions or reductions to the Store Space of the
Shopping Center, as permitted under this Lease or otherwise. Until six (6)
months following the Commencement Deadline, Tenant's architect shall have the
right to review the foregoing square footage computations with Landlord's
architect. Any size errors discovered during such six (6) month period which are
agreed to exist between such architects shall be promptly corrected. Under no
circumstances may either party question the square footage set forth in this
Section after six (6) months following the Commencement Deadline.
The term "real estate taxes" shall mean all taxes and assessments and
other governmental impositions, charges and levies, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind and
nature, levied or assessed against realty of the Shopping Center (i.e., the
land, buildings and improvements forming the Shopping Center, as the same may be
enlarged or reduced from time to time), and other taxes (other than Landlord's
income taxes) arising out of the use and/or occupancy of the Shopping Center
imposed by federal, state, commonwealth, county, municipal or local governmental
authority or any other taxing authority having jurisdiction over the Shopping
Center, including, but not limited to, expenses incurred by Landlord in
contesting the validity of, in seeking a reduction in or in seeking to prevent
an increase in any such tax(es) and/or assessment(s); provided, however, that
Landlord shall be entitled to include expenses incurred in contesting the
validity of, in seeking a reduction in, or seeking to prevent an increase in any
taxes or assessments only to the extent such costs do not exceed the amount of
such tax determined to be invalid, the amount of such reduction relating to such
tax, or the amount of increase avoided as a result of such action. Solely for
the purpose of determining Tenant's share of "real estate taxes", an amount
equal to the then current applicable contributions, if any, paid by any "Anchor
Tenants" or "Outparcel Tenants" (both as hereinafter defined) in respect of
"real estate taxes" for the applicable period shall be deducted from the then
applicable aggregate amount thereof prior to the computation of Tenant's share.
Landlord shall estimate Tenant's annual share of the real estate taxes
referred to in this Section and Tenant shall pay one-twelfth (1/12th) thereof
monthly in advance together with the payment of Minimum Rent. Landlord shall
have the right, at any time and from time to time during each calendar year, to
increase said estimate based on changed circumstances, additional facts
previously unknown to Landlord or for any other reason. After the end of each
calendar year, Landlord shall furnish Tenant a statement of the actual real
estate taxes, and there shall be an adjustment between Landlord and Tenant, with
payment to Landlord on demand, or credit to Tenant against the next such payment
due, as the case may require, to the end that Landlord shall receive from Tenant
the entire and proper amount of Tenant's annual share for such period.
- 10 -
<PAGE>
Should the taxing authorities include in such real estate taxes the value
of any machinery, equipment, fixtures, inventory or other personal property or
assets of Tenant, then Tenant agrees to pay the entire taxes attributable to
such items in addition to, but not in duplication of, the real estate taxes
referred to above, as determined by Landlord.
If at any time during the Term of this Lease a tax, excise or patente,
however described, is levied or assessed against Landlord by any lawful taxing
authority on account of the Landlord's interest in this Lease or the Rent and/or
other charges expressly reserved hereunder (excluding only income taxes imposed
upon Landlord) as a substitute, in whole or in part, or in addition to, the real
estate taxes hereinbefore described, Tenant agrees to pay Landlord the amount of
such tax, excise or patente, but only to the extent of the amount thereof which
is lawfully assessed or imposed as a direct result of Landlord's ownership of
this Lease or the Rent and/or other charges reserved hereunder. In the event any
such tax, excise or patente is levied or assessed directly against Tenant by any
lawful taxing authority on account of Tenant's interest in this Lease or the
leasehold estate hereby created or the Rent and/or other charges to be paid by
Tenant hereunder, then Tenant shall be responsible therefor and agrees to pay
the same directly before delinquency; or should any lawful taxing authority
require that any such tax, excise or patente for which Tenant is responsible
hereunder, other than the real estate taxes levied or assessed against the
Shopping Center, be paid by Tenant, but collected by Landlord for and on behalf
of such taxing authority and from time to time forwarded by the Landlord to such
taxing authority, then the same shall be paid by Tenant to Landlord at such
times as such taxing authority shall require.
All of the sums required to be paid by Tenant to Landlord in this Section
2.3 are collectively referred to herein as "Taxes".
Section 2.4 Common Areas and Operating Costs. All common areas and other
common facilities (hereinafter collectively called "Common Areas") made
available by Landlord in, on, over or about the Shopping Center (or which may
lie outside of the Shopping Center, but serve the Shopping Center in some
manner) shall be subject to the exclusive control and management of Landlord,
expressly reserving to Landlord the right to alter, eliminate, enlarge or
otherwise make such changes to the Common Areas as Landlord, in its sole
discretion, shall deem desirable, including, without limitation, the right to
erect and install, within the Common Areas, kiosks, planters, fountains,
sculpture, free-standing buildings, additional buildings or other improvements,
additional stories to buildings, mall enclosures or otherwise, and, if any such
Common Areas are changed into leasable areas, to retain, for Landlord's own
account, all receipts in respect thereof; provided, however, notwithstanding the
foregoing, in no event shall such changes materially impair access to the Leased
Premises or result in a material modification of the "primary theatre parking
area" which serves the Leased Premises as depicted on Site Plan attached hereto
as Exhibit A, or materially impair Tenant's primary signage outside the Leased
Premises. Common Areas (as initially constructed or as the same may be enlarged
or reduced at any time thereafter, all in Landlord's sole discretion) shall mean
all land, areas, space,
- 11 -
<PAGE>
facilities, equipment, signs and special services from time to time made
available by Landlord for the common and joint, but non-exclusive (except as
specifically provided herein to the contrary), use and benefit of Landlord,
Tenant and other tenants and occupants of the Shopping Center, and their
respective employees, agents, permitted subtenants, concessionaires, licensees,
customers and invitees, whether on the property of the Shopping Center or
off-site, which shall include, without limitation (but the following shall not
be deemed a representation as to their present or future existence or
availability), to the extent applicable to the Shopping Center, the sidewalks,
parking areas, entrance areas, drainage facilities, access roads, driveways,
landscaped areas, truck serviceways, loading docks, pedestrian malls, bridges
and walkways (enclosed or open), food and other courts, stairs, ramps,
elevators, escalators, comfort and first aid stations, public restrooms,
community halls or auditoriums and common pick-up stations.
Landlord hereby expressly reserves the right, from time to time, in
Landlord's sole discretion, in addition to, and not by way of limitation of,
other rights reserved herein, to expand the Shopping Center by the addition of
an open or enclosed mall with or without additional leasable improvements
(converting Common Areas to such leasable improvements as applicable) or
otherwise; to construct, maintain and operate lighting and other facilities,
equipment and signs on all of the Common Areas; to police the same; to change
the area, level, location and arrangement of the Common Areas and other
facilities forming a part of said Common Areas; to build additional and/or
multi-story parking facilities; to designate specific areas for parking by
tenants and other occupants of the Shopping Center and their employees, agents,
subtenants, concessionaires and licensees; to close temporarily all or any
portion of the Common Areas for the purpose of making repairs or changes thereto
and to discourage non-customer parking; to establish, modify and enforce
reasonable rules and regulations with respect to the Common Areas and the use to
be made thereof; to improve drainage facilities pursuant to public requirements,
private agreements or otherwise; and to grant individual tenants and others the
right to use and/or conduct sales in the Common Areas on an exclusive basis.
Landlord shall operate, manage, equip, light and maintain the Common Areas in
such manner as Landlord may from time to time determine, and Landlord shall have
the right and exclusive authority to employ and discharge all personnel
connected therewith.
Subject to all of the terms and conditions hereof, Tenant is hereby given
a non-exclusive license to use, for the purposes intended therefor during the
Term, the Common Areas as they may now or at any time during the Term exist,
provided, however, that if the size, location or arrangement of such Common
Areas or the type of facilities or services at any time forming a part thereof
be changed, diminished or eliminated in a nonmaterial way (including, but not
limited to, elimination by reason of the conversion thereof from Common Areas to
leasable area, as aforesaid), Landlord shall not be subject to any liability
therefor (including, but not limited to, liability for the temporary or
permanent diminishment or alteration of visibility, access, etc. in connection
therewith and/or for the inconvenience and annoyance relating in any way to
construction and similar activities relating to such
- 12 -
<PAGE>
nonmaterial change, diminishment or elimination), nor shall Tenant be entitled
to any compensation or diminution or abatement of Rent (or other charges)
therefor, nor shall any such nonmaterial change, diminution or elimination of
such areas be deemed a constructive or actual eviction. Landlord reserves the
right to grant to third persons the non-exclusive right to cross over and use in
common with Landlord and all tenants and occupants of the Shopping Center the
Common Areas as designated from time to time by Landlord. In order to establish
that the Shopping Center and any portion thereof is and will continue to remain
private property and to prevent a dedication thereof or the accrual of any
rights of any person or the public therein, Landlord hereby reserves the
unrestricted right to close all or any portion of the Shopping Center to the
general public for one (1) day in each calendar year (or such longer period as
Landlord may determine), and, in connection therewith, to seal off all entrances
to the Shopping Center and/or any portion thereof. Tenant hereby acknowledges,
consents and agrees that any and/or all services, facilities and access by the
public to the Leased Premises and/or to the Shopping Center may, in Landlord's
sole discretion, be suspended in whole or in part during any periods of actual
or threatened civil commotion, insurrection or other circumstances which make
such suspension reasonable or beyond the control of Landlord.
Notwithstanding Landlord's rights in and to the Common Areas as
hereinabove or elsewhere provided in the Lease to the contrary, Landlord and
Tenant recognize that vehicular access to the Shopping Center is important to
the day-to-day operation of Tenant's intended use of the Leased Premises and
Landlord agrees to maintain access to the Shopping Center through a minimum of
two (2) of the vehicular entrances and exits shown on the Site Plan attached
hereto as Exhibit A. In the event Landlord fails to maintain a minimum of two
(2) vehicular entrances and exits to the Shopping Center for a period in excess
of fifteen (15) days, the Minimum Rent shall be fully abated and Tenant shall be
obligated to pay Landlord, for the period that Landlord fails to maintain a
minimum of two (2) vehicular entrances and exits to the Shopping Center in
excess of fifteen (15) days only [and not thereafter or for the first fifteen
(15) days], the lesser of (a) eight percent (8%) of Tenant's Gross Sales during
such period; or (b) Tenant's Minimum Rent; plus in either the case of (a) or
(b), Tenant's pro-rata share of Operating Costs, Insurance and Real Estate
Taxes.
Notwithstanding Landlord's rights in and to the parking areas as
hereinabove or elsewhere provided in the Lease to the contrary, Landlord and
Tenant recognize that vehicular parking is important to the day-to-day operation
of Tenant's intended use of the Leased Premises and Landlord agrees not to
modify the parking area outlined on the Site Plan attached hereto as Exhibit A
as "primary theatre parking area" and to maintain such area in an unobstructed
manner for the non-exclusive use by customers of Tenant. In addition, Landlord
agrees to maintain within all parking areas serving the Shopping Center a ratio
of parking equal to no less than five (5) parking spaces for each one-thousand
(1,000) square feet in the Shopping Center. Landlord shall have the right to
rearrange said parking areas, so long as the changes do not reduce the number of
parking spaces required pursuant the immediately preceding sentence or
materially alter the convenience
- 13 -
<PAGE>
of the parking areas to the Leased Premises. In the event Landlord fails to
maintain the number of parking spaces required pursuant to this paragraph, the
Minimum Rent shall be fully abated and Tenant shall be obligated to pay
Landlord, for the period that Landlord fails to maintain the number of parking
spaces required pursuant to this paragraph (but not thereafter), the lesser of
(a) eight percent (8%) of Tenant's Gross Sales during such period; or (b)
Tenant's Minimum Rent; plus in either the case of (a) or (b), Tenant's pro-rata
share of Operating Costs, Insurance and Real Estate Taxes.
Tenant hereby agrees to pay Landlord a share, computed as hereinafter
provided, of the "Operating Costs" (as hereinafter defined) of operating,
managing, insuring, maintaining, cleaning, repairing, modifying, improving and
replacing the Common Areas and all other portions of the Shopping Center and all
improvements, portions and components thereof [with the sole exception of those
portions of the Shopping Center which Tenant and/or other tenants or occupants,
from time to time, are obligated, respectively, to maintain, insure, repair
and/or replace (all such excepted portions as aforesaid being collectively
referred to as the "Excluded Property", and the Common Areas and all other
portions of the Shopping Center, except only the Excluded Property, being
collectively referred to as the "Included Property", for purposes of this
paragraph)]. In no event shall the provisions of this paragraph be interpreted
to allow a double counting for the benefit of Landlord. "Operating Costs" shall
mean the total cost and expense incurred in operating, managing, insuring,
maintaining, cleaning, repairing, modifying, improving and replacing the
Included Property and all improvements, portions and components thereof, as
aforesaid, and including, without limitation, the cost of all materials,
supplies and services purchased or hired therefor; the cost and expense of
landscaping, gardening and planting, irrigating, cleaning, painting (including,
but not limited to, line painting), sweeping, waxing, buffing, stripping,
resurfacing, decorating, paving, lighting, sanitary control, on-and off-site
drainage control, improvement and maintenance, removal of trash, garbage and
other refuse, including, but not limited to, costs relating to acquiring,
maintaining, repairing and replacing trash dumpsters and compactors (and
enclosures therefor); the cost of maintenance, repair and replacement of parking
areas, sidewalks, malls, curbs, guardrails, bumpers, fences, screens, flagpoles
and bicycle racks; the cost of illuminating, heating, ventilating,
air-conditioning ("HVAC") and sprinklering of enclosed malls, if any, and other
enclosed portions of the Common Areas, if any; the total cost and expense of all
repairs, replacements and modifications and maintenance, operation and
management of the Included Property of whatsoever nature (including, without
limitation, capital improvements), and the systems, facilities and equipment
serving the Included Property (including, without limitation, floors, ceilings,
roofs, skylights, structural and other walls, windows, escalators, elevators,
transportation equipment and systems, HVAC, sprinklering, on- and off-site
drainage and irrigation systems); the total cost and expense of fire protection,
water and sewerage, electricity and other utility charges for the Common Areas
(including, but not limited to, all costs associated with on- and off-site
equipment and its maintenance, repair and replacement, appropriately prorated
with any other properties of Landlord at which such equipment is used), and
license and permit fees for
- 14 -
<PAGE>
the Common Areas; and the total cost and expense of all types of insurance
coverages ("Insurance Costs") carried from time to time by Landlord in
connection with the entire Shopping Center including, but not limited to, (i)
fire and casualty insurance with standard extended coverage and coverage for
such other risks as Landlord may elect or be required to carry covering all
portions of the building(s) and other improvement(s) in the Shopping Center,
including, but not limited to, all improvements, betterments, fixtures,
equipment and machinery installed in such building(s), excluding any personal
property, movable trade fixtures and contents owned by Tenant and the other
respective tenants occupying the Shopping Center, (ii) all other insurance
covering the Shopping Center, including, without limitation, public liability,
personal and bodily injury and property damage, liability and automobile
coverage, fire and extended coverage, vandalism and malicious mischief and all
broad form coverages, sign insurance, worker's compensation, plate glass
insurance and any other insurance that may be carried by Landlord covering the
Shopping Center or any part thereof, all in limits and with deductibles selected
by Landlord, and (iii) other insurance in such amounts, and for such purposes,
as Landlord may determine; the total cost and expense of operation, maintenance
and replacement of loudspeakers and any other equipment supplying music to the
Common Areas or any parts thereof; operation of public toilets; maintenance and
replacement of signs; maintenance, operation, utility costs, repair and
replacement of all free-standing signs advertising the Shopping Center;
maintenance, repair and replacement of utility systems serving the Included
Property including, but not limited to, water, fire protection, sanitary sewer
and storm water lines and other utility lines, pipes and conduits; maintenance,
repair and acquisition cost (i.e., rental fees and/or purchase price or, in lieu
of purchase price, the annual depreciation allocable thereto) of all machinery
and equipment used in the operation, cleaning, and maintenance of the Common
Areas; depreciation of all depreciable items included in the Included Property
(or, in lieu of depreciation for all or any of such items, in Landlord's
reasonable discretion, reserves for future repairs and/or replacements thereof);
all personal property taxes and other charges incurred in connection with any of
the foregoing; the cost of personnel (including, but not limited to, applicable
payroll taxes, worker's compensation insurance, disability insurance and other
employee benefits), whether full or part time, to implement all or any of the
foregoing (appropriately prorated with any other properties of Landlord for
which such personnel are also used), whether such personnel are located on-site
or off-site, including, without limitation, management and administrative
employees and security and maintenance personnel for the Common Areas and, if
any, for security and/or the directing of traffic and parking of automobiles on
the parking areas thereof; audit and other professional fees incurred in
connection with the maintenance and operation of the Common Areas of the
Shopping Center, including, but not limited to, the preparation of any
statements of Operating Costs. The period of depreciation or reserves, but not
both in order to avoid double counting, shall be the useful life of the item for
which such depreciation is being taken or reserve is being made. Landlord may
cause any or all of said services to be provided by Landlord or by a contractor
or contractors, whether or not affiliated with Landlord (or if affiliate with
Landlord, the services and charges therefor shall be competitively
- 15 -
<PAGE>
priced), the cost of which shall be included in Operating Costs, provided that
any annual management fee included in Operating Costs shall not exceed an amount
equal to 5% multiplied by the total gross receipts of the Shopping Center (i.e.,
the total annual charges under this Lease and all other leases and agreements in
the Shopping Center -- e.g., contributions to Operating Costs, Taxes, Rent and
all other sums specified herein and therein). Any item of Operating Costs which
is paid directly to Landlord or to an affiliated entity of Landlord shall be
competitively priced.
Tenant's annual share of the Operating Costs shall be computed by
multiplying the total amount of such annual Operating Costs for the Shopping
Center (after reduction as set forth below) by a fraction, the numerator of
which shall be the number of square feet of floor space in the Leased Premises,
and the denominator of which shall be the number of square feet of floor space
in all Store Space. Solely for the purpose of determining Tenant's share of
Operating Costs, an amount equal to the then applicable contributions, if any,
including any special user charges (such as charges for utilities which are
included as Operating Costs), paid by any Anchor Tenants and Outparcel Tenants
for the relevant year in respect of Operating Costs for such year shall be
deducted from the then applicable aggregate amount thereof prior to the
computation of Tenant's share. Tenant's annual share of the Operating Costs for
each full calendar year and partial calendar year shall be paid in monthly
installments on the first day of each calendar month, in advance, in an amount
estimated by Landlord from time to time. Landlord shall have the right, at any
time and from time to time during each calendar year, by notice to Tenant, to
change said estimate based on changed circumstances, additional facts previously
unknown to Landlord or for any other reason. Subsequent to the end of each full
calendar year or partial calendar year, Landlord shall notify Tenant of Tenant's
actual share of Operating Costs for such full calendar year (or partial calendar
year). If the estimated payment made by Tenant pursuant to this paragraph for
any full (or partial) calendar year shall be less than the actual amount due
from Tenant for such period as determined by the foregoing formula and as shown
on such notice, Tenant shall pay to Landlord the difference between the amount
paid by Tenant and the actual amount due, within ten (10) days after receipt of
such notice. If the total amount paid by Tenant for any full (or partial)
calendar year shall exceed the actual amount due from Tenant for such full (or
partial) calendar year, such excess shall be credited against the next payment
for Operating Costs, Minimum Rent, Percentage Rent or other charges due from
Tenant to Landlord pursuant to this paragraph. If the Commencement Date is a day
other than the first day of the calendar year, or if the Term shall end on a day
other than the last day of the calendar year, then Tenant's share of Operating
Costs shall be billed and adjusted on the basis of such fraction of a calendar
year, provided that the amount which Tenant shall owe shall be the total
Operating Costs attributable to the Leased Premises as aforesaid for the full
period for which such year-end calculation is made, pro-rated for the portion of
the Term which occurs during such full period (but without regard to the actual
expenditures incurred during such actual pro-rated period).
- 16 -
<PAGE>
Notwithstanding the definition of Operating Costs in the Lease, it is
hereby agreed that Tenant shall be required to pay 100% of all Operating Costs
which are incurred by Landlord after normal mall operating hours in order to
accommodate Tenant's extended operating hours (such as costs related to parking
lot and other lighting, security and similar costs resulting from such after
hours operations), except in the case where other tenants are also open during
such hours, in which case such costs shall be divided on a prorata basis between
all tenants, including Tenant, open during such extended hours. Any payments by
Tenant or such other tenants for any such items of cost shall be deducted from
Operating Costs prior to the computation of Tenant's share of Operating Costs.
Notwithstanding the definition of Operating Costs in the Lease, it is
hereby agreed that Tenant shall not be required to pay as part of Tenant's
portion of Operating Costs, those costs relating to the following:
(a) The cost of air conditioning the enclosed common areas of the food
court/entertainment area of which the Lease Premises are a part; and
(b) Any capital improvement items (as opposed to a repair or replacement),
except to the extent that such capital improvement (as opposed to a repair or
replacement), results in a decrease in Operating Costs. To the extent any
capital improvement which meets the foregoing requirement of resulting in a
decrease in Operating Costs is made, Landlord shall amortize the cost of such
capital improvement over the useful life thereof (determined in accordance with
generally accepted accounting principles consistently applied) and is authorized
to include within Operating costs only the amortized portion of such capital
improvement attributable to that calendar year; and
(c) The cost of any repairs and/or replacements to the extent (a) reserves
previously established therefor have been charged and collected as Operating
Costs, or (b) depreciation of the item being repaired and/or replaced has been
charged and collected as Operating Costs.
Tenant shall have the right to audit Landlord's books and records
regarding Tenant's share of Operating Costs. If any audit made by Tenant shows
Landlord's original statement overstates Operating Costs in an amount equal to
or greater than two (2%) of the amount of Operating Costs reported by Landlord's
statement for the period of the audit, the expenses of the audit shall be paid
by Landlord, otherwise, the expenses of the audit shall be paid by Tenant. If
the total amount paid by Tenant for any full (or partial) calendar year shall
exceed the actual amount due from Tenant for such full (or partial) calendar
year, such excess shall be credited against the next payment for Operating
Costs, Minimum Rent, Percentage Rent or other charges due from Tenant to
Landlord pursuant to this paragraph.
Operating Costs shall be based on actual expenditures by Landlord plus
applicable depreciation and reserves.
Section 2.5 Cap on Taxes and Operating Expenses.
Notwithstanding the provisions of Sections 2.3 and 2.4 hereof, it is
hereby agreed that, through and
- 17 -
<PAGE>
including the end of the first full Lease Year, Tenant's prorata share of Taxes,
Insurance Costs and Operating Costs (which by definition excludes Taxes but
includes Insurance Costs) shall not exceed the lesser of: (1) the product of the
square footage of the Leased Premises multiplied by $2.00 (the "First Year
Cap"), or (2) Tenant's prorata share of Taxes and Operating Costs for the first
full Lease Year determined in accordance with the provisions of Sections 2.3 and
2.4 hereof.
Following the expiration of the first full Lease Year, Landlord shall
determine, commencing with the first day of the first full Lease Year, what
portion of the First Year Cap is attributable to Tenant's prorata share of Taxes
and Tenant's prorata share of Insurance Costs. The balance remaining after
deducting Tenant's prorata share of Taxes and Insurance Costs, as so determined,
from the First Year Cap, shall constitute the "First Year Operating Cost Cap"
for the first full Lease Year (i.e., the First Year Cap, less Tenant's prorata
share of Taxes and Insurance Costs, shall equal the First Year Operating Cost
Cap).
Tenant's prorata share of Operating Costs (other than Insurance Costs),
commencing on the first day of the second full Lease Year, shall be equal to the
lesser of: (1) the First Year Operating Cost Cap, increased each Lease Year,
commencing with the second Lease Year, and each Lease Year thereafter, by six
percent (6%) per Lease Year (compounded), prorated for any partial Lease Year,
or (2) Tenant's prorata share of Operating Costs (other than Insurance Costs)
for each such Lease Year determined in accordance with the provisions of Section
2.4 hereof.
Tenant's prorata share of Taxes and Insurance Costs, commencing on the
first day of the second full Lease Year, shall be equal to Tenant's prorata
share of Taxes and Insurance Costs for each such Lease Year determined in
accordance with the provisions of Sections 2.3 and 2.4 hereof.
Any delay by Landlord in making the determinations required of Landlord in
this Section shall not relieve Tenant from its obligation to pay any adjustments
due from Tenant once such determinations are made.
Section 2.6 Utilities Charges. Tenant shall pay promptly, as and when the
same become due and payable, all water bills, rents, rates and charges, all
sewer bills and rents and all charges for electricity, gas, heat, telephone,
air-conditioning, ventilating, lighting systems and other utilities supplied to
the Leased Premises, whether by Landlord, a governmental unit or utility
company. If any such utilities are not separately metered or assessed or are
only partially separately metered or assessed and are used in common with other
tenants in the Shopping Center, Tenant will pay to Landlord, in addition to
Tenant's payments of Operating Costs and separately metered charges, a
proportionate share of such charges for utilities so used in common based on
Landlord's reasonable estimate of the amount of usage of each such common user,
which estimate, if reasonable and fairly allocated, shall be conclusive. Tenant
shall have a separate air conditioning system for Tenant's sole use, which will
be metered through Tenant's separate electric meter.
Landlord may install re-registering meters and Tenant shall pay to
Landlord any and all charges shown
- 18 -
<PAGE>
to be due thereby (Landlord thereafter making returns to the proper public
utility company or governmental unit), as long as Tenant is thereby charged the
rates it would be charged for the same services if metered directly to the
Leased Premises by such companies or governmental units.
Any of the aforesaid charges due Landlord shall be due and payable at the
same time that Minimum Rent is payable, or, if separately billed, within thirty
(30) days after billings therefor are rendered to Tenant.
Except if same is as a direct result of Landlord's gross negligence or
willful misconduct, Landlord shall have no liability to Tenant for the quality,
quantity, failure or disruption of any utility service, and in no event shall
such failure or disruption constitute constructive eviction or entitle Tenant to
an abatement of Rent or other charges.
III.
CONSTRUCTION OF LEASED PREMISES
Section 3.1 Construction. After Substantial Completion of Landlord's Work
by Landlord and correction of any defects in Landlord's Work of which Tenant has
notified Landlord in writing pursuant to this Section 3.1, Tenant agrees to
perform (or cause to be performed), at Tenant's sole cost and expense, the
Tenant's Work specified in Exhibit B, if any. The Leased Premises shall be
constructed by Landlord and Tenant in accordance with the provisions of Exhibit
B. Landlord and Tenant each represent and warrant to the other that both
Landlord's Work and Tenant's Work, respectively, shall be performed in a good
and workmanlike manner in substantial compliance with the plans and
specifications therefor approved, if applicable, by the other and in compliance
with all applicable governmental requirements. Both Landlord and Tenant shall
have the option to inspect and approve the other's Work to insure that no
defects exist for a period of thirty (30) days following written notice of the
completion of the other's Work. If Landlord or Tenant reasonably determine that
any defects exist, Landlord or Tenant, as applicable, shall notify Landlord or
Tenant, as applicable, in writing, no later than fifteen (15) days following the
expiration of such thirty (30) day period, specifying the defects and Landlord
or Tenant, as applicable, shall thereafter promptly correct the defect(s), at
Landlord's or Tenant's, as applicable, sole cost and expense. Except as set
forth in Section 12.6 with respect to latent defects, any defects in Landlord's
Work not raised by Tenant in the notice to Landlord provided for hereunder,
shall be deemed forever waived by Tenant and, except as provided elsewhere in
this Lease, any defects in Tenant's Work not raised by Landlord in the notice to
Tenant provided for hereunder, shall be deemed forever waived by Landlord.
IV.
USE OF LEASED PREMISES
Section 4.1 Use of Leased Premises. Tenant agrees to use the Leased
Premises only for the permitted use(s) expressly set forth in Section 1.1 (e)
(i) and for no other purpose.
- 19 -
<PAGE>
Notwithstanding anything in this Lease to the contrary, should Tenant
determine that a multi-screen cinema is no longer economically feasible at this
location, Tenant shall have the right, from time to time, to convert the Leased
Premises to any use permitted by law and typically found in shopping centers and
which, in Landlord's reasonable opinion, is in harmony with other businesses
then operating within the Shopping Center and not (a) in violation of any
exclusives or restrictions granted by Landlord to any then existing tenant of
the Shopping Center, and (b) in violation of any restrictive covenant in this
Lease or then in effect between Landlord and any other tenant in the Shopping
Center. Tenant shall have the right, at Tenant's sole cost and expense, to alter
and remodel the Leased Premises for such purpose. Should Tenant wish to convert
the Leased Premises to a use not in harmony with other businesses then operating
within the Shopping Center, it shall obtain Landlord's prior consent, which
consent Landlord may grant or withhold in Landlord's sole discretion. In the
event Tenant elects to exercise the right to convert contained in this
paragraph, the exclusive use rights granted to Tenant under Section 1.1(e)(i)
shall cease and be null and void as if they had never existed. If Tenant elects
to exercise the rights granted Tenant in this paragraph, Landlord shall have the
right to cancel the Lease pursuant to Section 12.26 hereof.
Tenant covenants that, during the Term, no part of the Leased Premises or
improvements thereon shall be used in any manner whatsoever for any purposes
other than aforesaid and no part of the Leased Premises or improvements thereon
shall be used in violation of the laws, ordinances, regulations, codes or orders
of the United States, or of the state, commonwealth, county, and/or city or
other applicable governmental subdivisions where the Leased Premises are
located. To the extent that Tenant is not "grandfathered in", Tenant shall
comply with all applicable laws, ordinances, regulations, codes and orders now
in effect or hereafter enacted or passed during the Term insofar as the Leased
Premises and any signs of the Tenant are concerned, including, but not limited
to, zoning and/or similar ordinances, building, fire, health and safety codes,
and environmental, re-cycling and other conservation laws; and Tenant shall
make, at Tenant's own cost and expense (but subject to Landlord's prior approval
as provided in Section 7.2 hereof), all additions, deletions and alterations to,
and all mandated clean up of, the Leased Premises ordered or required by such
authorities, whether in order to meet the special needs of Tenant, or by reason
of the occupancy of Tenant, or otherwise. Without limiting the generality of the
foregoing, Tenant shall be obligated to eliminate any product or substance
currently permitted to be used, but hereafter banned (whether or not such future
ban is in the current contemplation of the parties or of applicable law), and to
take all steps necessary to comply with, and effect all work incidental or
appropriate to, or arising directly or indirectly as a result of, such
elimination, if but only if originally installed, used or provided by Tenant.
Tenant shall indemnify, defend and hold Landlord (and its partners,
principals, affiliates, directors, officers, employees, mortgagees, heirs,
successors and assigns, as applicable) harmless from and against all claims and
liability arising from a violation or breach of the foregoing obligations of
Tenant.
- 20 -
<PAGE>
Section 4.2 Continuous Operation by Tenant. Tenant agrees that the
Shopping Center's success is dependent, in part, on the continued operation of
Tenant's business for the benefit of all involved, and that maintenance of the
character and quality of the Shopping Center is enhanced by the continued
occupancy of the Leased Premises and the regular conduct of Tenant's business
therein. Tenant also acknowledges that a material inducement to Landlord to
enter into this Lease is the expectation of the receipt of Percentage Rent and
that Landlord would not have entered into this Lease without the provisions
hereof regarding Percentage Rent. Accordingly, Tenant agrees to open the Leased
Premises for business by the Commencement Deadline hereinabove provided and
operate one hundred (100%) percent of the Leased Premises during the entire
Term, under the name, if any, set forth in Section 1.1 (e) (ii) of this Lease or
such other name as Landlord may approve in writing, with due diligence and
efficiency so as to produce all of the Gross Sales which may be reasonably
produced by such manner of operation. Tenant shall show at all times in said
Leased Premises movies of such quantity, character and quality as shall be
reasonably designed to produce as much Gross Sales as reasonably possible;
provided, however, that the showing or other display of movies which are not
distributed to and showed and displayed by mainstream major movie theatre
companies in the United States and Puerto Rico is expressly prohibited. Subject
to any legal prohibition, Tenant shall conduct its business in the Leased
Premises during the operating hours specified in Section 1.1 (j). A failure to
open or vacation or cessation of operations by any other tenant(s) in the
Shopping Center shall not in any way release Tenant from Tenant's obligations
under this Lease, all such obligations being independent covenants.
Section 4.3 Additional Covenants of Tenant. Tenant's use of the Leased
Premises and the Common Areas shall be subject at all times during the Term to
those reasonable rules and regulations adopted from time to time by Landlord
(provided they are not in conflict with any of the express provisions hereof)
governing the use of the Common Areas, signs, exteriors of buildings, lighting
and other matters affecting other tenants in and the general management and
appearance of the Shopping Center. Tenant agrees to comply with all such rules
and regulations upon written notice to Tenant from Landlord.
Without limiting the generality of the foregoing, Tenant expressly agrees
to the following initial rules and regulations (provided they are not in
conflict with any of the express provisions hereof):
1. All deliveries to or from the Leased Premises shall be made only at
such times, in the areas and through the rear or other entrances designated for
such purposes by Landlord.
2. Merchandise shall not be displayed outside the Leased Premises, nor on
the sidewalks, loading areas or malls, if any, adjacent to the Leased Premises,
and the Leased Premises and all such areas shall not be obstructed and shall be
free from trash, litter, hazardous materials and any other obstructions. All
garbage and refuse shall be kept inside the Leased Premises, and shall be placed
outside of the Leased Premises only if prepared for collection in the manner and
at the times and places specified from time to time
- 21 -
<PAGE>
by Landlord (and, if required by law, properly separated for re-cycling or other
conservation or environmental purposes). If Landlord shall provide or designate
a service for picking up refuse and garbage, Tenant shall use same at Tenant's
cost provided that the service designated by Landlord is competitively priced.
Tenant shall pay the cost of removal of any of Tenant's refuse and garbage and
maintain its and any common loading areas in a clean manner reasonably
satisfactory to the Landlord. Tenant shall use any trash dumpster or compactor
Landlord designates, if any, for the general use of Tenant and others in a
designated area of the Shopping Center, and if Landlord does not provide same,
Tenant shall do so in a manner acceptable to Landlord.
3. No radio or television aerial or other device shall be erected on the
roof or exterior walls of the Leased Premises or the building in which the
Leased Premises are located, and no roof, wall or other penetrations of any kind
shall be made by, under the direction or with the actual or assumed knowledge of
Tenant.
4. No loud speakers, televisions, phonographs, radios, tape players or
other devices shall be used in a manner so as to be heard or seen outside the
Leased Premises, nor shall Tenant solicit business or distribute advertising or
promotional material in the Common Areas.
5. The plumbing and drainage facilities shall not be used for any purpose
other than that for which they are constructed; no foreign substance of any kind
shall be thrown therein or otherwise dumped on or about the Shopping Center; and
the expense of any breakage, stoppage, mandatory clean-up or damage resulting
from a violation of this provision shall be borne by Tenant. All grease traps
(and all plumbing lines leading from such grease traps into the main sewer lines
of the Shopping Center), if any, shall be installed, regularly cleaned and
maintained by Tenant in accordance with applicable law and with Landlord's
requirements.
6. Tenant, at its expense, shall contract for termite and pest
extermination services covering the Leased Premises, or shall participate, at
Landlord's election and Tenant's expense, in a common monthly exterminating
program provided that the service designated by Landlord is competitively
priced. Tenant shall not permit to be used or stored on or about the Leased
Premises any extermination or other substance which is now or hereafter deemed
hazardous or environmentally suspect other than commercially available cleaning
substances and substances used in limited quantities necessary to facilitate the
operation and maintenance of Tenant's business in the Leased Premises. If Tenant
uses or maintains any such materials on or in the Leased Premises and the same
are hazardous or environmentally suspect, Tenant agrees to handle, store,
transport and dispose of all such materials at Tenant's sole cost and expense in
accordance with all then-existing Commonwealth, state and federal rules and
laws.
7. Tenant shall keep any display windows or signs in or on the Leased
Premises well lighted during such hours and days that the Shopping Center is
lighted by Landlord, or as otherwise may be designated by Landlord.
- 22 -
<PAGE>
8. Tenant shall keep and maintain the Leased Premises (including, without
limitation, exterior and interior portions of all windows, doors, all other
glass and the frames therefor) in a neat, clean and well finished and maintained
condition.
9. Tenant at its expense shall participate in any window cleaning program
that may be established by Landlord for all or substantially all other stores in
the Shopping Center provided that the service designated by Landlord is
competitively priced.
10. INTENTIONALLY OMITTED.
11. Tenant shall pay before delinquency all license or permit fees and
charges of a similar nature for the conduct of its business in the Leased
Premises.
12. Tenant shall store and/or stock in the Leased Premises only such
merchandise as Tenant is permitted to offer for sale in the Leased Premises
pursuant to this Lease.
13. Tenant shall not conduct or permit any fire, bankruptcy, auction or
"going out of business" sale (whether real or fictitious) in the Leased
Premises, or utilize any unethical method of business operation.
14. Tenant shall not perform any act or carry on any practice which may
damage, mar of deface the Leased Premises or any other part of the Shopping
Center.
15. Tenant shall not place a load on any floor in the Leased Premises, or
in any area of the Shopping Center, exceeding the floor load which such floor
was designed to carry, nor shall Tenant install, operate or maintain therein any
heavy item or equipment except in such manner as to achieve a proper
distribution of weight or as is common in businesses such as Tenant's business.
16. Tenant shall not install, operate or maintain in the Leased Premises
or in any other area of the Shopping Center any electrical equipment which does
not bear underwriter's approval, or which would overload the electrical system
or any part thereof beyond its capacity for proper and safe operation as
determined by Landlord. No machine tow motor or gas or propane operated
equipment shall be permitted.
17. Tenant shall not suffer, allow or permit any vibration, noise, light,
odor (excluding those normally associated with movie theatres) or other
emanation to emanate from the Leased Premises, or from any machine or other
installation therein, or otherwise suffer, allow or permit the same to
constitute a nuisance or otherwise interfere with the safety, comfort or
convenience of Landlord or any of the other occupants of the Shopping Center or
their customers, agents or invitees or any others lawfully in or upon the
Shopping Center. Upon notice by Landlord to Tenant that any of the aforesaid is
occurring, Tenant agrees to forthwith eliminate or control the same to
Landlord's reasonable satisfaction (excluding those normally associated with
movie theaters).
18. Tenant shall not use or occupy the Leased Premises in any manner or
for any purpose which would impair the present or future value of the Leased
Premises and/or the Shopping Center.
- 23 -
<PAGE>
19. Tenant shall not install, utilize, introduce, store, display, sell, or
distribute any dangerous or environmentally sensitive materials [including,
without limitation, fireworks, asbestos (or asbestos containing materials),
PCB's, urea formaldehyde, hydrocarbons, CFC's, or the like] other than
commercially available cleaning substances and substances used in limited
quantities necessary to facilitate the operation and maintenance of Tenant's
business in the Leased Premises. If Tenant uses or maintains any such materials
on or in the Leased Premises and the same are hazardous or environmentally
suspect, Tenant agrees to handle, store, transport and dispose of all such
materials at Tenant's sole cost and expense in accordance with all then-existing
Commonwealth, state and federal rules and laws.
20. Under no circumstances shall Tenant violate any "exclusives" [i.e.,
rights, if any, of any tenant or tenants to be the only tenant(s) in the
Shopping Center to sell any particular product or provide any particular
service] now or hereafter granted by Landlord to other tenants, provided that
nothing herein will prevent Tenant from conducting its business consistent with
the specifically permitted use(s) and other provisions of this Lease and
provided further that Landlord notifies Tenant of the existence of such
"exclusives".
21. Tenant shall not use or occupy the Leased Premises or do or permit
anything to be done thereon in any manner which shall prevent Landlord and/or
Tenant from obtaining at standard rates any insurance required or desired, or
which would invalidate or increase the cost to Landlord of any such insurance,
or which might cause structural injury to any building, or which would
constitute a public or private nuisance or which would violate any present or
future laws, regulations, ordinances or requirements (ordinary or extraordinary,
foreseen or unforeseen) of the federal, state, commonwealth, county or municipal
governments, or of any departments, subdivisions, bureaus, agencies or offices
thereof, or of any other governmental, public or quasi-public authorities now
existing or hereafter created having jurisdiction over the Leased Premises or
the Shopping Center.
22. Tenant shall only operate a limited number (i.e., 8 or less) of coin
or token operated vending machines or similar devices (including, without
limitation, pay telephones, pay lockers, pay toilets, scales, amusement devices
and machines for sale of beverages, foods, candy, cigarettes or other
merchandise and/or commodities) on the Leased Premises or in any part of the
Shopping Center.
23. Tenant shall not modify, alter, improve, obstruct or otherwise utilize
for any purpose any unenclosed portions of the Leased Premises for any purpose
whatsoever (including, but not limited to, the sale or display of Tenant's
merchandise, or the placing of signs or exhibits of any kind), provided that
such portions may be used by Tenant, its employees and customers, if reasonably
necessary for purposes of ingress and egress to and from the enclosed portions
of the Leased Premises.
24. Tenant shall not sell, dispense or distribute any alcoholic beverages.
25. Tenant shall not show, display, advertise, sell, dispense or
distribute any movies, performances or
- 24 -
<PAGE>
merchandise from the Lease Premises which are not distributed to, shown,
displayed, advertised and dispensed by mainstream major movie theatre companies
in the United States and Puerto Rico in connection with their normal business
activities.
Section 4.4 Signs, Awnings and Canopies. Landlord may erect and maintain
such signs, awnings and canopies as it, in its sole discretion, may deem
appropriate in the Shopping Center. Tenant may erect and maintain only such
signs as Landlord may approve in writing. Tenant shall submit to Landlord
detailed drawings of its proposed signs for review and written approval by
Landlord prior to erecting said signs on the Leased Premises. Without limiting
the generality of the foregoing, all of Tenant's signs shall comply with Exhibit
C attached hereto and made a part hereof whether or not same conflict with
Landlord's sign criteria for other tenants of the Shopping Center.
Notwithstanding anything in this Lease to the contrary, Tenant may erect the
signs described in Exhibit C hereto, subject to the provisions thereof. The
terms of Exhibit C hereto shall control in the event of a conflict between the
terms of the body of this Lease and those contained in Exhibit C.
Tenant shall keep insured and maintain such signs in good condition,
repair and operating order (including, but not limited to, replacing any lights
as needed) at all times. If any damage (other than damage caused by the
negligence of Landlord or Landlord's employees, agents or contractors; provided,
however, that Landlord's liability in each such case shall be limited to the
coverage, if any, afforded by Landlord's liability insurance) is done to
Tenant's signs, Tenant shall commence to repair same within fifteen (15) days
following written notice from Landlord or, in addition to its other remedies,
Landlord may, at its option, repair same at Tenant's expense.
Except as set forth in Exhibit C hereto, Tenant shall not place or permit
to be placed or maintained on any door, exterior wall or interior window (if
such sign can be seen from outside the Leased Premises) or exterior window of
the Leased Premises or within any display window space in the Leased Premises,
or within five (5') feet of the front of the Leased Premises (in the case of an
open storefront), or within the entrance to the Leased Premises, any sign,
awning or canopy or advertising matter or other thing of any kind, and shall not
place or maintain any decoration, lettering or advertising matter on the
interior glass (if same can be seen from outside the Leased Premises) or
exterior glass of any window or door of the Leased Premises, without first
obtaining Landlord's prior written consent in each instance. In addition to its
other remedies, Landlord shall have the right, without notice to Tenant and
without any liability for damage to the Leased Premises reasonably caused
thereby, to remove any items displayed or affixed in violation of the foregoing.
Tenant further agrees to maintain any such signs, awnings, canopies, decoration,
lettering, advertising matter or other things as may be approved by Landlord in
good condition, operating order and repair at all times. All signs of Tenant
visible from the Common Areas of the Shopping Center shall be in good taste and
shall conform to the standards of design, motif and decor from time to time
established by Landlord for the Shopping Center. Except as set forth in Exhibit
C hereto, no flashing or revolving signs shall be permitted. No hand lettered
signs shall be permitted. Tenant must install professionally lettered name signs
on its service doors, if any.
Section 4.5 Retail Restriction Limit. The parties acknowledge that the
realization of the benefits of this Lease are dependent upon Tenant maximizing
its Gross Sales, and that self competition is inconsistent with the generation
of maximum Gross Sales. The parties further acknowledge that the Minimum Rent
was negotiated together with and giving consideration to the
- 25 -
<PAGE>
Percentage Rent and that self competition by Tenant will deprive Landlord of a
bargained for consideration. Accordingly, Tenant covenants and agrees that,
during the Term, neither Tenant, nor any person or entity controlling,
controlled by or in common control with Tenant [nor any corporation or other
entity wherein fifty percent (50%) or more of its equity interest is owned by
Tenant or any or all of Tenant's equity owners, or equity owners of such equity
owners (at any and all tiers), or any parties affiliated with, controlling,
controlled by or in common control with any or all of them], will, directly or
indirectly, engage in any business similar to or in arguable competition with
that for which the Leased Premises are let within a radius of five (5) miles of
the Shopping Center. Mark B. Davis, Luis Alberto Rubi and Mark H. Greene, the
three (3) individual principals of Landlord, agree that no entity of which any
of them is also a principal, including Landlord, and in which any of them owns a
controlling interest and has the ability to control decisions of such entity as
owner of a controlling interest, that such entity, including Landlord, will not
lease any premises to another movie theater within a radius of five (5) miles of
the Shopping Center; provided that the foregoing shall not apply if at the time
of such lease Tenant is not then conducting business in the Leased Premises as a
movie theater. If the covenant contained in this Section is breached, then, in
addition to the rights and remedies provided elsewhere in this Lease for
Tenant's default, Landlord may, at its option, require that all gross sales
generated by any violative theatre (which gross sales Tenant shall thereafter
report monthly to Landlord) be included as part of Tenant's Gross Sales in
calculating the Percentage Rent due under this Lease. For purposes hereof, a 50%
or more direct, familial or indirect equity interest or voting interest shall be
deemed to be a controlling interest. This restriction shall not apply to the
acquisition by Tenant, Landlord or an entity of which any of the three (3)
principals listed above owns a controlling interest, of an existing competing
business (as to Tenant) or an existing competing premises (as to Landlord or any
one of such principals) within a radius of five (5) miles of the Shopping
Center.
V.
INSURANCE REQUIRED OF TENANT
Section 5.1 Insurance Required of Tenant.
(a) Tenant shall obtain and provide, on or before the earlier of
Landlord's Tender of Possession or Tenant's entering the Leased Premises for any
purpose, and keep in force at all times thereafter, the following insurance
coverages with respect to the Leased Premises:
(i) Commercial General Liability Insurance relating to the Leased
Premises and its appurtenances on an occurrence basis with a minimum
single limit of at least Five Million Dollars ($5,000,000.00).
(ii) Fire and Lightning, Extended Coverage, Vandalism and Malicious
Mischief and Flood (if flood insurance is required by Landlord, or any
mortgagee or governmental authority and if obtainable) Insurance in
amounts adequate to cover the full replacement cost [with commercially
reasonable deductibles not to exceed five percent (5%) of the replacement
cost of the property which Tenant is required to insure hereunder] of all
of Tenant's personal property, decorations, trade fixtures, furnishings,
equipment and all contents therein.
(iii) Boiler (if applicable) or Machinery Insurance covering all
pressure vessels, boilers, heating and air-conditioning equipment, or
similar equipment, if any, in,
- 26 -
<PAGE>
on, adjoining, above or beneath the Leased Premises, in the minimum amount
of One Million Dollars ($1,000,000.00).
(iv) Worker's Compensation Insurance covering all persons employed,
directly or indirectly, in connection with Tenant's store, as well as in
connection with any of Tenant's Work or any Tenant repair or alteration
authorized by this Lease or consented to by Landlord, and all employees
and agents of Tenant with respect to whom death or injury claims could
otherwise be asserted against Landlord or Tenant, in the minimum amount of
One Million Dollars ($1,000,000.00) or as otherwise required by applicable
law.
(v) INTENTIONALLY OMITTED.
(vi) Such other insurance as may be reasonably required by Landlord
from time to time.
(b) Before undertaking Tenant's Work and other alterations, additions,
improvements or construction, Tenant shall obtain at its expense a builders risk
and public liability insurance policy insuring Tenant and Landlord (evidenced by
an insurance certificate) against any liability which may arise on account of
such proposed Tenant's Work and other alterations, additions, improvements or
construction on an occurrence basis with the minimum limits set forth in Exhibit
B attached hereto.
(c) All of the aforesaid insurance shall be written in the name of Tenant,
with Landlord and Landlord's mortgage lender named as additional insureds, as
their interests may appear, and shall be written by one or more responsible
insurance companies satisfactory to Landlord and in form satisfactory to
Landlord; all such insurance may be carried under a blanket policy covering the
Leased Premises and any other of Tenant's stores; and all such insurance shall
contain endorsements providing that such insurance may not be cancelled or
amended with respect to Landlord (or its designees) except upon thirty (30)
days' prior written notice to Landlord (and any such designees) by the insurance
company. Tenant shall be solely responsible for payment of all premiums and
neither Landlord nor Landlord's lender shall be required to pay any premium for
such insurance. In the event of payment of any loss covered by any such policy,
Landlord and Tenant shall be paid simultaneously by the insurance company for
their respective losses. The minimum limits of the comprehensive general
liability policy of insurance required of Tenant hereunder shall in no way limit
or diminish Tenant's liability hereunder. Tenant shall deliver to Landlord at
least fifteen (15) days prior to the time such insurance is first required to be
carried by Tenant, and thereafter at least fifteen (15) days prior to the
expiration of each such policy, either a duplicate original or a certificate of
insurance for all policies procured by Tenant in compliance with its obligations
hereunder, together with evidence satisfactory to Landlord of the payment of the
premiums therefor. If Tenant fails to obtain and provide any or all of the
aforesaid insurance, then, in addition to its other remedies, after ten (10)
days notice to Tenant [provided Tenant does not provide all such insurance
within such ten (10) period], except in the case of emergency, in Landlord's
sole discretion, Landlord may, but shall not be required to, purchase such
insurance on behalf of Tenant and add the cost of such insurance, as additional
rent, to the next installment of Minimum Rent.
(d) INTENTIONALLY OMITTED.
(e) Tenant agrees to notify Landlord in writing not less than thirty (30)
days prior to the date Tenant opens for business in the Leased Premises of the
replacement cost of all personal property, movable trade fixtures and contents.
- 27 -
<PAGE>
Section 5.2 Fire Insurance Rate and Requirements.
(a) Tenant agrees, at its own cost and expense, to comply with all of the
rules and regulations of the fire insurance rating organization having
jurisdiction and any similar body. If, at any time and from time to time, as a
result of any failure by Tenant to comply with the foregoing sentence, or of any
act of omission or commission by Tenant, its employees, agents, contractors or
licensees, or as a result of the use to which the Leased Premises are put
(notwithstanding that such use may be for the purposes hereinbefore permitted or
that such use may have been consented to by Landlord), the insurance rate(s)
applicable to the Leased Premises, or the building in which same are located, or
to any other premises in said building, or to any adjacent property owned or
controlled by Landlord, or an affiliate of Landlord, and/or to the contents in
any or all of the aforesaid properties (including, but not limited to, rent
insurance relating thereto) shall be higher than that which would be applicable
for the occupancy legally permitted therein, Tenant agrees that it will pay to
Landlord, on demand, 100% of such portion of the premiums for all Landlord's
insurance policies in force with respect to the aforesaid properties (including,
but not limited to, rent insurance relating thereto) and their contents as shall
be attributable to such higher rate(s). If Tenant installs any electrical
equipment that overloads the lines in the Leased Premises or the building in
which the Leased Premises are located, Tenant shall, at its own cost and
expense, promptly make whatever changes are necessary to remedy such condition
and to comply with all requirements of the Landlord and the board of fire
insurance underwriters and any similar body and any governmental authority
having jurisdiction thereof. For purposes of this paragraph, any finding or
schedule of the fire insurance rating organization having jurisdiction thereof
shall be deemed to be conclusive (provided same is final and unappealable
administratively or judicially).
(b) In the event that this Lease so permits and Tenant engages in the
preparation of food or sells package foods or engages in the use, sale or
storage of inflammable or combustible material, Tenant shall install chemical
extinguishing devices approved by the fire insurance rating organization and
shall keep such devices under service as required by such organization.
(c) If gas is used in the Leased Premises, Tenant shall install at its
expense gas cut-off devices (manual and automatic) required by Landlord and the
fire insurance rating organization.
Section 5.3 Waiver of Subrogation. Neither party to this Lease shall be
liable for any damage by fire or other peril includable in the coverage afforded
by the standard form of fire insurance policy with extended coverage endorsement
attached, no matter how caused, it being understood that the damaged party will
look solely to its insurer for reimbursement, provided that this waiver of
liability shall apply only to the extent that the party incurring such loss is
actually reimbursed for such loss by the proceeds of insurance. Landlord's and
Tenant's policies of insurance shall contain a waiver of subrogation confirming
the foregoing. Any waiver of rights required by this Section shall be null and
void if such waiver shall be unobtainable, or result in a breach of the
insurance contract or in material increase in the cost of insurance of the
waiving party, unless the other party shall pay such increase within ten (10)
days after notice thereof.
The foregoing provision shall apply as between Tenant and any other tenant
of the Shopping Center whose premises equal or exceed 20,000 square feet, and
their respective employees, agents, invitees, licensees, visitors and
contractors, as if Tenant and such other tenants directly contracted between
each other for such purpose, but solely to the extent that such other
- 28 -
<PAGE>
tenant complies with this waiver of subrogation section and obtains and
maintains a reciprocal waiver from its insurer (or pursuant to its self
insurance) in effect in favor of Tenant as contemplated in this Section 5.3.
Section 5.4 Insurance Required of Landlord. Throughout the Term of this
Lease, Landlord shall maintain comprehensive public liability insurance,
property damage and all-risk hazard insurance on the Common Areas, buildings,
appurtenances and other improvements constituting the Shopping Center, but not
on Tenant's Work (or that of other tenants of the Shopping Center) or other
improvements or personal property within the Leased Premises (or the premises of
other tenants of the Shopping Center). Such insurance shall (i) be carried with
reputable companies licensed to do business in Puerto Rico; (ii) have liability
limits of at least $3,000,000 for each occurrence, bodily injury and property
damage combined; (iii) provide full replacement cost for the buildings and
improvements covered thereunder; and (iv) be subject to commercially reasonable
deductibles.
VI.
REPAIRS AND MAINTENANCE
Section 6.1 Repairs by Landlord. Within a reasonable period of time after
receipt of written notice from Tenant, Landlord shall make necessary (a)
structural repairs to the Leased Premises, including the roof of the Leased
Premises for the first five (5) Lease Years, but not including the roof of the
Leased Premises for periods after the first five (5) Lease Years, and (b)
repairs to the sidewalks, malls, parking areas, curbs and all other portions of
the Common Areas. Notwithstanding the foregoing, Landlord shall not be required
(and Tenant shall be obligated instead) to make any and all such repairs where
same are made necessary by any act or omission or negligence of Tenant, any
subtenant or concessionaire of Tenant (this clause not being deemed a consent
thereto), or their respective employees, agents, invitees, licensees, visitors
or contractors.
If Landlord shall fail to carry out its maintenance and repair obligations
hereunder within a reasonable time after written notice from Tenant, then Tenant
shall have the right upon additional notice to Landlord to conduct such
maintenance and make such repairs and to deduct the actual cost thereof in fact
paid by Tenant to third parties from the next ensuing installment or
installments of Minimum Rent.
Section 6.2 Repairs and Maintenance by Tenant. Tenant shall make and pay
for all repairs to the Leased Premises and all equipment and systems serving
only the Leased Premises and shall replace all things which are necessary to
keep the same in a good state of repair and operating order, such as, but not
limited to, all fixtures, electrical, plumbing and mechanical systems and
equipment serving only the Leased Premises, furnishings and store signs of
Tenant and the roof of the Leased Premises after Lease Year five (5). Without
limiting the generality of the foregoing (but limited solely to systems serving
only the Leased Premises), Tenant shall maintain, replace and keep in good
repair and operating order all air-conditioning, ventilating, plumbing,
sprinklering, heating and electrical installations, ceilings, interior walls and
load bearing components, and carpeting and floor surfaces serving the Leased
Premises and all exterior entrances, glass and show-windows (and frames and
moldings thereof), partitions, doors, floor surfaces, fixtures, equipment and
appurtenances thereof in good order, condition and repair, and in a reasonably
satisfactory condition of cleanliness, including, but not limited to, reasonably
periodic painting of the interior of the Leased Premises, and Tenant shall make
all other necessary repairs and replacements in and to the Leased
- 29 -
<PAGE>
Premises. Tenant shall at its expense replace all broken or damaged glass or
substitutes therefor, as the case may be. Further, Tenant, at its sole cost and
expense, shall engage a contractor, satisfactory to Landlord in all respects, to
provide monthly servicing of Tenant's heating, ventilating and air-conditioning
systems, for preventive and actual maintenance purposes. Anything to the
contrary herein notwithstanding, neither Tenant, nor any contractor, employee or
agent of Tenant, shall be permitted access to the roof (nor shall Tenant install
anything requiring any roof penetration) without Landlord's prior written
approval (which may be conditioned, among other things, on the use of a
particular contractor provided that the contractor designated by Landlord is
competitively priced), and any such access shall be conditioned on Tenant being
solely responsible (as between Landlord and Tenant only) for any and all damages
to the roof caused by or attributable to persons entering upon the roof for or
on behalf of Tenant. It is expressly understood that, notwithstanding any other
provisions in this Lease to the contrary, although Landlord shall effect all
roof repairs, the Tenant shall be solely responsible for the direct reasonable
cost of repairing any areas of the roof above its Leased Premises caused by a
forcible entry into said Premises for the purpose of committing a criminal act
or caused by any other reason (other than casualty not otherwise the
responsibility of Tenant and normal wear and tear). Tenant agrees to promptly
pay, as additional rent, the full cost of any of the aforesaid repairs to the
roof within ten (10) days after being furnished bills for said cost by the
Landlord.
If (i) Tenant does not effect the foregoing repairs, maintenance and
replacements properly as required hereunder and to the reasonable satisfaction
of Landlord, or (ii) Landlord, in the exercise of its sole discretion,
determines that emergency repairs are necessary, or (iii) repairs or
replacements to the Shopping Center and/or Common Areas or to the Leased
Premises are made necessary by any act or omission or negligence of Tenant, its
agents, employees, subtenants, assignees, concessionaires (this clause not being
deemed a consent thereto), contractors, invitees, licensees or visitors, then,
in any of such events, Landlord, in addition to its other remedies, after ten
(10) days written notice to Tenant, except in the case of (ii) above, in which
case no notice shall be required [and except if Tenant makes such repairs within
such ten (10) day period], may make such repairs without liability to Tenant for
any loss or damage that may accrue to Tenant's merchandise, fixtures or other
property or to Tenant's business by reason thereof, and, upon completion
thereof, Tenant shall pay Landlord's costs for making such repairs, upon
presentation of a bill therefor. Said bill shall include, among other things,
Interest from the date such repairs were paid for by Landlord to the
contractor(s) making such repairs.
Notwithstanding the foregoing, Landlord shall be responsible for repairs
occasioned directly by Landlord's or any of Landlord's agents, employees or
contractors negligence; provided, however, that Landlord's liability in each
such case shall be limited to the coverage, if any, afforded by Landlord's
liability insurance.
Section 6.3 Inspection. Landlord and its representatives shall have the
right to enter the Leased Premises at any time during normal business hours (and
during other hours if an emergency situation should exist, as determined by
Landlord), and from time to time (with or without giving notice), during the
Term, for the purpose of conducting inspections and making repairs therein.
- 30 -
<PAGE>
VII.
ADDITIONS AND ALTERATIONS; ADDITIONAL RENT
Section 7.1 By Landlord. Except as provided in Section 2.4 hereof, in the
event Landlord, in its sole discretion, shall hereafter determine during the
Term to erect additional or remove structures, add or remove stories to existing
buildings, enclose or remove open courts or sidewalks and create or eliminate
malls in the Shopping Center (or any portions thereof as may be designated by
Landlord), enlarge or reduce the Shopping Center by addition(s) to the Shopping
Center of land and/or buildings or by the diminution thereof, Tenant hereby
consents thereto and to the performance of all work necessary to effect the same
provided same does not block or deny access to the Leased Premises by Tenant's
patrons. The design, materials and performance of necessary work therefor shall
be in the sole and unrestricted discretion of Landlord.
If at any time (i) Landlord is required by any laws, ordinances, rules or
regulations of any governmental agency having jurisdiction over the Shopping
Center to provide additional parking, or (ii) Landlord proposes to increase the
total rentable building space within the Shopping Center which would require
additional parking in the Shopping Center, Landlord may elect to provide such
additional parking by constructing decked or elevated parking facilities.
Section 7.2 By Tenant. Tenant shall make no material changes, alterations
or improvements to the interior or exterior of the Leased Premises or the
structure of the building without Landlord's prior written consent, which, as to
non-structural, interior alterations, Landlord will not unreasonably withhold.
After receipt of such consent, but prior to commencement of any such work,
Tenant shall obtain Landlord's prior written approval of the plans and
specifications therefor and shall cause Landlord's reasonable requirements for
bonding, insurance and other contractor requirements (as specified in Exhibit B
attached hereto) to be satisfied. Any work effected by Tenant under the
provisions of this Section shall not interfere with the use by the other tenants
of their premises in the Shopping Center.
VIII.
DAMAGE, DESTRUCTION OR CONDEMNATION OF THE LEASED PREMISES
Section 8.1 Damage or Destruction.
(a) If all or any part of the Leased Premises shall be damaged or
destroyed by fire or other casualty insured under the standard fire insurance
policy with approved standard extended coverage endorsement applicable to the
Leased Premises, Landlord shall, except as otherwise provided herein, repair
and/or rebuild the same with reasonable diligence, but Landlord's obligation
hereunder shall be limited to the performance of Landlord's Work, if any, in
accordance with Exhibit B hereof (or, if no such work is required by Landlord,
then Landlord shall restore the Leased Premises to their condition as of the
date of Landlord's Tender of Possession, reasonable wear and tear excepted).
Nothing hereinabove contained shall impose upon Landlord any liability or
responsibility to repair, rebuild or replace any property belonging to Tenant.
If the Leased Premises shall become untenantable as a result of such damage or
destruction, the Minimum Rent and other sums payable hereunder shall abate and
the Break Point shall be proportionately reduced based on the period of time the
Leased Premises shall be untenantable. Unless this Lease is terminated by
Landlord as hereinafter provided, upon completion of Landlord's repairs and
rebuilding, Tenant shall promptly repair, redecorate and refixture the Leased
Premises and restock the contents thereof in a manner and to at least a
- 31 -
<PAGE>
condition equal to that existing prior to its destruction or casualty. Tenant
agrees to exercise its best efforts to reopen for business in the Leased
Premises as soon as practicable unless this Lease is terminated by Landlord as
hereinafter provided.
(b) Notwithstanding anything else to the contrary in this Section or
elsewhere in this Lease, Landlord, at its sole option, may terminate this Lease
on thirty (30) days written notice to Tenant given at any time after the
occurrence of any of the following:
1. The Leased Premises shall be damaged or destroyed during the
last two (2) years of the Term or any extended Term provided
Landlord does not intend to rebuild the Leased Premises within
the twelve (12) month period following such damage or
destruction or if Landlord does intend to rebuild the Leased
Premises within such twelve (12) month period if Tenant does
not extend this Lease to a term of ten (10) years from the
time of the completion of the recon- structed Leased Premises
(provided, however, that in no event shall Landlord be
required to rebuild anything other than Landlord's Work, it
being the intention of the parties that Landlord's obligation,
if any, to rebuild the Leased Premises shall be limited to
Landlord's Work); or
2. Any or all of the buildings or Common Areas of the Shopping
Center are damaged (whether or not the Leased Premises are
damaged) to such an extent that the Shopping Center cannot be
operated as an economically viable unit.
(c) Except to the extent specifically provided for in this Lease, unless
this Lease is terminated as herein provided or unless Tenant is unable to occupy
any part of the Leased Premises, none of the Minimum Rent and other sums payable
by Tenant, nor any of Tenant's other obligations under any provisions of this
Lease, shall be affected by any damage to or destruction of the Leased Premises
by any cause whatsoever.
(d) The term "cost of replacement" as used above shall be determined by
the company or companies insuring Landlord against the casualty in question, or
if there shall be no insurance, then by Landlord's architect.
(e) Tenant shall give to Landlord and to all mortgagees of which Tenant
has been provided written notice, prompt written notice of any damage to or
destruction of any portion of the Leased Premises resulting from fire or other
casualty.
Section 8.2 Condemnation. If the entire Leased Premises shall be
appropriated or taken under the power of eminent domain by any public or
quasi-public authority, or conveyance shall be made in lieu thereof, this Lease
shall terminate and expire as of the date of such taking or conveyance.
Anything in this Lease to the contrary notwithstanding, in the event more
than fifteen (15%) percent of the Leased Premises, more than twenty (20%)
percent of the then existing paved parking spaces of the Shopping Center or more
than thirty five (35%) percent of the then existing paved parking spaces serving
the Leased Premises as described in Section 2.4, shall be appropriated or taken,
or conveyance made in lieu thereof, either party shall have the right to cancel
and terminate this Lease as of the date of such taking upon giving thirty (30)
days' written notice to Tenant of such election.
- 32 -
<PAGE>
If more than fifty (50%) percent of the leasable floor space within the
Shopping Center shall be so taken, regardless of whether or not the Leased
Premises shall have been partially or completely taken, either party shall have
the right to cancel and terminate this Lease on thirty (30) days' written
notice.
In the event of any such cancellation, the parties shall thereupon be
released from any further liability under this Lease (except for obligations due
and payable on or before the effective date of such cancellation or obligations
which survive or are intended by their nature to survive such cancellation).
In the event a portion of the Leased Premises is appropriated or taken or
conveyed as aforesaid, and this Lease is not terminated in accordance herewith,
the Leased Premises shall be deemed reduced by the portion of space appropriated
or taken or conveyed, effective as of the date title thereto vests in the
applicable authority, and, as of such date, the Minimum Rent payable hereunder,
and the Break Point set forth herein, shall each be reduced to the respective
amounts realized by multiplying each such amount by a fraction, the numerator of
which shall be the number of square feet contained in the Leased Premises
immediately after such appropriation or taking, and the denominator of which
shall be the number of square feet contained in the Leased Premises immediately
prior to such appropriation or taking. If requested by Landlord or Tenant, the
party receiving the request shall execute such document(s) as the requesting
party may reasonably request to confirm the foregoing reductions in the Leased
Premises, the Minimum Rent and the Break Point.
Except as provided below, all compensation awarded or paid upon such a
total or partial appropriation, taking or conveyance of the Leased Premises
shall belong to and be the sole property of Landlord without any participation
whatsoever by Tenant. Tenant shall take no acts which will in any way diminish
Landlord's recovery.
Tenant shall have the right, however, to pursue an independent action for
business interruption damages, relocation expenses, the unamortized cost of
Tenant's improvements which Tenant is permitted to remove from the Leased
Premises at the expiration of this Lease and similar damages, as long as same
shall not diminish or adversely affect Landlord's claims.
Provided the conditions of this paragraph are met, Landlord and Tenant
shall each support the other's claim against the condemning authority.
IX.
INTENTIONALLY OMITTED.
X.
FINANCING
Section 10.1 INTENTIONALLY OMITTED.
Section 10.2 Subordination/Non-Disturbance/Attornment.
This Lease shall be a prior and superior to any mortgage encumbering the
Shopping Center. Tenant agrees to acknowledge and abide by any collateral
assignment of this Lease by Landlord and to attorn to any mortgagee(s) who shall
succeed to Landlord's rights under this Lease.
Tenant shall within ten (10) days of the written request of Landlord or
any mortgagee of the Shopping Center, execute whatever instruments may be
reasonably required by Landlord or any such mortgagee, which shall contain such
provisions,
- 33 -
<PAGE>
excluding subordination, but including attornment, as Landlord or any such
mortgagee shall reasonably request.
Landlord agrees that it will obtain and deliver to Tenant within ninety
(90) days from the date hereof, from the holder of any mortgage to which this
Lease is presently subject and subordinate, a written agreement in form and
content reasonably satisfactory to Tenant which subordinates such mortgage to
this Lease pursuant to the terms of this Section.
Landlord hereby consents to the mortgaging of Tenant's interest in this
Lease and all of its personal property and assets within the Leased Premises
which Tenant has the right to remove under Section 12.8 hereof on the
termination or expiration of this Lease in favor of Tenant's current lender or
in favor of another lender which provides financing to Tenant, provided that
such financing is made, on its face, expressly subject and subordinate in all
respects to Landlord's interest in this Lease and in the Leased Premises and to
any and all fee mortgages. Landlord agrees to execute such reasonable consents
and estoppels as Tenant and/or Tenant's lender may reasonably request in
connection with such financing provided same are consistent with the provisions
of this Section and provided further that such consents grant Tenant's lender
only the right to notice and opportunity to cure defaults by Tenant under this
Lease and, in the event such lender succeeds to the rights of Tenant under this
Lease, permits such lender, subject to the prior cure of all preexisting
defaults under this Lease and compliance with all the terms and provisions of
this Lease, to succeed to Tenant's rights and obligations under the Lease and to
thereafter assign its rights and obligations under the Lease in accordance with
the terms of this Lease. Landlord further agrees to use its good faith efforts
to cause the holder(s) of any fee mortgage encumbering the Shopping Center to
join in such consents and estoppels as Tenant or its lender may reasonably
request.
In this Lease, the terms "mortgage" and "mortgagee" shall include within
their meanings (i) the terms "deed of trust" and "trustee" thereunder, if
applicable; as well as (ii) an "agreement for deed" or any other instrument to
secure debt and the holder of any such agreement for deed or other security
instrument, if applicable.
Further, without in any way limiting the foregoing, Landlord agrees that,
if requested by Tenant's mortgagee, it will execute and deliver an Estoppel and
Consent in substantially the form of Exhibit D attached hereto and will use its
good faith diligent efforts to cause the holders of any fee mortgage(s) to
execute and deliver an Estoppel and Consent in substantially the form of Exhibit
E attached hereto.
Section 10.3 Financial Statements. Within ten (10) days following
Landlord's written request of Tenant, Tenant shall provide Landlord with a full
and complete copy of Tenant's (and all guarantors') last available annual
financial statements and such other interim financial statements as shall then
be available to Tenant (and such guarantors). Landlord may disclose such
statements to Landlord's mortgagees or ground lessors, potential mortgagees or
ground lessors, potential purchasers and/or to such other parties having an
interest in or considering the acquisition of an interest (direct or indirect,
as owner or mortgagee) in the Shopping Center or in Landlord, as Landlord may
designate. Any financial statement released by Landlord to any third party shall
be released on condition that such party shall keep such financial statement
confidential.
Section 10.4 INTENTIONALLY OMITTED.
Section 10.5 INTENTIONALLY OMITTED.
- 34 -
<PAGE>
XI.
DEFAULT
Section 11.1 Default. Tenant shall be in default hereunder if (a) Tenant
fails to pay when due Rent or any other charges due under this Lease and such
failure is not cured within fifteen (15) days after notice by Landlord to
Tenant; or (b) the Leased Premises shall be abandoned, deserted or vacated and
not re-opened within fifteen (15) days of Landlord's notice thereof; or (c)
Tenant fails to take possession of the Leased Premises and initially open for
business to the public by the Commencement Deadline as required hereunder
(unless the Commencement Deadline is extended in writing by Landlord in its sole
discretion); or (d) Tenant fails to open or remain open on the days and hours
required by this Lease and fails to cure such failure within fifteen (15) days
of Landlord's notice thereof; or (e) Tenant "Transfers" (as hereinafter defined)
its interest in this Lease in violation of the provisions hereof and such
Transfer is not voided within fifteen (15) days after Landlord's notice thereof;
or (f) there occurs any event specified in the first paragraph of Section 11.2
hereof; or (g) Tenant fails to observe and perform any of the other terms,
covenants and/or conditions of this Lease and such failure shall continue for
more than thirty (30) days after written notice from Landlord to Tenant (unless
such failure reasonably requires more than thirty (30) days to cure, in which
case Tenant shall not be deemed in default hereunder if, within such thirty
(30)-day period, Tenant commences to cure such failure and thereafter Tenant
prosecutes such cure diligently and without interruption to completion).
The Leased Premises shall be conclusively deemed abandoned (for purposes
of clause (b) above) by Tenant upon (i) unexcused absence from the Leased
Premises by Tenant or its agents for more than ten (10) consecutive days or
twenty (20) days in the aggregate during any Lease Year, or (ii) removal,
without Landlord's prior written approval, of all or a substantial portion of
Tenant's trade fixtures, equipment or inventory from the Leased Premises unless
same is replaced within ten (10) days of such removal.
Section 11.2 Bankruptcy. If at any time during the Term there shall be
filed, by or against Tenant or any successor tenant then in possession or any
guarantor of either under this Lease, in any court pursuant to any statute
either of the United States or of any state or commonwealth, a petition (i) in
bankruptcy, (ii) alleging insolvency, (iii) for reorganization, (iv) for the
appointment of a receiver, (v) for an arrangement under any federal or state or
commonwealth bankruptcy code, or (vi) for any similar creditor's or debtor's
rights, Tenant shall be in immediate default hereunder without the necessity of
any notice or cure period being given (except in the event of an involuntary
filing against Tenant, no default shall occur unless such filing is not
dismissed within 60 days of such filing), and thereupon Tenant shall immediately
quit and surrender the Leased Premises to Landlord, but Tenant shall continue to
be liable for the payment of Rent and all other sums due hereunder.
In the event Landlord may not terminate Tenant's rights under this Section
11.2 by reason of protection afforded Tenant under the applicable bankruptcy
act, and Tenant is in default of any of the other terms, covenants or conditions
of this Lease, then the duly-appointed trustee in bankruptcy of the
Tenant-debtor (the "Trustee") may assume this Lease only after he undertakes the
following:
1. cures any default, or provides adequate assurance that he will
promptly cure such default;
- 35 -
<PAGE>
2. compensates or provides adequate assurance that he will
promptly compensate Landlord for any actual pecuniary loss
resulting from such default; and
3. provides adequate assurance of future performance.
Adequate assurance of future performance includes, but is not limited to,
adequate assurance: (1) of the source of Rent and other considerations due under
the Lease; (2) that any Percentage Rent due under the Lease will not decline
substantially; (3) that assumption or assignment of the Lease will not breach
any provisions, including, but not limited to, radius, location, use or
exclusivity provisions, in any other lease, financing agreement or master
agreement relating to the Shopping Center of which the Leased Premises are a
part; and (4) that assumption or assignment of the Lease will not disrupt
substantially any tenant mix or balance in the Shopping Center of which the
Leased Premises are a part.
To assign the Lease, the Trustee must first assume the Lease in accordance
with the bankruptcy code and provide adequate assurance of future performance by
the assignee, and must not be in default of any of the other terms hereunder.
Section 11.3 Landlord's Rights on Default. In addition to any other
remedies or rights of Landlord in this Lease or by law or equity provided, in
the event of any default by Tenant (beyond any applicable grace, notice and/or
cure period specifically granted herein, if any), Landlord may:
a. terminate this Lease (which shall only occur if Landlord so
specifies a termination in writing), re-enter the Leased Premises and take
possession thereof and remove all persons and property therefrom, and
Tenant shall have no further claim or right to possession hereunder;
and/or
b. bring suit for the collection of Rent and other sums due under
this Lease, and for damages (including, without limitation, attorneys'
fees and the cost of repairing and reletting the Leased Premises) with or
without entering into possession of the Leased Premises or terminating the
Lease. Commencement of any such action by Landlord shall not be construed
as an election to terminate this Lease and shall not absolve or discharge
Tenant from any of its obligations or liabilities for the remainder of the
Term; and/or
c. re-enter and retake possession of the Leased Premises from Tenant
by summary proceedings or otherwise. To the extent permitted by law,
Tenant waives any right of redemption or repossession. Commencement of any
action by Landlord for re-entry, or any such actual re-entry, shall not be
construed as an election to terminate this Lease and shall not absolve or
discharge Tenant from any of its obligations or liabilities for the
remainder of the Term or otherwise. If, in the event of a re-entry,
Landlord relets the Leased Premises, Tenant shall continue to be liable
for the payment of any deficiencies in Minimum Rent and other sums due
under this Lease after such reletting. In the event of any re-entry,
Landlord shall have the right, but not the obligation, to remove any
personal property from the Leased Premises and place the same in storage
at a public warehouse or on any sidewalk at the sole expense and risk of
Tenant or any other owner thereof; and/or
d. INTENTIONALLY OMITTED.
Section 11.4 Damages Upon Default or Termination. If Landlord elects to
exercise any of its remedies for Tenant's default under the provisions of the
above Section, whether or not
- 36 -
<PAGE>
Landlord elects to terminate this Lease, Landlord may recover from Tenant
damages computed in accordance with the following formula, in addition to its
other remedies:
a. any unpaid Rent and other sums due under this Lease which have
accrued at the time of such exercise; plus
b. the unpaid Rent and other sums due under this Lease for the
balance of the Term after the time of such exercise (in which event, if
the Leased Premises are thereafter re-leased to one or more new tenants,
Landlord shall promptly pay Tenant all net rental amounts realized by
Landlord on account of such re-letting, in maximum amounts equal to the
amount Tenant had theretofore actually paid to Landlord as damages
hereunder for the applicable period for which such damage payment is
made); plus
c. any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, without limitation, the
cost of repairing, modifying or modernizing the Leased Premises, new
tenant allowances, reasonable brokerage fees and reasonable attorneys'
fees and costs; plus
d. at Landlord's election, such other amounts as may be permitted
from time to time by the laws of the state or commonwealth; plus
e. Interest on all of the foregoing from the date due until paid in
full.
Section 11.5 Landlord's Self-Help. In addition to Landlord's other
remedies (including, but not limited to, Landlord's rights of self-help set
forth elsewhere in this Lease), if Tenant at any time fails to perform any of
its obligations under this Lease beyond any applicable grace, notice and/or cure
period specifically granted herein, if any, Landlord shall have the right, but
not the obligation, upon giving Tenant at least two (2) days' prior written
notice of its election to do so (in the event of any emergency, however, no
prior notice being required), to perform such obligations on behalf of and for
the account of Tenant and to take all such action necessary to perform such
obligations.
In such event, Landlord's costs and expenses incurred therein shall be
paid for by Tenant forthwith, with Interest. The performance by Landlord of any
such obligation shall not constitute a release of Tenant or waiver of Landlord.
Section 11.6 Non-Waiver Provisions. The failure of Landlord or Tenant to
insist upon a strict performance of any of the terms, conditions and covenants
herein shall not be deemed to be a waiver of any rights or remedies that
Landlord or Tenant may have and shall not be deemed a waiver of any subsequent
breach or default in the terms, conditions and covenants herein contained,
except only as may be expressly waived in writing.
The maintenance of any action or proceeding to recover possession of the
Leased Premises, or to recover any installment or installments of Rent or any
other moneys that may be due or become due from Tenant to Landlord, shall not
preclude Landlord from thereafter instituting and maintaining subsequent actions
or proceedings for the recovery of possession of the Leased Premises or of any
other moneys that may be due or become due from Tenant. Any entry, re-entry or
termination by Landlord shall not be deemed to absolve or discharge Tenant from
full financial liability hereunder.
- 37 -
<PAGE>
The acceptance by Landlord of payment from Tenant (or any other person or
entity) of less than the full amount owed shall not be deemed an accord or
satisfaction or otherwise be construed as other than a payment on account
regardless of any notation or endorsement prepared by Tenant (or such other
person or entity) to the contrary, unless (and only unless) Landlord, in a
separate document, specifically and voluntarily agrees to such an accord and
satisfaction.
Section 11.7 Other Leases. Landlord shall not be obligated to apply a
consistent enforcement policy throughout the Shopping Center and the election of
Landlord to pursue any or all of its rights and remedies hereunder shall not be
precluded or otherwise affected by its election not to pursue any such rights or
remedies in the case of identical, similar or other defaults of other tenants in
the Shopping Center.
Section 11.8 Landlord's Default; Inability to Perform. In the event
Landlord shall be in default hereunder in any respect, such default shall not
give rise to any rights or remedies of Tenant unless and until such default
shall continue for more than thirty (30) days after Landlord's actual receipt of
written notice thereof from Tenant (or, as to defaults not reasonably
susceptible of being cured within such 30-day period, unless and until Landlord
fails to commence the cure thereof within such 30- day period and fails
thereafter diligently to prosecute the same to completion). Further, if Landlord
is delayed or prevented from performing any of its obligations under this Lease
by reason of a strike or other labor troubles, weather or any other similar
cause beyond Landlord's control, the period of such delay or such prevention
shall be deemed added to the time herein provided for the performance of any
such obligation by Landlord.
Section 11.9 Attorneys Fees and Costs. If either party shall at any time
be in default hereunder, and if the other party shall deem it necessary to
engage attorneys to enforce its rights hereunder, the prevailing party shall be
reimbursed by the other party for the reasonable expenses incurred thereby,
including, but not limited to, court costs and reasonable attorneys' fees
through all appeals, whether or not suit be filed.
Section 11.10 Specific Performance; Injunction. Both parties shall have
the right to obtain a judgment of specific performance, an injunction and/or
restraining order and shall have all other equitable remedies available under
applicable law in the event of default.
Section 11.11 Remedies Cumulative. All remedies of hereunder are
cumulative and not mutually exclusive and may be exercised in addition to all
other remedies available at law and in equity.
XII.
OTHER PROVISIONS
Section 12.1 Definition and Liability of Landlord. The term "Landlord" as
used in this Lease means only the owner from time to time of the building in
which the Leased Premises are located [or the owner from time to time of a
leasehold interest in said building and/or in the land thereunder (if Landlord's
interest is that of a lessee under a ground lease)], so that in the event of the
sale of said building (or leasehold interest) or an assignment of this Lease, or
a new demise of said building (and/or land and/or leasehold), Landlord named
herein [and any successor thereto other than the then owner (or then ground
lessee, as appropriate)] shall be and hereby is entirely freed and relieved of
all obligations of Landlord hereunder subsequently accruing.
- 38 -
<PAGE>
It is specifically understood and agreed that there shall be no personal
(or entity) liability of Landlord (nor Landlord's agents, if any) in respect of
any of the covenants, conditions or provisions of this Lease. In the event of a
breach or default by Landlord of any of its obligations under this Lease beyond
the applicable grace and/or cure period, or if Landlord shall otherwise be
liable to Tenant for any reason whatsoever, Tenant shall look solely to the
interest, if any, of the applicable Landlord in the Leased Premises for the
satisfaction of Tenant's remedies.
Section 12.2 Relationship of the Parties. Nothing contained in this Lease
shall be deemed or construed as creating the relationship of principal and agent
or of partnership or joint venture between the parties hereto, it being
understood and agreed that neither the method of computing Rent (including, but
not limited to, Percentage Rent), nor any other provision contained herein or
any acts of the parties hereto, shall be deemed to create any relationship
between the parties other than that of landlord and tenant.
Section 12.3 INTENTIONALLY OMITTED.
Section 12.4 Indemnity. Tenant agrees to indemnify, defend and save
Landlord harmless from and against any and all claims and demands for, or in
connection with, any accident, injury or damage whatsoever caused to any person
or property arising, directly or indirectly, from any act or omission or breach
of this Lease of Tenant or any concessionaire or subtenant (this clause not
being deemed a consent thereto) or any of their respective licensees, servants,
agents, employees, contractors or invitees, and from and against any and all
costs, expenses and liabilities incurred in connection with any such claims or
demands and/or proceedings brought thereon (including, but not limited to, costs
and reasonable attorneys' fees through all appeals). In case Landlord shall,
without fault or contractual assumption hereunder on its part, be made a party
to any litigation commenced against Tenant, Tenant shall protect and hold
Landlord harmless and pay all costs, expenses and reasonable attorney's fees
incurred or paid by Landlord in connection with such litigation.
Landlord agrees to indemnify, defend and save Tenant harmless from and
against any and all claims and demands for, or in connection with, any accident,
injury or damage whatsoever caused to any person or property in the Common Areas
of the Shopping Center arising, directly or indirectly, from the negligence of,
or breach of this Lease by, Landlord or any of Landlord's agents, employees or
contractors (provided, however, that Landlord's liability in each such case
shall be limited to the coverage, if any, afforded by Landlord's liability
insurance), and from and against any and all costs, expenses and liabilities
incurred in connection with any such claims or demands and/or proceedings
brought thereon (including, but not limited to, costs and reasonable attorneys'
fees through all appeals). In case Tenant shall, without fault or contractual
assumption hereunder on its part, be made a party to any litigation commenced
against Landlord, Landlord shall protect and hold Tenant harmless and pay all
costs, expenses and reasonable attorney's fees incurred or paid by Tenant in
connection with such litigation (provided, however, that Landlord's liability in
each such case shall be limited to the coverage, if any, afforded by Landlord's
liability insurance).
Section 12.5 Property in Leased Premises. All leasehold improvements, such
as electrical, plumbing and other fixtures and heating and air-conditioning
equipment, and all other construction and installation to be done by Tenant as
set forth in Exhibit B hereto (excluding Tenant's theatre seats, movie screens
and music speakers, equipment and trade fixtures, whether
- 39 -
<PAGE>
affixed or unaffixed to the Premises, which Tenant may remove), as well as all
other personal property furnished or paid for by Landlord (whether as initially
installed or as replacements thereof), shall when installed automatically attach
to the freehold and/or become and remain the property of Landlord.
Tenant shall pay before delinquency all taxes assessed against Tenant's
fixtures, furnishings, leasehold, improvements, equipment and stock-in-trade
placed in, on or about the Leased Premises. Any such taxes paid by Landlord on
behalf of Tenant shall be due and payable from Tenant to Landlord within ten
(10) days after billings therefor are rendered to Tenant.
Section 12.6 Damage to Property or Persons. Except as provided in Section
12.4, Landlord shall not be liable for any loss of or damage to property of
Tenant or of others located in the Leased Premises or the Shopping Center, by
theft or otherwise, nor for any loss or damage whatsoever to Tenant's business,
inventory, fixtures, equipment, furniture, walls, ceilings or floor coverings or
any other property of Tenant or others, whether or not Tenant could remove same
at the end of the Term as hereinafter provided, resulting from fire, explosion,
falling plaster, steam, gas, electricity, wind, water, rain or leaks from any
part of the Leased Premises or from the pipes, appliances or plumbing, or from
the roof, walls, glass frames, doors, street or subsurface or from any other
place or by dampness or by or from any other cause of whatsoever nature. Unless
the maintenance and repair of any item is specifically the on-going
responsibility of Landlord hereunder, Landlord shall not be liable for any
injury or damage caused by other tenants or any person(s) either in the Leased
Premises or elsewhere in the Shopping Center, or by occupants of property
adjacent to the Shopping Center, or by the public, or by operations in the
construction of any private, public or quasi-public work. Landlord shall be
liable for any latent defect in construction of the Leased Premises or of
Landlord's Work thereto, if any, for a period of one (1) year following
Landlord's Tender of Possession of the Leased Premises to Tenant.
Section 12.7 Assignment or Subletting. Tenant shall not assign, sublet,
mortgage or hypothecate this Lease or Tenant's interest in and to the Leased
Premises or any part thereof or permit any other party to manage the Leased
Premises or control the operation thereof (herein collectively or individually
referred to as a "Transfer"), without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Consent by Landlord
to any specific Transfer shall not constitute a waiver of the necessity for such
consent to any subsequent Transfer. Consent shall not be assumed to have been
given or be deemed to have been given under any circumstances, except only if
specifically given in writing, or if Landlord fails to reject Tenant's request
for a consent within thirty (30) days following written notice from Landlord to
Tenant requesting such consent, in which case such consent shall be deemed
irrevocably granted. Without limiting the generality of the foregoing,
acceptance of Rent or other payments paid by any third party in respect of this
Lease shall not be deemed to be an implied or other consent to a Transfer to
such third party.
If the Tenant is a trustee, corporation, partnership or other business
entity, any change in the underlying ownership (legal, equitable or beneficial)
of, and/or (in the case of a corporation) in the power to vote fifty-one (51%)
percent or more of the outstanding capital stock of, Tenant, whether such change
of ownership is by sale, assignment, operation of law (e.g., merger or
consolidation) or otherwise, shall be deemed a Transfer and shall be subject to
the provisions of this Section.
Any Transfer by Tenant in accordance with this Section shall be only for
the purpose and use hereinabove specified and for no
- 40 -
<PAGE>
other purpose, and in no event shall any Transfer be deemed a novation or
otherwise release or relieve Tenant from any obligations under this Lease unless
agreed to in writing by Landlord (which agreement Landlord may grant or withhold
in its sole and unfettered discretion). Any permitted transferee shall assume in
writing Tenant's obligations hereunder and shall deliver to Landlord an
assumption agreement in form reasonably satisfactory to Landlord within ten (10)
days after the effective date of the Transfer. Tenant agrees to pay Landlord's
reasonable attorney's fees incurred in connection with the review and/or
preparation of any documents in connection with any Transfer up to a maximum of
$1,000.
Any attempted Transfer in violation of the provisions of this Section
shall not be binding upon Landlord and shall confer no rights upon any third
person.
Landlord shall promptly consent to an Transfer proposed by Tenant in
accordance with the provisions of this Lease provided that either (i) Tenant
continues to manage the theater and other operations at the Leased Premises, or
(ii) the proposed transferee or its senior management has substantial experience
in the ownership and operation of movie theatres, and in the case of both (i)
and (ii) above, the proposed transferee demonstrates by presentation to Landlord
of financial statements and projections that it has the financial capacity to
perform the obligations of Tenant hereunder, notwithstanding the fact that
Tenant nonetheless remains liable to Landlord under the Lease.
Notwithstanding anything in this Lease to the contrary, Tenant shall have
the right to assign this Lease or sublet the Leased Premises, without Landlord's
consent, to a parent, subsidiary, merged or consolidated company as a result of
a consolidation or merger with Tenant, or to a company acquiring all or
substantially all of Tenant's assets provided that, in any such case, Tenant
(and/or the resulting entity of any merger or consolidation) shall remain fully
liable hereunder, and such internal assignment shall not be deed a Transfer
under this Lease.
Section 12.8 Surrender of Premises and Holding Over. At the expiration or
earlier termination of the tenancy hereby created, Tenant shall surrender the
Leased Premises (and all portions thereof and property which Tenant is required
to maintain herein) in good, "broom-clean" condition, reasonable wear and tear
alone excepted, and Tenant shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of Rent and shall inform
Landlord of all combinations on locks, safes and vaults, if any, in the Leased
Premises. Tenant's obligation to observe and perform this covenant shall survive
the expiration or other termination of the Term. If Tenant shall default in so
surrendering the Leased Premises, Tenant's occupancy subsequent to such
expiration or earlier termination, whether or not with the consent or
acquiescence of Landlord, shall be deemed to be that of a tenancy at will and in
no event from month-to-month or from year-to-year, and it shall be subject to
all the terms, covenants and conditions of this Lease applicable thereto, except
that Minimum Rent shall be twice the amount payable in the last year of the Term
(in which case the Break Point shall likewise double), and no other extension or
renewal of this Lease shall be deemed to have occurred by such holding over.
At the expiration or sooner termination of this Lease, (i) Tenant may
remove (or shall remove if requested by Landlord in writing) its theatre seats,
signs, movie screens and music speakers, and (ii) Tenant shall remove any and
all moveable trade fixtures, equipment and other unattached items (excluding
Tenant's theatre seats, movies screens and music speakers which Tenant may
remove) which Tenant, at its expense, may have
- 41 -
<PAGE>
installed, stored or left in the Leased Premises or elsewhere in the Shopping
Center, including, but not limited to, counters, shelving, showcases, chairs and
unattached movable machinery (excluding Tenant's theatre seats, movie screens
and music speakers which Tenant may remove) purchased or provided by Tenant and
which are susceptible of being moved without damage to the Leased Premises; and
if removable only by causing damage, then removable only if any such damage is
immediately and fully repaired or restored as set forth below. Tenant shall not
remove any plumbing or electrical fixtures or equipment, heating or
air-conditioning equipment, floor coverings (including, but not limited to,
wall-to-wall carpeting), walls, ceilings, lights, bathroom fixtures, wall
coverings, storefronts, doors or storage room partitions, all of which shall be
deemed to constitute a part of the freehold and/or leasehold interest of
Landlord, as set forth above, nor shall Tenant remove any other items of
personal property that were furnished or paid for by Landlord (whether as
initially installed or as replacements thereof). Landlord shall have the right
to inspect the Leased Premises within ninety (90) days prior to the expiration
or sooner termination of this Lease; and prior to the expiration of the Term,
Tenant shall repair any damage to and/or replace and/or remove any of the
above-mentioned items (and repair any damages to the Leased Premises caused by
such removal and restore the affected portions of the Leased Premises to their
original condition, reasonable wear and tear alone excepted). In the event
Tenant does not repair or replace same properly as required hereunder to the
reasonable satisfaction of Landlord within thirty (30) days after written notice
thereof from Landlord to Tenant, then, in addition to its other remedies,
Landlord may make such repairs and replacements without liability to Tenant and
Tenant shall pay Landlord's reasonable costs for making such repairs and
replacements upon presentation of a bill therefor. Said bill shall include
Interest from the date the costs of such repairs and replacements were paid to
the contractor(s) making such repairs and replacements. If Tenant shall fail to
remove its trade fixtures or other property as provided in this Section, such
fixtures and other property not removed by Tenant shall be deemed conclusively
abandoned by Tenant and at the option of Landlord shall become the property of
Landlord, or at Landlord's option may be removed by Landlord at Tenant's expense
plus Interest, or placed in storage at Tenant's expense, or sold or otherwise
disposed of, in which event the proceeds of such sale or other disposition,
after deduction for the above expenses, shall belong to Tenant. The foregoing
and all other obligations of Tenant hereunder shall survive the expiration or
earlier termination of this Lease.
Section 12.9 INTENTIONALLY OMITTED.
Section 12.10 Tenant's Liens. The interest of Landlord shall not be
subject to liens for improvements or otherwise made by or on behalf of or at the
direction of Tenant. Tenant shall discharge any lien filed against the Shopping
Center, and any part thereof, for work done or materials or labor furnished with
respect to the Leased Premises by or for the benefit of Tenant or at its request
within ten (10) days after Tenant receives notice that such lien has been filed.
If Tenant fails to keep this covenant beyond any applicable grace, notice and/or
cure period specifically granted herein, if any, in addition to any other
remedies available to Landlord under this Lease or otherwise, Landlord may at
its option discharge such lien, in which event Tenant agrees immediately to pay
Landlord a sum equal to the amount of the lien thus discharged plus Landlord's
internal administrative costs, reasonable attorney's fees, expenses and damages
thereby caused Landlord, plus Interest.
Prior to commencing any work on the Leased Premises that is required or
permitted hereunder (including, without limitation, any work required or
permitted under Articles III, VI, VII or
- 42 -
<PAGE>
VIII or under Section 12.8 of this Lease), the cost of which is expected to
exceed $25,000.00, Tenant shall obtain, at its own cost and expense, and shall
submit to Landlord originals of, payment and performance bonds (in favor of
Landlord and Tenant as dual obligees) issued by reputable bonding companies
acceptable to Landlord securing the payment in full of all wages and materials
due in connection with, and otherwise the lien-free completion of, all such
work.
Section 12.11 Interest. Whenever this Lease refers to "Interest", same
shall be computed at the rate of 12% per annum or the maximum rate permitted
under the circumstances by the State's or Commonwealth's law, whichever is less.
All sums of any kind and character not paid by Tenant or Landlord on their due
date shall bear Interest from such due date until paid in full. Express
provisions herein which require or permit the imposition of Interest in specific
instances shall not be deemed a limitation upon the generality of this clause.
Section 12.12 Late Payments. Should Tenant fail to pay within ten (10)
days of when due any installment of Rent or any other sum payable to Landlord
under the terms of this Lease, then, at Landlord's option, if not prohibited by
applicable law, a one-time per occurrence late charge equal to five (5%) of the
amount due may be imposed to compensate Landlord for its administrative costs in
dealing with such late payments; and Interest shall accrue on all such sums from
and after thirty (30) days following the date on which any such sums shall
become due and payable and such Interest shall be paid by Tenant to Landlord at
the time of payment of such sums.
Section 12.13 Consents. Any consent or approval of Landlord or Tenant
required under this Lease shall not be unreasonably withheld or delayed.
Section 12.14 INTENTIONALLY OMITTED.
Section 12.15 Notices. Whenever notice shall or may be given to either of
the parties by the other, each such notice shall be in writing and shall be
given by registered or certified mail (with return receipt requested), or by a
recognized overnight delivery service (such as Federal Express), in any such
case at the respective address(es) of the parties as contained in Section 1.1
(h) above, or to such other address(es) as either party may from time to time
designate in writing to the other. Any notice under this Lease shall be deemed
to have been given upon actual receipt thereof. A notice properly given on
behalf of Landlord by Landlord's management company or manager, or by an
attorney representing Landlord or its manager or management company, shall be
deemed for all purposes to be a notice from Landlord and a notice properly given
on behalf of Tenant by an attorney representing Tenant shall be deemed for all
purposes to be a notice from Tenant.
Section 12.16 No Broker. The parties each represent and warrant to the
other that no real estate brokers, salesmen or finders are involved in this
transaction for which a commission is or may be claimed. In the event a claim
for brokerage in connection with this transaction is made by any broker,
salesman or finder claiming to have dealt through or on behalf of one of the
parties hereto (the "Indemnitor"), said Indemnitor shall indemnify, defend and
hold the other party hereunder harmless from all liabilities, damages, claims,
costs, fees and expenses whatsoever (including reasonable attorneys' fees and
court costs) with respect to such claim for brokerage. The provisions of this
Section shall survive the termination of the Term.
Section 12.17 Registration. The parties hereto agree that at Tenant's
request and option at any time after this Lease is executed, this Lease will be
elevated to a public document by
- 43 -
<PAGE>
deed of elevation (the "Deed") which will be presented to the appropriate
registry of the Commonwealth for registration, all at Tenant's sole cost and
expense (including payment of all legal, notarial, recording and any other fees
and expenses incidental thereto). Tenant shall have the right to select the
Notary, subject to Landlord's reasonable approval. If this Lease is so recorded,
Tenant hereby covenants and agrees that it will, promptly upon the expiration or
any other termination of this Lease pursuant to the terms hereof for any reason
other than the default of Landlord, at Tenant's sole cost and expense (including
payment of all legal, notarial, recording and any other fees and expenses
incidental thereto), do all things necessary to cancel this Lease of record.
Tenant shall have the right to select the Notary, subject to Landlord's
reasonable approval.
If the Registrar of Property refuses to record the Deed for any reason
that constitutes a Landlord's Defect (as hereinafter defined), Landlord, at its
cost and expense, shall take all necessary and reasonable steps to correct such
defect with all reasonable diligence. In the event that, at any time during the
period from the date of this Lease to the date that is one hundred eighty (180)
days after the date Tenant takes possession of the Leased Premises, Tenant
presents the Deed to Landlord for execution and, within twenty (20) days after
such execution, either (a) Tenant requests a leasehold policy of title insurance
from Chicago Title Insurance Company (the "Title Company") insuring Tenant's
interest in the Leased Premises pursuant to the Lease and as otherwise
hereinafter described (the "Policy") and the Title Company refuses to issue the
Policy for any reason that constitutes a Landlord's Defect, or (b) Tenant
presents the Deed to the Registry of Property and the Registrar of Property
refuses to either accept the Deed for registration or later refuses to record
the Deed, subject only to the Permitted Exceptions (as hereinafter defined),
because of any Landlord's Defect (even if the Registrar's notification of such
defects is issued after such 180-day period), and Tenant notifies Landlord of
such refusal by the Title Company or the Registrar of Property, as the case may
be (including with such notice, if applicable, a copy of the Registrar's notice
of defects), within five (5) business days from Tenant's receipt of such
refusal, then, if Landlord, with Tenant's full cooperation, is unable to cure,
at its cost and expense, Landlord's Defects within sixty (60) days from the date
of such notice by Tenant, Tenant may (but shall not be required to) terminate
this Lease by giving one hundred eighty (180) days prior written notice to
Landlord, whereupon this Lease shall terminate and neither Landlord nor Tenant
shall have any rights or obligations hereunder or with respect to the Leased
Premises whatsoever. Notwithstanding the foregoing, in the event that Landlord's
cure of Landlord's Defects, using its good faith efforts and with all reasonable
diligence, requires more than sixty (60) days (including, without limitation, if
Landlord is challenging the Registrar's grounds for its refusal to record the
Deed), Landlord shall have such additional time as may be reasonably required to
cure Landlord's Defects if, within such sixty (60) day period, Landlord
commences to cure Landlord's Defects and thereafter prosecutes such cure
diligently to completion; provided, however, that if during such sixty (60) day
period or such additional time, Tenant's possession of the Leased Premises is
threatened because the Deed has not been recorded, subject only to Permitted
Exceptions, as a result of Landlord's Defects, then Landlord's time to cure
Landlord's Defects (assuming Tenant has corrected any defects preventing such
recordation that are not Landlord's Defects) shall be the period during which
the presentation of the Deed at the Registry ("asiento de presentacion") shall
remain in effect (barring any voluntary withdrawal of the Deed from the Registry
by Tenant prior to the legally scheduled expiration date of such presentation
("asiento de presentacion"); it being understood that Tenant shall not be
required to take any actions with respect to any Landlord's Defect in order to
extend such
- 44 -
<PAGE>
expiration date). With respect to any lien, encumbrance or claim recorded in, or
presented for recordation to, the Registry other than as a voluntary action of
Landlord, whether as a result of or in connection with a judicial proceeding or
otherwise (e.g., a "lis pendens" or "anotacion preventiva de demanda"), Tenant's
possession of the Leased Premises shall not be deemed to be threatened unless
and until: (i) in case of a judicial claim, a judgment is issued against
Landlord and such judgment becomes firm, final and unappealable, and (ii) in all
cases, such lien, encumbrance, claim or judgment will result in the Tenant
losing possession or use for its intended purposes of all or part of the Leased
Premises. Tenant's election not to terminate this Lease as aforesaid shall not
relieve Landlord of its obligation to cure Landlord's Defects using all
reasonable diligence, nor shall it constitute a waiver of any rights Tenant may
have against Landlord at law or in equity.
As used herein the term "Landlord's Defect" means any reason for the
refusal of the Title Company to issue the Policy or for the refusal of the
Registrar of Property to record the Deed that does not relate to the form of the
Deed or to the payment of the premium for the Policy or to the cost of execution
and recordation of the Deed.
Landlord shall execute any and all documents reasonably required by Tenant
to correct any defects that are not Landlord's Defects and that impede the
issuance of the Policy and/or the recordation of the Deed, all at Tenant's cost
and expense.
The Policy shall be a leasehold policy of title insurance insuring
Tenant's interest in the Leased Premises created by the Lease, subject only to
the Permitted Exceptions, but in any case insuring Tenant against loss
associated with any objection by the Registrar to the Deed and any accompanying
document(s), as well as any loss associated with the Registrar's refusal to
record the Deed.
The term "Permitted Exceptions", as used herein, means (1) the standard
printed exceptions on the customary form of title insurance policy used in the
Commonwealth of Puerto Rico (endorsed or amended, however, in accordance with
good local commercial practice and in no event adversely affecting the coverage
described above regarding registration), (2) mortgages or other encumbrances
created by Tenant upon its leasehold interest, (3) those matters shown on
Exhibit F attached hereto and made a part hereof, (4) such easements,
restrictions and other rights (excluding mortgages) hereafter voluntarily
created by Landlord that do not interfere with Tenant's rights under the Lease
or Tenant's use of the Leased Premises, and (5) any mortgage(s) of Landlord's
interest in the Shopping Center with respect to which Tenant fails to satisfy
its obligations under Section 10.2 of the Lease. It is expressly understood and
agreed that to satisfy the requirements hereof, the Policy must affirmatively
insure that Tenant's interest in the Leased Premises under the Deed is in fact
superior to all mortgages of Landlord's interest in the Shopping Center other
than those described in clause (5) of the preceding sentence.
Section 12.18 Entire and Binding Agreement; Survival. This Lease contains
all of the agreements between the parties hereto, supersedes all prior and/or
contemporaneous agreements and understandings and it may not be modified in any
manner other than by an agreement in writing signed by all the parties hereto or
their successors in interest. The terms, covenants and conditions contained
herein shall inure to the benefit of and be binding upon Landlord and Tenant and
their respective permitted successors and assigns, except as may be otherwise
expressly provided in this Lease.
- 45 -
<PAGE>
All obligations of Tenant and/or Landlord which are or may be intended by
their nature to be performed and/or complied with after the expiration or
earlier termination of this Lease shall survive such expiration or termination.
Express provisions herein which require or permit survival in specific
instances, or as to specific obligations, shall not be deemed a limitation upon
the generality of this survival clause.
Section 12.19 Provisions Severable. If any term or provision of this Lease
or the application thereof to any person or circumstance shall, to any extent,
be determined by appropriate judicial authority to be illegal, invalid or
unenforceable, the same shall be struck from this Lease as if never included
herein; but the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
illegal, invalid or unenforceable, shall not be affected thereby and each term
and provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
Section 12.20 Captions. The captions contained herein are for convenience
of reference only and shall not be deemed a part of this Lease, nor construed as
in any manner limiting or amplifying the terms and provisions of this Lease to
which they relate.
Section 12.21 Governing Law; Negotiated Agreement. This Lease shall be
construed and governed in accordance with the laws of the State or Commonwealth
in which the Leased Premises are located. All of the parties to this Lease have
participated (or have had the opportunity to participate) fully in the
negotiation and preparation hereof, and, accordingly, this Lease shall not be
more strictly construed against any one of the parties hereto.
Section 12.22 Irrevocable Offer. In consideration of Landlord's
administrative expense in considering this Lease and the terms of Tenant's
proposed tenancy hereunder, Landlord's reservation of the Leased Premises
pending such consideration and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Tenant's submission to
Landlord of this Lease, duly executed by Tenant, shall constitute Tenant's
irrevocable offer to continue for thirty (30) days from and after receipt by
Landlord of said Lease duly executed by Tenant or until Landlord shall deliver
to Tenant written notice of rejection of Tenant's offer, whichever shall first
occur.
Even though the first draft of this Lease was prepared by Landlord,
Landlord shall in no event be bound by the terms and conditions of this Lease,
nor obligated to reserve the Leased Premises for Tenant, unless and until
Landlord has fully executed this Lease and delivered a fully executed original
to Tenant.
Section 12.23 Time of Essence. All time specified herein shall be of the
essence hereof. Express provisions herein which recite in specific circumstances
that time shall be of the essence shall not be deemed a limitation upon the
generality of this paragraph.
Section 12.24 Hand Deletions. The physical deletion of any portion of this
Lease should not be construed as an intention that the opposite of such deleted
language should apply.
Section 12.25 Certain Definitions; Administrative Charges; Collection
Remedies.
(a) Unless otherwise specifically set forth in this Lease, "floor space"
and "Floor Space" shall mean, as the context would require, the number of square
feet in the Leased Premises or, if applicable, in other store premises in the
Shopping Center
- 46 -
<PAGE>
(excluding space on any mezzanines) as reasonably determined by Landlord. No
deduction or exclusion shall be made from floor space otherwise computed by
reason of stairs, elevators, escalators, interior partitions or other interior
construction or equipment in any such store premises.
(b) The term "Store Space" shall mean the number of square feet of the
aggregate floor space of all store space premises (including the Leased
Premises) which are leasable or saleable floor space in the Shopping Center,
whether or not leased or sold; excluding therefrom, however, in all cases space
leased (or being held for lease) to, or owned by (or being held for sale to),
any particular tenants or occupants (i) occupying (or expected to occupy) more
than 20,000 square feet ("Anchor Tenants"), and (ii) occupying (or expected to
occupy) an outparcel or pad as shown on Exhibit A attached hereto ("Outparcel
Tenants"), if any now or hereafter are designated by Landlord, from time to
time, as being such an Anchor Tenant or Outparcel Tenant. The determination as
to the size of the Store Space and of the Leased Premises shall be made
exclusively and conclusively by Landlord's architect or engineer, as Landlord
may determine.
(c) The terms "herein", "hereunder", "hereof" and the like shall refer to
this entire Lease (including, but not limited to, all Exhibits, Addenda and
documents executed by Landlord and Tenant or otherwise included as part of this
Lease); and the reference to "this Lease" shall include all such Exhibits,
Addenda and documents.
(d) Certain terms defined in various Sections of this Lease are summarized
below and the location of the Section in which each such term is so defined is
set forth opposite each such term below:
Defined Term Defined in Section:
------------ -------------------
Anchor Tenants 12.25
Break Point 1.1(d)
Commencement Date 1.2
Commencement Deadline 1.2
Common Areas 2.4
Excluded Property 2.4
Floor Space (or floor space) 12.25
Gross Sales 1.1(d)
Included Property 2.4
Interest 12.11
Landlord 12.1
Landlord's Work Ex.B, Par. 1
Lease Year 1.2
Leased Premises 1.1(a)
Minimum Rent 1.1(c) and 2.1
Operating Costs 2.4
Outparcel Tenants 12.25
Percentage Rent 1.1(d)
Rent 1.2
Security Deposit 1.1(g)
Shopping Center 1.1(a)
Store Space 12.25
Taxes 2.3
Tenant's Work Ex.B, Par. 2
Tender of Possession 1.2
Term 1.1(b)
Transfer 12.7
(e) Unless otherwise provided specifically to the contrary herein, if
Landlord advances any funds to cure any default by Tenant or performs any
obligation on behalf of Tenant which requires an expenditure, Tenant shall be
obligated to reimburse Landlord, immediately upon demand therefor, for all such
advances
- 47 -
<PAGE>
and expenditures, together with Interest thereon from the date such advances
were made until the date Landlord is reimbursed in full by Tenant.
(f) Landlord shall have the same remedies for Tenant's failure to make any
and all payments required to be made by Tenant hereunder [including, but not
limited to, Percentage Rent, Operating Costs, Taxes, all other charges and all
advances, damages, expenditures, late fees, administrative charges, additional
rent, security deposit reimbursements and Interest] as for failure to pay
Minimum Rent, as if, for purposes of such remedies, all of the foregoing were
deemed part of Minimum Rent. Specific references to this point elsewhere in this
Lease shall not limit the generality of this paragraph.
Section 12.26. Cancellation of Lease. Notwithstanding the foregoing or any
provision of this Lease to the contrary, if, at any time or from time to time
during the Term or any extended Term, Tenant shall notify Landlord that Tenant
intends to cease theatre operations in any substantial portion of the Leased
Premises, then Landlord may elect, by giving Tenant notice at any time within
the ninety (90) days following the date on which such notice was given, to
terminate the Lease as of a date not more than six (6) months later than the
date Landlord's notice is given, as fully as if that date had been specified for
the expiration of the Term. If Tenant shall not have first notified Landlord as
provided above, and Tenant shall at any time fail for ninety (90) consecutive
days to operate a theatre in substantially all of the Leased Premises, then
Landlord shall have the right specified above to terminate the Lease by giving
Tenant notice at any time within ninety (90) days following the date Landlord
first actually becomes aware of such cessation. For purposes of the preceding
sentence, any period of interruption due to repairs or alterations of the Leased
Premises, changing of fixtures, fire or other casualty or eminent domain shall
not be counted in determining whether Tenant has failed to operate a theatre in
the Leased Premises for the required amounts of time. If Landlord shall fail to
timely exercise such right (whether following notice from Tenant or following
Landlord first becoming aware of the cessation of such business without notice),
the right granted to Landlord herein shall terminate (as to such event, but not
as to a future cessation of business to which the right shall again apply) and
the Lease shall continue in full force and effect.
Section 12.27. Confidentiality. Subject to the provisions hereof regarding
the registration of this Lease, including Section 12.17 hereof, Landlord and
Tenant hereby agree that all monetary terms of this Lease and all information
discovered or learned by Landlord and/or Tenant pursuant to any audit permitted
under this Lease and all information and documentation in the possession of
either Landlord and/or Tenant related thereto, shall remain confidential and
shall not be revealed or disclosed to any person or party whatsoever, except (a)
by Tenant, to Tenant's attorneys, accountants or lenders, (b) by Landlord, to
Landlord's attorneys, accountants, mortgagees or ground lessors, potential
mortgagees or ground lessors, potential purchasers and/or to such other parties
having an interest in, or considering the acquisition of, an interest (direct or
indirect, as owner or mortgagee) in the Shopping Center or in Landlord, and (c)
by either party, if required in court proceedings.
Section 12.28. Representations and Warranties. (a)
Landlord represents and warrants to Tenant as set forth in this
Section 12.28(a).
(i) Landlord is a Puerto Rico special partnership duly formed,
validly existing and in good standing under the laws of the Commonwealth of
Puerto Rico, with full power and authority to
- 48 -
<PAGE>
acquire, develop and lease the Shopping Center, including but not limited to the
execution, delivery and performance of this Lease.
(ii) All necessary partnership action has been taken (including any
necessary partner approvals) for the execution and delivery of this Lease by the
undersigned representative of Landlord and the performance by Landlord of its
obligations hereunder.
(iii) This Lease has been duly executed and delivered by Landlord,
and constitutes the valid and binding obligation of Landlord, enforceable
against Landlord in accordance with its terms.
(iv) The execution, delivery and performance of this Lease and the
transactions contemplated herein do not and will not conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, (i) the partnership agreement of Landlord, or (ii) any bond,
debenture, note or other evidence of indebtedness to which Landlord is a party
or by which Landlord or the Shopping Center are bound, or (iii) any contract,
indenture, mortgage, loan agreement, lease, joint venture agreement or other
agreement or instrument to which Landlord is a party or by which Landlord or the
Shopping Center are bound, or result in any violation by Landlord of any law,
order, rule or regulation of any court or governmental agency or body. Landlord
has no actual knowledge of any violation of any law, ordinance, governmental
rule or regulation or court decree to which it may be subject, or failure to
obtain and maintain in full force and effect any license, permit, certificate,
franchise or other governmental authorization necessary to the ownership,
construction and operation of the Shopping Center.
(v) Landlord owns good, marketable and indefeasible title to the
Shopping Center, free and clear of any mortgages and restrictions, covenants,
conditions, easements or other matters (except those which do not interfere with
Tenant's rights under this Lease or Tenant's use of the Leased Premises)
whatsoever, other than the Permitted Exceptions, leases of portions of the
Shopping Center other than the Leased Premises and those matters set forth in
Exhibit F attached hereto and made a part hereof.
(vi) Based solely on Landlord's Phase I Environmental Site
Assessment Report of the property on which the Shopping Center is constructed,
prepared by Law Environmental-Caribe, dated October 31, 1991, the Shopping
Center is in compliance with all environmental laws applicable to it, and there
is not now pending, nor, to the Landlord's actual knowledge, threatened, any
action, suit, investigation or proceeding against Landlord seeking to enforce
any right or remedy under any environmental laws. No notice has been serviced on
Landlord form any entity, governmental body, or individual claiming any
violation of any environmental law, regulation, ordinance or code, or demanding
payment or contribution for environmental damage or injury to natural resources.
(vii) The sole partners of Landlord are as follows:
Mark B. Davis, Luis Alberto Rubi, Mark H. Greene and Wal-Mart
Puerto Rico, Inc.
(b) Tenant represents and warrants to Landlord as set for forth in this
Section 12.28(b).
(i) Tenant is a Puerto Rico corporation duly formed, validly
existing and in good standing under the laws of the Commonwealth of Puerto Rico,
with full power and authority to execute, deliver and perform its obligations
under this Lease.
- 49 -
<PAGE>
(ii) All necessary corporate action has been taken (including any
necessary board of director and shareholder approvals) for the execution and
delivery of this Lease by the undersigned representative of Tenant and the
performance by Tenant of its obligations hereunder.
(iii) This Lease has been duly executed and delivered by Tenant, and
constitutes the valid and binding obligation of Tenant, enforceable against it
in accordance with the terms hereof.
(iv) The execution, delivery and performance of this Lease and the
transactions contemplated herein do not and will not conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, (i) the articles of incorporation or by-laws of Tenant, or (ii)
any bond, debenture, note or other evidence or indebtedness to which Tenant is a
party or by which Tenant is bound, or (iii) any contract, indenture, mortgage,
loan agreement, lease, joint venture agreement or other agreement or instrument
to which Tenant is a party or by which Tenant is bound, or result in any
violation by Tenant of any law, order, rule or regulation of any court or
governmental agency or body. Tenant is not in violation of any law, ordinance,
governmental rule or regulation or court decree to which it may be subject, nor
has it failed to obtain and maintain in full force and effect any license,
permit, certificate, franchise or other governmental authorization necessary to
the performance of its obligations hereunder.
Section 12.29. Closing of Anchors. Landlord covenants and agrees that in
the event both Wal*Mart and Pueblo (or Xtra, as applicable) (or replacements
thereof) close for any reason (other than for remodeling, taking of inventory or
as a result of a casualty or condemnation) for a period longer than six (6)
months, Tenant, as long as Tenant is fully operating as of the date of the
second such closing, shall only be obligated to pay, in addition to all other
charges required under this Lease, but in lieu of but not exceeding Minimum
Rent, eight percent (8%) of its Gross Sales, commencing with the beginning of
the seventh (7th) month following the second of such closings and ending on the
date one of such closed anchors (or its replacement for substantially all of
such closed anchor's space) reopens or thirty-six (36) months from the date of
the second of such closings, whichever shall first occur. Full Minimum Rent
shall automatically be restored upon the re-opening of one of such closed
anchors (or its replacement). If Tenant is not so operating as of the date of
the second such closing, full Minimum Rent will continue to apply.
If one of such closed anchors does not so reopen (or is not so replaced)
within thirty-six (36) months from the date of the second of such closings,
Tenant shall have the option, exercisable only by written notice to Landlord if
properly given within thirty (30) days following the expiration of such 36-month
period, to (i) cancel the Lease, or (ii) keep the Lease in full force and
effect, in which latter case Tenant shall thereupon recommence the payment of
full Minimum Rent and shall have no further remedies with respect to said closed
anchor spaces. If no notice is given by Tenant within such 30-day period, Tenant
shall be deemed irrevocably to have elected option (ii) above.
Tenant will have no other right or remedy for the failure of any anchor
tenant (or other tenant) to operate.
During any period that Tenant is obligated to pay a percentage of Gross
Sales in lieu of Minimum Rent pursuant to the provisions hereof, Tenant shall
submit to Landlord, on or before the 15th day of each calendar month (or partial
calendar month), a written statement showing Tenant's Gross Sales for the
preceding calendar month, and together with such statement, shall
- 50 -
<PAGE>
pay to Landlord the full amount due to Landlord for such preceding calendar
month. Any rent paid during the abatement of Minimum Rent shall be classified as
"minimum rent" for purposes of computing the sum of percentage rent due in any
given Lease Year.
To permit time to complete the construction and initial lease-up and
tenant improvements in the Shopping Center, the rights granted to Tenant under
this Section shall not apply through and including December 31, 1996 (i.e., the
earliest date to which this Section shall apply shall be January 1, 1997).
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease on
the respective dates set forth below, this Lease being effective as of the later
of such dates.
In executing this Lease, Tenant hereby acknowledges that neither Landlord,
nor any Landlord representative, has made any representations to or agreements
with Tenant which are not contained in this Lease. Without limiting the
generality of the foregoing, Tenant acknowledges that neither Landlord, nor its
representatives, have made any promise or representation as to Tenant's
anticipated Gross Sales, income or expense, nor as to other tenancies, nor as to
any other matter not specifically incorporated into this Lease in writing.
Furthermore, Tenant acknowledges that it has read this Lease and fully
understands, agrees with and intends fully to be bound by all of the provisions
of this Lease, including, but not limited to, those provisions containing
waivers and/or indemnities by Tenant (including, but not limited to, Sections
3.1, 4.1, 5.3, 8.1, 8.2, 11.3, 12.4, 12.6, 12.8, 12.9, 12.13, 12.14, 12.16 and
Exhibit B, pars. 1 and 7).
TENANT:
THEATER ACQUISITIONS OF PUERTO
RICO, INC., a Puerto Rico
corporation
By: /s/ Carl Drew
----------------------------
CARL DREW
Senior Vice President
Date: July 14, 1994
LANDLORD:
PALMA REAL ASSOCIATES, S.E., a
Puerto Rico special
partnership
By: /s/ Mark B. Davis
----------------------------
MARK B. DAVIS
Managing Partner
Date: July 20, 1994
- 51 -
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 14th day of July,
1994, by CARL DREW, as Senior Vice President of THEATER ACQUISITIONS OF PUERTO
RICO, INC., a Puerto Rico corporation, on behalf of said corporation. He is
personally known to me and did not take an oath.
My Commission Expires:
/s/ Lynn M. Johnson
NOTARY PUBLIC
STATE AND COUNTY AFORESAID
May 25, 1996
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this _____ day of
July, 1994, by MARK B. DAVIS, as Managing Partner of PALMA REAL ASSOCIATES,
S.E., a Puerto Rico special partnership, on behalf of said special partnership.
He is personally known to me and did not take an oath.
My Commission Expires:
------------------------------
NOTARY PUBLIC
STATE AND COUNTY AFORESAID
- - -----------------------
- 52 -
<PAGE>
LIST OF EXHIBITS
EXHIBIT A - Shopping Center Site Plan and Legal
Description
-show "primary theatre parking area"
-show "Store Space"
-show "entrances and exits to Shopping
Center"
-show "outparcels"
-show locations of tenant's signs
EXHIBIT B - Description of Landlord's Work and
Tenant's Work
EXHIBIT C - Signage
EXHIBIT D - Landlord's Consent and Estoppel
EXHIBIT E - Fee Mortgagee's Consent and Estoppel
EXHIBIT F - List of Permitted Title Exceptions
<PAGE>
EXHIBITS INTENTIONALLY OMITTED.
EXHIBIT B
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE is made as of the 10th day of May, 1995, by
and between Palma Real Associates, S.E., a Puerto Rico special partnership
("Landlord"), and Reading Cinemas of Puerto Rico, Inc. (successor by merger to
"Theater Acquisitions of Puerto Rico, Inc."), a Puerto Rico corporation
("Tenant").
W I T N E S S E T H:
A. Landlord and Tenant entered into that certain Lease (the "Lease"),
dated July 13, 1994, in connection with that certain Shopping Center known as
Plaza Palma Real. The defined terms set forth in the Lease are incorporated
herein by this reference.
B. Landlord and Tenant wish to amend the Lease.
NOW, THEREFORE, for and in consideration of the premises, the parties
hereto, intending to be legally bound hereby, hereby amend the Lease as follows:
1. Section 1.1(a) of the Lease is hereby amended to increase the square footage
of the Leased Premises from 18,850 square feet to 22,404 square feet.
2. The Minimum Rent set forth in Section 1.1(c) of the Lease is
hereby amended as follows:
Each of Lease Years: Annual Amount:
-------------------- --------------
Years 1 through 10: $196,035.00, or
$8.75 per annum per
square foot in the
Leased Premises.
Minimum Rent for each Lease Year of the Option Terms (if properly
and validly exercised) shall be as follows:
Annual Amount
-------------
Option Term 1
(each of Lease Years 11 - 15) $225,440.25
Option Term 1
(each of Lease Years 16 - 20) $259,256.29
Option Term 2
(each of Lease Years 21 - 25) $298,144.73
Option Term 3
(each of Lease Years 26 - 30) $342,866.44
Option Term 4
(each of Lease Years 31 - 35) $394,296.41
Option Term 5
(each of Lease Years 36 - 40) $453,440.87
3. Section 1.1(e)(i) is hereby amended to delete reference to the maximum number
of seats to be contained in the Leased Premises.
4. Tenant hereby agrees that if Landlord enters into a lease for the operation
of a "Time Out" game room in the Shopping Center, Tenant will only operate coin-
or token-operated amusement devices, including, but not limited to, video games,
pinball machines, redemption games, kiddie rides, or the like, pursuant to a
license agreement between Tenant and the operator of such game room, provided
that the terms and conditions of such license agreement, insofar as the split of
revenues is concerned, are competitive with other similar license arrangements
available to Tenant at the Leased Premises and under such license agreement, the
licensor is obligated to supply and maintain "state of the art" games for the
amusement devices.
5. The $200,000.00 Tenant Allowance specified in Exhibit B of the
Lease is hereby increased to $237,708.22.
- 1 -
<PAGE>
6. Except as modified hereby, the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First
Amendment as of the day and year first above written, each acknowledging hereby
receipt of an executed copy hereof.
TENANT:
Reading Cinemas of Puerto Rico,
Inc.
By: /s/ Robert F. Smerling
----------------------------
Date: May 4, 1995
-------------------------
LANDLORD:
Palma Real Associates, S.E.
By: /s/ Mark B. Davis
----------------------------
Date: 5/10/95
-------------------------
- 2 -
<PAGE>
State of Florida ) P.R.
)SS:
City of Boca Raton )
AFFIDAVIT NUMBER: __________
Before me a Notary Public, personally appeared Mark B. Davis, to me
personally known as a partner of Palma Real Associates, S.E., a Puerto Rico
special partnership, who acknowledged execution of the foregoing Amendment for
and on behalf of said special partnership.
WITNESS my hand and Notarial seal, this 10th day of May, 1995.
/s/ Lynn M. Johnson
-------------------
NOTARY PUBLIC
(SEAL)
___________ of ______________)
)SS:
City of _____________________)
AFFIDAVIT NUMBER: 6429
Before me a Notary Public, personally appeared Robert Smerling, of legal
age, to me personally known married and resident of New York, NY as President of
Reading Cinemas of Puerto Rico, Inc., a Puerto Rico corporation, who
acknowledged execution of the foregoing Amendment for and on behalf of said
corporation by authorization of its Board of Directors.
WITNESS my hand and Notarial seal, this fourth (4th) day of May, 1995.
/s/ Leopoldo J. Cabassa Sauri
NOTARY PUBLIC
(SEAL)
- 3 -
$15,000,000
CREDIT AGREEMENT
Dated as of December 20, 1995
Among
READING CINEMAS OF PUERTO RICO, INC.
as Borrower
-----------
and
THE BANKS NAMED HEREIN
as Banks
--------
and
CITIBANK, N.A.
as Administrative Agent
-----------------------
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 - DEFINITIONS AND ACCOUNTING TERMS.................................1
SECTION 1.1. Certain Defined Terms.....................1
SECTION 1.2. Computation of Time Periods..............26
SECTION 1.3. Accounting Terms.........................26
ARTICLE 2 - AMOUNTS AND TERMS OF THE ADVANCES...............................27
SECTION 2.1. The Advances.............................27
SECTION 2.2. Making the Advances......................28
SECTION 2.3. Fees.....................................30
SECTION 2.4. Optional and Mandatory Reductions of the
Commitments............................31
SECTION 2.5. Repayment................................32
SECTION 2.6. Interest.................................32
SECTION 2.7. Interest Rate Determination..............35
SECTION 2.8. Voluntary and Mandatory Conversion of
Advances...............................37
SECTION 2.9. Optional and Mandatory Prepayments.......39
SECTION 2.10. Increased Costs..........................41
SECTION 2.11. Illegality...............................42
SECTION 2.12. Payments and Computations................43
SECTION 2.13. Sharing of Payments, Etc.................45
SECTION 2.14. Limitation on Additional Amounts, Etc....45
ARTICLE 3 - CONDITIONS OF LENDING...........................................46
SECTION 3.1. Conditions Precedent to Initial
Borrowing..............................46
SECTION 3.2. Conditions Precedent to Each Borrowing...54
SECTION 3.3. Additional Conditions to Each 936 Rate
Advance................................55
SECTION 3.4. Additional Conditions to Advances to be
used to Finance Capital Expenditures...56
SECTION 3.5. Determinations Under Article 3...........56
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES..................................57
SECTION 4.1. Representations and Warranties of the
Borrower...............................57
ARTICLE 5 - COVENANTS OF THE BORROWER.......................................67
SECTION 5.1. Affirmative Covenants....................67
SECTION 5.2. Negative Covenants.......................83
-ii-
ARTICLE 6 - SPECIAL PROVISIONS AS TO COLLATERAL.............................92
SECTION 6.1. Perfection of Security Interest..........92
SECTION 6.2. Provisions Relating to Receivables.......93
SECTION 6.3. Warranties with Respect to Receivables
and Inventory..........................94
SECTION 6.4. Provisions Relating to Machinery
and Equipment..........................95
SECTION 6.5. Collateral Reporting.....................96
SECTION 6.6. Collections..............................99
ARTICLE 7 - EVENTS OF DEFAULT..............................................100
SECTION 7.1. Events of Default.......................100
ARTICLE 8 - THE ADMINISTRATIVE AGENT.......................................105
SECTION 8.1. Authorization and Action................105
SECTION 8.2. Administrative Agent's Reliance, etc....106
SECTION 8.3. Citibank and Affiliates.................107
SECTION 8.4. Lender Credit Decision..................107
SECTION 8.5. Indemnification.........................107
SECTION 8.6. Successor Agent.........................108
ARTICLE 9 - MISCELLANEOUS..................................................109
SECTION 9.1. Amendments, etc.........................109
SECTION 9.2. Notices, etc............................109
SECTION 9.3. No Waiver; Remedies.....................111
SECTION 9.4. Costs, Expenses and Taxes; Indemnifica-
tion..................................112
SECTION 9.5. Right of Set-off........................115
SECTION 9.6. Binding Effect..........................115
SECTION 9.7. Assignments and Participations..........116
SECTION 9.8. Severability of Provisions..............120
SECTION 9.9. Survival of Covenants...................120
SECTION 9.10. Application of Payments.................120
SECTION 9.11. Execution in Counterparts...............121
SECTION 9.12. Confidentiality.........................121
SECTION 9.13. Waiver of Jury Trial....................122
SECTION 9.14. Governing Law...........................122
CREDIT AGREEMENT
----------------
Dated as of December 20, 1995
READING CINEMAS OF PUERTO RICO, INC., a Puerto Rico corporation (the
"Borrower"), the banks (the "Banks") listed on the signature pages hereof, and
CITIBANK, N.A. ("Citibank"), as administrative agent (the "Administrative
Agent") for the Lenders hereunder, agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. Unless otherwise defined in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquisition" has the meaning assigned to that term in Section
2.1.
"Advance" means an advance by a Lender to the Borrower
pursuant to Article 2, and refers to a 936 Rate Advance, a Eurodollar Rate
Advance or a Base Rate Advance (each of which shall be a "Type" of Advance).
"Affiliate" means with respect to any Person, any other Person
(i) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such Person, (ii) which
directly or indirectly, of record or beneficially, owns or holds ten percent
(10%) or more of the shares of any class of the capital stock of such Person
having voting powers, or (iii) ten percent (10%) or more of the shares of such
stock of which are owned or held, directly or indirectly, of record or
beneficially, for such Person. For the
-2-
purposes of this Agreement, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of a Person, whether through ownership of common stock, by contract or
otherwise; all of the Borrower's officers, shareholders owning ten percent (10%)
or more of the common stock of the Borrower, directors, subsidiary corporations,
joint venturers and partners shall be deemed to be the Borrower's Affiliates.
"Agreement" or "this Agreement" shall include all amendments,
modifications and supplements hereto and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.
"Apartment Lease" means the lease agreement described in item
10 of Schedule 4.1(aa).
"Applicable Margin" means a percentage per annum as set forth
below:
Base Eurodollar 936
Rate Rate Rate
Advances Advances Advances
-------- -------- --------
.50% 2.25% 2.25%
provided, however, that, if a Default has not occurred and is continuing, the
Applicable Margin shall be reduced by .25% per annum if EBITDA of the Borrower
for any Fiscal Year (commencing with the Fiscal Year ending December 31, 1996)
equals or exceeds Projected EBITDA for such Fiscal Year by 25% or more; provided
further, that the cumulative reduction in the Applicable Margin first set forth
above shall never be greater than .50% per annum below the Applicable Margin
first set forth above. In the event that a reduction in the Applicable Margin as
aforesaid is in effect and (i) EBITDA of the Borrower for any Fiscal Year is
less
-3-
than Projected EBITDA for such Fiscal Year by 10% or less, then the Applicable
Margin then in effect shall be increased by .25% per annum, or (ii) EBITDA of
the Borrower for any Fiscal Year is less than Projected EBITDA for such Fiscal
Year by more than 10%, then the Applicable Margin then in effect shall be
increased by up to .50% per annum (but never in excess of the Applicable Margin
first set forth above).
"Banks" has the meaning assigned to that term in the
Preamble.
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall at
all times be equal to the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate.
"Base Rate Advance" means an Advance which bears interest as
provided in Section 2.6(a)(i).
"Blocked Account" means a blocked account or special
depository account maintained by or on behalf of the Borrower or any Subsidiary
thereof at any bank into which the Borrower and such Subsidiary, respectively,
deposit or cause the deposit of Cash Collateral.
"Blocked Account Agreement" means an agreement, in
substantially the form of Exhibit G hereto, entered into by the Borrower or any
Subsidiary thereof (as the case may be), the Administrative Agent and a Blocked
Account Bank.
"Blocked Account Bank" means any of the banks holding
one or more Blocked Accounts.
-4-
"Borrower" has the meaning assigned to that term in the
Preamble.
"Borrowing" means a borrowing consisting of Advances of the
same Type made on the same day by the Lenders.
"Business Day" means a day of the year on which banks are not
required or authorized to close in San Juan, Puerto Rico and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Capital Expenditures" means, for any period and for any
Person, expenditures by such Person and its Subsidiaries during such period for
equipment, fixed assets, real property or improvements, or for replacements or
substitutions therefor or additions thereto or renewals or capitalized repairs
therefor, that have a useful life of more than one year.
"Capitalized Lease" has the meaning assigned to that
term in the definition of Debt.
"Cash Collateral" has the meaning assigned to that term
in Section 5.1(w).
"Cash Concentration Account" has the meaning assigned
to that term in Section 6.6.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) U.S. dollar denomi-
-5-
nated time deposits, certificates of deposit and bankers acceptances of (x) any
Lender or (y) any bank whose short-term commercial paper rating from Standard &
Poor's Rating Group ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Services, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank or Lender, an "Approved Bank"), in each case with
maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by an Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long-term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within six months after
the date of acquisition, (iv) marketable direct obligations issued by the
Commonwealth of Puerto Rico or any state of the United States of America or any
political subdivision of the Commonwealth of Puerto Rico or any such state or
any public instrumentality thereof maturing within six months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's, (v) investments in money
market funds substantially all the assets of which are comprised of securities
of the types described in clauses (i) through (iv) above, and (vi) Eurodollar
time deposits having a maturity of less than one year purchased directly from
any Approved Bank.
"Cayey Lease" means the lease agreement described in
item 3 of Schedule 4.1(aa).
"Cinema Centro Lease" means the lease agreement described in
item 5 of Schedule 4.1(aa).
-6-
"Closing Date" means the date of this Agreement.
"Code" means the United States Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Collateral" means and includes the Receivables, the
Inventory, the Machinery and Equipment, the Leases and the corresponding
Leaseholds created thereby, the Material Contracts, the Pledged Shares and all
of the other real and personal property in which a security interest is granted,
or purported to be granted, in accordance with the terms of this Agreement.
"Commitment" has the meaning assigned to that term in
Section 2.1.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type pursuant to
Section 2.8.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of such
Person for the deferred purchase price of property or services (other than trade
payables and accrued expenses incurred in the ordinary course of such Person's
business), (c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all Obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even through the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) the principal
component of all Obligations of such Person as lessee under leases that have
been or should be, in accordance with Generally Accepted Accounting Principles,
recorded as capital
-7-
leases ("Capitalized Leases") which principal component has been or should, at
the time of determination, be capitalized on a balance sheet in accordance with
Generally Accepted Accounting Principles; provided, however, that the principal
component in the amount of $526,000 of the Cinema Centro Lease shall not be
considered as Debt for purposes of this Agreement, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities, (g) all Obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock, (h) all Debt of
others referred to in clauses (a) through (g) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such Debt
or to advance or supply funds for the payment or purchase of such Debt, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Debt or to assure the holder of such Debt against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including any agreement to
pay for property or services irrespective of whether such property is received
or such services are rendered) to assure a creditor against loss or (iv)
otherwise to assure a creditor against loss, and (i) all Debt referred to in
clauses (a) through (g) above secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Debt in an amount equal to the lesser of the amount of the Debt
secured by the Lien or the fair market value of such property; provided, however
that the Obligations of the
-8-
Borrower with respect to the Plaza Escrow shall not be considered as Debt for
purposes of this Agreement.
"Debt Service Coverage Ratio" has the meaning assigned
to that term in Section 5.1(s).
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Development Capital Budget" means, as of any date, the
projected unexpended amount of Capital Expenditures relating to the development
of the Borrower's new Humacao, Mayaguez Mall and Mayaguez Shopping Center
theater locations.
"EBITDA" of any Person means, for any period, an amount equal
to (i) Net Income, plus (ii) tax expenses, interest expenses, depreciation
expenses, amortization expenses, and any non-cash items (including, without
limitation, amortization of minimum lease payments to the extent included as
"rental expenses" in the financial statements of the Borrower) used to determine
Net Income in accordance with Generally Accepted Accounting Principles, plus
(iii) the Management Fee and the Guaranty Fee expensed during such period, plus
(iv) the amount of extraordinary losses, less (v) the amount of extraordinary
gains, less (vi) interest income, in each case determined in accordance with
Generally Accepted Accounting Principles for such period.
"Eligible Activity" has the meaning assigned to that
term in the Regulation.
"Eligible Assignee" means any Lender, any Affiliate of a
Lender and any other Person that otherwise meets with the approval of the
Majority Lenders which (i) is an Eligible Institution, as defined in the
Regulation (but such condition shall
-9-
apply only if 936 Funds are then generally available in Puerto Rico for funding
loans) and (ii) has a combined capital and surplus of at least $50,000,000.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any Governmental Authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any Environmental Law and (b) any claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from hazardous or toxic materials or arising from
alleged injury to health, safety or the environment.
"Environmental Law" means any federal, state or local
(including, without limitation, the Commonwealth of Puerto Rico) law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
relating to the environment, health, safety or hazardous or toxic materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Hazardous Materials Transportation Act, the Clean Water Act, the Toxic
Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the
Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and
the Occupational Safety and Health Act, each as amended from time to time.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
Environmental Law.
-10-
"Equity" means, as of any date, an amount equal to (i)
stockholder's equity plus (ii) accrued and unpaid (x) Management Fees, (y)
Guaranty Fees and (z) interest on Subordinated Debt, all as of such date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Funds" means deposits in United States dollars in
the principal office in London, England of those Lenders having an office
therein.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate
per annum equal to LIBOR two Business Days before the first day of such Interest
Period for deposits in an amount substantially equal to the amount of such
Eurodollar Rate Advance comprising part of such Borrowing and for a period equal
to such Interest Period.
"Eurodollar Rate Advance" means an Advance which bears
interest as provided in Section 2.6(a)(iii).
"Eurodollar Rate Reserve Percentage" of any Lender for the
Interest Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of
-11-
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such Lender with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event of Default" has the meaning assigned to that
term in Section 7.1.
"Excess Cash Flow" means, for any period, an amount equal to
(i) EBITDA, less (ii) taxes paid during such period, less (iii) the amount of
Capital Expenditures made during such period, if any, less (iv) the amount of
principal repayments of Funded Debt of the Borrower during such period, less (v)
interest expense (whether or not paid) on all Funded Debt of the Borrower for
such period, less (vi) the amount, if any, of dividends paid by the Borrower
during such period in accordance with the terms of this Agreement.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fiscal Year" means the twelve-month period commencing on
January 1 and ending on December 31 of every year.
-12-
"Fixed Charge Coverage Ratio" has the meaning assigned to that
term in Section 5.1(t).
"Funded Capital Expenditures" means Capital Expenditures of
the Borrower financed with subordinated loans or capital contributions made to
the Borrower by Reading and/or an Affiliate of Reading (other than a Subsidiary
of the Borrower).
"Funded Debt" means Debt for borrowed money (including
Capitalized Leases, Purchase Money Debt and Subordinated Debt (but not including
the Management Fee or the Guaranty Fee)).
"Funding Agreement" has the meaning assigned to that
term in Section 3.1(v).
"Generally Accepted Accounting Principles" means generally
accepted accounting principles consistently applied and maintained throughout
the period indicated and consistent with the prior financial practice of the
Borrower, except for changes mandated by the Financial Accounting Standards
Board or any similar accounting authority of comparable standing.
"Governmental Approval" means any applicable consent, permit,
license or other approval issued by any agency, department, bureau, division or
other instrumentality of any Governmental Authority.
"Governmental Authority" means any municipal, Commonwealth,
state or federal governmental authority (domestic or foreign) having
jurisdiction over the Borrower or the transactions contemplated in this
Agreement.
"Guaranty Fee" means the guaranty fee payable by the Borrower
to Reading pursuant to the Reimbursement Agreement.
-13-
"Hatillo Lease" means the lease agreement described in
item 2 of Schedule 4.1(aa).
"Humacao Lease" means the lease agreement described in
item 6 of Schedule 4.1(aa).
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts and other similar
agreements, all in form and substance reasonably acceptable to the Majority
Lenders.
"Holdings" means Puerto Rico Holdings, Inc., a Delaware
Corporation.
"Interest Coverage Ratio" has the meaning assigned to
that term in Section 5.1(u).
"Interest Period" means, for each 936 Rate Advance comprising
part of the same Borrowing or each Eurodollar Rate Advance comprising part of
the same Borrowing, the period commencing on the date of such Advance or the
date of the Conversion of any Advance into such an Advance and ending on the
last day of the period selected by the Borrower pursuant to the provisions below
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be (i) in the case of a 936 Rate Advance, 30, 60 or
90 days, or, subject to the availability to all Lenders of 936 Funds for such
periods, longer periods not exceeding five years, and (ii) in the case of a
Eurodollar Rate Advance, one, two, three or six months, or, subject to the
availability to all Lenders of Eurodollar Funds for such periods, longer periods
not exceeding five years; in each case as the Borrower may, upon notice received
by the Administrative Agent not later than 11:00
-14-
A.M. (Puerto Rico time) two Business Days prior to the first day of such
Interest Period, select; provided, however, that:
(a) Interest Periods commencing on the same date for Advances
comprising part of the same Borrowing shall be of the same duration;
(b) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, in the case of any Interest Period for a Eurodollar Rate Advance, that
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day; and
(c) the Borrower may not select any Interest Period that ends
after any Mandatory Commitment Reduction Date unless, after giving effect to
such selection, the aggregate principal amount of Base Rate Advances and of
Advances having Interest Periods that end on or prior to such Mandatory
Commitment Reduction Date shall be at least equal to the aggregate amount of
Advances due and payable prior to such date.
"Inventory" means and includes all of the Borrower's now owned
and hereafter acquired inventory, including, without limitation, all goods,
merchandise and other personal property furnished under any contract of service
or intended for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used, consumed or sold in the Borrower's business or are or might be
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise and other personal property, all
returned or repos-
-15-
sessed goods now, or at any time or times hereafter, in the possession or under
the control of the Borrower, the Administrative Agent or any Lender, and all
documents of title or documents representing the same.
"Investment" means Reading Investment Company, Inc., a
Delaware corporation.
"Lease(s)" means (i) the lease agreements described in
Schedule 4.1(aa) hereto and all amendments, extensions, renewals and
modifications thereto and (ii) in addition, from and after the Closing Date, all
new or additional lease agreements relating to real property occupied or to be
occupied by the Borrower or any of its Subsidiaries, and all amendments,
extensions, renewals and modifications thereto.
"Leasehold(s)" means the leasehold estates created by the
Leases.
"Leasehold Mortgage(s)" has the meaning assigned to that term
in Section 3.1(d)(ii)(III).
"Lenders" means the Banks listed on the signature pages hereof
and each Eligible Assignee that shall become a party hereto pursuant to Section
9.7.
"Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Lending Office" opposite its name on the
signature page hereof or in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from
time to time specify to the Borrower and the Administrative Agent.
"LIBOR" means, as of any particular date, the offered
quotation for the rate of interest (expressed out to the sixth
-16-
decimal place and truncated thereafter) on deposits of U.S. dollars in the
London interbank market, as published by Telerate Systems, Inc. (currently on
page 3750 of the financial information reporting services furnished
electronically by Telerate Systems, Inc.) at approximately 11:00 a.m. (London
time) on such date. If, as of any date, LIBOR cannot be ascertained on the
foregoing basis, such rate shall be the Administrative Agent's offered quotation
to leading banks in the London interbank market for deposits of Dollars at 11:00
a.m. (London time) on the date in question.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
"Loan Documents" means this Agreement, the Notes, the
Subordination Agreements, the Funding Agreement, the guaranty and security
instruments referred to in Section 3.1(d)(ii) and, on and after the date of
delivery thereof, each other guaranty, mortgage, pledge, assignment or other
security instrument required to be delivered under the terms of this Agreement
or any other Loan Document, in each case as amended or otherwise modified from
time to time.
"Loan Parties" means the Borrower and each other Person (other
than the Administrative Agent or any Lender) which is or becomes or, under the
terms of any Loan Document, is required to become a party to a Loan Document.
"Machinery and Equipment" means and includes all of the
Borrower's equipment and fixtures, including, without limitation, all furniture,
machinery, vehicles and trade fixtures, together
-17-
with any and all accessories, accessions, parts and appurtenances thereto,
substitutions therefor and replacements thereof.
"Majority Lenders" means at any time Lenders holding at least
51% of the then aggregate unpaid principal amount of the Notes held by Lenders,
or, if no such principal amount is then outstanding, Lenders having at least 51%
of the Commitments.
"Management Agreement" means that certain Management
Agreement, dated as of December 1, 1995, by and between the Borrower and
Reading.
"Management Fee" means the management fee payable to Reading
pursuant to the Management Agreement.
"Mandatory Commitment Reduction Amount" has the meaning
assigned to that term in Section 2.4(b)(i).
"Mandatory Commitment Reduction Date" has the meaning assigned
to that term in Section 2.4(b)(i).
"Material Adverse Change" means any material adverse change
in the business, condition (financial or otherwise), operations, performance or
properties of (i) the Borrower or (ii) the Borrower and its Subsidiaries taken
as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations, performance or
properties of (i) the Borrower or (ii) the Borrower and its Subsidiaries taken
as a whole, (b) the rights and remedies of the Administrative Agent or any
Lender under any Loan Document or (c) the ability of any Loan Party to perform
its Obligations under any Loan Document to which it is or is to be a party.
-18-
"Material Contract" means, with respect to any Person, each
contract (other than the Leases) to which such Person is a party involving
aggregate consideration payable to or by such Person of $100,000 or more in any
year or otherwise material to the business, condition (financial or otherwise),
operations, performance or properties of such Person.
"Mayaguez Mall Lease" means the lease agreement
described in item 4 of Schedule 4.1(aa).
"Mayaguez Shopping Center Lease" means the lease agreement
described in item 7 of Schedule 4.1(aa).
"Net Income" means, for any period, net income (or net
deficit, as the case may be) properly attributable to the conduct of business
for such period, as determined in accordance with Generally Accepted Accounting
Principles consistently applied.
"936 Compliance Certificate" has the meaning assigned to that
term in Section 3.3(iii).
"936 Funds" means deposits in United States dollars in the
principal office of the Lenders in the Commonwealth of Puerto Rico by
corporations qualified to receive a tax credit under Section 936 of the Code.
"936 Rate" means, for any Interest Period for each 936 Rate
Advance comprising part of the same Borrowing, an interest rate per annum equal
to the weighted average (rounded upward to the nearest whole multiple of 1/16 of
1% per annum, if such average is not such a multiple) of the rate per annum
offered by the Lenders at their principal offices in the Commonwealth of Puerto
Rico two (2) Business Days before the first day of such Interest Period in an
amount substantially equal to the amount of such 936 Rate Advance comprising
part of the same Borrowing and for a term
-19-
equal to such Interest Period. The 936 Rate for the Interest Period for each 936
Rate Advance comprising part of the same Borrowing shall be determined by the
Administrative Agent on the basis of applicable rates furnished to and received
by the Administrative Agent from the Lenders two (2) Business Days before the
first day of such Interest Period, subject, however, to the provisions of
Section 2.7.
"936 Rate Advance" means an Advance which bears interest as
provided in Section 2.6(a)(ii).
"936 Ruling" has the meaning assigned to that term in Section
3.3(ii).
"Note" means a promissory note of the Borrower payable to the
order of a Lender, in substantially the form of Exhibit B hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made to the Borrower by such Lender.
"Notice of Borrowing" has the meaning assigned to that term in
Section 2.2(a).
"Notice of Conversion" has the meaning assigned to that term
in Section 2.8.
"Obligations" means, with respect to any Person, any
obligation of such Person of any kind (including, without limitation,
overdrafts), including, without limitation, any liability of such Person on any
claim, whether or not the right of any creditor to payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 7.1(f). With-
-20-
out limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents include (a) the obligation to pay principal,
interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Loan Party under any Loan Document
and (b) the obligation to reimburse any amount in respect of any of the
foregoing that the Administrative Agent or any Lender, in its sole discretion,
may elect to pay or advance on behalf of such Loan Party.
"Office Lease" means the lease agreement described in item 8
of Schedule 4.1(aa).
"Operating Account" has the meaning assigned to that term in
Section 6.6.
"PBGC" has the meaning assigned to that term in Section
5.1(c)(vi).
"Permitted Encumbrances" means, as to any particular Leasehold
at any time, (i) such easements, encroachments, covenants, rights of way,
irregularities or encumbrances on title which are not unusual with respect to
property similar in character to such Leasehold and which do not, individually
or in the aggregate, in the reasonable opinion of the Administrative Agent, have
a Material Adverse Effect or materially impair such Leasehold for the purpose
for which it is held by the Borrower or any Subsidiary thereof, as the case may
be, (ii) municipal and zoning ordinances which are not violated in any material
respect by the existing improvements and the present use made by the Borrower or
any Subsidiary thereof, as the case may be, of the premises covered by such
Leasehold, (iii) general real estate taxes not yet delinquent, and (iv) such
other items as the Administrative Agent may consent to in writing.
-21-
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section 5.1(i); (b) Liens
imposed by law, such as materialmen's, mechanics', carriers', workmen's and
repairmen's Liens and other similar Liens arising in the ordinary course of
business securing obligations that are not overdue for a period of more than
thirty (30) days; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; (d) easements, rights of way and other encumbrances on title to
real property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for its
present purposes; (e) Liens securing surety, indemnity and performance bonds
entered into in the ordinary course of business as to which full reserves are
maintained; (f) Liens securing the obligations of a lessee under a Capitalized
Lease permitted by the terms of this Agreement to the extent that such Liens
attach only to the property so leased; (g) purchase money Liens ("Purchase Money
Liens") upon or in property acquired by a Borrower or any of its Subsidiaries in
the ordinary course of business to secure all or any part of the purchase price
of such property or to secure all or any part of Debt (such purchase price or
part thereof and such Debt or part thereof referred to herein collectively as
"Purchase Money Debt") incurred solely for the purpose of financing the
acquisition of any such property to be subject to such Liens, provided that such
Liens attach only to the property so acquired and provided further that the
amount of such Purchase Money Debt does not exceed the amount permitted by the
terms of this Agreement; (h) Liens in existence on the Closing Date which are
listed, and the property subject thereto described, in Schedule 4.1(m), without
giving effect to any extensions or renewals thereof; (i) Liens arising from
judgments, decrees or attachments in
-22-
circumstances not constituting an Event of Default; (j) leases or subleases
granted to third Persons not interfering in any material respect with the
business of the Borrower or any of its Subsidiaries (but only if the rights of
the Borrower or such Subsidiaries thereunder shall have been assigned to the
Administrative Agent, for the ratable benefit of the Lenders, as collateral
security for the Obligations of the Borrower); (k) any interest or title of a
lessor under any Lease permitted by the terms of this Agreement; (l) deposits of
not more than $50,000 in the aggregate made in the ordinary course of business
to secure liabilities to insurance carriers; and (vi) other Liens securing Debt,
provided that the Debt secured by such Lien and the value of the property
subject thereto shall not exceed $50,000 in the aggregate at any time
outstanding.
"Person" means and includes any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal, or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof), and including the Borrower.
"Plan" has the meaning assigned to that term in Section
4.1(i).
"Plaza Escrow" means the amounts described in Section 2.7(b)
of that certain Purchase Agreement, dated as of July 8, 1994, by and among
Theater Acquisitions, L.P., Theater Acquisitions of Puerto Rico, Inc. and
Reading.
"Plaza Lease" means the lease agreement described in item 1 of
Schedule 4.1(aa).
-23-
"Pledged Shares" has the meaning assigned to that term in
Section 3.1(d)(ii)(VI).
"Projected EBITDA" means, for any period, the EBITDA of the
Borrower estimated by the Borrower for such period pursuant to the projections
delivered to the Administrative Agent in writing prior to the Closing Date.
"Purchase Money Debt" has the meaning assigned to that term in
the definition of Permitted Liens.
"Purchase Money Lien" has the meaning assigned to that term in
the definition of Permitted Liens.
"Reading" means Reading Company, a Pennsylvania corporation.
"Receivables" means and includes all of the Borrower's present
and future rights to payments for goods, merchandise or Inventory sold or leased
or for services rendered (including, without limitation, ticket receipts,
concession receipts and advertising receipts), whether or not represented by
instruments or chattel paper, and whether or not earned by performance; all of
the Borrower's now owned or hereafter acquired accounts, contract rights,
chattel paper, instruments, documents and proceeds, including, without
limitation, all insurance proceeds; proceeds of any letter of credit on which
the Borrower is beneficiary; and all forms of obligations whatsoever owing to
the Borrower, together with all instruments and documents of title representing
any of the foregoing, all rights in any goods, merchandise or Inventory which
any of the foregoing may represent, all rights in any returned or repossessed
goods, merchandise or Inventory, and all rights, security and guaranties with
respect to each of the foregoing, including, without limitation, any right of
stoppage in transit.
-24-
"Regular Capital Expenditures" means Capital Expenditures
incurred by the Borrower with respect to theaters of the Borrower existing and
in operation as of the Closing Date (other than the theaters of the Borrower
located in Humacao, Puerto Rico).
"Regulation" means Regulation 5105 and any successor
regulation with respect to the subject matter thereof issued by the Commissioner
of Financial Institutions of the Commonwealth of Puerto Rico, or any other
Governmental Authority having jurisdiction in the matter, and other applicable
laws and regulations in effect from time to time with respect to the subject
matter thereof.
"Reimbursement Agreement" means that certain Reimbursement
Agreement, dated as of August, 1994, between the Borrower's predecessor in
interest, Theater Acquisitions of Puerto Rico, Inc., and Reading.
"Reportable Event" has the meaning assigned to that term in
Title IV of ERISA.
"Required Financial Data" means the financial ratios and other
financial information described in Sections 5.1(r), (s), (t), (u) and (v).
"Senorial" means Senorial Theaters, Inc., a Puerto Rico
corporation.
"Senorial Lease" means the lease agreement described in item
11 of Schedule 4.1(aa).
"Senorial Management Agreement" means that certain Agency and
Custodial Agreement, dated as of January 1, 1995, by and between the Borrower
and Senorial.
-25-
"Solvent" means, as to any Person, that (a) the fair value and
present fair saleable value of such Person's assets is in excess of the total
amount of such Person's stated liabilities; (b) the present fair saleable value
of such Person's assets is in excess of the amount that will be required to pay
such Person's probable liability on such Person's Debt as such Debt becomes
absolute and mature; (c) such Person does not have unreasonably small capital to
carry on the business in which such Person is engaged and all businesses in
which such Person is about to engage; and (d) such Person has not incurred Debt
beyond such Person's ability to pay such Debt as it matures.
"Subordinated Debt" means all Debt payable from time to time
by the Borrower to Reading and Investment or any of their respective Affiliates
and all amounts payable by the Borrower to Reading from time to time under the
Management Agreement and the Reimbursement Agreement, to the extent subordinated
pursuant to a Subordination Agreement.
"Subordination Agreement" has the meaning assigned to that
term in Section 3.1(o).
"Subsidiary" means any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation is at the time
directly or indirectly owned or controlled by the Borrower or by one or more
Subsidiaries.
"Termination Date" means the earlier of December 31, 2003 and
the date of termination in whole of the Commitments pursuant to Section 2.4 or
Section 7.1.
-26-
"Termination Event" means (i) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of the Borrower or any Affiliate
of the Borrower from a Plan during a Plan year in which it was a "substantial
employer" as defined in Section 4001(a) (2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Type" has the meaning assigned to that term in the
definition of "Advances".
"Unfunded Capital Expenditures" means Regular Capital
Expenditures financed with the proceeds of Advances made hereunder and/or
internally generated funds of the Borrower.
"Warehouse Lease" means the lease agreement described in item
9 of Schedule 4.1(aa).
SECTION 1.2. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.3. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistent with those
-27-
applied in the preparation of the financial statements referred to in
Section 4.1(e).
ARTICLE 2
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.1. The Advances. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make revolving credit advances (each an
"Advance") to the Borrower from time to time on any Business Day during the
period from the Closing Date up to and including the Termination Date in an
aggregate principal amount for all such Advances not to exceed at any time
outstanding the amount set opposite such Lender's name as its Commitment on the
signature pages hereof or, if such Lender has entered into an Assignment and
Acceptance, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.7, as such amount may be reduced
pursuant to Section 2.4 (such Lender's "Commitment"). The proceeds of the
Advances shall be used for the following purposes: (i) to refinance a portion of
the acquisition by the Borrower of 100% of the stock of Theater Acquisitions of
Puerto Rico, Inc. (the "Acquisition"), (ii) to finance Capital Expenditures
under the Development Capital Budget, (iii) to finance Regular Capital
Expenditures, (iv) to pay closing fees and expenses incurred in connection with
this Agreement and the other Loan Documents, and (v) to finance the working
capital requirements of the Borrower. Each borrowing under this Section 2.1 (a
"Borrowing") shall be in an aggregate principal amount of not less than $100,000
or an integral multiple of $25,000 in excess thereof and shall consist of
Advances of the same Type made on the same day by the Lenders ratably according
to their respective Commitments. Within the limits of each Lender's Commitment,
the Borrower may borrow, repay and reborrow Revolving Credit Advances under this
Section 2.1.
-28-
SECTION 2.2. Making the Advances.
(a) (i) Each Borrowing shall be made on notice, given not
later than 1:00 P.M. (Puerto Rico time) on the second Business Day prior to the
date of the proposed Borrowing, by the Borrower to the Administrative Agent,
which shall give to each Lender prompt notice thereof by telecopier, telex or
cable or by personal delivery. Each such notice from the Borrower of a Borrowing
(a "Notice of Borrowing") shall be by telephone, telecopier, telex or cable (in
each such case confirmed immediately in writing) or by personal delivery, in
substantially the form of Exhibit A hereto, specifying therein the (i) requested
date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii)
aggregate amount of such Borrowing, (iv) in the case of a Borrowing comprised of
936 Rate Advances or Eurodollar Rate Advances, initial Interest Period for such
Advance, and (v) use to be given to the Advances referred to in the Notice of
Borrowing. Each Lender shall, before 11:00 A.M. (Puerto Rico time) on the date
of such Borrowing, make available to the Administrative Agent at its address
referred to in Section 9.2, in same day funds, such Lender's ratable portion of
such Borrowing. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article 3, the
Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's aforesaid address.
(ii) The Administrative Agent shall be entitled
to rely on any telephonic notice given by the Borrower pursuant to sub-section
(a)(i) above (regardless of whether or not such telephonic notice is
subsequently confirmed in writing, but without prejudice to the Borrower's
obligation to deliver such written confirmation) which the Administrative Agent
in good faith believes to be from a responsible officer of the Borrower, and the
Borrower hereby waives any right that it may have to dispute
-29-
the accuracy of the Administrative Agent's transcription or record of such
telephonic notice.
(b) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing which the related Notice of
Borrowing specifies is to be comprised of 936 Rate Advances or Eurodollar Rate
Advances, the Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article 3, including, without limitation, any
loss (but excluding loss of anticipated profits with respect to the relevant
Advance), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Advance to be
made by such Lender as part of such Borrowing when such Advance, as a result of
such failure, is not made on such date.
(c) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.2 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent, at (i) in the case
of the Borrower, the interest rate applicable at the time under
-30-
Section 2.6 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.3. Fees.
(a) The Borrower agrees to pay to the Administrative Agent for
the ratable account of the Banks structuring fee equal to $150,000 on the
Closing Date. The Administrative Agent acknowledges having received the amount
of $25,000 from the Borrower prior to the Closing Date, which amount will be
credited to the structuring fee which is payable on the Closing Date.
(b) The Borrower agrees to pay to the Lenders a commitment fee
on the average daily unused Commitment of each Lender from the date hereof in
the case of each Bank and from the effective date specified in the Assignment
and Acceptance pursuant to which it became a Lender in the case of each other
Lender, until the Termination Date at the rate of one-half of one percent (1/2
of 1%) per annum, payable quarterly in arrears on the last Business Day of each
March, June, September and December, commencing on December 29, 1995, and on the
Termination Date.
(c) The Borrower agrees to pay to the Administrative Agent for
its own account an agency fee equal to $50,000 per
-31-
annum. The agency fee shall be payable quarterly in advance in equal
installments of $12,500 on the last Business Day of each March, June, September
and December, commencing on December 29, 1995.
(d) All fees provided for herein shall be fully earned when
due and shall not be subject to proration or rebate upon the early termination
of this Agreement or any Commitment hereunder for any reason.
SECTION 2.4. Optional and Mandatory Reductions of the Commitments. (a)
The Borrower shall have the right, upon at least five Business Days' notice to
the Administrative Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders, provided that each
partial reduction (i) shall be in the aggregate amount of $100,000 or an
integral multiple of $25,000 in excess thereof, and (ii) shall be made ratably
among the Lenders in accordance with their Commitments. Each such optional
reduction of the Commitments pursuant to this subsection (a) shall be applied to
the Mandatory Commitment Reduction Amounts in the inverse order of the Mandatory
Commitment Reduction Dates.
(b)(i) The Commitments shall be permanently reduced on the
dates set forth in Schedule 2.4(b) (each a "Mandatory Commitment Reduction
Date") by the amounts set forth in Schedule 2.4(b) (each a "Mandatory Commitment
Reduction Amount").
(ii) Subject to the provisions of sub-section (b)(iii) below,
the Commitments shall be permanently reduced as of the tenth Business Day
following the date on which the Borrower is required to deliver an annual
financial statement and certificate pursuant to Section 5.1(c)(ii) for each
Fiscal Year ending on or after December 31, 1996, by an amount equal to fifty
percent (50%) of Excess Cash Flow, if any, for such Fiscal Year.
-32-
Each such mandatory reduction of the Commitments pursuant to this subsection
(b)(ii) shall be applied to the Mandatory Commitment Reduction Amounts in the
inverse order of the Mandatory Commitment Reduction Dates.
(iii) Each mandatory reduction of the Commitments pursuant to
this Section 2.4(b) shall ratably reduce in part (or, if such mandatory
reduction exceeds the Commitments then in effect, terminate in whole) the
respective Commitments of the Lenders.
SECTION 2.5. Repayment. The Borrower shall repay to the Administrative
Agent for the ratable account of the Lenders the aggregate outstanding principal
amount of the Advances made to the Borrower by not later than the Termination
Date.
SECTION 2.6. Interest. (a) The Borrower shall pay interest on the
unpaid principal amount of each Advance made by each Lender from the date of
such Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of (I) the
Base Rate in effect from time to time plus (II) the Applicable Margin in effect
from time to time, payable monthly in arrears on the last day of each month
during such periods and on the date such Base Rate Advance shall be Converted or
paid in full.
(ii) 936 Rate Advances. During such periods as such Advance is
a 936 Rate Advance, a rate per annum equal at all times during each Interest
Period for such Advance to the sum of (I) the 936 Rate for such Interest Period
for such Advance plus (II) the Applicable Margin in effect on the first day of
such Interest Period, payable in arrears on the last day of each month
-33-
during such periods and on the date such 936 Rate Advance shall be Converted or
paid in full.
(iii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (I) the Eurodollar Rate for
such Interest Period for such Advance plus (II) the Applicable Margin in effect
on the first day of such Interest Period, payable in arrears on the last day of
each month during such periods and on the date such Eurodollar Rate Advance is
Converted or paid in full.
(b) Upon the occurrence and during the continuance of an Event
of Default pursuant to Section 7.1(a), the Borrower shall pay interest on (i)
the unpaid principal amount of each Advance owing to each Lender, payable in
arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at
a rate per annum equal at all times to two percent (2%) per annum above the rate
per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii)
or (a)(iii) above and (ii) the amount of any interest, fee or other amount
payable hereunder which is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to two percent (2%) per annum above the rate per annum required to be paid
on Base Rate Advances pursuant to clause (a)(i) above.
(c) The Borrower shall pay to the Administrative Agent for the
account of each Lender, so long as such Lender shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
each Eurodollar Rate Advance of such Lender, from the effective date
-34-
of such regulation until the principal amount of such Advance is paid in full,
at an interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the Eurodollar Rate for the Interest Period for such Advance
from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage
equal to one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage
of such Lender for such Interest Period, payable on each date on which interest
is payable on such Advance. Such additional interest shall be determined by such
Lender and notified to the Borrower through the Administrative Agent. Each
Lender will determine the additional interest payable under this sub-section (c)
acting reasonably and in good faith and using averaging and attribution methods
among its customers which are fair and reasonable.
(d) The Applicable Margin at any time shall be that determined
by reference to the financial statements and certificates most recently
delivered pursuant to Section 5.1(c)(ii). If the Borrower fails to deliver such
financial statements and certificates within the time period provided for in
Section 5.1(c)(ii), the Applicable Margin for each Advance shall be the highest
Applicable Margin until the delivery to the Administrative Agent of the
financial statements and certificates required by Section 5.1(c)(ii), at which
time the Applicable Margin for each Advance shall be determined in accordance
with this Section 2.6(d). Except as set forth in the preceding sentence, any
change in the Applicable Margin shall become effective on the second Business
Day following the receipt of such statements and certificates by the
Administrative Agent.
(e) The obligation of the Lenders hereunder to make 936 Rate
Advances and Eurodollar Rate Advances hereunder shall in all cases be subject to
the availability to all of the Lenders of 936 Funds and Eurodollar Funds,
respectively; provided, however, that to the extent that a Lender has sufficient
936 Funds or
-35-
Eurodollar Funds to fund an Advance requested by the Borrower hereunder, such
936 Funds or Eurodollar Funds will be made available for such Advance subject to
the terms and conditions of this Agreement.
SECTION 2.7. Interest Rate Determination. (a) Each Lender agrees to
furnish to the Administrative Agent timely information for the purpose of
determining each 936 Rate, as applicable. If any one or more of the Lenders
shall not furnish such timely information to the Administrative Agent for the
purpose of determining any such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Lenders.
(b) The Administrative Agent shall give prompt notice to the
Borrower and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.6(a)(i), (a)(ii) or (a)(iii), and
the applicable rate, if any, furnished by each Lender for the purpose of
determining the applicable interest rate under Section 2.6(a)(ii).
(c) If no Lender furnishes timely information to the
Administrative Agent for determining the 936 Rate for any 936 Rate Advances,
(i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot be determined for
such 936 Rate Advances,
(ii) each such Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base Rate
Advance (or if such Advance is then a Base Rate Advance, will continue as
a Base Rate Advance) or, at the option of the Borrower, convert into a
Eurodollar Rate Advance if the
-36-
Borrower timely delivers to the Administrative Agent the notice thereforas
required in the definition of "Interest Period", and
(iii) the obligation of the Lenders to make, or to
Convert Advances into, 936 Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, which notice the
Administrative Agent agrees to give promptly after obtaining actual knowledge
that such circumstances no longer exist (provided that neither the Borrower nor
any Loan Party shall have any claim against the Administrative Agent or any
Lender for the Administrative Agent's failure to give any such notice).
(d) If, with respect to any 936 Rate Advances or Eurodollar
Rate Advances, the Majority Lenders notify the Administrative Agent that the 936
Rate or the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Majority Lenders of making, funding or
maintaining their respective 936 Rate Advances or Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance or 936 Rate
Advance, as the case may be, will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance (or if such
Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and
(ii) the obligation of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances or 936 Rate Advances, as the
case may be, shall be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist, which notice the Administrative Agent agrees to give promptly
after
-37-
obtaining actual knowledge that such circumstances no longer exist (provided
that neither the Borrower nor any Loan Party shall have any claim against the
Administrative Agent or any Lender for the Administrative Agent's failure to
give any such notice).
(e) The Borrower acknowledges that, in the event that any
Advance is funded with Eurodollar Funds or 936 Funds, one or more of the
Lenders, at their discretion and in order to fund such Advance, may purchase
deposits consisting of Eurodollar Funds or 936 Funds, as the case may be, in an
aggregate amount equal to the Advance being funded and with a maturity
coterminous with the maturity of such Advance or of the corresponding Interest
Period. The provisions of this Agreement relating to the funding and pricing of
Advances are included only for the purpose of conducting operations hereunder,
and therefore it is agreed that, regardless of the manner selected by any of the
Lenders to fund such Advances, all operations hereunder, including without
limitation the determination as to the interest rate applicable to any such
Advance and the amounts payable pursuant to Section 9.4(c) hereof, shall be
conducted as if each Lender had actually funded such Advances funded with
Eurodollar Funds or 936 Funds through the purchase of deposits consisting of
Eurodollar Funds or 936 Funds, as the case may be, in an aggregate amount equal
to the Advance being funded and with a maturity coterminous with the maturity of
such Advance or of the corresponding Interest Period.
SECTION 2.8. Voluntary and Mandatory Conversion of Advances. (a) The
Borrower may on any Business Day, upon notice (a "Notice of Conversion") given
to the Administrative Agent not later than 1:00 P.M. (Puerto Rico time) on the
second Business Day prior to the date of the proposed Conversion and subject to
the provisions of Sections 2.7 and 2.11, Convert all (or any portion thereof of
not less than $100,000 or an integral multiple
-38-
of $25,000 in excess thereof) Advances of one Type comprising the same Borrowing
into Advances of another Type; provided, however, that any Conversion of any 936
Rate Advances or Eurodollar Rate Advances into Advances of another Type shall be
made on, and only on, the last day of an Interest Period for such 936 Rate
Advances or Eurodollar Rate Advances. Each such Notice of Conversion shall,
within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is
into 936 Rate Advances or Eurodollar Rate Advances, the duration of the Interest
Period for each such Advance. If such Conversion is into 936 Rate Advances, the
obligation of the Lenders to Convert such Advances shall be subject to
satisfaction by the Borrower of the conditions precedent specified in Section
3.3.
(b)(i) If at any time the Majority Lenders shall determine
that all or any portion of a 936 Rate Advance shall cease to constitute an
Eligible Activity, the Administrative Agent will forthwith so notify the
Borrower and the Lenders and such portion or all, as the case may be, of such
936 Rate Advance shall automatically be Converted into a Base Rate Advance or,
at the option of the Borrower, into a Eurodollar Rate Advance if the Borrower
timely delivers to the Administrative Agent the notice therefor as required in
the definition of "Interest Period".
(ii) If the Borrower shall fail to select the duration
of any Interest Period for any 936 Rate Advance or any Eurodollar Rate
Advance in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.1, the Administrative Agent will forthwith so
notify the Borrower and the Lenders and such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance.
-39-
SECTION 2.9. Optional and Mandatory Prepayments.
(a) The Borrower may, upon at least five (5) Business Days
prior written notice to the Administrative Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrower shall, prepay the outstanding principal amount of the Advances
comprising a Borrowing designated by the Borrower in whole or ratably in part
with accrued interest to the date of such prepayment on the amount prepaid;
provided, that each such partial prepayment shall be in an aggregate principal
amount of not less than $100,000 and in integral multiples of $25,000; and
provided further, that any prepayment of any 936 Rate Advances or Eurodollar
Rate Advances shall be made on, and only on, the last day of an Interest Period
for such Advances unless the Borrower, upon making such prepayment, reimburses
the Lenders in respect thereof pursuant to Section 9.4(c). Unless otherwise
designated by the Borrower, each such prepayment shall be applied ratably to the
then outstanding Advances in inverse order of maturity.
(b) (i) On each date on which a Commitment is required to be
reduced pursuant to Section 2.4(b)(ii), (I) if on such date the aggregate amount
of reductions is less than the aggregate principal amount of Base Rate Advances
and of Advances having Interest Periods that end on the mandatory reduction
date, the Borrower shall prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings equal to the aggregate amount of
reductions required to be made on such date, or (II) if on such date the
aggregate amount of reductions exceeds the aggregate principal amount of Base
Rate Advances and of Advances having Interest Periods that end on the mandatory
reduction date, the Borrower shall (x) prepay an aggregate principal amount of
the Advances comprising part of the same Borrowing equal to the aggregate
principal amount of Base Rate Advances and of Advances having Interest Periods
that end on the mandatory
-40-
reduction date and (y) invest the amount of the excess in investments of the
type described in clauses (i) and (ii) of the definition of "Cash Equivalents"
with maturities not extending beyond the end of the next Interest Period(s) for
Advances in the aggregate principal amount equal to the amount of such excess,
and shall pledge the instruments evidencing such investments to the
Administrative Agent, for itself and the ratable benefit of the Lenders,
pursuant to pledge agreements in form and substance acceptable to the
Administrative Agent as security for the payment and performance of the
Obligations of the Borrower under this Agreement and the other Loan Documents;
provided that on the maturity date of such investments the Borrower shall
deliver the proceeds thereof to the Administrative Agent in prepayment of an
aggregate principal amount of Advances comprising part of the same Borrowings
equal to the aggregate amount of reductions required to be made, but not
previously made, on the mandatory reduction date referred to above.
(ii) The Borrower shall prepay, on each Business Day,
an aggregate principal amount of the Advances comprising part of the same
Borrowings equal to the amount, if any, by which the aggregate principal amount
of Advances then outstanding exceeds the aggregate amount of the Commitments of
all Lenders on such Business Day. Each such prepayment shall be applied ratably
to the then outstanding Advances in the inverse order of their maturities.
(iii) All prepayments under this subsection (b) shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid and any amounts required to be paid to the Lenders
pursuant to Section 9.4(c); provided, however, that no amounts payable pursuant
to Section 9.4(c) shall be required to be paid with respect to mandatory
prepayments made in accordance with the terms of subsection (b)(i) above.
-41-
SECTION 2.10. Increased Costs. (a) If, due to either (i) the
introduction of or any change (including any change by way of imposition or
increase of reserve requirements) in, or in the interpretation of, any law or
regulation occurring after the Closing Date or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) issued after the Closing Date, there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining 936 Rate Advances or Eurodollar Rate Advances, then the
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such increased
cost, submitted to the Borrower and the Administrative Agent by such Lender,
shall be conclusive and binding for all purposes, absent manifest error. Each
Lender will determine the amount of the increased cost payable under this
sub-section (a) acting reasonably and in good faith and using averaging and
attribution methods among its customers which are fair and reasonable.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type (considering such Lender's
policy regarding capital adequacy), then, upon demand by such Lender (with a
copy of such demand to the Administrative Agent), the Borrower shall pay to the
Administrative Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts
-42-
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably and in good faith
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder (using averaging and attribution methods
among its customers which are fair and reasonable). A certificate as to such
amounts submitted to the Borrower and the Administrative Agent by such Lender
shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if a Lender shall notify the Administrative Agent that the
introduction of or any change in, or in the interpretation of, any law or
regulation makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Lender to perform its
obligations hereunder to make 936 Rate Advances or Eurodollar Rate Advances or
to fund or maintain 936 Rate Advances or Eurodollar Rate Advances, as the case
may be, hereunder, (i) the obligation of such Lender (or of all of the Lenders
if more than one Lender shall have so notified the Administrative Agent) to
make, or to Convert Advances into, 936 Rate Advances or Eurodollar Rate
Advances, as the case may be, shall be suspended until the Administrative Agent
shall notify the Borrower and, if applicable, the Lenders that the circumstances
causing such suspension no longer exist (which notice the Administrative Agent
agrees to give promptly after obtaining actual knowledge that such circumstances
no longer exist, provided that neither the Borrower nor any Loan Party shall
have any claim against the Administrative Agent or any Lender for the
Administrative Agent's failure to give any such notice) and (ii) all outstanding
936 Rate Advances or Eurodollar Advances, as the case may be, made by such
Lender (or by all of the Lenders if more than one Lender shall have so notified
the Administrative Agent) shall automatically be Converted into Base Rate
Advances or, at the option of the Borrower, into an Advance
-43-
of a Type not covered by the provisions of this Section 2.11 if the Borrower
timely delivers to the Administrative Agent the notice therefor as required in
the definition of "Interest Period".
SECTION 2.12. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 2:00 P.M. (Puerto Rico
time) on the day when due in United States dollars to the Administrative Agent.
The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Borrower is in respect of principal,
interest, fees or any other Obligations then payable hereunder and under the
Notes to more than one Lender, to such Lenders for the account of their
respective Lending Offices ratably in accordance with the amounts of such
respective Obligations then payable to such Lenders and (ii) if such payment by
the Borrower is in respect of any Obligation then payable hereunder to one
Lender, to such Lender for the account of its Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its acceptance of
any Assignment and Acceptance and recording of the information contained therein
in the Register maintained by the Administrative Agent pursuant to Section 9.7,
from and after the effective date of such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under any
Note held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
-44-
(c) All computations of interest and of fees shall be made by
the Administrative Agent on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fees are payable. Each
determination by the Administrative Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fee, as the case
may be; provided, however, if such extension would cause payment of interest on
or principal of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(e) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
-45-
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.10) in excess of its ratable share of payments on account
of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances made by them
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.14. Limitation on Additional Amounts, Etc. Notwithstanding
anything to the contrary contained in this Agreement, unless the Borrower is
given notice that the Borrower is obligated to pay an amount under Sections
2.6(c), 2.10 or 9.4(c) within 180 days after the later of (i) the date the
relevant Lender incurs the respective increased costs, taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital or (ii) the date the relevant Lender has actual knowledge of its
incurrence of the respective
-46-
increased costs, taxes, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital, then such Lender shall
only be entitled to be compensated for such amount by the Borrower pursuant to
said Sections 2.6(c), 2.10 or 9.4(c), as the case may be, to the extent the
costs, taxes, loss, expense or liability, reduction in amounts received or
receivable or reduction in return on capital are incurred or suffered on or
after the date which occurs 180 days prior to such Lender giving notice to the
Borrower that it is obligated to pay the respective amounts pursuant to said
Sections 2.6(c), 2.10 or 9.4(c), as the case may be.
ARTICLE 3
CONDITIONS OF LENDING
SECTION 3.1. Conditions Precedent to Initial Borrowing. The obligation
of each Lender to make an Advance on the occasion of the initial Borrowing is
subject to the following conditions precedent:
(a) There shall have occurred no Material Adverse Change since
December 31, 1994.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party pending or, to the knowledge
of any Lender or any Loan Party, threatened before any court, governmental
agency or arbitrator that (i) is reasonably likely to have a Material Adverse
Effect or (ii) purports to affect the legality, validity or enforceability of
this Agreement, any Note, any other Loan Document or the consummation of the
transactions contemplated hereby or thereby.
(c) The Borrower shall have paid all accrued fees and
expenses of the Administrative Agent and the Lenders (including
-47-
the accrued fees and expenses of counsel to the Administrative Agent) to the
extent invoiced.
(d) The Administrative Agent shall have received on or before
the day of the initial Borrowing the following, each dated such day (unless
otherwise specified), in form and substance satisfactory to the Lenders (unless
otherwise specified) and (except for the Notes) in sufficient copies for each
Lender:
(i) The Notes of the Borrower to the order of the Lenders.
(ii) The following guaranties and security instruments, duly
executed by the parties identified below or in such instruments:
(I) personal property mortgages, or the pledge of mortgage
notes in the aggregate principal amount of $2,417,368.00, secured by
first priority personal property mortgages, executed by the Borrower
and Senorial, creating a continuing first priority Lien covering the
Machinery and Equipment described in the schedules delivered by the
Borrower and initialled by the Administrative Agent on or prior to the
date of this Agreement;
(II) assignment of accounts receivable agreements executed
by the Borrower and Senorial, creating a continuing first priority Lien
covering all of the Receivables of the Borrower and Senorial,
respectively, the corresponding statements of assignment of accounts
receivable and all other instruments which the Administrative Agent may
require in order to perfect such security interest;
(III) a pledge of mortgage notes in the aggregate
principal amount of $8,400,000 secured by first
-48-
mortgages creating a continuing first priority Lien over the Leaseholds
(other than the Leaseholds created by the Plaza Lease, the Senorial
Lease, the Mayaguez Shopping Center Lease, the Warehouse Lease, the
Office Lease and the Apartment Lease), pursuant to deeds of leasehold
mortgage executed by the Borrower (each a "Leasehold Mortgage");
(IV) a collateral assignment of all rights of the Borrower
in the Mayaguez Shopping Center Lease, the Warehouse Lease and the
Office Lease and of Senorial in the Senorial Lease pursuant to
assignment agreements executed by the Borrower and Senorial, as the
case may be; provided, however, that the Borrower shall not be required
to obtain the consent of the landlord under the Plaza Lease with
respect to the assignment of such Lease;
(V) a factor's lien agreement executed by the Borrower and
Senorial creating a continuing first priority Lien over all of the
Inventory of the Borrower and Senorial and all of the Receivables
generated by the sale of such Inventory;
(VI) a pledge of not less than 100% of the shares of
voting stock (the "Pledged Shares") of the Borrower and Senorial
pursuant to pledge agreements executed by each of the legal and
beneficial owners thereof, together with certificates representing the
Pledged Shares referred to therein accompanied by undated stock powers
executed in blank;
(VII) a collateral assignment of all rights of the
Borrower and Senorial in the Material Contracts pursuant to assignment
agreements executed by the Borrower and Senorial, as the case may be,
together with all notices, consents, acknowledgements and instruments
which the Admin-
-49-
istrative Agent may require in order to perfect each such assignment;
(VIII) an assignment of all rights of the Borrower and
Senorial in all Blocked Accounts and in the cash, deposits, instruments
and amounts deposited therein from time to time pursuant to assignment
agreements, in form and substance acceptable to the Administrative
Agent, executed by the Borrower and Senorial, as the case may be,
together with all notices, consents, acknowledgments and instruments
which the Administrative Agent may require in order to perfect each
such assignment;
(IX) a collateral assignment of all rights of the Borrower
in intangible property (including the trademarks, service marks and
trade names identified in Schedule 4.1(cc)) pursuant to an assignment
agreement executed by the Borrower, together with all notices and
instruments which the Administrative Agent may require in order to
perfect such assignments;
(X) a guaranty agreement pursuant to which Senorial
guarantees, jointly and severally (solidariamente) with the Borrower,
the Obligations of the Borrower under this Agreement and the other Loan
Documents; and
(XI) evidence that all other actions necessary or, in the
reasonable opinion of the Administrative Agent, desirable to perfect
and protect the Liens, guarantees and assignments created by the
foregoing security instruments have been taken.
(e) Certified copies of the resolutions of the Board of
Directors and, if required, the consents of the stockholders of each Loan Party,
approving each Loan Document to which it is a
-50-
party, and of all documents evidencing other necessary corporate action and
Governmental Approvals, if any, with respect to each such Loan Document.
(f) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of the officers of
such Loan Party authorized to sign each Loan Document to which it is a party and
the other documents to be delivered by it hereunder.
(g) A favorable opinion of (i) Fiddler, Gonzalez & Rodriguez,
counsel for the Borrower, Senorial, Reading, Investment and Holdings, (ii)
Duane, Morris & Hecksher, counsel for Reading, and (iii) S. Craig Tompkins,
Esq., in-house counsel for Reading, Holdings and Investment, each substantially
in the form previously agreed to by the Administrative Agent and the Borrower,
and as to such other matters as any Lender through the Administrative Agent may
reasonably request.
(h) Certificates of good standing dated not more than thirty
(30) days prior to the execution of this Agreement showing that the Borrower and
Senorial are in good standing in the Commonwealth of Puerto Rico, and a copy
certified by the Secretary of the Borrower and Senorial, dated not more than
thirty (30) days prior to the date of execution of this Agreement, of the
Articles of Incorporation and By-Laws of the Borrower and Senorial.
(i) Evidence of the insurance required by Section 5.1(b)
hereof and by the other Loan Documents.
(j) Title insurance policies with respect to each of the
Leasehold Mortgages, in customary ALTA form, in amounts equal to the amounts of
each such Leasehold Mortgage, with premiums paid thereon, issued by a title
insurance company acceptable to
-51-
the Administrative Agent, and insuring that each such Leasehold Mortgage
constitutes a valid first priority Lien on the Leasehold described therein, free
and clear of any and all defects whatsoever, other than Permitted Encumbrances
and usual and ordinary title exceptions acceptable to the Administrative Agent
at its discretion, and that the Leasehold is subject to no Liens or encumbrances
other than Permitted Liens and customary easements which do not affect the full
use and enjoyment of the Leasehold; provided, however, that such policy shall
not contain exceptions as to real property taxes owed with respect to the leased
realty.
(k) (i) Blocked Account Agreements with all Blocked Account
Banks referred to in Schedule 4.1(ee) and (ii) blocked account or other similar
agreements with the Administrative Agent for the establishment of the Cash
Concentration Account to be maintained for the collection of Receivables and the
deposit of all cash and cash proceeds of the Borrower and its Subsidiaries.
(l) A certificate of the Borrower, signed on behalf of the
Borrower by its President or a Vice President and its Secretary or any Assistant
Secretary, dated the date of the initial Borrowing (the statements made in which
certificate shall be true on and as of the date of the initial Borrowing),
certifying as to (A) the truth of the representations and warranties contained
in the Loan Documents as though made on and as of the date of the initial
Borrowing and (B) the absence of any event occurring and continuing, or
resulting from the initial Borrowing, that constitutes a Default.
(m) Such financial, business and other information regarding
the Borrower as the Lenders shall have requested, including, without limitation,
information as to possible contingent liabilities, tax matters, environmental
matters, obligations under ERISA and welfare plans, collective bargaining
agreements and other arrangements with employees, annual financial state-
-52-
ments for the Borrower dated as of December 31, 1994, interim financial
statements for the Borrower dated the end of the most recent fiscal quarter for
which financial statements are available, business plans as to the Borrower and
forecasts prepared by management of the Borrower in form and substance
satisfactory to the Lenders, of balance sheets, income statements and cash flow
statements on an annual basis for the first year following the date of the
initial Borrowing and on an annual basis for each year thereafter through and
including the year 2000.
(n) A letter, in form and substance satisfactory to the
Administrative Agent, from the Borrower to Ernst & Young LLP, its independent
certified public accountants, advising such accountants that the Administrative
Agent and the Lenders have been authorized to exercise all rights of the
Borrower to require such accountants to disclose any and all financial
statements and any other information of any kind that they may have with respect
to the Borrower and directing such accountants to comply with any reasonable
request of the Administrative Agent or any Lender for such information.
(o) Subordination agreements pursuant to which Reading and
Investment subordinate all Subordinated Debt to the Obligations due to the
Administrative Agent and the Lenders under the Loan Documents (each a
"Subordination Agreement").
(p) Copies of the instruments and agreements evidencing the
Subordinated Debt.
(q) Certificates in form and substance acceptable to the
Administrative Agent and executed by the Secretary or an Assistant Secretary of
the Borrower and Senorial, certifying as to certain matters relating to the
issued and outstanding capital stock of the Borrower and Senorial.
-53-
(r) A certificate of the President or Chief Financial Officer
of the Borrower evidencing compliance, after giving effect to the initial
Borrowing, with Sections 5.1(r), (s), (t) (u) and (v), in substantially the form
of Exhibit C hereto.
(s) A copy of each Lease and of each Material Contract,
certified by the Secretary or Assistant Secretary of the Borrower to be a true
and complete copy of such Lease or Material Contract as in effect on the date of
such certification.
(t) A copy of each permanent and unconditional use permit
authorizing the fully functioning operation and occupancy of each facility
operated by the Borrower and of such other permits necessary for the use and
operation of each such facility issued by the respective Governmental
Authorities having jurisdiction over each such facility.
(u) An appraisal of each Leasehold, prepared by a Person, and
using a methodology, satisfactory to the Administrative Agent.
(v) A funding agreement (the "Funding Agreement") of Reading
in favor of the Borrower, the Lenders and the Administrative Agent pursuant to
which Reading agrees to provide from time to time all funds, up to an amount
equal, as of any date, to the excess, if any, of (i) the Development Capital
Budget as of such date over (ii) the amount of the unused Commitments as of such
date.
(w) Landlord's Estoppels from the lessor of each Lease listed
in Schedule 4.1(aa) (other than the Mayaguez Shopping Center Lease and the
Apartment Lease) and Landlord's Consents from each lessor of each of the Plaza
Lease, the Senorial Lease, the Hatillo Lease, the Humacao Lease and the Office
Lease, each in form and substance satisfactory to the Administrative Agent.
-54-
(x) Mortgagee's Estoppel and Consents from each mortgagee of
the fee interest held by each lessor of each of the Senorial Lease, the Mayaguez
Mall Lease and the Cayey Lease, each in form and substance satisfactory to the
Administrative Agent.
(y) Evidence satisfactory to the Administrative Agent that
each of the Leases listed in Schedule 4.1(aa) (other than the Mayaguez Shopping
Center Lease, the Office Lease, the Warehouse Lease and the Apartment Lease) has
been recorded or presented for recordation (or, in the case of the Humacao Lease
will promptly hereafter be presented for recordation) in the proper Section(s)
of the Registry of Property of Puerto Rico.
(z) A copy of the Development Capital Budget as of the Closing
Date, certified by the Chief Financial Officer of the Borrower to be true and
correct as of such date.
(aa) A certificate signed by the Chief Financial Officer of
the Borrower certifying the Projected EBITDA to be utilized for purposes of
calculating the Applicable Margin under this Agreement.
SECTION 3.2. Conditions Precedent to Each Borrowing. The obligation of
each Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing:
(a) The following statements shall be true and each of the
giving of the applicable Notice of Borrowing and the acceptance by the Borrower
of the proceeds of such Borrowing shall constitute a representation and warranty
by each Loan Party (as to each Loan Document to which it is a party) that on the
date of such Borrowing such statements are true:
-55-
(i) The representations and warranties contained in each
Loan Document are true and correct in all material respects on and as of the
date of such Borrowing before and after giving effect to such Borrowing and to
the application of the proceeds therefrom, as though made on and as of such date
(except to the extent any representation or warranty is made as of a specific
date, in which case such representation or warranty shall be true and correct in
all material respects as of such date), and
(ii) No event has occurred and is continuing, or would
result from such Borrowing, or from the application of the proceeds therefrom,
which constitutes a Default.
(b) The Administrative Agent shall have received such other
approvals, opinions or documents as the Majority Lenders through the
Administrative Agent may reasonably request.
SECTION 3.3. Additional Conditions to Each 936 Rate Advance. The
obligation of each Lender to make a 936 Rate Advance on the occasion of each
Borrowing (including the initial Borrowing) shall be subject to the following
further conditions precedent:
(i) the use by the Borrower of the proceeds of such 936 Rate
Advance for Eligible Activities under the Regulation, and the receipt by each
Lender of such evidence and assurances as such Lender may reasonably request
through the Administration Agent, upon reasonable prior notice to the Borrower,
with respect to the qualifications as Eligible Activities under the Regulation
of the use of the proceeds of such proposed 936 Rate Advance;
(ii) the receipt by each Lender of such information,
certificates and other documents as such Lender may reasonably request, and the
completion by each Lender of any due diligence
-56-
investigations and such determinations as it may reasonably require, for
purposes of complying with Section 6.4 of the Regulation (including, without
limitation, an opinion of legal counsel for the Borrower acceptable to the
Majority Lenders or a ruling (the "936 Ruling") from the Commissioner of
Financial Institutions of the Commonwealth of Puerto Rico confirming that the
purpose for which the Borrower has requested such 936 Rate Advance qualifies as
an Eligible Activity under the Regulation, and the receipt by each Lender of
such evidence and assurances as such Lender may reasonably request through the
Administrative Agent, including, without limitation, the documents listed in
Section 6.4.3 of the Regulation required to be submitted by a borrower of 936
Funds), with the other provisions of the Regulation and with the 936 Ruling (if
applicable), and the same shall be reasonably satisfactory to the Lenders in
form and substance; and
(iii) each Lender shall have received a certificate in the
form of Exhibit D hereto, appropriately completed (a "936 Compliance
Certificate") with respect to the 936 Rate Advances requested by the Borrower.
SECTION 3.4. Additional Conditions to Advances to be used to Finance
Capital Expenditures. The obligation of each Lender to make an Advance on the
occasion of each Borrowing (including the initial Borrowing), the proceeds of
which are to be used by the Borrower to finance Capital Expenditures under the
Development Capital Budget, shall be subject to the further condition that the
Administrative Agent shall have received an updated Development Capital Budget
as of the date of such Advance, certified by the Chief Financial Officer of the
Borrower as being true and correct.
SECTION 3.5. Determinations Under Article 3. For purposes of
determining compliance with the conditions specified in
-57-
Article 3 on the occasion of any Borrowing, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to the Lenders unless an officer of the Administrative Agent
responsible for the transactions contemplated by the Loan Documents shall have
received notice from such Lender prior to the relevant Borrowing specifying its
objection thereto and such Lender shall not have made available to the
Administrative Agent such Lender's ratable portion of such Borrowing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Borrower. In order
to induce the Lenders to make the Advances hereunder, the Borrower makes the
following representations and warranties to the Lenders, each and all of which
shall survive the execution and delivery of this Agreement:
(a) The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of Puerto Rico
and the Borrower does not conduct business in any other jurisdiction where the
nature of its business or assets requires it to be so qualified to do business
as a foreign corporation, except where the failure to so qualify would not have
a Material Adverse Effect on the business or the assets of the Borrower. The
Borrower has all requisite power and authority, corporate and otherwise, to
conduct its business, to own its property and to execute, deliver and perform
all of its obligations under this Agreement, the Notes and each of the other
Loan Documents to which it is or will be a party.
(b) The execution, delivery and performance by the Borrower of
this Agreement, the Notes and all other Loan Docu-
-58-
ments to which it is or will be a party, have been duly authorized by all
necessary corporate action of the Borrower and do not and will not (A)
contravene the charter or by-laws of the Borrower, (B) violate in any material
respect any provision of any applicable law, rule, regulation (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination or
award, (C) constitute or result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower or any Subsidiary of the Borrower is a party or
by which they or their properties may be bound or affected, or (D) result in, or
require, the creation or imposition of any mortgage, deed of trust, pledge,
Lien, security interest or other charge or encumbrance of any nature (other than
as required hereunder) upon or with respect to any of the properties now owned
or hereafter acquired by the Borrower. Neither the Borrower nor any Subsidiary
of the Borrower is in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award, or in breach of any such
indenture, agreement, lease or instrument, the violation or breach of which is
reasonably likely to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body is
required for (i) the due execution, delivery and performance by the Borrower of
this Agreement, the Notes and each other Loan Document to which it is or will be
a party, or for the consummation of the transactions contemplated hereby or
thereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to
any Loan Document, (iii) the perfection or maintenance of any Liens created by
any Loan Document (including the first priority nature thereof) or (iv) the
exercise by the Administrative Agent or any Lender of its rights and remedies
under the Loan Documents, except the filings in the corresponding
-59-
public registries of the Commonwealth of Puerto Rico of the collateral security
documents that are susceptible of recordation and that have been delivered to
the Administrative Agent hereunder. The Borrower has all material licenses,
permits, rights, variances and other Governmental Approvals that are necessary
to perform its various obligations under the Loan Documents, to own and operate
its properties and assets and to conduct its business as currently conducted.
(d) This Agreement is, and each other Loan Document to which
the Borrower is or will be a party when delivered hereunder will be, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms, except to the extent enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights generally and by
equitable principles (regardless of whether enforcement is sought in equity or
at law).
(e) The balance sheet of the Borrower as of December 31, 1994
and the related statements of income and retained earnings of the Borrower for
the six-month period ended on December 31, 1994, copies of which have been
furnished to the Administrative Agent, fairly present the financial condition of
the Borrower as of such date and the results of the operations of the Borrower
for the period ended on such date, all in accordance with Generally Accepted
Accounting Principles consistently applied, and since such date, there has been
no Material Adverse Change in such condition or operations.
(f) There is no pending or, to the best of the Borrower's
knowledge, threatened action or proceeding affecting the Borrower or any
Subsidiary of the Borrower, before any court, governmental agency or arbitrator
which, (i) if adversely determined, is reasonably likely to have a Material
Adverse Effect or
-60-
(ii) purports to affect the legality, validity or enforceability of this
Agreement, any Note or any other Loan Document or the consummation of the
transactions contemplated hereby or thereby.
(g) No proceeds of any Advance will be used by the Borrower to
acquire any security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
(h) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used by the Borrower to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(i) Set forth on Schedule 4.1(i) hereto is a complete and
accurate list of each employee benefit plan or other plan maintained for the
employees of the Borrower or any Subsidiary of the Borrower and covered by Title
IV of ERISA (hereinafter referred to as a "Plan").
(j) As of the Closing Date, the Borrower does not have any
direct or indirect Subsidiaries, except as set forth in Schedule 4.1(j), and the
Borrower is not engaged in any joint venture or partnership with any Person,
except as set forth in Schedule 4.1(j).
(k) The Borrower is Solvent.
(l) The Borrower and each of its Subsidiaries have filed all
federal, state, commonwealth and local tax returns required to be filed and have
paid all taxes shown thereon to be due, including interest and penalties, or
have provided adequate reserves therefor; no unpaid or uncontested assessments
have been
-61-
made against the Borrower or any Subsidiary of the Borrower by any taxing
authority, nor has any penalty or deficiency been assessed by any such
authority, which in the aggregate for all such assessments, penalties and
deficiencies equals or exceeds $100,000. All contested assessments of $100,000
or more in the aggregate have been disclosed to the Administrative Agent and
adequate reserves have been made therefor. Such tax returns properly reflect the
income and taxes of the Borrower and its Subsidiaries for the periods covered
thereby, subject only to reasonable adjustments required by the corresponding
taxing authorities upon audit and having no Material Adverse Effect on the
financial condition, business or results of operations of the Borrower or any of
its Subsidiaries.
(m) Except as indicated in Schedule 4.1(m), the Borrower has
good and marketable title to all of the assets carried on its books and
reflected in the balance sheets of the Borrower referred to in subsection (e) of
this Section 4.1, subject to no Liens or rights of third parties.
(n) No Reportable Event has occurred with respect to any Plan
of the Borrower or of any Subsidiary of the Borrower, and neither the Borrower
nor any Subsidiary of the Borrower has any current or past service liability
under any Plan.
(o) No Termination Event has occurred or is reasonably
expected to occur with respect to any Plan of the Borrower or of any Subsidiary
of the Borrower, and neither the Borrower nor any Subsidiary of the Borrower has
any current or past service liability under any Plan.
(p) Neither the Borrower nor any Subsidiary of the Borrower
has incurred any actual withdrawal liability under ERISA with respect to any
Plan.
-62-
(q) Neither the business nor the properties of the Borrower or
of any Subsidiary of the Borrower are affected by any labor dispute which could
have a Material Adverse Effect.
(r) No written information, exhibit or report furnished by the
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement, taken together, contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading.
(s) As of the Closing Date, the registered principal office
and principal place of business of the Borrower, and the place where the
Borrower maintains all records relating to the Collateral, is at the address(es)
set forth in Schedule 4.1(s) hereto. The Borrower has such other places of
business, and maintains Collateral at such other locations, as are specified on
Schedule 4.1(s). Except as set forth on Schedule 4.1(s), the Borrower does not
have any other place of business nor does it maintain Collateral at any other
location.
(t) During the five (5) years preceding the date of this
Agreement, the Borrower has not been known as or used any corporate name or any
trade of fictitious name, except as disclosed on Schedule 4.1(t) hereto.
(u) The use of the proceeds of each Advance made, or to be
made, by the Lenders hereunder is, and will continue to be, a legal and proper
corporate use (duly authorized by the Borrower's Board of Directors and the
stockholders thereof, if required) of the Borrower and such use is, and will
continue to be, consistent with all applicable laws and regulations.
(v) To the best of the Borrower's knowledge, (i) the
operations and properties of the Borrower comply in all material
-63-
respects with all applicable Environmental Laws; (ii) all necessary
Environmental Permits have been obtained and are in effect for the operations
and properties of the Borrower, and the Borrower is in compliance in all
material respects with all such Environmental Permits; (iii) none of the
operations or properties of the Borrower is subject to any Environmental Action
alleging the violation of any Environmental Law; (iv) no circumstances exist
that could form the basis of an Environmental Action against the Borrower or any
of its properties that could have a Material Adverse Effect or cause any such
property to be subject to any restrictions which could have a Material Adverse
Effect on ownership, occupancy, use or transferability under any Environmental
Law; (iv) none of the operations of the Borrower are the subject of a federal,
state, commonwealth or local investigation evaluating whether any remedial
action is needed to respond to a release of any hazardous or toxic waste,
substance or constituent, or any other substance into the environment, which
remedial action may have a Material Adverse Effect on the Borrower's business
operations, financial condition or the value of any Collateral; and (v) the
Borrower does not have any contingent liability in connection with any release
of any hazardous or toxic waste, substance or constituent, or any other
substance into the environment which contingent liability, if liquidated, would
not be adequately covered (in the reasonable determination of the Majority
Lenders) by insurance or other indemnification rights and which, in the
reasonable determination of the Majority Lenders, would not have a Material
Adverse Effect on the Borrower's business operations, financial condition or the
value of any Collateral. The Borrower has not filed any notice under any
Environmental Law indicating past or present treatment, storage or disposal of a
hazardous waste or reporting a spill or release of a hazardous or toxic waste,
substance or constituent, or any other substance into the environment.
-64-
(w) As of the Closing Date, (i) the authorized, issued and
outstanding capital stock and other securities of the Borrower consists of the
capital stock and other securities described in Schedule 4.1(w), (ii) Schedule
4.1(w) sets forth the registered and beneficial owners of the capital stock and
other securities of the Borrower, the aggregate of which constitutes one hundred
percent (100%) of the issued and outstanding capital stock and other securities
of the Borrower, and (iii) all of the capital stock and other securities of the
Borrower have been validly issued and duly authorized, are fully paid and
non-assessable and none of such capital stock or securities are subject to any
Liens or to any options, warrants, conversion privileges or any other rights
with respect thereto (other than Liens in the Pledged Shares in favor of the
Administrative Agent, for itself and the ratable benefit of the Lenders).
(x) Neither (i) the Borrower or any of its Subsidiaries nor
(ii) as of the Closing Date, any other Loan Party, is an "investment company",
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Advances, nor the application of the
proceeds or repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated hereby, will violate any provision of the Investment
Company Act of 1940, as amended, or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(y) Set forth on Schedule 4.1(y) hereto is a complete and
accurate list of all Debt outstanding on the date hereof, showing as of the date
set forth thereon the principal amount outstanding thereunder.
(z) As of the date hereof, the Borrower does not own any real
property.
-65-
(aa) Set forth on Schedule 4.1(aa) hereto is a complete and
accurate list as of the Closing Date of all leases of real property under which
the Borrower is the lessee, showing the street address, lessor, lessee,
expiration date and annual rental cost thereof. As of the date on which this
representation is made or re-made from time to time by the Borrower, as the case
may be, the Borrower is not in default in any material respect under any Lease
existing as of the Closing Date (if this representation is made as of the
Closing Date) or under any Lease relating to any of the Borrower's theater
locations existing as of any other date (if this representation is made as of a
date other than the Closing Date) nor does the Borrower have actual knowledge or
reason to believe that any other party to any such Lease is in default in any
material respect under such Lease or has disclaimed any of such other party's
material obligations under such Lease or claimed that such Lease is not
enforceable against such other party in accordance with its terms.
(bb) Set forth on Schedule 4.1(bb) hereto is a complete and
accurate list as of the Closing Date of all Material Contracts of the Borrower,
showing the parties, subject matter and term thereof. As of the date on which
this representation is made or re-made from time to time by the Borrower, (i)
the Borrower is not in default in any material respect under any Material
Contract existing as of such date and (ii) the Borrower does not have actual
knowledge or reason to believe that any other party to any Material Contract is
in default in any material respect under such Material Contract or has
disclaimed any of such other party's material obligations under such Material
Contract or claimed that such Material Contract is not enforceable against such
other party in accordance with its terms. For purposes of clause (ii) above, the
term "Material Contract" shall be deemed to mean a contract involving aggregate
consideration payable to or by the Borrower of $250,000 or more in any year or
which is otherwise material to the business,
-66-
condition (financial or otherwise), operations, performance or properties of the
Borrower.
(cc) Set forth on Schedule 4.1(cc) hereto is a complete and
accurate list as of the Closing Date of all patents, trademarks, trade names,
service marks and copyrights, and all applications therefor and licenses
thereof, of the Borrower showing the jurisdiction in which registered, the
registration number, the date of registration and the expiration date.
(dd) Neither the Borrower nor any of its Subsidiaries is a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended.
(ee) The name and address of each Blocked Account Bank,
together with the account numbers for each Blocked Account at such Blocked
Account Bank, is specified in Schedule 4.1(ee) hereto (or at such other Blocked
Account Banks and/or with such other Blocked Accounts as have been notified to
the Administrative Agent and established in accordance with the provisions of
Section 5.2(y)).
(ff) Neither the Borrower nor any of its Subsidiaries has any
Blocked Account or other deposit account other than the Blocked Accounts listed
on Schedule 4.1(ee), the Cash Concentration Account, the Operating Account and
the accounts referred to in items 9, 10 and 11 of Schedule 4.1(ee).
-67-
ARTICLE 5
COVENANTS OF THE BORROWER
SECTION 5.1. Affirmative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will:
(a) Comply, and cause each of its Subsidiaries to comply, in
all material respects, with all applicable laws, rules, regulations and orders
except where such non-compliance is not reasonably likely to have a Material
Adverse Effect.
(b) (i) Maintain, and cause each of its Subsidiaries to
maintain, all of their properties (real and personal) insured at all times by
responsible, reputable and financially sound insurance companies or associations
(as reasonably determined by the Borrower) in such amounts and covering loss or
damage by fire, earthquake and windstorm and such other risks as are usually
carried by companies engaged in similar businesses and owning similar properties
as the Borrower and such Subsidiaries (as reasonably determined by the
Borrower), and maintain adequate (as reasonably determined by the Borrower)
business interruption insurance, product liability insurance and other insurance
against liability to persons for such risks and hazards and in such amounts as
are usually carried by companies engaged in similar businesses (as reasonably
determined by the Borrower); (ii) upon the request of the Administrative Agent
or the Majority Lenders, use all reasonable commercial efforts to increase, vary
or otherwise modify the amounts and risks covered by such policies of insurance
and/or change the insurers issuing such policies in order to comply with the
standards set forth above (as reasonably determined by the Majority Lenders);
(iii) all such policies shall name the Administrative Agent (for its benefit and
the ratable benefit of the Lenders) as an insured party (as its interests may
appear) and provide for payment of the proceeds
-68-
thereof to the Borrower and the Administrative Agent, as their respective
interests may appear, and shall contain an endorsement providing that the
insurance shall not be cancelable except upon thirty (30) days prior written
notice to the Administrative Agent; and (iv) from time to time at the request of
the Administrative Agent, the Borrower shall deliver to the Administrative Agent
a detailed schedule indicating all insurance policies then in force. Anything
herein to the contrary notwithstanding, the proceeds of any claim for the
replacement or repair of property of the Borrower which is less than or equal to
$200,000 shall be paid over to the Borrower if no Event of Default then exists
and such proceeds are in fact used for the repair or replacement of property of
the Borrower within a period not exceeding ninety (90) days. The proceeds of any
claim for the replacement or repair of property of the Borrower which is more
than $200,000 shall be paid over to the Administrative Agent and (x) held by the
Administrative Agent, for itself and the ratable benefit of the Lenders, as
additional collateral security for the Obligations under this Agreement and the
other Loan Documents, and (y) if the Borrower shall so elect and no Default then
exists, such proceeds shall be made available to the Borrower from time to time
for the repair or replacement of property of the Borrower in accordance with a
budget and disbursement schedule prepared by the Borrower and approved by the
Administrative Agent (which approval shall not be unreasonably withheld).
(c) Furnish to the Administrative Agent:
(i) as soon as available and in any event within (x) sixty
(60) days after the end of the first three fiscal quarters of each Fiscal Year
of the Borrower and (y) ninety (90) days after the end of the last fiscal
quarter of each Fiscal Year of the Borrower, unaudited financial statements of
the Borrower and its Subsidiaries on a consolidated basis, including balance
sheets, income statements and cash flow statements (provided that
-69-
cash flow statements shall not be required with respect to the financial
statements for the last fiscal quarter) prepared according to Generally Accepted
Accounting Principles, together, in the case of the first three fiscal quarters
only, with a certificate in the form of Exhibit E (a "Compliance Certificate")
of the President or Chief Financial Officer of the Borrower showing the
calculation of all Required Financial Data and the basis therefor;
(ii) as soon as available and in any event within one hundred
twenty (120) days after the end of each Fiscal Year of the Borrower, audited
financial statements of the Borrower and its Subsidiaries on a consolidated
basis, including balance sheets, income statements and cash flow statements
prepared according to Generally Accepted Accounting Principles, as of the end of
such year, certified, without exception or qualification, by independent
certified public accountants acceptable to the Majority Lenders, together with
(A) calculations of EBITDA and of the Required Financial Data (showing the basis
for such calculations), (B) a special report of such independent certified
public accountants stating that in the course of their regular audit of the
business of the Borrower, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, nothing came to their
attention which would lead them to conclude that an Event of Default under
Sections 5.1(r), (s), (t), (u) or (v) has occurred and is continuing, or if,
such Event of Default has come to their attention, a statement as to the nature
thereof and (C) a certificate of the President or Chief Financial Officer of the
Borrower stating that no event has occurred and is continuing which constitutes
a Default or, if a Default has occurred and is continuing, a statement as to the
nature thereof and the action which the Borrower has taken or will take with
respect thereto;
-70-
(iii) within five (5) Business Days after any change is made
in the Development Capital Budget (if such change is equal to the greater of
$150,000 or five percent (5%) of the Development Capital Budget in effect on the
date of such change), but in any event within sixty (60) days after the end of
each fiscal quarter of each Fiscal Year, a schedule, in form and substance
reasonably acceptable to the Administrative Agent, showing the Capital
Development Budget as of such date, certified as true and correct by the Chief
Financial Officer of the Borrower;
(iv)as soon as available, and in any event within sixty (60)
days after the end of each Fiscal Year of the Borrower, (A) the budget and
financial projections for the following Fiscal Year of the Borrower and, if
applicable, its Subsidiaries, including the marketing, operating and financial
assumptions of such projections and (B) if the five-year business plan delivered
to the Lenders as of the Closing Date has been modified, a description of, and
detailed explanation of the reasons for, such modifications;
(v) promptly but in any event within five (5) Business Days
after the Borrower knows or has reason to know of the existence of a Default, a
statement of the President or the Chief Financial Officer of the Borrower
setting forth details of such Default and the action which the Borrower has
taken or will take with respect thereto;
(vi) promptly but in any event within five (5) Business Days
after receipt thereof by the Borrower or any of its Subsidiaries from the
Pension Benefit Guaranty Corporation (the "PBGC"), copies of each notice
received by the Borrower or such Subsidiary of the PBGC's intention to terminate
any Plan or to have a trustee appointed to administer any such Plan;
-71-
(vii) promptly but in any event within five (5) Business Days
after the Borrower or any of its Subsidiaries knows or has reason to know that
any Termination Event with respect to any Plan has occurred, a statement of the
President or Chief Financial Officer of the Borrower describing such Termination
Event and the action, if any, which the Borrower or such Subsidiary has taken or
will take with respect thereto;
(viii) promptly but in any event within five (5) Business Days
after receipt thereof by the Borrower or any of its Subsidiaries from a Plan
sponsor, a copy of each notice received by the Borrower or such Subsidiary
concerning the imposition or amount of withdrawal liability pursuant to Section
4202 of ERISA;
(ix) promptly but in any event within five (5) Business Days
after receipt by the Borrower or any Subsidiary of the Borrower of service of
process or other notice of commencement thereof, notice of all actions, suits,
investigations, litigation and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which requests a monetary judgment not covered by insurance against, or
other type of monetary relief not covered by insurance from, the Borrower or any
Subsidiary thereof in the amount of $200,000 or more in the aggregate or which
could otherwise result in a Material Adverse Effect, and promptly after the
occurrence thereof notice of any material adverse change in the status or the
financial effect on the Borrower or any Subsidiary of such actions, suits,
investigations, litigation and proceedings;
(x) promptly but in any event within five (5) Business Days
after receipt thereof, copies of the following: (i) any notice of tax deficiency
received from the Puerto Rico Treasury Department or any other taxing authority
of the Commonwealth of Puerto Rico, (ii) any notice of municipal license tax
-72-
deficiency received from the Finance Director of any of the municipalities of
the Commonwealth of Puerto Rico and (iii) any notice of property tax deficiency
received from the Municipal Revenue Collections Center of Puerto Rico; provided
that this subsection (ix) shall only apply to deficiencies of $200,000 or more
in the aggregate;
(xi) promptly but in any event within five (5) Business Days
after the Borrower knows or has reason to know of the existence thereof, notice
of any condition or occurrence on any property of the Borrower or of any of its
Subsidiaries that results in noncompliance with, or liability under, any
Environmental Law or Environmental Permit with respect to the Borrower or such
Subsidiary, and which noncompliance or liability could result in a Material
Adverse Effect;
(xii) promptly but in any event within five (5) Business Days
after the Borrower knows or has reason to know of the existence thereof, notice
of any material labor dispute to which the Borrower or any of its Subsidiaries
may become a party, any strikes or walkouts relating to any of its or their
facilities;
(xiii) promptly but in any event within five (5) Business Days
after the occurrence thereof, notice of the default by the Borrower or any of
its Subsidiaries under any note, indenture, loan agreement, mortgage, lease,
deed or other similar agreement requiring the payment by the Borrower or such
Subsidiary of $200,000 or more in the aggregate;
(xiv) promptly but in any event within five (5) Business Days
after the occurrence thereof, notice of a material default by the Borrower or
any of its Subsidiaries under any Lease or Material Contract to which the
Borrower or such Subsidiary is a party or by which it or they are bound;
-73-
(xv) promptly but in any event within five (5) Business Days
after the occurrence thereof, notice of any default by any obligor with respect
to any amount payable to the Borrower or any of its Subsidiaries which is equal
to or in excess of $200,000 in the aggregate;
(xvi) promptly after the Borrower knows or has reason to know
of the existence thereof, notice of the enactment or promulgation of any
federal, state, commonwealth or local law or regulation pertaining specifically
to the Borrower or its industry that may result in a Material Adverse Effect;
provided, however, that the Borrower's failure to comply with the covenant in
this sub-section (c)(xvi) shall not constitute an Event of Default and neither
the Administrative Agent nor any Lender shall have any claim against the
Borrower or any other Loan Party for the Borrower's failure to give any such
notice; and
(xvii) promptly, such other information respecting the
business condition (financial or otherwise), operations, performance, properties
or prospects of any Loan Party as any Lender may, from time to time, reasonably
request.
(d) Obtain, preserve and maintain, and cause its Subsidiaries
to obtain, preserve and maintain, (i) its corporate existence and going concern
status (except as permitted under Section 5.2(f) with respect to the merger of
Subsidiaries), and (ii) all rights (charter and statutory) and all approvals,
authorizations, licenses, permits and franchises of all Governmental Authorities
necessary to enable the Borrower to operate and maintain its property, business
and operations as currently conducted other than such rights, approvals,
authorizations, licenses, permits and franchises which failure to obtain,
preserve or maintain could not reasonably be expected to have a Material Adverse
Effect.
-74-
(e) At any time and from time to time during daytime business
hours Monday through Friday, upon reasonable notice, permit the Administrative
Agent and any of the Lenders, or any agents or representatives thereof, to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower and any of its Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their respective officers.
(f) Keep, and cause its Subsidiaries to keep, proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and businesses of the Borrower and its
Subsidiaries in accordance with Generally Accepted Accounting Principles
consistently applied.
(g) Maintain and preserve, and cause its Subsidiaries to
maintain and preserve, all of its properties which are necessary or reasonably
useful for the proper conduct of their respective businesses in good working
order and condition, ordinary wear and tear excepted, and in material compliance
with all applicable standards and rules imposed by all Governmental Authorities
with jurisdiction, except where the failure to do so is not, individually or in
the aggregate, reasonably likely to result in a Material Adverse Effect; and at
all times do or cause to be done all things necessary to obtain, preserve, renew
and keep in full force and effect all copyrights, trademarks, service marks and
trade names, except where the failure to do so is not, individually or in the
aggregate, reasonably likely to result in a Material Adverse Effect.
(h) Utilize the proceeds of the Advances for the purposes set
forth in Section 2.1.
-75-
(i) File, and cause its Subsidiaries to file, all federal,
state, commonwealth and local tax returns and other reports required by law to
be filed, except if the failure to timely file such returns and reports would
not result in a Material Adverse Effect; maintain, and cause its Subsidiaries to
maintain, adequate reserves (in the reasonable opinion of the Borrower) for the
payment of all taxes, assessments, governmental charges and levies imposed upon
the Borrower and its Subsidiaries, their income or their profits; pay and
discharge, and cause its Subsidiaries to pay and discharge, all such taxes,
assessments, governmental charges and levies imposed upon the Borrower and any
of its Subsidiaries or against their respective properties prior to the date on
which penalties accrue, except to the extent that the same may be contested by
the Borrower or such Subsidiary, as the case may be, in good faith by
appropriate proceedings and adequate reserves have been made therefor, unless
and until a Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors; and prior to their becoming overdue,
promptly notify the Administrative Agent in writing as to any such taxes,
assessments and governmental charges which it intends to contest.
(j) Notify the Administrative Agent in writing at least thirty
(30) Business Days prior thereto, of the opening of any new office or place of
business of the Borrower or any of its Subsidiaries or of the closing or change
in the Borrower's or any of its Subsidiaries' principal place of business,
principal office or registered principal office (according to the records of the
Puerto Rico Department of State), and (ii) at least ninety (90) days prior
thereto, of the closing of any theater location of the Borrower or any of its
Subsidiaries.
(k) Furnish to the Administrative Agent promptly after receipt
thereof by the Borrower, the filing thereof with the Secretary of Labor of the
United States or the PBGC, copies of
-76-
each annual report which is filed with respect to each Plan maintained by the
Borrower or any of its Subsidiaries for each Plan year, including, if available
to the Borrower:
(i) a statement of assets and liabilities of such Plan as of
the end of such Plan year and statements of changes in fund balance and in
financial position, or a statement of changes in net assets available for Plan
benefits for such Plan year, certified by independent public accountants of
recognized standing acceptable to the Administrative Agent, and
(ii) an actuarial statement of such Plan applicable to such
Plan year, certified by an enrolled actuary of recognized standing acceptable to
the Administrative Agent.
(l) Continue, and cause each of its Subsidiaries, to be
Solvent.
(m) As and to the extent requested from time to time by the
Administrative Agent or the Majority Lenders, the Borrower and each of its
Subsidiaries will grant to the Administrative Agent, for the benefit of the
Lenders, a Lien in respect of each asset (to the extent hereinafter set forth)
acquired by the Borrower or such Subsidiaries after the Closing Date and not
otherwise encumbered by the Loan Documents. Such Lien shall be granted, with
respect to each leasehold interest, promptly upon acquiring any leasehold
interest in real property and, with respect to other assets, promptly (i) when
the aggregate value of such assets acquired after the Closing Date not subject
to a Lien in favor of the Administrative Agent reaches $100,000, and (ii) in
addition, in the case of Machinery and Equipment, on the earlier of (x) sixty
(60) days after the assets are delivered to the premises where they are to be
installed and (y) when the premises where such assets are to be installed open
for business. The amount of any leasehold mortgage required hereby shall not be
-77-
less than the cost of the leasehold improvements made or to be made by the
Borrower or its Subsidiary to the corresponding leased premises. Each such Lien
shall be granted pursuant to documentation reasonably satisfactory in form and
substance to the Administrative Agent and shall constitute valid and enforceable
perfected Liens superior to and prior to the rights of all other Persons and
subject to no other Liens other than Permitted Liens and Permitted Encumbrances.
Such documents or other instruments related thereto shall be duly recorded or
filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Administrative Agent for
the ratable benefit of the Lenders required to be granted pursuant hereto, and
all taxes, fees and other charges payable in connection therewith shall be paid
in full by the Borrower. Anything in this sub-section (m) to the contrary
notwithstanding, the obligation of the Borrower or any of its Subsidiaries to
constitute a Lien upon any leasehold interest in real property or upon Machinery
and Equipment to be installed therein shall be subject, to the extent required
by the terms of the corresponding Lease, to the prior written consent of the
relevant lessor, which consent the Borrower agrees to seek using all reasonable
commercial efforts. The Borrower agrees to use all reasonable commercial efforts
to avoid having any such restrictions included in the Leases entered into after
the Closing Date.
(n) Conduct its business and that of its Subsidiaries so as to
comply in all material respects with all applicable Environmental Laws and
Environmental Permits; provided, however, that nothing contained in this
subsection shall prohibit the Borrower from contesting, in good faith by
appropriate legal proceedings, any such Environmental Law or Environmental
Permit or the interpretation or application thereof, provided, further, that the
Borrower shall comply with the order of any court or other governmental body of
applicable jurisdiction relating to
-78-
such Environmental Laws and Environmental Permits unless the Borrower shall then
be prosecuting an appeal or proceedings for review and shall have secured a stay
of enforcement or execution or other arrangement postponing enforcement or
execution pending such appeal or proceedings for review. If the Borrower shall
(i) receive notice that any violation of any Environmental Law or Environmental
Permit may have been committed or is about to be committed by the Borrower, (ii)
receive notice that any Environmental Action has been filed or is about to be
filed against the Borrower alleging violations of any Environmental Law or
Environmental Permit or requiring the Borrower to take any action in connection
with the release of toxic or hazardous substances into the environment, (iii)
receive any notice from a federal, state, commonwealth or local governmental
agency or private party alleging that the Borrower may be liable or responsible
for costs associated with a response to or cleanup of a release of a toxic or
hazardous substance into the environment or any damages caused thereby, (iv)
receive any notice that the Borrower is subject to federal, state, commonwealth
or local investigation evaluating whether any remedial action is needed to
respond to the release of any hazardous or toxic waste, substance or
constituent, or any other substance into the environment, or (v) receive any
notice that any properties or assets of the Borrower are subject to a Lien in
favor of any governmental entity for any liability under Environmental Laws or
damages arising from or costs incurred by such governmental entity in response
to a release of a hazardous or toxic waste, substance or constituent, or any
other substance into the environment, then the Borrower shall promptly but in
any event within five (5) Business Days after the Borrower's receipt thereof,
provide the Administrative Agent with a copy of such notice.
(o) (i) Make all payments and otherwise perform all material
obligations in respect of all Leases and Material Contracts, (ii) keep such
Leases and Material Contracts in full
-79-
force and effect, (iii) not allow such Leases or Material Contracts to lapse or
be terminated or any rights to renew such Leases or Material Contracts to be
forfeited or cancelled, except where any failure to comply with clauses (i),
(ii) or (iii) is not reasonably likely, taken alone or otherwise, to have a
Material Adverse Effect, (iv) execute, or cause to be executed, and present for
recordation all such documents as may be required in order to permit the
recordation of each Lease (other than the Office Lease and the Warehouse Lease)
in the proper Section(s) of the Registry of Property of Puerto Rico on or prior
to the date on which the Borrower makes any Capital Expenditure with respect to
the corresponding leased premises, and (v) use all reasonable commercial efforts
to obtain landlord's and mortgagee's estoppel and consent agreements, in form
and substance reasonably acceptable to the Administrative Agent, for the benefit
of the Borrower, the Administrative Agent and the Lenders with respect to each
of the Leases and the corresponding leasehold mortgages required pursuant to the
provisions of this Agreement.
(p) Conduct, and cause each of its Subsidiaries to conduct,
all transactions otherwise permitted under the Loan Documents with any of their
Affiliates on terms that are fair and reasonable and no less favorable to the
Borrower or such Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate. The terms of the Management
Agreement, the Reimbursement Agreement and the Senorial Management Agreement and
of the Subordinated Debt are deemed to comply with this sub-section (p).
(q) Subject to availability of 936 Funds or Eurodollar Funds
to all Lenders, fix, within 180 days after the Closing Date and at all times
thereafter, the rate of interest with respect to that portion of the aggregate
principal outstanding at any time under the Notes which exceeds $7,500,000, for
a period of not less than three (3) years, or in the alternative, enter into,
-80-
within 180 days after the Closing Date, and maintain at all times thereafter,
interest rate Hedge Agreements with Persons acceptable to the Borrower and the
Majority Lenders, covering a notional amount of not less than that portion of
the aggregate principal outstanding at any time under the Notes which exceeds
$7,500,000, for a minimum of three (3) years time.
(r) Maintain at all times Equity in any Fiscal Year set forth
below of not less than the amount set forth below for such Fiscal Year:
Fiscal Year Ending Amount
------------------ ------
December 31, 1995 $ 2,975,000
December 31, 1996 $ 2,875,000
December 31, 1997 $ 2,725,000
December 31, 1998 $ 3,700,000
December 31, 1999 $ 5,250,000
December 31, 2000 $ 7,700,000
December 31, 2001 $10,750,000
December 31, 2002 $14,750,000
December 31, 2003 $14,750,000
(s) As of the end of each fiscal quarter, maintain a ratio
(the "Debt Service Coverage Ratio") of (i) EBITDA of the Borrower for the four
fiscal quarters just ended to (ii) the sum of (A) interest expense (whether or
not paid) on all Funded Debt of the Borrower for the four fiscal quarters just
ended plus (B) the aggregate principal amount of all Funded Debt required to be
paid (whether or not paid) by the Borrower during the four fiscal quarters just
ended, of not less than the amount set forth below for each period set forth
below:
-81-
3/31 6/30 9/30 12/31
---- ---- ---- -----
1995 -- -- -- 1.40:1.00
1996 1.45:1.00 1.45:1.00 1.45:1.00 1.45:1.00
1997 1.40:1.00 1.40:1.00 1.40:1.00 1.40:1.00
1998 1.10:1.00 1.10:1.00 1.10:1.00 1.10:1.00
1999 1.20:1.00 1.20:1.00 1.20:1.00 1.20:1.00
2000 1.30:1.00 1.30:1.00 1.30:1.00 1.30:1.00
2001 and 1.50:1.00 1.50:1.00 1.50:1.00 1.50:1.00
thereafter
(t) As of the end of each fiscal quarter, maintain a ratio
(the "Fixed Charge Coverage Ratio") of (i) EBITDA of the Borrower for the four
fiscal quarters just ended to (ii) the sum of (A) interest expense (whether or
not paid) on all Funded Debt of the Borrower for the four fiscal quarters just
ended plus (B) the aggregate principal amount of all Funded Debt required to be
paid (whether or not paid) by the Borrower during the four fiscal quarters just
ended plus (C) the amount of Unfunded Capital Expenditures paid by the Borrower
during the four fiscal quarters just ended plus (D) the aggregate amount of
income taxes actually paid by the Borrower for the four fiscal quarters just
ended plus (E) the amount of dividends paid by the Borrower during the four
fiscal quarters just ended, of not less than the amount set forth below for each
period set forth below:
3/31 6/30 9/30 12/31
---- ---- ---- -----
1995 -- -- -- 1.20:1.00
1996 1.25:1.00 1.25:1.00 1.25:1.00 1.25:1.00
1997 1.25:1.00 1.25:1.00 1.25:1.00 1.25:1.00
1998 1.05:1.00 1.05:1.00 1.05:1.00 1.05:1.00
1999 1.10:1.00 1.10:1.00 1.10:1.00 1.10:1.00
2000 and 1.25:1.00 1.25:1.00 1.25:1.00 1.25:1.00
thereafter
(u) As of the end of each fiscal quarter, maintain a ratio
(the "Interest Coverage Ratio") of (i) EBITDA of the Bor-
-82-
rower for the four fiscal quarters just ended to (ii) interest expense (whether
or not paid) on all Funded Debt of the Borrower for the four fiscal quarters
just ended, of not less than the amount set forth below for each period set
forth below:
3/31 6/30 9/30 12/31
---- ---- ---- -----
1995 -- -- -- 1.40:1.00
1996 1.45:1.00 1.45:1.00 1.45:1.00 1.45:1.00
1997 1.75:1.00 1.75:1.00 1.75:1.00 1.75:1.00
1998 2.30:1.00 2.30:1.00 2.30:1.00 2.30:1.00
1999 2.70:1.00 2.70:1.00 2.70:1.00 2.70:1.00
2000 and 3.00:1.00 3.00:1.00 3.00:1.00 3.00:1.00
thereafter
(v) As of the end of each fiscal quarter, maintain a ratio
(the "Funded Debt/Cash Flow Ratio") of (i) the aggregate principal amount of all
Funded Debt required to be shown on the liabilities side of the balance sheet of
the Borrower in accordance with Generally Accepted Accounting Principles to (ii)
EBITDA of the Borrower for the four fiscal quarters just ended, of not more than
the amount set forth below for each period set forth below:
3/31 6/30 9/30 12/31
---- ---- ---- -----
1995 -- -- -- 10.00:1.00
1996 8.25:1.00 8.25:1.00 8.25:1.00 8.25:1.00
1997 6.45:1.00 6.45:1.00 6.45:1.00 6.45:1.00
1998 4.80:1.00 4.80:1.00 4.80:1.00 4.80:1.00
1999 3.90:1.00 3.90:1.00 3.90:1.00 3.90:1.00
2000 3.00:1.00 3.00:1.00 3.00:1.00 3.00:1.00
2001 2.45:1.00 2.45:1.00 2.45:1.00 2.45:1.00
2002 and 1.85:1.00 1.85:1.00 1.85:1.00 1.85:1.00
thereafter
(w) Except as otherwise expressly provided under the terms of
this Agreement or of any other Loan Document, deposit, or cause the deposit of,
on a daily basis in the case of cash and
-83-
promptly (but not more than five Business Days after receipt) in the case of
non-cash items, in a Blocked Account or in the Cash Concentration Account all
cash, checks, instruments and other property from time to time received in
respect of its operations and investments and in respect of or in exchange for
any or all Collateral (collectively, the "Cash Collateral").
(x) Close the bank accounts referred to in items 9, 10 and 11
of Schedule 4.1(ee) by not later than thirty (30) days after the Closing Date.
SECTION 5.2. Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
without the prior written consent of the Majority Lenders (or, if required under
Section 9.1, of all of the Lenders):
(a) Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien or other
charge or encumbrance (other than carrier's, warehousemen's and mechanic's liens
and other similar Liens arising in the ordinary course of business), or any
other type of preferential arrangement, upon or with respect to any of their
properties (real or personal, tangible or intangible), including without
limitation Liens on Receivables and Inventory, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, excluding, however, from the operation of the foregoing
restrictions the following Liens: (i) Liens created by the Loan Documents, (ii)
Permitted Liens and (iii) Permitted Encumbrances.
(b) Create, incur, guarantee, endorse, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, guarantee, endorse,
assume or suffer to exist, any Debt, direct, contingent or otherwise, except (i)
Debt hereunder and
-84-
under the Notes; (ii) trade payables and accruals incurred in the ordinary
course of business; (iii) unsecured current liabilities other than for money
borrowed incurred in the ordinary course of business; (iv) the Debt described in
Schedule 4.1(y); (v) the Subordinated Debt; (vi) Debt under any Capitalized
Lease to the extent that the principal component thereof (which principal
component has been or should, at the time of determination, be capitalized on a
balance sheet in accordance with Generally Accepted Accounting Principles), when
added to outstanding Purchase Money Debt, does not exceed $150,000 in aggregate
principal amount at any time outstanding; (vii) Purchase Money Debt which, when
added to the principal component of Capitalized Leases (which principal
component has been or should, at the time of determination, be capitalized on a
balance sheet in accordance with Generally Accepted Accounting Principles), does
not exceed $150,000 in aggregate principal amount at any time outstanding;
(viii) Debt under Hedge Agreements required pursuant to the terms of this
Agreement; (ix) Debt not exceeding $50,000 in the aggregate at any time
outstanding created, incurred or assumed by the Borrower in order to obtain
surety, utility, appeal or similar bonds in the ordinary course of business; and
(x) Debt of the Borrower and its Subsidiaries in addition to the Debt permitted
under this sub-section (b) in an aggregate principal amount not to exceed
$50,000 at any time outstanding.
(c) Utilize the amounts provided to the Borrower by Reading
under the Funding Agreement for any purpose other than payment of Capital
Expenditures in accordance with the Development Capital Budget.
(d) Declare or pay any dividends, purchase, redeem, retire,
defease or otherwise acquire for value any of its capital stock or any warrants,
rights or options to acquire such capital stock now or hereafter outstanding,
return any capital to its stockholders as such, make any distribution of assets,
capital
-85-
stock, warrants, rights, options, obligations or securities to its stockholders
as such, or permit any Subsidiary of the Borrower to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of the Borrower or of
any Subsidiary of the Borrower or any warrants, rights or options to acquire
such capital stock, except that, so long as no Default shall have occurred and
be continuing or will occur as a result of such transaction, (i) the Borrower
may declare and deliver dividends and distributions payable in its common stock
so long as not less than one hundred percent (100%) of the shares of common
stock of the Borrower are pledged to the Administrative Agent for the ratable
benefit of the Lenders at all times as collateral security for the Obligations
of the Borrower hereunder and under the Loan Documents and (ii) any Affiliate of
the Borrower may pay dividends to the Borrower.
(e) Sell, lease, transfer or otherwise dispose of, or permit
any Subsidiary of the Borrower to sell, lease, transfer or otherwise dispose of,
any asset (including, without limitation, Receivables, Machinery and Equipment,
Leases, Leaseholds, realty, trademarks, trade names, goodwill and other tangible
and intangible assets), except (i) in the ordinary course of business, and (ii)
as expressly permitted pursuant to Section 6.4, and (iii) the sale, during any
Fiscal Year of the Borrower, of assets having a market value not exceeding
$100,000 in the aggregate so long as the proceeds derived therefrom (net of the
reasonable costs of sale) are invested, within ninety (90) days after the date
of sale, in replacement assets used in the Borrower's business operations.
(f) Merge, or permit any of its Subsidiaries to merge, into or
consolidate with any Person, except that any Subsidiary of the Borrower may be
merged with or into the Borrower if (i) the Borrower is the surviving
corporation, (ii) not less than thirty (30) days prior written notice thereof is
given to the
-86-
Administrative Agent (except with respect to the merger of Senorial into the
Borrower, in which case notice shall be given to the Administrative Agent not
more than ten (10) days after the effective date of the merger) and (iii) such
security instruments as are required by the Administrative Agent in order to
establish or maintain a Lien in favor of the Administrative Agent for the
ratable benefit of the Lenders on any Collateral are delivered to the
Administrative Agent.
(g) Make, or permit any of its Subsidiaries to make, any
material change in the nature of the business carried on by the Borrower and its
Subsidiaries as of the date hereof, or make any material change in the
Borrower's business objectives, purposes or operations.
(h) Create or make any investment in, or permit any of its
Subsidiaries to create or make any investment in, any direct or indirect
Subsidiary or any other Person; enter into, or permit any of its Subsidiaries to
enter into, a partnership, joint venture or similar arrangement; or make, or
permit any of its Subsidiaries to make, any change in its capital structure
(except as otherwise expressly permitted under the terms of this Agreement);
provided, however, that (i) subject to the provisions of Section 6.6, the
Borrower and its Subsidiaries may invest in cash and Cash Equivalents; (ii) the
Borrower and its Subsidiaries may acquire and hold Receivables owing to it if
created or acquired in the ordinary course of business and payable and
dischargeable in accordance with customary trade terms; (iii) subject to the
terms of Section 6.2, the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business; (iv) the Borrower may establish,
create and/or invest in wholly-owned Subsidiaries if (I) not less than
-87-
thirty (30) days prior written notice thereof is given to the Administrative
Agent, (II) one hundred percent (100%) of the capital stock thereof is pledged
to the Administrative Agent, for itself and the ratable benefit of the Lenders,
as security for the payment and performance of the Obligations of the Borrower
under this Agreement and the other Loan Documents pursuant to pledge agreements
in form and substance acceptable to the Administrative Agent, (III) each such
Subsidiary shall execute a guaranty agreement, in form and substance acceptable
to the Administrative Agent, in favor of the Administrative Agent and the
Lenders, with respect to the Obligations of the Borrower under this Agreement
and the other Loan Documents, (IV) each such Subsidiary shall grant the Liens
and execute the documents required pursuant to Section 5.1(m), and (V) the
business conducted or to be conducted by each such Subsidiary shall be directly
related to the ownership, operation and management of movie theaters in the
Commonwealth of Puerto Rico; (v) the Borrower may enter into the Hedge
Agreements required under Section 5.1(q); and (vi) Subordinated Debt may be
converted into equity as a capital contribution in the Borrower (provided that
any shares of additional stock of the Borrower issued as a result thereof are
duly pledged to the Administrative Agent pursuant to Section 5.2(r) hereof);
provided further, that in the case of each of the investments referred to in
clauses (i), (ii) and (iii) above, the Borrower and its Subsidiaries, as the
case may be, prior to making any such investments, shall execute such documents
as the Administrative Agent may require in order to establish and maintain at
all times a Lien on all such investments described in clauses (i), (ii) and
(iii) above in favor of the Administrative Agent, for itself and the ratable
benefit of the Lenders, as security for the payment and performance of the
Obligations of the Borrower under this Agreement and the other Loan Documents.
-88-
(i) Permit the aggregate compensation (including salaries,
bonuses, commissions and other forms of remuneration) paid to officers and
directors of the Borrower or any of its Subsidiaries to exceed an amount which
is reasonable and proper in relation to the work performed and which is
comparable to that paid by other companies engaged in similar lines of business.
The aggregate compensation paid to officers and directors of the Borrower and
Senorial as of the Closing Date is deemed to comply with this sub-section (i).
(j) Disburse cash for Regular Capital Expenditures, or permit
any Subsidiary of the Borrower to disburse cash for Regular Capital
Expenditures, which in the aggregate for the Borrower and such Subsidiaries
exceeds $250,000 during any Fiscal Year; provided, however, that for purposes of
determining the amount of Regular Capital Expenditures during any such period,
Funded Capital Expenditures shall not be included.
(k) Assume, guarantee, endorse or otherwise be or become
liable upon, or permit any Subsidiary to assume, guarantee, endorse or otherwise
be or become liable upon, the obligations of any Person, except (i) by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (ii) indemnity and
performance bonds and deposits not exceeding $50,000 in the aggregate at any
time and made in the ordinary course of business to secure the performance of
the Borrower or its Subsidiaries under the Leases.
(l) Make or have outstanding at any time, or permit any
Subsidiary to make or have outstanding at any time, any guarantee, loan or
advance to, or otherwise extend credit to any Person, including without
limitation any officer, director or stockholder of the Borrower or any Affiliate
of the Borrower, except (i) any guarantee, loan, advance or extension of credit
-89-
existing as of the Closing Date and listed in Schedule 5.2(l), and (ii) loans
and advances to employees of the Borrower and its Subsidiaries not exceeding
$50,000 in aggregate principal amount at any time outstanding.
(m) Create or enter into, or permit any of its Subsidiaries to
create or enter into, any Plan except in compliance in all material respects
with all applicable laws and regulations.
(n) Transfer its or any Subsidiary's principal place of
business or change its or any Subsidiary's registered principal office, or
maintain its Machinery and Equipment or its or any Subsidiary's records with
respect to Collateral, at any locations other than those at which the same are
presently kept or maintained, as set forth on Schedule 4.1(s) hereto, except
after the delivery to the Administrative Agent of security instruments, if
required by the Administrative Agent in order to establish or maintain a Lien on
any Collateral, in form and substance satisfactory to the Administrative Agent.
(o) Use, or permit any Subsidiary to use, any corporate name
(other than its own), other than those disclosed on Schedule 4.1(t) hereto,
except after the delivery to the Administrative Agent of security instruments,
if required by the Administrative Agent in order to establish or maintain a Lien
on any Collateral, in form and substance satisfactory to the Administrative
Agent.
(p) Enter into or be a party to, or permit any of its
Subsidiaries to enter into or be a party to, any transaction with any of its
Affiliates, except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms which are no less favorable to the Borrower or such
Subsidiary
-90-
than the Borrower or such Subsidiary would obtain in a comparable arm's length
transaction with a Person which is not the Borrower's Affiliate, and subject in
each case to the provisions of Section 5.2(x). The Management Agreement, the
Reimbursement Agreement, the Senorial Management Agreement and the Subordinated
Debt are deemed to comply with this sub-section (p).
(q) Amend, or permit any Subsidiary to amend, in connection
with any provision relating to capital stock or otherwise in any way adverse in
any material respect to the interest of the Administrative Agent or the Lenders,
the Articles of Incorporation or By-Laws of the Borrower or such Subsidiary,
except to the extent required in order to comply with applicable law. In any
event, the Borrower shall give the Administrative Agent not less than thirty
(30) days written notice before amending the Articles of Incorporation or
By-Laws of the Borrower or any of its Subsidiaries.
(r) Issue, or permit any Subsidiary to issue, shares of
capital stock (unless such shares are pledged to the Administrative Agent, for
the ratable benefit of the Lenders, as security for the Obligations and pursuant
to a stock pledge agreement in form and substance acceptable to the
Administrative Agent) or grant, or permit any Subsidiary to grant, any options,
warrants, conversion privileges or any other rights with respect thereto, in
addition to those shares which are issued and outstanding on the date hereof and
those options, warrants, conversion privileges or other rights described in
Schedule 4.1(w).
(s) Make or permit, or permit any of its Subsidiaries to make
or permit, any change in accounting policies or reporting practices including,
without limitation, any change in its Fiscal Year or fiscal periods, except as
required by or advisable under Generally Accepted Accounting Principles and only
after written notice thereof to the Administrative Agent specifying the nature
-91-
of such change and a detailed explanation of the reasons for such
change.
(t) Except as otherwise expressly permitted under the terms of
this Agreement or any other Loan Document, prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or make
any payment in violation of any subordination terms of, any Debt, other than the
prepayment of the Advances in accordance with the terms of this Agreement.
(u) Enter into or suffer to exist, or permit any of its
Subsidiaries to enter into or suffer to exist, any agreement prohibiting or
conditioning the creation or assumption of any Lien upon any of its property or
assets.
(v) Purchase, redeem, retire or otherwise acquire for value,
or set apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Subordinated Debt, except as permitted pursuant to the terms of
the Subordination Agreement.
(w) Consent to any modification, supplement or waiver of any
of the material provisions of any of the instruments and agreements evidencing
any Subordinated Debt.
(x) Enter into or suffer to exist, or permit any Subsidiary to
enter into or suffer to exist, any agreement providing for the payment of money
by the Borrower to any Affiliate of the Borrower, unless such payments have been
subordinated to the payment of the Obligations of the Borrower under the Loan
Documents pursuant to subordination agreements in form and substance reasonably
acceptable to the Administrative Agent.
-92-
(y) Add or terminate any Blocked Account or any bank as a
Blocked Account Bank from those listed in Schedule 4.1(ee) hereto, unless (i)
the Administrative Agent shall have received prior written notice of such
addition or termination, (ii) the applicable Loan Party, the Administrative
Agent and the corresponding Blocked Account Bank shall have entered into, and
delivered to the Administrative Agent an executed counterpart of, a Blocked
Account Agreement, and (iii) the applicable Loan Party shall have assigned all
rights of such Loan Party in the new Blocked Account (and in the cash, deposits,
instruments and amounts deposited therein from time to time) to the
Administrative Agent, for itself and the ratable benefit of the Lenders,
pursuant to an assignment agreement in form and substance acceptable to the
Administrative Agent.
(z) Finance any Capital Expenditure (other than Regular
Capital Expenditures and Capital Expenditures included in the Development
Capital Budget) other than with subordinated loans or capital contributions made
to the Borrower by Reading and/or any Affiliate of Reading (other than a
Subsidiary of the Borrower).
ARTICLE 6
SPECIAL PROVISIONS AS TO COLLATERAL
SECTION 6.1. Perfection of Security Interest. It is the intention of
the Lenders and the Borrower, and the Lenders and the Borrower hereby agree
that, until all obligations hereunder and under the Notes and other Loan
Documents have been fully satisfied, the Administrative Agent's Lien in the
Collateral, and all products and proceeds thereof, shall continue in full force
and effect. The Borrower shall take any and all steps requested by the
Administrative Agent to perfect, maintain and protect the Administrative Agent's
Lien in the Collateral, including, without limitation, executing and filing
security instruments, or amend-
-93-
ments thereof, in form and substance satisfactory to the Administrative Agent.
The Borrower shall pay the costs of, or incidental to, any recording or filing
of any security instrument concerning the Collateral and the reasonable costs
of, or incidental to, any and all other steps or procedures which the
Administrative Agent may request in order to perfect, maintain and protect the
Administrative Agent's Lien in the Collateral. If the Borrower fails to pay any
taxes, assessments or governmental charges levied or assessed or imposed upon or
with respect to the Collateral or any part thereof promptly when due (except to
the extent that the same are being contested by the Borrower in good faith by
appropriate proceedings and adequate reserves have been made therefor), the
Lenders may (but shall not be required to) pay the same and charge the cost
thereof to the Borrower's account with any Lender as part of the Obligations
payable hereunder on demand and secured by the Collateral. The Lenders agree
promptly to notify the Borrower prior to making any such payment, provided that
the failure to give such notice shall not affect any Lender's right to make such
payment and charge the amount thereof to any such account of the Borrower. In
order to protect or perfect any Lien which the Administrative Agent is granted
under any Loan Document, the Administrative Agent may, in its sole discretion,
maintain guards, discharge any Lien or encumbrance or bond the same, pay any
insurance, service bureau or warehouseman, or obtain any record and charge the
same to the Borrower's account with any Lender as part of the Obligations
payable hereunder on demand and secured by the Collateral.
SECTION 6.2. Provisions Relating to Receivables. The Borrower shall not
sell or assign or grant any Lien in any Receivable to any Person other than the
Administrative Agent for the ratable benefit of the Lenders, nor shall the
Borrower encumber, mortgage, pledge or grant any Lien in any of its Inventory to
anyone other than the Administrative Agent for the ratable benefit of the
Lenders. The Borrower shall place, or cause to be
-94-
placed, such notations in its financial statements as shall be effective to
disclose the assignment of all Receivables to the Administrative Agent (for the
ratable benefit of the Lenders) and the Administrative Agent's security
interest, assignment and Lien in, of or on all Collateral and all other security
held by or for the Administrative Agent for the ratable benefit of the Lenders.
The Borrower shall notify the Administrative Agent promptly of all disputes and
claims in excess of $150,000 and settle or adjust them at no expense to the
Administrative Agent or the Lenders, but no discount, credit or allowance shall
be granted to any customer or account debtor and no returns of merchandise shall
be accepted by the Borrower without the prior written consent of the Majority
Lenders, other than discounts, credits, allowances and returns of less than
$150,000 made, given or accepted in the ordinary course of the Borrower's
business. The Borrower shall notify the Administrative Agent promptly after
learning that any setoff in an amount of $150,000 or more has been made by a
Receivables debtor against any Receivable. Upon the occurrence of an Event of
Default the Administrative Agent or the Majority Lenders, at its or their
option, may (i) settle or adjust disputes and claims with respect to Receivables
directly with customers or account debtors for amounts and upon terms which the
Majority Lenders consider advisable unless the Borrower has substituted other
Receivables or Collateral in form and amount satisfactory to the Majority
Lenders and (ii) notify customers or account debtors at any time that
Receivables have been assigned to the Administrative Agent or of the
Administrative Agent's Lien therein, collect them directly and charge the
collection costs and expenses to the Borrower.
SECTION 6.3. Warranties with Respect to Receivables and Inventory. The
Borrower agrees, represents and warrants that all Inventory is and will be owned
by the Borrower free of all Liens, claims or encumbrances other than those in
favor of the Administrative Agent, for the ratable benefit of the Lenders, and
the
-95-
Permitted Liens and shall be kept by the Borrower at its places of business
specified in Schedule 4.1(s) hereto, and that the Borrower shall not remove the
Inventory therefrom except for the purposes of sale in the ordinary course of
its business. Except for sales of Inventory made in the ordinary course of its
business, the Borrower shall not sell, encumber (other than Permitted Liens) or
dispose of or permit the sale, encumbrance or disposal of any Inventory.
SECTION 6.4. Provisions Relating to Machinery and Equipment. The
Borrower shall (x) keep and maintain all Machinery and Equipment in good
operating condition and repair, reasonable wear and tear excepted, and shall
make all necessary replacements thereof so that the value and operating
efficiency thereof shall at all times be maintained and preserved, (y) promptly
inform the Administrative Agent of any additions to or deletions from the
Machinery and Equipment, and (z) not permit any such Machinery and Equipment to
become a fixture to real estate or accession to other personal property unless
the Administrative Agent has a first priority Lien in such real estate or other
personal property. The Borrower shall, immediately on demand therefor by the
Administrative Agent, deliver to the Administrative Agent any and all evidence
of ownership of any Machinery and Equipment. The Borrower shall not, without the
prior written consent of the Majority Lenders, sell, lease, grant a Lien in or
otherwise dispose of or encumber any Machinery and Equipment, or any part
thereof; provided, however, that (i) the Borrower may, without the prior written
consent of the Majority Lenders, sell obsolete Machinery and Equipment having a
market value not exceeding $150,000 in the aggregate during any Fiscal Year of
the Borrower and (ii) the Borrower may sell the Machinery and Equipment
installed as of the Closing Date at its existing Mayaguez Mall theaters. In the
event that any of the Machinery and Equipment is sold with the prior written
consent of the Majority Lenders as herein provided, or as otherwise permitted
pursuant to the
-96-
proviso to the preceding sentence, (I) if the Machinery and Equipment so sold is
not replaced by the Borrower within ninety (90) days after the sale or is
replaced by Machinery and Equipment leased by the Borrower pursuant to a
Capitalized Lease permitted by the terms of this Agreement, then if required by
the Majority Lenders the Borrower shall deliver all of the cash proceeds thereof
to the Administrative Agent, which proceeds shall be applied ratably to the
repayment of such Obligations of the Borrower as the Majority Lenders may
determine, and (II) if such sale is made in connection with the purchase by the
Borrower of replacement Machinery and Equipment, then the Borrower shall use the
cash proceeds thereof to pay the purchase price of such replacement Machinery
and Equipment and shall deliver to the Administrative Agent written evidence of
the use of the proceeds for such purchase within ninety (90) days after the
sale; provided, however, that in the case of the Machinery and Equipment
referred to in clause (ii) of the preceding sentence, the proceeds of sale may
be used by the Borrower within the time period set forth above for the payment
of Capital Expenditures relating to the development of the new Mayaguez Mall
theater location. All such replacement Machinery and Equipment purchased by the
Borrower shall be free and clear of all Liens, claims and encumbrances, except
for the Administrative Agent's Lien therein and the Permitted Liens. The
Borrower agrees to execute any and all instruments which the Administrative
Agent may request in order to perfect its Lien in all replacement Machinery and
Equipment.
SECTION 6.5. Collateral Reporting. (a) Within forty-five (45) days
after the end of each fiscal quarter, the Borrower shall provide the
Administrative Agent with schedules describing all Receivables created or
acquired by it (including the name and address of each account debtor if not
previously delivered to the Administrative Agent) during the immediately
preceding fiscal quarter and which continue to be outstanding as of such date,
and
-97-
shall execute and deliver confirmatory written assignments of such Receivables
to the Administrative Agent in such form as the Administrative Agent may
reasonably require; provided, however, that the Borrower's failure to execute
and deliver such schedules or assignments shall not affect or limit the
Administrative Agent's Lien or other rights in and to the Receivables. Together
with each schedule, the Borrower shall furnish agings of all Receivables of the
Borrower and, upon request therefor, copies of related customers' invoices or
the equivalent and copies of original shipping or delivery receipts for all
merchandise sold (or the equivalent) and such other documents as the
Administrative Agent may reasonably require.
(b) The Borrower shall provide to the Administrative Agent,
within forty-five (45) days after the end of each fiscal quarter, a schedule of
its Inventory showing the value thereof (at the lower of cost or market value),
in form and substance reasonably satisfactory to the Administrative Agent, and
shall execute and deliver confirmatory written instruments in such form as the
Administrative Agent may reasonably require pledging to the Administrative Agent
the Inventory described in such schedules or otherwise owned by the Borrower;
provided, however, that the Borrower's failure to execute and deliver such
confirmatory instruments, or to list any Inventory therein, shall not affect or
limit the Administrative Agent's Lien in the Inventory. All instruments and
certificates prepared by the Borrower which show the value of Inventory shall be
accompanied, upon request therefor by the Administrative Agent, by copies of
related purchase orders and invoices. The Borrower shall conduct an annual (or
more often when requested by the Administrative Agent if an Event of Default has
occurred and is continuing) physical count of the Inventory and a copy of each
such count shall be promptly supplied to the Administrative Agent accompanied by
a report of the value (at the lower of cost and market value) of such Inventory.
-98-
(c) Within forty-five (45) days after the end of each fiscal
quarter, the Borrower shall provide the Administrative Agent with schedules
describing all Leases and Material Contracts created, acquired or entered into
by it (including the name and address of each contracting party if not
previously delivered to the Administrative Agent) during the immediately
preceding fiscal quarter and shall execute and deliver leasehold mortgages with
respect to such Leases (if permitted under the terms of such Leases) and
confirmatory written assignments of Material Contracts (if permitted under the
terms of such Material Contracts) to the Administrative Agent in such form as
the Administrative Agent may reasonably require; provided, however, that the
Borrower's failure to execute and deliver such schedules or assignments shall
not affect or limit the Administrative Agent's Lien or other rights in and to
the Material Contracts.
(d) Simultaneously with the execution and delivery of this
Agreement, the Borrower shall furnish to the Administrative Agent a certificate
scheduling all items of Machinery and Equipment and designating the places where
such Machinery and Equipment is located. Thereafter, within sixty (60) days
after the end of each fiscal quarter, the Borrower shall furnish to the
Administrative Agent a certificate in such form as the Administrative Agent may
reasonably require as to any additions with an aggregate value of $100,000 or
more to, or deletions from, or any changes in the locations of, the Machinery
and Equipment scheduled on the original certificate or any other quarterly
certificate furnished to the Administrative Agent hereunder.
(e) In addition to the foregoing requirements, the Borrower
shall comply with such other reporting requirements as may be reasonably
required by the Majority Lenders through the Administrative Agent, and shall
furnish to the Administrative Agent such other documents and information with
respect to the
-99-
Collateral as Majority Lenders, through the Administrative Agent, may reasonably
request.
SECTION 6.6. Collections. The Administrative Agent and the Borrower
shall establish and maintain in favor of the Administrative Agent, for its
benefit and the ratable benefit of the Lenders, a special collateral account
(the "Cash Concentration Account") with the Administrative Agent under the
exclusive control and dominion of the Administrative Agent (which may be a
blocked account or such other arrangement as shall be required by the
Administrative Agent) for the deposit of all Cash Collateral. All Cash
Collateral that is received by the Borrower shall be received by the Borrower as
the Administrative Agent's trustee. At the end of each Business Day the Borrower
shall deposit, or cause to be deposited, all Cash Collateral (whether received
by delivery of currency or drafts, by electronic payment transfers or other
electronic means of payment or otherwise) in the Cash Concentration Account. So
long as no Event of Default shall have occurred and be continuing, the
Administrative Agent will transfer at the end of each Business Day (or at such
earlier time as the Administrative Agent and the Borrower may agree in writing)
to an operating account to be maintained by the Borrower with the Administrative
Agent (the "Operating Account"), and after applying collected funds in the Cash
Concentration Account in payment of any Obligations then due and payable, the
balance of any collected funds in the Cash Concentration Account.
SECTION 6.7. Application of Collateral. The Majority Lenders, in their
sole discretion, may (i) exchange, waive or release any security or portion of
the Collateral, (ii) enforce any security or portion of the Collateral following
the occurrence of an Event of Default, (iii) apply such security or any proceeds
of the Collateral following the occurrence of an Event of Default, and direct
the order or manner of sale thereof as the Majority Lenders, from time to time,
may determine, and
-100-
(iv) settle, compromise, collect or otherwise liquidate any such Collateral for
the Obligations in any manner following the occurrence of an Event of Default,
without affecting or impairing the right of the Administrative Agent or the
Lenders to take any other further action with respect to any security or
Collateral for the Obligations or any part thereof.
ARTICLE 7
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal of
or any interest on any Advance, or the Borrower shall fail to pay any fees or
amounts required to be paid pursuant to this Agreement within five (5) days
after such fees and amounts shall become due; or
(b) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Sections 5.1(b)(i), (c), (d)(i), (h), (i),
(l), (m), (o), (p), (q), (r), (s), (t), (u), (v), (w), or (x), Section 5.2 or
Section 6.6 hereof; or
(c) (i) The Borrower shall fail to perform the covenant
contained in Section 5.1(b)(iii) hereof and such failure shall remain unremedied
for a period of five (5) days after the occurrence thereof; or (ii) the Borrower
shall fail to perform or observe any term, covenant or agreement contained in
Sections 5.1(a), (b)(ii), (b)(iv), (d)(ii), (e), (f), (g), (j), (k) or (n) or
Article 6 (not including Section 6.6) hereof, or any Loan Party shall fail to
perform or observe any other term, covenant or agreement contained in any Loan
Document on its part to be performed or observed, and in any such case any such
failure shall remain unremedied for a period of fifteen (15) days
-101-
after written notice thereof shall have been given to the
Borrower by the Administrative Agent or the Majority Lenders; or
(d) Any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document to which it
is a party shall, when taken as a whole, prove to have been incorrect in any
material respect when made; or
(e) The Borrower or any Subsidiary thereof shall fail to pay
any principal of, premium or interest on any Debt that is outstanding in a
principal amount of $150,000 or more in the aggregate (excluding Debt evidenced
by the Notes) (as the case may be), when due and owing (whether at scheduled
maturity, by required prepayment, acceleration, demand or otherwise) or any
other default under any agreement or instrument relating to any such Debt, or
any other event, shall occur, if the effect of such default or event is to
accelerate, or to permit the acceleration of, or to permit the acceleration
after the giving of notice or passage of time or both, of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof; or
(f) Any Loan Party (other than Investment) or any of its
Subsidiaries shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party (other than Investment) or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of any
order for
-102-
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of sixty (60) days or any of the actions
sought in such proceeding (including, without limitation, the entry of any order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any substantial part of its property) shall
occur; or any Loan Party (other than Investment) or any of its Subsidiaries
shall take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(g) Any Reportable Event which the Majority Lenders believe
might constitute grounds for termination of any Plan maintained by the Borrower
or any Subsidiary thereof or by Holdings shall have occurred or if a United
States District Court appoints a trustee to administer any such Plan, or if the
PBGC shall institute proceedings to terminate any such Plan or to appoint a
trustee therefor; or if any Termination Event with respect to a Plan shall have
occurred, and sixty (60) days thereafter, (i) such Termination Event (if
correctable) shall not have been corrected and (ii) the then present value of
such Plan's vested benefits exceeds the then current value of assets accumulated
in such Plan; or if the Borrower or any Subsidiary thereof or Holdings as
employer under a Plan shall have made a complete or partial withdrawal from such
Plan and the Plan sponsor of such Plan shall have notified such withdrawing
employer that such employer has incurred an actual withdrawal liability which
materially adversely affects the financial condition of the Borrower or any
Subsidiary thereof or Holdings; or
(h) Any of the Liens established or purported to be
established by any of the Loan Documents delivered to the Admin-
-103-
istrative Agent pursuant to this Agreement shall for any reason not attributable
to the Administrative Agent or any Lender, except to the extent permitted by the
terms hereof or thereof, cease to create a valid and perfected first priority
Lien in any of the Collateral with an aggregate value of $100,000 or more
purported to be covered thereby securing the payment and performance of the
Obligations hereunder, under the Notes and the other Loan Documents; or
(i) There is a change in the ownership of Holdings or the
Borrower such that (i) Reading is no longer the legal and beneficial owner of
not less than one hundred percent (100%) of the total issued and outstanding
voting stock of Holdings or is no longer entitled to elect at least a majority
of the Board of Directors of Holdings, or (ii) Holdings is no longer the legal
and beneficial owner of not less than one hundred percent (100%) of the total
issued and outstanding voting stock of the Borrower or is no longer entitled to
elect at least a majority of the Board of Directors of the Borrower; or
(j) Any final and unappealable judgment or order for the
payment of money in excess of $150,000 which is not covered by insurance shall
be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of thirty (30) consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(k) Any non-monetary judgment or order shall be rendered
against the Borrower or any other Loan Party or any of its Subsidiaries that is
reasonably likely to have a Material Adverse Effect, and there shall be any
period of thirty (30) consecutive days during which a stay of enforcement of
such
-104-
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(l) The Administrative Agent shall at any time for any reason
cease to have in its favor for the ratable benefit of the Lenders a valid and
perfected first priority Lien in not less than one hundred percent (100%) of the
voting stock of the Borrower issued and outstanding from time to time; or
(m) Any provision of any Loan Document after delivery thereof
pursuant to this Agreement shall for any reason (other than pursuant to the
terms hereof or thereof) cease to be valid and binding on or enforceable against
any party to it (other than the Administrative Agent or any Lender), or any such
party shall so state in writing; or
(n) Any Lease or Material Contract shall have been terminated
prior to the stated expiration date thereof and such termination shall not have
been nullified, enjoined or otherwise stayed within a period of thirty (30) days
after the effective date of termination; or
(o) There shall have occurred a condition or a change of
circumstances which, taken as a whole, has or could reasonably be expected to
have a Material Adverse Effect on the assets, properties, operations,
performance or condition (financial or otherwise) of the Borrower or any
Subsidiary thereof;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Notes, all interest thereon and all other amounts
-105-
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to the Borrower or any of its Subsidiaries under the Federal Bankruptcy
Code, (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE 8
THE ADMINISTRATIVE AGENT
SECTION 8.1. Authorization and Action. Each Lender hereby appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes; provided, however, that the
Administrative Agent shall not be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law. The Administrative Agent agrees to give to each
-106-
Lender prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
SECTION 8.2. Administrative Agent's Reliance, etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.7;
(ii) may consult with legal counsel (including counsel for any of the Loan
Parties), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement or any other Loan
Document; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any other Loan Document on the part of any Loan Party or to inspect
the property (including the books and records) of any Loan Party; (v) shall not
be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document; and (vi) shall incur no liability under or in respect of this
Agreement or any other Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopier,
-107-
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 8.3. Citibank and Affiliates. With respect to its Commitment,
the Advances made by it and the Notes issued to it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Administrative Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, any of the Loan Parties, any of its Subsidiaries and any
Person who may do business with or own securities of the Borrower or any such
Subsidiary, all as if Citibank were not the Administrative Agent and without any
duty to account therefor to the Lenders.
SECTION 8.4. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.1(e), and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
SECTION 8.5. Indemnification. Each Lender agrees to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower), from and
against such Lender's ratable share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of
-108-
any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of this
Agreement or any Loan Document or any action taken or omitted by the
Administrative Agent under this Agreement or any Loan Document, provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the Administrative Agent promptly upon demand for its ratable share of any cost
and expenses (including counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and the Loan Documents, to the extent
that the Administrative Agent is not reimbursed for such expenses by the
Borrower. For purposes of this Section, the Lenders' respective ratable shares
of any amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lenders, plus (b) their respective Commitments at such time. The
failure of any Lender to reimburse the Administrative Agent promptly upon demand
for its ratable share of any amount required to be paid by the Lenders to the
Administrative Agent as provided herein shall not relieve any other Lender of
its obligation hereunder to reimburse the Administrative Agent for its ratable
share of such amount, but no Lender shall be responsible for the failure of any
other Lender to reimburse the Administrative Agent for such other Lender's
ratable share of such amount.
SECTION 8.6. Successor Administrative Agent. The Adminis-
trative Agent may resign at any time by giving written notice thereof to the
Lenders and the Borrower and may be removed at any
-109-
time with or without cause by the Majority Lenders. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Lenders, and shall have accepted such appointment,
within thirty (30) days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the laws of the United States of America or the
Commonwealth of Puerto Rico and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Amendments, etc. No amendment or waiver of any provision
of this Agreement, the Notes or any other Loan Documents, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Lenders (and, in the case of
any such amendment, by the Borrower), and then such waiver or consent shall be
effective only in the specific instance and for
-110-
the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the Lenders (and,
in the case of any such amendment, by the Borrower), do any of the following at
any time: (i) waive any of the conditions specified in Article 3, (ii) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the Advances, or the number of Lenders that shall be required for
the Lenders or any of them to take any action hereunder, (iii) amend or waive
Section 5.2(e) with respect to all or substantially all of the Collateral or any
defined term to the extent used therein with respect thereto, (iv) permit the
creation, incurrence, assumption or existence of any Lien (other than Permitted
Liens and Permitted Encumbrances) on all or substantially all of the Collateral
to secure any Obligations other than Obligations owing to the Lenders and the
Administrative Agent under the Loan Documents, (v) amend this Section 9.1, (vi)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (vii) reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder, (viii) postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder or amend Section 2.9(b), (ix) limit the liability of any party
under any Loan Document, or (x) release any Collateral except to the extent
permitted by the Loan Documents; and provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above to take such action, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document. Each amendment shall be filed with the proper and necessary
authorities, offices and public registries in the Commonwealth of Puerto Rico,
and the Borrower agrees to execute, and to cause each Subsidiary to execute, all
documents which may be reasonably required by the Administrative Agent in
connection with such filing (including,
-111-
without limitation, the corresponding amendments to any security instruments).
SECTION 9.2. Notices, etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered personally or by courier, if to the Borrower, at Miramar
Plaza Center, Suite 608, 954 Ponce de Leon Avenue, Santurce, Puerto Rico 00907
(Facsimile Number: 809-721-8385), with copies to Reading Company, One Penn
Square West, Suite 1300, 30 South 15th Street, Philadelphia, Pennsylvania
19102-4813, Attention: Chief Financial Officer (Facsimile Number: 215-569-2862)
and to Fiddler, Gonzalez & Rodriguez, PO Box 363507, San Juan, Puerto Rico
00936-3507, Attention: Leopoldo J. Cabassa, Esq. (Facsimile Number:
809-759-3108); if to any Lender, at its address specified opposite its name on
the signature page hereof or in the Assignment and Acceptance pursuant to which
it became a Lender; and if to the Administrative Agent, at its address at 252
Ponce de Leon Avenue, Hato Rey, San Juan, Puerto Rico 00917, Attention:
Corporate Banking Group (Facsimile No. (809) 766-1434); or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective three (3) days after
being deposited in the mails, on the day when transmitted by telecopier, on the
day when delivered to the telegraph company, on the day when confirmed by telex
answerback or on the day when delivered to the cable company, respectively, and
when delivered personally or by courier, on the day when delivery is made.
Notwithstanding the foregoing, notices and communications to the Administrative
Agent pursuant to Articles 2, 3 or 8 shall not be effective until received by
the Administrative Agent.
-112-
SECTION 9.3. No Waiver; Remedies. No failure on the part of any Lender
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.4. Costs, Expenses and Taxes; Indemnification. (a) The
Borrower agrees to pay on demand all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement, the Notes, the
Loan Documents and the other documents to be delivered hereunder and under the
other Loan Documents, including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement and under the other Loan Documents. The
Borrower further agrees to pay on demand all reasonable costs and expenses, if
any (including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) after the occurrence of an Event of Default of this Agreement, the
Notes, the Loan Documents and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 9.4(a). In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Loan Documents and the other documents to be delivered
hereunder (excluding taxes imposed or measured by the net income or profits of
the Administrative Agent and/or the Lenders), and agrees to save the
Administrative Agent
-113-
and each Lender harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes.
(b) The Borrower hereby agrees to indemnify and hold harmless
the Administrative Agent and each Lender and each of their Affiliates and their
officers, directors, employees, agents, advisors and representatives (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, the reasonable fees and
expenses of counsel), joint or several, that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of, or in connection with the preparation for a
defense of, any investigation, litigation or proceeding arising out of, related
to or in connection with (i) the transactions contemplated by this Agreement and
the other Loan Documents or any use made or proposed to be made with the
proceeds of the Advances or (ii) the actual or alleged presence of hazardous
materials on any property of the Borrower or any of its Subsidiaries or any
Environmental Action relating in any way to the Borrower or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower or any of its Subsidiaries, its or their
respective directors, shareholders or creditors or an Indemnified Party or any
Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. The Borrower further
agrees that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Borrower or its shareholders
or creditors for or in connection with the transactions contemplated by this
Agreement and the other
-114-
Loan Documents, except to the extent that such liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct; provided,
however, that the provisions of this Section shall not in any way alter any
contractual obligation or contractual remedy of any Indemnified Party. The
Borrower also agrees not to assert any claim against the Administrative Agent,
any Lender, any of their affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to any of the transactions contemplated herein or in any other Loan
Document or the actual or proposed use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or 936 Rate Advance is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or conversion pursuant to Sections
2.8(b), 2.9 or 2.11, acceleration of the maturity of the Notes pursuant to
Section 7.1 or for any other reason, such Borrower shall, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs and expenses that it may
reasonably incur as a result of such payment, including, without limitation, any
loss (excluding loss of anticipated profits with respect to the relevant
Advance), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain such
Advance. Such Lender will determine the losses, costs and expenses payable under
this sub-section (c) acting reasonably and in good faith.
-115-
(d) If any Loan Party fails to pay when due any costs,
expenses or other amounts payable by it under any Loan Document, including,
without limitation, fees and expenses of counsel and indemnities, such amount
may be paid on behalf of such Loan Party by the Administrative Agent or any
Lender, in its sole discretion.
SECTION 9.5. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 7.1 to authorize the Administrative
Agent to declare the Notes due and payable pursuant to the provisions of Section
7.1, each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower against any and all of the Obligations of the Borrower
now or hereafter existing under this Agreement, the Note(s) held by such Lender
and the other Loan Documents, whether or not such Lender shall have made any
demand under this Agreement, such Note(s), such other Loan Documents and
although such Obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
any such set-off and application. The rights of each Lender under this Section
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.
SECTION 9.6. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have been notified by each Bank that such
Bank has executed it and thereafter shall be binding upon and inure to the
benefit of
-116-
the Borrower, the Administrative Agent and each Lender and their respective
successors and assigns, except that the Borrower shall have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Lenders.
SECTION 9.7. Assignments and Participations. (a) Each Lender may assign
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitments, the Advances owing to it, the Note or Notes held by
it and the remaining Loan Documents); provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all rights
and obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $3,000,000 (unless such lesser amount is the
entire amount of such assigning Lender's Commitment or outstanding Advances) and
shall be an integral multiple of $100,000, (iii) each such assignment shall be
to an Eligible Assignee which on the date of such assignment has sufficient 936
Funds available to fund the outstanding Advances then being assigned to it (but
such condition shall apply only if 936 Funds are then generally available in
Puerto Rico for funding loans), and (iv) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing and recordation fee of
$2,500.00. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (A) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (B) the
-117-
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.1(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative
-118-
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Commitments of, and principal amount of the Advances
owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Note or Notes subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit F hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrower. Within five (5) Business
Days after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or new Notes to the order of such
-119-
Eligible Assignee in an amount equal to the Commitments assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Commitments hereunder, a new Note or new Notes to the order of the assigning
Lender in an amount equal to the Commitments retained by it hereunder. Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the effective
date of such Assignment and shall otherwise be in substantially the form of
Exhibit B or Exhibit C, as the case may be.
(e) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitments to the Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement, and (iv)
the Borrower, the Administrative Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section,
disclose to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential infor-
-120-
mation relating to the Borrower received by it from such Lender pursuant to the
terms of Section 9.12.
SECTION 9.8. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.9. Survival of Covenants. All covenants, agreements,
representations and warranties made by the Borrower in this Agreement or in any
other Loan Document or any instrument, document or certificate delivered
pursuant hereto or thereto shall be deemed to have been material and relied on
by the Lenders, notwithstanding any investigation made by the Lenders, and shall
survive the execution and delivery of this Agreement and of such instrument,
document or certificate until repayment of all amounts due hereunder and under
the Notes; provided, however, that the Obligations of the Borrower under Section
9.4 of this Agreement shall survive such repayment.
SECTION 9.10. Application of Payments. The Administrative Agent and
each of the Lenders shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the Obligations of
the Borrower. To the extent that the Borrower or any Loan Party makes a payment
or payments to the Administrative Agent or any Lender or the Administrative
Agent or any Lender receives any payment or proceeds of the Collateral for the
Borrower's benefit, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law or state, commonwealth or federal law,
-121-
or equitable cause, then, to the extent of such payment or proceeds received,
the Obligations of the Borrower or part thereof intended to be satisfied shall
be revived and continue in full force and effect, as if such payment or proceeds
had not been received by the Administrative Agent or any such Lender.
SECTION 9.11. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent and
each of the Lenders severally agrees to keep confidential all non-public
information pertaining to the Loan Parties or any of their respective
Subsidiaries which is provided to it by any such parties in accordance with such
Lender's customary procedures for handling confidential information of this
nature, and shall not disclose such information to any Person except (i) to the
extent such information is public when received by such Lender or becomes public
thereafter due to the act or omission of any party other than a Lender, (ii) to
the extent such information is independently obtained from a source other than
the Loan Parties or any of their respective Subsidiaries and such information
from such source is not, to such Lender's knowledge, subject to any obligation
of confidentiality or, if such information is subject to an obligation of
confidentiality, that disclosure of such information is permitted, (iii) to any
Affiliate of the Administrative Agent or such Lender, counsel, auditor, examiner
or any regulatory authority having jurisdiction over the Administrative Agent or
such Lender, accountants and other consultants retained by the Administrative
Agent or such
-122-
Lender, (iv) in connection with any litigation or the enforcement of the rights
of any Lender or the Administrative Agent under this Agreement or any other Loan
Document, (v) to the extent required by any applicable statute, rule or
regulation or court order (including, without limitation, by way of subpoena) or
pursuant to the request of any Governmental Authority having jurisdiction over
any Lender or the Administrative Agent, or (vi) to the extent disclosure to
other Persons is appropriate in connection with any proposed or actual
assignment or grant of a participation to such other Person (who will in turn be
required to maintain confidentiality as if it were a Lender party to this
Agreement). In no event shall the Administrative Agent or any Lender be
obligated or required to return any such information or other materials
furnished by the Loan Parties pursuant to this Agreement or the other Loan
Documents.
SECTION 9.13. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES
OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
SECTION 9.14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
-123-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
READING CINEMAS OF PUERTO RICO, INC.
By: /s/ Eduardo Llauger
-----------------------------------
Eduardo Llauger
Vice President
ADMINISTRATIVE AGENT:
CITIBANK, N.A., as Administrative Agent
By: /s/ Maritza Abadia
-----------------------------------
Maritza Abadia
Vice President
-124-
BANKS:
CITIBANK, N.A.
Commitment: By: /s/ Maritza Abadia
$15,000,000.00 ------------------------------------
Maritza Abadia
Vice President
Address for Notices:
252 Ponce de Leon Avenue
Hato Rey
San Juan, Puerto Rico 00917
Attention: Corporate Banking Group
Facsimile (809) 766-1434
Lending Office:
252 Ponce de Leon Avenue
Hato Rey
San Juan, Puerto Rico 00917
Facsimile (809) 766-1434
Affidavit No. ________
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
20th day of December, 1995 by the following persons who are personally known to
me: Eduardo Llauger, of legal age, married, executive and resident of San Juan,
Puerto Rico, in his capacity as Vice President of Reading Cinemas of Puerto
Rico, Inc., and Maritza Abadia, of legal age, married, banker and resident of
San Juan, Puerto Rico, in her capacity as Vice President of Citibank, N.A.
------------------------------
Notary Public
EXHIBIT INTENTIONALLY OMITTED
EXHIBIT A
SCHEDULE 2.4(b)
---------------
MANDATORY COMMITMENT REDUCTIONS
-------------------------------
Date Amount
---- ------
March 31, 1998 $562,500.00
June 30, 1998 $562,500.00
September 30, 1998 $562,500.00
December 31, 1998 $562,500.00
March 31, 1999 $637,500.00
June 30, 1999 $637,500.00
September 30, 1999 $637,500.00
December 31, 1999 $637,500.00
March 31, 2000 $675,000.00
June 30, 2000 $675,000.00
September 30, 2000 $675,000.00
December 31, 2000 $675,000.00
March 31, 2001 $637,500.00
June 30, 2001 $637,500.00
September 30, 2001 $637,500.00
December 31, 2001 $637,500.00
March 31, 2002 $637,500.00
June 30, 2002 $637,500.00
September 30, 2002 $637,500.00
December 31, 2002 $637,500.00
March 31, 2003 $600,000.00
June 30, 2003 $600,000.00
September 30, 2003 $600,000.00
December 31, 2003 $600,000.00
SCHEDULE 4.1(aa)
----------------
LEASES (REAL PROPERTY)
----------------------
[Show street address, name of lessor and lessee,
expiration date and annual rental cost]
<TABLE>
<CAPTION>
PREMISES/LOCATION LESSOR EXPIRE MINIMUM RENT*
- - ----------------- ------ ------ -------------
<S> <C> <C> <C>
READING CINEMAS OF PUERTO RICO, INC.:
1. Plaza Theaters:
Plaza Las Americas Mall Plaza Las Americas, Inc. 6/30/13 $681,530-to6/98
Hato Rey, PR 00918 $851,912-to 6/03
$908,706-to end
2. Hatillo Theater:
Plaza del Norte TJAC (Hatillo), S.E. 3/31/03 $239,784
Hatillo, PR 00926
3. Cayey Theater:
Cayey Shopping Center Desarrolladora de
Cayey, PR 00663 Centros Comerciales 2/28/96 $10,000
4. Mayaguez Theaters:
Route 2 Empresas Puertorriquenas 10/4/22 $55,000
Hormigueros, PR 00680
5. Centro Theaters:
Santa Rosa Mall
Ave. Aguas Buenas Calle Cinema Centro, S.E. 3/16/94 $116,480
Bayamon, PR 00959
6. Hurnacao Theater:
Plaza Palma Real
P.R. #3 and P.R. #53 Palma Real Associates, S.E. 12/??/05 $164,937
Hurnacao, P.R.
7. University Theater:
Mayaguez, Shopping Center Mayaguez Shopping Center, 20 yrs from $186,000
Mayaguez, P.R. S.E. date of open.
</TABLE>
<TABLE>
<CAPTION>
PREMISES/LOCATION LESSOR EXPIRE MINIMUM RENT*
- - ----------------- ------ ------ -------------
<S> <C> <C> <C>
READING CINEMAS OF PUERTO RICO, INC.:
8. Principal Office:
Miramar Plaza Center
Ave. Ponce de Leon 954 Miramar Plaza, S.E. 5/31/98 $30,236
Suite 608
San Juan, PR 00907
9. Warehouse:
Corona Commercial Park
Antigua Cerveceria Corona Munoz Bermudez, S.E. 3/31/97 $21,420
Parada 20, Calle Progreso
Santurce, PR 00907
10. Apartment:
Condado Princess Condo
#2 Washington Street Roberto Izquierdo 12/31/96 $26,400
Apartment #802
Condado, PR 00907
SENORIAL THEATERS, INC.:
11. Senorial Theater:
Senorial Shopping Center FNE Associates 7/5/07 $25,000
Cupey, P.R. 00926
* Does not include percentage rent, common area maintenance, or other costs
which may be billed by lessors as reimbursements of expenses.
</TABLE>
SCHEDULE 4.1 (bb)
-----------------
MATERIAL CONTRACTS
------------------
[Show names of parties, subject matter and term.]
1. Advertising Agreement dated February 1, 1991 between Theater Acquisitions
of Puerto Rico, Inc. and Guastella Film Producers, Inc.
2. Advertising Agreement dated December 1, 1994 between Reading Cinemas of
Puerto Rico, Inc., and Coca-Cola Puerto Rico Bottlers.
3. Cleaning Service Contract dated February 28, 1995 between Reading Cinemas of
Puerto Rico, Inc. and Mirage Cleaning Services, Inc.
4. Management Agreement dated December 1, 1995 between Reading Cinemas of
Puerto Rico, Inc. and Reading Company.
5. Reimbursement Agreement dated August 17, 1994 between Theater Acquisitions
of Puerto Rico, Inc. and Reading Company.
6. Standard Form of Agreement dated September 1, 1995 by and between Reading
Cinemas of Puerto Rico, Inc. and Miramar Construction.
7. Convenio Colectivo (Union Contract) dated May 11, 1994 between Theater
Acquisitions of Puerto Rico Inc. and S.I.U. De Puerto Rico, Caribe y
Latinoamerica.
8. Agency and Custodial Agreement dated January 1, 1995 between Senorial
Theaters, Inc. and Reading Cinemas of Puerto Rico, Inc.
The Company has issued various purchase orders for supplies, materials and
installation of same at the Humacao theater presently under construction.
The Company enters into film rental agreements with film distributors in the
ordinary course of business.
SCHEDULE 4.1(cc)
----------------
PATENTS, TRADEMARKS, TRADE NAMES, SERVICE MARKS AND COPYRIGHTS
--------------------------------------------------------------
(including licenses and pending applications)
[Show jurisdiction in which registered, registration number,
date of registration and expiration date.]
CineVista trade name (Puerto Rico; Reg. No. 470; Registra-
tion Date - 7/28/95; Expiration Date - ___________)
CineVista & design (Puerto Rico; Reg. No. ____; Registration
Date - 3/28/95; Expiration Date - ____________)
SCHEDULE 4.1(ee)
----------------
BLOCKED ACCOUNT BANKS
---------------------
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
FIRST AMENDMENT dated as of February 7, 1996 by and among READING
CINEMAS OF PUERTO RICO, INC., a Puerto Rico corporation (the "Borrower"), the
banks (the "Banks") listed on the signature pages hereof, and CITIBANK, N.A.
("Citibank"), as administrative agent (the "Administrative Agent") for the
Lenders hereunder.
W I T N E S S E T H
WHEREAS, the Borrower, the Administrative Agent and the Banks entered
into a Credit Agreement dated as of December 20, 1995 (the "Credit Agreement";
all capitalized terms used herein which are not otherwise defined, shall have
the meanings set forth therein);
WHEREAS, the Borrower, the Administrative Agent and the Banks have
agreed to amend certain provisions of the Credit Agreement;
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Amendments to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, hereby amended as follows:
a. A new defined term is hereby added to Section 1.1 of the
Credit Agreement to read, in its entirety, as follows:
"`Cine Vista' means Cine Vista Holdings Inc.,
a Delaware Corporation."
b. Section 3.1(d)(ii)(VI) is hereby amended to read, in
its entirety, as follows:
"(VI) a pledge of not less than 100% of the
shares of voting stock (the "Pledged Shares") of Holdings
<PAGE>
-2-
and the Borrower pursuant to pledge agreements executed by each of the
legal and beneficial owners thereof, together with certificates
representing the Pledged Shares referred to therein accompanied by
undated stock powers executed in blank;"
c. Section 3.1(q) is hereby amended to read, in its
entirety, as follows:
"(q) Certificates in form and substance acceptable to
the Administrative Agent and executed by the Secretary or an Assistant
Secretary of Holdings and the Borrower, certifying as to certain
matters relating to the issued and outstanding capital stock of the
Borrower and Holdings."
d. New subsections (xviii), (xix) and (xx) are hereby added to
Section 5.1(c) of the Credit Agreement, to read, in their entirety, as follows:
"(xviii) within ten (10) days after the end of each
fiscal quarter of each Fiscal Year of the Borrower, commencing with the
fiscal quarter ending on June 30, 1996 an estoppel certificate
containing the information set forth in Section 22.5 of the Plaza Lease
duly executed by Plaza Las Americas, Inc."
"(xix) on or before the tenth day of each month,
commencing with the month of February, 1996, evidence acceptable to the
Administrative Agent that the Borrower has satisfied all payment
obligations of the Borrower then due and payable under the Plaza
Lease."
"(xx) as soon as available and in any event within
thirty (30) days of being recorded in the Registry of Property of
Puerto Rico, the duly recorded certified copy of each Leasehold
Mortgage pending recordation as of the date hereof."
e. A new subsection (y) is hereby added to Section 5.1 of the
Credit Agreement, to read, in its entirety, as follows:
"(y) At any time, upon the request of the
Administrative Agent, open and maintain at all times in
<PAGE>
-3-
the Borrower's name, and at its sole cost and expense, a post office
box at the Central Post Office in San Juan, Puerto Rico (00936) or, if
a box is not available at such location, at any other post office
location acceptable to the Administrative Agent to which the
Administrative Agent shall have exclusive access. Upon opening such
post office box, the Borrower shall instruct Plaza Las Americas, Inc.,
in writing, that all notices to be delivered to the Borrower under the
Plaza Lease shall be delivered to such post office box and to such
other address as the Borrower may select. In connection with the
foregoing, the Borrower hereby authorizes the Administrative Agent to
receive, open and dispose of all mail addressed to the Borrower
delivered to such post office box; provided, however, that the
Administrative Agent shall have no obligation to notify or send copies
of any of such correspondence to the Borrower."
f. Section 7.1(i) is hereby amended to read, in its
entirety, as follows:
"(i) There is a change in the ownership of Cine
Vista, Holdings or the Borrower such that (1) Reading is no longer the
legal and beneficial owner of not less than one hundred percent (100%)
of the total issued and outstanding voting stock of Cine Vista or is no
longer entitled to elect at least a majority of the Board of Directors
of Cine Vista, (2) Cine Vista is no longer the legal and beneficial
owner of not less than one hundred percent (100%) of the total issued
and outstanding voting stock of Holdings or is no longer entitled to
elect at least a majority of the Board of Directors of Holdings, or (3)
Holdings is no longer the legal and beneficial owner of not less than
one hundred percent (100%) of the total issued and outstanding voting
stock of the Borrower or is no longer entitled to elect at least a
majority of the Board of Directors of the Borrower; or"
g. Section 7.1(l) is hereby amended to read, in its
entirety, as follows:
"(l) The Administrative Agent shall at any time for
any reason cease to have in its favor for the ratable benefit of the
Lenders a valid and perfected first priority Lien in not less than one
hundred percent (100%)
<PAGE>
-4-
of the voting stock of Holdings and the Borrower issued
and outstanding from time to time; or"
h. Paragraph 7 of Schedule 1 of Exhibit D to the Credit
Agreement is hereby amended to read, in its entirety, as follows:
"7. pledge of 100% of the voting stock of
Holdings, the Borrower and the Borrower's Subsidiaries."
Section 2. Execution of the Allonge. Simultaneously with the execution
hereof and effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 3 hereof, the Note is being
amended as set forth in an allonge substantially in the form of Exhibit A hereto
(the "Allonge").
Section 3. Conditions of Effectiveness. This Amendment shall become
effective when, and only when the Bank shall have received the same executed by
the Borrower and Sections 1 and 2 hereof shall become effective when, and only
when, the Administrative Agent shall have additionally received all of the
following documents, each document (unless otherwise indicated) being dated the
date hereof, in form and substance satisfactory to the Bank:
a. Certified copies of (a) the resolutions of the Board of
Directors of each Loan Party approving this Amendment and the matters
contemplated hereby and (b) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment and
the matters contemplated hereby.
b. Amendment to the Agreement for the Creation of a Factor's
Lien under the Provisions of Act No. 86, approved June 24, 1954, dated December
20, 1995, executed by the Borrower and the Administrative Agent.
<PAGE>
-5-
c. Personal Property Mortgage executed by the Borrower and the
Administrative Agent with respect to the personal property located at the
Senorial theater.
d. Amendment to Personal Property Mortgage Notes Pledge
Agreement dated December 20, 1995, executed by the Borrower and the
Administrative Agent.
e. Certificate, in form and substance acceptable to the
Administrative Agent and executed by the Secretary or an Assistant Secretary of
Holdings, certifying as to certain matters relating to the issued and
outstanding capital stock thereof.
f. Stock Pledge Agreement executed by Cine Vista
Holdings, Inc. pursuant to which it pledges all of the issued and
outstanding stock of Holdings.
g. The Allonge.
Section 4. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
a. The execution, delivery and performance by the Borrower of
this Amendment, the Allonge and the Loan Documents to which it is or is to be a
party are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action and do not contravene (1) the Borrower's charter
or by-laws or (2) any law or any contractual restriction binding on or affecting
the Borrower.
b. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by
<PAGE>
-6-
the Borrower of this Amendment, the Allonge or any of the other
Loan Documents to which it is or is to be a party.
c. This Amendment, the Allonge and each of the other Loan
Documents to which the Borrower is a party constitute legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms except to the extent enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditor's rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
d. The Loan Documents consisting of security agreements to
which any Loan Party is a party constitute valid and perfected first priority
Liens in and to the collateral covered thereby enforceable against all third
parties in all jurisdictions and secure the payment of all Obligations of the
Borrower and the other Loan Parties under the Loan Documents, as the same may be
amended hereby; and the execution, delivery and performance of this Amendment
and the Allonge do not adversely affect the aforesaid Liens created by such Loan
Documents.
e. The representations and warranties of the Loan Parties
contained in the Credit Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date hereof as though made on
and as of this date (except to the extent any representation or warranty is made
as of a specific date, in which case such representation and warranty shall be
true and correct in all material respects as of such date).
f. No event has occurred and is continuing which constitutes a
Default or an Event of Default.
Section 5. Reference to and Effect on the Loan Documents.
<PAGE>
-7-
a. Upon the effectiveness of Sections 1 and 2 hereof, on and
after the date hereof, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby and each reference in the Note to "this Note", "hereunder",
"hereof" or words of like import referring to the Note and each reference in the
other Loan Documents to "the Note", "thereunder", "thereof" or words of like
import referring to the Note shall mean and be a reference to the Note as
amended by the Allonge.
b. The following Loan Documents are hereby amended as
set forth below:
(1) The Assignment of Accounts Receivable Agreement
dated December 20, 1995 between the Borrower and the Administrative
Agent, for itself and as Agent for the Banks, is amended to reflect the
amendment of the Credit Agreement by this Amendment and the amendment
of the Note by the Allonge, in order that the Credit Agreement and the
Note, as so amended, shall continue to be secured by such Agreement as
part of the Obligations (as defined therein).
(2) The Personal Property Mortgage Notes Pledge
Agreement dated December 20, 1995 between the Borrower and the
Administrative Agent, for itself and as Agent for the Banks, is amended
to reflect the amendment of the Credit Agreement by this Amendment and
the amendment of the Note by the Allonge, in order that the Credit
Agreement and the Note, as so amended, shall continue to be secured by
such Agreement as part of the Obligations (as defined therein).
<PAGE>
-8-
(3) The Leasehold Mortgage Notes Pledge Agreement
dated December 20, 1995 between the Borrower and the Administrative
Agent, for itself and as Agent for the Banks, is amended to reflect the
amendment of the Credit Agreement by this Amendment and the amendment
of the Note by the Allonge, in order that the Credit Agreement and the
Note, as so amended, shall continue to be secured by such Agreement as
part of the Obligations (as defined therein).
(4) The Assignment Agreement (Material Contracts)
dated December 20, 1995 between the Borrower and the Administrative
Agent, for itself and as Agent for the Banks, is amended to reflect the
amendment of the Credit Agreement by this Amendment and the amendment
of the Note by the Allonge, in order that the Credit Agreement and the
Note, as so amended, shall continue to be secured by such Agreement as
part of the Obligations (as defined therein).
(5) The Assignment Agreement (Leases) dated December
20, 1995 between the Borrower and the Administrative Agent, for itself
and as Agent for the Banks, is amended to reflect the amendment of the
Credit Agreement by this Amendment and the amendment of the Note by the
Allonge, in order that the Credit Agreement and the Note, as so
amended, shall continue to be secured by such Agreement as part of the
Obligations (as defined therein).
(6) The Pledge and Assignment Agreement (Blocked
Accounts) dated December 20, 1995 between the Borrower and the
Administrative Agent, for itself and as Agent for the Banks, is amended
to reflect the amendment of the Credit Agreement by this Amendment and
the amendment of the Note by the Allonge, in order that the Credit
Agreement and the Note, as so
<PAGE>
-9-
amended, shall continue to be secured by such Agreement as part of the
Obligations (as defined therein).
(7) The Collateral Assignment of Intangibles
Agreement dated December 20, 1995 between the Borrower and the
Administrative Agent, for itself and as Agent for the Banks, is amended
to reflect the amendment of the Credit Agreement by this Amendment and
the amendment of the Note by the Allonge, in order that the Credit
Agreement and the Note, as so amended, shall continue to be secured by
such Agreement as part of the Obligations (as defined therein).
Upon the effectiveness of this Amendment, each reference in any of the
above-referenced Loan Documents to "this Agreement", "hereunder", "hereof" or
words of like import referring to such document, and each reference in the other
Loan Documents to such document, shall mean and be a reference to such document
as amended hereby. Except as specifically amended above, the foregoing Loan
Documents shall remain in full force and effect and such Loan Documents are
hereby in all respects ratified and confirmed.
Section 6. Waiver. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Administrative Agent or the Banks under any of
the Loan Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
Section 7. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Amendment, The Allonge and the other instruments and documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with
<PAGE>
-10-
respect thereto and with respect to advising the Administrative Agent as to its
rights and responsibilities hereunder and thereunder. The Borrower further
agrees to pay on demand all costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) after
the occurrence of an Event of Default of this Amendment, the Allonge and the
other instruments and documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 7. In addition, the Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment, the Allonge and
the other instruments and documents to be delivered hereunder (excluding taxes
imposed or measured by the net income or profits of the Administrative Agent
and/or the Lenders), and agrees to save the Administrative Agent harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes.
Section 8. No Novation. This Amendment shall not in any way constitute
an extinctive novation of the Obligations. Except as specifically amended hereby
and by the Allonge, the Credit Agreement and the Note shall remain in full force
and effect.
Section 9. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
<PAGE>
-11-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
READING CINEMAS OF PUERTO RICO, INC.
By: /s/ Eduardo Llauger
----------------------------------
Eduardo Llauger
Vice President
ADMINISTRATIVE AGENT:
CITIBANK, N.A., as Administrative Agent
By: /s/ Maritza Abadia
------------------------------------
Maritza Abadia
Vice President
BANKS:
CITIBANK, N.A.
By: /s/ Mariza Abadia
------------------------------------
Maritza Abadia
Vice President
Address for Notices:
252 Ponce de Leon Avenue
Hato Rey
San Juan, PR 00917
Attention: Corporate Banking Group
Facsimile (809) 766-1434
Lending Office:
252 Ponce de Leon Avenue
Hato Rey
San Juan, PR 00917
Facsimile (809) 766-1434
<PAGE>
-12-
Affidavit No. ________
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
7th day of February, 1996 by the following persons who are personally known to
me: Eduardo Llauger, of legal age, married, executive and resident of San Juan,
Puerto Rico, in his capacity as Vice President of Reading Cinemas of Puerto
Rico, Inc. and Maritza Abadia, of legal age, married, banker and resident of San
Juan, Puerto Rico in her capacity as Vice President of Citibank, N.A.
------------------------------
Notary Public
The undersigned, as a party to certain Loan Documents executed in
connection with that certain Credit Agreement dated December 20, 1995 (the
"Credit Agreement"; all capitalized terms used herein that are not otherwise
defined shall have the meanings set forth in the Credit Agreement) by and among
Reading Cinemas of Puerto Rico, Inc., Citibank, N.A., as Administrative Agent,
and the Banks listed on the signature pages thereof, hereby consents to the
terms of the above First Amendment to Credit Agreement (the "Amendment") and
hereby confirms and agrees that (i) the Loan Documents executed thereby are, and
shall continue to be, in full force and effect and each is hereby ratified and
confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, each reference in the Loan Documents to
the Credit Agreement, "thereunder", "thereof" or words of like import shall mean
and be a reference to the Credit Agreement as amended by the Amendment and each
reference in the Loan Documents to the Note, "thereunder", "thereof" or words of
like import shall mean and be a reference to the Note as amended by the Allonge,
and (ii) the Loan Documents and all of the collateral described in each of such
documents do, and shall continue to, secure the payment of all of the
obligations described in the Credit Agreement, as amended by the Amendment, and
the Note, as amended by the Allonge.
PUERTO RICO HOLDINGS, INC.
By: /s/ Eduardo Llauger
-------------------------
Name:
Title:
<PAGE>
Affidavit No. ________
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
7th day of February, 1996 by the following person who is personally known to me:
------------------------------
Notary Public
The undersigned, as a party to certain Loan Documents executed in
connection with that certain Credit Agreement dated December 20, 1995 (the
"Credit Agreement"; all capitalized terms used herein that are not otherwise
defined shall have the meanings set forth in the Credit Agreement) by and among
Reading Cinemas of Puerto Rico, Inc., Citibank, N.A., as Administrative Agent,
and the Banks listed on the signature pages thereof, hereby consents to the
terms of the above First Amendment to Credit Agreement (the "Amendment") and
hereby confirms and agrees that (i) the Loan Documents executed thereby are, and
shall continue to be, in full force and effect and each is hereby ratified and
confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, each reference in the Loan Documents to
the Credit Agreement, "thereunder", "thereof" or words of like import shall mean
and be a reference to the Credit Agreement as amended by the Amendment and each
reference in the Loan Documents to the Note, "thereunder", "thereof" or words of
like import shall mean and be a reference to the Note as amended by the Allonge,
and (ii) the Loan Documents and all of the collateral described in each of such
documents do, and shall continue to, secure the payment of all of the
obligations described in the Credit Agreement, as amended by the Amendment, and
the Note, as amended by the Allonge.
READING INVESTMENT COMPANY, INC.
By: /s/ Eduardo Llauger
--------------------------------
Name:
Title:
Affidavit No. ________
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
____ day of February, 1996 by the following person who is personally known to
me:
------------------------------
Notary Public
<PAGE>
-2-
The undersigned, as a party to that certain Funding Agreement and that
certain Subordination Agreement (collectively, the "Reading Agreements"), each
of which was executed in connection with that certain Credit Agreement dated
December 20, 1995 (the "Credit Agreement"; all capitalized terms used herein
that are not otherwise defined shall have the meanings set forth in the Credit
Agreement) by and among Reading Cinemas of Puerto Rico, Inc., Citibank, N.A., as
Administrative Agent, and the Banks listed on the signature pages thereof,
hereby confirms and agrees that the Reading Agreements are, and shall continue
to be, in full force and effect and each is hereby ratified and confirmed in all
respects except that, upon the effectiveness of, and on and after the date of,
the First Amendment to Credit Agreement to which this Acknowledgement forms a
part (the "Amendment"), each reference in the Reading Agreements to the Credit
Agreement, "thereunder", "thereof" or words of like import shall mean and be a
reference to the Credit Agreement as amended by the Amendment and each reference
in the Reading Agreements to the Note, "thereunder", "thereof" or words of like
import shall mean and be a reference to the Note as amended by the Allonge.
READING COMPANY
By:__________________________
Name:
Title:
Affidavit No. ________
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
____ day of February, 1996 by the following person who is personally known to
me:
------------------------------
Notary Public
<PAGE>
EXHIBIT A
---------
ALLONGE
-------
The terms of that certain Note (the "Note") in the principal amount of
$15,000,000, issued by READING CINEMAS OF PUERTO RICO, INC. (the "Borrower") to
the order of CITIBANK, N.A. dated December 20, 1996, under Affidavit No. 1105
before Notary Patricia G. Cara, are hereby amended and modified as of the date
hereof, as follows:
i. The third paragraph of the Note is hereby amended to read
as follows:
"This Note is one of the Notes referred to in the Credit
Agreement dated as of December 20, 1995, as amended by a First
Amendment to Credit Agreement dated as of February 7, 1996 (as so
amended and as hereafter subsequently modified and supplemented and in
effect from time to time, the "Credit Agreement") between the Borrower,
the Lenders party thereto and Citibank, N.A., as Administrative Agent,
and evidences the Advances made by the Lender thereunder. Terms used
but not defined in this Note have the respective meanings assigned to
them in the Credit Agreement."
ii. It is not the intention of the parties that this Allonge
in any way constitute an extinctive novation of the indebtedness
evidenced by the Note.
Except as amended hereby, all other terms and conditions of the Note
shall remain unchanged and in full force and effect.
<PAGE>
-2-
Executed in San Juan, Puerto Rico, on this 7th day of February, 1996.
READING CINEMAS OF PUERTO RICO, INC.
By: /s/ Eduardo Llauger
--------------------------------
Eduardo Llauger
Vice President
Affidavit No._____
Acknowledged and subscribed before me in San Juan, Puerto Rico, on this
7th day of February, 1996 by the following person who is personally known to me:
Eduardo Llauger, of legal age, married, executive and resident of San Juan,
Puerto Rico, in his capacity as Vice President of Reading Cinemas of Puerto
Rico, Inc.
--------------------------
Notary Public
AGREED TO AND ACCEPTED:
CITIBANK, N.A.
By: /s/ Maritza Abadia
--------------------------
Maritza Abadia
Vice President
-----------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
OF
READING INTERNATIONAL CINEMAS LLC
----------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CONSTRUCTION................................ 1
1.1 Definitions.............................................. 1
1.2 Directly or Indirectly................................... 3
1.3 Captions................................................. 3
1.4 Interpretation........................................... 3
1.5 References to this Agreement............................. 4
ARTICLE II FORMATION................................................ 4
2.1 Formation................................................ 4
2.2 Name..................................................... 4
2.3 Principal Office; Pennsylvania Office.................... 4
2.4 Agent.................................................... 4
2.5 Business; Purpose; Powers................................ 4
2.6 Term of the Company...................................... 4
ARTICLE III MEMBERS AND MEMBERSHIP INTERESTS......................... 4
3.1 Members.................................................. 4
3.2 Voting Rights; Approval Required......................... 5
3.3 Meetings of Members...................................... 5
3.4 Disposition of Interests................................. 6
3.5 Right of First Refusal................................... 6
3.6 Buy-Sell Agreement....................................... 8
3.7 Amendment of Agreement to Reflect New Members............ 9
3.8 No Resignation or Removal................................ 9
3.9 No Liability to Third Parties............................ 9
3.10 Rights of Assignees...................................... 9
3.11 Rights of Voting Members.................................10
ARTICLE IV CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS...............10
4.1 Capital Contributions....................................10
4.2 No Return of Capital Contribution; No Interest...........10
4.3 Capital Accounts.........................................10
4.4 No Obligation to Restore Deficits........................11
4.5 Additional Capital Contributions.........................11
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS............................11
5.1 Allocations of Income and Loss...........................11
5.2 Special Allocations......................................11
5.3 Allocation of Income and Loss in Respect of
a Transferred Interest...................................13
5.4 Distributions............................................14
5.5 Form of Distributions....................................14
ARTICLE VI MANAGEMENT AND OPERATION.................................14
6.1 Management of Company by Members.........................14
i.
<PAGE>
ARTICLE VII TAX MATTERS..............................................14
7.1 Tax Returns..............................................14
7.2 Tax Matters Partner......................................15
7.3 Tax Elections............................................15
7.4 Withholding..............................................15
ARTICLE VIII INFORMATION..............................................16
8.1 Information..............................................16
ARTICLE IX BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS...............16
9.1 Maintenance of Books.....................................16
9.2 Financial Information....................................16
9.3 Bank Accounts............................................16
ARTICLE X DISSOLUTION AND WINDING UP...............................16
10.1 Conditions of Dissolution................................16
10.2 Liquidation and Termination..............................17
10.3 Cancellation of Filings..................................18
ARTICLE XI INDEMNIFICATION AND INSURANCE............................18
11.1 Indemnification by Company...............................18
ARTICLE XII GENERAL PROVISIONS.......................................19
12.1 Notices..................................................19
12.2 Entire Agreement; Waivers and Modifications..............19
12.3 Binding Effect; No Third-Party Beneficiaries.............20
12.4 Governing Law............................................20
12.5 Further Assurances.......................................20
12.6 Waiver of Certain Rights.................................20
12.7 Multiple Counterparts; Facsimile Transmissions...........20
12.8 Submission to Jurisdiction...............................21
ii.
<PAGE>
This Limited Liability Company Agreement of Reading International
Cinemas LLC is made and entered into as of this 9th day of November, 1995 by and
between the Members.
For and in consideration of the mutual covenants, rights, and
obligations set forth herein, the benefits to be derived therefrom, and other
good and valuable consideration, the receipt and sufficiency of which each
Member acknowledges, the Members agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Definitions. When used herein, the following capitalized
terms shall have the meanings indicated:
"Act" means the Delaware Limited Liability Company Act and any
successor statute, as amended from time to time.
"Affiliate" means as to any Person a director of such Person
or any other Person who, directly or indirectly, through one or more
intermediaries, Controls or is Controlled by or under common Control
with that Person.
"Agreement" means this Limited Liability Company Agreement, as
originally executed and as amended from time to time.
"Capital Account" means the capital account established and
maintained for a Member pursuant to Article IV.
"Capital Contribution" means as to any Member the cumulative
sum of money contributed by the Member to the capital of the Company,
as provided in Article IV.
"Certificate" or "Certificate of Formation" means the
certificate of formation of the Company filed on November 7, 1995 in
accordance with the Act and as amended from time to time.
"Code" means the Internal Revenue Code of 1986 and any
successor statute, as amended from time to time.
"Company" means Reading International Cinemas LLC, the
Delaware limited liability company.
"Company Minimum Gain" has the meaning ascribed to the
term "Partnership Minimum Gain" in Treas. Reg. ss. 1.704-2(d).
"Control," "Controls," or "Controlled" (and derivations
thereof) means as to a corporation the right to exercise, directly or
indirectly, more than 50% of the voting rights in the corporation, and
as to any other Entity the possession,
1.
<PAGE>
directly or indirectly, of the power to direct or cause the
direction of the management or policies of the same.
"Craig" means Craig Corporation, a Delaware corporation.
"Dispose," "Disposing," or "Disposition" means a sale,
assignment, transfer, exchange, mortgage, pledge, grant of a security
interest, or other disposition or encumbrance (including, without
limitation, by operation of law), or the acts thereof.
"Dissolution Event" means a Member's resignation,
removal, withdrawal, bankruptcy or dissolution.
"Distributable Cash" means the amount of money on hand of the
Company and available for distribution to the Members, taking into
account all accrued debts, liabilities, and obligations of the Company
and any amounts necessary or advisable to reserve, designate, or set
aside for actual or anticipated costs, payments, liabilities,
obligations, claims with respect to the Company's business or
reinvested in any lawful activity that may be undertaken by the
Company, as determined by a Majority in Interest of the Members.
"Entity" means any association, corporation, estate, limited
liability company, limited partnership, partnership, venture or other
entity.
"Income" means any item of Company economic income not
includable in gross income for federal income tax purposes, and Company
taxable income for federal income tax purposes, including Tax Items
(items of income, gain, loss, deduction, or credit of the Company)
taken into account separately by the Members.
"Liquidation Member" means the trustee for the time being
of RC Trust.
"Loss" means (i) any Company deduction specially allocable to
a Member, (ii) any Company expenditure that is neither deductible nor
chargeable to capital account under section 705(e)(2)(B) of the Code or
Treasury Regulation section 1.704-1(b)(2)(iv) and (d)(2), and (iii) the
Company's net loss for federal income tax purposes, excluding
deductions described in clause (i) and including Company Tax Items
taken into account separately by the Members.
"Member Nonrecourse Debt" has the meaning ascribed to the
term "Partner Nonrecourse Debt" in Treas. Reg. ss. 1.704-
2(b)(4).
2.
<PAGE>
"Member Nonrecourse Deductions" means items of Company loss,
deduction or Code section 705(a)(2)(B) expenditures which are
attributable to Member Nonrecourse Debt.
"Members" means the persons listed in Section 3.1 of this
Agreement and those persons subsequently admitted as Members pursuant
to the terms of this Agreement, so long as they have not ceased being
Members pursuant to the terms of this Agreement. A reference to a
"Member" means any of the Members, and a reference to a "Majority in
Interest" of the Members means a Member or Members owning a majority of
the interest in the Company.
"Membership Interest" means a Member's allocable share of the
Company's Income, Loss, and similar items and the Member's rights to
receive distributions from the Company, together with all obligations
of such Member to comply with the provisions of this Agreement.
"Nonrecourse Liability" has the meaning set forth in
Treas. Reg. ss. 1.752-1(a)(2).
"Person" means any individual or Entity.
"RC Trust" means RC Revocable Trust, a trust formed in the
State of California as of November 9, 1995.
"Reading" means Reading Investment Company, Inc., a
Delaware corporation.
"Secretary of State" means the California Secretary of
State of the State of Delaware.
"Tax Items" has the meaning set forth under the
definition of "Income."
"Voting Members" means all Members of the Company except
for the Liquidation Member.
1.2 Directly or Indirectly. Any provision of this Agreement which
refers to an action which may be taken by any Person, or which a Person is
prohibited from taking, shall include any such action taken directly or
indirectly by or on behalf of such Person, including by or on behalf of any
Affiliate or agent of such Person.
1.3 Captions. All captions in this Agreement are inserted for reference
only and are not to be considered in the construction or interpretation of any
provision hereof.
1.4 Interpretation. In the event any claim is made by any Person
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be
3.
<PAGE>
implied by virtue of the fact that this Agreement was prepared by or at the
request of a particular Person or its counsel.
1.5 References to this Agreement. References to numbered or lettered
articles, sections, and subsections refer to articles, sections, and subsections
of this Agreement unless otherwise expressly stated.
ARTICLE II
FORMATION
2.1 Formation. As of the effective date of this Agreement, the Company
has been formed as a Delaware limited liability company under and pursuant to
the Act. The Company has executed and filed the Articles with the Secretary of
State.
2.2 Name. The name of the Company shall be Reading International
Cinemas LLC. The business of the Company shall be conducted under that name or
any other name or names selected by the Voting Members.
2.3 Principal Office; Pennsylvania Office. The principal office of the
Company shall be Reading, The Graham Building, One Penn Square West, 30 South
15th, Suite 1300, Philadelphia, Pennsylvania 19102, or such other office as the
Voting Members may designate from time to time. The Company also may have such
other offices within the United States as the Voting Members may from time to
time determine.
2.4 Agent. The Company shall at all times maintain a registered agent
as required under the Act who shall be as stated in the Certificate or as
otherwise may be determined from time to time by the Voting Members in the
manner provided by law.
2.5 Business; Purpose; Powers. The business and purpose of the Company
is through one or more other entities to develop, own, hold, lease and operate
motion picture exhibition assets in Australia.
2.6 Term of the Company. The term of the Company shall commence on the
date hereof and the Company shall continue in existence until December 31, 2025,
or such earlier time as specified in or pursuant to this Agreement.
ARTICLE III
MEMBERS AND MEMBERSHIP INTERESTS
3.1 Members. Reading and Craig are hereby admitted as Members. Reading
and Craig are admitted as the "Voting Members" and the initial Liquidation
Members, but have directed that their interests as Liquidation Members be
transferred to and held by RC
4.
<PAGE>
Trust as the sole "Liquidation Member." After the date hereof, no Person may be
admitted as an additional Member except with the approval of the Voting Members.
3.2 Voting Rights; Approval Required. Except as otherwise specifically
provided in this Agreement, the vote, consent, or approval of Voting Members
holding in the aggregate fifty one (51%) percent of the interest in the income
of the Company as determined under Section 5.1 (a "Majority in Interest") shall
be required as to all matters as to which the vote, consent or approval of the
Members is required or permitted under this Agreement. The vote, consent or
approval of the Voting Members, wherever required or permitted hereunder, may be
obtained in any manner permitted hereunder or under the Act.
3.3 Meetings of Members.
3.3.1 No annual or regular meetings of the Members shall be
required; if convened, however, meetings of the Members may be held at such
date, time, and place as the Voting Members may fix from time to time.
3.3.2 A meeting of the Members may be called at any time by a
Majority in Interest of the Voting Members for the purpose of addressing any
matter on which the vote, consent or approval of the Voting Members is required
under this Agreement.
3.3.3 Notice of any meeting of the Members shall be sent or
otherwise given to the Members in accordance with this Agreement not less than
ten nor more than 60 days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and the general nature of the
business to be transacted. Except as the Voting Members may otherwise agree, no
business other than that described in the notice may be transacted at the
meeting.
3.3.4 Attendance, in person or by proxy, of a Voting Member at a
meeting shall constitute a waiver of notice of that meeting, except when the
Voting Member objects, at the beginning of the meeting, to the transaction of
any business because the meeting is not fully called or convened, and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting if that
objection is expressly made at the meeting. Neither the business to be
transacted nor the purpose of any meeting of Members need be specified in any
written waiver of notice. The Voting Members may participate in any meeting of
the Members by means of conference telephone or similar means as long as both
Voting Members can hear one another. A Member so participating shall be deemed
to be present in person at the meeting.
3.3.5 Any action that can be taken at a meeting of the Members may
be taken without a meeting if a consent in writing
5.
<PAGE>
setting forth the action so taken is signed and delivered to the Company by a
Majority in Interest of the Voting Members. All such consents shall be
maintained in the books and records of the Company.
3.3.6 Any Voting Member entitled to vote on any matter shall have
the right to do so either in person or by one or more agents authorized by a
written proxy signed by the Voting Member and delivered to the other Voting
Member. The use of proxies in all other respects shall be governed by the
provisions of the Delaware General Corporation Law pertaining to the use of
proxies by corporate stockholders.
3.4 Disposition of Interests.
3.4.1 No Member shall Dispose of all or any part of its Membership
Interest without the approval each of the other Voting Members, except as
provided below. Any attempted Disposition of a Membership Interest, or any part
thereof, other than in accordance with either Section 3.4, Section 3.5 or
Section 3.6 shall be, and hereby is declared, null and void ab initio.
3.4.2 If, in connection with a permitted Disposition of a
Membership Interest, a Member purports to grant the Person to which the
Membership Interest is Disposed the right to be admitted as a member of the
Company, such Person shall have the right to be so admitted as a member if (a)
the other Voting Members consent in writing to such admission, and (b) the other
Voting Members receive a document (i) executed by both the Member effecting such
Disposition and the Person to which the Membership Interest is Disposed, (ii)
including the notice and payment address and facsimile number of the Person to
be admitted to the Company as a member and the written acceptance by such Person
of all the terms and provisions of this Agreement and an agreement by such
Person to perform and discharge timely all of the obligations and liabilities in
respect of the Membership Interest being acquired, (iii) setting forth the
respective percentage interests in Company allocations after the Disposition of
the Member effecting the Disposition and the Person to which the Membership
Interest is Disposed, which together shall total the percentage interest in
Company allocations of the Member effecting such Disposition prior thereto, (iv)
containing a representation and warranty by the Member effecting the Disposition
and the Person to which the Membership Interest is Disposed to the effect that
such Disposition was made in accordance with all laws and regulations, including
securities laws, applicable to such Member or Person, as appropriate, and (v)
setting forth the effective date of the Disposition.
3.5 Right of First Refusal.
No Voting Member shall directly or indirectly sell, assign,
transfer, or otherwise dispose of (collectively, a "transfer") its Voting
Membership Interest ("VMI"), or any part thereof
6.
<PAGE>
or interest therein, at any time, except (i) once during a trailing 12-month
period and then only (ii) in a sale exclusively for cash or in a transfer
expressly permitted by this subsection; and no Voting Member shall transfer its
VMI in a sale for cash at any time without first giving written notice to the
Company and the other Voting Members of its intention to transfer such VMI. Any
such notice shall specify the identity of the transferee and the amount of the
cash purchase price proposed to be paid for such VMI. This subsection shall not
prohibit, and no such notice shall be required for, a transfer to a corporation
wholly-owned, directly or indirectly, except for director's qualifying shares
and executive stock options (provided that such director's qualifying shares and
shares issuable upon exercise of such stock options do not represent more than
20% of the outstanding share or equity interests of such corporation on a
fully-diluted basis), by one or more Voting Members.
Any transfer of VMI requiring the giving of written notice under
this Section 3.5 shall be subject to a right of first refusal on the part of the
Company exercisable within thirty (30) days of receipt of such written notice
(the "Company Period"). During the Company Period, the Company, subject to any
restrictions imposed by law, shall have the right to elect to purchase all or
any part (subject to the condition set forth below) of the VMI (the "Subject
VMI") proposed to be sold by the Voting Member delivering such notice (the
"Selling Voting Member") for cash equal to the cash purchase price, if any,
proposed to be paid for such VMI. The Company shall exercise its election right
by written notice delivered to the Selling Voting Member and the other Voting
Members within the Company Period. If the Company does not elect to purchase all
of the Subject VMI, then such right of first refusal shall pass to the other
Voting Members as follows.
Upon the expiration of the Company Period, each Voting Member,
other than the Selling Voting Member, shall have fifteen (15) days (the "Member
Period") to elect in writing to purchase all or any part of the Subject VMI not
subject to purchase by the Company. In the event that the other Voting Members
elect to purchase in the aggregate more VMI than the Subject VMI available for
sale, the Subject VMI shall be apportioned among the other Voting Members in
proportion to their respective VMIs. The other Voting Members shall exercise
their election right by written notice delivered to the Selling Voting Member
and the Company within the Member Period. If the Company and the other Voting
Members entitled to this right of first refusal decline to purchase in the
aggregate an amount equal to all of the Subject VMI, the Selling Voting Member
may thereafter transfer all, but not less than all, the Subject VMI in
accordance with the terms set forth in the written notice to the Company and the
other Voting Members.
If the Company elects to purchase all of the Subject VMI it shall
tender payment for such interest at the end of the Company Period to the Selling
Voting Member. If the Company does not elect
7.
<PAGE>
to purchase all of the Subject VMI but the Company and/or the other Voting
Members elect to purchase all of the Subject VMI they shall tender payment for
such interest at the end of the Member Period to the Selling Voting Member.
No transfer of the Subject VMI shall be made after the end of
ninety (90) days after the original notice given to the Company and the Voting
Members under this Section 3.5 or for a price that is lower than the price
specified in the notice referred to in this Section 3.5, unless the VMI are
first offered again to the Company and the other Voting Members in accordance
with this Section 3.5.
3.6 Buy-Sell Agreement.
In the event that a Voting Member holding at least fifty (50%)
percent of the Voting Membership Interests desires to purchase all of the VMI
held by the other Voting Members, it shall be entitled, at any time, to make an
offer in writing to the other Voting Members to purchase all, but not less than
all, of remaining VMI (the "Initial Offer"). Such written offer shall specify
the price which shall be payable in cash per one (1%) percent of VMI, and all
other relevant information concerning the Initial Offer. The other Voting
Members (the "Offeree Members") shall then have forty-five (45) days from the
giving of the Initial Offer in which to elect, in writing, (i) to accept the
Initial Offer, or (ii) to purchase (the "Purchase Option") in the aggregate the
entire VMI of the Voting Member making the Initial Offer (the "Offering Member")
at the same price per one (1%) percent of VMI and on the terms and conditions of
the Initial Offer, or, if terms and conditions are not amenable to exact
duplication, upon substantially equivalent terms and conditions. If there is
more than one Offeree Member, then each Offeree Member can elect to purchase
all, or any portion, of the Offering Member's VMI. In the event that the Offeree
Members elect to purchase more than the VMI held by the Offering Member, the
Offering Member VMI will be apportioned among the Offeree Members in proportion
to their respective VMIs. All Voting Members agree to be bound by and to sell
their VMI in accordance with this Section 3.6 and specifically waive any rights
to challenge or otherwise contest the sufficiency or adequacy of the
consideration to be paid for VMI pursuant to this Section 3.6. If no election is
so made by the Offeree Member within forty-five (45) day period, the Initial
Offer shall be deemed to have been accepted.
Once the Initial Offer or the Purchase Option has been accepted,
the purchaser(s) shall have one hundred twenty (120) days from delivery of
notice of acceptance or, if the Initial Offer is not expressly accepted, from
the last day of the forty-five (45) day period referenced in this Section 3.6 to
consummate the purchase and pay the seller. Should the purchaser(s) fail to
consummate the purchase and pay for the VMI within the period specified above,
time being expressly of the essence, the
8.
<PAGE>
purchaser(s) shall be liable for all reasonable out-of-pocket costs incurred by
the seller. In addition, the Voting Members acknowledge and agree that in view
of (i) the length of the purchase period and the reliance and change of position
which must necessarily result from the purchaser's election to purchase
hereunder and (ii) the fact that the damages which would result from the
purchaser's failure to consummate the purchase are uncertain in amount and
cannot be determined with certainty, a reasonable estimation of damages is an
amount equal to ten percent (10%) of the offered price, provided that damages
shall not be recoverable in cash but only by way of any adjustment in the
offered price if the option described in the next succeeding sentence is
exercised. Accordingly, the Voting Members agree that in the event of the
purchaser's unexcused failure to consummate the purchase, in addition to the
seller's remedies at law or in equity, and in addition to the seller's right to
collect from the defaulting party out-of-pocket costs and expenses, the selling
Voting Member (the "Option Holder") shall have an option for the six (6) month
period following the expiration of one hundred twenty (120) day closing period
to purchase all, but not less than all, the defaulting purchaser's VMI for the
offered price (again calculated on a per 1% basis), in cash, less ten percent
(10%); the Option Holder may exercise this option by giving notice to the
defaulting purchaser not later than 90 days after the expiration of 120-day
period, and must tender payment in full not later than the end of six-month
option period.
3.7 Amendment of Agreement to Reflect New Members. If a Person is to be
admitted to the Company as a new member, the Person to be admitted as a new
member shall execute appropriate amendments to this Agreement to take into
account the Person's admission as a new member. In the case of any admission
pursuant to Section 3.4.2, amendment shall provide, among things, that the
admission of the new member shall be deemed to occur immediately before any
withdrawal of the transferor Member.
3.8 No Resignation or Removal. Except as otherwise specifically
provided in this Agreement, a Member does not have the right or power to resign
or withdraw from the Company as a Member and shall be entitled to do so only
with the approval of the other Members.
3.9 No Liability to Third Parties. No Member shall have any personal
obligation for any liabilities of the Company, whether liabilities arise in
contract, tort or otherwise, except to the extent that any liabilities are
expressly assumed in a separate writing by the Member.
3.10 Rights of Assignees. In the event the Company is required to
recognize the validity of a Disposition notwithstanding the provisions of this
Article III to the contrary, the assignee of a Membership Interest who has not
been admitted to the Company in accordance with this Article III shall be
entitled only to alloca-
9.
<PAGE>
tions and distributions with respect to Membership Interest as provided in this
Agreement, but shall have no right to any information or accounting of the
affairs of the Company, or to inspect the books or records of the Company, and
shall not have any rights of a Member under the Act or this Agreement.
3.11 Rights of Voting Members. Notwithstanding any other provision of
this Agreement, with effect on and from the commencement of the dissolution of
the Company, Voting Members will not have any right to participate in a
distribution of the property of the Company; that right will be possessed only
the Liquidation Member.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
4.1 Capital Contributions. Reading and Craig shall each make an initial
Capital Contribution of $5,000,000, on an as needed basis. RC Trust shall not be
required to make any Capital Contributions.
4.2 No Return of Capital Contribution; No Interest. Except as otherwise
specifically provided in this Agreement, a Member shall not be entitled to
demand or receive the return of all or any portion of the Member's Capital
Contribution or to be paid interest in respect of either its Capital Account or
Capital Contribution. Under circumstances permitting or requiring a return of a
Member's Capital Contribution, the Member shall have no right to receive
property other than cash. No Member shall be required to contribute or to lend
any money or property to the Company to enable the Company to return any other
Member's Capital Contribution.
4.3 Capital Accounts. A Capital Account shall be established and
maintained for each Member. Each Member's Capital Account (a) shall be increased
by (i) the amount of money contributed by or on behalf of that Member to the
Company, (ii) the fair market value of property contributed by or on behalf of
that Member to the Company (net of liabilities secured by contributed property
that the Company is considered to assume or take subject to under section 752 of
the Code), and (iii) allocations to that Member of Company Income and gain (or
items thereof), including income and gain exempt from tax and income and gain
described in Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), but excluding income and gain
described in Treas. Reg. ss. 1.704-1(b)(4)(i), and (b) shall be decreased by (i)
the amount of money distributed to that Member by the Company, (ii) the fair
market value of property distributed to that Member by the Company (net of
liabilities secured by the distributed property that the Member is considered to
assume or take subject to under section 752 of the Code), (iii) allocations to
that Member of expenditures of the Company described in section 705(a)(2)(B) of
the Code, and (iv) allocations of Company loss and deduction (or items thereof),
including loss and deduction described in Treas.
10.
<PAGE>
Reg. ss. 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
of this sentence and loss or deduction described in Treas. Reg. ss.
1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Capital Accounts shall also be
maintained and adjusted as permitted by the provisions of Treas. Reg. ss.
1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treas. Reg.
ss.ss. 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the
allocations to the Members of depreciation, depletion, amortization, and gain or
loss as computed for book purposes rather than the allocation of the
corresponding items as computed for tax purposes, as required by Treas. Reg. ss.
1.704-1(b)(2)(iv)(g). On the transfer of all or part of a Membership Interest,
the Capital Account of the transferor that is attributable to the transferred
Membership Interest or part thereof shall carry over to the transferee in
accordance with the provisions of Treas. Reg. ss. 1.704- 1(b)(2)(iv)(l).
4.4 No Obligation to Restore Deficits. No Member shall have any
liability or obligation to the Company, the other Members or any creditor of the
Company to restore at any time any deficit balance in Member's Capital Account.
4.5 Additional Capital Contributions. In the event that a Majority in
Interest of the Voting Members determine that additional capital contributions
are required by the Company, each Voting Member shall be entitled to make
additional capital contributions pro rata in accordance with their interests in
the Company as determined under Section 5.1.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations of Income and Loss. Income and Loss for each year shall
be allocated as follows:
5.1.1 After giving effect to the special allocations set forth in
Section 5.2, Income shall be allocated to the Voting Members equally.
5.1.2 After giving effect to the special allocations set forth in
Section 5.2, Loss shall be allocated to the Voting Members equally.
5.2 Special Allocations.
5.2.1 Notwithstanding the provisions of Section 5.1, if there is a
net decrease in Company Minimum Gain during any taxable year, each Member shall
be specially allocated items of Company income and gain for year (and, if
necessary, in subsequent years) in an amount equal to the portion of Member's
share of the net decrease in Company Minimum Gain that is allocable to the
disposition of Company property subject to a Nonrecourse Liability,
11.
<PAGE>
which share of net decrease shall be determined in accordance with Treas. Reg.
ss. 1.704-2(g)(2). Allocations pursuant to this Section 5.2.1 shall be made in
proportion to the amounts required to be allocated to each Member under this
Section 5.2.1. The items to be so allocated shall be determined in accordance
with Treas. Reg. ss. 1.704-2(f). This Section 5.2.1 is intended to comply with
the minimum gain chargeback requirement contained in Treas. Reg. ss. 1.704-2(f)
and shall be interpreted consistently therewith.
5.2.2 Notwithstanding the provisions of Section 5.1, if there is a
net decrease in Minimum Gain attributable to a Nonrecourse Liability during any
taxable year, each Member who has a share of Company Minimum Gain attributable
to Nonrecourse Debt (which share shall be determined in accordance with Treas.
Reg. ss. 1.704-2(i)(5)) shall be specially allocated items of Company income and
gain for taxable year (and, if necessary, in subsequent years) in an amount
equal to that portion of Member's share of the net decrease in Company Minimum
Gain attributable to Nonrecourse Liability that is allocable to the disposition
of Company property subject to Nonrecourse Debt (which share of net decrease
shall be determined in accordance with Treas. Reg. ss. 1.704-2(i)(5)).
Allocations pursuant to this Section 5.2.2 shall be made in proportion to the
amounts required to be allocated to each Member under this Section 5.2.2. The
items to be so allocated shall be determined in accordance with Treas. Reg. ss.
1.704-2(i)(4). This Section 5.2.2 is intended to comply with the minimum gain
chargeback requirement contained in Treas. Reg. ss. 1.704-2(i)(4) and shall be
interpreted consistently therewith.
5.2.3 Notwithstanding the provisions of Section 5.1, any
nonrecourse deductions (as defined in Treas. Reg. ss. 1.704- 2(b)(1)) for any
taxable year or other period shall be specially allocated to the Voting Members
in accordance with their respective percentage interests in Income and Member
Nonrecourse Deductions shall be allocated to the Member to whom the Member
Nonrecourse Debt is allocated.
5.2.4 Notwithstanding the provisions of Section 5.1, those items
of Company loss, deduction, or expenditures under section 705(a)(2)(B) of the
Code which are attributable to Member Nonrecourse Debt for any taxable year or
other period shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which items are
attributable in accordance with Treas. Reg. ss. 1.704-2(i).
5.2.5 Notwithstanding the provisions of Section 5.1, if a Member
unexpectedly receives any adjustments, allocations, or distributions described
in Treas. Reg. ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event
creates a deficit balance in Member's Capital Account in excess of Member's
share of Minimum Gain, items of Company income and gain shall be specially
allocated to Member in an amount and manner sufficient to eliminate excess
deficit balance as quickly as possible. Any special allocations of
12.
<PAGE>
items of income and gain pursuant to this Section 5.2.5 shall be taken into
account in computing subsequent allocations of income and gain pursuant to this
Article V so that the net amount of any item so allocated and the income, gain,
and losses allocated to each Member pursuant to this Section 5.2.5 to the extent
possible, shall be equal to the net amount that would have been allocated to
each Member pursuant to the provisions of this Article V if unexpected
adjustments, allocations, or distributions had not occurred.
5.2.6 Notwithstanding any other provision in this Article V, in
accordance with section 704(c) of the Code, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of property to the Company for federal
income tax purposes and its fair market value on the date of contribution.
Allocations pursuant to this Section 5.2.5 are solely for purposes of federal,
state, and local taxes; as, they shall not affect or in any way be taken into
account in computing a Member's Capital Account or share of Income, Loss, or
items of distribution pursuant to any provision of this Agreement.
5.2.7 In the event any Member has a deficit Capital Account at the
end of any Company taxable year which is in excess of the sum of (i) the amount,
if any, Member is obligated to restore and (ii) the amount Member is deemed to
be obligated to restore pursuant to the next to the last sentences of Treas.
Reg. ss.ss. 1.704-2(g)(1) and 1.704(2)(i)(5), each Member shall be specially
allocated items of Company income and gain in the amount of excess as quickly as
possible, provided that an allocation pursuant to this Section 5.2.7 shall be
made if and only to the extent that Member would have a deficit Capital Account
in excess of sum after all other allocations provided for in this Article V have
been tentatively made as if this Section 5.2.7 and Section 5.2.5 hereof were not
in this Agreement.
5.3 Allocation of Income and Loss in Respect of a Transferred Interest.
5.3.1 If a Member's Membership Interest is transferred, or is
adjusted by reason of additional Capital Contributions, the admission of a new
Member, or otherwise, during any taxable year, each item of income, gain, loss,
deduction, or credit of the Company for taxable year shall be assigned pro rata
to each day in the particular period of year to which item is attributable
(i.e., the day on or during which it is accrued or otherwise incurred) and the
amount of each item so assigned to any day shall be allocated to the Member
based upon its percentage interest in Company allocations at the close of day.
For the purpose of accounting convenience, except as provided below, the Company
may treat a transfer of, or an adjustment in, a Membership Interest which occurs
at any time during a semi-monthly period
13.
<PAGE>
(commencing with the semi-monthly period including the date hereof) as having
been consummated on the first day of semi-monthly period, regardless of when
during semi-monthly period transfer or adjustment actually occurs.
5.3.2 Notwithstanding any provision to the contrary in this
Agreement, gain or loss of the Company realized in connection with a Disposition
of any of the assets of the Company shall be allocated solely to the Members as
of the date Disposition occurs (or to any particular Member or Members as
required by Code section 704(c), if applicable to Disposition).
5.4 Distributions.
5.4.1 Subject to any restrictions under applicable law, the
Company shall periodically distribute Distributable Cash to the Voting Members
not less frequently than annually, with the amount and timing of distributions
to be determined by the Voting Members.
5.4.2 Except as otherwise provided in the case of the Company's
liquidation and termination, all distributions of Distributable Cash shall be
made to the Voting Members equally.
5.5 Form of Distributions. A Member has no right to demand or receive
any distribution from the Company in any form other than cash. Likewise, except
in connection with the dissolution of the Company as provided herein no Member
shall be compelled to accept from the Company a distribution of any asset in
kind.
ARTICLE VI
MANAGEMENT AND OPERATION
6.1 Management of Company by Members.
6.1.1 The business, property, and affairs of the Company shall be
managed exclusively by the Voting Members. The full, complete, and exclusive
authority to manage and control the business, affairs, and properties of the
Company in accordance with the terms of this Agreement, to make all decisions
regarding the same, and to perform any and all other acts or activities
consistent therewith which are customary or incidental to the management of the
Company's business is subject to approval of a Majority in Interest of the
Voting Members.
ARTICLE VII
TAX MATTERS
7.1 Tax Returns. The Company shall prepare or cause to be prepared and
filed all necessary federal, state, and local income tax returns for the
Company. The Company shall furnish to each
14.
<PAGE>
Member copies of all returns that are actually filed and shall keep them
informed of any and all pending or threatened tax proceedings regarding the
Company.
7.2 Tax Matters Partner. Reading shall be the "tax matters partner" of
the Company pursuant to section 6231(a)(7) of the Code. Reading shall take
action as may be necessary to cause each other Member to become a "notice
partner" within the meaning of section 6231(a)(8) of the Code, and shall inform
each other Member of all significant matters that may come to its attention in
its capacity as "tax matters partner" and, shall forward to each Member copies
of all significant written communications it may receive in capacity. Reading
shall not take any action contemplated by sections 6222 through 6231 of the Code
without the consent of the Members.
7.3 Tax Elections. The Company shall make the following elections on
the appropriate tax returns:
7.3.1 to adopt the calendar year as the Company's fiscal year;
7.3.2 to adopt an appropriate method of accounting and to keep the
Company's books and records on that method; and
7.3.3 any other election Reading deems appropriate and in the best
interests of the Company and the Members. It is the intent of the Members that
the Company be treated as a partnership for United States federal income tax
purposes and, to the extent permitted by applicable law, for state and local
franchise and income tax purposes. Neither the Company nor any other Member may
make an election for the Company to be excluded from the application of the
provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar
provisions of applicable state or local law, and no provision of this Agreement
shall be construed to sanction or approve an election.
7.4 Withholding. With respect to any Member who is not a United States
person within the meaning of the Code, any tax required to be withheld under
section 1446 or other provisions of the Code, or under state law, shall, unless
already reflected by an appropriate charge to that Member's Capital Account, be
charged to that Member's Capital Account as if the amount of tax had been
distributed to Member. The amount so withheld shall be treated as a distribution
of Distributable Cash to Member for all purposes of this Agreement.
15.
<PAGE>
ARTICLE VIII
INFORMATION
8.1 Information. In addition to the other rights specifically set forth
in this Agreement, each Member shall have access to all information to which a
Member is entitled to have access pursuant to the Act and other information
regarding the Company, as it may reasonably request from time to time.
ARTICLE IX
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
9.1 Maintenance of Books. The books of account for the Company shall be
maintained on an accrual basis in accordance with the terms of this Agreement,
except that Capital Accounts shall be maintained in accordance with Article IV.
The calendar year shall be the accounting year of the Company.
9.2 Financial Information. The Company shall prepare, or shall cause to
be prepared, as soon as practicable after the end of each fiscal year of the
Company, and in any event on or before the 90th day thereafter, a balance sheet,
an income statement and a statement of changes in Members' capital in the
Company for, or as of the end of, that year. In addition, the Company shall
deliver to each Member within 90 days after each fiscal year a copy of the
Company's federal income tax return for that year and a Schedule K- 1 setting
forth Member's distributions and allocations.
9.3 Bank Accounts. The Company shall establish and maintain one or more
separate bank and investment accounts for the Company's funds in the Company's
name with financial institutions and firms as the Voting Members may select and
designate signatories thereon. The Company's funds may not be commingled with
other funds of any other Person.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Conditions of Dissolution. The Company shall be dissolved, its
assets shall be disposed of, and its affairs wound up on the first to occur of
the following:
(a) the vote, consent or approval of a Majority in Interest of the
Voting Members at any time to dissolve the Company;
(b) the occurrence of a Dissolution Event, unless within 90 days
after the occurrence, the remaining Voting Members (other than the Member as to
which Dissolution Event occurred) consent to continue the Company;
16.
<PAGE>
(c) the Disposition of all of the property and assets of the
Company;
(d) the entry of a decree of judicial dissolution under the Act;
or
(e) the expiration of the term of existence of the Company.
10.2 Liquidation and Termination.
10.2.1 Upon the dissolution of the Company as provided in Section
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Voting Members shall act as liquidators or may appoint one
or more other Persons to act as liquidator. The liquidator shall oversee the
winding up and liquidation of the Company, take full account of the liabilities
of the Company and assets, either cause the Company's assets to be sold as
promptly as is consistent with obtaining fair market value therefor (or, with
the consent of the Voting Members, distributed to the Liquidation Member) and,
if sold, shall cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed as provided in paragraphs (c) and (d) below. Until
final distribution, the liquidator shall manage the Company's business and other
property and assets with all of the power and authority of the Voting Members.
The steps to be accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be made of
the Company's assets, liabilities, and operations through the last day of the
calendar month in which the dissolution shall occur or the final liquidation
shall be completed, as applicable;
(b) during the period commencing on the first day of dissolution
pursuant to Section 10.1 hereof and ending on the date on which all of the
assets of the Company have been distributed to the Liquidation Member in
accordance with this Section 10.2, the Voting Members shall continue to share
Income, Loss, and other items of Company income, gain, loss or deduction in the
manner provided in Article V, provided that no distributions shall be made
pursuant to Section 5.4;
(c) the liquidator shall pay or discharge from Company funds all
of the debts, liabilities and obligations of the Company (including, without
limitation, but subject to the provisions of applicable law, all expenses
incurred in liquidation) or otherwise make reasonably adequate provision
therefor (including, without limitation, the establishment of a cash escrow fund
for contingent liabilities in amount and for terms as the liquidator may
reasonably determine); and
17.
<PAGE>
(d) all remaining assets of the Company shall be distributed to
the Liquidation Member.
(e) the liquidator may sell any or all Company property, including
to the Voting Members for fair market value.
10.2.2 Any distributions in kind to the Liquidation Member shall
be made subject to the liability of distributee for costs, expenses, and
liabilities theretofore incurred or for which the Company has committed prior to
the date of termination.
10.3 Cancellation of Filings. Upon completion of the distribution of
Company assets as provided herein, the Company is terminated, and the liquidator
shall take actions as may be necessary to terminate the Company.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.1 Indemnification by Company.
11.1.1 The Company shall indemnify and defend each Member or
officer or employee of the Company who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding") by reason of the fact that it is or was a Member, manager,
officer, or other agent of the Company or that, being or having been a Member,
manager, officer or agent, it is or was serving at the request of the Company as
a manager, director, officer, employee, or other agent of another Person (all
Persons being referred to hereinafter as an "agent"), to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit; provided,
however, that no Person shall be entitled to indemnification hereunder for any
act or omission constituting gross negligence, wilful misconduct or material
breach of this Agreement. Furthermore, the Company may, but shall not be
obligated to, indemnify any other Person who was or is a party or is threatened
to be made a party to, or otherwise becomes involved in, a Proceeding by reason
of the fact that person is or was an agent to the same extent as is provided for
in the preceding sentence with respect to a Member or agent.
11.1.2 The indemnification provided by, or granted pursuant to,
the provisions of this Article XI shall not be deemed exclusive of any other
rights to which any Person seeking indemnification may be entitled under any
agreement, vote of Members, or otherwise, both as to action in Person's capacity
as an agent of the Company and as to action in another capacity while serving as
an agent. All rights to indemnification under this Article XI shall be deemed to
be provided by a contract between the Company and each Member and officer who
serves in capacity at any
18.
<PAGE>
time while this Agreement and relevant provisions of the Act and other
applicable law, if any, are in effect. Any repeal or modification hereof or
thereof shall not affect any rights then existing.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices and other communications provided for or
permitted to be given under this Agreement shall be in writing and shall be
given by depositing the notice in the United States mail, addressed to the
Person to be notified, postage paid, and registered or certified with return
receipt requested, or by notice being delivered in person or by facsimile
communication to party. Notices given or served pursuant hereto shall be
effective upon receipt by the Person to be notified. All notices to be sent to a
Member shall be sent to or made at, and all payments hereunder shall be made at,
the address given for that Member or other address as that Member may specify by
notice to the Company and the other Members.
12.2 Entire Agreement; Waivers and Modifications.
12.2.1 The Certificate and this Agreement constitute the entire
agreement of the Members and their respective Affiliates relating to the Company
and supersedes any and all prior contracts, understandings, negotiations, and
agreements with respect to the Company and the subject matter hereof, whether
oral or written.
12.2.2 The Certificate and this Agreement may be amended or
modified from time to time only by a written instrument executed by both of the
Voting Members. However, no amendment or modification which has an adverse
affect upon the Liquidation Member may be adopted without the written consent of
the Liquidation Member.
12.2.3 In the event of an inconsistency or conflict between the
provisions of this Agreement and any resolution adopted by the Voting Members,
resolution shall be deemed an amendment to this Agreement and a waiver by the
Voting Members of the inconsistent or conflicting provision of this Agreement.
Any waiver or consent, express, implied or deemed to or of any breach or default
by any Person in the performance by that Person of its obligations with respect
to the Company or any action inconsistent with this Agreement is not a consent
or waiver to or of any other breach or default in the performance by that Person
of the same or any other obligations of that Person with respect to the Company
or any other action. Failure on the part of a Person to complain of any act of
any Person or to declare any Person in default with respect to the Company,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of
19.
<PAGE>
its rights with respect to that default until the applicable statute of
limitations period has run. Except with respect to the matters described in the
first sentence of this Section 12.2.3, all waivers and consents hereunder shall
be in writing and shall be delivered to the Company and the Members in the
manner set forth in Section 12.1. A Member may grant or withhold any waiver or
consent in its absolute sole discretion.
12.3 Binding Effect; No Third-Party Beneficiaries. Subject to the
restrictions on Dispositions set forth herein, this Agreement is binding on and
inures to the benefit of the Members and their respective successors and
assigns. Nothing in this Agreement shall provide any benefit to any third party
or entitle any third party to any claim, cause of action, remedy or right of any
king, it being the intent of the parties that this Agreement shall not be
construed as a third-party beneficiary contract.
12.4 Governing Law. This Agreement is governed by and shall be
construed in accordance with the law of the State of Delaware, excluding any
conflict-of-laws rule or principle that might refer the governance or
construction of this agreement to the law of another jurisdiction. If any
provision of this Agreement or the application thereof to any Person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby, and that provision shall be enforced to
the greater extent permitted by law.
12.5 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
12.6 Waiver of Certain Rights. Each Member irrevocably waives any right
it might have to maintain any action for partition of the property of the
Company.
12.7 Multiple Counterparts; Facsimile Transmissions. This Agreement may
be executed in multiple counterparts with the same effect as if the signing
parties had signed the same document. All counterparts shall be construed
together and constitute the same instrument. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart of this Agreement. Upon the request of any party,
any party who shall have delivered an executed counterpart of this Agreement by
facsimile shall deliver a manually executed counterpart as well, but the failure
to so deliver a manually executed counterpart shall not affect the validity,
enforceability and binding effect of this Agreement.
20.
<PAGE>
12.8 Submission to Jurisdiction. Each of the Members hereby consents to
the jurisdiction of any state or federal court located within the State of
Delaware, and, subject to the provisions of Section 12.8, irrevocably agrees
that all actions or proceedings relating to this Agreement shall be instituted
and heard by the courts of jurisdiction. Each Member hereby waives any objection
that it may have based on improper venue or forum non conveniens to the conduct
of any proceeding in any court and personal service of any and all process upon
it, and consents to any service of process made in the manner provided herein
for the giving of notices under this Agreement.
IN WITNESS WHEREOF, the parties hereto executed this Agreement
effective as of the date first above written.
MEMBERS:
--------
CRAIG CORPORATION
By__________________________________________
READING INVESTMENT COMPANY, INC.
By__________________________________________
TRUSTEE OF RC REVOCABLE TRUST
CRAIG MANAGEMENT, INC.
By__________________________________________
21.
RC REVOCABLE TRUST
This is a trust agreement between Reading Investment Company, Inc., a
Delaware corporation and Craig Corporation, a Delaware corporation (referred to
collectively as "Grantors") and Craig Management, Inc., a California corporation
as trustee (referred to as the "Trustee"). The trust formed hereunder shall be
called the "RC Revocable Trust."
Article One: Original Trust Estate. This RC Revocable Trust is the
Liquidation Member of Reading International Cinemas LLC, a Delaware limited
liability company ("LLC"), with all rights attendant thereto ("Liquidation
Membership") and is holding the Liquidation Membership in trust for the persons
who are Voting Members of the LLC as that term is defined in the Limited
Liability Company Agreement of the LLC dated November 13, 1995 (the "LLC
Agreement") on the first date of the dissolution of the LLC pursuant to Section
10.1 of the LLC Agreement (the "Liquidation Voting Members"). The beneficial
interest of each of the Liquidation Voting Members in this RC Revocable Trust is
the same percentage interest as each Voting Member's interest in the Income of
the LLC as set forth in Section 5.1.1 of the LLC Agreement immediately prior to
dissolution of the LLC. At the date of this Agreement, Grantors are the sole
Voting Members of the LLC. Trustee acknowledges receipt of the trust estate and
agrees to hold and administer all assets in accordance with the terms and
conditions of this trust agreement for the benefit and account of Liquidation
Voting Members.
Article Two: Amendment. Except for the trust of the Liquidation
Membership, this agreement and the trust it creates are revocable, and can be
altered, amended, revoked, or terminated at any time specified in this
agreement, by written agreement signed by each of the Voting Members of the LLC
and the Trustee.
Article Three: Administration of Trust. All property transferred to the
Trustee as provided above will be held, in trust, for the purposes and upon the
conditions specified below. Trustee shall hold, manage, invest, and reinvest all
assets of the trust estate and shall collect and receive the interest, income,
and profits therefrom, upon the following terms and for the following purposes:
A. Trust for Beneficiaries. Trustee shall hold the Liquidation
Membership in trust for the Liquidation Voting Members on the basis set forth in
Article One above and all other assets of the trust estate for the benefit of
the Voting Members of the LLC in the same percentage interest as each Voting
Member's interest in the Income of the LLC as set forth in Section 5.1.1 of the
LLC Agreement (the Liquidation Voting Members and the Voting Members of the LLC
are sometimes referred to herein as the "Beneficiaries").
B. Distribution of Principal. If any distributions are made by the LLC
to the Trust as the Liquidation Member of the LLC, Trustee shall distribute any
such assets to the Liquidation Voting Members of the LLC, in accordance with
their respective interests as set forth in Article
1
<PAGE>
One above, upon written instructions from the Board of Directors or other
governing body of each Liquidation Voting Member.
Article Four: Trustee Succession. The Trustee may resign at any time by
giving 90-days written notice to the Voting Members of the LLC. The notice will
be sufficient if mailed to each Voting Member at that person's last known
mailing address. The Voting Members may remove any Trustee for reasonable cause
by giving written notice to that Trustee. If any Trustee ceases to serve, the
Voting Members may appoint a successor for that Trustee, but in no event may the
Voting Members ever be appointed as Trustees under this agreement. If the Voting
Members do not appoint such a successor Trustee within 90 days of the death or
notice of resignation of any Trustee, any Voting Member may petition a court of
competent jurisdiction to appoint as a successor Trustee a bank. A successor
Trustee may require a terminating Trustee to render a full and final accounting.
A successor Trustee will not be liable for any inconsistencies or irregularities
in the administration of the trust by any prior Trustee, but will be responsible
and accountable only for those assets under Trustee's control and custody.
Article Five: Powers and Authority of Trustees. The Trustee has the
following continuing, absolute, and discretionary powers to deal with any
property, real or personal, held in any trust. The Trustee may exercise its
powers without the approval of any court or judicial authority. No person
dealing with the Trustee need inquire into the propriety of any of the Trustee's
actions or into the application of any funds or other property that Trustee
receives. Trustee shall, however, exercise all powers in a fiduciary capacity
for the best interests of the trust estate. Without limiting the generality of
the foregoing, the Trustee is given the following specific powers and authority
in addition to all other powers conferred by law:
A. Except as otherwise provided to the contrary, to hold funds
uninvested as Trustee deems appropriate, and to invest in any assets Trustee
deems advisable even though they are not technically recognized as legal
investments for fiduciaries, without responsibility for depreciation or loss on
account of those investments, or because those investments are nonproductive.
B. To expend whatever funds Trustee deems proper for the preservation,
maintenance, or improvement of trust assets and to take whatever steps necessary
to ensure and supervise the assets and their preservation, maintenance, and
improvement.
C. To employ and compensate attorneys, accountants, managers, agents,
assistants, and advisors without liability for any act of those persons, so long
as they are selected and retained with reasonable care.
D. To execute deeds, leases, contracts, bills of sale, notes, and other
written instruments.
E. To render at any time an accounting to the Beneficiaries, or to file
a judicial settlement in account with a court of competent jurisdiction. Written
approval of the accounting by the
2
<PAGE>
Beneficiaries, or by the court, will be binding and conclusive on all persons
interested in the trust estate.
F. To hold any assets in the name of a nominee without disclosing
Trustee's fiduciary relationship, or to hold the property unregistered, without
increasing or decreasing Trustee's fiduciary liability.
G. To compromise, arbitrate, or otherwise adjust claims in favor of or
against the trust and to agree to any rescission or modification of any contract
or agreement.
H. To participate in any type of liquidation or reorganization of LLC
and to distribute assets to the Beneficiaries.
I. To exercise all powers granted by this trust agreement, even though
the Trustee may also be acting or on behalf of any other person or entity
interested in the same matters. Trustee, however, shall exercise these powers at
all times in a fiduciary capacity, primarily in the interest of the
Beneficiaries.
Article Six: Miscellaneous Provisions. The parties further agree as
follows:
A. Applicable Law. This trust agreement will be construed and
administered in accordance with the laws of the State of California.
B. Further Instruments. The Voting Members of the LLC shall execute
such further instruments as may be necessary to vest Trustee with full legal
title to the property held by Trustee under this agreement.
C. Binding Effect. This agreement extends to and is binding upon the
personal representatives, successors, and assigns of the Voting Members of the
LLC, the Liquidation Voting Members and of the Trustee.
D. Construction. Reference in this agreement to any gender includes
either masculine or feminine, as appropriate, and reference to any number
includes both singular and plural where the context permits or requires. Use of
descriptive titles for articles and subarticles in this agreement is for
purposes of convenience only and is not intended to restrict the application of
those provisions nor the construction of this agreement as one entire trust
agreement.
Article Seven: Compensation. The Trustee is not entitled to receive
compensation for Trustee's services rendered in the administration of the trust
but are entitled to be reimbursed for reasonable out-of-pocket expenses incurred
as Trustee.
Article Eight: Indemnity and Liability. The Voting Members of the LLC
and the Liquidation Voting Members shall indemnify and hold harmless the Trustee
and any successor
REA11-1.003
3
<PAGE>
Trustees appointed under Article Four (and to the extent applicable their
respective directors, officers, employees and agents), from and against any
cost, loss, liability, expense, damage or injury suffered or sustained by reason
of any acts or omissions of the Trustees pursuant to this Trust or otherwise
arising out of the performance by the Trustees of their duties under this Trust,
including any judgment, award, settlement, reasonable attorneys' fees and other
costs or expenses incurred in connection with the defense of any actual action,
proceeding or claim; provided, however, that the Voting Members of the LLC and
the Liquidation Voting Members shall not indemnify a Trustee if such acts or
omissions were attributable to fraud, gross negligence, or willful misconduct by
that Trustee. Any indemnification pursuant to this Article shall be had either
directly against the Voting Members of the LLC, the Liquidation Voting Members
or from the assets of this Trust, at the option of the Trustee being
indemnified. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof. The
provisions of this Article shall survive the resignation or removal of any
Trustee and the termination of the Trust. Trustees shall not be liable to the
Trust or the Beneficiaries of the Trust unless the basis for the liability is
action or omission to act by a Trustee involving fraud, gross negligence or
willful misconduct of that Trustee.
In witness whereof, the parties have executed this agreement in
duplicate as of the date written below.
Grantors:
CRAIG CORPORATION
Dated: November 9, 1995 By: __________________________________________
READING INVESTMENT COMPANY, INC.
Dated: November 9, 1995 By: _______________________________________
4
<PAGE>
Trustee:
CRAIG MANAGEMENT, INC.
Dated: November 9, 1995 By: _______________________________________
5
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On November __, 1995, before me,__________________, a Notary Public,
personally appeared _________________________________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------------------
Notary Public
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On November __, 1995, before me, ___________________, a Notary Public,
personally appeared _______________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------------------
Notary Public
6
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On November __, 1995, before me, ____________________, a Notary Public,
personally appeared ___________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------------------
Notary Public
7
LEASE AGREEMENT FOR SPACE TO BE CONSTRUCTED
IN THE MAYAGUEZ SHOPPING CENTER
THIS INDENTURE OF LEASE, made on this 10th day of August of 1995 by
MAYAGUEZ SHOPPING CENTER, S.E., a special partnership organized and existing
under the laws of the Commonwealth of Puerto Rico, herein called "Owner"
represented by its Principal Partners, Juan A. Albors Hernandez and Ada M.
Albors Hernandez and Reading Cinemas of Puerto Rico, Inc., a corporation
organized and existing under the laws of the Commonwealth of Puerto Rico, herein
called "Tenant" represented by its President, Mr. Robert Smerling.
WITNESSETH:
ARTICLE I
GRANT AND TERM
SECTION 1.10 Construction of New Building and Leased Premises
The Owner shall, at its own cost and expense, construct a new building as
part of the Mayaguez Shopping Center (said shopping center and any building now
or hereinafter forming part thereof hereinafter called "Commercial Center") to
contain the property leased to Tenant in accordance with the terms and
conditions of this lease.
Tenant shall lease from Owner certain new premises on the second floor of
the new building (the "New Building") that will be erected by Owner in the
Commercial Center, which new second floor premises consist of an approximate
area of (18,600) EIGHTEEN THOUSAND SIX HUNDRED SQUARE FEET, hereinafter referred
to as the Leased Premises, for the term and upon the terms and conditions set
forth in this Lease Agreement. The location of the Leased Premises within the
site plan of the Commercial Center, which is marked "Exhibit A", attached hereto
and made part hereof, shows the boundaries and location of the Leased Premises
as outlined in red therein.
On the date hereof Owner has shown the final construction plans (and
specifications) of the Leased Premises certified by the architect, and Tenant
within 30 days from the date hereof, after reviewing such final plans will
approve or object to the
1
<PAGE>
final design and the construction specifications of the Leased Premises that
shall be constructed at the Commercial Center for the use of Tenant. The
approval of Tenant shall not be deemed to constitute a waiver of Tenant to make
any claim against the Owner should the Leased Premises not be constructed in
accordance to the approved plans and specifications and/or in compliance with
applicable building codes and regulations.
Section 1.20 Description of Leased Premises
The Leased Premises that Owner shall construct will be on the second floor
of the Commercial Center and will provide to Tenant premises consisting of a
typical shell; that is, steel structure, back and side concrete walls or dryvit,
glass front wall and roof. Owner will provide in addition, inclined unfinished
floors and projection mezzanines. Owner will only provide the inclined
unfinished floors and projection mezzanines on each of the six auditoriums.
Owner will only provide the structural floor of the projection mezzanines; and
the walls to enclose the mezzanines shall be the responsibility and at the cost
of the Tenant. In addition, Owner will provide a twenty six feet six inches
(26'.6") clear elevation from the level floor of the Leased Premises to the
lowest part of the bottom of the framing system of the roof; three (3) hours
fire retardant protection beneath primary floor of Leased Premises and the
ceiling of the first floor retail space under the Leased Premises, electrical
(3-phase, 480 volts/2,000 amperes capacity, 500 kva substation) from which
Tenant will make the necessary connection for its own needs, and at least 2
inches water supply pipeline for bathrooms, rough-in sanitary facility, and
water supply for sprinklers, drinking water fountains, concession stands, and
for air conditioning to be installed by Tenant, and telephone facilities for at
least three (3) lines. Tenant will provide at its own cost and expense, all
other interior work for its use, such as air conditioning system, interior
electrical facilities, lighting, partitions for each auditorium, sprinklers
system, fire alarm system, bathrooms, interior ceiling, floor covering,
painting, fixtures and equipment. Tenant shall bear all cost of utility services
serving the Leased Premises, including, but not limited to, electric power,
water, sewer, gas, and telephone services. Tenant will submit to Owner for
approval the plans for any interior work to be done within the Leased Premises.
Such approval shall be deemed
2
<PAGE>
granted if Tenant has not received any objection by Owner within twenty (20)
days of submitting such plans.
Section 1.30 Purpose and Use
The Leased Premises shall be used by Tenant for the purpose of operating a
multi screen movie theater for the exhibiting of motion picture presentations,
other theater purposes, including without limitation, vaudeville, theatrical,
dramatic, operatic, and other performances and exhibitions, including those
broadcast or televised to or from the Leased Premises, for general auditorium
purposes and civic functions, for the sales of food, refreshments and other
beverages, records, tapes, books, magazines, toys, novelties and similar items
sold in connection therewith, maintain video and entertainment games limited to
only ten (10) machines for the entire lobby of the six theater auditoriums and
vending machines for the use of patrons of Tenant and for such other uses as are
customary and usual in connection with any of the foregoing or with the general
cinema business. With the written consent of the Owner, Tenant shall have the
right at any time to convert the use of the Leased Premises to any other lawful
use provided that such other contemplated use is not in conflict or violation of
any exclusive use agreement of space in the Commercial Center granted by the
Owner to any other Tenant. Tenant shall operate under the trade name: Cinevista
or any other trade name.
Section 1.31 OTHER THEATERS
Owner hereby grants and affords Tenant the exclusive privilege for the
operation of theater auditoriums for exhibiting of motion picture presentations
in or about the Commercial Center and in any expansion thereof. Owner covenants
and agrees that no part of the Commercial Center, other than the Leased
Premises, shall during the term of this Lease or any renewals or extensions
thereof, be leased, occupied or used for movie theater, live performances of any
type, television broadcasts and / or the exhibition of any other entertainment
performances other than video games, except that in the food court there may be
installed television screens on the premises of the food-court broadcasting at
every moment during the operating hours of the food court, and may have
pay-per-view broadcasts, such as boxing, any type of sports, or any other
pay-
3
<PAGE>
per-view entertainment (other than first run motion pictures of the type which
may simultaneously be exhibited by Tenant in the Leased Premises) transmitted in
the television screens of the food court of the Commercial Center, and also
except for incidental activities by other Tenants and / or Owner such as live
performances, television broadcasts, pay-per- view broadcasts and or the
exhibition of any other entertainment performances.
Owner shall not permit the sale of ready-to-eat pop- corn for consumption
anywhere in the food court and in the Commercial Center, except within the
Leased Premises, excluding the sale of raw pop-corn for consumption out-side the
Commercial Center, and except as may be allowed on the date hereof by lease
contracts between Owner and existing tenants.
Section 1.40 Substantial Completion of Premises
The Owner expects to complete the construction of premises on or before
June 30, 1997 but this date shall be extended for all delays in construction
resulting from causes beyond the control of the Owner. Construction shall be
deemed to have been completed upon delivery by Owner to Tenant of the
appropriate use permit of the New Building. Possession of the Leased Premises
shall be permitted by Tenant prior to the completion of the Leased Premises upon
written notice of partial completion by Owner to Tenant for the purpose of
commencement of construction of Tenant's interior work. Upon Owner final
completion of the construction of the Leased Premises, Owner and Tenant shall
measure the Leased Premises to determine the actual gross leased area of the
Leased Premises and any amount payable under this lease determined on the basis
of the area of the Leased Premises shall be computed on the basis of the actual
measured gross leased area of the Lease Premises; that is, to the exterior of
the perimeter walls. If by December 31, 1997, Tenant has not been delivered the
appropriate use permits as aforesaid and has not been put in possession of the
Leased Premises, Tenant shall have the right to cancel this Lease at any time
after such date.
4
<PAGE>
Section 1.50 Use of Additional Areas
The use and occupation by the Tenant of the Leased Premises shall include
the use in common with others entitled thereto of the common areas, employees
parking areas, service roads, loading facilities, sidewalks, and customer car
parking areas, as they now or may hereinafter exist, and other facilities as may
be designated from time to time by the Owner, subject, however, to the terms and
conditions of this Lease Agreement and to reasonable rules and regulations for
the use thereof as prescribed from time to time by the Owner.
Section 1.60 Commencement and Ending Date of Term
The term of this Lease Agreement and Tenant's obligation to pay rent
hereunder shall commence 120 days after Tenant has been put in possession of the
Leased Premises, or on the date Tenant opens for business, whichever comes
first, and the original term of this lease shall be for 20 years after such
date. If Tenant is not open for business within said 120 day period as a result
of Tenant's inability to obtain a use permit for the Leased Premises resulting
from the actions or inactions of Owner, its employees, agents or contractors,
such 120 day period shall be extended by the period of such inability. Tender of
possession of the Leased Premises by the Owner to the Tenant shall be evidenced
by written notice given by the Owner to the Tenant, accompanied by a copy of any
necessary certificate of occupancy, stating that the New Building and the Leased
Premises have been substantially completed as herein provided and are ready for
occupancy by the Tenant. If the commencement date of the term of this lease
shall be a day other than the first day of a calendar month, then the original
term of this lease shall be deemed extended by the number of days between the
commencement date of this lease and the first day of the calendar month
following the commencement date of this lease, so that the original term of this
lease shall expire 20 years after such first day of the first calendar month
following the commencement date of this lease. In such case, the Tenant shall
pay pro rata rent, in advance, for the period from the effective date of this
lease to the first day of such following calendar month.
5
<PAGE>
On and after the first day of such following calendar month the Tenant shall pay
the rent as hereinafter provided in this lease.
Section 1.70 Term of the Original Lease
The term of this original lease shall be for a period of Twenty (20)
years.
Section 1.80 Renewal Options
Tenant will have the right to extend the original lease agreement for four
additional consecutive option periods of five years each.
Section 1.90 Lease Year Defined
The term "lease year" as used herein shall mean a period of twelve (12)
consecutive full calendar months. The first lease year shall begin on the date
of commencement of the term hereof if the date of commencement of the term
hereof shall occur on the first day of a calendar month; if not, then the first
lease year shall commence upon the first day of the calendar month next
following the date of commencement of the term hereof. Each succeeding lease
year shall commence upon the anniversary date of the first lease year.
ARTICLE II
RENT
Section 2.00 Minimum Rent
On the basis of Leased Premises consisting of 18,600 square feet, Tenant
agrees to pay to Owner at the office of Owner, or at such other place designated
by Owner within the Commonwealth of Puerto Rico, without any prior demand
therefor, and without any deduction or set-off whatsoever, and as fixed minimum
rent:
a. Tenant shall pay Owner in equal monthly installments, in advance, a
Minimum Annual Rent in the amount of $15,500.00 per month that is, ONE HUNDRED
EIGHTY SIX THOUSAND DOLLARS ($186,000.00) per year that is, $10.00 per square
foot per year for the first 10 years of the original term, and $17,050.00 per
month that is, TWO HUNDRED FOUR THOUSAND SIX HUNDRED DOLLARS ($204,600) per year
that is, $11.00 per square foot per year during the following five years, and
$17,825.00 per month that is, TWO HUNDRED THIRTEEN THOUSAND NINE HUNDRED
6
<PAGE>
DOLLARS ($213,900) per year that is, $11.50 per square foot per year during the
last five years of the original lease agreement.
b. Upon the expiration of the original term of this lease agreement,
Tenant agrees to pay for the first option period of five years, (if such option
is exercised by Tenant) a Minimum Annual Rent in the amount of $18,600.00 per
month that is, TWO HUNDRED TWENTY THREE THOUSAND TWO HUNDRED DOLLARS ($223,200)
per year that is, $12.00 per square foot per year.
c. Upon the expiration of the first option period, Tenant agrees to pay
for the second option period of five years, (if such option is exercised by
Tenant) a Minimum Annual Rent in the amount of $20,150.00 per month that is, TWO
HUNDRED FORTY ONE THOUSAND EIGHT HUNDRED DOLLARS ($241,800) per year that is,
$13.00 per square foot per year.
d. Upon the expiration of the second option period, Tenant agrees to pay
for the third and fourth option periods of five years each, (if such options are
exercised by Tenant), Minimum Annual rents applicable to each such option
periods to be determined by an independent real estate appraiser acceptable to
each party and in accordance with the market rents on the dates that the third
and fourth option periods are to commence.
Section 2.10 Taxes
Tenant shall pay its prorata share of taxes levied on the land, buildings
and improvements of the Commercial Center; said share (hereinafter "Prorata
Share") to be determined and ascertained by a fraction in which the numerator
shall be 18,600 square feet or Tenant's actual gross leased area and the
denominator shall be the Commercial Center's gross leasable area.
The additional rent provided for in this Section 2.10 shall be paid within
thirty (30) days after demand therefor by Owner. A tax bill submitted by Owner
to Tenant shall be sufficient evidence of the amount of taxes assessed or levied
against the real property to which such bill relates. Owner may choose to bill
Tenant monthly in proportion of said amount together with the monthly basic
rent. Any difference at the end of the six month period shall be adjusted and
credited or charged to the Tenant, as
7
<PAGE>
the case may be. Owner shall pay all such real estate taxes to the appropriate
taxing authorities within the maximum discount period. (See subdivision e of
Section 7.00 of ARTICLE VII for Tenant's real estate taxes maximum annual
reimbursement payment)
Section 2.20 Percentage Rent
Tenant shall also pay Owner in addition to the Minimum Annual Rent, a
Percentage Rent computed on the basis of Gross Sales for each Lease Year less
the Minimum Rent payable for such Lease Year, equal to 10% of Box Office
Receipts and 10% of Confection Receipts. The term Gross Sales as used herein is
defined to mean the total amount in dollars of the actual sales price, whether
for cash or on credit or partly cash and partly credit, of all 'Box Office
Receipts', whether sold from the Leased Premises or elsewhere if used in the
Leased Premises (excluding, however, tickets sold in the Leased Premises for use
at other theaters and not in fact used in the Leased Premises), and all
'Confection Receipts'. As used herein, the term 'Box Office Receipts' shall mean
all money received by Tenant from the sale of theater admissions' tickets to the
Leased Premises, whether such sales are effected by computer, cable, microwave
or other current or future technology and all money received by Tenant from
using the Leased Premises for general auditorium purposes and civic functions.
As used herein, the term 'Confection receipts' shall mean 50% of all money
received by Tenant from the sale of food, candies, beverages, records, tapes,
books, magazines, toys, novelties and any and all other items sold in or about
the Leased Premises. On video and entertainment games and vending machines
located in the Leased Premises that are owned by Tenant, all sales from such
videos and vending machines shall be included in the calculation of Confection
Receipts. In the event that such videos and/or vending machines are owned by an
unrelated third party and/or that any sales are conducted through
concessionaires, then only the commissions received by Tenant therefrom shall be
included in the calculation of Gross Sales. There shall be excluded from the
calculation of Gross Sales: (i) any sums collected or paid out for any sales or
rental excise tax or any other tax imposed or levied by any duly constituted
governmental authority, whether now or hereafter in force, (ii) any exchange of
goods or merchandise
8
<PAGE>
between the stores of Tenant made solely for the convenient operation of the
business of Tenant and not for the purpose of depriving Landlord of the benefits
of a sale, (iii) the amount of return to shippers or manufactures, (iv) the
amount of any cash or credit refund, (v) sales of fixtures, equipment or
properties that are not a part of Tenant's stock in trade, (vi) returned,
exchange or waived admission fees, (vii) sales to employees not to exceed 2% of
Gross Sales,, (viii) commissions fees paid by Tenant to tickets agencies and
(IX) employee or gift pass admissions not to exceed 2% of Gross Sales.
Tenant will register its sales using the cash registers that Tenant
commonly uses in its business which contains cumulative sales indicators.
The percentage rent shall be due sixty days after the last of each lease
year, partial lease year during the term of the lease or expiration or earlier
termination of this lease.
All of Tenant's books and records to the extent pertaining only to the
total gross sales generated in the business conducted on the Leased Premises
shall be open to inspections and audit by Owner's authorized representative upon
reasonable prior written notice to Tenant. Tenant shall submit to Owner the
following written statements.
(a) On or before the thirtieth (30)th day following each monthly
period of the lease term, a statement showing the amount of gross sales for the
month or fractional month preceding.
(b) On or before the sixtieth (60)th day following the end of each
lease year or partial lease year, a statement showing the amount of gross sales
during the lease year or partial lease year.
Each of these statements shall be (a) certified as correct by Tenant; (b)
accurate and in reasonable detail, satisfactory in scope to Owner; and (c) sent
to the place then fixed for payment of the rent.
Acceptance by Owner of payment of percentage rent shall be without
prejudice to Owner's rights to examine Tenant's books and records pertaining
only to the total gross sales, in order to verify the amount of Tenant's gross
receipts and without prejudice to Owner's right to cause an audit to be made as
provided below.
9
<PAGE>
At its option, at any reasonable time upon twenty (20) days written notice
to the Tenant and only once a year, Owner may cause an audit to be made of all
or any part of Tenant's business affairs and records, relating to the gross
sales generated in the business generated in the Leased Premises for the period
covered by any statement issued by Tenant. If the audit discloses a discrepancy
of four percent or more of the amount of gross sales, the Tenant shall reimburse
Owner for the reasonable cost of the audit. If after any examination or audit,
the audit accurately discloses that an additional sum is due as percentage rent,
Tenant agrees to pay such sum upon written demand.
Section 2.30 Past-Due Rent and Additional Rent
If Tenant shall fail to pay, after fifteen (15) days, when the same is due
and payable, any rent or any additional rent, or amounts or charges of the
character described in ARTICLE II hereof, such unpaid amounts shall bear
interest from the due date thereof to the date of payment at the rate of 200
basis points over the prime rate per annum quoted by The Chase Manhattan Bank,
N.A.
ARTICLE III
CONSTRUCTION, ALTERATION, RELOCATION, AND FINANCING OF IMPROVEMENTS AND
ADDITIONS THERETO
Section 3.00 Owner's Obligation
Owner shall construct the New Building and the Leased Premises as provided
in Sections 1.10 and 1.20 of this Lease Agreement. Tenant shall submit plans to
Owner for its written approval, prior to making any changes, modifications, or
alterations, in the Leased Premises. Without seeking Owner's prior consent,
Tenant is permitted to make additions, improvements and constructions in the
Leased Premises not exceeding in cost the sum of $100,000.00 per year. Any
repairs, alterations, or changes to the Leased Premises performed by Owner at
Tenant's request, shall be paid entirely by Tenant.
In making any alterations or modifications to the Leased Premises, Tenant
shall conserve the existing facilities to the greatest extent possible and shall
not affect the structure of the Leased Premises in any way. All sort of
modification, changes,
10
<PAGE>
reconstruction, etc., shall be done, whenever possible, using the back entrance
to the Leased Premises. Any work performed by Tenant shall be done with
commercially reasonable care and diligence, so as to cause the least nuisance,
noises, or inconveniences to other tenants of the Commercial Center. In respect
to such alterations and modifications, Tenant shall be exclusively responsible
for any damages to third persons, Owner, or their property and shall hold or
harmless and indemnity it for any damages caused, as provided in ARTICLE XI
except for those caused by willful or negligent act of Owner or any other third
person.
Section 3.10 Parking Facilities and Illumination
As part of the expansion of the Commercial Center, Owner will construct at
its own cost and expense within the Commercial Center a multi level garage
parking of approximately 187 spaces and an additional ground level parking of
approximately 183 spaces. Owner guarantees that under no circumstances the
parking will be reduced to less than 300 spaces. The illumination of the
parking, the interior common area facilities serving the Leased Premises and the
exterior common areas of the Commercial Center will be on at least 30 minutes
after the last show of every evening.
3.20 Changes and Additions to Buildings
Owner hereby reserves the right at any time to make alterations or
additions to and to build additional stories on the building in which the
premises are contained and to build adjoining the same. Owner also reserves the
right to construct other buildings or improvements in the Commercial Center from
time to time and to make alterations thereof or additions thereto and to build
additional stories on any such building or buildings and to build adjoining the
same and to construct double-deck or elevated parking facilities, provided,
however, that none of the foregoing shall interfere or interrupt the use of the
Leased Premises for the purposes contemplated under this lease.
Section 3.30 Right to Relocate
Except as otherwise stated in Section 3.10, Owner reserves the right at
any time to relocate the automobile parking areas, and other common areas on the
11
<PAGE>
Commercial Center as it now exists.
ARTICLE IV
CONDUCT OF BUSINESS BY TENANT
Section 4.00 Use of Premises
Tenant shall use commercially reasonable efforts to conduct continuously
in the Leased Premises the business above stated. Except as otherwise stated in
this lease, Tenant will not use or permit, or suffer the use of the Leased
Premises for any other business or purpose.
Section 4.10 Operation of Business
Tenant shall conduct its business in the Leased Premises during the
regular customary days and hours which are economically and commercially
feasible for such type of business in the city, or trade area in which the
Commercial Center is located.
ARTICLE V
OPERATION OF CONCESSIONS
CONCESSIONAIRE
Section 5.00 Consent of Owner
Except as otherwise permitted in this lease, without Owner's prior
consent, Tenant shall not permit any business to be operated in or from the
Leased Premises by any concessionaire of licensee. Failure to comply shall
constitute breach of this lease.
ARTICLE VI
PARKING AND COMMON USE AREAS AND FACILITIES
Section 6.00 Control of Common Areas by Owner
All automobile parking areas, driveways, entrances and
exits thereto, and other facilities furnished by Owner in or near
the Commercial Center, including employee parking areas, the truck
way or ways loading docks, package pick-up stations, pedestrian
sidewalks and ramps, landscaped areas, exterior stairways, first-
aid stations, comfort stations and other areas and improvements
provided by Owner for the general use, in common, of tenants, their
officers, agents, employees and customers, shall at all times be
subject to the exclusive control and management of Owner, and Owner
shall have the right from time to time to establish, modify and
enforce commercially
12
<PAGE>
reasonable rules and regulations with respect to all facilities and areas
mentioned in this Article. Owner shall have the right and obligation to
construct, maintain and operate adequate lighting facilities on all said areas
and improvements; to police the same; from time to time to change the area,
level, location and arrangement of parking areas and other facilities
hereinabove referred to; to restrict parking areas; to enforce parking charges
(by operation of meters or otherwise), with appropriate provisions for free
parking ticket validating by Tenants; to close all or any portion of said areas
or facilities to such extent as may, in the opinion of Owner's counsel, be
legally sufficient to prevent a dedication thereof or the accrual of any rights
to any person or the public therein; to close temporarily all or any portion of
the parking areas of facilities; to discourage non-customer parking; and to do
and perform such other acts in and to said areas and improvements as, in the use
of good business judgement, the Owner shall determine to be advisable. Owner
will operate and maintain the common facilities referred to above in such manner
as Owner, in its sole discretion, shall determine from time to time. Without
limiting the scope of such discretion, Owner shall have the full right and
authority to employ all personnel and to make all fair and commercially
reasonable rules and regulations pertaining to and necessary for the proper
operation and maintenance of the common areas and facilities. Notwithstanding
anything herein to the contrary, the rights afforded to Owner by this Section
6.00 are limited and restricted by the other provisions of this lease,
including, without limitation, Section 3.10, 3.20 and 3.30.
Section 6.10 License
Tenant is hereby granted the right to use all common
areas and facilities of the Commercial Center concurrently and
simultaneously used by other tenants of the Commercial Center not
within the Leased Premises during the time Tenant is in possession
of the Leased Premises and such right shall only be revoked and
terminated in the event Owner obtains possession of the Leased
Premises. If the amount of the common areas and facilities of the
Commercial Center is diminished by Owner or any other reason, Owner
shall not be subject to any liability nor shall Tenant be entitled
to any compensation or diminution or abatement of rent, nor shall
such diminution of such
13
<PAGE>
areas be deemed constructive or actual eviction.
ARTICLE VII
COST OF MAINTENANCE OF COMMON AREAS
Section 7.00 Tenant to Bear Pro Rata Share of Expense
(a) Subject to the limitations set forth in Section 7.00 (e), in
each lease year, Tenant will pay to Owner, in addition to the rentals specified
in Article II hereof, as further additional rent, subject to the limitation
hereinafter set forth, a proportion of the Commercial Center's operating cost,
hereinafter defined, based upon the ratio of the actual square feet of the gross
leased area of the Leased Premises to the total square feet of all the leasable
gross building space in the Commercial Center.
(b) For the purpose of this Section 7.00 the "Commercial Center's
operating cost" means the total fair and commercially reasonable cost and
expense incurred in operating and maintaining the common facilities, hereinafter
defined, actually used or available for use by Tenant and the employees, agents,
servants, customers and other invitee of Tenant, but specifically including,
without limitation, gardening and landscaping, the cost of public liability
insurance, administrative salaries and management fees (the management fees will
not exceed 5% of the total gross revenues of the Commercial Center), repairs,
painting, utilities, sanitary control, removal of trash, rubbish, cleaning and
other refuse, equipment used in such maintenance, the cost of personnel to
implement such services, to direct parking, and to police the common facilities,
the cost of lighting and guard services, but excluding any depreciation expenses
of any kind.
Property Insurance and Real Estate Taxes and Assessments are also part of the
operating expenses of the Commercial Center, but the pro rata share of property
insurance and real estate taxes shall be computed as stipulated on Section 2.10
and Section 11.00. Owner shall operate and maintain the Commercial Center in a
fair and commercially reasonable manner.
"Common facilities" means all areas, space, equipment and special services
provided by Owner for the common or joint use and benefit of the occupants of
the
14
<PAGE>
Commercial Center, their employees, agents, servants, customers and other
invites, including without limitation parking areas, access roads, driveways,
retaining walls, landscaped areas, truck service ways or tunnels, loading docks,
pedestrian malls, courts, stairs, ramps and sidewalks, elevators, comfort and
first aid stations, washrooms and parcel pick-up stations.
(c) The additional rent provided to be paid in this Section 7.00
shall be computed on a monthly basis, and shall be paid by Tenant promptly
within twenty (20) days upon receipt of monthly bills therefor from Owner
setting forth in reasonable detail charges and calculations, without any
deduction or set-off whatever.
(d) Changes in any particular floor area occurring during any month
shall be effective on the first day of the next succeeding month and the amount
of any floor area shall be in effect on the first day of each calendar month.
(e) Owner hereby guarantees that Tenant's pro-rata share of the
Commercial Center's operating cost as defined in paragraph (b) of Section 7 of
ARTICLE VII shall not be greater than $2.50 per square foot of Tenant's gross
leased area in the Leased Premises; that is, $46,500.00 annually on the basis of
Leased Premises of 18,600 square feet. The $2.50 per square foot maximum charges
for the Commercial Center's operating cost shall be adjusted annually by the
percentage increases (or equivalent) in the Puerto Rico Government Consumer
Price Index ("C.P.I.") at the end of each lease year over the "C.P.I." at the
beginning of the same lease year. Tenant shall pay the lesser of its pro-rata
share of actual expenses, or the $2.50 per square foot plus the cumulative
compounded annual C.P.I. increase as explained above.
(f) Tenant shall reimburse its corresponding share of the expenses
for the Commercial Center's Opening Activity based on its participation ratio as
set forth in Section 7.00 of ARTICLE VII, or $5,000.00, whichever is lower.
(g) Tenant or its agents, upon prior notice to Owner, may audit and
inspect, but only once a year, at the offices where the books and records of the
Commercial Center are maintained, Owner's records of operating expenses,
insurance and property taxes of
15
<PAGE>
the Commercial Center, provided such audit and inspection shall be made during
normal business hours and not unreasonably interfere with the general business
operations of Owner, provided, however, that if any such audit or inspection
discloses that the actual cost of operating expenses, insurance, and property
taxes of the Commercial Center is less than four (4%) or more than those
reported, Owner shall forthwith pay to Tenant the cost of such audit or
inspection together with the corresponding reimbursements of such excess cost
charged to Tenant.
ARTICLE VIII
SIGNS, AWNINGS, CANOPIES, FIXTURES, ALTERATIONS
Section 8.00 Installation by Tenant
All fixtures installed by Tenant shall be new or completely reconditioned.
Tenant shall not make or cause to be made any alterations, additions or
improvements to the exteriors of the Leased Premises or instal or cause to be
installed any, exterior signs, exterior sign, exterior lighting, shades or
awnings or make any changes to the store front without first obtaining Owner's
written approval and consent. Tenant shall present to the Owner plans and
specifications for such work at the time approval is sought.
Tenant shall have the right to instal a pylon sign within the premises of
the Commercial Center. Tenant shall submit to Owner evidence of permit approval
from "Administracion de Reglamentos y Permisos" (ARPE) allowing the installation
of such pylon sign. Tenant shall be responsible for the application of the
necessary permits with (ARPE) required to allow the installation of such pylon
sign. Tenant shall be responsible for the installation, maintenance and
electricity expenses of such pylon sign. Tenant shall operate the pylon sign
properly, well maintained and lighted every night. After the installation of
such pylon sign, Tenant, without the written consent of Owner, shall not remove
such pylon sign. At the end of this lease agreement and all its extension
rights, or at any termination date of this lease agreement, such pylon sign will
be considered a permanent addition to the Commercial Center, and ownership of
such pylon sign shall be transferred to Owner.
16
<PAGE>
Section 8.10 Removal and Restoration by Tenant
All alterations, decorations, additions and improvements made by the
Tenant, or made by the Owner on the Tenant's behalf by agreement under this
lease, shall remain the property of the Tenant for the term of the lease, or any
extension or renewal thereof. Such alterations, decorations, additions and
improvements shall not be removed from the premises prior to the end of the term
hereof without prior consent in writing from the Owner. Upon expiration of this
lease, or any renewal term thereof, the Tenant shall remove all such
alterations, decorations, additions and improvements, and restore the Leased
Premises as provided in Section 9.20 hereof. If the Tenant fails to remove such
alterations, additions, decorations and improvements and restore the Leased
Premises, then upon the expiration of this lease, or any renewal thereof, and
upon the Tenant's removal from the Leased Premises, all such alterations,
decorations, additions and improvements shall become the property of the Owner.
Section 8.20 Tenant Shall Discharge All Liens
Tenant shall promptly pay all its contractors and materialmen, so as to
minimize the possibility of a lien attaching to the Leased Premises, and should
any such lien from its contractors and/or materialmen be made or filed, Tenant
shall bond against or discharge the same within ten (10) days after written
request by Owner.
Section 8.30 Signs, Awnings and Canopies
Except as set forth in Section 8.00, no signs shall extend above the
parapet heights of the buildings or shall project more than 18 inches from the
front building line. If Tenant should install a previously approved canopy by
Owner it may erect signs thereon, provided such signs do not extend beyond the
edge of the canopy nor above the parapet height of the building. Notwithstanding
the above, Tenant will not place or suffer to be placed or maintained on any
exterior door, wall, or window of the Leased Premises any sign, awning, or
canopy, or advertising matter or other thing of any kind, and will not place or
maintain any decoration, lettering, or advertising matter on the glass of any
window or door of the Leased Premises without first obtaining Owner's
17
<PAGE>
written approval and consent. Tenant further agrees to maintain such sign,
awning, canopy, decoration, lettering, advertising matter or other thing as may
be approved in good condition and repair at all times.
ARTICLE IX
MAINTENANCE OF LEASED PREMISES
Section 9.00 Maintenance by Tenant
Tenant shall at all times keep the Leased Premises (including maintenance
of the exterior entrances, all glass and show window moldings) and all
partitions, walls, doors, fixtures, carpets, equipment, and appurtenances
thereof (including lighting and plumbing fixtures, escalators, elevators, and
any air conditioning system) in good order, condition, and repair (including
reasonably periodic painting), except for structural portions of the Leased
Premises, which shall be maintained by Owner, but if Owner is required to make
repairs to structural portions of the Leased Premises by reason of Tenant's
negligent acts or omission to act, Owner may add the reasonable cost of such
repairs to the rent which shall thereafter become due. In the case of the
air-conditioning system, all repairs, including replacements if necessary, are
to be made by Tenant at its cost.
Section 9.10 Maintenance by Owner
If Tenant refuses or neglects to repair the Leased Premises as required
hereunder as soon as reasonably possible after written demand, Owner may make
such repairs without liability to Tenant for any loss or damage that may accrue
to Tenant's merchandise, fixtures, or other property or to Tenant's business by
person thereof, and upon completion thereof, Tenant shall pay Owner's reasonable
costs for making such repairs plus ten percent (10%) for overhead, upon
presentation of bill therefore, as additional rent.
Section 9.20 Surrender of Premises
At the expiration of the tenancy hereby created, Tenant shall surrender
the Leased Premises in the same condition as the Leased Premises were in upon
delivery of possession thereto under this lease, reasonable wear and tear
excepted, and shall
18
<PAGE>
surrender all keys for the Leased Premises to Owner at the place then fixed for
the payment of rent and shall inform Owner of all combinations of locks, safes
and vaults, if any, in the Leased Premises. Tenant shall remove all its trade
fixtures, and any alterations or improvements as provided in Section 8.10
hereof, before surrendering the premises as aforesaid and shall repair any
damage to the Leased Premises caused thereby. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination to the
term of this lease.
ARTICLE X
RULES AND REGULATIONS
Section 10.00 Rules and Regulations
The rules and regulations appended to this lease are hereby made a part of
this lease, and Tenant agrees to comply with and observe the same. Tenant's
failure to keep and observe said rules and regulations shall constitute a breach
of the terms of this lease in the manner as if the same were contained herein as
covenants. Owner reserves the right from time to time to amend or supplement
said rules and regulations and to adopt and promulgate additional rules and
regulations applicable to Leased Premises and the Commercial Center. Notice of
such additional rules and regulations, and amendments and supplements, if any,
shall be given to Tenant, and Tenant agrees thereupon to comply with and observe
all such rules and regulations, and amendments thereto and supplements thereof,
provided the same shall apply uniformly to all tenants of the Commercial Center
and that the same are fair and commercially reasonable.
ARTICLE XI
INSURANCE AND INDEMNITY
Section 11.00 Insurance
Subject to the limitations set forth in Section 7.00 (e), Tenant shall pay
it prorata share of property insurance for all Risks on the Commercial Center;
paid share, (prorata share) to be determined and ascertained by a fraction in
which the numerator shall be Tenant's actual gross leased area in the Leased
Premises and the denominator shall be the Commercial Center's gross leasable
area. Prorata share of liability insurance
19
<PAGE>
shall be paid as stipulated in Section 7.00 subdivision (a) of ARTICLE VII.
The additional rent provided for in this Section 11.00 shall be paid
within twenty (20) days after demand therefor by Owner, accompanied by a
statement setting forth in reasonable detail costs and calculations. Subject to
Section 7 (g), a premium bill submitted by Owner to Tenant shall be sufficient
evidence of the amount of insurance assessed or levied against the real property
to which such bill relates. Owner may choose to bill Tenant monthly in
proportion of said amount together with the monthly basic rent. Any difference
at the end of the six month period shall be adjusted and credited or charge to
the Tenant, as the case may be.
Section 11.10 Increase in Fire Insurance Premium
Tenant agrees that it will not keep, use, sell or offer for sale in or
upon the Leased Premises any article which may be prohibited by the standard
form of fire insurance policy. Tenant agrees to pay any reasonable increase in
premiums for fire and extended coverage insurance that may be charged during the
term of this lease on the amount of such insurance which may be carried by Owner
on said premises or the part of the building of the Commercial Center which they
are a part, resulting from the type of merchandise sold by Tenant in the Leased
Premises, whether or not Owner has consented to the same. Subject to Section 7
(g), in determining whether increased premiums are the result of Tenant's use of
the Leased Premises, a schedule reasonably satisfactory to Tenant, issued by the
organization making the insurance rate on the Leased Premises, showing the
various components of such rate, shall be conclusive evidence of the several
items and charges which make up the fire insurance rate on the Leased Premises.
In the event Tenant's occupancy causes any increase of premium for the
fire, boiler and\or casualty rates on the Leased Premises or any part thereof
above the rate for the standard form of the fire, boiler and / or casualty
insurance policy, the Tenant shall pay the additional reasonable premium on the
fire boiler and\or casualty insurance policies by reason thereof. The Tenant
also shall pay in such event, any additional premium on the rent insurance
policy that may be carried by the Owner for its
20
<PAGE>
protection against rent loss through fire. Bills for such additional premiums
shall be rendered by Owner to Tenant at such times as Owner may elect, and shall
be due from, and payable by Tenant, when rendered, and the amount thereof shall
be deemed to be, and be paid as additional rent. Owner recognizes and accepts
that the contemplated use of the Leased Premises is not prohibited by the
standard form of the fire, boiler, and / or casualty insurance policy.
Section 11.20 Indemnification of Owner
Tenant will indemnify Owner and save it harmless from and against any and
all claims, actions, damages, liabilities and expenses in connection with loss
of life, personal injury and\or damage to property arising from or out of any
occurrence in, upon or at the Leased Premises, or the occupancy or use by Tenant
of the Leased Premises or any part thereof, or occasioned wholly or in part by
any act or omission of Tenant, its agents, contractors, employees, servants,
lessees or concessionaires provided, however, that such indemnification shall
not take effect where the matter is otherwise covered by insurance and/or in the
case such claims, actions, damages, liabilities and/or expenses is caused by the
negligence or willful misconduct of Owner, its agents, contractors, employees,
or servants. In case Owner shall, without fault on its part, be made a party to
any litigation commenced by or against Tenant, then Tenant shall protect and
hold Owner harmless and shall pay all costs, expenses and reasonable attorney's
fees incurred or paid by Owner in connection with such litigation.
Section 11.30 Mutual Protection
For the mutual protection of Owner and Tenant, Tenant agrees to at all
times maintain in full force a policy as public liability and property damage
insurance with respect to the Leased Premises, in the minimum amounts of
$100,000 per person, $300,000 per accident and $50,000 for property damage.
Further Tenant shall, at its expense, maintain fire and extended insurance
coverage in amount adequate to cover the cost of replacement of all fixtures,
contents, decorations, and improvement installed by Tenant or which Tenant is
obligated to maintain and replace. All policies of insurance will name Owner,
any mortgagee of the Commercial Center, and, at no additional cost
21
<PAGE>
to Tenant, any person, firm, or corporation designated by Owner, and Tenant as
insured, and shall contain a clause that the insurer will not cancel or change
the insurance without first giving Owner thirty days' written notice. The
insurance shall be carried with a creditable insurance company doing business in
Puerto Rico and a copy of the policy or a certificate of insurance shall be
delivered to Owner.
Tenant shall, at Tenant's expense, maintain a workmen's compensation
policy in the minimum amount necessary to meet the requirements of any
applicable workmen's compensation act, and a copy of the policy or a certificate
of insurance shall be delivered to Owner.
If Tenant fails to obtain or maintain any insurance required by this
lease, Owner shall have the option, after thirty days written notice to Tenant,
to obtain such insurance. Any sums thus advanced by Owner for Tenant's account
shall be secured as if they were rentals due under the terms of this lease, and
shall bear interest at the highest legal rate from the date of such expenditure.
ARTICLE XII
UTILITIES
Section 12.00 Utility Charges
Tenant shall be solely responsible for and promptly pay all charges for
water, sewer, gas, electricity or any other utility used or consumed at the
Leased Premises. Should Owner elect to supply the water, gas, electricity or any
other utility used or consumed in the Leased Premises, Tenant agrees to purchase
and pay for the same as additional rent at the applicable rates filed by the
Owner with the proper regulatory authority. In no event shall Owner be liable
for an interruption in the supply of any such utilities to the Leased Premises,
for reasons beyond Owner's control.
ARTICLE XIII
OFFSET STATEMENT, ATTORNMENT SUBORDINATION
Section 13.00 Offset Statement in Case of Sale of Commercial Center
Within thirty days after request therefor by Owner, or in
the event that upon any sale, assignment or hypothecation of the
Leased Premises and\or the land
22
<PAGE>
thereunder by Owner an offset statement shall be required from Tenant; Tenant
agrees to deliver in recordable form a certificate to any proposed mortgagee or
purchaser, or to Owner, certifying (if such be the case) that this lease is in
full force and effect and that there are no defenses or offsets thereto, or
stating those claimed by Tenant.
Section 13.10 Attornment
Tenant shall, in the event any proceedings are brought for the foreclosure
of, or in the event of exercise of the power of sale under any mortgage made by
the Owner covering the Leased Premises or in case of sale to a third party,
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the Owner under this lease, provided, however, that this attornment
is subject to the condition precedent that such purchaser consents and accepts
that so long as Tenant is not in default under the lease or any renewal thereof,
such purchaser shall not divest, impair, abrogate, modify or otherwise adversely
affect any interest or right whatsoever of Tenant under this lease.
Section 13.20 Subordination
Subject and contingent to Section 24.90, upon request of the Owner, Tenant
will subordinate its rights hereunder to the lien of any mortgage or mortgages,
or the lien resulting from any other method of financing or refinancing, now or
hereafter in force against the land and\or buildings hereafter placed upon the
land of which the Leased Premises are a part, and to all advances made or
hereafter to be made upon the security thereof.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
Section 14.00 Consent Required
Tenant will not sublet all or any part of the Leased Premises without
Owner's prior written consent. The consent by Owner to any subletting shall not
constitute a waiver of the necessity for such consent for any subsequent
subletting. This prohibition against subletting shall be construed to include a
prohibition against any subletting by operation of law. If the Leased Premises
or any part thereof be underlet
23
<PAGE>
or occupied by anybody other than Tenant, Owner may collect rent from the
undertenant or occupant, and apply the net amount collected to the rent herein
reserved, but no such underletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. Notwithstanding any sublease,
Tenant shall remain fully liable on this lease and shall not be released from
performing any of the terms, covenants and conditions of this lease.
Section 14.10 Assignment of Lease
Tenant shall have the right to sell and assign this Lease with the prior
written approval of the Owner. Tenant shall notify Owner within 30 days before
any contemplated sale or assignment of this Lease. Such approval shall be
granted by the Owner if the contemplated purchaser, assignee or transferee of
this lease has experience in the cinema or theater industry, financial stability
and a good business reputation. Upon Owner's approval and consummation of such
sale and assignment, Tenant shall be released from any further obligation or
undertaking under this lease. Tenant shall notify Owner within 30 days before
any contemplated change in the effective voting control of Tenant, provided,
however, that no change in the effective voting control of Tenant nor any
transfer of the voting shares of Tenant shall be deemed or construed to
constitute an assignment, sale or transfer of this Lease.
ARTICLE XV
WASTE, GOVERNMENTAL REGULATIONS
Section 15.00 Waste or Nuisance
Tenant shall not commit or suffer to be committed any waste upon the
Leased Premises or any nuisance or other act or thing which disturbs the quiet
enjoyment of any other tenant in the New Building where the Leased Premises are
located, or in the Commercial Center.
Tenant shall not use or permit any part of the demised premises to be used
in such manner as to cause annoying noises or vibrations, or offensive odors.
24
<PAGE>
Section 15.10 Governmental Regulations
Tenant shall, at Tenant's sole cost and expense, comply with all of the
requirements of all municipal, state, federal and other applicable governmental
authorities, now in force, or which may hereafter be in force, pertaining to the
said Leased Premises all municipal ordinances and state and federal statutes now
in force or which may hereafter be in force, including permit for use.
ARTICLE XVI
ADVERTISING
Section 16.00 Solicitation of Business
Except as otherwise permitted in this lease, Tenant and Tenant's employees
and agents shall not solicit business in the parking or other common areas, nor
shall Tenant distribute any handbills or other advertising matter in automobiles
parked in the parking area or in other common areas. No sidewalks, parking
areas, roadways, means of ingress or egress or other common areas shall be used
for the sale, display or storage or merchandise or any other property of Tenant.
All business shall be conducted within the Leased Premises.
ARTICLE XVII
DESTRUCTION OF LEASED PREMISES
Section 17.00 Total or Partial Destruction
If the Leased Premises shall be damaged by fire, the elements, unavoidable
accident or other casualty, and are thereby rendered untenantable in whole,
Tenant may at its election, terminate this lease and the tenancy hereby created
by giving to Owner within the sixty (60) days following the date of said
occurrence, written notice of Tenant's election to do so and in the event of
such termination rent shall be adjusted as of such date, or if Tenant elects not
to terminate this lease, Owner shall repair such damage, at its own expense and
the rent shall be abated for the repair period. Such repair shall be performed
only with, and to the extent of the net compensation from hazard insurance
policies. If by reason of such occurrence the Leased Premises shall be rendered
untenantable only in part, Owner shall repair the damage, only with, and to the
extent
25
<PAGE>
of the net compensation from hazard insurance policies and the fixed minimum
rent meanwhile shall be abated proportionately as to the portion of the Leased
Premises rendered untenantable. If the premises shall be rendered wholly
untenantable by reason of such occurrence, if Tenant elects not to terminate
this lease, Owner shall repair such damage, only with, and to the extent of the
net compensation from hazard insurance policies, and the fixed minimum rent
meanwhile shall abate until the Leased Premises have been restored and rendered
tenantable. When applicable, nothing in this Section 17.00 shall be construed to
permit the abatement in whole or any part of the percentage rent, but for the
purpose of Section 2.20 hereof the computation of percentage rent shall be based
upon the revised minimum rent as the same may be abated pursuant to this Section
17.00.
Section 17.10 Partial Destruction of Commercial Center
In the event that fifty percent (50%) or more of the rentable area of the
Commercial Center shall be damaged or destroyed by fire or other cause,
notwithstanding that the Leased Premises may be unaffected by such fire or other
cause, Tenant may terminate this lease and the tenancy hereby created by giving
to the other party five (5) days prior written notice of it's election to do so
which notice shall be given, if at all, within the sixty (60) days following the
date of said occurrence. Rent shall be adjusted as of the date of such
termination. If Tenant elects to continue operations in the unaffected Leased
Premises, then the maximum reimbursement amount of Tenant's pro-rata share of
operating expenses, insurance, and property taxes described in paragraph (e) of
Section 7 of ARTICLE VII shall be multiplied by 1.5 times and the new product of
such multiplication shall be the new maximum amount ("new amount") for Tenant's
pro-rata share of operating expenses, insurance, and property taxes. This new
amount shall be subject to the "C.P.I." increases as stated in paragraph (e) of
Section 7 of ARTICLE VII, and shall be in effect until the Commercial Center has
been rehabilitated in whole.
26
<PAGE>
ARTICLE XVIII
EMINENT DOMAIN
Section 18.00 Total Condemnation of Leased Premises
If the whole of the Leased Premises shall be acquired or condemned by
eminent domain for any public or quasi-public use or purpose, then the term of
this Lease shall cease and terminate as of the date of title vesting in such
proceeding and all rentals shall be paid up to that date and Tenant shall have
no claim against Owner nor the condemning authority for the value of any
unexpired term of this lease, except as set forth in Section 18.50.
Section 18.10 Partial Condemnation
If any part of the Leased Premises shall be acquired or condemned as
aforesaid, and in the event that such partial taking or condemnation shall
render the Leased Premises unsuitable for the business of the Tenant, then
Tenant shall have the right to terminate this lease as of the date of title
vesting in such proceeding. Except as set forth in Section 18.50, Tenant shall
have no claim against Owner nor the condemning authority for the value of any
unexpired term of this lease and rent shall be adjusted to the date of such
termination. In the event of a partial taking or condemnation which is not
extensive enough to render the premises unsuitable for the business of the
Tenant, then Owner may elect to restore the Leased Premises to a condition
comparable to its condition at the time of such condemnation less the portion
lost in the taking, and if that be the case, this lease shall continue in full
force and effect without any reduction or abatement of rent, except for the area
taken by such condemnation and to the extent of Tenant's loss of use of the
Leased Premises.
Section 18.20 Total Condemnation of Parking Area
If the whole of the common parking area in the Commercial Center shall be
acquired or condemned as aforesaid, then Tenant shall have the right to
terminate this Lease as of the date of title vesting in such proceeding unless
Owner may elect to provide other parking facilities substantially equal to the
previously existing ratio between the
27
<PAGE>
common parking areas and the Leased Premises, and reasonably located. In the
event that Owner shall provide such other substantially equal parking
facilities, then this lease shall continue in full force and effect, without any
reduction or abatement of rent.
Section 18.30 Partial Condemnation of Parking Area
If any part of the parking area in the Commercial Center shall be acquired
or condemned as aforesaid, and if, as the result thereof the parking is reduced
to less than 250, then Tenant may elect to terminate this lease upon title
vesting in such proceeding, unless the Owner shall take immediate steps toward
restoring the parking spaces to at least 300, in which event this lease shall be
unaffected and remain in full force and effect without any reduction or
abatement of rent. Except as set forth in Section 18.50, in the event of
termination of this lease as aforesaid, Tenant shall have no claim against Owner
nor the condemning authority for the value of any unexpired term of this lease
and rent shall be adjusted to the date of said termination.
Section 18.40 Owner's Damages
In the event of any condemnation of taking as aforesaid, whether whole or
partial, except as stated in Section 18.50, the Tenant shall not be entitled to
any part of the award paid for such condemnation and Owner is to receive the
full amount of such award, the Tenant hereby expressly waiving any right or
claim to any part thereof.
Section 18.50 Tenant's Damages
Tenant shall have the right to claim and recover from the award of the
condemning authority, but not from Owner, such compensation, if any, with
respect to Tenant's investment in the leasehold improvements in the Leased
Premises, not otherwise received by Tenant, an amount obtained by multiplying
(i) the sum of all of Tenant's investment in the leasehold improvements in the
Leased Premises, by (ii) a fraction, the numerator of which is the number of
months from and including the date of the taking by condemnation or eminent
domain through the date of expiration of the original term of this lease, and
the denominator of which is the original term of this lease (240 months).
28
<PAGE>
Section 18.60 Condemnation of Less than a Fee
In the event of a condemnation of a leasehold interest in all or a portion
of the Leased Premises without the condemnation of the fee simple title also,
this lease shall not terminate and such condemnation shall not excuse Tenant
from full performance of all of its covenants hereunder, but Tenant in such
event shall be entitled to present or pursue against the condemning authority
its claim for and to receive all compensation or damages sustained by it by
reason of such condemnation, and Owner's right to recover compensation or
damages shall be limited to compensation for and damages if any, to its
reversionary interest; it being understood, however, that during such time as
Tenant shall be out of possession of the Leased Premises by reason of such
condemnation, the lease shall not be subject to forfeiture for failure to
observe and perform those covenants not calling for the payment of money. In the
event the condemning authority shall fail to keep the Leased Premises in the
state of repair required hereunder, or to perform any other covenant not calling
for the payment of money, Tenant shall have ninety (90) days after the
restoration of possession to it within which to carry out its obligations under
such covenant or covenants. During such time as Tenant shall be out of
possession of the Leased Premises by reason of such leasehold condemnation,
Tenant shall pay to Owner, in lieu of the minimum and percentage rents provided
for hereunder, and in addition to any other payments required of Tenant
hereunder, an annual rent equal to the average annual minimum and percentage
rents paid by Tenant for the period from the commencement of the term until the
condemning authority shall take possession, or during the preceding three full
calendar years, whichever period is shorter. At any time after such condemnation
proceedings are commenced, Owner shall have the right, at its option, to require
Tenant to assign to Owner all compensation and damages payable by the condemnor
to Tenant, to be held without liability for interest thereon as security for the
full performance of Tenant's covenants hereunder, such compensation and damages
received pursuant to said assignment to be applied first to the payment of rents
and all other sums from time to time payable by Tenant pursuant to the terms of
this lease as such sums fall due, and the remainder, if any, to be payable to
Tenant at the end of the
29
<PAGE>
term hereof or on restoration of possession to Tenant, whichever shall first
occur, it being understood and agreed that such assignment shall not relieve
Tenant of any of its obligations under this lease with respect to such rents,
and other sums except as the same shall be actually received by Owner.
ARTICLE XIX
DEFAULT OF THE TENANT
Section 19.00 Right to Re-enter
In the event of any failure of Tenant to pay any rental due hereunder
within fifteen (15) days after the same shall be due, or any failure to perform
any other of the terms, conditions or covenants of this lease to be observed or
performed by Tenant for more than thirty (30) days after written notice of such
default shall have been given to Tenant, or if default cannot be reasonably
cured in 30 days, such longer period as is reasonably required to cure the
default so long as the curing of such default is diligently pursued, or if
Tenant or an agent of Tenant shall intentionally falsify any report required to
be furnished to Owner pursuant to the terms of this lease, or if Tenant or any
guarantor of this lease shall become bankrupt or insolvent, or file any debtor
proceedings or take or have taken against Tenant or any guarantor of this Lease
in any court pursuant to any statute either of the United States or of any State
a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Tenant's or any such
guarantor's property, or if Tenant or any such guarantor makes an assignment for
the benefit of creditors, or petitions for enters into an arrangement provided
that in each of the foregoing instances such reorganization, bankruptcy,
insolvency or other proceeding or such receiver or trustee or such assignment is
not terminated, dismissed or vacated within sixty (60) days, or if Tenant shall
abandon said premises, or suffer this lease to be taken under any writ of
execution if not released within sixty (60) days, then the Owner besides other
rights or remedies it may have, shall have the immediate right to the extent
permitted by law of re-entry and may remove all persons and property from the
Leased Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the
30
<PAGE>
account of Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby.
SECTION 19.10 Right to Relet
Should Owner elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this lease or it may from time to time without
terminating this lease, make such alterations and repairs as may be reasonably
necessary in order to relet the Leased Premises, and relet said premises or any
part thereof for such term or terms (which may be for a term extending beyond
the term of this lease) and at such rental or rentals and upon such other terms
and conditions as Owner in its sole discretion may deem advisable; upon each
reletting all rentals received by the Owner from such reletting shall be
applied, first, to the payment of any indebtedness other than rent due hereunder
from Tenant to Owner; second, to the payment of any costs and expenses of such
reletting, including brokerage fees and attorney's fees and of costs of such
alterations and repairs; third, to the payment of rent due and unpaid hereunder,
and the residue, if any shall be held by Owner and applied in payment of future
rent as the same may become due and payable hereunder. If such rentals received
from such reletting during any month be less than that to be paid during that
month by Tenant hereunder, Tenant shall pay any such deficiency to Owner. Such
deficiency shall be calculated and paid monthly. No such re-entry or taking
possession of said premises by Owner shall be construed as an election on its
part to terminate this lease unless a written notice of such intention be given
to Tenant or unless the termination thereof by decree of a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Owner may
at any time thereafter elect to terminate this lease for such previous breach.
Should Owner at any time terminate this lease for any breach, in addition to any
other remedies it may have, it may recover from Tenant all damages it may incur
by reason of such breach, including the cost of recovering the Leased Premises,
reasonable attorney's fees, and including the worth at the time of such
termination of the excess, if any, of the amount
31
<PAGE>
of rent and charges equivalent to rent reserved in this lease for the remainder
of the stated term over the then reasonable rental value of the Leased Premises
for the remainder of the stated term, all of which amounts shall be immediately
due and payable from Tenant to Owner. In determining the rent which would be
payable by Tenant hereunder, subsequent to default, the annual rent for each
year of the unexpired term shall be equal to the average annual minimum and
percentage rents paid by Tenant from the commencement of the term to the time of
default, or during the preceding three full calendar years, whichever period is
shorter.
SECTION 19.20 Waiver of Jury Trial
The parties hereto shall and they hereby do waive trial by jury in any
action, preceding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and Tenant, Tenant's use or
occupancy to the Leased Premises, and / or any claim of injury or damage.
SECTION 19.30 Waiver of Rights of Redemption
Tenant hereby expressly waives any and all rights of redemption granted by
or under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Owner obtaining possession of the
Leased Premises, by reason of the violation by Tenant of any of the covenants or
conditions of this lease, or otherwise.
ARTICLE XX
ACCESS BY OWNER
SECTION 20.00 Right of Entry
Upon reasonable prior written notice and during a time which causes the
least interruption to Tenant's business, Owner or Owner's agents shall have the
right to enter the Leased Premises at all times to examine the same, and to show
them to prospective purchasers of the Commercial Center, and to make such
repairs, alterations, improvements or additions as Owner may deem necessary or
desirable, and Owner shall be allowed to take all material into and upon said
premises that may be required therefor without the same
32
<PAGE>
constituting an eviction of Tenant in whole or in part and the rent reserved
shall in no way abate while said repairs, alterations, improvements, or
additions are being made, by reason of loss or interruption of business of
Tenant, or otherwise, except that abatement of rent shall be granted to the
extent that the foregoing causes Tenant's loss of use of the Leased Premises.
During the six months prior to the expiration of the term of this lease of any
renewal term, Owner may exhibit the premises to prospective tenants or
purchasers and place upon the premises the usual notices "To Let" or "For Sale"
which notices Tenant shall permit to remain thereon without molestation. If
Tenant shall not be personally present to open and permit an entry into said
premises at the time of an emergency, may enter the same by a master key, or may
forcibly enter the same, without rendering Owner or such agents liable therefor,
and without in any manner affecting the obligations and covenants of this lease.
Nothing herein contained, shall be deemed or construed to impose upon Owner any
obligation, responsibility or liability whatsoever, for the care, maintenance or
repair of the building or any part thereof, except as otherwise herein
specifically provided.
SECTION 20.10 Excavation
If an excavation shall be made upon land adjacent to the Leased Premises,
or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the Leased Premises
for the purpose of doing such work as Owner shall deem necessary to preserve the
wall or the building of which the Leased Premises form a part from injury or
damage and to support the same by proper foundations, without any claim for
damages or indemnification against Owner or diminution or abatement of rent,
except that abatement of rent shall be granted to the extent that such
excavation causes Tenant's loss of use of the Leased Premises.
ARTICLE XXI
TENANT'S PROPERTY
SECTION 21.00 Taxes on Leasehold
Tenant shall pay its pro-rata share of additional or increased taxes
levied after the base year on the land, buildings and improvements on the
Commercial Center. For the
33
<PAGE>
purpose herein, the base year shall constitute the year on which the lease
commences pursuant to Section 1.60. Tenant share shall be determined and
ascertained by multiplying the increase in taxes by a fraction in which the
numerator shall be Tenant's actual gross leased area and the denominator of
which shall be the Commercial Center gross leasable area.
SECTION 21.10 Loss and Damage
Owner shall not be liable for any damage to property of Tenant or of
others located on the Leased Premises, nor for the loss of or damage to any
property of Tenant or of others by theft or otherwise. Owner shall no be liable
for any injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain leaks from any part of the
Leased Premises or from the pipes, appliances or plumbing works or from the
roof, street, or sub-surface or from any other place or by dampness or by any
other cause of whatsoever nature. Owner shall not be liable for any such damage
caused by other tenants or persons in the Leased Premise, occupants of adjacent
property, of the Commercial Center, or the public, or caused by operations in
construction of any private, public, or quasi-public work. All property of
Tenant kept or stored on the Leased Premises shall be so kept or stored at the
risk of Tenant only and Tenant shall hold Owner harmless from any claims arising
out of damage to the same, including subrogation claims by Tenant's insurance
carrier. Tenant shall insure its property at its own expense, against all risks.
None of the foregoing shall release Owner from any claim damage or loss caused
by the negligence or willful misconduct of Owner, its agents, contractors,
employees or servants.
SECTION 21.20 Notice by Tenant
Tenant shall give immediate notice to Owner in case of fire, flood, accidents,
or any natural disaster in the Leased Premises or in the building of which the
premises are a part of defects herein or in any fixtures or equipment.
34
<PAGE>
ARTICLE XXII
HOLDING OVER, SUCCESSORS
SECTION 22.00 Holding Over
Any holding over after the expiration of the term hereof, with the consent
of the Owner, shall be construed to be a tenancy from month to month at the
rents herein specified (prorated on a monthly basis) and shall otherwise be on
the terms and conditions herein specified, so far as applicable.
SECTION 22.10 Successors
All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors, and assigns of the said parties; and if
there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee is permitted under this lease.
ARTICLE XXIII
QUIET ENJOYMENT
SECTION 23.00 Owner's Covenant
Upon payment by the Tenant of the rents herein provided, and upon the
observance and performance of all the covenants, terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the Leased Premises for the term hereby demised without hindrance
or interruption by Owner or any other person or persons lawfully or equitably
claiming by, through or under the Owner, subject, nevertheless, to the terms and
conditions of this lease.
ARTICLE XXIV
MISCELLANEOUS
SECTION 24.00 Waiver
The waiver by any party herein of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition
35
<PAGE>
herein contained. The subsequent acceptance of rent hereunder by Owner shall not
be deemed to be a waiver of any preceding breach by Tenant of any term, covenant
or condition of this lease; other than the failure of Tenant to pay the
particular rental so accepted, regardless of Owner's knowledge of such
proceeding breach at the time of acceptance of such rent. No covenant, term or
conditions of this lease shall be deemed to have been waived by any party
herein, unless such waiver be in writing by such party.
SECTION 24.10 Accord and Satisfaction
No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompany any check or payment as rent be deemed an accord
and satisfaction, and Owner may accept such check or payment without prejudice
to Owner's right to recover the balance of such rent or pursue any other remedy
in this lease provided.
SECTION 24.11 Recording
Each party agrees, that at the request of the other, to jointly raise this
Lease to the category of a public deed and that such deed be recorded in the
corresponding Registry of Property and for such purpose the parties agree to
re-execute this instrument in public deed form as above stated and to perform
such other acts which may be necessary to satisfy the recording requirements.
The fees and expenses incidental to the preparation, recording and cancellation
of such public deed shall be borne by the party making such request.
SECTION 24.12 Leasehold Mortgage
Tenant shall have the right to mortgage its leasehold interest in this
Lease. Tenant shall notify to Owner his intention to mortgage its leasehold
interest in this Lease at least 20 days before the execution of such mortgage.
Any mortgagee acquiring this lease by foreclosure or otherwise may assign and
transfer this lease subject to all covenants, clauses and conditions herein
contained, provided, however, that thereafter any further mortgage or assignment
of this lease is subject to the prior written approval of Owner. Such approval
shall be based upon such factors as experience of such assignee
36
<PAGE>
or operator in the cinema or theater industry, business reputation and financial
stability. Whoever acquires title to the Lease, through foreclosure or
otherwise, shall do so subject to all the terms and conditions thereof and more
specifically to all use and purpose limitations contained therein.
SECTION 24.20 Entire Agreement and Rules and Regulations
This lease and the Exhibits attached hereto and forming a part
hereof, set forth all the covenants, promises, agreements,
conditions, and understandings between Owner and Tenant concerning
the Leased Premises and there are no covenants, promises
agreements, conditions, or understandings, either oral or written,
between them other than are herein set forth. Except as herein
otherwise provided, no subsequent alteration amendment, change or
addition to this lease shall be binding upon Owner or Tenant unless
reduced to writing and signed by them.
SECTION 24.30 No Partnership
Owner does not, in any way or for any purpose, become a partner of Tenant
in the conduct of its business, or otherwise, or joint adventurer or a member of
a joint enterprise with Tenant.
SECTION 24.40 Force Majeure
Anything in this agreement to the contrary notwithstanding, providing such
cause is not due to the willful act or neglect of the Owner, the Owner shall not
be deemed in default with respect to the performance of any of the terms,
covenants and conditions of this lease if same shall be due to any strike,
lockout, civil commotion, war-like operation, invasion, rebellion, hostilities,
military or usurped power, sabotage, governmental regulations or control,
inability to obtain any material service or financing, through Act of God or
other cause beyond the control of the Owner. In the event that either party
shall be delayed or hindered in or prevented from the performance of any act
required hereunder by reason of strikes, lock-outs, labor troubles, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrection, war or other reason of a like nature not the
fault of the party delayed in performing work or doing acts required under the
terms of this lease, the performance
37
<PAGE>
of such act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Section 24.40 shall not operate to
excuse Tenant from prompt payment of rent, additional rent, or any other
payments required by the terms of this lease.
SECTION 24.50 Notices
Any notice, demand, request or other instrument which may be or are
required to be given under this lease shall be in writing, and shall be
delivered in person or sent by United States certified mail postage prepaid or
by tested telex or telecopy and shall be addressed (a) if to Owner, at the
address first hereinabove given or at such other address as Owner may designate
by written notice, and (b) if to Tenant, at the Leased Premises or at such other
address as Tenant shall designate by written notice.
SECTION 24.60 Tenant Defined, Use of Pronoun
The word "Tenant" shall be deemed and taken to mean each and every person
or party mentioned as a Tenant herein, be the same one or more; and if there
shall be more than one Tenant, any notice required or permitted by the terms of
this lease may be given by or to any one thereof, and shall have the same force
and effect as if given by or to all thereof. The use of the neuter singular
pronoun to refer to Owner or Tenant may be an individual, a partnership, a
corporation, or a group of two or more individuals or corporations. The
necessary grammatical changes required to make the provisions of the lease apply
in the plural sense where there is more than one Owner or tenant and to either
corporations, association, partnerships, or individuals, males or females, shall
in all instances be assumed as though in each case fully expressed.
SECTION 24.70 Broker's Commission
Each of the parties represents and warrants that there are no claims for
brokerage commissions or finder's fees in connection with the execution of this
lease, except as listed below, and each of the parties agrees to indemnify the
other against, hold it harmless from, all liabilities arising from any such
claim (including, without limitation, the cost of counsel fees in connection
therewith) except as follows:
38
<PAGE>
SECTION 24.80 Partial Invalidity
If any term, covenant or condition of this lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this lease, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or enforceable, shall not be affected thereby and each term,
covenant or condition of this lease shall be valid and be enforced to the
fullest extent permitted by law.
Section 24.90 Non Disturbance
Owner agrees, on a best efforts basis, to procure from any mortgagee or
lienholder, holding a lien upon the land, Commercial Center, the Leased Premises
and or any part thereof, their consent and acceptance that so long as Tenant is
not in default under the lease or any renewal thereof, no foreclosure of the
lien of said mortgage or any other proceeding in respect thereof, shall divest,
impair, abrogate, modify or otherwise adversely affect any interest or right
whatsoever of Tenant under this lease. Said consent and acceptance shall be made
in an instrument in recordable form to be filled for record in the appropriate
Registry of Property of Puerto Rico.
SECTION 24.91 No Option
The submission of this lease for examination does not constitute a
reservation of or option for the Leased Premises and this lease becomes
effective as a lease only upon execution and delivery thereof by Owner and
Tenant. The rights and obligations of Owner and Tenant under this lease shall
become effective and in full force and effect at the above stated date.
SECTION 24.92 CONSENTS
Whenever in this lease express provision is made that Tenant is required
to procure Owner's permission, consent or approval, such permission, consent or
approval shall be on the basis of commercially reasonable standards and shall
not be unreasonably withheld or delayed.
SECTION 24.93 ATTORNEYS' FEES AND EXPENSES
If either party hereto brings an action to enforce the terms hereof or
39
<PAGE>
declare rights hereunder, the prevailing party in such action shall be entitled
to reasonable attorneys' fees, costs and expenses of suit at trial and through
all appeals.
SECTION 24.94 FINANCING OF NEW BUILDING
Tenant recognizes that Owner has to obtain financing for the construction
of the New Building. Owner covenants and agrees with Tenant to use all its best
efforts to procure and obtain the necessary financing for the construction of
the New Building. In the event that Owner fails to obtain such financing within
one (1) year from the date hereof, this lease shall terminate and, except as
hereinafter stated, the rights and obligations of Owner and Tenant shall be of
no further force or effect. Notwithstanding the foregoing, if at any time
thereafter the New Building is constructed and/or Owner shall otherwise intend
or plan to lease space in the Commercial Center for the operation of a movie
theater, Tenant, its successors and assigns, are hereby granted an irrevocable
exclusive right of first refusal to lease space in the Commercial Center for the
operation of a movie theater under terms substantially the same as this lease.
Such right of first refusal shall survive the termination of this lease.
IN WITNESS WHEREOF, Owner and Tenant have signed
this lease as of the day and year first above written, at San Juan, P. R.
MAYAGUEZ SHOPPING CENTER, S.E.
By: /s/ Juan A. Albors Hernandez
--------------------------------
Juan A. Albors Hernandez
Principal Partner
By: /s/ Ada M. Albors Hernandez
--------------------------------
Ada M. Albors Hernandez
Principal Partner
Reading Cinemas of Puerto Rico, Inc.
By: /s/ Robert Smerling
--------------------------------
Mr. Robert Smerling
President
40
<PAGE>
RULES AND REGULATIONS
TENANT AGREES AS FOLLOWS:
(1) All loading and unloading of goods shall be done only at such
times, in the areas, and through the entrances, designated for such purposes by
Owner.
(2) The delivery or shipping of merchandise, supplies and fixtures
to and from the Leased Premises shall be subject to such reasonable rules and
regulations as in the reasonable judgment of Owner are necessary for the proper
operation of the Leased Premises or Commercial Center, and uniformly applied.
(3) All garbage and refuse shall be kept in the kind of container
specified by Owner, and shall be placed outside of the premises prepared for
collection in the manner and at the times and places specified by Owner. If
Owner shall provide or designate a service for picking up refuse and garbage,
Tenant shall use same at Tenant's cost. Tenant shall pay the cost of removal of
any of Tenant's refuse or rubbish.
(4) No radio or television or other similar device shall be
installed without first obtaining in each instance Owner's consent in writing.
No aerial shall be erected on the roof or exterior walls of the premises, or on
the grounds, without in each instance, the written consent of Owner. Any aerial
so installed without such written consent shall be subject to removal without
notice at any time.
(5) No loud speakers, televisions, phonographs, radios or other
devices shall be used in a manner so as to be head or seen outside of the
premises without the prior written consent of Owner.
(6) The outside areas immediately adjoining the premises shall be
kept clean and free from dirt and rubbish by Tenant to the satisfaction of
Owner, and Tenant shall not place or permit any obstructions or merchandise in
such areas.
(7) Tenant and Tenant's employees shall park their cars only in
those portions of the parking area designated for that purpose by Owner. Tenant
shall furnish Owner with State automobile license numbers assigned to Tenant's
car or cars, and cars of Tenant's employees, within five (5) days after taking
possession of the premises and shall thereafter notify Owner of any changes
within five (5) days after such
41
<PAGE>
changes occur. In the event that Tenant or its employees fail to park their cars
in designated parking areas as aforesaid, then Owner at its option shall charge
Tenant Ten Dollars ($10.00) per day per car parked in any area other than those
designated, as and for liquidated damage.
(8) The plumbing facilities shall not be used for any other purpose
than that for which they are constructed, and no foreign substance of any kind
shall be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by Tenant, who
shall, or whose employees, agents or invites shall have caused it.
(9) Tenant shall use at Tenant's cost such pest extermination
contractor as Owner may direct and at such intervals as Owner may require.
(10) Tenant shall not burn any trash or garbage of any kind in or
about the Leased Premises.
42
<PAGE>
EXHIBIT "A" Omitted from 10-K filing.
48
EXHIBIT 10.16
CONTRACT OF SALE
OF REAL ESTATE
BRICK & PIPE INDUSTRIES LTD
ACN 004 028 559
78 MIDDLEBOROUGH ROAD, BURWOOD
<PAGE>
CONTRACT OF SALE OF REAL ESTATE
IMPORTANT NOTICE TO PURCHASER
Cooling-off period Section 31 Sale of Land Act 1962
If none of the exceptions listed below applies to you, you
may end this contract within 3 clear business days of the
day you sign the contract.
To end this contract within this time, you must either give
the vendor or the vendor's agent written notice that you are
ending the contract or leave the notice at the address of
the vendor or the vendor's agent.
If you end the contract in this way, you are entitled to a
refund of all the money you paid EXCEPT for $100 or 0.2% of
the purchase price (whichever is more).
EXCEPTIONS -- The 3-day cooling-off period does not apply if
--
- The price of the property (including chattels) exceeds
$250,000
- You bought the property at or within 3 clear business
days before or after a publicly advertised auction
- You received independent advice from a solicitor before
signing the contract
- The property is used mainly for industrial commercial
purposes
- The property is more than 20 hectares in size and is
used mainly for farming
- You previously signed a similar contract for the same
property
- You are an estate agent or a corporate body
The conditions of this contract are contained in the attached --
Particulars of Sale, and
Schedule, and
General Conditions, and
Special Conditions (if any).
The vendor sells and the purchaser buys both the property and the
chattels for the price and upon the conditions set out in this
contract.
The Vendor's Statement required by section 32(1) of the Sale of
Land Act 1962 is attached to, and included in, this contract.
Where the signature of any party to this contract is secured by
an agent, the parties acknowledge being give a copy of this
contract by the agent at the time of signing.
- - ---------------------------------------------------------- Vendor
Brick & Pipe Industries Ltd. ACN 004 028 559
- - ---------------------------------------------------------- Purchaser
<PAGE>
GENERAL CONDITIONS ("GC")
Encumbrances
1.1 The purchase buys the property and the chattels subject to
the encumbrances shown in Item 1 of the Schedule.
1.2 If the purchaser is taking over an existing mortgage--
(a) the purchaser assumes liability for the mortgage
(b) the price is satisfied to the extent of any mortgage
money owing at the settlement date, and
(c) the vendor must treat any payment made by the purchaser
under the mortgage as a payment made to the vendor
under this contract.
Loss or Damage Before Settlement
2.1 The vendor carries the risk of loss or damage to the
property and the chattels until settlement date, and
2.2 The vendor must deliver the property and the chattels to the
purchaser at settlement date in their present condition
(fair wear and tear excepted).
2.3 If any chattel is not in its present condition (fair wear
and tear excepted) at settlement, the purchaser is only
entitled to compensation from the vendor.
(3 and 4 omitted by consent of participants)
Nominee
5 If the contract says that the property is sold to a named
purchaser "and or nominee" (or similar words), the named
purchaser may, at least 14 days before settlement date,
nominate a substitute or additional purchaser, but the named
purchaser remains personally liable for the due performance
of all the purchaser's obligations under this contract.
Payment
6.1 The purchaser must pay all money (except the deposit) to the
vendor, the vendor's solicitor or at the direction of the
vendor.
6.2 The purchaser must pay the deposit--
(a) to the vendor's estate agent or, if there is no estate
agent, to the vendor's solicitor, or
(b) if the vendor directs, into a special purpose banking
account specified by the vendor in the joint names of
the purchaser and the vendor.
6.3 If the land sold is a lot on an unregistered plan of
subdivision then the deposit--
(a) must not exceed 10% of the price, and
(b) must be paid--
(i) to the vendor's solicitor or estate agent to be
held by the solicitor or estate agent on trust for
the purchaser, or
(ii) if the vendor directs, into a special purpose
banking account in Victoria specified by the
vendor until the registration of the plan.
Breach
7 A party who breaches this contract must pay to the other
party on demand --
(a) compensation for any reasonably foreseeable loss to the
other party resulting from the breach, and
(b) any interest due under this contract as a result of the
breach.
Time
8 If the time for performing any action expires on a Saturday,
Sunday or bank holiday, then time is extended until the next
business day.
2
<PAGE>
General Conditions in Legislation
9.1 The general conditions in Table A of the Seventh Schedule of
the Transfer of Land Act of 1958 apply if the land is under
the operation of that Act.
9.2 The general conditions in the Third Schedule of the Property
Law 1958 apply if the land is not under the operation of the
Transfer of Land Act 1958.
9.3 General Condition 9 in Table A or in the Third Schedule
applies as if its second last sentence ended with the
additional words, "as a resident Australian beneficial owner
of the land".
Conflict Between Conditions
10 In case of a conflict between the conditions the order of
priority is--
(a) any special conditions in this contract
(b) general conditions in this contract
(c) general conditions in legislation
Conditions
11 These conditions prevail over the conditions in any earlier
contract and any requisitions and answers properly made and
given under that contract are deemed to be requisitions and
answers properly made and given under the contract.
Service
12 Any document served by post is deemed to be served on the
next business day after posting unless proved otherwise.
Transfer of Settlement
13.1 The purchaser must provide the instrument of transfer
required by General Condition 12 of Table A, or the
assurance required by the Third Schedule (as the case may
be), to the vendor or the vendor's solicitor at least 10
days prior to the settlement date.
13.2 The vendor must pay the bank fees on all bank cheques
exceeding 3 that are required by the vendor for settlement.
Law Institute of Victoria Property Law Dispute Resolution
Committee Guidelines -- DELETED
<PAGE>
CONTRACT OF SALE OF REAL ESTATE
<PAGE>
PARTICULARS OF SALE
VENDOR'S AGENT: GRAY & JOHNSON
30 Collins Street, Melbourne 3000
Tel: 654 3022 Fax: 654 2001
Ref: Colin Roebuck
VENDOR'S SOLICITOR: MARSHALLS & DENT
Level 12, 459 Little Collins Street
Melbourne 3000
DX 213 Tel: 9670 500 Fax: 642 0409
Ref: David Hart
PURCHASER'S COLTMANS
SOLICITOR: 15th Floor, 575 Bourke Street,
Melbourne 3000
DX 519 Tel: 9615 2222
Ref: Des Dodds
VENDOR: BRICK & PIPE INDUSTRIES LTD
ACN 004 028 559
of 78 Middleborough Road, Burwood
3125
PURCHASER: BURGUNDY TWO PTY LTD ACN 071 195 429
AND/OR NOMINEE CARE OF ALLEN ALLEN &
HEMSLEY, LEVEL 17, CHIPLEY TOWER,
CHIPLEY SQUARE, SIDNEY NSW 2000
LAND: Title(s) * and Plan(s)
and being:
Lot 12 on Plan of Subdivision No 918,
part of Crown Section 98, Parish of
Nunawading and being the whole of the
land in Certificate of Title Volume
1965 Folio 916;
Part of Crown Section 98, Parish of
Nunawading and being the whole of the
land in Certificate of Title Volume
1830 Folio 839;
Lots 14, 15 and 16 on Plan of Subdivision
No 918, part of Crown Allotment 89, Parish
of Nunawading and being the whole of the
land in Certificate of Title Volume 2445
Folio 985;
Lot 37 and part of Lots 9, 10 and 11 on
Plan of Subdivision No 918, being part of
Crown Section 98, Parish of Nunawading and
being the whole of the land in Certificate
6343 Folio 543;
<PAGE>
Part of Crown Section 98, Parish of
Nunawading and being the whole of the
land in Certificate of Title Volume
1775 Folio 957;
Part of Crown Section 98, Parish of
Nunawading and being the whole of the
land in Certificate of Title Volume
4539 735;
and Lot 1 on Plan of Subdivision No
38588, Parish of Nunawading and being
the whole of the land in Certificate
of Title Volume 8194 Folio 270.
PROPERTY: the land together with any improvements
know as
ADDRESS: 78 MIDDLEBOROUGH ROAD, BURWOOD
CHATTELS: Nil, subject to the provisions of
Special Condition 11 hereof.
PRICE: $5,250,000
DEPOSIT: $525,000 being 10% of the Price
of which 1% is payable
on the signing hereof
and 9% upon approval by
the Board referred to in
Special Condition 20
INSTALLMENT: $787,500 being 15% of the Price
payable on or before the
20th day of December,
1995
RESIDUE: $3,937,500
PAYMENT OF RESIDUE: On or before the expiration of twelve
months from the Settlement Date.
SETTLEMENT DATE: is the date upon which vacant possession
of the Property, subject to Special
Condition 16 hereof, shall be provided,
namely, upon acceptance of title and
payment of the Deposit and Installment
in full
PURCHASER'S FINANCE: Not applicable.
<PAGE>
DAY OF SALE: is the date of this Contract, namely,
the 9th day of October, 1995.
SCHEDULE
ITEM (1) (GC1) Encumbrances to be assumed by the
Purchaser:--
As to the whole of the land--
(1) All registered easements, covenants
or other similar restrictions, and
the covenants, reservations and
exceptions referred to and/or
contained in the Crown Grant and
the encumbrances and restrictions,
if any, referred to in the attached
Vendor's Statement.
(2) Sewers/drains, if any, laid outside
registered easements.
(3) Leases - N/A
(4) Mortgage Nos. -- N/A
(include Schedule 1 particulars as
specified in section 6(2) of the
Sale of Land Act 1962).
(5) Extractive Industry License No 59-1
(as amended) a copy of which is
attached, subject to the terms of
Special Condition 15 hereof.
(6) E.P.A. Licenses Numbered HS00456/9
and MW 532/2, copies of which are
attached.
(7) Right of occupation of part of the
property reserved to the Vendor by
Special Condition 16 hereof.
As to the land in Certificate of
Title Volume 4539 Folio 735
(8) Creation of Easement No C360556, a
copy of which is attached.
(9) Creation of Easement No C509052, a
copy of which is attached.
As to the land in Certificate of
Title Volume 6343 Folio 543 and
(10) deleted
<PAGE>
ITEM (2) (GC4) DELETED
SPECIAL CONDITIONS
As attached:--
<PAGE>
SPECIAL CONDITIONS
1. If there shall be more than one Purchaser the agreements and
obligations of the Purchaser under this Contract and the Conditions
thereof shall bind them and any two or more of them jointly and each
of them severally.
2. (Deleted by consent of participants).
3. The Purchaser admits that the land as offered for sale and inspected
by him is identical with that described in the title particulars given
above. He shall not make any requisition or claim any compensation for
any alleged misdescription of the land or deficiency in its area or
measurements or call upon the Vendor to amend title or to bear all or
any part of the cost of doing so. Condition 3 of the said Table "A"
and of the said Third Schedule shall not apply to this Contract.
4. The Purchaser buys subject to any restrictions imposed by and to the
provisions of the Nunawading Planning Scheme, the Planning and
Environment Act 1987, the Housing Contracts Guarantee Act 1987, the
Building Control Act 1981, the Local Government act 1958 and any other
Town Planning Schemes or Acts and all regulations, by-laws,
restrictions and controls governing, regulations, controlling or
affecting in any way the use or development of the land sold.
5. The Purchaser acknowledges that the land hereby sold has been or may
have been quarried, filled, or otherwise raised, levelled or packed.
The Purchaser shall make no requisition nor claim any compensation
from nor raise any set-off against the Vendor in respect thereof and
the Purchaser hereby indemnifies the Vendor against any claim made by
any person in respect of such quarrying, filling, raising, leveling or
packing and shall hold the Vendor harmless in respect thereof.
6.(a)Any deposit monies as defined by Section 23 of the Sale of Land Ac
1962 paid or payable hereunder to the Vendor's Agent or Solicitors
shall be held by such Agent or Solicitors as stakeholder pursuant to
Section 24 of the said Act.
(b)The Vendor and the Purchaser hereby authorise and instruct the
Vendor's Solicitor named herein to invest any deposit moneys paid to
the Vendor's Solicitor hereunder
<PAGE>
- 2 -
in an interest bearing trust account with the National Australia Bank
and to pay any interest accruing to that account to the Vendor or
Purchaser (as the case may be) who is ultimately entitled to the
deposit moneys.
7. Notwithstanding anything herein contained or any rule of law to the
contrary, the property shall remain at the risk of the Vendor until
the Purchaser becomes entitled to possession of the property.
8. In the interpretation of this Contract Condition 4 of the said Table
"A" and of the said Third Schedule shall be read and construed and
shall take effect as if the words "on demand made by" were deleted
therefrom and replaced with the word "to".
9. If the Purchaser shall make default in any of the terms and conditions
hereof and the Vendor shall serve on the Purchaser any notice pursuant
to the provisions of this Contract relating to such default then the
Purchaser shall not be deemed to have cured such default until the
Purchaser pays the Vendor's Solicitors' reasonable costs of and
incidental to such default and notice.
10. It is hereby agreed and declared that there are no conditions,
warranties or other terms affecting the sale other than those embodied
herein and the Purchaser shall not be entitled to rely on any
representation alleged to have been made by the Vendor or their Agent
such as are not made conditions of this Contract.
11. The Purchaser acknowledges and agrees that it buys the Property with
the intention that all buildings, structures and improvements,
chattels, fixtures and fittings, plant, equipment and stock which
reside on the Property at the expiration of three (3) months from the
Settlement Date are to be demolished and/or removed by the Purchaser
at the Purchaser's expense following the expiration of three (3)
months from the Settlement Date (subject to any right of the Vendor
granted pursuant to Special Conditions 16) PROVIDED HOWEVER, that the
Purchaser further acknowledges and agrees that nothing herein
contained shall prohibit or restrict the Vendor from removing from the
Property any building, structure, improvement, chattel, fixture
fitting, plant equipment and/or stock prior to the expiration of three
(3) months from the Settlement Date or where relevant prior to the
expiration of the period of occupation granted to the Vendor pursuant
to Special Condition 16 AND that in so removing any such item from the
Property the Vendor shall not be liable for any damage caused to or
for the repair of or reinstatement of any of the buildings,
structures, or improvements which are to remain on the Property on the
Settlement Date.
<PAGE>
- 3 -
The Purchaser covenants and agrees with the Vendor as follows:--
(a) that the Purchaser buys the property in its current condition and
subject to any defect in the land or contamination of the
property, whether disclosed in the report or not; and
(b) that the Purchaser shall from the Day of sale accept
responsibility for all statutory obligations, works, costs,
expenses and claims, whether involving remediation of the
property or otherwise, arising from any contamination of on or in
the property and the Purchaser hereby indemnifies the Vendor
against any liability, cost, expense or claim for which the
Vendor might otherwise be liable or incur or receive in relation
to contamination on the property or any remediation of the
property;
(c) that no representations, warranties, or indemnities of any kind
have been made or given by the Vendor concerning the risks of or
any possible harm or detriment which may be caused to any
beneficial use of the Property by contamination and the Purchaser
further agrees not to make any requisition or claim against the
Vendor whatsoever arising by reason of or in consequence of or in
respect of any contamination or any harm or detriment which may
be caused to any beneficial use of the land.
13. In the event of any part of this Contract being or becoming void or
unenforceable or being illegal then that part shall be severed from
this Contract to the intent that all parts that shall not be or become
void or unenforceable or illegal shall remain in full force and effect
and be unaffected by such severance.
14. (Deleted by consent of paricipants).
<PAGE>
- 4 -
15.(a) The Purchaser acknowledges that the Property is currently subject to
the provisions of Extractive Industry Licence 59-1, as amended, ("the
Licence") and that pursuant to Condition 24 of the Licence the
Licensee is bound to reclaim the land (by one of the option specified
in the Vendor's Working Proposal and Working Plan) (copies of the
Licence, Working Proposal and Working Plan are attached).
(b) The Purchaser further acknowledges and agrees that it shall prior to
the Settlement Date provide all details and do all things as are
necessary for the Vendor to comply with the provisions of the Licence
in particular Condition 24.2 thereof and the Purchaser shall indemnify
the Vendor in respect of all loss, expenses or costs which the Vendor
may incur in complying with the terms of the Licence, including
(without limiting the generality of the foregoing) the Security of
Sixty Thousand Dollars ($60,000.00) referred to in Condition 25 of the
Licence which shall, if the same has not been released beforehand, be
paid by the Purchaser to the Vendor on the Settlement Date. The Vendor
acknowledges and agrees that it shall account to the Purchaser for any
amount which it might subsequently receive upon release of the
Security.
16. This sale is subject to and conditional upon the right being reserved
by the Vendor and granted by the Purchaser for the Vendor (and any of
its employees, agents and invitees) to remain in occupation of and to
have the use of (including all buildings, structures, improvements,
chattels, fixtures, fittings, plant and equipment thereon) those parts
of the Property being:--
Firstly the land more particularly described
in Certificate of Title Volume 1965 Folio
916 which land is shown hatched on the Plan
attached, and
Secondly the land more particularly
described in Certificate of Title Volume
1830 Folio 839 which land is shown cross
hatched on the Plan attached. ("the licensed
land")
upon the following terms and conditions:--
(a) the right hereby granted confers no right of exclusive occupation
of the licensed land upon the Vendor and the Purchaser may from
time to time exercise all its rights as Purchaser / owner
including (but without in any way limiting the generality of this
provision) the right to use, possess or enjoy the whole or any
part of the licensed land save only in so far as such rights of
the Purchaser interfere with the rights of the Vendor hereby
granted in which case the rights of the Vendor shall prevail and
the Purchaser shall indemnify the Vendor in relation to any
damages, costs or expenses which the Vendor may incur as a result
of the Purchaser's use, possession or enjoyment of the licensed
land;
<PAGE>
- 5 -
(b) the Vendor shall have the right to occupy and use the licensed
land for a period of twelve (12) months from the Settlement Date
PROVIDED HOWEVER that the Vendor shall have the right to vacate
the licensed land at such earlier date as it may determine;
(c) the right to occupy and use the licensed land is granted in
consideration of the sale by the Vendor to the Purchaser of the
Property and such right is granted free of any obligation by the
Vendor to pay any rent, occupation fee or license fee;
(d) the Vendor shall not be liable to pay any rates or land tax in
respect of the licensed land but shall be responsible for any
electricity, gas or water consumption charges which are applied
in respect of the licensed land during the period/s of
occupation.
17. If any provision of this Contract remains to be performed or is
capable of having effect after the date of final payment this Contract
shall remain in full and effect notwithstanding completion of the sale
and purchase of the land and that provision shall not merge in the
Instrument of Transfer of the land.
18. The Purchaser hereby acknowledges the Vendor's notification that
between the date that this Property was advertised for Sale by Tender
and the Day of Sale the Vendor may have removed from the Property up
to 60,000 cubic metres (approximately) of clay material (including
brick clay stockpiled on the Property).
19. The Purchaser acknowledges that prior to signing this Contract or any
agreement or document in respect of the sale hereby made which is
legally binding upon or intended legally to bind the Purchaser the
Purchaser had been given by the Vendor's Agent --
(a) A Statement in writing signed by the Vendor containing the
matters specified in Section 32(2) of the Sale of Land
(Amendment) Act 1982 in the form of the copy Statement annexed
hereto, and
(b) a copy of this Contract in compliance with Section 53 of the
Estate Agents Act 1980.
<PAGE>
- 6 -
20. This Contract is conditional upon and subject to written approval
being given by the Board of Directors of Reading Corporation of Penn
Square, 1 Penn Square West, 30 South 15th Street, Suite 1300,
Philadelphia, Pennsylvania, USA, within 30 days of the date hereof.
21. The Vendor and Purchaser agree that all information and documentation
in any way relating to and/or associated with the negotiations and the
subject matter of this Contract are confidential between themselves
their respective legal representative accountants agents and lending
institutions and further agree not to divulge the same to any third
party save as may be consented to in writing.
22. This Contract is subject to the Purchaser (being a corporation,
business or trust in which there is a substantial foreign interest
within the meaning of the Foreign Acquisitions and Takeovers Act 1975)
obtaining the approval of the Treasurer of the Commonwealth of
Australia to its entering into this Contract and of the Reserve Bank
of Australia in relation to any funding. The Purchaser will make
immediate application for such approval and use its best endeavors and
comply with all requests necessary to obtain such approval.
23. The Purchaser agrees that within 7 days from the date on which it
receives approval of the Board referred to in Special Condition 20
hereof it will pay the balance of deposit and lodge an amount equal to
15 per cent of the purchase price in a bank account to be agreed
between the Vendor and Purchaser in joint names of the Vendor and
Purchaser in order to secure the Purchaser's obligations to pay the
Installment on the 20th day of December 1995. In the event of default
by the Purchaser in paying the Installment such amount together with
interest accrued thereon will be released to the Vendor. In the event
that the Installment is paid in accordance with the terms of this
Contract such amount and interest will be released to the Purchaser.
24. The vendor warrants that there are no breaches of the Extractive
Industry Licence No. 59-1 (as amended) or EPA Licenses No. HS00456-9
and MW53-2 referred to in the Schedule.
25. Omitted
26. The Vendor will sign any planning or development application that may
be required by the Purchaser to assist with any development proposal.
<PAGE>
Page relating Plan referred to in Special Condition 16 of the
Contract of Sale Omitted.
<PAGE>
GUARANTEE AND INDEMNITY
TO:
(hereinafter called "the Vendor")
IN CONSIDERATION of the Vendor agreeing at the request of
(hereinafter called "the Guarantors") to enter into a Contract
of Sale with the within named Purchaser (hereinafter called "the
Purchaser") the Guarantors DO HEREBY JOINTLY AND SEVERALLY
GUARANTEE to the Vendor the due and punctual payment by the
Purchaser to the Vendor of all the purchase moneys interest and
other moneys payable by the Purchaser to the Vendor under or
pursuant to the within Contract or Sale (hereinafter called "the
moneys hereby secured") and ALSO the due performance and
observance by the Purchaser of all and singular the covenants
provisions and stipulations contained or implied in the within
named Contract of Sale and on the part of the Purchaser to be
performed and observed and DO HEREBY ACKNOWLEDGE that this
Guarantee is given upon and subject to and with the benefit of
the following conditions:
1. THE Vendor shall have the fullest liberty without affecting
this Guarantee to postpone for any time and from time to
time to exercise of all or any of the powers rights
authorities and discretions conferred by the within
Contract of Sale and to exercise the same at any time and
in any manner and either to enforce or forebear to enforce
the agreements for payments by the Purchaser of the moneys
hereby secured or any other remedies or securities
available to the Vendor AND the Guarantors shall not be
released by any exercise by the Vendor of his liberty with
reference to the matter aforesaid or any of them or by any
time being given to the Purchaser or by any other thing
whatsoever which under the law relating to sureties would
but for this provision have the effect of so releasing the
Guarantors.
2. THIS Guarantee shall be a continuing guarantee and shall
not be considered as wholly or partially discharged by the
payment at any time hereafter of any part of the moneys
hereby secured or by any settlement of account intervening
payment of by any other matter or thing whatsoever.
3. THIS Guarantee shall bind the respective successors of the
Guarantors and shall not be determined by the death of
either of the Guarantors and shall bind their respective
legal personal representatives.
4. THIS Guarantee shall not be affected or prejudiced by any
variation or modification of the terms of the within
Contract of Sale.
<PAGE>
- 2 -
5. THIS Guarantee shall not affect or be affected by any or
any further security now or hereafter held or taken by the
Vendor or by any loss by the Vendor of any such collateral
or other security or by the Vendor failing or neglecting to
recover by the realisation of any collateral or other
security or otherwise any of the moneys at any time owing
by the Purchaser to the Vendor or by any laches or mistakes
on the part of the Vendor.
6. UNTIL the Vendor shall have received all moneys hereby
secured neither of the Guarantors shall be entitled on any
grounds whatsoever to claim the benefit of any security for
the time being held by the Vendor or either directly or
indirectly to claim or receive the benefit of any dividend
or payment out of the winding up of the Purchaser and in
the event of the Purchaser going into liquidation or
assigning its assets for the benefit of its creditors or
making a deed of arrangement or composition in satisfaction
of its debts or a scheme of arrangement of its affairs then
neither of the Guarantors shall be entitled to prove or
claim in the liquidation of the Purchaser in competition
with the Vendor so as to diminish any dividend or payment
which but for such proof the Vendor would be entitled to
receive out of such winding up and the receipt of any
dividend or other payment which the Vendor may receive from
such winding up shall not prejudice the right of the Vendor
to recover from the Guarantors to the full amount of this
Guarantee the moneys hereby acquired.
7. ANY demand or notice to be made upon the Guarantors or any
of them by or on behalf of the Vendor hereunder shall be
deemed to be duly made if the same be in writing and signed
by the Vendor or by any of the principals for the time
being of Marshalls & Dent Level 12 459 Little Collings
Street Melbourne or by other person duly authorised by the
Vendor to make such demand on behalf of the Vendor and the
same may be left at or sent through the post in a pre-paid
letter addressed to the Guarantors concerned at their
address last known by the Vendor. Any such demand or
notice sent by post shall be deemed to have been duly
delivered or served at the expiration of forty-eight hours
from the time of its posting notwithstanding that it may
subsequently be returned through the Post Office unclaimed.
8. THIS Guarantee shall enure for the benefit of the Vendor
and its successors and transferees.
9. FOR the consideration aforesaid and as a separate severable
and additional covenant the Guarantors HEREBY JOINTLY AND
SEVERALLY AGREE to indemnify and at all times hereafter to
keep indemnified the Vendor from and against all claims,
actions, proceedings, liabilities, obligations, damages,
loss, harm, charges, costs, expenses duties, taxes or other
outgoings of whatever nature which the Vendor may incur by
reason of any default on the part of the Purchaser in
relation to the within Contract of Sale.
10. IF any payment made to the Vendor by or on behalf of the
Purchaser shall subsequently be avoid or set aside by
reason of any statutory provision or otherwise, such
payment shall not be deemed to have prejudiced or otherwise
affected this Guarantee or the Vendor's rights to recover
<PAGE>
- 3 -
such payment from the Guarantors pursuant hereto with the
intent that the Vendor shall with respect to its right to
recover pursuant to this Guarantee the moneys hereby
secured, to be restored to the same position in which it
would have been had such payment not been made.
DATED the day of 1995.
SIGNED SEALED AND DELIVERED by )
)
the said )
)
in presence of: )
SIGNED SEALED AND DELIVERED by )
)
the said )
)
in presence of:
<PAGE>
VENDORS STATEMENT
TO THE PURCHASER
PURSUANT TO SECTION 32
OF THE SALE OF LAND ACT
AND
ADDITIONAL VENDORS STATEMENT
BRICK & PIPE INDUSTRIES LTD
ACN 004 028 559
78 MIDDLEBOROUGH ROAD, BURWOOD
<PAGE>
BLUE FORM
VENDORS STATEMENT TO THE PURCHASER
OF REAL ESTATE PURSUANT TO
SECTION 32 OF THE SALE OF LAND ACT 1962 ("the Act)
VENDOR: BRICK & PIPE INDUSTRIES LTD ACN 004 028 559
PROPERTY: 78 MIDDLEBOROUGH ROAD BURWOOD, being:--
Lot 12 on Plan of Subdivision no 918, part of
Crown Section 98, Parish of Nunawading and being
the whole of the land in Certificate of Title
Volume 1965 Folio 916;
Part of Crown Section 98, Parish of Nunawading and
being the whole of the land in Certificate of
Title Volume 1830 Folio 839;
Lots 14, 15 and 16 on Plan of Subdivision No 918,
part of Crown Allotment 98, Parish of Nunawading
and being the whole of the land in Certificate of
Title Volume 2445 Folio 985;
Lot 37 and part of Lots 9, 10 and 11 on Plan of
Subdivision No 918, being part of Crown Section
98, Parish of Nunawading and being the whole of
the land in Certificate of Title Volume 6343 Folio
543;
Part of Crown Section 98, Parish of Nunawading and
being the whole of the land in Certificate of
Title Volume 1775 Folio 975;
Part of Crown Section 98, Parish of Nunawading and
being the whole of the land in Certificate Title
Volume 4539 Folio 735;
and Lot 1 on Plan of Subdivision No 38588, Parish
of Nunawading and being the whole of the land in
Certificate of Title Volume 8194 Folio 270.
IMPORTANT NOTICE TO PURCHASER
The use to which you propose to put the Property may be
prohibited by planning or building controls applying to the
locality or may require the consent or permit of the municipal
council or other responsible authority. It is in your interest
to undertake a proper investigation of permitted land use before
you commit yourself to buy. You should check with the
appropriate authorities as to the availability (and cost) of
providing essential services not connected to the Property.
Details must be attached where necessary, if insufficient space
is available.
In this Statement, "certificate" means a certificate (or a copy)
issued by the relevant authority.
<PAGE>
- 2 -
1. RESTRICTIONS - Information concerning any easement,
covenant or other similar restriction affecting the Property
(registered or unregistered)
1.1 Description -
(a) As set out in the attached copies of title documents
As to the whole of the land -
(b) All registered easements, covenants or other similar
restrictions and the covenants, conditions,
exclusions, reservations and exceptions referred to
and/or contained in the Crown Grant and the
encumbrances and restrictions, if any, referred to in
this Vendor's Statement.
(c) Sewers/drains, if any, laid outside registered
easements.
(d) Extractive Industry Licence No 59-1 (as amended) a
copy of which is attached, subject to the terms of
Special Condition 15 of the Contract of Sale.
(e) E.P.A. Licenses Numbered HS000456/9 and MW 532/2,
copies of which are attached.
(f) Right of occupation of part of the property reserved
to the Vendor by Special Condition 16 hereof.
As to the land in Certificate of Title Volume 4539
Folio 735
(g) Creation of Easement No C360556, a copy of which is
attached.
(h) Creation of Easement No C50952, a copy of which is
attached.
(i) As to part of the land in Certificate of Title Volume
6343 Folio 543
The Residential Tenancy, on a month to month basis (no
written agreement) of John Davies of 14 Eley Road,
Burwood at $80.00 per week, paid fortnightly.
1.2 Particulars of any existing failure to comply with
their terms are as follows --
The Vendor is not aware of any existing failure to
comply with the terms of any easement, covenant or
other similar restriction. Utilities providing
services to the property have the right to enter,
inspect, repair, service, maintain, install and remove
their installations and facilities.
2. PLANNING- Information concerning any planning instrument
*Is contained in the attached certificate and
<PAGE>
- 3 -
*is as follows --
2.1 Name (1) Nunawading Planning Scheme
2.2 The responsible authority is --
(1) Minister for Planning
2.3 Zoning and/or Reservation --
(1) is included in an EXTRACTIVE INDUSTRIAL ZONE and
abuts on a ROAD - EXISTING MAIN
and a ROAD - EXISTING SECONDARY
3. OUTGOINGS & STATUTORY CHARGES - Information concerning any
rates, taxes, charges or other similar outgoings (including
any Body Corporate charges) AND any interest payable on any
part of them --
3.1 *As contained in the attached certificate/s;
*Their amounts are as follows --
Authority Amount Year Interest
(if any)
(1) City of Whitehorse $49,468.00 94/95
(which includes
State Deficit
Levy of $100.00)
(2) Yarra Valley
Water Ltd $29,218.00 94/95
Trade Waste
Charge $ 353.00 94/95
(3) State Revenue $201,390.00 single holding 1995
Office ($278,375.64 Grouped Assessment)
Any amounts (including any proposed Body Corporate levy) for
which the Purchaser may become liable in consequence of the
purchase of the Property, are as follows--
Subject to adjustment of rates, taxes, charges or other
similar outgoings as provided in Condition 9 of Table A of
the Transfer of Land Act 1958 only rates, taxes, charges or
other similar outgoings assessed levied or imposed
subsequent to the date of sale of the property herein
referred to and the improvements therein.
3.2 Their total does not exceed $280,432.00
3.3 The amount owing under any other registered or
unregistered statutory charge that secures an amount
due under any other legislation is --
$Nil.
<PAGE>
- 4 -
4. SERVICES -- Information concerning the supply of the
following services --
Service Connected Name of Authority(if
Service is connected)
4.1 Electricity Yes United Energy Ltd
4.2 Gas Yes G. & F. C. of Vic
4.3 Water Yes Yarra Valley Water Ltd
4.4 Sewerage Yes Yarra Valley Water Ltd
4.5 Telephone Yes Telecom
5. BUILDING APPROVALS -- Particulars of any building approval
granted during the past seven years under the Building
Control Act 1981 (required only where the Property includes
a residence) -- Not applicable.
6. NOTICES -- Particulars of any notice, order, declaration,
report or recommendation of a public authority or government
department or approved proposal affecting the Property of
which the Vendor might reasonably be expected to have
knowledge including any --
6.1 affecting the Body Corporate and any liabilities
(whether contingent, proposed or otherwise) where the
Property is in a subdivision containing a Body
Corporate, including any relating to the undertaking
of any repairs to the Property -- Not applicable.
6.2 quarantine or stock order imposed under the Stock
Diseases Act 1968 (whether or not the quarantine or
order is still in force) -- Not applicable.
6.3 notice pursuant to section 6 of the Land Acquisition
and Compensation Act 1986 -- not applicable.
6.4 Extractive Industry Licence No 59-1 (as amended), a
copy of which is attached.
6.5 Yarra Valley Water Trade Waste Agreement, a copy of
which is attached.
are contained in the attached certificate/s and/or
statement/s
The Vendor has no means of knowing all decisions of
public authorities and government departments
affecting the property unless communicated to the
Vendor.
<PAGE>
- 5 -
7. TITLE -- Attached are copies of the following document/s
concerning the Title --
7.1 the Certificate of Title:
Volume 1965 Folio 916
Volume 1830 Folio 839
Volume 2445 Folio 985
Volume 6343 Folio 543
Volume 1775 Folio 957
Volume 4539 Folio 735
Volume 8194 Folio 270
7.2 Plan of Subdivision No 918.
7.3 Plan of Subdivision No 38588.
7.4 Creation of Easement No C360556.
DATE OF THIS STATEMENT 30/6/95
Signature/s of the Vendor /s/ Louis Nucifora
For and on behalf of
Brick & Pipe Industries Ltd
ACN 004 028 559
The Purchaser acknowledges being given a duplicate of this
statement signed by the Vendor before the Purchaser signed any
Contract.
DATE OF THIS ACKNOWLEDGEMENT 21/9/1995
Signature/s of the Purchaser /s/ John Altson
PLEASE NOTE THAT WHERE THE PROPERTY IS TO BE SOLD ON TERMS
PURSUANT TO SECTION 32(2)(f) OF THE ACT AND/OR SOLD SUBJECT TO A
MORTGAGE THAT IS NOT TO BE DISCHARGED BY THE DATE OF POSSESSION
(OR RECEIPT OF THE RENTS AND PROFITS) OF THE PROPERTY PURSUANT
TO SECTION 32(2)(a) -- then the Vendor must provide an
additional statement containing the particulars specified in
Schedules 1 and 2 of the Act.
<PAGE>
(Exhibits to this filing have been omitted on the basis that
they are immaterial to the nature of the agreement; copies are
available upon request to the Company).
EXHIBIT 10.17
ROYAL SOCIETY FOR THE
PREVENTION OF CRUELTY TO ANIMALS
(VICTORIA) INCORPORATED
BURGUNDY TWO PTY LTD
(ACN 071 195 429)
<PAGE>
CONTRACT OF SALE OF REAL ESTATE
IMPORTANT NOTICE TO PURCHASERS
Cooling-off period Section 31 Sale of Land Act 1962
If none of the exceptions listed below applies to you, you may end this contract
within 3 clear business days of the day you sign the contract.
To end this contract within this time, you must either give the vendor or the
vendor's agent written notice that you are ending the contract or leave the
notice at the address of the vendor or the vendor's agent.
If you end the contract in this way, you are entitled to a refund of all the
money you paid EXCEPT for $100 or 0.2% of the purchase price (whichever is
more).
EXCEPTIONS -- The 3-day cooling-off period does not apply if --
- The price of the property (including chattels) exceeds
$250,000
- You bought the property at or within 3 clear business
days before or after a publicly advertised auction
- You received independent advice from a solicitor before
signing the contract
- The property is used mainly for industrial commercial
purposes
- The property is more than 20 hectares in size and is
used mainly for farming
- You previously signed a similar contract for the same
property
- You are an estate agent or a corporate body
The conditions of this contract are contained in the attached --
Particulars of Sale, and
Schedule, and
General Conditions, and
Special Conditions (if any).
The vendor sells and the purchaser buys both the property and the chattels for
the price and upon the conditions set out in this contract.
The Vendor's Statement required by section 32(1) of the Sale of Land Act 1962 is
attached to, and included in, this contract.
Where the signature of any party to this contract is secured by an agent, the
parties acknowledge being give a copy of this contract by the agent at the time
of signing.
<PAGE>
(SEE ATTACHED)
__________________________________________________________Vendor
(SEE ATTACHED)
________________________________________________________Purchaser
<PAGE>
GENERAL CONDITIONS ("GC")
Encumbrances
1.1 The purchaser buys the property and the chattels subject to
the encumbrances shown in Item 1 of the Schedule.
1.2 If the purchaser is taking over an existing mortgage--
(a) the purchaser assumes liability for the mortgage
(b) the price is satisfied to the extent of any mortgage
money owing at the settlement date, and
(c) the vendor must treat any payment made by the purchaser
under the mortgage as a payment made to the vendor
under this contract.
Loss or Damage Before Settlement
2.1 The vendor carries the risk of loss or damage to the
property and the chattels until settlement date, and
2.2 The vendor must deliver the property and the chattels to the
purchaser at settlement date in their present condition (fair
wear and tear excepted).
2.3 If any chattel is not in its present condition (fair wear and tear
excepted) at settlement, the purchaser is only entitled to compensation
from the vendor.
Finance
3 If a lender is nominated in the Particulars of Sale this contract is
subject to the lender approving the loan on the security of the
property by the approval date or any later approval date allowed by the
vendor. The purchaser may end the contract if the loan is not approved
by the approval date only if the purchaser --
(a) has made immediate application for the loans
(b) has done everything reasonably required to obtain
approval of the loan
(c) serves written notice ending the contract on the vendor
on or before 2 business days after the approval date,
and
(d) is not in default under any other conditions of this
contact when the notice is given
All moneys must be immediately refunded to the purchaser if the
contract is ended.
Terms Contract
4 If this is a "terms contract" as defined in section 2(1) of
the Sale of Land Act 1962, then --
(a) the vendor must arrange the discharge of any mortgage
affecting the land by the settlement date
(b) all money payable under the contract must be paid to a
duly qualified legal practitioner or a licensed estate
agent to be applied towards discharging the mortgage
(c) the purchaser must pay interest to the vendor from the
settlement date upon the balance outstanding at the
<PAGE>
rate, on the days, and with the adjustments set out in
Item 2 of the Schedule
(d) the vendor must apply installments under this contract first
to pay interest and then to reduce the balance owing.
Nominee
5 If the contract says that the property is sold to a named purchaser
"and or nominee" (or similar words), the named purchaser may, at least
14 days before settlement date, nominate a substitute or additional
purchaser, but the named purchaser remains personally liable for the
due performance of all the purchaser's obligations under this contract.
Payment
6.1 The purchaser must pay all money (except the deposit) to the
vendor, the vendor's solicitor or at the direction of the
vendor/
6.2 The purchaser must pay the deposit--
(a) to the vendor's estate agent or, if there is no estate
agent, to the vendor's solicitor, or
(b) if the vendor directs, into a special purpose banking
account specified by the vendor in the joint names of
the purchaser and the vendor.
6.3 If the land sold is a lot on an unregistered plan of
subdivision then the deposit--
(a) must not exceed 10% of the price, and
(b) must be paid--
(i) to the vendor's solicitor or estate agent to be
held by the solicitor or estate agent on trust for
the purchaser, or
(ii) if the vendor directs, into a special purpose banking
account in Victoria specified by the vendor until the
registration of the plan.
Breach
7 A party who breaches this contract must pay to the other
party on demand --
(a) compensation for any reasonably foreseeable loss to the
other party resulting from the breach, and
(b) any interest due under this contract as a result of the
breach.
Time
8 If the time for performing any action expires on a Saturday, Sunday or
bank holiday, then time is extended until the next business day.
General Conditions in Legislation
9.1 The general conditions in Table A of the Seventh Schedule of the
Transfer of Land Act of 1958 apply if the land is under the operation
of that Act.
9.2 The general conditions in the Third Schedule of the Property
Law 1958 apply if the land is not under the operation of the
<PAGE>
Transfer of Land Act 1958.
9.3 General Condition 9 in Table A or in the Third Schedule applies as if
its second last sentence ended with the additional words, "as a
resident Australian beneficial owner of the land".
Conflict Between Conditions
10 In case of a conflict between the conditions the order of
priority is--
(a) any special conditions in this contract
(b) general conditions in this contract
(c) general conditions in legislation
Conditions
11 These conditions prevail over the conditions in any earlier contract
and any requisitions and answers properly made and given under that
contract are deemed to be requisitions and answers properly made and
given under the contract.
Service
12 Any document served by post is deemed to be served on the next business
day after posting unless proved otherwise.
Transfer of Settlement
13.1 The purchaser must provide the instrument of transfer required by
General Condition 12 of Table A, or the assurance required by the Third
Schedule (as the case may be), to the vendor or the vendor's solicitor
at least 10 days prior to the settlement date.
13.2 The vendor must pay the bank fees on all bank cheques exceeding 3 that
are required by the vendor for settlement.
Law Institute of Victoria Property Law Dispute Resolution
Committee Guidelines
1 The Committee has been established to decide disputes relating to
property law matters. Where one party does not have a solicitor
representing them, the dispute cannot be heard until that party
instructs a solicitor.
2 An agreed Statement of Fact must be signed by all parties
and referring solicitors and must include:
2.1 A clear and concise statement of all the relevant agreed facts
upon which the dispute is based. The Committee is unable to
make any decision unless the facts are agreed between the
parties.
2.2 A copy of all relevant documents.
2.3 The issues, based on the agreed facts, to be decided by
Committee.
<PAGE>
2.4 Applications for disputes to be decided by the Committee shall
include and agreement by the referring Solicitors and the
parties to be bound by the Committee's decision on any
question of law or practice.
3 Applications in the appropriate form must be lodged with the
Secretary of the Property Law Dispute Resolution Committee
of the Law Institute of Victoria. The form is set out in
the Conveyancing diary or may be obtained from the Property
Law Section of the Institute.
4 An administration fee of $50.00 for each referring solicitor must be
paid to the Institute when the application is lodged.
5 The Committee's decision will be based upon the material contained in
the Statement of Facts only. In making its decision the Committee shall
act as an expert panel and not as an arbitrator.
6 The Committee reserves the right--
(1) to call for further and better particulars in order to
make a decision
(ii) to refuse to decide any dispute, in which case any fees
will be refunded in full.
7 The Committee's written decision will be sent to the referring
solicitors within seven days of the dispute being decided.
<PAGE>
CONTRACT OF SALE OF REAL ESTATE
<PAGE>
EXECUTION
THE COMMON SEAL of THE ROYAL SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS
(VICTORIA) INCORPORATED is affixed in accordance with its rules in the presence
of:
/s/ Onn Ben-David
_______________________________
Onn Ben-David (Vice President)
/s/ James T. Smith
______________________________
James T. Smith (Treasurer)
/s/ Peter J. Barter
______________________________
Peter J. Barter (Director)
THE COMMON SEAL of BURGUNDY TWO PTY LTD was hereunto affixed in accordance with
its articles of association in the presence of:
- - --------------------------------
Director
- - --------------------------------
Secretary
<PAGE>
PARTICULARS OF SALE
VENDOR'S SOLICITOR: Corrs Chambers Westgarth
of Bourke Place, 600 Bourke Street,
Melbourne.
DX 336 Tel: 9672-3000 Ref: Peter Drake
PURCHASER'S SOLICITOR: Coltmans
of 15th Floor, 575 Bourke Street,
Melbourne
DX 510 Tel: 9615-2222 Ref: Des Dodds
VENDOR: ROYAL SOCIETY FOR THE PREVENTION
OF CRUELTY TO ANIMALS (VICTORIA)
of 3 Burwood Highway, Burwood East
Victoria
PURCHASER: BURGUNDY TWO PTY LTD
(ACN 071 195 429)
of Level 17, The Chifley Tower
2 Chifley Square, Sydney,
New South Wales
LAND: Lot 2 on Plan of Subdivision no PS347288N
being part of the land described in
the attached copy certificates of
title volume 9347 folios 628 and 629
and being
PROPERTY: the land together with any improvements
know as
ADDRESS: Part of 3 Burwood Highway, Burwood East
CHATTELS: NIL
PRICE: $3,465,000.00
DEPOSIT: An amount equal to ten percent (10%) of
the Price payable in full on the Day of
Sale.
INSTALLMENT: $787,500 being 15% of the Price
payable on or before the
20th day of December,
1995
RESIDUE: An amount equal to ninety per centum
(90%)of the Price.
PAYMENT OF RESIDUE: In full on the date which is the later
of:
(a) 14 days after the Vendor advises
<PAGE>
the Purchaser of the registration
of the Plan of Subdivision; and
(b) the date which is the earlier of:
(i) 14 days after the Purchaser
obtains the Planning Permit in
accordance with special
condition 8; and
(ii) 150 days after the Day of
Sale.
<PAGE>
SETTLEMENT DATE: is the date upon which vacant possession
of the Property shall be given, namely
upon acceptance of title and payment of
the whole Price.
PURCHASER'S FINANCE: NOT APPLICABLE
(General condition 3)
DAY OF SALE: is the date of this Contract, namely,
9th November, 1995
SCHEDULE
ITEM (1) (GC1) (1) All restrictions disclosed in the
Vendor's Statement.
(2) To the extent that they
affect the Property, the
registered easements to the
City of Nunawading and
melbourne & Metropolitan
Board of Works created by
Instrument B707893 and
C685307 respectively,
copies of which are
attached in the Vendor's
Statement.
(3) All easements created or to be
created as specified on the Plan of
Subdivision.
(4) Any other easements and
other restrictions which a
responsible authority
requires to be included on
the Plan of Subdivision as
a condition of approval of
the Plan of Subdivision.
ITEM (2) (GC4) NOT APPLICABLE
<PAGE>
SPECIAL CONDITIONS
1. Interpretation
In this Contract, unless the context otherwise requires:
2. (a) Definitions:
"Annexure" or "Schedule" means an annexure or schedule to
this Contract;
"Carpark Plan" means that copy of the Plan of Subdivision which is
attached to this Contract and headed "Carpark Plan";
"Contract" means this Contract of Sale of Real Estate and, unless the
context otherwise requires, includes the Annexures and Schedules to
this Contract and the Vendor's Statement;
"Planning Permit" means any planning permit which must be obtained from
the City of Whitehorse for the use and development of the Property as a
cinema complex with associated entertainment and restaurant facilities;
"Plan of Subdivision" means plan of subdivision no PS347288N, a copy of
which is attached to this Contract, as amended from time to time in
accordance with this Contract;
"Purchaser" means the party named as the Purchaser and includes the
Purchaser's successors, assigns and tranferees.
"RSPCA Land" means lot 1 on the Plan of Subdivision;
"Special Condition" means a special conation of the
Contract;
"Vendor" means the party named as the Vendor and includes
the Vendor's successors, assigns and transferees;
"Vendor's Statement" means the Vendor's Statement to the Purchaser of
Real Estate pursuant to section 32 of the Sale of Land Act 1962 a copy
of which is annexed to and forms part of this Contract;
(b) Construction:
words importing the singular include the plural and vice
versa;
words importing any gender include the other genders;
references to a person includes a corporation and bodies
politic;
<PAGE>
references to a person include the legal personal
representatives, successors and assigns of that person;
headings shall be ignored in construing this Contract;
an obligation of two or more parties shall bind them jointly
and each of them severally;
references in this Contract to Table A are references to Table A of the
Seventh Schedule to the Transfer of Land Act 1958 and references to the
Third Schedule are references to the Third Schedule of the Property Law
Act 1958; references to a person or body which has ceased to exist or
has been reconstituted, amalgamated, reconstructed or merged, or the
functions of which have become exercisable by any other person or body
in its place, shall be taken to refer to the person or body established
or constituted in its place or by which its functions have become
exercisable;
any party may, at its election, by written notice waive any and all of
the conditions to which its obligations under this Contract are subject
or conditions which are expressed for the benefit of that party and any
waiver may be made subject to any conditions the party making the
waiver stipulates in the notice and shall operate from the date of the
notice unless otherwise specified;
this Contract may not be amended, modified or supplemented except in
writing executed by persons duly authorised by each of the parties or
by a waiver in accordance with this Contract;
a reference in these Special Conditions to an Act of Parliment includes
a reference to that Act as amended, replace or consolidated for the
time being and all regulations made thereunder.
2 Condition of Property
The Purchaser acknowledges that:
(a) any improvements on the Property may be subject to or
require compliance with the Victoria Building Regulations,
municipal by-laws, relevant statutes and any regulations
thereunder or any repealed laws under which the improvements
were constructed. Any failure to comply with any one or
more of those laws shall not and shall be deemed not to
constitute a defect int he Vendor's title and the Purchaser
shall not make any requisition or claim any compensation
from the Vendor on that ground; and
(b) the Purchaser has purchased the Property as a result of the
Purchaser's own inspection or inquiries and in its present
condition and state of repair and subject to all faults and
<PAGE>
defects both latent or patent and except to any extent expressly
provided in this Contract the Vendor has not and no person on the
Vendor's behalf has made any warranty or representation in relation to
those matters.
3 Acknowledgements
The purchaser acknowledges that prior to the payment of any part of the Deposit
or the execution of this Contract or any other contract agreement or document
whatever in relation to the purchase of the Property, the Purchaser received
from the Vendor:
(a) the Vendor's Statement executed by the Vendor, and
(b) a copy of this Contract.
4 Stamp Duty Indemnity
The purchaser shall keep the Vendor indemnified at all times against all
liabilities, claims proceedings and penalties whatever under the Stamp Act 1958
relating to this Contract, any substitute Contract of Sale and the instrument of
transfer or conveyance of the Property or any one or more of them.
5 Entire Understanding
(a) This Contract embodies the entire understanding and
agreement between the parties as to the subject matter of
this Contract.
(b) All previous negotiations, understandings, representations, warranties,
memoranda or commitments in relation to, or in any way affecting, the
subject matter of this Contract are merged in and superseded by this
contract and are of no force or effect whatever and no party is liable
to any other party in respect of those matters.
(c) No oral explanation or information provided by any party to
another:
(i) affects the meaning or interpretation of this
Contract, or
(ii) constitutes any collateral agreement, warranty or
understanding between any of the parties.
6 Interest Payable on Default
If the Purchaser defaults in payment of any money under this
<PAGE>
Contract the Purchaser shall pay to the Vendor interest at the rate of 16% per
annum computed on the money overdue during the period of default without
limiting any other rights of the Vendor. Condition 4 of Table A and Condition 4
of the Third Schedule do not apply to this Contract.
7 Substituted Contract
(a) General Condition 5 does not apply to this Contract. If the Purchaser
is not in default under this Contract the Purchaser may prior to 14
days before the Settlement Date require the Vendor to enter into a
substituted Contract with a nominee of the Purchaser in accordance with
this Special Condition but the Purchaser shall remain liable to perform
and observe the covenants and conditions of this Contract.
(b) The cancellation and substitution can only be effected by
the Purchaser delivering to the Vendor:
(i) a substituted Contract which is to be identical to
this Contract save for:
(A) the deletion of the Special Condition;
(B) the name of the substituted purchaser as
Purchaser;
(C) the insertion of the following Special
Conditions:
*(a) The Purchaser acknowledges that the
Purchaser has accepted title to Property
and waives the right to deliver
requisitions on title or make any
objections to title.
(b) The parties agree that for the purposes of
Condition 15 of Table A and Third Schedule
the Day of Sale shall be [here insert the
Day of Sale in this Contract] and not the
Day of Sale of this Contract.
(D) the adjustments of dates (if necessary) for the
payment of moneys to coincide with this
Contract;
(E) if required by the Vendor, the Day of Sale under
the substituted Contract coinciding with the Day of
Sale under this Contract; and
(F) execution by the substituted purchaser, which
substituted Contract shall be prepared at the
cost of the Purchaser;
<PAGE>
(ii) (A) an authority from the Purchaser addressed to
the person firm or corporation then holding the
Deposit ("stakeholder") authorising the stake-
holder to hold the Deposit and any other moneys
payable under this Contract as the Deposit and
other moneys payable under the substituted
Contract; or
(B) an acknowledgement by the substituted purchaser
that any authority given by the Purchaser to
enable release of the Deposit is binding on the
substituted purchaser;
(iii) a duly executed guarantee and indemnity in a form acceptable
to the Vendor's Solicitors by the Purchaser (and all the
directors of the substituted purchaser) of all the
obligations of the substituted purchaser under the
substituted Contract;
(iv) an acknowledgement by the Purchaser that the
Purchaser has delivered the original Vendor's
Statement to the substituted purchaser, together with
an indemnity by the Purchaser in favor of the Vendor
from and against all costs actions and damages which
the Vendor may sustain as a result of any failure by
the Purchaser to deliver the original Vendor's
Statement to the substituted purchaser;
(v) an acknowledgement by the substituted purchaser that
the original Vendor's Statement has been received
fromthe Purchaser; and
(vi) the part of this Contract which has been executed by
the Vendor.
(c) On delivery to the Vendor of the items referred to in paragraph (b) the
Vendor shall execute one part of the substituted Contract and on
delivery of that substituted Contract to the substituted purchaser this
Contract shall be and be deemed cancelled.
(d) For the purposes of any books of account of the Vendor the substituted
sale shall if required by the Vendor be deemed to have been made on the
date of this Contract and in that event a condition to that effect
shall be inserted in the substituted Contract.
8 Subject to grant of Planning Permit
(a) The Purchaser must at its expense:
(i) prepare with all due diligence an application to the
responsible authority for a Planning Permit
("Application");
<PAGE>
(ii) produce the Application (including all plans and
supporting materials) to the Vendor for approval as
soon as reasonably possible after the Day of Sale;
(iii) lodge the Application with the responsible authority within
50 days after the Day of Sale (provided that it has first
been approved by the Vendor in writing);
(iv) not amend or withdraw the Application (but provided
that the Purchaser shall be entitled to make
amendments to the Application which do not materially
alter the nature of the development for which the
Application is made; the Purchaser shall give the
Vendor written notices of any such amendments as soon
as reasonably possible after those amendments are
made);
(v) keep the Vendor regularly advised of the progress of
Application; and
(vi) pursue the Application with due diligence and do everything
necessary to obtain a Planning Permit (including the
exercising of all rights of appeal and review) by the date
which is 140 days after the Day of Sale ("Approval Date").
(b) Subject to the Vendor being satisfied that the Application
is for a Planning Permit for a cinema complex with
associated entertainment and restaurant facilities and not
for any other purpose, the Vendor shall not unreasonably
withhold or delay approval of the Application and shall
execute all documents and provide all consents which are
reasonably required by the Purchaser in relation to the
Application.
(c) The Purchaser shall pay all fees, costs and charges and shall bear all
expenses associated with the Application and with the satisfaction of
the conditions of any planning permit which is granted.
(d) If a Planning Permit is not obtained by the Approval Date,
the Purchaser (if the Purchaser is not in default under this
Contract) may determine this Contract by giving notice in
writing to the Vendor at any time before the earlier of the
date being 150 days from the Day of Sale and the date that
the Planning Permit is granted, whereupon the Deposit
together with accrued interest shall be returned to the
Purchaser.
(e) If the Purchaser does not give written notice in accordance with
special condition 8(d) by the date specified in special condition 8(d)
then notwithstanding that the Planning Permit has not been granted this
Contract shall continue in full force and effect as if this special
condition 8 was not
<PAGE>
included.
(f) (i) The Purchaser does not rely on any statement made by
the Vendor or anyone on the Vendor's behalf in
respect to the application.
(ii) The Vendor gives no warranty nor does the Purchaser rely on
any statement made by the Vendor nor anyone on the Vendor's
behalf about the use to which the Property may be put.
(iii) The Purchaser acquires the Property subject to any
prohibition or restriction on its use, development or
enjoyment under any act, ordinance, regulation or by-law and
subject to the conditions of any planning permit or
instrument applicable to the Property and must obtain at its
own expense any necessary consent of any authority to any
use of Property.
(g) This special condition 8 is for the benefit of the
Purchaser.
9 Use of Land
(a) The Purchaser acknowledges that it is essential to the
vendor that the Purchaser develop the Property as a cinema
complex with associated entertainment and restaurant
facilities ("Cinema Complex") and that the Vendor would not
have entered into this Contract except on the basis of the
Purchaser's agreement that the Purchaser would use its best
endeavors to ensure that a development of that kind would be
carried out.
<PAGE>
(b) If the Purchaser settles on the Settlement date notwithstanding that
the Purchaser has not obtained a Planning Permit, the Purchaser shall
continue to use its best endeavors to obtain a Planning Permit
including exercising all reasonable rights of appeal and review.
(c) The Purchaser shall commence the development of Cinema Complex as soon
as reasonably possible after obtaining a Planning Permit and shall use
its best endeavours to complete that development within two years after
the Planning Permit is obtained.
(d) Whether or not the Purchaser obtains a Planning Permit, for so long as
the Purchaser or any related company of the Purchaser is the owner or
occupier of the Property the Purchaser shall not permit the Property to
be used or developed for any noxious use or any use which is likely to
significantly interfere with the operations of the Vendor on the RSPCA
Land.
(e) During the period of 18 months after the Day of Sale, the
Purchaser shall not sell, agree to sell, lease or otherwise
deal with the Property in any manner whatsoever (other than
by the granting of any mortgage reasonably required to
secure provision of fiance for the development of the
Property) without procuring the person acquiring an interest
in the Property from the Purchaser ("Acquiring Party") to
covenant with the Vendor that the Acquiring Party shall not
permit the Property to be used or developed for any noxious
use or any use which is likely to significantly interfere
with the operations of the Vendor on the RSPCa Land and that
the Acquiring Party will procure the same covenant from any
person acquiring an interest in the Property from the
Acquiring Party during the period of eighteen (18)months
after the Day of Sale in this Contract.
10 Foreign Investment
(a) This special condition applies to this Contract if the Purchaser is or
includes a person to whom the Foreign Acquisitions and Takeovers Act
1975 ("Act") applies in relation to the Property, but not otherwise.
(b) The Purchaser must:
(i) at its own expense prepare with all due diligence a notice
under section 26A of the Act and all additional material
required by the Foreign Acquisition and Takeovers (Notices)
Regulations ("Notice") stating the Processors intention to
acquire the Property;
(ii) furnish the Notice to the Treasurer of the
<PAGE>
Commonwealth of Australia ("Treasurer") within 14
days after the Day of Sale (if not already
furnished);
(iii) confirm to the Vendor within 3 days after furnishing
the Notice to the Treasurer that the Notice has been
so furnished;
(iv) not withdraw, delay or cancel the Notice without the
written consent of the Vendor; and
(v) pursue the satisfaction of this special condition with due
diligence and do everything reasonably necessary to cause
this special condition to cease to apply to this Contract.
(c) This Contract is conditional on either:
(i) the Treasurer giving an advice that the Commonwealth
Government does not object to the Purchaser entering into
this Contract, being an advice that is not subject to
conditions which the Purchaser in its reasonable opinion
considers unacceptable ("Advice"), or
(ii) a period of 120 days expiring after the day on which the
Notice was received by the Treasurer without and order being
made by the Treasurer prohibiting the acquisition of the
Property of the Purchaser,
whichever first occurs. On satisfaction of either of the conditions referred to
above, this Contract will cease to be subject to this sepcial condition.
(d) Each party must pormptly provide information in relations to
the Property which is reasonably required to obtain the
Advice or to avoid an order prohibiting the acquisition of
the Property. The Purchaser must promptly provide to the
Vendor's solicitors a copy of all written correspondence
with the Treasurer or the Department of Treasury and also a
copy of accurate notes relating to non-written
communications with such persons or authorities.
(e) The Purchaser must immediately notify the Vendor's
solicitors as soon as the Advice has been obtained or an
order made by the Treasurer.
(f) If the Treasurer makes an order prohibiting the proposed acquisition of
the Property by the Purchaser within 120 days after the day on which
the Notice was received by the Treasurer, either the Vendor or the
Purchaser may at any time thereafter avoid this Contract by giving
written notice to the other. In that event the Deposit shall be
refunded by the Vendor to the Purchaser and this Contract shall come
<PAGE>
to an end. The Purchaser shall not be entitled to exercise that right
of avoidance if the making of an order by the Treasurer is due to or
arises from the Purchaser's failure to comply with this special
condition or if the Purchaser is otherwise in default under this
Contract.
(g) The Purchaser shall not be entitled to avoid this Contract under this
special condition without first giving the Vendor a reasonable
opportunity to procure the Treasurer's approval of the acquisition.
(h) This special condition is for the benefit of the Purchaser
and the Vendor.
11 Subdivision
(a) The Vendor shall use its best endeavours to procure the registration of
the Plan of Subdivision. The Purchaser shall co-operate with the Vendor
to achieve the registration of the Plan of Subdivision including
without limitation by signing any consents or approvals and providing
any information which the Vendor reasonably requires.
(b) The Vendor may make amendments to Plan of Subdivision. The
Vendor must obtain the consent of the Purchaser to material
amendments, but no consent shall be required to amendments
which are of a minor nature and which are required by the
City of Whitehorse or the Registrar of Titles or because of
the need to have regard to the location of buildings and
other fixtures and services which are on the Property or the
RSPCA Land. Also, no consent shall be required to the
removal in part of easement "E2" on the Plan of Subdivision
to the extent that easement encumbers the RSPcA Land so long
as the remaining width of the easement is not less than 15
metres (including 2.5 metres on lot 2).
(c) Notwithstanding anything to the contrary contained in this
Contract, under no circumstances shall the Vendor be obliged
to make or accept any amendment to the plan of Subdivision
which involves the removal or alteration of the carriageway
easement marked "E2" on lot 2 of the Plan of Subdivision,
notwithstanding that such an amendment may be necessary to
enable the certification or registration of the Plan of
Subdivision.
(d) The Vendor and the Purchaser shall share equally the costs
of the surveyor and the prescribed fees payable to the City
of Whitehorse and to the Registrar of Titles for the
certification and registration of the Plan of Subdivision.
The Purchaser shall pay and hereby indemnifies the Vendor in
respect of all costs, fees, charges and expenses which are
incurred or required to be paid as a result of any
requirement imposed by any authority as a condition of the
certification of registration of the Plan of Subdivision or
<PAGE>
in any planning permit in relation to the Plan of Subdivision including
without limitation the provision of any services to the Property or the
RSPCA Land or the payment of a public open space contribution,
development contribution or like fee.
12 Contract subject to registration of the Plan of Subdivision
(a) This contract is conditional upon the Plan of Subdivision being
registered by the Registrar of Titles within 95 days after the Day of
Sale.
(b) The Deposit and all other moneys payable by the Purchaser shall be paid
to Corrs Chambers Westgarth for the Vendor to be held in an interest
bearing trust account or an interest bearing trust account term deposit
with the Australia and New Zealand Banking Group Limited until the Plan
of Subdivision has been so registered.
(c) If the Plan of Subdivision is no so registered within 195
days after the Day of Sale, the Purchaser or the Vendor may,
at any time after expiration of that period of 195 days but
before the Plan of Subdivision is so registered, by notice
in writing to the other rescind this Contract in which event
the Purchaser shall be entitled to the immediate return of
the Deposit (including any interest from time to time
accruing in respect of such account); otherwise such
interest shall accrue for the benefit of and be paid to the
Vendor.
(d) General Condition 6.3 does not apply.
13 Car Park
(a) The Purchaser shall as soon as reasonably possible after
being requested by the Vendor to do so carry out all
necessary works on the land coloured red on the Carpark Plan
("Cinema Carpark") to construct a paved access road with
ancillary carparking and shall complete those works by not
later than six months after the date of the request. The
Purchaser's Application for a Planning Permit shall include
an application for any planning approval which is necessary
for the construction of this access road with ancillary car
parking. The Vendor shall not make a request in accordance
this special condition 13(a) until after the Settlement
Date, but after such a request has been made the Purchaser
shall obtain any permits necessary for the construction of
the Cinema Carpark and shall construct the Cinema Carpark
notwithstanding that the Purchaser may not have obtained a
Planning Permit.
(b) The Purchaser shall maintain the access road and ancillary carparking
referred to in special condition 13(a) in good condition at all times.
<PAGE>
(c) The Purchaser shall as soon as reasonably possible after
being requested by the Vendor to do so construct a paved
carparking area on the land coloured blue on the Carpark
Plan ("RSPCA Carpark") and shall complete construction by
not later than six months after the date of that request.
The Vendor shall not make a request in accordance with this
special condition 13(c) until after the Settlement Date and
until after the Vendor has obtained all permits necessary
for the construction of the RSPCA Carpark. After completion
of construction the Vendor shall be responsible for the
maintenance of the RSPCA Carpark.
(d) (i) The Purchaser shall permit the Vendor and its employees
and invitees to have access to Cinema Carpark at all times
for the purpose of parking vehicles. Nothing in this special
condition 13(d)(i) shall limit the Vendor's right of
carriageway over the Cinema Carpark.
(ii) The Vendor shall permit the Purchaser and its
employees and invitees to have access to the RSPCA
Carpark daily after 6:00 p.m. for the purposes of
parking vehicles.
(e) (i) The exercise by the Vendor and its employees and
invitees of their rights under special condition
13(d)(i) shall be at the risk of the Vendor entirely
and the Vendor indemnifies and shall keep the
Purchaser indemnified from and against all claims,
demands, actions, costs, losses, damages and expenses
which the Purchaser may incur or for which the
Purchaser may become liable as a result of or arising
from the exercise by the Vendor or its employees or
invitees of the rights granted by the special
condition 13(d)(i).
(ii) The exercise by the Purchaser and its employees and
invitees of their rights under special condition
13(d)(ii) shall be at the risk of the Purchaser
entirely and the Purchaser indemnifies and shall keep
the Vendor indemnified from and against all claims,
demands, actions, costs, losses, damages and expenses
which the Vendor may incur or for which the Vendor
may become liable as a result of or arising from the
exercise by the Purchaser or its employees or
invitees of the rights granted by special condition
13(d)(ii).
(iii) The Vendor and the Purchaser shall each maintain public
liability insurance for an amount of not less than five
million dollars ($5,000,000.00) in respect of any single
accident or event which shall include coverage in relation
to the use by the Vendor of the Cinema Carpark and the use
by the Purchaser of the
<PAGE>
RSPCA Carpark respectively.
(f) If after the Day of Sale the Vendor or the Purchase sells,
transfers, grants any lease in respect of or otherwise
disposes of or deals with in any manner whatsoever the land
on which the RSPCA Carpark and the Cinema Carpark
respectively are located the party so dealing with the land
("Disposing Party") shall procure the purchaser, transferee,
lessees, mortgagee or other person acquiring this interest
in that land ("Acquiring Party") to covenant with the other
party to this Contract ("Remaining Party") acknowledging the
rights of the Remaining Party as specified in this special
condition 13 and the Remaining Party acknowledging that the
Acquiring Party shall have the benefit of the rights
specified in this special condition 13.
14. Disclosure of Works
Pursuant to section 9AB(1) of the Sale of Land Act 1962, the Vendor discloses
that the Vendor proposes to carry out works on the RSPCA Land which may affect
the natural surface level of the RSPCA Land being the development referred to in
special condition 19.
15. Identity
The Purchaser admits that the Land as offered for sale and inspected by the
Purchaser is identical with the relevant lot or lots on the Plan of Subdivision.
The Purchaser shall not make any requisition or claim any compensation or
purport to rescind this Contrac or to avoid any of its obligations under this
Contract by reason of:
(a) any alleged misdescription on the Plan of Subdivision;
(b) any deficiency in the area or measurements of the Property
or
(c) any amendment to the Plan of Subdivision:
(i) which does not materially affect the Property and is
erquired by the Registrar of Titles or requested by
the Vendor; or
(ii) which restricts or limits the use of the Property and
which:
(A) results from any recommendation of a public
authority or government department; or
(B) is in respect of the final location of an
easement shown on the Plan of Subdivision
Condition 3 of Table A shall not apply to this Contract.
<PAGE>
16 Adjustment on Area Basis
If there are no separate assessments of rates or land tax for the Property then
the Property shall be deemed to contribute that percentage of the total rates
and land tax as the area of the Property bears to the whole of the area assessed
and adjustments shall be calculated accordingly.
17 Back Rates
As between the Vendor and the Purchaser, the Purchaser shall be responsible for
the payment of all back rates (whenever assessed) in respect of the Property
under section 174 of the Local Government Act 1989 and under any other relevant
Act and all special land tax (whenever assessed) in respect of the Property
under section 10 of the Land Tax Act 1958 which are assessed as a consequence of
the sale of the Property under this Contract and the Purchaser shall indemnify
the Vendor against any payment which the Vendor may be required to make in
respect of back rates or in respect of special land tax.
18 Expenses
In addition to the other payments required by the Purchaser under this Contract,
the Purchaser shall pay the Vendor on the Day of Sale an amount of $5,000.00 to
reimburse the Vendor for its expenses associated with the preparation of this
Contract.
19 Development of RSPCA Land
The Purchaser agrees that it shall not object to the use and development of the
RSPCA Land and any other adjoining land owned by the vendor for an
administration centre and animal welfare centre or to the construction of other
facilities required to be constructed or relocated as a consequence of those
development or as a consequence of sale of the Property. The Purchaser
acknowledges that the Vendor may wish to re-zone the RSPCA Land and adjoning
land to enable its use and development as aforesaid and the Purchaser shall not
object to any such re-zoning. The Purchaser shall sign any consents and other
documents that the Vendor shall reasonably require in relation to the use and
development of the RSPCA Land for these purposes.
20 Old Burwood Road Reserve
(a) In this special condition the term "Old Burwood Road Reserve" means the
land coloured red on the plan annexed to this contract headed "Road
Reserve Plan".
(b) The Purchaser shall on behalf of itself and the Vendor and in
consultation with the Vendor approach the relevant State Government
Departments as soon as resonably possible after the Day of Sale and use
its best endeavours to obtain:
<PAGE>
(i) the transfer to the Purchaser and the Vendor respectively of
those portions of the Old Burwood Road Reserve which are
adjacent to the Property and the RSPCA Land respectively for
prices which are agreed by the Purchaser and the Vendor
respectively; and
(ii) in the interim, a lease from the Crown to the Purchaser and
the Vendor respectively of those parts of the Old Burwood
Road Reserve which are adjacent to the Property and the
RSPCA Land respectively,
but provided that prior to the Settlement Date any transfer or lease
shall be solely to the Vendor and the Vendor's rights shall be
transferred or assigned to the Purchaser on settlement insofar as they
relate to that part of the Old Burwood Road Reserve adjacent to the
Property.
(c) As soon as reasonably possible after the Purchaser has acquired that
part of the Old Burwood Road Reserve which is adjacent to the Property,
the Purchaser shall grant the Vendor an easement of carriageway which
extends the easement of carriageway shown on the Plan of Subdivision in
a direct line through the Old Burwood Road Reserve to its northern
boundary.
(d) The Vendor shall be entitled to negotiate on its own behalf with the
relevant State Government Departments to obtain a transfer or a lease
as specified in special condition 20(b).
(e) The Purchaser shall procure any person or persons acquiring the
Property or the land behind the Property known as "the Brick and Pipe
land" from the Purchaser prior to the completion of the transfers
contemplated by special condition 20(b) to covenant with the Vendor on
the same terms as this special condition including this special
condition 20(e).
21 Right of First Refusal
(a) During the period of eighteen (18) months from the Day of Sale the
Vendor shall not sell or agree to sell the RSPCS Land to any person
other than the Purchaser unless:
(i) the Vendor has first offered in writing to sell the RSPCA
Land to the Purchaser at a price not greater than the price
at which the RSPCA Land is actually sold or agreed to be
sold and on terms as to payment and otherwise not less
favourable to the Purchaser than the terms on which the
RSPCA Land is actually sold or agreed to be sold; and
(ii) the Purchaser has not accepted the offer referred to
<PAGE>
in special condition 21(a)(i) within ten (10) days after
receipt of that offer from the Vendor by the Purchaser.
(b) Special condition 21(a) shall not apply:
(i) in the event of the Vendor selling the RSPCA Land at any
normally advertised public auction sale or within a period
of two (2) months thereafter or by public tender; or
(ii) where the purchaser of the RSPCA Land is an entity with
similar purposes to the purposes of the Vendor and the sale
occurs as a result of the reorganization of the Vendor or of
the activities conducted under the auspices of RSPCA
Australia Incorporated.
(c) Nothing in this special condition 21 shall be construed as prohibiting
the Vendor from selling the RSPCA Land to any person conditionally on
the Purchaser's rejection of non-acceptance of an offer of sale of the
RSPCA Land made in accordance with this special condition 21.
22 Non-Merger of Obligations on Completion
To the extent that this Contract includes obligations which continue to arise
after the Settlement Date, this Contract remains in full force and effect
irrespective of settlement. The provisions of this Contract do not merge with
any conveyance, transfer or assignment or registration of any of these.
23 Governing Law and Jurisdiction
(a) This Contract is governed by, and must be construed in
accordance with, the laws of the State of Victoria.
(b) The parties irrevocably and unconditionally submit to the non-exclusive
jurisdiction of the State of Victoria and any courts which have
jurisdiction to hear appeals from any of those courts. The parties
waive any rights to object to any proceedings being brought in those
courts.
<PAGE>
Exhibits to the Document have been excluded from this filing; they are available
upon request to the Company.
<PAGE>
Stock Purchase and Sale Agreement
This STOCK PURCHASE AND SALE AGREEMENT is entered into as of this 29th day of
March, 1996 by and between Craig Corporation, a Delaware corporation ("Seller")
and Reading Holdings, Inc., a Delaware corporation ("Purchaser"), at Purchaser's
corporate headquarters located in Wilmington, Delaware and with reference to the
following facts:
WHEREAS, Seller is the owner of the following securities, issued by
Citadel Holding Corporation, a Delaware corporation ("Citadel"):
a. One Million Five Hundred Sixty Four Thousand
Four Hundred Seventy Three (1,564,473) shares (the "Common
Shares") of common stock, par value $.01 per share (the
"Common Stock");
b. One Million Three Hundred Twenty Nine Thousand
One Hundred Fourteen (1,329,114) shares (the "Preferred Shares")
of 3% Cumulative Convertible Preferred Stock, stated value $3.95
per share (the "Preferred Stock"); and
c. Warrants to purchase Six Hundred Sixty Six
Thousand (666,000) shares of Common Stock at an exercise price
of $3.00 per share, expiring April 11, 1997 (the "Warrants"); and
WHEREAS, the closing price for Shares of Common Stock on the American
Stock Exchange as of the date immediately preceding the date hereof was
$2.250; and
WHEREAS, Purchaser desires to purchase and Seller desires to sell the
Common Shares;
WHEREAS, Purchaser desires to acquire and Seller desires to grant
options to acquire the Preferred Shares and the Warrants on the terms
set forth hereinbelow:
Page 1
<PAGE>
THE PARTIES HERETO in consideration of the above stated premises, the terms and
conditions hereinbelow set forth, and other good and valid consideration, the
receipt and sufficiency of which is hereby acknowledged, do hereby agree as
follows:
1. The Common Stock:
1.1 Purchase Price: The purchase price of the Common Shares will be
Three Million Three Hundred Twenty Four Thousand Five Hundred Five
Dollars ($3,324,505), representing a purchase price of slightly less
than $2.125 per share.
1.2. Form of Payment: The Purchase Price will be paid at the Closing
(as defined in Section 5) in the form of Purchaser's promissory note in
the amount of the purchase price (the "Note"). The Note will have a
term of five (5) years, bear interest at that fluctuating rate equal
from time to time to thirty (30) day LIBOR plus two hundred twenty-five
(225) basis points payable quarterly in arrears, and otherwise be on
the terms set forth in Exhibit 1, hereto.
2. The Preferred Stock:
2.1. Preferred Purchase Option: Effective at the Closing, Seller hereby
grants to the purchaser an option (the "Preferred Purchase Option")
exercisable for a period of twelve (12) months, commencing upon the
later of (a) the tenth (10th) business day following the next annual
meeting of the stockholders of Citadel and (b) July 1, 1996 to purchase
all, but not less than all, of the Preferred Shares or such securities
into which such Preferred Shares may have been converted (the
"Preferred Securities"). Seller will use commercially reasonable
efforts to have the conversion feature of the Preferred Stock
considered by the shareholders of Citadel at the next meeting of such
shareholders.
2.2. Exercise Price: The exercise price will be equal to the fair
market value of the Preferred Securities on the date of exercise, as
determined by an investment banking firm mutually and reasonably
agreeable to Purchaser and Seller; provided, however, that in the event
that (i) Purchaser has determined to enter into an Acquisition
Transaction (as such term is defined in Section 3.1, below) and (ii)
Seller has, prior to the closing of any transfer following exercise of
the Preferred Purchase Option, exercised its right to convert the
Preferred Shares into Common Stock, then the exercise price with
respect to such Common Stock shall be the same price and the form of
payment will be in the same form as paid to third party shareholders of
Citadel Common Stock (the "Independent Shareholders") in such
Acquisition Transaction.
The cost and expense of any such investment banker will be shared
equally between the Purchaser and the Seller.
Page 2
<PAGE>
2.3. Form of Payment: The Exercise Price will be paid upon the closing
of the sale of such Preferred Shares in the form of a further note (the
"2nd Note") issued by Purchaser in the amount of the Exercise Price
(less the amount of any fees paid under Section 2.5, below), which 2nd
Note will be in the same form as the Note, carry interest at the same
rate as specified in the Note, and have a term co-terminus with the
Note.
2.4. Notice and Closing: Purchaser shall give to Seller not less than
forty-five (45) days notice of its determination to exercise the
Preferred Purchase Option. Purchaser and Seller shall thereafter work
in good faith to designate a mutually acceptable investment banker, so
as to permit a timely closing of the sale.
2.5. Option Fee: Purchaser will pay to the Seller at the Closing an
Option Fee of Fifty Thousand Dollars ($50,000) which amount will be
credited against the Exercise Price in the event of the exercise by
Purchaser of the Preferred Purchase Option. In the event that Purchaser
wishes to extend the Preferred Purchase Option so that the total option
term is two years rather than one year, Purchaser may do so at anytime
prior to the expiration of the Preferred Purchase Option by increasing
the Option Fee paid to Seller to One Hundred Thousand Dollars
($100,000) by delivery to Seller on or before the expiration of the
Preferred Purchase Option the sum of an additional Fifty Thousand
Dollars ($50,000).
2.6. Assignment: This Preferred Purchase Option is personal to the
Purchaser and may not be transferred to any other person or entity
without the approval of Seller, which may be withheld or granted in the
sole discretion of the Seller; provided, however, that the Preferred
Purchase Option may be assigned to any wholly owned subsidiary of the
Purchaser without any such approval, provided that (a) the Common
Shares and the Warrant Purchase Option (as defined below) are
simultaneously transferred to and retained by such affiliate and (b)
such affiliate executes and delivers to Seller its written agreement to
be bound by the terms of this Agreement (an "Approved Transfer"). The
Preferred Purchase Option will immediately terminate upon any transfer
of the Common Shares by the Purchaser, other than an Approved Transfer.
3. The Warrants:
3.1. The Warrant Purchase Option: Effective at the Closing, Seller
hereby grants to Purchaser an option (the "Warrant Purchase Option")
exercisable in the event that the Purchaser determines, by a resolution
duly adopted by its Board of Directors, to proceed with an acquisition
(through merger, asset purchase, tender offer or otherwise) of an
equity interest in Citadel sufficient to permit the consolidation of
Citadel and the Purchaser for Federal Income Tax purposes (an
"Acquisition Transaction"), to acquire the Warrants simultaneously with
the consummation of such transaction. It is understood that Seller will
have no obligation to exercise the Warrants or to acquire the
underlying Common Stock.
Page 3
<PAGE>
3.2. Exercise Price: The exercise price for the Warrant Purchase Option
will be that amount equal to the difference between $3.00 per share and
the price per share being paid to Independent Shareholders in the
Acquisition Transaction. Seller may elect to receive such consideration
either in cash or, if Independent Shareholders are being paid in whole
or in part in securities, in the form of such securities. In the event
that, as of the time of the closing of the Acquisition Transaction,
Seller has exercised the Warrants, in whole or in part, and paid the
purchase price for the underlying Common Stock, then to such extent
such underlying Common Stock, and not the Warrants, will be the subject
of this Warrant Purchase Option, and the exercise price with respect to
such shares of Common Stock will be the same consideration as paid to
Independent Shareholders.
3.3. Exercise and Closing: The Warrant Purchase Option may be exercised
at any time on not less than twenty (20) day's written notice from the
Purchaser to the Seller. The closing will be simultaneous with the
closing of the Acquisition Transaction, and the closing of the
Acquisition Transaction will be a condition precedent to the obligation
of the Seller to sell and of the Purchaser to purchase.
3.4. Term: The term of the Warrant Purchase Option is the same as the
Preferred Purchase Option as modified by Section 3.3.
3.5. Assignment: The Warrant Purchase Option is subject to the
provisions of Section 2.6.
4. Seller's Put Option: In the event that Purchaser determines, by a
resolution duly adopted by its Board of Directors, to proceed with an
Acquisition Transaction, then Seller will have the right to put to
Purchaser the Preferred Securities, the Warrants and/or the Common
Stock underlying such Warrants, as the case may be, to the Purchaser on
the same terms as if the Purchaser had exercised the Preferred Purchase
Option and/or the Warrant Purchase Option.
5. The Closing: The Closing will be held at 1:00 p.m., Wilmington local
time, on March 29, 1996, at the offices of the Purchaser in Wilmington,
Delaware, or at such other location as the parties hereto may
determine.
6. Representations and Warranties:
6.1. Due Authority: Each party hereby represents, subject to the
receipt of appropriate Board approvals, that it has all necessary
corporate power and authority and that it has taken all necessary
corporate action required to perform its obligations under this
Agreement.
Page 4
<PAGE>
6.2. Good Title: Seller hereby represents that it has good and
marketable title to the Common Stock, the Preferred Stock and the
Warrants, and that it is permitted to and will transfer such securities
free and clear of all liens, claims or other encumbrances.
6.3. Unregistered Securities: Purchaser acknowledges that Seller is an
affiliate of Citadel, and that the Preferred Stock and the Warrants
have not been registered with any state or federal authority and that
the Preferred Stock and Warrants are not traded on any securities
exchange. Accordingly, Purchaser represents that it is acquiring the
Common Stock, the Preferred Purchase Option and the Warrant Purchase
Option in a privately negotiated transaction, with an intention to hold
such securities for the indefinite future, and without any intention to
engage in a public distribution of such securities.
7. Board Approval: The obligations of the Purchaser and the Seller are
subject to the approval of this agreement on or before 1:00 p.m.,
Wilmington local time, on March 29, 1996.
8. Miscellaneous Provisions:
8.1. Integrated Agreement: This Agreement sets forth all of the
agreements of the parties with respect to the subject matter hereof.
8.2. Choice of Law: This Agreement will be interpreted in accordance
with the laws of the State of Delaware, as such laws govern contracts
to be made and performed within such State. Any dispute between the
parties with respect to this agreement will be adjudicated solely in
the state or federal courts sitting in Wilmington, Delaware, and both
parties consent to the jurisdiction of such court.
8.3. Notices: Any notice required or permitted by this Agreement shall
be deemed delivered when personally delivered or on the fourth (4th)
business day after deposit in the U.S. Mail, postage paid, registered
or certified mail and addressed to the recipient at its corporate
headquarters address.
Page 5
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be entered
into as of the date first set forth above.
CRAIG CORPORATION READING HOLDINGS, INC.
By: /s/ S. Craig Tompkins By: /s/ James A. Wunderle
Its: President Its: Vice President
Page 6
<PAGE>
EXHIBIT 1
FORM OF PROMISSORY NOTE
$3,324,505 March 29, 1996
FOR VALUE RECEIVED, READING HOLDINGS, INC., a Delaware corporation (the
"Maker") hereby promises to pay to the order of CRAIG CORPORATION, a Delaware
corporation (the "Payee") the principal sum of Three Million, Three Hundred
Twenty-Four Thousand, Five Hundred Five Dollars ($3,324,505) according to the
terms hereof.
1. Defined Terms All terms capitalized herein but not defined shall
have the meanings ascribed to them in that certain Stock Purchase and Sale
Agreement dated the date hereof between Payee and Maker.
2. Payment of Principal and Interest Interest shall accrue on the
outstanding principal amount hereunder at an annual rate of LIBOR plus 2.25%,
and shall be paid to Payee quarterly in arrears commencing July 1, 1996 and on
each October 1, January 1, April 1 and July 1 thereafter, with a final payment
of all accrued and unpaid interest being made on the date on which all
outstanding principal hereof is paid in full. For purposes of this Promissory
Note ("Note") "LIBOR" shall mean the London Interbank Offered Rate for
thirty-day deposits as published in The Wall Street Journal three business days
prior to the first day of each month. The principal amount due hereunder shall
be due and payable on March 29, 2001. This Note may be prepaid in whole or in
part at any time without penalty or prepayment charge.
3. Place of Payment All amounts payable by the Maker to the Payee
hereunder shall be paid directly to the Payee at its address as set forth in
paragraph 11 hereof, or at such other address of which the Payee shall give
written notice to the Maker.
4. Representations and Warranties of Maker The Maker represents and
warrants that as of the date hereof:
(a) Maker is a corporation duly incorporated and organized in
accordance with the laws of the State of Delaware with all necessary powers to
own its properties and operate its business as now owned and operated by it;
(b) Maker has full power and authority to enter into this Note and
Maker has taken or caused to be taken all actions required to authorize the
approval, execution and consummation of the transactions contemplated by this
Note. This Note is a valid and binding obligation of Maker, enforceable against
Maker in accordance with its terms, except (i) as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights and (ii) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought; and
Page 7
<PAGE>
(c) Neither the execution and delivery of this Note, nor the
consummation of the transactions contemplated hereby, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Maker, (ii) violate,
or be in conflict with, or constitute a default under, or permit the termination
of, or cause the acceleration of the maturity of any debt or obligation of
Maker, (iii) require the consent of any other party, or result in the creation
or imposition of any security interest, lien or other encumbrance upon any
property or assets of Maker under any agreement or commitment to which Maker is
a party or by which Maker is bound, or (iv) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which Maker is subject.
5. Events of Default; Remedies If any of the following events of default
("Events of Default") shall occur and be continuing for any reason whatsoever
(and whether it shall be voluntary or involuntary or occur or be affected by
operation of law or otherwise):
(a) the Maker fails to make any payment when due of any
principal or interest or other sum payable under this Note, which failure
remains uncured for a period of five days after written notice thereof from
Payee;
(b) the Maker shall (i) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, (iii) consent to the appointment of
a custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (iv) be
adjudicated insolvent or be liquidated, or (v) take appropriate action for the
purpose of any of the foregoing; or
(c) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the Maker, a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or if an order
for relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Maker, or if any petition for any such relief shall be filed against the
Maker, and such order or petition shall not be dismissed within sixty (60) days;
then, automatically upon the occurrence of an Event of Default described in
subparagraph (b) or (c), or in the sole discretion of the Payee upon the
occurrence of an Event of Default described in subparagraph (a), the unpaid
principal amount of, and the unpaid interest on, this Note shall become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the Maker.
6. Additional Remedies If any Event of Default shall have occurred and
be continuing, the Payee may proceed to protect and enforce its rights under
this Note by exercising such remedies as are available to the Payee in respect
thereof under applicable law, either by suit in equity or by action at law, or
both, whether for specific performance of any agreement contained in this Note
or in aid of the exercise of any power granted in this
Page 8
<PAGE>
Note. No remedy is intended to be exclusive and each such remedy shall be
cumulative.
7. No Waiver Neither the failure of the Payee nor any delay on the part
of the Payee in the exercise of any right, power or privilege under this Note
shall operate as a waiver thereof, nor shall any single or partial exercise by
the Payee of any right, power, or privilege preclude any other or further
exercise of that or any other right, power or privilege.
8. Expenses The Maker shall reimburse the Payee promptly for all
reasonable counsel fees, costs and other expenses incurred by the Payee in
connection with the enforcement and collection of this Note.
9. Payment Due On Holidays If the principal of or interest on this Note
or any fee due hereunder falls due on a Saturday, Sunday or legal holiday at the
place of payment, such payment shall be made on the next succeeding business day
and such extended time shall be included in computing interest.
10. Applicable Law The construction, interpretation and enforcement of
this Note shall be governed by the laws of the State of Delaware.
Page 9
<PAGE>
11. Notices Every notice and communication under this Note shall be in
writing and shall be given by either (i) hand-delivery, (ii) first class mail
(postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid), or (iv) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (i), (ii) and
(iii) of this sentence, to the following addresses:
If to the Maker:
Reading Holdings, Inc.
103 Springer Building
3411 Silverside Road
Wilmington, DE 19810
If to the Payee:
Craig Corporation
550 South Hope Street
Suite 1825
Los Angeles, CA 90071
Notice given by telecopy or other means of electronic
transmission shall be deemed to have been given and received when sent. Notice
by overnight courier shall be deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to have been given and
received three (3) calendar days after the date first deposited in the United
States Mail. Notice by hand delivery shall be deemed to have been given and
received upon delivery.
A party may change its address by giving written notice to the
other party as specified herein.
12. Severability If any provision in this Note shall be held
invalid under any applicable law, such invalidity shall not effect any other
provision of this Note that can be given effect without the invalid provision
and, to this end, the provisions hereof are severable.
13. Successors and Assigns This Note shall be binding upon the
Maker and its successors and assigns, and shall inure to the benefit of the
Payee and its successors and assigns, provided that Maker may not assign any of
its rights or obligations hereunder or any interest herein without the written
consent of Payee. Payee may assign this Note or any interest herein without
restriction, and upon written notice being given to Maker of such assignment,
the assignee shall be deemed to be the Payee for all purposes hereunder.
Page 10
<PAGE>
14. Waiver of Demand, Presentment, etc. The Maker waives the
requirements of demand, presentment, protest, notice of protest and dishonor and
all other demands or notices of any kind in connection with the delivery,
acceptance, performance, default, dishonor or enforcement of this Note.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Reading Holdings, Inc. has caused this Note to be executed and delivered by its
proper and duly authorized officer as of the date first above written.
READING HOLDINGS, INC.
By: /s/ James A. Wunderle
Page 11
<PAGE>
EXHIBIT 10.19
AMENDED AND RESTATED
CAPITAL FUNDING AGREEMENT
This Capital Funding Agreement with respect to READING INTERNATIONAL
CINEMAS LLC, a Delaware limited liability company (the "Company"), is made and
entered into as of this 8th day of March, 1996 by and among CRAIG CORPORATION, a
Delaware corporation ("Craig"), READING INVESTMENT COMPANY, INC., a Delaware
corporation ("Reading"), CRAIG MANAGEMENT, INC., a California corporation
("CMI") and the Company.
WHEREAS, Craig and Reading caused the Company to be formed
under the laws of the State of Delaware; and
WHEREAS, Craig and Reading entered into a Limited Liability
Company Agreement dated as of November 9, 1995 (the "LLC Agreement");
WHEREAS, CMI is a wholly-owned subsidiary of Craig; and
WHEREAS, Craig, Reading, CMI and the Company desire to
supplement and amend the LLC Agreement pursuant to this agreement,
NOW, THEREFORE, for and in consideration of the mutual
covenants, rights and obligations set forth herein, the benefits to be
derived therefrom, and other good and valuable considerations, the
receipt and sufficiency of which Craig, Reading, CMI and the Company
acknowledge, Craig, Reading, CMI and the Company agree as follows:
Section 1.
The terms of the LLC Agreement shall remain in full force and effect
unless and to the extent specifically amended by this Agreement and all terms
used in this Agreement shall have the meanings indicated in Section 1.1.
of the LLC Agreement.
Page 1
<PAGE>
Section 2.
At the Closing Time, as defined herein, Craig directly or through CMI,
will transfer to the Company cash in the amount of Twelve Million Five Hundred
Thousand Dollars ($12,500,000) and its undertaking, or that of CMI, to fund the
Company, upon demand, an additional Thirty-Seven Million Five Hundred Thousand
Dollars ($37,500,000). This undertaking (the "Craig Capital Funding
Undertaking") will be secured by a pledge of 693,650 shares (the "Shares") of
Stater Bros. Holdings, Inc., a Delaware corporation ("Stater") Series B
Preferred Stock, stated value $100 per share and par value $0.01 per share (the
"Preferred Stock") held by CMI. At the Closing Time, Reading shall transfer to
the Company cash in the amount of Twelve Million Five Hundred Thousand Dollars
($12,500,000) and its undertaking to fund to the Company, upon demand, an
additional Thirty-Seven Million Five Hundred Thousand ($37,500,000). This
undertaking (the "Reading Capital Funding Undertaking") will be secured by a
security interest in Reading's interest in Cine Vista Holding's, Inc. and by
additional collateral mutually agreeable to the parties and designed to have a
fair market value of not less than the amount of the Reading Capital Funding
Undertaking. The security agreements securing performance by the respective
parties under their respective Capital Funding undertakings will be in a form
mutually acceptable to the parties and will include usual and customary
provisions including a commercially reasonable collateral release and
substitution provisions. The parties will use their good faith best efforts to
document such grant of security interest and to perfect such security interests
promptly and in any event, within thirty (30) days following the closing. The
parties will review from time to time the collateral securing their respective
Capital Contribution Undertakings with the intention that such collateral have
from time to time a fair market value equal to approximately 125% of the amount
of the unfunded portion of such Capital Contribution Undertakings from time to
time; provided, however, that no such overcollateralization will be required
with respect to collateral consisting of government or government agency
securities.
The commitments of the parties under this Section 2 supersede any prior
commitments with respect to the funding of Reading International.
Section 3.
To the extent capital is contributed by CMI, the LLC Agreement will be
amended to constitute CMI a Voting Member pursuant to Section 3.1 of the LLC and
to reflect CMI's right to pro rate allocations of Income under Section 5.1.1.
and Loss under Section 5.1.2. of the LLC Agreement.
Section 4.
Page 2
<PAGE>
The Closing Time Shall take place in Wilmington, Delaware at the
registered offices of the Company at noon, Delaware time on March 29, 1996, or
such other time and place as may be agreed upon by the parties hereto.
Section 5.
Notices given pursuant to this Agreement shall be given in the manner
as set forth in Section 12.1 of the LLC Agreement. The provisions of Sections
12.4, 12.5 and 12.7 and 12.8 of the LLC Agreement are repeated in their entirety
herein and shall become applicable to this Agreement.
Section 6.
This Agreement is made and entered into subject to the approvals of the
Boards of Directors of both Craig and Reading. In the event such approval is not
obtained on or before March 29, 1996 at noon Delaware time, this Agreement shall
be null and void.
IN WITNESS WHEREOF, the parties hereto executed this Agreement
effective as of the date first above written.
CRAIG CORPORATION
By: /s/ S. Craig Tompkins
---------------------------
President
READING INVESTMENT COMPANY, INC.
By: /s/ James A. Wunderle
---------------------------
Vice President
Page 3
<PAGE>
CRAIG MANAGEMENT, INC.
By: /s/ S. Craig Tompkins
---------------------------
President
READING INTERNATIONAL CINEMAS LLC
By the Voting Members
CRAIG CORPORATION
By: /s/ S. Craig Tompkins
-----------------------------
President
READING INVESTMENT COMPANY, INC.
By: /s/ James A. Wunderle
-----------------------------
Vice President
Page 4
<PAGE>
EXHIBIT 21.1
READING COMPANY
As of March 28, 1996
CONSOLIDATED SUBSIDIARIES
1. Australia Cinema Management Pty Limited
2. Burgundy Two Pty Limited
3. Cine Vista Holdings, Inc.
4. FA, Inc.
5. The Port Reading Railroad Company
6. Puerto Rico Holdings, Inc.
7. Reading Australia Pty Limited
8. Reading Capital Corporation
9. Reading Center Development Corporation
10. Reading Cinemas, Inc.
11. Reading Cinemas of Puerto Rico, Inc.
12. Reading Cinemas U.K., Inc.
13. Reading Holdings, Inc.
14. Reading International Cinemas LLC
15. Reading Investment Company
16. Reading Real Estate Company (formerly Eastern Real Estate
Co.)
17. Reading Transportation Company
18. RORC, Inc.
19. Senorial Theaters, Inc.
20. Trenton-Princeton Traction Company
21. Ward Cinema Management PTY Limited
22. Washington and Franklin Railway Company
23. Western Gaming, Inc.
24. Wilmington & Northern Railroad (The)
UNCONSOLIDATED MINORITY INTERESTS
1. Allentown Terminal Railroad Company
2. Baltimore and Cumberland Valley Railroad Extension Company
3. Pennsylvania-Reading Seashore Lines
4. Philadelphia Belt Line Railroad Company (The)
5. Trailer Train Company
PARTNERSHIPS
1. Parametric Garage Associates
2. Rutherford Industrial Center Partners, G.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 2-83039 and No. 33-57222) pertaining to the stock option
plans of Reading Company of our report dated February 16, 1996, with respect
to the consolidated financial statements and schedule of Reading Company
included in the Annual Report (Form 10-K) for the year ended December 31, 1995.
Philadelphia, Pennsylvania
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 44,147
<SECURITIES> 42
<RECEIVABLES> 624
<ALLOWANCES> 291
<INVENTORY> 112
<CURRENT-ASSETS> 46,910
<PP&E> 10,389
<DEPRECIATION> 1,176
<TOTAL-ASSETS> 75,544
<CURRENT-LIABILITIES> 4,244
<BONDS> 521
0
0
<COMMON> 52
<OTHER-SE> 68,660
<TOTAL-LIABILITY-AND-EQUITY> 75,544
<SALES> 3,883
<TOTAL-REVENUES> 19,973
<CGS> 640
<TOTAL-COSTS> 12,793
<OTHER-EXPENSES> 4,590
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,590
<INCOME-TAX> 239
<INCOME-CONTINUING> 2,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,351
<EPS-PRIMARY> $0.47
<EPS-DILUTED> $0.47
</TABLE>
